SHOULD I TRY TO SETTLE MYSELF, USE A LAWYER, OR A SPECIALIST COMPANY?

This question most debtors ask themselves

This question most debtors ask themselves

This is the question that most debtors ask themselves when trying to figure out the best way to go about clearing their debt. Each situation is different and the circumstances of your debt will determine whether you will have to settle by yourself or if you will have to hire the services of a lawyer or the services of a specialist company. Debt settlement is a situation whereby you negotiate with your creditors, using lawyers or specialist companies or by yourself, to have the amount owed reduced.

Hiring a lawyer will come in handy when you need someone to analyze your situation and give you legal advice that is practical. A lawyer will be able to advise you if you will have to settle your debts or file for bankruptcy, depending on your situation. Also, should the creditor sue you, a lawyer will be able to defend your case in court. Ensure that your attorney is licensed and one who values integrity by upholding the ethical standards.

Opt a company to help you to consolidate

Opt a company to help you to consolidate

You may opt to use a company to help you to consolidate your credit card debt and make the process of clearing debt easier. The debt settlement companies require that you pay them a monthly amount while they negotiate with your creditors. The amount that you pay is then divided into savings that will be used in paying off your debt as well as the service fee charged for the work they are doing on your behalf.

When you have a number of credit card debts, you may opt to take a credit card consolidation loan and worry about one payment. When you consolidate credit cards, you will be able to get the lowest interest rates and benefit in making lesser payments over time as compared to paying the credit card debts individually.

The debt consolidation companies will be able to advise you on how to consolidate credit card debt. This will enable you to sort your finances as there will be no more hassle of making multiple credit cards and debt payments and you will be able to possibly increase your cash flow because bill consolidation reduces the monthly expenses.

Hire the services of a lawyer

Hire the services of a lawyer

You may opt not to hire the services of a lawyer, specialist companies such as a debt settlement company or to settle for debt settlement so as to get credit card debt relief.

This may be because you are wondering how you may afford such services yet you are already struggling with your debts. Should you choose to settle yourself, you will have to equip yourself with the knowledge and laws related to debt collection.

It is better to do debt settlement by yourself when you are certain that this is the choice that you will settle for and if your creditors are yet to start suing you for the debt owed.

While considering debt settlement, the option that you will settle for depends on your financial situation. Also, while you may hire the services of a lawyer or specialist companies, be sure to get legitimate ones so that you may not end up losing your money to scams.

WHEN DOES DEBT CONSOLIDATION MAKE SENSE?

Debt consolidation makes the most sense when a consumer is very deep in debt with high interest rates and large monthly payments.  Debt consolidation combined with a debt repayment plan and/or credit counseling can help a consumer pay off all of his debts and be debt free within 3 to 5 years.

Although, this isn’t the case for everyone that is in debt it can offer some relief and give consumers the opportunity to reorganize their finances and in some cases even save a little money.  If a consumer feels that debt consolidation is the best option it is very important that he choose a consolidation company that teaches methods on changing spending habits not one that simply reorganizes the debt.

It is equally important that the counselors work with consumers on maintaining the new habits even for a period of time after the conclusion of the consolidation.

The wrong debt consolidation company will make a lot of promises, but not deliver. They will promise lower monthly payments, lower interest rates and the convenience of a single payment. But, in reality they can be associated with high fees, greater debt and potentially more interest payments.

Things to Consider:

 

Things to Consider

Things to Consider

  1.  Debt consolidation is not a cure all.  The consumer must work on new habits.  It wasn’t the debt that got the consumer in the position that he was in it was the consumer’s choices.
  2. The most expensive service is not always the best service.  A good debt consolidation company will not cost the consumer more in the long run.  A consumer should beware if the company charges hefty fees for their services in areas such as high-interest rates, high upfront fees, and/or high monthly fees.
  3. The consumer will be paying more interest over time than if continuing to make their usual payments.  Consumers need to be careful because lower monthly payments could result in extending payments which can be more expensive over time.

Unfortunately, the prospect of being debt free is highly romanticized and in most cases debt consolidation doesn’t make sense.  Debt consolidation companies are the same as any other financial institution; they are in business to make money.  A few tips for consumers to avoid being taken advantage of include:

Tips for Consumers

Tips for Consumers

  1. Consumers should calculate how much they owe and their current interest rates and then determine how long it would take them to pay off the debts by maintaining their current rates.  Once all calculations are done consumers should compare their figures with the length of time they would be in debt consolidation.  In most cases a lower interest rate is more expensive than simply increasing the current payment.
  2. Consumers should also check to see what the monthly payment on a debt consolidation loan would be.  If the loan payment is more than what the consumer is currently paying it might be more beneficial for the consumer to increase the current payment.  If the loan payment is less than what the consumer pays each month the consumer could end up paying more in interest in the long run.
  3. Consumers should make sure that if they choose debt consolidation that the company will incorporate credit counseling so the consumer can learn how to use credit responsibly once the debt consolidation loan is paid in full.
  4. If the consumer is being pressured into a debt-management plan that he pays through the company he should be weary.
  5. Consumers should watch out for imposters.  Any deal that appears to be too good to be true, it probably is.
  6. Consumers should shy away from companies that promise to remove negative items from their credit reports.  If an item on a consumer’s credit report is true there is no way to remove it.  The only thing that the consumer can do is make it less negative.
  7. If a company promises to eliminate debt through obscure laws it probably is not legitimate.  A consumer’s debt is a legal obligation and it should be paid back.

Mathematics and Behavior Are the Key to Financial Freedom

 

Mathematics & Behavior are key to financial freedom

Mathematics & Behavior are key to financial freedom

Although, it may be very enticing to only deal with one monthly payment it is important for consumers to realize thatthere are instances where they can do the same things for themselves that a debt consolidation company can do for them and be able to save the money they would be paying the company.

The first thing that a consumer needs to do is to create a realistic budget.  The second thing that a consumer needs to do is decide whether to pay the highest interest or the lowest balance debts first.  Finally, the consumer would need to set up auto-pay and pay more than the minimum payment each month.

If a consumer decides that debt consolidation is the best route he needs to be aware of his behavior. Paying off debt with a loan doesn’t eliminate the debt it simply combines it and the consumer is still responsible for it.

Consumers who truly want help should do what they can to get it without worrying about what others may think.  Debt repayment and credit counseling are great resources to assist consumers in negotiating lower interest rates, establishing realistic budgets, and with gaining control of their debt instead of the debt controlling them.

ALL ABOUT PAYDAY LOAN CONSOLIDATION

How does payday loan consolidation work?

How does payday loan consolidation work?

How does payday loan consolidation work?

Payday loan consolidation occurs when a borrower has all of his payday loans combined into one loan so that there is only a single monthly payment.  Once the borrower has chosen consolidation company a representative from that company will meet with the borrower to discuss monthly income and expenses and then help the borrower determine the amount of money that needs to set aside each month.

The borrower will then begin to deposit the amount determined into a savings account that is opened and managed by the consolidation company.  Once the savings account reaches a certain balance the consolidation company will start to negotiate with the payday lenders on the borrower’s behalf in order to get a single monthly payment that is manageable for the borrower.

From start to finish a payday loan consolidation can take anywhere from 6 – 18 months depending on the following variables: how many lenders the borrower owes and the borrower’s monthly income and expenses.  Although, there isn’t a magic wand that a borrower can wave to determine if a payday loan consolidation is right for him there are questions that the borrower can ask himself to determine if consolidation would possibly benefit him:

  1. Can the borrower repay the payday loans in full within the next 2 – 3 months without disturbing his budget?
  2. Can the borrower completely eliminate the need for payday loans within the next 3 months?

If the answer is no to either of the questions payday loan consolidation could possibly benefit the borrower.

However, before making the decision to utilize a payday loan consolidation company the borrower needs to be aware of the following facts:

 

Borrower needs to be aware of some facts

Borrower needs to be aware of some facts

  1. It’s a third-party payment system: The consolidation company does not make loans or settle a borrower’s debt.  They simply act as a middleman to negotiate for the borrower and distribute funds to the borrower’s creditors until the creditors are paid in full.
  2. Payday loan consolidation companies range in quality:  There are organizations that are designed to govern such companies such as the National Foundation for Credit Counseling (NFCC) and the Financial Counseling Association of America (FCAA) to ensure that these companies follow certain standards set forth by the Council on Accreditation including employee training and certification protocol but it would still be wise to be picky.  A reliable company will be well organized, make timely payments on the borrower’s behalf, send statements to the borrower in a timely manner, and offer strong borrower education and support.
  3. All plans are created equal:  Financial institutions don’t provide preferential treatment all plans are structured the same way.  The consolidation representative will determine with the borrower what it will take for the borrower to fully repay his creditors in three to five years.  The standard payment is typically based on 2.5% of the total amount owed but under some extenuating circumstances other arrangements can be made.  The positive thing about these plans is that the borrower can pay more than the agreed upon amount when he has extra funds in order to get out of debt faster.

    Counseling before consolidation

    Counseling before consolidation

  4. Counseling before consolidation:  Before jumping into consolidation a borrower should attend financial counseling to ensure that all other alternatives have been exhausted and that the borrower will have enough money remaining in his budget to pay his basic expenses.   If the borrower has enough money left over after subtracting expenses from income consolidation as well as other options will be presented to the borrower.  A good counselor will be knowledgeable, compassionate, and encouraging to the borrower. Therefore, if a borrower is presented with a counselor who acts bored, judgmental, or pushy it would be advisable for the borrower to request a different counselor.
  5. Consolidation is not right for everyone:  The majority of the borrower’s balances should be in unsecured debts such as credit and charge cards, personal loans, and sometimes collection accounts.  If the majority of the borrower’s debts are associated with taxes and/or child support these plans would be of no help.
  6. Consolidation is simple, steady & efficient

    Consolidation is simple, steady & efficient

    Consolidation is simple, steady, and efficient: When a borrower is on a consolidation plan payments remain the same for the duration of the plan and he never has to wonder about the amount he is paying each month.  Also, once consolidation begins calls from creditors usually end.

  7. Record maintenance isn’t over: Despite the consolidation agreement creditors will continue to send borrower’s account statements that the borrowers will have to monitor and possibly even send in.  Agency reports will not reflect accruing interest so if the borrower fails to submit them the agencies balance will be drastically different from the borrower’s bank statements.  This can leave the borrower in mound of debt even after the consolidation services have ended.
  8. Charging must stop until the consolidation is paid in full: A common agreement with all consolidation companies is that borrowers must close all accounts and not open any new ones until the borrower is debt-free.
  9. Consolidation is not the same as bankruptcy:  Although borrowers are paying their debt in full lenders may still have a negative view on the service and the borrower’s credit report could still take a hit.  Some creditors will notate that the debt is being paid through a third party which can be viewed negatively as if the borrower needed help paying his bills.  Other creditors will look at consolidation as a positive thing because the borrower is making consistent and timely payments.

Clearly payday loan consolidation has positive and negative factors.  It is important for the borrower to determine if this option is going to be a good decision or not and act accordingly.  The one factor that is advisable prior to making any decision is that the borrower gathers as much information about his finances and options as possible to avoid making any hasty decisions.