Debt Consolidation

Debt Consolidation Equity Loan

Have you recently thought about taking out a debt consolidation equity loan?  If you own a home and have significant non-mortgage debt, this is an option you should seriously consider.  Compared to other forms of debt consolidation a home equity loan for debt consolidation, sometimes called a debt consolidation equity loan, can offer several advantages.

Advantages of a Debt Consolidation Equity Loan

There are two primary advantages of using a choosing a debt consolidation equity loan over other forms of debt consolidation.  First, home equity loans typically carry a much lower interest rate than credit cards and auto loans, the types of things that you will be consolidating.  Second, in some cases, the debt consolidation equity loan interest may be tax deductible.  Let’s explore these two advantages a bit more.

Debt Consolidation Equity Loans = Lower Interest Rates

Most credit cards these days will be charging from 9% to 21% interest on charges paid over time.  Gone are the days of 2% rates as a result of threatening to leave.  This is due in large part to the credit reform laws put in place to protect us consumers.  Credit card companies now know credit is harder to come by and thus are much stricter with their policies.  Also, auto loans, tend to be somewhere in the 4% to 12% range, depending on many factors.  In some cases, your auto loan interest rate will be lower than any debt consolidation equity loan that you can get, however, if the rates are close, it might make sense to fold it in as it can lower your payment by adding to the term, and still provide a potential tax deduction (more on that in a bit).  Current home equity loan rates are as low as 3% in some cases, while 3.75%-4.25% are very common.  At those rates you could save hundreds of dollars a month and thousands a year on your debt payments. And that doesn’t include the potential money you could save by the second potential advantage.

Debt Consolidation Equity Loan Interest Deductions

In many cases, the interest paid on your debt consolidation equity loan may be tax deductible (check with your tax professional).  I’m not a tax or legal professional so I can’t tell you for sure if this will be the case for you, but in many cases this interest can be deductable.  If you are thinking of taking out a home equity loan to consolidate your debt, check with your tax professional to find out if you can save even more by gaining an additional tax deduction from the interest paid yearly.  Combine this with the savings gained by consolidating your debt into a lower interest account, and you could save a massive amount of money. 

Do Your Homework on Debt Consolidation Equity Loans and Take Action

At www.debtconsolidationfairy.com we have a ton of info on debt consolidation topics such as credit repair, debt consolidation, student loan debt consolidation, and online debt consolidation services. Please use this information to help yourself get out of debt and stay out of debt. Remember, read, plan, and most importantly, take action!

Debt Consolidation: Hawaii Issue

So I’m on vacation this week, but true to form, I can’t get away from work (or myself), so I’m posting a quick note entitled Debt Consolidation: Hawaii Issue.  This unfortunately won’t include any big number crunching or huge tips, but rather a piece of reflection.  Being on vacation (not using credit, but rather points for airfare, and cash for everything else), I’m trying as hard as possible to not work, or even use my laptop at all.  Obviously I’ve failed, as evidenced by this post.  However, in my quest for sun, fun, and relaxation, I’ve noticed something over here in our American paradise.  Hawaii is expensive!

Ok, ok, I know that seems somewhat obvious to many.  But not every stops to think about how a huge amount of goods must be flown in here on a daily basis to support the population.  With a lack of ground and rail transportation for general goods, shipping costs skyrocket, and that gets passed down to the consumer.  Going into the grocery store and seeing milk at $5-6/gallon and orange juice right about the same, I’ve come to the realization that California isn’t the most expensive place to live.

To top it off, some relatives of mine were eating dinner with friends of theirs that were leaving this beautiful island paradise (Oahu) for Kentucky I believe. They have family there, but more importantly, and in my uncle’s words, ‘it’s called affordable housing.’  That’s right, in addition to the high cost of food and goods, real estate here is also super expensive, often in the $300-$600/square foot range, depending.

Looking at and hearing all of this, I can’t help but wonder what kind of debt the average resident here racks up just getting by.  I’m sure many are managing their finances just fine, but in a town where tourists shop for $300 sunglasses and $150 T-shirts while on vacation, and residents pay twice as much for groceries and more than that for real estate, you know there are people struggling and getting by on credit  cards and such.  Look, you do what you have to, to get by.

That being said, although I’m on vacation, it’s these kinds of observations that keep me motivated, knowing that the info in my blog could help someone, considering how many of us are ‘up to our eyeballs in debt.’

So that being said, to close out the Debt Consolidation Hawaii thoughts, I will say that I know we have a long road in front of us, but we’re going to be on it regardless.  Might as well make sure we’re better off the further we walk.  From Hawaii, aloha, if I’m to keep a happy marriage, you won’t hear from me for at least 4-5 more days.

Student Loan Debt Consolidation

Student loan debt consolidation is common, even among people who have no financial issues.  The fact is, student loan debt is often way too high for the average graduate, an entry level employee, to pay down during the standard 5-10 year repayment period.

For the 2007-2008 year, 58.8% of all undergraduate students took out student loans to help pay for school.  Cumulative debt during that year averaged around $18,625.00 .  The numbers are much higher for graduate students.  The median additional borrowed amount for graduate students was $25,000 for Masters’ degrees, $52,000 for doctoral degrees, and just under $80,000 for professional degrees (www.finaid.org).  As we can see, the amount of debt carried by graduating students is substantial. 

Interest rates at this writing were 6.8% for federal Stafford loans and 7.9% for PLUS loans (www.finaid.org).  Private loans are even higher.  A graduate leaving school with $50,000 in student loan debt at a 7% average interest will pay approximately $580.00 a month for 10 years.  A student with an advanced professional degree and $100,000 in student loan debt at a 7% average interest rate will pay approximately $1,161.00 a month for 10 years.

Typically a consolidated student loan’s interest rate will be the weighted average of the loans that go into it, rounded up to the nearest 1/8th percent.  The benefit is the extended term.  This lowers your monthly payment substantially (www.finaid.org).  There are typically multiple types of repayment plans including standard 10 year repayment, extended 20 and 30 year repayment, and various graduated plans, allowing for lower payments initially, gradually increasing every couple of years.

When working on your financial planning and budget management, student loan debt consolidation should always be a serious consideration.  They tend to be the easiest to consolidate because it is so common for students to do this.  The monthly savings provided by the longer term can be substantial and help your cash flow situation considerably.

Online Debt Consolidation Services – Do Your Homework

When considering consolidation, there are a number of online debt consolidation services and options available.  Simply searching for debt consolidation will get you a multitude of pages and sites dedicated to helping you manage and consolidate your debt.

It’s important to understand that while many of these online services are available, and most seem genuine and useful, there are always offers that simply are too good to be true, and in some cases simply fraudulent.  Be careful when engaging online debt consolidation services as you are ultimately trusting these services with your sensitive financial information, and in many cases, your financial livelihood.  There are some questions you can ask to help make sure you are working with a trustworthy organization.

What Services do they Offer?

Does the firm simply offer debt settlement disguised as debt consolidation?  Do they clearly offer both options?  Look at the details, and if you can’t find them call and ask.  If you can’t get a straight, clear answer, steer away.  A reputable firm will not hesitate to fully explain their services, benefits, and details.  Remember, debt settlement involves negotiating with the creditor to lower your obligation in exchange for obtaining a lump pay off of the balance.  This will show on your credit report, so be very careful when choosing this option, and when verifying debt consolidation offers are truly just consolidations.

What are the Company’s Credentials?

In most cases non-profit and not-for-profit agencies will be lower risk and more likely to provide a trusted service.  Look for companies that are part of the National Foundation of Credit Counseling (NFCC) or the Association of Independent Consumer Credit  Counseling Agencies (AICCCA) as this will further attest to their ethics and business practices.

Is the Company Easy to Get a Hold of?

While this isn’t a hard and fast rule (there are websites that are 99% available online that provide some great services), but it’s often easiest to exclude sites that don’t provide contact information such as phone number or live chat.  Remember, this is your financial future we’re talking about here.  Don’t trust it to just anyone.

Remember – Fools Don’t Rush In

One of the most important things to consider when choosing an online debt consolidation services company is whether or not you truly need debt consolidation or settlement at all.  Remember, there are a lot of do-it-yourself methods for consolidation, management, and cost reduction, many of which we talk about here at the Debt Consolidation Fairy.  Before you dive in head first, make sure you truly need the help of a third party.  If you do, try and ask the questions above of each organization you consider, and you’ll be taking a step in the right direction.  Until next time!

Debt Consolidation: Tips for Eliminating and Minimizing Debt

When it comes to debt consolidation, there are so many things to consider so we’ve put together a list of debt consolidation tips to help make navigating this road easier. Just a little bit of debt consolidation fairy dust for the masses.

Eliminate Credit Card Debt

The first step toward financial freedom is eliminating your credit card debt.  There are a few ways this can be done.  Obviously you can pay down the debt.  Let’s be honest though, that is usually not very easy, and if it were, you would not be here.  First and foremost, stop using your credit cards.  Put them away, and avoid charging anything for at least 3 months.  After that, you’ll be surprised how easy it is to ‘stay off plastic.’  Next, organized your credit cards by balance and interest rate.  Make minimum payments on all but one card (either the card with the highest interest rate, or the lowest balance, depending on what works best to motivate you).  I prefer to pay low balances off and eliminate a payment.  Pay as much as you can on this one, and when it is paid off, move to the next.  Follow the same methodology until all cards are paid off.  If you have a card with low balance transfer interest rates and enough credit, consider consolidating all cards onto that card.  Put those cards away for good, and pay as much as you can afford each month to the new single balance.  If these aren’t options, there are debt consolidation services available that will take this a step further and consolidate your accounts for you.  You then pay them a monthly payment to pay down the balances.

Reduce Student Loan Payments

Student loans are notorious for following graduates for decades.  This is because most students can’t afford to pay the loans off in the 5-10 year term given.  Student loans are consolidated more often than not, and this provides a lower monthly payment for graduates and professionals years out of school alike.  Consider a 20 year term if possible.  You’ll often see lower rates on average, and enjoy a substantial savings in monthly expenses.

Leverage Your Assets

One of the biggest debt consolidation tips I can give is to leverage what you have.  Not all debt is bad, and not all debt is created equal.  If you own a home and are in good standing with a good interest rate, consider a home equity line of credit or loan to consolidate certain debt.  You will have a much lower monthly payment, and often lower interest rate.  The drawback is you will typically be paying for this on a much longer term, but this allows you to save a lot of money on a monthly basis, and you instantly free up those balances which gives you points on your credit report.

Worst Case Scenarios aren’t Necessarily that Bad

If these tips don’t apply or don’t do enough, you still have other options.  You can consider a personal loan, either from your bank, credit union, or social lending institutions.  The interest rate may be a bit higher, and you may be limited to the amount you can borrow, but it still allows you to consolidate multiple debts into one balance and one payment and is often enough to make a big difference.  

That’s it for this portion of Debt Consolidation Fairy’s debt consolidation tips.  Look for more in the very near future!

In Need of Credit Repair? Debt Consolidation can Help!

When considering credit repair, debt consolidation is a natural option that should be looked at as a means of lowering your overall credit surface area.  With many Americans facing rising interest rates, lowered credit lines, and stricter rules around payments and credit use, a rise in defaults and lowered credit scores has become common.  As a result, many Americans are faced with bad credit and in dire need of credit repair.

Consolidate and Reduce              

There are a number of things that you can do to help repair your credit, much of this is certainly outside the scope of this single post.  There are books and even companies that focus completely on credit repair.  Debt consolidation is a natural fit for many credit repair scenarios because it helps organize debts and obligations, lowers interest rates, and lowers monthly payments.  Organization is a key component of credit repair.  A big reason many Americans fall into bad credit is disorganization around finances. Medical bills go unpaid, car payments go out late, credit card monthly payments are sent out for less than the minimum due.  Oftentimes these things happen not as the result of lack of funds, but simply because people forget or misplace bills.  Debt consolidation helps alleviate the organization issue by combining multiple obligations into one balance with one bill.  Additionally, consolidating typically allows for a lower overall effective interest rate, reducing monthly payments.  Finally, consolidation typically reduces the total cost of all debt obligations combined, providing a year over year savings, and providing a more manageable financial picture.

Consolidation and Credit Repair – A No-Brainer?

Considering the benefits of debt consolidation and how these line up with the goals of credit repair, you would think that consolidation is a guaranteed part of any credit repair plan.  However, that isn’t always the case.  There are situations where paying off small debts one at a time provides an overall long term better return and savings.  It’s important to do your homework and research what options are out there for debt consolidation and what kind of interest rates and costs will be associated with these options.

A First Step

Regardless of whether you simply need to tidy up a bit, or if you are in need of full on credit repair, debt consolidation is a logical first step to consider.  If the numbers make sense, putting a debt consolidation plan into action can provide a big return on a relatively small initial time and money investment.  Next time we’ll talk about some debt consolidation tips that can help you determine what services and options are right for your situation.

Need to Fix Your Finances Quick? Debt Consolidation Might be the Answer!

When your finances  need some TLC, a quick debt consolidation review could provide some options!  Part of balancing your budget includes finding ways to limit expenses and outward cash flow while also limiting costs.  Debt consolidation isn’t for everybody, but in many cases it can help lower monthly payments while also lowering the total cost of that debt.  Here are a couple of things you can do to determine if debt consolidation is right for you.

Organize Your Financial Life

Put together a list of all monthly income and expense items.  Make two columns.  In the first column, list your income items, added up monthly.  In the second column list your expense items for the month.  Add up the totals of each column and you will see a high level picture of your cash inflow and outflow for each month.  This will give you an idea of your overall monthly financial health.  If your expenses are more than your income, you now can see  where you may be able to either add income or reduce expenses.  There are a number of ways to accomplish both, and that is really outside the scope of this particular post.  That being said, there is one method for reducing expenses, and it can be quick: debt consolidation.

To Consolidate or Not to Consolidate – The Snapshot

Debt consolidation is not for everyone, in fact, depending on the method chosen, some households are better off keeping debt separate and paying off accounts one by one.  How do you know which of these households you fall into?  Well the good news is we can do a quick check that will help you determine if you should start down the road of consolidation.  In your favorite spreadsheet application enter all of your debt accounts.  Enter these in multiple columns.  The columns should be as follows:  account name, balance, interest rate, monthly payment, term (total payments, i.e. 360 for 30 years of monthly payments), payments left, and total paid.  Enter all of your account information and at the bottom add up all of the monthly payments, this will be your monthly obligation for all debts.  Also add the balances up to show you your total outstanding obligations.  In the total paid column, you will add a formula multiplying the monthly payment in each row by the total payments in each row.  This will show you how much money you will pay over the life of the obligation.  This will give you a present day look at your monthly costs as well as what you will pay over the life of all obligations.  Now you have a snapshot of your overall debt scenario.

You Have Options

Whether or not you need a quick debt consolidation solution, you have options.  There are multiple ways to consolidate, some you can do on your own, and others can be provided by financial services companies.  The next post will discuss these in more detail.

Best Debt Consolidation Advice Ever?

If I had to choose a single piece of advice that I consider to be the best debt consolidation advice ever, you might be surprised at what I said.  You might expect a super secret, profound tidbit that you could take and apply to your situation that would magically put you on the path to recovery.  Well, you would be partly right.

The Magic Word: Action

You read that right.  The magic word, the single biggest piece of advice I would give if I could only give one piece of advice would be to take action.  I know this is very general, and you probably think it is obvious, but knowing what to do, and doing it are two completely different things.

Putting ‘Action’ into Action

Part of the reason so many of us get so far into debt is that we simply put things off until later.  How many times have you thought of putting together a consolidation or payment plan and then let that plan sit on your computer for 6 months without putting it into action?  How many times have you approached a purchase you couldn’t necessarily afford with cash, only to put it on a credit card that you knew you could simply pay later?  The biggest thing you can do now to improve your financial picture is take action.  Take action by actively refusing to charge purchases you know you cannot afford.  Take action by putting a plan together to consolidate your debt payments and executing it immediately.  These are simply two things you can do, and do right now, that will have a huge impact on your financial picture.  Let’s explore this just a little bit to show you how simple this all really is.

Action Now, Save Later

First, let’s assume you put a budget together and identify what you can and can’t afford on a monthly basis.  Break this down into weeks, now you have a weekly affordable expense number.  This should be based on your income and nothing else.  What do you do with this information?  Simple, don’t spend more than that number in a given week.  This will stop the accumulation of debt immediately.  Next, take all of your credit, loan, and other debt-related balances, and put them in a spreadsheet.  Include all important information such as balance, monthly payment, interest rate, and term.  This will give you a solid picture of all of your debt/credit-related expenses on a monthly basis.  This will show you your total obligations and how much interest you are paying.  Once you have this, you can begin to look for debt consolidation programs that will lower your monthly payment and put you on the road to paying off your debt once and for all.

Don’t Put it Off

The best debt consolidation success stories always start the same way.  The subject took action and took control of their financial situation.  If I could give one piece of advice to someone struggling to manage their financial situation, it would easily be to simply take action!