There are times when couples don’t have a choice. If they purchased a home with both names on it, then both will always be responsible. If taxes were filed as a married couple both parties are responsible. In this day and age co-signing a car loan or any other type of loan means both parties are responsible as well.

Credit card debt is another story. It turns out that, unless one party passes away, the husband or wife isn’t responsible for their spouses debt. If the debtor gets sued and has their wages garnisheed, it only affects the person whose name is on the account. So, there are times when one party really has no responsibilities for the expenses of their spouse.

So, should couples combine their debt load? Truthfully, yes they should, but for two reasons. One, if you hope to remain a couple it’s probably the thing to do because it could cause resentment. Two, it helps because both parties in the relationship could get one blanket deal that could end up saving them money while getting the debts of both people paid off.

It’s also easier to get a loan from the bank if the household income is combined, as the higher the income the easier it is to get a loan of some type, even if it’s just a line of credit.

Of course, before getting married discussing the debts each person has is an imperative step. All debts should be out in the open before getting married because one or the other could find out that their relationship is a sham and based on financial needs, and that will just add a layer of complication that no one needs to deal with.

Frankly I found that to be an interesting result and I’m not sure I agree with it. I’m not sure if I disagree because it’s a company in the UK or if it’s because I’m not of the belief that more women than men are in control of the finances.

Here’s the overall reality. Couples more than singles will go for debt consolidation because they have the credit to get it done more often. It’s easier to get a loan if you own a home, and more couples own homes. The possibility of being a 2-income family affords one a better chance to not only qualify for a home loan, but a loan at a rate that’s not punitive.

It’s possible that couples will talk about the possibility of getting a consolidation loan more than singles will think about it, but that’s probably as far as it goes. Either way, if anyone is having problems with debt, taking positive actions to address it makes a lot of sense. Determining what one’s bills are, whether they need help and then going to get that help is the same across the board, whether it’s men, women, singles or couples.

That’s where getting a debt consolidation loan can sound like a good idea It gives you the opportunity to get all your debts figured out and paid off and only have one loan to worry about from that moment on. Yet, one still has to ask if getting a debt consolidation loan is the smart thing to do. Let’s look at the pros and cons.

One pro is that often the interest rate on a debt consolidation loan is far less than the interest you might be paying on some of your outstanding bills, especially credit cards. If you can get a bank loan sometimes the rate is between 6 and 10%, which is easily lower than a 19.8% credit card rate.

Another pro is that it’s easier only making one payments instead of multiple payments. You’ll either get one bill or have a ticket where you can make a monthly payment, and it will always be the same amount. Doing it this way also helps you pay your debt off quicker.

Of course there are downsides to everything, and in this case the downsides need to be seriously considered. For instance, it’s possible that wherever you get your loan they’ll request an automatic withdrawal from your bank account. That’s not the worst thing in the world, but many people have to try to learn discipline in making sure that money is in their bank accounts at the time, and that’s a hard lesson to learn.

Another bad thing concerns that discipline thing again, this time the discipline in not to continue using those credit cards. It’s hard for some people to look at a paid off credit card and just put it away when there’s so much good stuff out there. It doesn’t do any good to continue adding more debt while trying to pay it down.

Whatever course you decide, be ready to make some serious changes in your life. Debt consolidation loans could be just what you need, or it could be the beginning of even more problems.

Which mistakes should you avoid while consolidating your debt online?

When you’re getting help from online debt consolidation or debt management options, you must take certain steps before you carry on with it. There are a lot of scammers where they are waiting to take the money from you and not consolidate your debt. Take a look at the steps you must follow when you’re consolidating your credit cards:

1. Not planning in advance
You must have a financial strategy or a plan that’ll help you pay off your credit card debt on time. Even if you’re taking help of a professional or getting relief from debt situations yourself, you need to have a plan so that you’re comfortable in paying off your debt. If you have a savings account or an emergency fund, you can use the amount to pay off your debt every month. You need to plan your payment strategy so that you know how much you have to spare every month to pay off your debt. Some months you can pay more on your monthly amount so that you can get out of debt fast.

2. Not search for the best online company
Since these are online companies, there are a lot of chances that you may fall in scams. But if you search for the best online company, you’ll get the best of the lot. You can check the fee structure of the companies and also the type of work they do. Check for the testimonials and whether the people are friendly and knowledgeable. If they are not, you can go for another company. Just check if they have phone service so that you can call them up if you have any doubts. According the recent FTC rules, the for-profit companies are not supposed to ask for any advance fees before they resolve your debt. If they’re charging advance fees, they are trying to cheat you.

3. Not checking any accreditations
You must always check with the company’s ranking by the Better Business Bureau (BBB) for better knowledge about the company. If the company has other accreditations, be sure of them and do research on the company. Ask your relatives and friends about the authenticity of the company before you go for it. If you check the company’s profile with the BBB, you’ll also get to know any consumer complaints and if it’s accredited by the bureau.

Before you take any step regarding enrolling in an online debt consolidation or a debt management program, you must check your credit report. If you see any negative information, you can rectify them and then get relief from debt.

See Also: Should I cancel my credit cards?

Photo Credit: www.debt--consolidation-loan.net

One of the very first options that will come to mind when individuals experience problems concerning personal debt is taking out a debt consolidation loan. Often as the only solution that individuals are aware of for overcoming personal debt, it is usually chosen before any other debt solution choice. With so many choices available for dealing with debt, one should keep in mind that the larger majority of these choices or ideas are designed to make someone else money.

Borrowers need to remember that borrowing money is what started their problem with debt in the first place, so borrowing money to pay back borrowed money is not always the best solution for solving their problems with debt. Simply stated, borrowing more money to pay on borrowed money should be the last action taken. This article will give some enlightenment on the practices that need to taken to unravel yourself from personal debt problems in the long term, and to highlight some of the consequences related with debt consolidation loans.

Consequences:-

Why Debt Consolidation Can Be So Attractive:

• One of the main reasons people find debt consolidation so attractive is the idea of having only one payment instead of many payments. While this could be beneficial to an individual that has problems keeping track of all their debts and payments, this should be a minor consideration compared to whether the debt consolidation loan will in actuality solve your debt problems. Rather than making the situation worse by taking on another loan, it would probably be better to find some useful useable systems to help get yourself more organized.
• Another idea that makes debt consolidation so attractive is the promise of lower monthly payments. The length of time you spend repaying the loan should be just as important as how much has to be paid each month. A reduction from $500 per month to $250 sounds attractive, but if the $250 monthly payments have to be paid for 5 years when the $500 monthly payments would have only had to have been paid for 2 years, it looks bad on paper.

$250 x 60 months (5 years) = $15,000

$500 x 24 months (2 years) = $12,000

$3,000
You end up paying $3,000 more than the original amount of the debt owed to clear your debts.

Debt consolidation is not always a bad option, but the choice to consolidate debt through another loan should be researched and weighed carefully against other choices before choosing that route.

Consequences:

When a Debt Consolidation Loan is Advisable:

• When you have high interest rate debt.
  • When interest rates have plunged a considerable amount since the time you took on your debts.
  • When you have weighed the factors and know that you will be to make the payments on the loan.

You must have an understanding of what you can and cannot afford as far as terms of payments. Prepare a Personal Finance Statement. Templates are available many places online.

Consequences:

When to Avoid Debt Consolidation Loans:

• When you have defaulted on previous debt consolidation loans.
• When a loan is required to pay off a previous debt consolidation loan.
• When you want to pay your credit cards off with a loan in order to continue using those credit cards.
• When your exact financial position has not been worked out and you do not know how much you can afford to pay each month.
• When the amount of your total debt compared to the total loan payment amount has not been figured.
• When you have used your home to secure the loan. Consequences:

Why to be Mindful of Secured Loans:

• Often only homeowners are able to get debt consolidation loans because the loan is secured against their home. Their home is used as collateral for the loan. If the homeowner defaults on the loan, the lender will sell the home to get their money back.

Possible Consequences:

• Overall debt will be increased because the time period in which the monies must be repaid will be extended over a longer period of time.
• The underlying cause of the debt was not addressed and the knowledge of how to deal with debt problems in the long term was never obtained.
• The situation could become worse than before if payments on the new loan are not kept up.
• If your loan is secured against your home, you could lose your home if you default on your loan.

Consequences:
Conclusions:

If the choice is made to go through with debt consolidation, research your options, shop around. There is no shortage of companies offering debt consolidation loans out there. Always know what the total amount of repayment will be compared to the original amount of your total debts.

For long term solutions to problems concerning debt you should understand your financial situation and try to negotiate with your creditors to make payments on your debts that you can actually afford. You must also learn to live within your means and not be irresponsible with your spending.

While debt consolidation loans are one of the first options considered when individuals are deeply in debt, they are rarely the best solution. Research the topic for yourself, so that you understand the consequences and know when debt consolidation should be avoided or advisable.

See Also: Debt Consolidation Tips

Photo Credit: www.prlog.org

Debt consolidation is the process of obtaining one loan to pay off many others. Most often consumers do this to secure a lower interest rate, to secure a fixed rate on their debt or for the convenience of having to pay only one loan.

Debt consolidation can entail converting many unsecured loans into one secured loan. More commonly consolidating debt involves one secured loan against some type of asset that serves as collateral, such as a home mortgage or savings. Using the home mortgage as collateral often secures a lower interest rate, but also allows the forced sale of the home to pay back the loan. The lenders risk is minimized; therefore the interest rate is often lower.

Debt consolidation companies can reduce the loan amount. The loan is bought at a discount when the debtor is in danger of bankruptcy. Debt consolidation can affect the debtor’s ability to unload debts in bankruptcy; the determination on whether or not to consolidate must be thoroughly thought through and weighed carefully.

Theoretically, debt consolidation is most often recommended for those paying large amounts of credit card debt. Because of the larger interest rate often carried by credit cards, often the larger unsecured loans from a bank, acquiring a secured loan using property as collateral to obtain a lower interest rate is often advisable. The total cash and interest paid towards the debt is lower allowing the amount to be paid sooner.

The advantages that debt consolidation offers debtors with high interest debts brings companies wanting to take advantage by charging high fees for refinancing in their debt consolidation loans. Often the fee amounts nearly reach the state maximums for mortgage fees. Some unprincipled companies will intentionally wait for a debtor to get so far in debt that they must refinance and consolidate their debts in order to pay off bills that are past due. Often the debtor will pay the high fees so they do not lose their home. Sometimes the debtor does not know to shop around for lower interest rates and fees, or does not have the time. Companies that partake in this practice are known as predatory lenders. Most debt consolidation loans and transactions do not include predatory lending practices.

See Also: What are the benefits and Negatives of debt consolidation?

Photo Credit: www.4.bp.blogspot.com

USA (United States of America)

In the United States, student loan consolidation entails the purchasing and closing of existing student loans by a loan consolidation company or the Department of Education. Student loan consolidation interest rates are based on that year’s rate, which is based on the 91-day Treasury bill rate at the last auction in May of each year.

Interest rates on student loans can often fluctuate from the current low of around 4.7% to a maximum of 8.25% for Stafford federal loans, 9% for PLUS loans. The student loan consolidation program that is currently being used allows a student to consolidate with a private lender once, and re-consolidate again only with the Department of Education. When a loan is consolidated, a fixed rate is set based on the current interest rate. If a loan is re-consolidated, the interest does not change. When different types of loans and different rates are combined into one new consolidation loan, a calculated weighted average will establish the appropriate rate based on the current interest rates of the different loans that are being consolidated together.

Refinancing is often the term used when referring to federal student loan consolidation. This term is not correct because the rates on the loan are not changed, they are just locked in. Student loan consolidation does not incur any fees for the borrower; unlike private sector debt consolidation where private companies make money on student loan consolidation by reaping subsidies from the federal government.

The consolidation of student loans can be beneficial to a student’s credit rating, yet it is important to remember that not all federal student loan consolidation companies report their loans to all credit bureaus.

UK (United Kingdom)

Student Loan entitlements are guaranteed in the UK. The loans are recovered using a means-tested system based off the student’s future income. Student loans cannot be included in Bankruptcy in the UK, but the loans do not affect a student’s credit rating because the payments are recovered from the student’s future salary.

FTC Crack Down on Debt Consolidation Companies

Recently the Federal Trade Commission has decided to join attorney generals around the country in looking at debt consolidation companies to see whether they’re misrepresenting what they say they’ll do for consumers, as well as verify that they’re not harming consumers at the same time.

Their first issue is in determining how these companies are obtaining clients in the first place.  They actually sued and froze assets of one company, United Savings Center & Mutual Consolidated Saving, for violating telemarketing rules.  At the same time, they cited them for promising lower interest rates on outstanding debt while collecting high fees up front.

A reality with companies like this is that most people who sign up with one of them, more often than not, will drop out of the program once the going gets tough, and the going will get tough.  Most debt consolidation companies, if they’re not non-profit groups, will wait until your credit is trashed before they’ll attempt to take action, which could be as long as 18 months.  During that time, you’ll receive both collection letters and calls, and could even possibly be sued, though most of these companies tell you it won’t happen.  So, people drop out, then realize that money they’ve already paid is non-refundable.

Also, companies they negotiate with don’t have to reduce either interest rates or payments, though many of them will once you’ve reached a very bad spot.  So, the promise that they will do it is a violation of the law, since it’s something they can’t really guarantee.

The FTC’s second issue, therefore, is in the promises that are made to the consumers, along with the make up of the deals they have consumers sign.  Most of those deals have people pay an upfront fee, then monthly fees.  The New York State Attorney General’s office released guidelines for people to follow, and one of the first is to never pay up front for services from these companies until they’ve accomplished what they say they will, which almost no one will because that’s not what they’re trying to do for you.  Many of these companies, who are now trying to distance themselves from the pejorative title of “debt consolidation” and are switching to either “debt settlement” or “debt negotiation,” won’t begin talking to anyone on your behalf until they know they can negotiate a rate that will also afford them the opportunity to collect a nice percentage of the savings on the back end.

Having outstanding debt is scary.  That doesn’t mean one should sacrifice common sense in the face of fear.  Check out any debt consolidation company with your local Better Business Bureau.  Check them out online to see how many complaints there are against them, and what types of complaints they are.  The first step everyone should take, though, is to contact the lenders and creditors themselves first, to see if an agreement can be arranged.  In these days of a tough economic environment, many people are finding lenders and creditors willing to work with you to get something, and it will protect your credit history much better than any contracts you may sign with a debt consolidation company.

As always, be wary of outstanding promises of almost anything.  Protect yourself and your money; someone’s always willing to take it from you.

See more:

Debt Consolidation Companies Under Fire

New York Attorney General Launches Investigation Into Debt Consolidation Companies

How Does Debt Consolidation Work?

As more and more people are looking at ways to get out of financial trouble, they’re turning to debt consolidation companies for assistance.  The problem with this may be that the company you hook up with may do you more harm that good.

Not all debt consolidation companies are fake.  Those that are, however, will cost you a lot of money, although still less than what you’d owe your creditors, but they will kill your credit rating, while collecting upfront fees of at least $500 or more, or asking for a percentage of your debt, which could be anywhere between 10% and 15%.

So, what do these companies do for, or to you?  They start out by telling you to stop paying all credit card bills, and to give the money to them.  You believe they’re actually paying your bills for you, even though you keep getting statements that look worse and worse, which may eventually turn into collection letters.

What’s going on is that they want to hurt your credit rating.  Why?  Because a person with a bad credit rating isn’t expected to be able to pay their bills in full.  So, what these debt consolidation companies will do, usually within a year to two years, is then contact all your creditors and offer to make payments to them at either half the amount owed or less.  Creditors often accept these payments because at least they’re getting something back, even though they’ve charged off the amounts and already gotten some kind of money back.

Then the debt consolidation makes the payment, and takes a percentage of the savings, and move on to the next creditor.  When they’re done, all your bills will be paid, and you might get some money back, but the company will have earned more money than you would have known about, plus got to use your money and earn interest on it.

One other problem with this deal is that not all debt consolidation companies confirm with these creditors that you’ll get a letter stating that your payment is considered as being in full, nor ask them to contact the credit agencies on your behalf stating the same thing.  This in turn will keep your credit score and credit report looking pretty bad for at least seven years.

If you’re thinking about checking into debt consolidation companies, do some research online to see if people have written negative reports about them.  You could end up saving yourself a lot of grief.

Photo Credit: Redp.com

Do you know how much debt you have?  Are you looking for a way out of it?

Many people are buried in debt these days and are looking for a way to lessen their financial obligations. Some people aren’t in as much trouble as they think they are, whereas some are much worse off than they know.  Regardless of how you currently sit regarding  debt, if you’re thinking about doing some kind of debt consolidation, you’ll be better of knowing some of the terms and rules that you might end up running into.

But first things first, you need to get over the fear of working on reducing your debt and determine if you’re in big trouble, a little bit of trouble, or no trouble.  Knowing this will help determine what kind and how much help you need.

For instance, if you’re in little trouble a few reductions in monthly expenditures and a clear system for paying down your debt may be the answer to a better future. If you’re in a little more trouble, a debt consolidation loan might be the way to go.  A debt consolidation loan can be in the form of a line of credit or an actual bank loan.  The determination will be if you’ll have enough money after obtaining the loan to still pay your bills and have some kind of life.

If you’re going to be able to go for a debt consolidation loan, and you don’t go for the line of credit, then you should shop around for the best deal you can get.  Usually credit unions will offer the best deals, but some credit unions make you join them, or have a relative who’s a member.  Often, your own bank will be easier on you if you’ve had a good relationship with them over a number of years.

There are two different kinds of loans, and you need to know these terms.  One is a “secured” loan, which means taking a determination of your assets against your debts and using your assets as collateral against your loan.

The other is known as an “unsecured”, or “non-secured” loan.  This usually means they don’t look all that hard at your assets, but your interest rate will be much higher than with a secured loan.  If the interest rate is still much lower than what your outstanding debt is, then you might still be ahead in the end.

For both of these, it’s possible that you may not get the amount of the loan that you’re looking to get.  That’s something else you’ll have to think about to see if the loan is worth taking.

These are only a few of the things you’ll have to be wary of if you’re going to go through with debt consolidation.  Always remember to do your research before you decide to go any route.

See Also:

Secured Loans on About.com