Debt, Finance, Foreclosure Advice

Nonprofit Debt Consolidation Loans

2009-01-05T11:23:00.000-08:00

There are many nonprofit debt consolidation loans available and many people choose this type of loan above others. If you have a lot of small bills that you are paying off every month, a debt consolidation loan could be the answer. You take out one loan that pays off all of your other debts, so you only have one repayment to make each month. It is much easier to budget and to remember the payments. Often it can work out cheaper too.

Not for profit loans are available from credit unions. These are co-operative associations owned by all of their members. This is different from other financial institutions such as banks which are owned by shareholders.

The first place that most people try for a loan would be a bank or finance company that you already do business with. If you have had a checking or savings account with a bank for a number of years, they are likely to feel better about lending to you because they can look back and see exactly what has been happening in your account.

However, credit unions can be a better option because they can often offer you more choices. They work through a different set of laws and regulations than those applying to banks, and they also have a different approach. You are more likely to get personal advice that will consider all aspects of your financial situation from a credit union. The interest rate is often lower too.

In a credit union, some members save and put their money into the credit union. Other members need to borrow and they take money out. The interest that they repay (after administration costs) goes to the members who have saving accounts, as the interest on their savings.

In the USA, credit unions are regulated by the Credit Union National Association, or CUNA. Credit unions have a 'field of association' which is the definition of people that they will lend to. They are not open to everyone. They might only take members from a certain geographical area, church, school or employer. In order to join a credit union so that you can save or borrow with them, you need to be in the 'field of association' for that CU. You can search CUNA's database to locate a credit union: http://www.creditunion.coop/cu_locator/index.html

When you find a credit union that will accept you, you also need to know if they offer debt consolidation loans. Then get a quote.

It is quite simple to figure out whether the loan will make you better off financially. One way is to look at the interest rate and compare it to the interest rates of your various small debts. If it is lower than most of the other balances that you owe, it will probably be a good deal for you. Or you can make an application or ask for a quote. Then check that the monthly payment that they quote you is less than the total of all the payments you are making right now.

Usually, the loans offered by credit unions have more favorable terms than a bank loan. Most people who are eligible would recommend nonprofit debt consolidation loans over loans from other financial institutions.

Government Grants for Debt Relief

2009-01-05T11:21:00.000-08:00

There is a lot of mistaken information going around these days about government debt relief grants. Some people believe that the government will pay to get individuals out of debt. Unfortunately that is not true. However, there may be other ways that the government can help you financially.

Grants

The federal government will not give you money just because you are in debt, but it may be that you will qualify for a grant for other purposes. That would help you out financially.

There are 26 different government grant making agencies. Many of these are set up to make grants for community projects, for example in the arts or community development. Others are research grants, for hospitals or doctors carrying out research into health and disease. However, some grants are available to individuals.

You have to be in certain situations to qualify for these grants. For example, there is disaster prevention and relief which helps people who have lived through disasters such as hurricanes or fires. Other grants may be available for housing or for developing your small business if you have one. You can see the grants available at www.grants.gov

Loans

There is also a government loans program. While this will not get you out of debt, if you qualify you could get a loan at a much better rate of interest than you would pay with most credit cards or commercial loan companies. Again these are usually for specific purposes such as business, housing and education (student loans).

Some of the government loans are administered through banks. So if you are asking your bank about a loan, it is always worth enquiring whether they have any government loans that you might be entitled to. You can find information about these loans at www.govloans.gov

Debt Relief Agencies

There are many debt relief agencies that are nothing to do with the federal or state government but may have a name that makes you think they are a government agency. Be cautious in dealing with any of these. Some of them are reputable agencies but others may be trying to deceive you.

You can be fairly sure that if a website ends in .gov, it is a government website. If it ends in .com or anything else, it is probably not. If you are in doubt, check the terms of the website or ask them.

If an agency charges you a fee for finding you a grant or helping you get out of debt, it is a sign that you are probably just dealing with a commercial debt counselor or debt relief agency. They may be able to help you reduce your debts but they will charge you something for their time. You have to decide if this is likely to save you money overall.

Sometimes a company may advertise that they have 'government debt relief' available. What they will usually offer you is advice on declaring bankruptcy. This process may be regulated by the federal government but it is not a grant. For most people there are better ways of getting out of debt than bankruptcy.

Even if it comes as bad news, it is better to know the truth about the options that are available to you. There is really not such a thing as government debt relief grants.

Debt Relief: Debt Snowballs

2009-01-05T11:16:00.001-08:00

The debt snowball is a form of self managed debt relief, a way to finally get rid of your debt. Yes, it is possible - and you can almost certainly do it, however much you owe.

The first thing to do is accept that your debt is not going to disappear overnight. It probably took many years to mount up and it will certainly take months, perhaps years, to work it off. Forget about winning the lottery. If you want to get out of debt you have to develop patience and determination. You also have to stop using your credit cards.

Next, work out how much you have to spend. Look at ways to decrease your expenses and increase your income so that you have enough to live on, pay your essential bills and make the minimum monthly payments due on your debts. Cut out any repeat billings that are not strictly necessary, like gym memberships and magazine subscriptions.

Then start to save. Before you can operate the debt snowball you should have minimum savings of $500 for a single person or $1000 for a couple or family. This money is for emergencies - not food or rent, you have to cover those from your income, but for example to repair your car if you need a car for your work.

The reason you need this amount of savings is so that if an emergency occurs, you will not borrow or use the money that you need for your monthly payments.

Then you can start the debt snowball. Make a list of all of your debts, large and small. Include everything, even $5 that you borrowed from a friend that they never expected you to repay. Arrange the list in order of how much you owe, lowest first (the total debt, not the monthly payment). You should finish up with a list that starts maybe with the $5 you owe your friend and ends with your mortgage or your biggest loan.

Now you will take all the spare money that you have each month - the money that you were putting toward your savings before - and start to pay off those debts, beginning with the smallest.

Some people will tell you to pay off the highest interest debts first and while this makes sense in theory, it does not work in practice because we are not motivated by saving a few pennies here and there. We are motivated by a sense of achievement, and we get that whenever we can cross one debt off our list.

Imagine how you will feel taking that $5 to your friend. Way, way better than if you put it toward one of the bigger debts. The effect of the debt snowball is to motivate you to keep paying off your debts by having you get that great feeling of achievement as often as possible in the beginning.

To maximize the feeling, give yourself a treat whenever you pay off a debt. Don't make it an expensive treat of course, but do something that you enjoy. If you are married or have a family, the treat should be for all of you. Make getting out of debt a whole family experience.

Once you experience the feeling of paying off the first few debts, you will never want to go back. That is why it is called a debt snowball - you start it off and then it goes on rolling under its own momentum. Use the debt snowball to get yourself the best kind of debt relief.

Credit Card Debt Settlement: Your Options

2009-01-05T11:15:00.000-08:00

Credit card debt settlement is an option that you may be able to take if you have long outstanding credit card debts where you are not making the monthly payments.

What Is Discounted Debt Settlement?

Sometimes, if a company can from its records that you have not paid anything for a while and they figure it is not likely that they will get the full amount of the debt plus interest from you, they will sent you a discounted debt settlement offer.

This means that they will write with an offer where you can pay perhaps 50% of the debt and they will write off the rest. Usually they will want this all in one payment, but if it is a large amount they may accept it in two or three installments.

Often the letter will come from a debt collection agency. This can mean that your original lender has signed over the debt to the debt collectors, or it may simply mean that the agency is working for a percentage of whatever they can recover.

Why Do They Offer Debt Settlement?

The finance companies offer this when they can see that you are having so much trouble making payments, they might have to take you to court to get the whole amount, and maybe they wouldn't even get it then, because you might declare bankruptcy.

So they have a choice between incurring the cost of court proceedings and perhaps still getting nothing from you, or offering you this deal where you pay 50% or whatever. They figure they will be better off accepting half of what you owe, than trying to get the full amount through the courts.

What Should You Do?

Whether you should accept the offer depends on many factors.

First, you should be aware that accepting this will affect your credit score in a negative way, because you will not have paid off your whole debt. If you can pay the full amount then it is better for your credit record if you do so. However, you probably would not have gotten to the point of receiving a settlement offer if you could pay in full. Accepting the settlement offer is usually better than having court actions against you.

Second, you will need to consider how you can make the payment that they want. Does it mean that other debts will go unpaid for a couple of months? What will be the consequences of that? Would you have to miss rent payments and perhaps lose your home? Think carefully about how you can raise the money.

Third, even if you decide to accept it may be worth trying to negotiate a lower settlement. This means calling them and saying that you cannot pay what they have asked for but you could pay 40% or whatever. This is often worth trying because it can save you some money without extra penalties.

When you call, write down the person's name that you speak to. If they accept your offer, ask them to put it in writing and wait for the letter to come before you pay. Then write a letter to send with your check stating that this is full and final settlement of your debt, and ask them to write back acknowledging that the debt has been paid.

Be aware that if you decide not to accept the offer, then after a while they may take the matter to court. A court may judge that you must pay the whole amount plus the costs, so you would have a lot more to pay.

If you decide to accept, always read the small print on any offer. You need to be sure this is full settlement and they will write off any additional debt, so they have no right to come back to you in future demanding more.

When everything is complete, check out what has been posted to your credit record. If there is any mistake you should ask for it to be corrected right away and you will need to send copies of all of your correspondence. So keep all of the paperwork when you accept any credit card debt settlement.