Saturday, March 2, 2019

5 things you should know about credit counseling

1. Credit counseling should be a first step

Credit counseling is a basic and introductory service that can lead you to other financial services if necessary. Typically during a credit counseling your advisor and you assess your financial situation from a critical and objective point of view to help you achieve the financial goal you have in your sights. The most important part is that your advisor will make personalized recommendations to help you and guide you towards your goal and that in some situations these recommendations include utulizar other services or more specialized help.

2. There is a difference between a credit counseling and a debt management program



A debt management program is a systematic repayment plan to pay your debts in full. It is usually a program that offers many benefits because it lowers interest and reduces your monthly payments, which means that you save time and money by repaying everything you owe. Unlike a consultancy, the program requires your cooperation and commitment in the long term and does carry a monthly cost. Generally, it is a recommendation that can arise in a credit counseling if your advisor considers it to be your best repayment option.

3. You must be prepared to take advantage of your session

Typically a counseling session lasts 1 hour. Much of that time can be invested in the process of informing your financial advisor about your current financial situation so that you can form a critical and objective opinion of the current situation. For example, your advisor needs to know details about all your monthly cats, your sources of income, your debts, your assets / liabilities and any other debt you have or information relevant to your financial situation. In addition, you would need to have with you documents such as the current account statements of your credit cards to have references on the interests and current balances of your accounts. If you arrive at your session with this information prepared, your advisor will have more time to focus on finding solutions and creating an effective action plan for you.

4. Not all agencies offer this service for FREE

Many companies appear to offer this service for free but they do not. Before scheduling your appointment, inquire and research a little about the services offered by the institution you have selected. If you have doubts, ask and do not have any pain in asking if the service has a cost and if the subsequent counseling also has it. You are in your right to be an informed consumer. Many agencies try to charge in advance and are usually not the most respectable or those that put your needs above their financial gain.

5. Work with a reliable credit counseling agency

Although many nonprofit agencies offer this type of counseling for free, this should not be the deciding factor in your decision to work with an agency. You must investigate the organization and know its policies to see if they are to your liking. Consult the National Foundation for Credit Counseling (NFCC) to obtain references from national agencies. You should also consult both the Better Business Bureau and the state attorney general's office or the local prosecutor's office to inquire if there are pending complaints against the agency you plan to work with.

As you can see, the benefits of a credit counseling are substantial. Also, you do not need to be in a bind to work with a credit counselor. A credit counselor can also help you organize your finances, plan better to save or educate you on how the financial system of the United States works, including how to read and analyze your credit report.

The good news is you already know that you are not alone and that you can find reliable and free help when you need it.

Friday, December 21, 2018

Understanding the Annual Percentage Rate

Credit cards and loans are not free money. The convenience of any line of credit has a price, and that price is the interest that will be reflected in your debt. Any money borrowed will always cost more with the additional interest.

Interest is really a fact of financial life. If you take out a loan or use the loan, you will have to pay for the convenience and purchasing power, with additional charges. Unfortunately, interest can be a problem when it rises too high or when debts are left for a long time without being paid in full.

The following information will help you understand what interest is and how it applies to your debts.

What is the APR?


The interest is usually calculated in the form of an APR (Annual Percentage Rate, for its acronym in English). Technically, it is a single percentage number that represents the actual annual cost of the funds during the term of the loan. This includes all commissions or additional costs associated with the transaction. The interest is applied each month until you finish paying your debt.

This means that while you are taking action to pay off your debt each month, this debt is also growing a little more each month. Under normal circumstances, payments are more than accrued interest; So every time you make a payment, you pay the additional interest in that month, plus a little bit of the original debt.

As a result, you pay a significant amount of money to the creditor or lender before your debts are paid in full. The bigger the debt and the longer it takes to pay, the more money you will have to pay in interest.

What happens when the APR is too high?


When your APR is too high, you have two problems. The first problem is that your debts will actually cost more in interest than the original purchase price of the items you bought. A purchase may end up costing 2 to 3 times more than the marked price, with the additional interest. It is a waste of your money.

The second problem is that interest eats most of your payment when the APR is too high. As a result, you never see your balances go down. In very bad circumstances, your debts grow even though the payments were made every month. It's a step forward, two steps back.

How to get ahead with a high interest?


In a word: refinancing. You have to find a way to get the lender to agree to lower the interest rate so that you can recover and get ahead with your payments. In some cases, you can negotiate directly with a lender or creditor to reduce your interest rates. For your mortgage, there may also be government programs available for modifications if you are facing foreclosure.

For credit card debt, there are several ways to consolidate your debt so you can lower the interest rates that apply to you. If you have good credit, then a balance transfer or a personal consolidation loan may be the solution you need. If you do not have good credit, then the only option left to reduce your interest rates is usually by enrolling in a debt management program.

Tuesday, November 6, 2018

Liquidating Your Credit Card Debt

 If you have reached the limit of spending with your credit cards and your debts are sinking more and more, it is quite likely that you feel overwhelmed. How will you end up paying your debt someday? Now, imagine that you learn that there is a company that promises to reduce - or even erase - your debt by paying a few cents for every dollar you owe. Is it true that it seems to be the answer to your problems?

Debt Settlement Companies


There are different types of debt relief services that are promoted saying that they can help people with debt problems. Among them are the services offered by "debt settlement companies" that say they will negotiate with your creditors to reduce the amount you owe them. Some debt settlement or settlement companies say they can make the necessary arrangements to pay off your debt for a much smaller amount - between 30 and 70 percent of the balance you owe. For example, if you have a credit card debt of $ 10,000, a debt settlement company can tell you that you are in a position to negotiate with your creditor so that you pay it off by paying less, say, $ 4,000.

But there is no guarantee that debt settlement companies can persuade a credit card company to accept a partial payment of a legitimate debt. And even if they could do it, you must separate money every month for your creditors. Meanwhile, months - or even years - may pass before the debt settlement company negotiates with your credit card company to settle your debts. And if during that period you stop making your payments, usually, every month the company issuing your credit card will add charges for failure to pay on date and the corresponding interest. This can double or triple the amount of your original debt.

How to Research the Reputation of Companies

If you decide to pay a company to negotiate the resolution of your debt, investigate a little before choosing a particular one. Consider other people's experiences with debt settlement companies. One way to find out is to enter the name of the company along with the word "complaints" or "complaints" in an online search engine. Read other people's comments about that company. You are making an important decision that involves spending an amount of money that could be used to pay your debt.

Charges Applicable to Debt Settlement Services




Companies that sell telephone resolution services or debt settlement and other relief services for indebted persons can not charge or charge a fee before liquidating or reducing the debt.

If you hire the services of a debt settlement company, you may be required to deposit money in a bank account for the charges and possible agreements of the company. This bank account that is exclusively destined to the payment of your debts will be administered by an independent third party that is called an account administrator. The account manager can charge you a reasonable fee for your services and is responsible for transferring the funds from your account to pay your creditors and the debt settlement company when it reaches an agreement with your creditors to settle your debt - always and when the following conditions are met:

The account is held in an insured financial institution.

You exercise possession and control of the funds (and any accrued interest), and you can withdraw the funds at any time.

The debt settlement company does not exercise the possession or control of the funds nor is it associated with the account administrator.

The debt settlement company does not share the charges charged with the account manager.

You can interrupt your relationship with the debt settlement company at any time without paying any fine. If you decide to terminate the relationship with the company, you must return the money by depositing it in the account within seven subsequent business days - the company can deduct the charges accrued legitimately.

Mandatory Information

Before you enroll in the program, the debt settlement company must provide you with the following information:

Charges and conditions. Before you sign up for the service, the company must explain your charges or fees. If the company charges a specific dollar amount, you must inform it of the amount. The company can only charge a part of the total charge applied for each one of the debts that it resolves. Let's say for example that you owe money to five creditors. The company manages to negotiate an agreement with one of its creditors. At that time, the company can only charge you a portion of your total charges since you still have to negotiate with the remaining four creditors and reach a satisfactory agreement. Each time the debt settlement company reaches an agreement with one of its creditors to settle its debt, the company can charge another part of the total charge. If the company charges fees that are based on a percentage of the amount you save through the negotiation, you must report the percentage it charges and the approximate dollar amount that percentage represents. Charges of this type are generally called "eventual" or "contingent". The company must also inform you of any conditions applicable to its services. For example, if the company has a refund policy, you must communicate the terms and conditions to obtain the refund. If the company does not have a refund policy, you must inform them before you sign up.

Results The company must inform you how many months or years will pass until you make a payment proposal to each of your creditors.

Proposals The company must inform you how much money or what percentage of each outstanding debt you should save before you make a payment proposal to each of your creditors.

Cessation of payment. If the company asks you to stop paying your creditors - or if the program is based on your not paying your debts - the company must inform you of the possible negative consequences of not paying, which includes:

The damage caused to your credit report and your credit rating.

That your creditors can sue you or go ahead with the collection process.

That the companies issuing their credit cards may charge you additional charges and interest, which will further increase the amount owed.

Tax Consequences

Depending on your financial situation, money saved using the services of debt settlement companies can be considered as taxable income. Credit card companies and other creditors can report debt settlement agreements to the IRS, and the tax collection agency can consider the amount you were saved from paying as an income, unless it is determined that you are " insolvent". It is considered that a person is insolvent when the total amount of their debts is higher than the market value of all their assets. Determining a person's insolvency can be a complicated process. If you are not sure of meeting the requirements to benefit from this exception, talk to a tax professional.

Red Flags

Avoid dealing with any company that promises to settle your debts and act in one of the following ways:

I charged you before agreeing to settle your debts.

Offer to participate in a "new government program" to get rid of personal debts incurred by credit card.

I assure you that you can eliminate your unsecured debt.

Tell him to stop communicating with his creditors.

Tell you that you can stop all debt collection calls and prevent lawsuits.

I assure you that you can cancel your unsecured debts by paying a few cents for every dollar you owe.

Other Options

Trying to settle your debts by hiring the services of a debt settlement company is just one of several options available to solve your debt problem. You could also negotiate directly with the issuer of your credit card, consult a credit counselor or consider filing for bankruptcy.

Contact your credit card company - even if they have previously refused to help you with your problem. Instead of paying a company to speak on your behalf with your creditor, keep in mind that you can do it yourself without having to pay anything. You can find the phone number on your card or in the account summary. Insist and keep a good record of your debts in order to explain your situation when you manage to contact the credit card company. Your goal is to try to reach an agreement with the company to establish a modified payment plan that reduces the amount of your payments to a manageable level.
If you do not pay your debt for 180 days, your creditor will cancel your debt by recording it as a loss; Your credit rating will suffer a great impact and you will continue to be indebted. Often, creditors are willing to negotiate with you even after you cancel your debt by recording it as a loss.

Establish contact with a credit counselor or advisor. The reputable credit counseling organizations offer advice on managing money, bills and debts, and help people develop a budget, and usually offer free information and workshops on these topics. The advisors or advisors should analyze with you their global financial situation and help you develop a personalized plan to get out of debt.
 There is a new law that establishes that credit card issuers must include in their account summaries a toll-free telephone number so that credit card holders can consult information on how to find non-profit credit counseling organizations.

 Most credit counselors offer services through local offices, on the Internet, or by telephone. Look for an organization that offers advice through personal face-to-face interviews. There are several universities, military bases, credit cooperatives, housing authorities and affiliates of the U.S. Cooperative Extension Service that operate non-profit credit counseling programs.

Occasionally, a credit counselor can tell you that you have to consider filing for bankruptcy. Filing bankruptcy or bankruptcy has serious consequences, including the reduction of your credit score, but credit counselors and other experts say that in some cases it is the most logical alternative. People filing a Chapter 13 bankruptcy filing and receiving a fixed income are allowed to retain ownership of their assets, such as a mortgaged house or a car they would lose in a bankruptcy proceeding filed under Chapter 7. In a Chapter 13 bankruptcy case, the court approves a repayment plan that allows you to pay your debts for a period of three to five years, without having to give up your property right. When you finish making all the payments established in the plan, the discharge of your debts is determined. As part of the Chapter 13 process, you will have to pay the fees of a lawyer and you must receive credit counseling from a government approved organization within six months prior to the filing of any type of discharge of bankruptcy debts.