Monthly Archives: June 2010

Help That is Available for People In Debt.


There are various different types of debt help available, all of them designed to get people out of different situations. If you are in debt, the list of debt solutions can often sound intimidating, so it is important to understand each option, before deciding what to do. Debt advice may be all you need to help you on your way to a debt-free life. Many debt management organisations offer free debt advice, such as budgeting tips.

As well as giving you advice on where you can improve your finances now, when you contact a professional debt adviser, they will be able to assess your situation, and talk you through a plan of action for the future. The debt adviser could also advise you on whether or not you require a debt solution, and if so, which solution might be best for you.

Debt management plan

A debt management plan may be right for you if you can’t make the agreed repayments to your unsecured debts. Debt management involves negotiating with your unsecured creditors, to try and agree a smaller monthly payments based on your disposable income (income minus essential expenditure).

Debt management plans can be useful for people whose disposable income is not enough to repay their unsecured debts. However, it is important to note that creditors are not obliged to accept any changes to the existing repayment plan – nor are they obliged to stick with them after they have agreed to the changes. Be aware that reducing your monthly payments means you will be paying your debt off for longer. It may mean that you end up paying more overall, due to the interest added to your total debt each month.

It is also important to note that when you enter a debt management plan, you are defaulting on an original agreement. This will show up on your credit rating, which could then affect the cost and/or availability of credit for 6 years. You can create your own debt management plan, and negotiate with creditors on your own. However, debt management plans are also available from professional organizations.

Debt consolidation

Debt consolidation could be the right way out of debt for you, if you have multiple debts and you would like to turn them into one manageable debt. Debt consolidation works by taking out a loan to pay off all the money you owe in one go (so all your creditors get all their money back at the same time). Instead of having several payments to make each month, you will now have one.

A potential benefit of a debt consolidation loan is that you can reduce your monthly payments by arranging to repay the debt consolidation loan more slowly than you would otherwise have repaid your debts. However, it is important to note that due to interest, this may lead to you paying more overall. Debt consolidation loans would not be suitable for people who aren’t sure they could commit themselves to making the loan repayments.

IVAs (Individual Voluntary Arrangements)

If your overall unsecured debt stands at around £15,000 or more, then an IVA could be an appropriate alternative to bankruptcy. An IVA may be suitable for people who don’t think they can repay their debts in a reasonable period of time – but want to avoid the risks of bankruptcy, such as losing their home.

When you enter into an IVA, you enter an agreement to make regular monthly payments (of a pre-arranged amount) to your Insolvency Practitioner. Therefore, an IVA is not appropriate for people who feel they cannot commit to regular monthly payments. The new agreement must be accepted by 75% of your creditors (by debt value*). If it is accepted, the agreement becomes legally binding for (in most cases) 5 years.

In the 54th month of the agreement, homeowners may be required to release some of their equity, so they can repay more of their debt. Once the IVA has come to a successful end, any remaining unsecured debt will be written off. The IVA will then stay on your credit report for one year, which can make further credit more expensive, and more difficult to obtain.

If you want more information about the types of debt help available, it might be wise to contact a professional debt adviser. The right debt adviser will be able to advise you on how to deal with your debts.

The Right Way of Handling Financial Stress


Bad money management can lead to financial stress which may take its toll over your family life. Financial stress may also cause health problems like diabetes, high blood pressure and, even heart attacks. This will only increase the existing stress level, causing havoc to personal life.Learning to deal with financial stress in the right way helps to overcome all its negating effects against you, and your family. Simple lifestyle changes, and meticulous planning can get us out of any unwarranted financial crisis.

Be aware of your financial status. Understand what your current sources of money are, and how they are currently getting spent. Most of us deal with the expenses part of it, and forget to address the income sources. What is important is to build on the income part with a clear, and focused thinking on current and future needs. When a savings is created as a commitment to a future event, it makes us more aware of our spending, and eventually helps to manage our finances well.

When a person is in financial stress, it means his lifestyle has made him spend more for himself and his family. So, make a slow and steady but a conscious change from your current lifestyle. Develop a spending strategy that cuts the spending by 20-25%, and increases your savings subsequently. Remember to put aside a small savings amount from every month salary, and then plan for expenditure with the remaining amount only. When people commit to a savings strategy, it becomes a routine for them. Use a budget planning software to make expense management easy, and to track monthly bill payments.

Make amends on a regular basis, and make concrete plans for managing and handling your personal finances to deal with current financial constraints. Your example will also teach your children the right way to prevent financial stress in their own lives. Financial stress can be catastrophic to the family, when not handled properly. Learning to make amends with a cool head can help deal with the situation calmly, and find solutions fast.

Tips and Suggestions on Rebuilding Your Credit Rating After A Bankruptcy


Individuals, who have filed for bankruptcies, find rebuilding credit status a very difficult activity, after the bankruptcy has been dealt with. It’s important to rebuild credit after coming out of bankruptcy, since account details are flagged for seven years right after the inception of bankruptcy. One might experience certain financial hardships, especially when it comes to availing loans and credit facilities from creditors. At times, individuals often feel getting fresh or new credit after Chapter 7 bankruptcy or Chapter 13 bankruptcy is next to impossible. The primary reason why this happens is because:

• The bankruptcy leaves a negative impact on your credit score, and ratings for as long as seven years.

• The credit scores and FICO takes a beating during, and just after bankruptcy. So creditors don’t feel like sponsoring an individual who has bad credit history, and poor ratings.

The basic issue is, filing for bankruptcy can lead to long time repercussions, and that comments related to bankruptcy remain on the credit report for as long as ten years, and the related negative information for nearly seven years. However, it’s possible to correct the situation, and rebuild the credit status, and ratings even after the bankruptcy. Typically, when a creditor reviews a credit application, it’s checked for steady employment history, low delinquency status and levels, a good history of monthly payments, and the overall status of the savings accounts. The following tips can help the individual rebuild the credit status after being bankrupt:

• Secured credit cards:

It’s possible to re-establish the credit ratings by applying for a secured credit card. This can be done by creating, or setting up a savings account within a reputed bank that offers secured credit card facilities, and later applying for a credit card.

• Unsecured credit cards:

A few banks offer unsecured credit cards facilities. In such cases, no deposit needs to be deposited, to avail the facilities. It can be a very good option in re-establishing new credit ratings. In order to qualify, one needs to be employed, and provide identity as well as residence proof in the form of telephone, or utility bills. The individual also needs to have a certain fixed monthly income. The credit history should not include any recent derogatory entries, or comments within the past six months.

• Merchants:

Filing a bankruptcy is not advisable, as it’s guaranteed to affect the credit ratings. The local merchants can help in re-establishing fresh credit ratings. It’s possible. One needs to find out whether they report all payment activities to a credit bureau, and in the event they do, carry out transactions with them. If the merchants approve the purchase activity, one need to pay off the item’s cost within 90 days. By carefully carrying out certain calculated transactions every month, it’s possible to control the credit history. And one can improve upon the credit ratings, by exhibiting good quality transactions.

• Automobile:

Certain dealers specialize in selling cars to individuals who have faced bankruptcy, or possess bad credit ratings. So one can possibly check out the telephone directory, or alternately look out for advertisements of car retailers and dealers who specialize in such issues. One should be prepared to pay big deposits, and higher interest rates. The automobile bought functions as collateral for the loan availed. Since the credit facility is associated with high interest rates, many dealers might be interested in helping out. One need to ensure all payments is made on time. Timely payments can help build good credit reports.

Preventing Foreclosure Before It Gets Worse


Discovering that your home is about to be foreclosed can be extremely unsettling. A person might understandably begin to think that there is nothing that they can do towards preventing foreclosure. Preventing foreclosure is, however, manageable by following just a few foreclosure stopping methods. There are a few very important steps that someone in a difficult financial predicament needs to undertake, in order to save their home from an unwanted foreclosure.

The first foreclosure stopping method to consider, is to seek out an investor who is able to buy your home for more than you currently owe on it. This would relieve you of the burden of the loan without further damaging your credit. Depending on how much you owe, this could be unrealistic because the large number of distressed properties, means that investors are enjoying a buyer’s market.

That is where the ‘Short Sale’ comes in as a feasible foreclosure stopping strategy. A short sale is where the bank reduces the amount of the loan payoff down to the price the investor is willing to pay, and you walk away from the home. When the homeowner is not accepted for loss mitigation and is sure to lose their home, a short sale is a good method of preventing foreclosure. You’ll still have to move, but at least your debt will be cleared. Their credit score is reduced by about 100 points, as opposed to an average drop of 250 points in the case of a foreclosure, and subsequent sheriff’s sale. There is also the threat of a deficiency judgement, whereby the homeowner would have to pay the difference between amount owed to the lender, and the auction sale price.

If you are unable to effect a sale to an investor, something similar can be done between just you and the bank. In this case, a Deed in Lieu of Foreclosure is executed, and the bank will take over your home in exchange for you moving out of the home, and leaving it in good condition.
Short sales and Deeds in Lieu of Foreclosure, will both have a negative impact on your credit. Generally, this will last for approximately two years instead of five or more years for a foreclosure.

Another foreclosure stopping method, is to negotiate either a forbearance agreement, or a loan modification agreement with your banker. You might be able to work something out with the lender to remain in your home though. The banks currently have a lot at stake in preventing foreclosure. Hundreds of thousands of bank owned homes are sitting vacant. They represent liabilities, not assets, to the lenders.

Also, both federal and state government agencies are providing the banks with incentives, and pressuring them to modify loans. If you are struggling to make your house payment each month, give your lender a call and learn what can be worked out. You may be surprised to find that lenders are more receptive now, than they once were.

As a homeowner interested in preventing foreclosure, be assured that you are not alone. 1 out of every 100 homeowners are experiencing trouble with their mortgage payments. Millions of people have already lost their homes. And, while some of them have been fortunate enough to have found suitable rental homes or shared accommodations with friends, many have become homeless. So clearly, preventing foreclosure is not something to be taken lightly.

The high rate of foreclosures, is also an important issue for our entire country. Americans with a sense of social justice are interested in seeing that their fellow citizens are adequately housed. Beyond that, the economics of the situation demand the these problems are addressed before they become even more widespread. To the relief of many troubled homeowners, Government is becoming more proactive with their efforts in preventing foreclosure. If your home is at risk, it is important for you to educate yourself on these foreclosure stopping strategies.

Calculating Your Regular Expenses and How It Affects Your Cashflow


A key part of personal financial planning is calculating your cash flow. Your regular expenses not only include your non-discretionary expenses, but all of your common expenses. If you ignore this fact when calculating your expenses, you will create an incorrect picture of your cash flow.

Almost everyone remembers to include expenses like housing, utilities, transportation and food when calculating their common monthly expenses. These are basic necessities that are part of life. For most people, these items will represent the largest part of their overall monthly expenses. Unfortunately, many people forget to consider other expenses as part of their financial picture. This can create a very misleading picture of their finances. Although many expenses are voluntary, they are an important part of your overall financial picture.

Some things can be difficult to remember because they are paid through automatic billing, or they are not paid monthly. Examples of this are insurance, gym memberships, cable TV and newspaper subscriptions. Although expenses do not happen on a monthly basis, they still need to be calculated in your overall cash flow. If you pay for your newspaper only twice a year, you still need to divide the payment by six and add it to your customary monthly expenses.

Other items that are not regular, also need to be included in your monthly expenses. Things like clothing, vehicle maintenance and gifts are all important expenditures which must be accounted for. Many people overlook expenses that are not regular, but anything you do on a regular basis affect your cash flow. The best thing to do, to estimate these expenses is look over your spending habits for the last several months.

The last category of expenses we will discuss is entertainment expenses. Entertainment is one of lives true pleasures, and some money for entertainment should be included in your budget, no matter how frugal you are. Not including this, will lead to a budget that you most likely cannot stick to. Most people spend a considerable sum on entertainment, for things like eating out, movies and the ever famous late night outings. While spending $15 a day doesn’t seem like much, not including it in your cash flow with throw your calculations off by $450! Depending on your income, this can spell catastrophe.

For an accurate picture of your personal cash flow, you must include all of your expenses in your figures. If you fail to include non-essentials, like entertainment and things that are irregular, like home maintenance, you will not have created a useful picture of your cash flow.

The Benefits of Financial Planning


Planning is a basis of every activity you undertake in your life. Whether it is a routine job, or a year-long project for its systematic and timely execution, you have to plan for it well in advance. Planning is an integral part of our life, and when it comes to financial matters planning is quite inevitable. Financial planning has various branches, and stages that depend on the need of the individual. An ideal financial plan should incorporate short-term gains, as well as long-term security. There are many factors that one has to consider while creating a proper financial plan, and a well devised plan can reap unlimited benefits in future.

The basic and immediate benefit of financial planning, is in having a controlled monthly budget. Having a well-defined strategy regarding your monetary resources, and its allocation among expenses, savings and investments will motivate a family to stick to their monthly budget. In reality, a monthly budget is also a form of financial planning that defines your short-term money flow. It allows you to verify your total income, and compare it with monthly expenses. Random spending will never make an individual or family realize the importance of having savings. Meanwhile, a monetary plan or budget helps in setting proper financial goals and targets that can be both long-term and short-term. Having such goals is very essential, in order to avoid getting into the debts. For instance, if you have to buy a new home, or to plan for the college expenses of your kid, you need to set a specific goal and start saving for it right from today. The earlier you plan for it, the lesser will be your financial burden as time passes by. This savings will also motivate you to plan for feasible investment opportunities. Hiring a financial agent to suggest suitable investment ventures, can help you in having a more profitable saving.

The real benefit of financial planning, is experienced whenever you are posed with some kind of unforeseen expenses or emergencies. Creating reserves for medical expenses, theft, accidents is an essential part of your financial plan. Securing timely insurance for all these emergencies, can help you in reducing your financial liabilities in case of a contingency.

Having a proper plan motivates you to save, and it improves your financial insight and knowledge. Your interest in financial security will lead to find new ways, and means to increase your earnings. Adequate savings also gives you the option of investing in a private venture or business. Nevertheless, this is an option considered by every other common man under the current market scenario.

The final part of the benefits that you would reap from a properly executed financial plan, comes during the time of your retirement. Your retirement plan is an important chapter of your entire financial planning. This will enable you to have a definite source of income after your retirement, in the form of return from investments or savings account.

Planning on How to Get Out of Debt


Getting into debt is straightforward. Getting out of debt is a tad more complex. It is a certainty that a lot of citizens have learned in bad times, and this knowledge is the source of the following information which explains the causes of household debt, and how to grow out of debt.

Household debt has developed into part of today’s way of life. Households are in debt in exchange for the realization of dreams, or requirements as well as surprises such as increased taxes, medicinal emergencies, and personal development. Debt can have its advantages, but to sidestep it’s most devastating disadvantages, each debt obligation ought to be accompanied by a proposal to fix it.

Two rules of Debt vigilance
The steps to getting out of debt ought to start before debt obligations are made.

Theory 1:

In this regard, each individual anticipating debt ought to be extremely aware of:
A. Own assets such as money, property, and accounts
B. Employment status
C. Insurance
D. Current, and anticipated obligations
With this knowledge, a person can determine the level of debt he will agree to. Commonly speaking, debt ought not to exceed 25% of disposable revenue, if there is to be a reasonable accumulation of savings. Savings is significant, since it could eliminate or else reduce the need for debt.

Theory 2:

No debt ought to be accepted without including an arrangement on how to settle it. In other words, don’t run into debt, if you don’t know how you are going to repay it. However, when into debt, the procedure of getting out of debt starts.

How to Get Out of Debt
Getting out of debt has significance on credit ratings; that being so, every strategies in favor of getting out of debt has to examine the impression on credit worthiness. Usually speaking, it is more effective to remain on your compensation strategy and simplify debt slowly but surely, by not acquiring further debt.

If situations require a more rapid elimination of debt, clear up debt by:

A. Paying in advance or else paying bigger payments. This reduces debt more rapidly, and protects credit ratings.

B. Any items or property financed should be returned. It may not possibly pay back your total debt, and still receive harmful credit implications, if you can’t settle the balance in a suitable period of time.

C. Discuss premature payoffs, or else reduced principle settlements. In case of monetary distress, certain companies would simplify interest requirements, or else simplify principle due more willingly, than press for total payoff. It could harmfully affect credit reputation.

D. Reduce collateral, and settle debts. It may well not settle all debt, and there could be legal restrictions without coordinating this act with the creditor.

E. Discuss reduced payments. Many times, creditors could lengthen the payment time to lower payments. It will not simplify debt although may perhaps alleviate monthly obligations.

F. Apply savings to settle debts. This alternative takes away your monetary safety net, but may possibly remove burdensome obligations, and guard credit ratings.

Household debt will be a burden and could create surplus, and many times excessive stress. The best options are to keep debt under 25% of household earnings. As soon as debt is required, there must at all times be a strategy to repay, and the strategy must continuously include a limit of debt obligations.

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