Debt Consolidation Blog

What is student loan consolidation?

Mon, 23 Jun 2008 15:19:00 GMT

Students can get various kinds of educational loans. These loans help students to pursue their choices of courses even if they are unable to afford them.

Different consolidated loans for students

Students can get different kinds of loans for their educational purposes. There are mainly two categories of student loans. These are federal student loans and private student’s loan. The federal loans are given by the department of education and they are much easier to obtain. Private loans can be obtained from any of the leading banks and other institutions. Both of these loans are used by students for funding their education. But the students who want the option of student loan consolidation should not mix the two together.

Consolidating students loans by federal institutions

Students should always try and consolidate their federal loans first. By doing this the students can get various benefits like lower rates of interest. The interest rates of the private loans are much higher. It also helps to reduce the monthly payment option as the term of repayment of the loans can now be extended to 30 years depending on the amount of the loan. The repayment option for student loan consolidation has to be a single check every month.

Eligibility for student loan consolidation

Students can be eligible for loan consolidations of Federal loans and are applicable only when the students are not in school any more. At that time the student should have been actively repaying the loans or should be in the 6 month grace period. The minimum loan amount is also $10,000.

Avoiding mix up of Federal and Private Loans

Consumers are advised not to mix up Federal and private loans during the process of student debt loan consolidation because the interest rates on the Federal loans are tax deductible. The payments for the same can be deferred when the student gets back to school. There are also certain types of service for which the loan is forgiven. But private loans don’t provide the students with these advantages. If students mix the two loans then the benefits of the federal loan consolidation are also lost. Students can easily opt for the loan consolidation after their graduation to ease the burden of loans and debts. The monthly payment and the lower interest rates also help in saving a lot of money.

Hence while students are opting for these loans they should keep these factors in mind so that they can benefit from them in the future.

Student Loan Debt

Wed, 28 May 2008 13:25:00 GMT

Most college students graduate with a student loan debt. There are, however, several ways of reducing the debt burden.

How to reduce student loan debt

As education gets costlier, student loan debt continues to rise every year. Studies suggest that nearly half the number of college graduates is burdened with student loans, and the average student loan debt is to the tune of $10,000. To handle his/her college expenditure, a student can choose from various aid options, such as scholarships, federal or private loans, grants etc. According to College Board estimates, while a public school can cost a student about $13,000 a year, the annual cost in a private school is much higher at about $28,000. It forces students to seek loans from federal or private sources, and they have to start repaying the student loan debt after completing their graduation.

There are, however, a number of ways of lightening their burden. The most familiar ways of reducing student loan debt are consolidation and refinancing of student loans.

Consolidation for reducing student loan debt

Student loan consolidation is useful for two main reasons. Its most important advantage is that it reduces interest rates, implying a reduction in monthly payments as well as the amount of overall student loan debt. If interest rates decrease for one reason or the other, you may have a lower rate than what you had to pay when you first received the loan. The second benefit of loan consolidation is that a student needs to deal with a single creditor instead of many. It makes keeping track of his/her payments and the process of negotiation much easier.

Federal and private loan consolidation

There are two kinds of student loan consolidation: federal and private. In the federal type, all the debts of a student are purchased by a consolidation company or by the Department of Education. Here, the loans can correspond only to federal institutions. In the private variety, a student has to negotiate directly with a private company for consolidating his/her private loans. One should remember that federally funded student loans carry a lower interest rate than private loans. In federal loan consolidation, you are not required to pay any extra fees. But companies offering private consolidation loans will charge a fee for their services. Many students are still left with no alternatives but to choose this expensive option.

Last but not the least, a reduction in monthly payments also helps a student to keep all of his/her loans up-to-date. This means that the student does not have any defaulted loans, and his/her credit remains untainted. So student loan debt is not something extraordinary, it only has to be handled tactfully.

College Debt on the Rise

Thu, 22 May 2008 12:33:00 GMT

The main objective of a student when he/she enters college is to work single-mindedly for landing a suitable, well paying job. But as college tuition gets costlier, and government loans set borrowing limits higher – it is becoming increasingly difficult for students to pay off their college debt and even begin to shape their future. The amount of college debt is going higher and higher and more and more students are now finding themselves in a hole. And the situation, as only to be expected, is much worse for poorer students.

Rise in college debt

The average amount that an undergraduate student is likely to borrow is to the tune of $19,300. The amount was only $12,100 ten years ago. It is not that students from rich families never run into college debt to meet their education expenses, but it is always the poorer students who bear the brunt of the problem. About 72% of poor students go into debt to pay for their education. The average monthly rate amounts to $210, which is equivalent to 6 to 15% of the expected earnings of a fresh graduate. A recent survey of 1300 college students has revealed that 13 percent of them will require less than five years to pay off their student loans, 21% will take 5 to10 years, and 36% more than 10 years. The survey observed that only 30 percent of the students interviewed claimed to have no student loans.

Given the rise in college expenses, many students are running into college debt and looking for jobs as well to repay it. It is not very difficult to find jobs that fit their schedules and financial requirements. Those who work 10 to 15 hours a week are likely to complete their graduation as well.

Increase grants, scholarships

The United States education department is, however, not so worried over this rise in college debt and its consequences. It believes that lower interest rates and higher paying salaries are enough to offset this disadvantage. However, when nearly half of these college graduates say that they will need more than ten years to pay off their loans, the department’s belief sounds unconvincing. Ten years is a long time, and most graduates would like to find themselves settled by then. Many of them are likely to have families by that time. It is thought that college is necessary for a student’s financial success in life. But if the situation does not improve, the financial pressure of college fees will only hold the students back from fulfilling their dream. Things can, however, be better if grants and scholarships are increased.

Financial and Money Management Essentials for Kids

Wed, 07 May 2008 14:12:00 GMT

Parents cannot start too early to train their children in the skills of financial and money management. Here are the essentials for kids.

How Do Kids Learn?

Kids certainly learn by being taught, both by parent and teachers, the necessary content and skills to be “educated.” Financial and money management, until recent times, has not been taught in schools, and children have relied upon their parents to grasp and master the skills of financial responsibility so necessary to productive adulthood. What educational research clearly shows, moreover, is that young children learn by watching their parents’ behaviors, not necessarily by the words coming from those parents. Further, learning is cemented by hands-on activity, that is, actually participating in the learning actively. The results of this research can be used to effectively teach financial and money management essentials to kids.

Don’t Make Budget and Bill-Paying a Secret Activity

You do not need to inform your children, at any age, of all details of your financial picture. However, you can certainly be sure that they observe you as you design and revise your household budget and as you pay your monthly obligations on time. By watching you do this, children will see these activities as important and valuable. The older children become, the more they can be made aware of financial circumstances. When a child asks for a new video game, for example, it is perfectly fine to respond, “I would love to get it for you this week, but the bills I have to pay won’t leave enough money for the game. Next week, there will be fewer bills, and I can probably buy it then.” These responses let the child know that you are paying your bills first and that luxury items come only if there is enough money left to pay for them. What a great lesson!

The Business of Allowances

Children should be given allowances as early as possible. There are many good lessons in money management involved in this practice. If a child spends his/her entire allowance within the first day or two, there will be the pain of knowing that nothing more can be purchased until the next allowance day. There is also the joy of knowing that there is money to buy something if the child has been careful and frugal. If the lesson of managing money for a week at a time is not being learned, then it makes sense for parents to give the allowance and then take a portion back to hold for the later days of the allowance period. The child will then begin to learn that saving money for later can be a pleasurable thing. As the child grows and the desires become more expensive (video games, cell phones, cars, etc.), the parent continues to teach by concrete activity. It is perfectly correct to say to a child, “I know you want that cell phone. If you are willing to save for half of it, I will pay the other half. Then, you can save an additional amount out of your allowance each week to pay for half of the monthly bill.” Nothing can be quite the crisis as a teen that has run out of minutes and cannot call, accept calls, or text. Lesson learned.

Larger Allowances Mean More Financial Responsibility

As kids grow, allowances should grow as well. As allowances grow, parents need to add to the financial responsibilities. Giving a teen a monthly allowance that is meant to cover school lunches, gas, cell phone expenses, clothing, entertainment, etc. will provide additional management training. The allowance is now expected to last an entire month, and lessons in budgeting need to begin in earnest. The teen needs to project expenses and surplus, dividing that surplus over the month in order to afford the non-essential expenses. Expect a few mistakes – they are inevitable. Do not bail out your teen when these mistakes are made. No one will do that for him/her in adulthood.

Reverse Mortgage Explained

Thu, 01 May 2008 13:50:00 GMT

Reverse mortgages are a strong tool with the help of which a house-owner can secure a cash flow without incurring any tax.

What a reverse mortgage is all about

Reverse mortgage differs from what we call traditional or ‘forward’ mortgage in a number of ways. Unlike the traditional ones, reverse mortgages do not require you to have a steady income. What is of utmost importance in reverse mortgages is that the house must be owned by you. If you are the owner of a house, reverse mortgages will enable you to access the money you have built up as equity in your house. Reverse mortgages are extremely useful during the later part of their lives for old, retired people who own a house.

Eligibility criteria

In order to be eligible for a reverse mortgage, you have to be at least 62 years old and must own and occupy your home as your primary residence as long as the loan term is in operation. Only the following types of homes qualify for a reverse mortgage: single-family residence, buildings having one to four units, condominiums, and mobile homes constructed on a permanent foundation later than July 1976. Remember that cooperatives are not eligible except in certain areas of Los Angeles and New York. You will also require counseling from a counselor approved by the HUD before or after completing a HUD application.

Advantages of reverse mortgages

In the case of a reverse mortgage, you will be able to keep the ownership of your house for life. The rest of the equity will be passed on to your heirs. Another great benefit of a reverse mortgage is that its proceeds are free of tax. You can use the proceeds for different things such as repair and improvement of your house, education of your grandchildren, medical care, travel etc. As long as you are occupying the house as resident, no loan repayment or payments are needed. Reverse mortgages also do not require any income, medical or credit conditions to be fulfilled.

Various types of reverse mortgages

Reverse mortgages are mainly of three types: federally insured, lender insured and uninsured. There are three reverse mortgage products as well: Home Equity Conversion Mortgage (HECM), Fannie Mae Home Keeper Reverse Mortgage, and Cash Account. These products are distinguished by the type of residential property, payment types, loan amount, processing fees as well as interest on the loan balance.

How to draw money

You have a few options to choose from while deciding how to draw money from your reverse mortgage. You can draw a single lump sum amount, or prefer regular monthly advances, or even a credit account.

There is little doubt that reverse mortgages are of great help to people in the golden years of their lives.

Debt Relief Grants From The Government

Mon, 21 Apr 2008 13:24:00 GMT

Apart from those all-too-familiar ways, debt relief grants from the government can also help you to get rid of your nagging debt problems.

Government grants for debt relief

Debt-ridden people use various types of well-practiced strategies to overcome their debt problems. Not many, however, out of ignorance or otherwise, apply for debt relief grants from the government. Most people often wrongly believe that these grants are not for individuals and they do not qualify for such grants. But these grants can be extremely helpful for those people who meet the stipulated standards and requirements. Government comes forward to arrange these grants because debt-ridden people cannot afford to spend much money which, in turn, adversely affects all sectors of the economy.

No collateral required

Often easily available, government debt relief grants do not need any collateral or any other type of security. You can utilize the amount of money receives as grants to launch a new business, and use its proceeds to pay off your outstanding debts. You can get government grants if you want to repay debts incurred because of medical needs, education, business requirements etc. If you incur debt due to treatment in a hospital, medical bills, etc. you can pay off that debt making use of such government grants. Also, debts incurred on account of starting a business can also be repaid through these grants. So government grants are extremely useful for debt relief in a number of areas.

Easy availability

You can easily receive government grants if you can convince the government that you are in no position to repay your debts. The concerned authorities will closely examine your financial position, unpaid debts and capability of repayment before approving the grant. This aims to make sure that the grant reaches the really needy people who don’t have any other means to solve their problems.

Advantages of government grants

There are several advantages of availing government grants. One, the grant is easily available and needs no collateral or any other type of security. All a person has to establish is that he/she is really unable to repay his/her debt. Two, it is not a loan but an aid given by the government. So you are not required to repay the amount. In addition, it carries no interest and is non-taxable. The main objective of the grant is to make a debtor debt-free. Three, debt relief grants from the government can save a person from filing for bankruptcy, the dreaded last option for a debtor. Four, government grants are a much better option than other methods of debt relief because they can give a debtor freedom from debt almost instantly.

All in all, government grants are an ideal option for debt relief.

Finding Tax Debt Relief

Thu, 17 Apr 2008 17:19:00 GMT

If you find yourself trapped in tax debt with no escape route in sight, try to explore various ways to get relief and solve your problems.

How to get tax debt relief

You can have a tax debt for various types of reasons, avoidable or unavoidable. It is possible that you have forgotten to file your tax return, or underestimated the amount of taxes you should pay. Whatever be the reason, you must sort out the things as soon as possible to avoid punishment. In case you are in no position to repay your tax debt, you will have to try some alternative options for getting some relief that includes negotiating a settlement of your tax debt.

Negotiation to reduce burden

You should remember that the IRS will always try its best to collect at least some portion of the tax you owe them. And that is exactly what prompts the IRS to enter into negotiation with a defaulter like you. But instead going on your own, it is always advisable that you hire a professional tax attorney to negotiate on your behalf. If not the total amount of your tax debt, such a negotiation can at least successfully reduce the accumulated interest and penalties. For the government, it is better to settle for less than nothing.

Types of relief

If you are a genuine candidate to deserve tax debt relief, you can get in touch with the IRS and find out what kind of assistance you may get in your existing situation. The relief extended will depend on the nature of the case. However, if you are forced to underpay your taxes due to reasons that are not in your control, chances are that you will be treated sympathetically by the taxmen. Such treatment is, however, unlikely if you failed to make any payment whatsoever. A qualified tax attorney can help you in this regard.

Plan for the future

Remember that the government is unlikely to give you tax debt relief more than once. So you should plan carefully so that you figure your taxes properly and pay them on time. The plan should be chalked out in such a manner that it takes into account all your possible tax payments in the future. As the IRS rarely spares debtors who try to seek relief more than once, you should hire an accountant who can competently handle your tax matters in the future. This will ensure you never underpay your taxes yet again.

A tax professional can be of great help to you when you see tax debt relief. They only have the necessary expertise and experience to get the job done for you. So it makes sense to entrust the job to them and not try it yourself.

Can debt consolidation be done without the help of a professional?

Mon, 14 Apr 2008 20:36:00 GMT

Although a professional can make the job easier, debt consolidation can also be done without the help of a professional.

Is debt consolidation possible without professional help?

There is a widespread belief that debt consolidation is not possible without seeking the help of a professional. The belief, in fact, is far from true. It is very much possible to go for debt consolidation without any professional assistance at all. Those who find it difficult to afford the fees of a professional can try the job on their own. It should, however, be conceded that professionals have much more working experience in this area

and can make the process a lot easier and faster.

How good are professionals?

It is better if you have a close look at professional companies before you hand over the job of debt consolidation to one of them. Are they really worth being employed? The answer, in most cases, is no. A professional, no matter how efficient, can do little that you yourself cannot do. The company can neither drastically cut down your bills, nor make your debts vanish into thin air. In a number of cases, these companies will collect a monthly amount from you but withhold it without paying it to your creditors. This means your creditors won’t receive any payment during this period. When such non-payment happens, the creditors finally choose to formulate a new payment plan. It’s at this time that your chosen debt consolidation company will begin negotiations with your creditors. During this non-payment period, many of your bills will remain unpaid affecting your credit card history.

What you can do on your own

So, it makes sense if you try the job of debt consolidation all by yourself rather than paying a hefty fee to a professional who might even harm you in the long run. If you are facing difficulties in repaying your debts, meet your creditors and have a frank face-to-face discussion with them. It is highly likely that they will understand and believe the problems you are facing. Once they are convinced of your troubles, your creditors might agree to work out a fresh plan for repayment. The conditions imposed on you could be harsh; but you at least won’t need to hire a debt consolidation company for a fee to get over your problems. You must, however, maintain enough discipline to handle the affair by yourself. In case you fail to stick with your plan, everything may go haywire and you could very well find yourself in even deeper troubles in the future.

So, if you are disciplined enough and have confidence in yourself, going alone is seriously worth a try.

Negotiation Credit Card Debt With The Banks

Tue, 08 Apr 2008 15:31:00 GMT

As banks don’t like to see a debtor file for bankruptcy, they often keep open the option of credit card debt negotiation with customers.

Negotiate credit card debt with the banks

Credit card has almost turned into a necessary evil in people’s lives these days. A huge number of people all across the world spend recklessly using their credit cards and find themselves trapped in a debt trap that make their lives miserable. Different people try different methods to get over their debt problems. Negotiation of your credit card debt with your banks is also an available option worth trying. Although many debtors feel a bit nervous about approaching their banks, it may prove productive for them if they overcome their hesitation and start negotiating honestly with the banking authorities.

Talking with the bank

Nervous customers should realize that banks detest the idea of losing all their money and will always be keen on recovering at least a portion of the lent amount. That is why a person going bankrupt because of credit card debt is hardly an acceptable solution for banks. The avenue of negotiation, therefore, often remains open. When you start negotiation with officials of the bank, it is likely that they will understand your difficulties and reduce the rates. The bank may also propose to consolidate all your debts with the bank or assist you in arriving at an agreement between all your creditors simultaneously.

Negotiation skills essential

In case the credit card debt negotiation with the bank fails to yield satisfactory results, you will have to seek other agencies for consolidation of your debt. Remember that in this case too, you will have to call into play all your negotiation skills to clinch a good credit card debt deal. In case your negotiation skills come good, you may end up managing low standard APR or you a longer term on 0% APR. If you are extremely lucky, you might even get both.

Credit limits and other benefits

Apart from these most important features, the other things you may want to include while negotiating credit card debt are the credit limits and some other benefits as they come. In such cases, your objective is to get a better card as a result of the debt negotiation. However, if you have a bad credit history, it will be difficult for you to obtain unsecured bank loan or another credit card with the help of which you can transfer your balance.

All in all, negotiation of your credit card debt with your bank can help you in a number of ways. It might provide you with a new, attractive option that you never thought of. So, start negotiation with the bank without any hesitation and get the best results.

Getting a Lower Credit Card Rate

Fri, 04 Apr 2008 12:51:00 GMT

You can reduce the cost of your bills by either looking for credit cards with a lower rate, or by reducing the rates of your existing cards.

How to get lower credit card rate

Although credit cards are meant to help people, many of them misuse them to ultimately find themselves in a huge mess. It is not always fair to blame credit companies for your exorbitant bill amounts because you had been informed of their rules and policies before you bought your cards. Reckless use of your cards in frequent spending sprees will naturally lead to bills that are almost impossible to pay off. Apart from spending less, you can reduce the amount of your bills by looking for credit cards that carry lower interest rates. Yet another effective way of lessening your burden is lowering the rate on your present accounts.

How to proceed

In order to get lower rates on credit cards, you should get in touch with those departments in which you maintain credit accounts. Now try to convince them so that they agree to convert your credit account at a lower rate. It can help if you have a prolonged business relationship with them. In case your present credit card company fails to keep your request, you can choose other companies. Because, you only stand to lose if you stick to cards that have higher interest rates. Follow it up with looking for a company that is ready to accept new applicants. Show your keenness in dealing with the company to ensure a favorable response. If you do not hear from the credit card company for about a week after completing all the formalities, it is better to directly contact their office and inquire into the matter. If the company was to reject your application, they are obliged to write to you citing reasons for their refusal. In such a scenario, you can look for another company.

Good credit history essential

Keep it in mind that no matter how hard do you try, all your efforts to get a lower credit card rate will be in vain if you do not have good credit history. If your credit history is bad, you will be blacklisted by card companies. So a good credit history is essential if you are looking to get low interest rates on your cards. You should know that many credit card companies keep provisions for lower interest rates for those who are recognized as credible customers.

You should have a lot of patience if you want to get a lower credit card rate. You should never forget that it is you who will be benefiting at last from the amount of hard labor you are giving at present.