Bryan C. Fleming

Debt Consolidation: Easing the Burden

There’s no doubt that while having a certain amount of debt is normal and a way of life for most of us who live in North America, some of us have gone over the line where we can pay back what we owe in monthly payments. Before any further discussion of this unfortunate situation can take place, it’s necessary to note the facing a debt burden is something that can happen to anyone. It’s not just the people who don’t know how to manage their money that can get into trouble, but those unfortunate ones among us that are faced with the loss of a job, a family illness, or a host of other unexpected circumstances that find themselves falling behind.

Types of Debt

It matters what kind of debt you have, and as you might have guessed, there are several different kinds although most of the debt that the average person finds themselves facing is what’s called unsecured debt. This includes the one that most of us struggle with in one way or the other—credit card debt. As well there are those unpaid student loans that have a way of gathering interest like a stone rolling down a hill gathers moss, and tax debts as well as medical or legal bills that have gone unpaid.

It happens more and more that people find themselves unable to see over the mountain of debt that they’ve created for themselves. Most of them are good people who would love nothing better than to find a way out and there’s help out there. Debt relief agencies like Delray Credit Counseling are experts at studying people’s individual debt circumstances and then helping them find a way out.  
What to Do About It

 The best option is to speak to a professional that can help. A certified debt counselor is the right choice. Professionals like those at http://www.delraycc.com are the people that can listen to your situation and help you find a plan to get you back on track. To start, all you need to do is apply to a local debt consolidation program—they are either usually private or non profit agencies that will supply a free quote on the time and interest that will be required. It’s really quite simple and once a plan is in place, you stand to save a substantial amount of interest on the payments and shorten the time it will take to pay the money back. The debt consolidation company that you select works with your creditors to design a repayment method that will both satisfy them and start you back on the road to financial freedom.

There’s a good reason that this is the best option and it’s simple. By consolidating you debt, you avoid having to claim bankruptcy. While bankruptcy does erase many of your debts, it does not take away some of the ones that can swell to large proportions like child support payments and student loans. As well, once you’ve filed either the Chapter 7 or Chapter 13 versions of bankruptcy, you credit rating is affected for up to ten years and you will find it considerably more difficult to get a personal loan, a mortgage or even a job.   

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Credit Ratings and Credit Scores

It’s a mysterious thing that we hear people talking about all the time. Credit ratings. For the uninitiated, it holds a mysterious quality and power over the kind of financial clout a person has. Credit ratings seem to affect what we can and can’t buy, what kinds of vehicles we drive, and even where we live in some mysterious way.  Credit ratings appear to be cloaked in a curious jargon the banks seem to hold over us. We’re sure they’re a powerful tool that can work for or against us but we’re not always sure of the ins and outs of how. 

           There are actually two areas of the total package. One is called the credit rating and the other is called the credit score. The information used in both includes your social security number, your address, where you work and your bill payment history. It’s a composite picture of who you are and how you do business and its put together usually by three companies that vary depending on where you live. It’s important because any agency that might consider lending you money will have access to your credit rating or credit score and many of these agencies like banks actually provide information to keep these records accurate.

  So how do all those bad things like a bankruptcy affect your credit rating? Simple. A bankruptcy can hang around on these reports for up to ten years and a criminal record stays with you indefinitely. Even habitually missing payments stays on the reports for up to seven years.

 But because it’s called a credit rating, it stands to reason that the evaluation comes from somewhere, so there must be a credit score as well. The three credit bureaus in your area put together all the information on late payments, any collection actions as well as any outstanding debts. When they have all this information packaged, you get a score between 300 and 850. Obviously, the higher the number the more credit an institution loaning out the money will be happy to give you. There are certain cut off points as well. It seems that a person with a score at 619 or lower will have a hard time getting a credit card no matter where they live.

 There are several ways to monitor you credit rating or credit score and all the institutions that know about these things stress that you should make the proper inquiries at least once every six months. It’s also possible to pay a monitoring company who will let you know immediately if there are any noteworthy changes.   In America the three major companies that deal with your information are Equifax, Experian, and Trans Union. Although you can contact them and get the necessary information in one of the more traditional methods, going online and paying a monthly fee will get the scores and rating quite a bit faster.  Keeping track of this information is also a good way to monitor for Identity Theft.

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What your Bank doesn’t want you to know about Interest Rates

There are many things that your bank fails to tell you when have a credit card with them.  One of the biggest things that they neglect to tell you about is the truth about interest rates and just what they can do with them.  Before getting a credit card with your bank you need to be well educated on interest rates and what the rules are with them.

First and foremost don’t get pulled in by the claim of interest free time if you transfer the balance from one card to the new credit card.  What they neglect to tell you is that only the balance of the other credit card is subject to the interest free period.  Any new purchases that you make will be charged interest and this can be misleading for many as they do not read the fine print.

Another thing that the bank may not tell you is that they can raise the interest rate on your credit card if you late with payments for other cards.  You need to be sure that you make all of your payments on time so you can avoid these unwanted increases in your interest rate.  This is known as the universal default clause and it is becoming a general rule for most credit lenders.

Another thing that most people are not aware of is that the bank has no limit set on the amount they can charge you on a late payment.  Even if it is just one hour late the fees can be as little as $5 and as high as $30, sometimes even higher then that.  The amount of credit a bank will give you and the amount of the interest rate you will be assessed is based on your FICO score.  This is the score a person gets from their credit history.  Lenders such as banks and credit card companies look at the amount of dent that you have and how many times you have been late on your payment history.

Banks do not tell you that there is no federal limit as to what interest can be charged on a credit card.  You need to be sure that you read the tine print to know exactly what you are getting into with any loan or credit card that you obtain.  Be sure to talk things over with your bank prior to signing any papers.  You need to know what you are getting into completely before the final signing of the papers.

There is usually a 3 day waiting period when a loan is processed.  This is to allow you the opportunity to cancel the transaction.  This is the only window you have in which to rescind the loan or credit.  Again, this is something you need to discuss with the bank prior to signing the final papers.  You need to know what all of your rights are and what penalties that the bank will instill for breaks in the signed agreement.

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