admin on March 13th, 2009
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Now more than ever before, radio and television advertising is flooded with ads purporting to resolve your debt and credit issues. Are these debt settlement firms a panacea or another pitfall? If you’re not careful, you will find yourself not climbing out of the financial hole you’re in, but digging yourself deeper into debt.
Credit counseling is a good way to get started. You will find most reputable agencies are working with clients to ensure that your income matches your expenses at a minimum. Ideally, you want your income to exceed your expenses, but you need to get to break-even before taking the next step. It starts with curbing your spending. It moves onto establishing a solid budget in order to get income and expenses into balance. Moving beyond that - the work begins to initiate meaningful savings plans.
For those in the most serious situations, many firms now offer a fee-based debt management system to help the client restructure and repay their obligations. These are most often offered on a percentage basis or a monthly fee basis with you, the client, paying money to the debt management firm. From that, they pay your obligations and take their cut.
So what’s the pitfall? Too many people are still using their credit cards. They’re not budgeting for anything. They throwing good money after bad, bridging the gap on one end of the equation with the "help" of the debt management company while still supplementing their income with credit card spending. Not good.
The lure of an attractive advertising campaign can be strong. The television or radio extends its imaginary hand, promising to "eliminate your debt." It’s hard, when you’re drowning in a financial morass, not to reach out and grab hold of that helping hand. Truth be told… anyone claiming to be able to "eliminate your debt" is highly unlikely to back up that promise. Negotiate new terms on your behalf? Probably. Consolidate your debt into "one manageable monthly payment?" Sure, if you stop increasing your debt load.
Never forget, you can always go to your Better Business Bureau in order to ascertain the quality of the firm you are intending to use. You will see the firms’ ratings with regard to overall level of service and customer complaints and are awarded a letter grade of A+ (being the best) to F (for failure). You must use due diligence!
Other typical pitfalls and issues to avoid:
- Companies that offer you a document that claims to absolve you of all of your debt.
- Companies that charge fees "up-front" or fees that are unreasonable steep.
- Lenders can still sue you even though you’re hoping to settle.
- The process can take several years to accomplish, with the industry average being about 36-months.
- This will negatively impact your credit and debt interest will continue to accrue during the process.
- Companies that advise you to stop communicating with your lenders or stop making payments to your lenders.
Tips and information for you:
- Always communicate with your lenders. The worst thing you can do is cut them off.
- Find a firm that is certified with the National Foundation for Credit Counseling.
- Lenders would rather get something instead of nothing.
- You will probably have to pay income tax on the amount of the forgiven debt.
- Do not sign any contracts or agreements until you’ve read and understood them completely.
- Check the laws in your state - some, for instance, prohibit the collection of fees earlier than "half-way" through the process.
Most importantly, client beware. As with any industry, there are plenty of bad apples out there who will make your situation potentially far worse. Emails and websites tout a way to consolidate bills into one monthly payment without borrowing; stop credit harassment, foreclosures, repossessions, tax levies and garnishments; wipe out your debts; or rid bad credit. These offers often involve bankruptcy proceedings , but they rarely say so.
Proceed with caution.
admin on January 9th, 2009
An often overlooked aspect of the nation’s foreclosure crisis is the displaced homeowner after the foreclosure is final. There is a moment of finality for the fight to keep a home, but the perils of momentary homelessness are just the beginning of their problems. Additionally, the financial conditions that lead to the foreclosure may be far from over for the homeowner after the auctio
Other than children changing schools and the lack of cash to even seek legal advice, the first priority to the foreclosed homeowner is to find a new home. However, without cash for a rental security deposit or decent credit scores to verify creditworthiness, a foreclosed homeowner may discover finding a place to live difficult. Many municipalities offer counseling to assit in finding affordable housing and information on non-profit credit counseling agencies. Foreclosed homeowners with FHA insured mortgage may qualify for $1000, if they voluntarily vacate foreclosed homes in good physical condition. Statistically, foreclosed homeowners do become homeowners again, but re-establishing credit is difficult in financially restrictive times and can often take as much as two years. Millions of homeowners are currently fighting foreclosure, but hundreds of thousands have lost their homes and are facing increased challenges as the economy is predicted to worsen.
admin on November 26th, 2008
The nation’s record foreclosure rates had given birth to the new profession of mortgage auditors. As the foreclosure rates increases at a rate of 5 percent per month, homeowners have sought any means available to stay in their homes. At foreclosure proceedings, the lender must show proof of ownership in compliance with the law. The law requires that all documentation from the loan process to the closing documentation must be present and accurate or a foreclosure proceeding may be thrown out. If a foreclosure proceeding is dismissed, the lender is forced to modify the terms of the loan to avoid foreclosure.
One former mortgage originator began reviewing friends and family’s loan documents and later decided to charge a modest fee to help homeowners possibly avoid foreclosure. Proponents of mortgage auditors believe this service is a useful watchdog to insure lenders complied with the law. One in nearly every 700 homeowners receive a mortgage loan default notice each month. Mortgage auditors are finding their service a benefit to homeowners and necessary agent in consumer rights protection.
admin on June 12th, 2008
Credit Counseling is an education service that is provided to individuals interested in learning how to avoid taking on debt that cannot be repaid. In many cases, credit counseling is part of the process for individuals who are trying to establish a debt management plan for themselves. As you receive an education in relation to debt and credit, the education service provider will often be working with the creditors with whom you are involved. The most important thing to understand when it comes to credit counseling is that this is not a quick, get-rid-of-your-debt scheme. If you are involved in credit counseling, you need to have a sincere desire and commitment to eliminating and controlling the debt that you have in your life.
If you are involved in credit counseling, one of the first steps that might be taken is the closing of all of your included accounts. This is done in order to help prevent you from acquiring any more debt. When your debt is consolidated, you will most likely be paying less in your one consolidated monthly payment than you would have been paying if you were to continue paying individual monthly bills. When this occurs, you will also most likely notice that your interest rates have changed. People who are involved in a debt management plan as a part of credit counseling will often receive lower interest rates, which will help them to pay off their debt more quickly than they otherwise might be able to pay it off on their own.
Despite the fact that there are a number of positive benefits that individuals can take out of credit counseling and a debt management plan, these processes are not without criticism. In the 1990’s the number of credit counseling services increased significantly and it is believed that this increase is linked to some of the abuses in the industry that have surfaced. Individuals interested in credit counseling services need to be very careful that they are not scammed. Research needs to be done in order to validate the credit counseling services that you may be interested in working with in order to improve your finances. To help with this, you may want to consult the Better Business Bureau in order to make sure the company you are interested in is in good standing with the Bureau.
When you choose a legitimate credit counseling service, you will be on your way to an increased credit education and credit score. Financially, this education can really help you to turn your life around by helping you with the debt you have already incurred and educating you in order to limit your debt in the future.
