Thursday, August 24, 2006

The 7 Secrets To Getting and Staying Out Of Debt

By R. Sallay

As vice president of the American Credit Foundation, a nonprofit organization that helps individuals and families manage their debt, Mike Peterson knows firsthand how financial problems can wreak havoc in one’s life. Each day, counselors at the Midvale, Utah-based foundation help desperate clients dig themselves out from under piles of unpaid bills, stern notices from collection agencies and ominous foreclosure threats.

So, exactly what does it take to get—and stay—out of debt?

Here are 7 secrets that will help set you on the right path.

1. Cut Back on Credit Cards
Banks love to send offers for new credit cards to consumers, and mailboxes overflow with low-interest—even no-interest—“unbeatable deals.”

This doesn’t mean you should apply for them and risk running up large bills.

“Ideally, one should have no more than two or three credit cards,” Peterson says. “I would recommend a Visa or MasterCard, followed by an American Express card. Having two or three different cards will allow you more flexibility when utilizing credit, as some companies do not accept one or the other.”

2. Understand the Consequences of Breaking Rule #1
Even if you have excellent credit and zero debt, applying for too many credit cards can damage your credit rating.

“Generally, inquiries for new credit can affect your credit report for up to two years,” Peterson says. “Having too many credit cards—whether carrying balances or just high amounts of available credit—can negatively impact your credit score. Banks will look at your credit based on what you currently owe and also what ability you have to immediately incur additional debt.”

3. Stop the Spending
To minimize or avoid debt, monitor your monthly expenses—and halt spending when your budget starts to get tight.

“An additional reason to limit the number of credit cards you have is to prevent the possibility of not being able to keep track of all of the expenses you have incurred, which may make it difficult or impossible to pay them off each month,” Peterson says.

If you reach that point, he has one simple rule: “No more charging.”

“Commit now to discontinue the use of credit cards,” he says. “In fact, cut up the cards you have, call the companies, and close the accounts. If you must have a credit card for work, try a debit card. These are widely accepted, and the funds are pulled directly from your checking account.”

Don’t apply for another credit card until you can pay off all balances due and be 100% debt-free.

4. Pay More Than You Owe
Once you fully understand the monthly minimums you owe on each debt, add 5% or 10% to your total payment, if possible.

“The addition is not mandatory,” Peterson says, “but it will dramatically improve the success of your debt-reduction program.”

5. Stay the Course
Continue to pay 5% to 10% more on each debt until all debts are completely paid off. Even if your minimum payment requirements decrease as your debt diminishes, keep making the same payment, Peterson urges.

“And if one credit card is finally paid off, make the same total payment each month,” he says. “Just apply the extra funds to one of the other debts.”

6. Do the Math
Before you dig in your heels and say, “I just can’t do this,” it’s worthwhile to see how Peterson’s advice plays out in real dollars.

“If you owe $2,000 on a credit card with a 21% interest rate, and you make only the minimum payment each month, you will owe on this account for approximately 19 years—and pay a total of $6,725.64 in principal and interest,” he says. “The steps I’ve already discussed will help you pay off the debt in a fraction of the time. The emotional commitment to make this plan work may not be all that easy, but using this program—even without the additional 5% or 10%—will allow you to pay off the debt in about 8.5 years, and you will save approximately $2,387 in interest.”

7. Turn the Tables—and Start Earning Money
If you pay off your $2,000 debt in 8.5 years (versus 19 years of minimum payments), you will have 10.5 years to place that monthly minimum payment in an interest-bearing bank account, retirement account or other investment.

“Interest is a magical tool,” Peterson says. “Creditors use it to their advantage all the time. It can also work in your favor if properly implemented into the right program. If the steps mentioned above are taken, it won't be long before interest is working for you, instead of against you.”

Australian Debt Reduction offers all Australian consumers free debt consultations to assist them in getting back on top of their debt. They explain debt consolidation in simple terms and if you have over $4,000 in debt there are methods available to the Australian public you may not have heard of to help limit the amount of interest paid and rapidly reduce your debt. Visit Australian Debt Reduction at or contact them directly on 1300 306 272


Sunday, August 20, 2006

Credit Card Debt Management

by ElmerFizz

Credit card debt management

Credit cards that are used in moderation could be helpful in managing your finances. This means that splurging through the use of credit cards is almost financial suicide.

Here are few tips to manage the way you use your credit card to prevent you from acquiring debts that could lead to your financial death (excuse the pun).

1) Planning. Before purchasing any product using your credit card, make sure to provide yourself with a plan on how you will be able to pay for your credit card bills. Prioritize your needs before your wants. Purchasing grand items that you don't really need might give you that temporary high that impulsive buyers are addicted to. But that temporary high would eventually turn to long-term down feeling due to your piled up debts.

2) Limit. For you to be able to manage your debts and payments, never go overboard when it comes to your credit limit. If it's possible, it will help a lot if you just use about two-thirds of your limit.

3) Statement of account. Keep a record of all your credit card transactions for future reference. In order to prevent inaccuracies of bills and fraud, always remember to check the list of your purchase for the month. If your list and the statement of account do not match, report this to your bank.

4) Piled up debt remedies. There are a number of steps you have to do in order to escape these financial problems.

* Determine the amount you need to pay and provide yourself with a plan that would fix your finances without pressure.

* Consider paying the minimum amount to be paid. Then, ask for debt consolidation options that would make it a lot easier for you to pay your debts. If you don't know how to solve your financial problems, there are financial advisers that could help you with your credit card management. They might offer you financial assistance through bank loans that would allow you more time to pay aside from the debt consolidation method. But of course, remember to research on the agency before getting involved with them. Don't just go saying amen to whatever they offer since there is a possibility that they could cause the situation to aggravate.

Self-control is the best way to prevent getting debts that you won't be able to pay immediately. But if you're already in the pits, considering the abovementioned suggestions won't hurt.
For More Information on Credit and Debt see: Reprinting this article is permitted if all hyperlinks remain active. Please comply.


Tuesday, August 15, 2006

Using a Home Equity Line Of Credit To Repay Credit Card Debt

by Joseph Kenny

Two financial phenomena have taken place in the UK over the last decade. On the one hand, we have increasing become a nation of debtors, running up trillions of pounds in short-term debt. On the other hand, house value have increased exponentially during this period and many of us now have massive amounts of in-built equity value in our homes. It may seem natural, therefore, to use the proceeds of one to pay off the debts of the other. However, using a home equity line of credit (HELOC) may not be the best method of debt consolidation available to you.

What is a HELOC?

Essentially HELOC is exactly what it says it is. As a homeowner you have an asset - you home. Because housing prices in the UK have increased dramatically in the past decade, many of us have positive equity in our homes. To repay outstanding debt, you can free up some of this equity with a loan, against which you provide security - your home. You have now just completed a HELOC.

Why is this a good way to consolidate my UK credit card debt?

Many see HELOC as a good way to consolidate their UK credit card debt because, as a secured debt, the interest rate on the loan is much lower than the interest rate they're currently paying on their existing outstanding unsecured credit card debt. In addition, the repayment terms of the consolidated debt may be more affordable, i.e. the monthly repayments may be lower.

Why is this a bad way to consolidate my UK credit card debt?

There are essentially two principal reasons why HELOC may be considered a bad way to consolidate your debt. On the one hand, and very importantly, if you elect to consolidate your debt using a HELOC, you need to be aware that you are literally gambling with your home. If you fail to make repayments under the line of credit provided to you, as a secured loan, you stand to lose your home. Consequently, this can be seen as an extremely risky way to pay off unsecured debt, against which a claim against your biggest asset - your home - would be far more remote.

The second reason why HELOC are seen as not being a particularly good way to consolidate credit card debt is because, unlike in the past, there are now other alternative methods that credit card debtors can use to try and consolidate and pay off their credit card debt. Examples of this may be the unsecured personal loan or even the 0% interest offered as a promotional incentive to transfer your credit card balance to another UK credit card provider. In short then, HELOC are seen as an extreme measure to a short-term problem.

Having said there are two principal reasons why HELOC is seen as a bad way to consolidate credit card debt, there is in fact a third reason. In most cases credit card debtors use HELOC as a short-term measure to consolidate their credit card debt. Most credit card debtors who consolidate their debt with HELOC financing do not cut up their credit cards, rather, shortly thereafter, the credit card debtor will have run up another line of credit against their credit card. To repay this line of credit the homeowner will arrange another line of credit against the residual equity in their home. Before long, the home no longer has any residual equity left, the homeowner has a number of loans they need to repay, and another line of credit remains outstanding on their UK credit card. This type of financial mismanagement is all too easy to do today, but it coffin nail to your long-term financial future, so think long and hard before using a HELOC to consolidate your UK credit card debt.
Joseph Kenny writes for the Personal Loans Store, where you can home loans and read the article on Home Equity Line of Credit.
Visit today:


Saturday, August 12, 2006

The Effects of Consumer Debt

By Nicola Bullimore

Consumer Borrowing
Consumer borrowing in the UK has now crashed through the £1 trillion barrier. 80% of this is due to credit card borrowing, loans and mortgages. How are people managing to handle their debt and what effect is debt having on families today?

The National Consumer Council reports that 6 million families in the UK are already struggling to make repayments towards their debt, and Citizens Advice reports that over the last 6 years, they have seen a 44% increase in the number of people seeking debt advice. This may be just the tip of the iceberg. There must be many families in the UK who have debt problems, but are not aware of the free help and advice available.

Tackling Debt
According to a DTI survey carried out in 2002, a household is likely to be over-indebted if:

25% of your annual income is spent on repaying Creditors
50% of your annual income is spent on repaying credit and mortgages
You have 4 or more companies that you owe money to.

People find it difficult to make repayments for a number of reasons. Generally, the underlying cause is some kind of change in personal circumstances such as job loss, divorce, illness or a new baby. In these instances some people may resort to more borrowing in order to pay creditors or household bills. This is not always the best option.

Effects of Over-Indebtedness
The personal effect of struggling to repay debt can be far reaching. Sometimes a lack of financial awareness can lead to stress, depression, anxiety, mental health problems, relationship breakdown and even suicide.

Raising Financial Awareness
The Government recognise the need to raise financial awareness amongst the general public. The financial cost of debt is not only on an individual level, but there is also a cost to society in general.

People who experience stress due to their situation, will probably seek advice from their GP and may take time off work, therefore, this has an effect on already hard-pressed NHS and productivity due to absenteeism.

People who have had homes repossessed need to be re-housed, generally by the local Council. Those who seek legal aid due to debt issues also incur a cost to the taxpayer.

The Solution before the Problem
Will raising financial awareness alone tackle the issues of debt problems? It helps for people who are already struggling with debt, but are there other areas the Government should be looking at?

If you pay your creditors on time, regardless of what it takes to pay them, you are classed as a good payer and therefore, not a risk when it comes to additional borrowing. In fact, your finances could be in turmoil and you could be taking money from one card to pay another but you may still obtain even more credit.

The freedom creditors have to advertise loans, credit cards and mortgages could be challenged as well as how decisions are made regarding lending.

If people, who are currently in financial difficulty, find they cannot borrow more money, they should be made aware of the free financial advice that is available. Companies such as Payplan, a Free Debt Management Company can negotiate repayments with creditors, at no charge, so that monthly payments are reduced and become more manageable and all available surplus goes to pay off debt.

Read more articles by: Nicola Bullimore


Wednesday, August 09, 2006

When is the Best Time to Consolidate Student Loans?

by Chris Studer

There is no better time than the present to consolidate student loans. Consolidating or refinancing student loans can easily save borrowers up to 52% on their current loan payments so most people are anxious to consolidate as soon as possible.

Many students take out subsidized and unsubsidized Stafford loans every year of college - a total of 8 different loans, all accruing interest at a variable rate, and all showing as open and unpaid lines of credit on credit reports. Many students also take additional loans throughout their college years such as Perkins loans and various industry specific loans, further increasing the benefits of a single low interest loan payment.

By consolidating your loans, you'll take out one fixed rate loan to pay off all of the other unpredictable variable interest rate loans. The repayment period of a consolidated loan is longer, meaning much lower monthly payments. For those just out of college and starting careers, lower student loan payments offer a safe way to improve cash flow and reduce dependence on credit cards.

Unlike regular student loans, there are no deadlines for consolidating, although consolidating during certain times of the year can result in more savings. For those planning ahead, the absolute best time to consolidate is during the six month post graduation grace period. Refinancing student loans during this grace period means locking in to 0.6% lower interest rates than are available after the grace period has ended.

The loan consolidation process can take several months so it's critical to start the application processes soon after graduation. Don't worry about sacrificing your grace period by applying early. For federal loan consolidations you can enter your grace period end date so that the loan won't begin until that date.

The most important time to refinance in general is when you need to increase cash flow and reduce or reorganize your monthly bills. Making high student loan payments and having just enough left over to only pay the minimum balance on high interest credit cards just doesn't make financial sense. Through consolidating, the average $350 monthly loan payment can be reduced to around $165, freeing up an extra $185 per month to pay down high interest debts.

If possible, save the money and free yourself from debt altogether. $185 per month saved over the course of 5 years adds up to $11,000 to purchase a vehicle outright, start a business, or use for a down payment on a home. Although the loan amount is longer, leveraging your payments so that you pay less when your career is young can give you the cash flow needed to get your life off to the right start.

Any time is a good time for refinancing student loans. Low fixed interest rates and longer repayment terms are a winning combination for anyone looking for a smarter way to manage their monthly budget.
ScholarPoint Financial, Inc. is a national online consumer lending company specializing in student loans. We believe in combining state-of-the-art technology with world class service to help students and parents easily gain access to data, become informed, and enjoy the process of obtaining a college loan. Learn more about Student Loan Consolidation at


Monday, August 07, 2006

The "Credit Card Debt Termination" Scam

By: Charles Phelan

"Legally terminate credit card debt! You can be debt-free in 4-6 months!" Advertisements like this are for a new type of program that has spread via the Internet over the past few years. It's called "Credit Card Debt Termination," and victims are paying up to $3,500 for this bogus service. In this article, I'll review the principles behind this program and explain exactly why it's a scam to be avoided.

First, let's get our definitions straight. The scheme I'm describing here should not be confused with Debt Consolidation or Debt Settlement (also known as Debt Negotiation), both of which are legitimate and ethical methods for debt resolution. The easiest way to distinguish the Credit Card Debt Termination scam from other valid programs is based on the central claim that you really don't owe any money!

With Debt Consolidation, you pay back all of your debt balances. With Debt Settlement, you pay back a lower amount (usually around 50%) while the creditor agrees to forgive the remaining balance. However, with the bogus Credit Card Debt Termination program, promoters claim that you won't need to pay anything at all (except their outrageous fees, naturally). They make the surprising claim that you can legally wipe away your debts simply by using their super-duper magic documents. Based on some legal mumbo-jumbo, the claim is made that you really didn't borrow any money from your creditors!

In order to understand this scam, a little background is necessary. Remember the tax protest movement back in the 1970s? People were claiming that the IRS tax collection system was unconstitutional, and based on their misinterpretation of the tax code, they refused to pay taxes. The IRS came down hard on the tax protest movement, and through the court system, they blew holes in all the legal arguments put forth by the protesters. The Credit Card Debt Termination scam is a lot like the tax protest movement. In fact, among collection professionals, it's called the "monetary protest movement."

Just like the tax protest movement, there is a common theme that runs through all of the promotional materials issued by the monetary protestors. The basic idea is that our Federal Reserve monetary system and generally accepted accounting principles (GAAP) do not permit banks to loan out their own money. Therefore, according to their interpretation, the credit card banks are the ones running the scam on the American public.

Stay with me here, because the logic is pretty strange. If a bank cannot lend its own money, how does a credit card bank extend credit? The claim here is that your credit card agreement itself becomes a form of money (known as a promissory note) the moment you sign it. The idea is that the bank "deposits" your agreement as an asset on their books, and then any credit you use is offset as a liability against that asset. In other words, the core concept here is that you literally borrowed your own money from the credit card bank.

So let's say your balance with ABC Credit Card Bank is $10,000, which you borrowed against the card to make everyday purchases. The scam promoters say all you need to do is notify the bank that you want your original "deposit" back. However, you will permit the bank to offset the amount you borrowed against the amount you have on "deposit." Presto! You don't owe the balance anymore!

Now, as you can imagine, the banks don't take kindly to such tactics. Many of the consumers using this technique are getting sued by their creditors. But the scammers have more tricks available, as if the "smoke and mirrors" financial nonsense wasn't enough. One of their techniques is the use of bogus "arbitration" forums. Arbitration is of course a legitimate system that allows businesses and individuals to resolve disputes without going to court. What do the scammers do? They coach people on how to set up a fake arbitration forum, for the express purpose of making a dispute against their creditors! Naturally, the creditors will not send representatives to some non-existent arbitration forum, so the consumer gets to rubber-stamp their own arbitration award. If they get sued in a regular court, they present their bogus award to the judge in the hopes that the creditor's lawsuit will be dismissed.

There are other techniques used by promoters of this scheme, but the key point to remember is the central claim that your credit card debt does not really exist. Of course, it's all nonsense based on a misinterpretation of our monetary system, and if you step back and think about for a minute, the truth seems pretty obvious. What these scammers are saying is that the entire $700 billion credit card industry is operating on an illegal basis! Even if the legal theory used by the promoters were true (which it isn't), do you think for a moment the government would allow this giant industry to go under? That's exactly what would happen if the promoter's claims were proven true and used on a widespread basis.

The Federal Trade Commission, which has jurisdiction here, hasn't stomped on these con artists yet, but it's only a matter of time. Unfortunately, in the meanwhile, consumers are being bilked out of millions of dollars for a worthless program that will only get them into deep trouble with their creditors. If you are approached by someone offering to wipe away your debts using this system, I strongly recommend you run in the other direction while you hold on tightly to your wallet or purse.

Remember, you can eliminate your debts if you take a disciplined approach to your finances, make a budget and stick to it, and don't use your credit cards unless you can pay off new balances in full each month.

Good luck in your financial future!

Charles J. Phelan has been helping people become debt-free without bankruptcy since 1997. A former executive in the debt settlement industry, he teaches the do-it-yourself method of debt negotiation. Audio-CD material plus expert personal coaching helps consumers achieve professional results at a fraction of the cost.


Friday, August 04, 2006

Consolidate Debt to Make Debt Repayment Easier

by Thomas Erikson

Consolidate debt and take the worry out of making monthly payments. When was the last time a month passed by without you stressed about bill payments, or how much you charged on your credit cards?

Your debt just seems to keep growing and you find it harder and harder to make ends meet. With the average household having 10 credit cards, you are probably finding it more difficult to keep track of multiple credit card payments, bills, loan statements, and more. If you consolidate debt, you can make it much easier to pay off your debt.

When you consolidate debt, you combine your multiple debts into one easy to manage loan. By doing this, you make one payment each month to one lender instead of having to keep track of a bunch of different debts from multiple lenders. It makes it much easier to manage and you lower your risk of missing payments and ruining your credit.

Negotiating a debt consolidation loan allows you to get a lower interest rate. In order to be competitive, lenders usually offer a lower interest rate than you are currently paying on your outstanding debts (especially credit cards). This can save you a great deal of money over the long run.

When you consolidate debt, you lower your monthly payments. Having only one loan lowers the amount you will have to repay each month compared to the total amount you have to repay for your multiple debts.

Different options are available to consolidate debt - secured loans or unsecured loans. Secured loans use collateral to back the loan in case of default. These types of loans usually provide the lowest interest rates since the lender's risk is offset by the collateral. Unsecured loans are backed only by your credit worthiness and do not require collateral. Since only your reputation backs the loan, the interest rate is usually a little higher than a secured loan.

Types of secured loans include a home equity loan, a home equity line of credit and cash-out mortgage refinancing. Some more creative methods include automobile refinancing, a 401k loan and using your whole life insurance.

Types of unsecured loans include personal loans. You can also use no interest credit cards to consolidate your credit card debt through balance transfer but you need to know what you're doing. Done improperly, they can cost you dearly. Done properly, they can save you a lot of money.

Although you struggle with debt everyday now, you can make it much easier to repay your debts. If you consolidate debt, you can make your debt situation much more manageable. As your debt keeps growing, now may be the time to act.

Thomas Erikson is co-founder of which provides debt consolidation information and solutions. Please link to this site when using this article.


Wednesday, August 02, 2006

Interest Rates Are Rising, What Can You Do?

by Leo Love

Interest rates are rising, what can you do? The recent tension in the middle east and the sharp rise in fuel prices have already caused a stir in the Reserve Bank in Australia. Today they increased interest rates for the second time this year. People were on the news saying they were already cash strapped and had been watching their spending. They are going to feel the pinch over the next few months. As real estate property investors, what should we do then? Here's is a list of priorities that need to be addressed: First priority.

Exercise extreme caution and prudent due diligence on potential deals

Look at ways to reduce debt, particularly in the following situations:

* Personal debt (credit cards, personal loans) * Home equity funded personal debt (equity loans used for lifestyle) * Investment debt against non-income (i.e. growth) bearing property

Review your property portfolio

* Have strategies for protecting interest rate sensitive property * Consider cutting the asking price for your real estate investment property that has been on the market for some time * Re visit your calculations on your present deals based on interest rates being .75% higher. Act to protect your self and provide a buffer

Now would be an appropriate time to see your financial adviser and review your investments assets

Second Priority

Build cash reserves. Cash is king, money talks B/S walks.

Increase your financial literacy. Anyone can make money in a boom, but it is much harder in uncertain times. Get your self more education and a mentor, attend more seminars.

Renegotiate and lock in employment contracts, particularly subcontractors

Defer non-essential lifestyle expenditure

Third Priority

If you are looking to borrow money for a real estate investment property, start working on a business plan

Keep networking with people, you may not need them now, but you may need them in the future, proximity is power! A good peer group of people will propel your wealth creation.


Risky deals that require hard cash

Using your home equity to fund non-deductible lifestyle debt (jet ski's, holidays, motor bikes and cars etc)

Don't quit your job to become a full time investor

The financial excess that was in the boom times will quickly disappear when higher interest rates arrive. Times have changed and will change further. It's is critical that you always educate your self to the changing trends in real estate investing. If you need help then seek it out immediately, money and time spent to do this will pay huge dividends in the long run.

To your investing success.

Leo Love

PS If any of your family or friends is interested please pass this on to them.