Basic Understanding all main Principles and Concepts Of Debt

Budgeting is an important aspect of living and a person who knows how to budget will go a long way in this commercialized society. Budgeting has a lot to do with keeping the expenses less than the total income of the household. Those who are very good at budgeting can even come up with savings even if they have meager incomes.

 The problem sets in when a person fails to make an efficient financial plan and his expenses exceeds his earnings. When this happens, a person has no choice but to borrow money to make up for his financial deficiencies. Borrowing once or twice because of a mismanaged financial plan is normal but when borrowing becomes a regular thing then that can put a person in serious debt problems.

 A person who borrows money from another is said to be in debt. The debts of a person can be minimal or it can reach up to millions depending on the credit limits of such person. Sometimes, a person who has assets but isn't liquid can use these assets to get cash. Under this term, the person can be indebted for an amount mess or more than his assets.

 There are laws which provide that a person can never be forced to render services as payment for his debts. This is already called undue servitude which is prohibited by the laws of some countries. However, there are situations when the person who is in debt opts to settle his obligation by rendering his services.

 This can happen if a person is so talented in his craft like painting and he opts to pay for his debts by creating a painting of the creditor or the assignee of the creditor. Sometimes, a person can pay his debts gradually or on an installment basis.

 When a person dies, the law has provided for a hierarchy of preferences in the payment of such debts. Of course, payment of taxes to the government will always come first. The second priority for debt payments includes funeral expenses of the deceased and the payment for the wages of people.

 Debt is really just a simple concept which provides that a person who borrowed something from another is duty bound to pay that debt. However, the concept of debt becomes more complicated with the introduction of other concepts like mortgage, interest rates and other charges. Interest makes most debts double or even triple in amount. More often, the interest rates due for a certain debt is even higher than the principal amount borrowed.

 A person who wants to get credit can do so in the form of a loan. A loan can either be secured to unsecured. A secured loan means the debtor borrowed some money and supported by collateral or a security for the loan. The security or collateral can come in the form of a house and lot, a car or any asset of the debtor. An unsecured loan means otherwise.

 Most creditors require a security before granting a loan because it gives them something to hold on to or to forfeit in case the debtor defaults in payment. When the debtor fails to pay the debt within the agreed timeframe then the creditor can foreclose the security or the collateral.

 However, having an unsecured loan doesn't mean that the debtor can renege on his debts. When the debtor fails to pay his loans, the creditor can still run after him by filing a case in court. When this happens, the debtor who has no cash can sell some of his assets to pay for his outstanding loan.

 Being in debt is common even for the rich and the famous, the only difference between them and the common people is that their debts can be in the millions since they have more assets to support their loan. Unsecured loans most often have higher interest rates to make up for the lack of security.

 Even third world countries are indebted to more developed countries. However, the debts of a country can go on forever because they keep on paying their loan but they also get new credits as their credit ratings go up.

NEW! Are you stressed or worried about your debt? If so, click here to discover the secret to getting out of debt FAST and staying out of debt FOREVER.


This free article is provided by the FreeArticles.com Free Articles Directory

Read more »

Making Choice between Debt Services: Who Should You Hire?

You have decided that you need to do something about your debt; you have made some research and found out that there are different companies offering their services to improve your debt situation. But, you wonder what they are capable of doing and which one should you hire given your specific debt and financial situation. Learn which one is best for you.

Within the financial market you'll find debt counseling agencies, debt consolidation agencies and debt settlement agencies. Their area of expertise is similar but there are differences between them that you should know since this will determine whether their services will be useful for you or not.

Debt Counseling Agencies

These agencies will provide you with advice on how to make a budget, how to control your spending, how to choose a lender wisely, how to choose a credit card wisely, etc. What they do is counseling, but they won't take care of your debt, you'll have to make any arrangement, fill applications, etc. They will help you in the process but it will be your responsibility.

This is the perfect option for those who value their freedom and want to take care of their own finances. It is suitable for those with a debt situation that is not too critical and does not require extreme measures. For more complex situations you should better consider one of the other options.

Debt Consolidation Agencies

Debt consolidation agencies take the counseling process a bit further, not only will they advice you on what you should do but they will also take care of the paperwork and of the negotiations. They'll contact your creditors and agree with them new loan terms, waivers, interest reductions, debt cuts, repayment extensions, etc.

This option is best for those who have so much debt they can't handle the process themselves. Debt consolidation can otherwise be done personally by contacting lenders or resorting to a debt consolidation loan. However, if you feel overwhelmed by so many bills, loans and credit card balances and you think you can't handle so many negotiations on your own, contacting a debt consolidation agency is the smart thing to do.

Debt Settlement Agencies

Debt settlement is an even more complex process. It involves legal actions and legal representation. Even if there is not a legal action taken yet, if there is a possible threat of a legal action (like repossession) immediate legal advice should be contacted. Debt Settlement agencies have expert lawyers and law advisors that will analyze your case and guide you through any process. In most cases, the situation is solved in an out-of-court agreement.

If you think that your debt has been handled to a collection agency and that you are probably facing problems because you've ignored their calls or letters and your debt has been handled to the legal department, you should contact a debt settlement agency. Be careful though because some debt settlement agencies, despite the fact that they call themselves settlement agencies, what they actually do is debt negotiation or debt consolidation. Make sure they have legal advisors within their staff.

Article Source:

http://www.bestmanagementarticles.com
http://debt-consolidation.bestmanagementarticles.com

Read more »

Few Words About Debt Consolidation Agencies Common Situation

No Company will aid you with your debt problems out of the goodness of their hearts. Even though there are some non-profit debt consolidation agencies, the “non profit” tag is open to discussion to say the least. Understanding how these agencies make money will help you decide whether you should hand them in your debt problems to be taken care of.

A Common Situation

Bills piling up, credit card balances left unpaid, medical and legal fees you can't afford. Does it sound familiar? These situations are more common than you may think and there is no easy solution to them. A true fix to these problems includes a good amount of sacrifice on your part in order to cut on your expenses and commit to a long period of debt repaying without incurring in new debt.

How Does a Debt Consolidation Agency Make Money

There are different ways for a debt consolidation agency to earn cash while consolidating your debt. All of them are legal and even fair since they are actually offering a service to both parties from which they can collect money. However, the amount of money they collect may be abusive so you need to be careful not to hire the services of some agency with high charges.

Also, there are some agencies which are not legit and ask you for money to make payments on your behalf but then they just keep the money, so make sure you track payments to your creditors and don't just leave it all to them.

What they Charge You

Some debt consolidation agencies charge a fee for their services or a percentage of the money they handle for you. They may charge a fixed fee for negotiating with your creditors and delivering payments to them on your behalf, or they can charge you a percentage that should never exceed 10% on the overall amount of money they handle to make payments.

What they Charge the Creditors

They can also charge the creditors a small amount for collecting the money for them thus making sure you don't miss payments or pay late. This is a very valuable service for your creditors and they show their gratitude by resigning a percentage of the money they receive from you. Those Debt Consolidation Agencies who claim to be non-profit and actually don't charge you any money for their services, make money this way.

Most Debt Consolidation agencies however, make money by combining these two methods, charging you an additional amount of money for negotiating and agreeing with your creditors a reduction on your debt and an extension on your payment schedules and also charging the creditors a small amount for handling their collections.

What you get in Return

In Exchange for the amount you pay, you'll get a debt reduction that can reach up to 60% with an extension on your repayment programs that will make your monthly payments even more affordable. All of these can be done by yourself but if you don't know how to negotiate with your creditors or don't feel comfortable doing so, contacting a debt consolidation agency might be the solution.


Article Source:

http://www.bestmanagementarticles.com
http://debt-consolidation.bestmanagementarticles.com

Read more »

In this Article you will Find the Secret Way to Be Debt Free

Secured Loans

There are different types of loans that one can apply for to create a debt consolidating account. If you own an asset of substantial value, you can apply for a secured loan to be your debt consolidation loan. Secured loans are backed up by collateral either offered by the applicant or requested by the loan company and since there is something of value that the applicant puts up, the risk for the lender is substantially reduced. With this type of agreement, the lender will be entitled to take a legal action of repossession of the asset guaranteeing the loan in case there is a violation of the contract by the applicant or problems with the latter's payment terms. In turn, the interest rate is significantly lower and other requirements are considered with more leniency.

Unsecured Loans

If, however, you do not own a home or a vehicle or are not comfortable using your assets as collateral, there are still options available for you to consolidate your debts.

The other type of option is the unsecured loan. These types of loans are a bit harder to qualify for because there is no collateral or asset that the applicant guarantees as payment. Since the risk for the lender is much higher, the interest rate for these types of transactions is higher as well. You will need to prove that you have a good and long standing income and since the interest rate is almost exorbitantly high, most are better off applying for a secured loan.

However, unsecured loans are still a much better option compared to using credit cards. Since credit cards are easily accessible, spending can easily get out of hand. Also, they have a higher interest rate compared to the previous two loans mentioned. If you cannot, however, acquire a consolidation loan, it would be wise to transfer all of your credit card balance to the one with the lowest interest rate and to cancel the rest.

Credit Counselling Agencies

If all else fails, there are agencies that are prepared to assist you with your debt consolidation. Credit counselling agencies are willing to negotiate with creditors and lenders (if possible) and reduce the interest rates that you pay for your debts and outstanding bills. Once this process is completed, you will have to make just one payment to the agency which will then take care of the rest. Be warned, though, that acquiring the services of an agency does not automatically clear you of all of your debts. They are not magicians and, more importantly, you must also commit yourself in not getting into any more debts and try to control your spending in order to keep yourself on the right track.

As you can see, there are quite a number of options that one can have when trying to consolidate or eliminate debt. You just need to be vigilant and patient as this process may take a few years to accomplish especially if you have a considerable amount of outstanding debt. Once you get on the right track, though, and control your income-spending rate, debt will surely become a thing of the past.

Article Source:

http://www.bestmanagementarticles.com
http://debt-consolidation.bestmanagementarticles.com

Read more »

It is Your Personal Debt Management Programs

If you are considering a debt management program, here are a few important facts to look at. First of all, do you understand credit card debt? Do you know the difference between debt management and debt settlement programs?

Take time to educate yourself before starting the important process of improving your credit. Credit card debt is one of the quickest and easiest traps to fall into.

With companies making offers everywhere, from college campuses, to mailers, and even the Internet, Americans have more options than ever to get credit. There are many strategies used by so many different types of companies that it is almost impossible to resist.

This explains why so many people find themselves in debt and are looking for ways to get out. Most people do not realize how far in debt they are, until the damage has been done to their credit report.

Over the past twenty years, credit card debt has been on the rise. For some, it might be a difficult task to break out of the credit habit, but in the end it will be worth it.

If you are having trouble managing your debt, then maybe it is time you discussed matters with your lenders. Or look into a debt management program. Debt management programs are much different than debt settlement programs in that they do not reduce your outstanding debt substantially. Actually, these programs are typically sponsored by the credit card companies.

A debt management program will establish a repayment plan for you. These programs will help you to simplify your monthly financial commitments into one lower monthly payment and the debt management company will distribute those payments to the creditors on your behalf.

Be advised, this does not erase your negative credit history. Accurate information (good and bad) will remain on your credit report for up to seven years and a bankruptcy for ten.

Also, creditors will continue reporting that you are handling your accounts with a debt management program. Just because they are reporting this, doesn't mean that it work against you. If you are making your payments on time this will help show that you are taking positive steps and are serious about repairing your credit.

Take advantage of the free credit report you can access once a year. Make sure you manage your report and stay on top of your debt.

These programs are successful at helping you reduce your interest rate and maybe even some of your late fees. Keep in mind that you are still responsible to pay off the outstanding balance. The goal with these programs is to educate you on credit and ways to properly manage it, so you can avoid future debt problems.

Debt Management programs have less of a negative impact on your credit than a Debt Settlement program, and if you can afford to pay off the debt you accrued it is often a better overall option. The lesson in this is to learn how to stay out of debt, and adapt a lifestyle that is within your financial means.

Debt Management companies must be a non profit corporation and the fees are often very low. Although it will take some time and discipline from you, it will be worth it in the end. When you look back and find yourself debt free you will realize that it was a really smart move to make.

Article Source:

http://www.bestmanagementarticles.com
http://debt-consolidation.bestmanagementarticles.com

Read more »

Documentation about Credit Card Debt Settlement

When it comes to credit card debt settlement, there are many agencies that usually suggest among other options to refinance your home loan in order to obtain funds for cancelling your credit card debt. It is important for you to be extremely careful, know why certain debt settlement agencies suggest this and why you should avoid refinancing to pay credit card debt.

Within this article you'll find the reasons why you should consider very carefully refinancing as a debt elimination option and a brief explanation of which paths are better on your way to financial freedom with long lasting results as opposed to those you would obtain by exchanging your credit card unsecured debt with a secured low interest refinance home loan.

Risks Of Working With Certain Debt Settlement Agencies

There are many debt settlement agencies that come from the heart of credit card issuing companies or financial institutions. These agencies where created so as to let credit card companies to recover their money and thus, even if they'll provide you with solutions to eliminate your credit card debt, that solutions may not be in your best interest.

Many of these companies would suggest you to take a refinance home loan and use your home equity to repay your credit card debt. That may seem a good solution and in some cases, it can be. However, it shouldn't be your preference, and most certainly, a debt settlement agency committed to solving your debt problems shouldn't suggest it as your first choice.

Why Not To Refinance Your Home Loan?

Though refinancing your home loan to get extra cash and pay off your credit card debt might be a good idea. It is not the best solution. This serves best the credit card interests and not yours. Because even if you get your debt settled and eliminate it for good, if you don't change the way you spend, you'll keep accumulating debt once again and maybe next time you won't be able to resort to your home equity.

Moreover, since refinance home loans generally worsen the terms of your mortgage, you are further risking your property if you fail to meet the monthly payments. And though you may be replacing expensive debt with cheaper and more affordable debt, you are also replacing unsecured debt with debt that is secured with your home. If you are not good at managing your finances (and that's why you had to resort to debt settlement), that's something that you'd better avoid.

What Is Behavior Modification?

That's why those who know about this subject specifically explain that you shouldn't resort to loans based on equity if you don't modify your financial behavior. But what is exactly Behavior modification? It's a process in which the borrower learns techniques on how to manage his income and expenses maximizing the efficiency in the use of income and reducing unnecessary expenses. It's doesn't necessarily imply changing your style of life but getting the same things you want and need at lower costs and using your income with a higher effectiveness.

Article Source:

http://www.bestmanagementarticles.com
http://debt-consolidation.bestmanagementarticles.com

Read more »

Student Debt Consolidation Repaying - not so easy task

Repaying student debt is not always an easy task. Student Loans are long lasting loans and market variations along with common ups and downs on the graduated students lives can sometimes interfere with a proper and timely repayment of the loans. This can cause several troubles that can range from lowering the borrower's credit score to worse scenarios like default and bankruptcy. Fortunately, there are means to avoid this: Deferment, Forbearance and Consolidation.

It is important, however, to understand these concepts thoroughly because as any financial tool, they must be used to solve a particular problem. Otherwise you can easily use deferment of forbearance and only get to postpone a problem and even increase it or you could resort to consolidation to solve a temporary problem that could have been fixed with a simpler tool like deferment or forbearance.

Deferment And Forbearance: Similarities and Differences

Deferment is the right of the borrower to postpone the repayment of the debt. It's a right because if you qualify by meeting the requirements, you can request a deferment and the lender is obliged to grant it. It's a temporary suspension of the repayment program that doesn't accumulate interests on federal loans but can accumulate interests on private loans.

Forbearance is also a rescheduling of the loan repayment but it's not a borrower's right but a lender's decision and choice. Usually there are some requirements that you need to meet, including a good payment history. Interests accumulate regardless of the loan type and are added to the overall debt when the repayment program restarts.

Student Debt Consolidation And It's Consequences

Student Debt Consolidation is a completely different concept. You take a loan to pay off one or multiple loans and thus obtain a single and lower monthly payment with better loan conditions. There is no postponing of the loan repayment you are just combining and refinancing your debt. This implies that you need to have income capacity to start repaying the new loan.

Though you don't postpone the payment of your debt, you reduce it or at least reduce the monthly payments making them more affordable. Interests are included in the monthly payments and since there is no postponing they do not accumulate. Also, the interest rate you have to pay is locked and thus, you won't be affected by market variations as you were prior to consolidating due to variable rates.

Effects Of Combining The Different Tools

Under certain circumstances you can combine these different tools and thus obtain further benefits from them. Deferment and forbearance are hard to combine because you either are entitled to a deferment or you ask for a forbearance hoping that the lender will grant it. But consolidation and deferment or forbearance can be combined with interesting results.

If you foresee problems with your debt repayment you can obtain a delay on the payment program by means of deferment and forbearance. This will gain you a good amount of time. You can use this time to prepare a good consolidation plan and do the paperwork for obtaining the loan. Immediately after the stoppage period ends, you can consolidate your debt with a new more affordable repayment program. Hopefully by then, your financial situation will let you afford the new lower monthly payments. And as a plus, your deferment and forbearance chances are renewed as you are dealing with a fresh loan.

Article Source:

http://www.bestmanagementarticles.com
http://debt-consolidation.bestmanagementarticles.com

Read more »