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Debt Management and Family Crisis Debt Consolidation Loans and Debt Management
Debt consolidation loans are secured loans. A secured loan is one in which the borrower uses something that he owns as collateral for a loan. The borrower will then use the proceeds from a debt consolidation loan to pay off other loans.
Loans are called by many different names, but basically there are two types of loans. There are secured loans as was discussed above, and then there are unsecured loans. If a borrower defaults on a secured loan, the loaning institution can take possession of the collateral and sell it at auction in order to satisfy the debt.
An unsecured loan does not have any collateral attached to it. If the loan isn't paid, the only recourse that the lender has is to sue the borrower to try to recoup his loss.
Not always, but most often a debt consolidation loan is a second mortgage on a primary residence. The reason is that for most people, the equity that they have established in their home is their largest single asset. Equity is the difference between what is owed on the home and the balance of the mortgage. Fair market value is also considered. If the value of the property has increased since the original mortgage agreement was made, then that appreciation in value is also considered equity.
Being granted a debt consolidation loan is very much like the process that was required to get a first mortgage. Your equity in your home is the collateral that you are using to get a second mortgage. The payment that you will be required to make each month is also a payment on your home just like the first mortgage.
The interest rates for a second mortgage will be much less than the interest rates that you are paying on credit cards, but the length of the loan will likely be greater.
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The Fair Debts Collection Practices Act sets guidelines about what debt collectors can and cannot do. You need to know the rules so you know when they have been broken.
If you have the unfortunate opportunity to deal with a debt collector, you need to know what your rights are and know the best and most effective way of dealing with one.
Debt collectors can call you on your home phone during business hours. They can call you until you tell them, in writing, to stop. Once you have given them written instructions to stop calling you, that does not erase the debt, but it will stop the phone calls.
Debt collectors cannot threaten you with bodily harm. They cannot misrepresent themselves as being associated with the government or with a credit reporting agency.
If you must deal with a debt collector, never assume that they will play fair or that they have your best interests at heart. They won't, and they don't.
Do not ever send post-dated checks, and never give a debt collector the right to draft payments from your bank account. These things can end up costing you more money and more trouble than you already have.
When you are negotiating with a debt collector, remember that you are dealing with a person who has been well schooled in the art of negotiation. They know more about it than you do.
Never give a debt collector personal information like where you work, what your income is, or your bank account information. They do not have the right to even ask you these questions. If they do, and you let them know that you are informed about the law, it will strengthen your position.
Nothing that you do when you are dealing with a debt collector will erase the debt. But knowing the law, and knowing what to say and what not to say, can keep you from more grief. |
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Yes! If you are ever going to gain control over your finances, you are going to have to make a budget and learn to live within it. There aren't any other options for successful debt management.
You wouldn't start building anything without plans, would you? Even building a model airplane requires following a plan. Building a house always starts with drawing up the plans for the construction. There is an old saying that applies here: “Those who fail to plan, plan to fail.” Without a financial plan (a budget), you are certain to find yourself in debt up to your eyeballs and no visible way out.
Now, let's discuss the making of a budget. You cannot have every last penny of your net income allotted for providing for necessities and paying installment loans. That will not work. You must leave yourself some wiggle room. Stuff is going to happen. There WILL BE unexpected and unbudgeted expenses every single month. You can bet on it...you had BETTER bet on it.
There will be, without any doubt whatsoever, expenses that you will overlook when making your budget. They may seem like small items that aren't very important, but they have a way of multiplying.
For example: you suddenly realize that the inspection sticker on your car or truck is about to expire. There really isn't much of a choice about getting it renewed, is there? Will the vehicle pass inspection without two new tires? Are those in your budget?
It has been my experience that "miscellaneous" is usually the largest single expense in every workable budget that has ever been created. You need to allow room for unforeseen expenditures. When making your budget, be sure to leave yourself some wiggle room. Do not budget every single penny of your net income. |
Related Topics: Debt Management Makes a Comeback,
Debt Management and Health, Debt Management Is a Good Thing
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