If you are receiving harassing phone calls from debt collectors, you may be able to put a stop to them.

Here are a few tips to safeguard from the threatening calls of the collection agency:

1. Ask for validation:
Annoying debt collectors can compel you to admit that you owe money that they are collecting. In this situation, ask them to validate the debt before you start paying it off. Remember that the Federal Trade Commission enforced FDCP Act to protect the consumers from the illegal collection practices. Make sure that the collector provides the necessary documents to validate that you owe the debt, the amount you owe, and the collector is authorized to obtain it from you.

2. Verify info about the company:
Try to get the collection agency’s phone number and postal address so that you can verify certain information about the company. There are many fraudulent collection agencies that threaten consumers, trying to extract money from them through illegal means. If you feel that you are the victim of one of these companies, you should lodge a complaint with the FTC.

3. Cease communication:
If you are confident that you do not owe the debt, then you can send a registered letter to the debt collection agency requesting that they not contact you any further regarding the matter. Make sure to mention that you are no longer liable for the debt. You should send the written letter within a month of receiving the debt collection letter.

4. Know your consumer rights:
If you are aware of Fair Debt Collection Practice Act implemented by the FTC then it will be easier to manage the rogue debt collector. Make sure that you acquire information about the law before dealing with a debt collection agency. This will help to protect yourself from the fraudulent debt collector. According to the FCDP Act, it prohibits collectors of any kind from practicing illegal collection methods.

5. Review your credit report:
Make sure that you review your credit report extensively otherwise you might end up paying for old debts that have been forgiven by the creditors or already paid off and not documented yet. Debt collectors can illegally report old debts to the credit bureau that you might have to pay for. Therefore, try to keep an eye on your credit report to avoid the harassing debt collection calls.

So these are the five essential ways to avoid the annoying debt collectors and make sure that you pay off the owed amount on time.

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.

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?

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.

This has been a largely unregulated industry, as what they do hasn’t quite fit into either lenders or banks.  Therefore, no one monitors what these companies have been doing up front, and only when some people complain later on do these companies have to try to justify themselves.  And, unfortunately, many times there’s nothing that can be done because the consumers signed legitimate contracts, with legitimate being highly speculative, but as always, buyer beware.

It was with this in mind that some states, such as Oregon, are now passing laws to try to regulate these types of companies.  The Oregon House of Representatives recently voted 46-14 in favor of requiring debt management agencies to register with the state Department of Consumer and Business Services. It also limits fees that agencies can charge, caps the amount they can take for settling debt, regulates advertising and specifies other protections for consumers.

That part wasn’t so bad for these companies.  What they, and some of the representatives who voted against it didn’t like, was the cap amounts themselves.  The bill set a one-time maximum of $50 to open a file; reasonable costs for counseling up to $50; and up to 15 percent of funds consumers deposit in trust accounts, not to exceed $65 per month. Also, the agency can take no more than 7.5 percent of the difference between the original debt and the amount paid in settlement at the end of the process.

This contrasts greatly with those debt consolidation companies that take money from the consumers on both ends of the spectrum, up front when clients need help the most, then on the back end, after waiting until their clients credit has been destroyed, with a cut of the savings they’ve induced with creditors.

Of course, Oregon isn’t the only state that’s getting into the act.  Along with assistance from the Federal Trade Commission, 24 other states are starting to take a better look at not only debt consolidation companies, but also companies that purport to repair the credit reports of consumers.  It seems that an overwhelming majority of these companies turn out to be shams, taking consumers cash up front, then often not taking even the basic steps of making one or two phone calls on their behalf.

Consumers who wish to look into ways to consolidate their debt, or protect their credit reports, need to be aware that often, the best person to work for them is themselves.

However, for at least half the population, looking at debt consolidation might not be for you.  Some people don’t need it.  Some people aren’t ready for it.  Some people are grasping at straws, and hence aren’t taking the time to do the research to find out what might be the best way for them to go.

The fact is that, for those people who need debt consolidation, it can be a boon if you choose the proper way to go.  If you have multiple credit cards with high interest every month and you can not only pay off all those balances at once, but also have a much lower interest rate, which puts more money in your pocket, that can be a good thing.

But it’s not all that simple.  There are responsibilities that come even with doing something like that.  Let’s take a look at reasons why someone might not need, or shouldn’t even think about, debt consolidation:

1.  You make enough money to pay all of your bills.  Many people get nervous when it feels like they can’t pay their bills.  However, all most people really need to learn is how to budget their money.  If you’re someone whose first thought when you get paid is how to spend it, then it’s possible you have the resources to pay your bills, just not the discipline to restrain yourself.  What you need to do first is do a quick list of how much your net pay is times two, estimating your monthly income, then a total of all your bills and their monthly payments.  If you have at least $300 a month more in income than your monthly bills, if you can learn how to budget you might be fine.

2.  You make enough money, but you have no discipline.  So you’ve determined you make enough money, but your interest payments are high and you’d like to consolidate your bills.  The problem is that if you’re a spendthrift, consolidating your bills is only going to get you in more trouble.

When one consolidates their bills, they have to be ready to stop exhibiting some of the bad habits they already have.  One quick way to do that is to stop using all except maybe one of your credit cards.  It does you no good to consolidate your bills, then build more debt on top of that.  If you don’t believe you can maintain discipline, don’t even think about debt consolidation.

3.  Are you good at researching what you’re looking to get into?  If you’re someone who’s sitting at home worried about paying your bills, and the first people you’re ready to call are the ones who are advertising their services on TV, and you’re ready to sign up with them without researching what they’re all about, you’re not ready for debt consolidation.  Just knowing that the recommendation of some of these companies is for you to stop paying your bills should be reason enough to want to learn more about some of these companies.

4.  If you’re making less than the amount your bills come to, debt consolidation isn’t for you.  There’s probably no way that you’ll be able to obtain a loan anyway, unless you put something up for collateral, and it’s possible that the amount that you get to put back into your pocket isn’t enough for you to live on without worrying about defaulting on your loan.  And the last people you want to ever default on are people from whom you’ve gotten a debt consolidation loan from, especially if they’ve tied it into your mortgage.

These are some things to consider before you decide to go forward with debt consolidation.  Every person must be honest with themselves if they don’t want to possibly hurt themselves even more in the future.

The first part, of course, should be in taking a look at what your debt load is to first determine if you have the chance to qualify for a loan.  If you’re making less money than your bills by a significant amount, don’t bother putting in for a debt consolidation loan, because not only will you not qualify, but it could result in a negative statement on your credit report.

The same goes for trying to roll your debt into a home line of credit.  The restrictions for obtaining a line of credit are tougher than getting a loan, and often mortgage companies will recommend a loan rather than giving you a line of credit.  In this case, you might not qualify for either.

If you’re making more money than your monthly debt, even 10% more, you might have a chance to obtain a debt consolidation loan.  That will reduce the amount of your payments, putting more money into your pocket, but you’ll have to make sure that you not only keep up with those payments, as penalties for missing payments can be harsh.

Once you’ve made the decision, based on the figures, that you want to go for a debt consolidation loan, you need to determine where you want to go for that loan.  It’s easy to shop online for the best interest rate, but often your best bet is going to a place where you already have some kind of record, such as the bank or credit union where you already have a checking or savings account, or wherever you make mortgage payments.  They’re usually more willing to work with you in getting something.

Next, you need to know the terms “secured” and “unsecured” or “non-secured” loans.  A secured loan means they’re going to take what your assets are and use them as a lien against your possibly missing payments or defaulting on your loan.  An unsecured loan means they’re not going to take your assets into consideration, but your interest rates and fees will be much higher.

For both of these, you may not get the amount of loan that you’re looking for, and you need to be prepared for this information.  If a loan isn’t going to take care of the worst of your issues, or your interest rates on most of your outstanding debt is lower than what a potential new creditor might offer, getting a loan to consolidate your debt doesn’t make sense.

Then it’s time to go through the grind of the paperwork, and this can not only take awhile, but it can feel invasive.  Most of us aren’t usually going around telling everyone how much our debt is and how much money we make, but you will have to answer these questions are more.

Reputable loan officers aren’t going to take any chances in giving loans to people who they feel might default on them, and they’re going to dig deep into both the numbers and your patterns.  They’re going to make you prove your income by giving them tax statements for at least two years back, sometimes four.  They’re going to ask you about your jewelry, furniture, and other things within your household.  They’re going to ask your permission to take a look at your credit report.  If you go this route, you need to be ready for these types of things.

And, in the end, there’s no guarantee that you’ll even get a loan.  Be prepared for that also, especially in these tough economic times, because you might be left with only three options then: trying to work with your creditors; defaulting in payments and hurting your credit standing; declaring bankruptcy, which isn’t as easy as it used to be, but can help alleviate your present standing while hurting your credit for up to seven years.

It’s important to know not only what your debt consolidation options are, but some of the potential issues that could come up.  The process can be rough, and it might not turn out the way you’re hoping, but it could be the beginning of your financial health starting to recover and receiving financial relief.

Cut Your Debt in Half

In tough times, many more people are looking at debt consolidation as the way to go to help them get out of a financial bind.  Many of them decide to look at debt consolidation companies to help them.  Though there are some that might be reputable, many aren’t, and you will end up worse for wear than if you were going to do it yourself.

Here’s the basic premise of these “scam” debt consolidation companies.  They will look at all of your financial information, and if they accept you, which they almost always will.  At that point, you will have to pay them a fee, which can range from a flat fee of $500 to $1,000 most of the time, or a percentage of your outstanding debt, which can range from 10% to 15%.  That can be difficult if you were having problems paying your bills to begin with.

How will they help you find the money?  The first thing they will tell you is to stop paying on your credit cards and give the money to them.  What they’re going to do is build up a pool of money on your behalf, but of course this is going to put you behind with your credit card companies.  And, if you miss your payment to them, they have the right to take a percentage of the money they’ve been holding for you and closing out the deal you made with them, and you’re back to square one.

It’s actually their intention to get you into a collection status of some type so that they can negotiate a settlement that not only pays the creditors less money than what you owe, but they get a percentage of however much they’ve saved you in fees.  Of course, your credit rating takes a hit, but the debt is gone.  When they tell you that your debt will be paid in so many months, they’re doing that and building up your fund over that entire time so they can make a better negotiation with your creditors.  The lower your FICO score is, the better the deal they can make for you.

This won’t stop any of the phone calls or delinquent mailings you’ll be receiving for falling behind on your payments.  Your sense of relief is false, and it will affect your credit score in some fashion on the back end.  Remember, negative actions on your credit score will usually sit there for seven years.

What you end up paying for is someone to handle services you might be able to handle on your own.  Calling up your creditors and asking for more time or a short term deal is a much better way to go, especially if you have hopes that your status will change for the better in a little while.  And even if you’re not sure it will, you will still buy yourself some time and breathing room, which helps you think about other options that are hard to come up with when you’re stressed.

There are many components to debt consolidation that people need to do research and be aware of both the benefits and the dangers that may come.  Not reviewing either could end up costing more money, and hurting your status more, in the long term.

First, you may wish to consider speaking with a credit counselor. Credit counselors come in different shapes and sizes. You can find not-for-profit debt counselors, for-profit debt counselors, and even attorneys and law offices that specialize in helping consumers towards reducing their debt liability.

Second, you can consolidate your debt. This process involves taking all of your bills and consolidating them into one lower interest rate monthly payment. The most common approach to consolidate your debt is to take out a new loan. Homeowners with equity in their property can use that equity to take out a home equity loan, from which it can be used to pay down your debt.

Finally, you can settle your debt. Debt settlement can often damage a good credit score. This process allows for you to negotiate a lower balance with your creditors, at least those creditors who will agree to such terms. Your debt counselor will contact your creditors and explain to them that you have entered into a settlement program, which will reduce harassing phone calls.

Sources:

http://barex.biz/2009/credit-card-debt-relief-three-ways-to-get-out-of-debt/

One option is to request an extra debt consolidation loan so that you can consolidate all of your monthly bills into one easy to manage payment. Credit counseling agencies can be a valuable resource in helping individuals at reducing interest rates and often the total debt balance.

One method popularly used to consolidate debt is to transfer your debt to a low interest rate credit card. This is a good option for many, but as many of you already know, low interest rate credit cards are not always fixed rates. In other words, if you don’t pay down your balance prior to rate increases, you may very well find yourself paying an extraordinarily high rate of interest.

If you are fortunate enough to have equity in your home, applying for a home equity loan may be a great opportunity to use the funds to pay off other lines of credit. You may also be able to use your home’s equity as collateral  on a consolidation loan. Financial institutions will often issue consolidation loans backed by a home’s equity.

Resources:

http://www.frankyoung.net/revealing-debt-consolidation-secrets-for-anyone.html

http://barex.biz/2009/credit-repair-debt-consolidation-secrets/