BAD DEBT CONSOLIDATION

What is bankruptcy?

2010-12-23T20:20:00.000-08:00

A bankruptcy can be filed by any business entity, non profit organization, or individual. The entity that files the bankruptcy case is referred to as the ‘debtor.’

Creditors can also force a debtor into bankruptcy.

The purpose of bankruptcy laws are to give an honest debtor a fresh start on life by reliving the debtor of most debts and to repay creditors in an orderly manner to the extent that the debtor has property available for payment.

In general terms, bankruptcy is a process regulated by federal law which provides debtors (individual and corporations) with legal way of seeking relief from their creditors.

It is true to say that for individuals who are declared bankrupt the stigma is far greater than for companies who declare bankruptcy and insolvency.

The rules now covering the state of bankruptcy reduce the amount of time that a person is declared bankrupt and offer different ways to reach agreement with creditors.
What is bankruptcy?

Pay as you promise

2010-08-10T22:43:00.000-07:00

Pay as you promise
Your credit history is an indicator of whether you’re some one who follows through with commitments - a characteristics important to most people, whether they’re looking for a reliable worker, a responsible nanny, a dependable renter or a faithful mate.

Needles to say, a person or company considering lending you a sizeable sum of money will want to know the same.

Based in large part on your history of following through with your financial promises, you’re assigned credit score.

People with higher scores generally get the best terms, including lower interest rates and reduced minimum down payments.

People with lower credit scores may not get credit in today’s economy, unless they pay higher interest rates and possible additional fees or insurance.

And even then, they may not qualify at all, for anything, under tight approval guideless.

When it comes to your credit score, following through with your promises is only half of the game. The other half is doing it on time.

It’s fact in the lending business that the more overdue the payment, the more likely it will not be paid at all – or paid in full.

This is why, as you get further behind in your payments lenders became more anxious about collecting the amount you owe.

In fact, if you’re insufficiently delinquent, the lender may want you to pay back the entire amount at once rather than as originally scheduled.

The longer you take to do what you promised, the more it costs you and the more damage you do to your credit score.
Pay as you promise

How to Find the Right Broker or Lender

2010-07-03T21:09:00.001-07:00

How to Find the Right Broker or Lender
Over eighty percent of home buyers in the US work through a mortgage broker. As of 2005, there were over 20,0000 mortgage brokerage companies in America. In three words, the trick t obtaining the bets mortgage is to shop, compare and negotiate with your lender or broker.

The lender could be a local bank credit union, mortgage company, or some other type of financial institution.

Various organization specialize in different type of mortgage products that suitable for different types of borrowers.

Virtually all brokers and lenders are happy to work with people excellent credit and a steady, good paying job.

If however, you don’t fall into this category, you may need to spend some extra time shopping around for the best broker or lender in order to obtain an approval and receive the best possible rates and overall deal.

A loan officer or broker associate or a mortgage consultant is the person who works for the mortgage broker or lender and who is your primary contact person throughout the application, approval and closing process.

His or her job involves with you to help you chooses a mortgage product complete the mortgage application, get approved by the lender and prepare for the closing.

The loan officer will often work on a commission, based on the mortgage product he or she sells.
How to Find the Right Broker or Lender

Get Out of Debt Using Budget

2010-05-28T03:46:00.000-07:00

Get Out of Debt Using Budget
After assess the seriousness of financial situation, you need to prepare a plan for handling your debt including keeping up with creditor payments or at least keeping up with payments to your most important creditors.

One of the first things you should do is prepare a household budget (or spending plan, as some financial experts euphemistically call it).

Whether your annual household income is $20,000 or $100,000 living on a budget is probably the single most important thing you can do to get out of debt and to avoid debt problems down the road.

A budget is nothing more than a written plan for how you intend to spend your money each month. It helps you

Make sure that your limited dollars go toward paying your most spending more than you make.
Avoid spending more than you make.
Pay off your debts as quickly as you can.
Build up your savings.
Achieve your financial goals.

Get Out of Debt Using Budget

The Meaning of Credit Cards

2010-04-30T06:04:00.001-07:00

The Meaning of Credit Cards
Most sellers accept credit cards, as readily as they accept cash, checks or debit cards (some, such as internet sites, even prefer credit cards) and credit cards finance more than 20 percent of all consumer purchases.

Most credit card company make money in three ways: from the interest you pay on balances due; from annual fees, if applicable; and from fees charged to merchants who accept the card.

The first two components, along with a few other privileges and restrictions have to be looked at very carefully before you decide which card to carry.

Many credit cards are store or service specific cards. Visa Card and MasterCard are what are known as bank credit cards.

This means that they are issued by banks or credit unions. Neither Visa or MasterCard actually supplies the cards you carry in your wallet – banks do but they do provide support, staff, and infrastructure to the thousands of credit unions and banks that issue the cards.

Each banks can set its own credit standards and limits, and offer whatever other advantages it wants to its customers.
The Meaning of Credit Cards

What the Credit report says about you?

2010-04-04T06:17:00.001-07:00

What the Credit report says about you?
As a snapshot of your financial life, your credit report may also indirectly predict your potential behaviors in other areas of your life.

The fact that you have a history of making credit-card payments late may tell a prospective landlord that you’re likely to be late with your rent too.

A history of defaulted loans may suggest to a potential boss that your aren’t someone who follows through with commitments.

If you have a foreclosure in your life, it may tell someone that you may take on more than you can handle or just one unlucky duck.

If you’ve declared bankruptcy because your finances are out of control perhaps you’ve out of control in other ways, too.

This snapshot which brings into focus the details of your spending and borrowing and even suggests your personal life pattern, also paints a bigger picture of characteristics that are critical to employers, landlord, lenders and others.
What the Credit report says about you?

Smart Debt Principles

2010-03-06T16:40:00.000-08:00

Smart Debt Principles
Below are five smart debt principles you should apply to your home financing decisions:
1. Establish a credit history and a credit score that allow you to obtain a prime rate or “A paper” loan.

2. Find a moorage product with the lowest rates and fees for which you qualify based on credit history score, employment/income, etc.

3. Work with knowledge, reputable and experience mortgage broker or lender. Negotiate for the lowest fees.

4. Acquire a mortgage for an amount you need and can afford, for a term that’s reasonable, For example, if you can afford the monthly payments for a 20 year fixed rate mortgage, don’t go with a 30 year fixed rate mortgage; you’ll be paying considerably more interest over the life of the loan.

5. Develop a detailed plan for being able to afford the monthly payments on the mortgage throughout the life of the loan.
Smart Debt Principles

How Much Debt is Too Much?

2010-02-22T02:09:00.000-08:00

How Much Debt is Too Much?
by: Jo Ann LeQuang
People have a certain threshold or tolerance for debt. Most of us can tolerate a little bit of debt. How much debt is all right? And when are you in over your head?

Most of the time, the decision that you have "too much debt" is made emotionally. That is, you have too much debt when you feel you have too much debt.

So why do some people panic over small debts but others sleep like babies even when they owe tens of thousands?

The answer is that people have an emotional sense of how much debt is acceptable. The danger is that this personal gauge is highly unreliable. You may have gotten it from your family situation, past experiences, or what you saw on TV or in the movies. Your debt style also involves your own maturity level and self control.

We also have an emotional response to what is unacceptable, which is sometimes called "hitting rock bottom." For some people, hitting rock bottom is having a car repossessed. For others, the repo man was a familiar character from childhood.

Hitting rock bottom may be the day you cannot make minimum payments, the day you lie to a spouse about an overdue bill, or the threat of impending homelessness. In other words, the emotional response and not the event itself is what defines a "hitting rock bottom" moment. One man's rock bottom is another man's standard of living.

So when is debt too much debt? On a purely emotional level, many people hit "rock bottom" when the first calls from bill collectors start to come.

Getting hounded by a professional bill collector is tough. Some people cope, but others find it embarrassing, humiliating, and shameful. For some people, it may take an intervention of friends or family members to drive home the point that the debt is getting out of control. Others may wait till they are evicted or sued.

So how much is too much debt?

First, it's not a question you should answer emotionally. Most entrepreneurs have nerves of steel when it comes to debt and financial risk taking, but most of them do not carry a lot of personal debt. So the amount of debt you can tolerate emotionally is not the governing factor; in fact, it should not even be taken into account.

Debt is financial and the only way to evaluate financial things is to look at the big financial picture.

Your financial report card is something called your "net worth." You can do a reasonably good snapshot of your own net worth without hiring an accountant or doing a bunch of fancy stuff. Just write down all of the money you owe. If you have credit cards, list all the balances. If you have loans, list all of them. If you have a mortgage, add that. Take all of these debts (the accountants would call these "liabilities") and add them together.

Now take everything you own. This includes the contents of any bank or investment accounts you have, your retirement account, stock portfolios, and so on. If you own a house (even if it's mortgaged), add the fair market value of the house.

If you have vehicles (cars, boats) add them in. It is fair to add in the value of your furniture, electronics, and clothing, but be very conservative. It may have cost you thousands to build the wardrobe hanging in your closet, but it's doubtful you could convert it to very much cash. Don't count what you spent, count what you could get if you had to sell it today. Add everything together to get what accountants call your "assets."

Now subtract liabilities (what you owe) from your assets (what you own), and you have your net worth.

I hate to disillusion you, but the number should be positive. And it should be thousands.

There are some reasons for a low net worth. For those who are just starting out or those just starting over, your net worth may be low because you have not had chance to amass any assets. You may have just gone through a major medical disaster or other catastrophe. The other reason your net worth may be low is a lot of debt.

Now look at your income and your monthly bills. Don't worry about total debt here, just look at what you spend each month versus what you bring in. Take some pencil and paper time here. Does your out-go exceed your income? That's a debt-making machine. Until you turn this around, you're going to keep your debt growing which, in turn, will keep your net worth negative.

If you can't make minimum payments, if you are adding to your debt each month, or if you are really unsure of your financial states, you are probably in need of some financial help.

Certified credit counselors can help and there are lots of excellent books and programs on the market aimed at getting you debt-free. There are even free resources. For instance, your local banker can probably help you come up with a financial plan to manage your debt, including things like debt consolidation.

If you're wondering if you have too much debt, you probably do. One of the great financial secrets of the truly wealthy is this: no debt. It's possible for even ordinary people to live debt free.

The bill collector or the repo-man are not the first signs of debt problems; they are really symptoms of a prolonged period of too much debt. When the warning signals come, even if we are not rattled by them, we should take firm steps to dig ourselves out of debt. The difference between too much debt and being destroyed by debt are just a few missteps.
About The Author
Jo Ann LeQuang writes about debt management solutions and is a frequent contributor to websites. For information on debt consolidation, check out http://www.debt-consolidation-diva.com/.

Taking Stock of Your Finances

2010-02-04T13:35:00.000-08:00

Taking Stock of Your Finances
How you begin to take stock of your finances

Compare your monthly spending to your monthly income
Prepare yourself for a shock. Most people underestimates the amount that they actually spend relative to what they earn.
By doing this comparison, you may quickly realize that you’re using credit to finance a lifestyle you can’t afford, and you’re spending your way to the poorhouse.
Is that’s the case, you must reduce your spending to meet your financial obligations, and you may need to do a lot more than that depending on the seriousness of your financial situation.

Order copies of your credit histories of credit reporting agencies
Your credit history is a warts and all portrait of how you manage your money: to whom you owe money, how much you owe, whether you pay your debts on time, whether you are over your credit limits, and so on.
Being charge higher interest rates on credit cards and loans is a direct consequence of having a lot of negative information in your credit history.

There are many things beyond your control – like bad luck and rising prices may be partly to blame for your debt. However also there is chances you’re at least partly responsible as well. For example, you may:

*Pay too little attention to your finances. You forget to pay your bills on time; you don’t pay attention to the balance in your checking account so you bounce checks a lot; and /or you have a lot of credit accounts.

*Maintain high balances on your credit cards. As a consequence, you can afford to pay only the minimum due on the card you pay a lot in interest on your credit cards.

*Have little (or nothing) in savings so you have to use credit to pay every unexpected expense.

*Mismanage your finances because you don’t know how to manage them correctly.

There as a survey done, showed that 41 percent of consumers blamed their bankruptcy on poor money management skills; 34 percent attributed it to lost income; an 14 percent cited an increase in medical costs.

Compulsive spending is an addiction just like alcoholism and you can’t beat it on your own. You will always have debt problems if you can’t control your spending.
Taking Stock of Your Finances

Debit Card advantages and disadvantages

2010-01-17T18:20:00.001-08:00

Debit Card advantages and disadvantages
Debit cards are not charge cards or credit cards. Like charge cards they don’t offer you a line of credit.

Unlike charge cards they deduct your purchases directly from your checking account.

They function very like ATM cards personal checks. You can spend only what you’ve got in your account.

Advantages
Debit cards are very convenient. If you have one, you don’t have to carry checks or a large amount of cash. Also, merchants who will not accept a personal checque may accept them.

Disadvantages
Yes unlike credit cards, debit cards are not covered by federal regulations that protect consumers in disputes with merchants.

Also, many banks charge fees for the use of a debit card, though others don’t.

Shop around among banks and other financial institutions for the best deal.

Be sure to ask whether there’s monthly, annual, or per use charge for the card, and whether there’s any additional penalty for using the card at another institution’s ATM.

With debit card, you can’t stop payment on a purchase you are disputing the way you can with a check or a credit card payment.

A debit card does not help you establish a credit rating.

Finally, depending on the state you live and how quickly you report the loss or stolen debit card cab result in your checking account balance being used up, plus your overdraft protection amount too.
Debit Card advantages and disadvantages

Why a credit report is important?

2009-12-28T01:52:00.000-08:00

Why a credit report is important?
Your credit report doesn’t come into play just when you want to borrow money. A bad credit report may affect wheat you pay for insurance, whether you can rent the apartment of your choice, or whether you’ll be hired for certain jobs.

A particularly finance conscious romantic prospect might even nix you for a bad credit history.

Your credit score can cost you thousands of dollars and deny your opportunities you never knew you missed. Clearly, what you don’t know can hurt you.

*Say you signed for dating service. Now, what if all the information available to your prospective dates is given to them by people you’ve dated in the past? What if the quality of the date you get in the future is directly tied to what all the people you’ve dumped (or been dumped by say about you?

*Say you’re applying for a job. Your salary, job title, and the size of your office will be tied directly to what’s on your resume. But what you didn’t wrote your resume – your last employers did, and what if they mixed up your personal file with the file of that person who was fired for sexual harassment? Can you imagine walking in the job interview without any idea what you former boss may have reported or whether it was correct?

Meeting your life partner, landing a great job of these situation are ones in which you have a great deal of personal interest in a successful outcome. Kind of like getting a good mortgage rate so you can afford or keep that dream home.
Why a credit report is important?

Negotiate with Creditors

2009-11-19T23:50:00.001-08:00

Negotiate with Creditors
Contrary to popular belief, your creditors aren’t your enemy.

Your creditors are in business. They must earn a profit.

When you don’t pay bills it impacts their ability to do business and impacts their bottom line.

Many creditors are willing to be understanding about difficulty financial situations and short term financial problems, especially if you’re up front and openly communicate with them in a timely manner.

In other words, instead of skipping a handful of payments or defaulting on a loan, contact the creditor as soon as a problem arises and negotiate some form of resolution that’s acceptable and within your financial means.

Forcing a creditor to turn over your debt to a collection agency will simply cause you bigger problems in future, since many collection agencies are relentless in recovering money.

Furthermore, the negative information that’s placed on your credit report will have a negative impact on your credit score for a ling time.

Depending on the degree of financial difficulties, your creditors may be willing to do one or more to the following things to assist you, assuming you make the effort and show faith in contacting them to discuss your situation:

*Reduce your interest rate

*Reduce your monthly minimum payment

*Waive extra finance charges and late fees

*Allow you to skip one or more monthly payment and extend the length of the loan.

*Close the account and allow you to make affordable payments to reduce the balance over time.

*Close the account and accept a settlement for les than the amount you owe

*Allow you to refinance the loan at a lower interest rate and/or for a longer term to reduce your monthly payments.

Simply ignoring a debt, closing an account (or allowing a creditor to close an account to non payment),or moving without providing a creditor with your new address will not cause outstanding debt to disappear.

In many cases, the longer you delay paying your debts, the more you’ll wind up spending in interest fee, late fees, legal fees and other types of penalties.
Negotiate with Creditors

Is it alright to have debt?

2009-11-01T18:49:00.001-08:00

Is it alright to have debt?
Debts have a time and a place in all our lives. But the debt you take on must be in alignment with the goals you’ve set for yourself.

Do you want to pursue a dream of attending college, for example?

Then a student loan that will help finance your college tuition is “good debt.”

What about the mortgage you’re carrying on the house you live in, assuming that the house is not beyond your means?

That’s good debt, too, because it enables you to share in the benefits of home ownership and to maintain a safe haven for yourself and your family.

What about the loans you took years a go to help your parents through a rough financial patch or a health scare?

Or the car loan you’ve applied for, assuming if you need a car and can afford the payments?

All these loan situations are good, worthy and in alignment with sound goals.

On the other hand, overspending with credit cards continues to accumulate new clothes or furniture, is negative debt. It sacrifices tomorrow’s needs to today’s desires.
Is it alright to have debt?

Good Credit Citizen

2009-10-12T02:24:00.001-07:00

Good Credit Citizen
You’re already so many other good things, a good person, a mother or father a boyfriend or girl friend, a spouse, a sibling, a worker.

Taking the credit that is offered using the credit that is offered even not using credit at all can put you at a disadvantage.

So how do you know what’s good? You weren’t born with the credit gene that enabled you to understand the correct path to follow like so many migrating birds.

Being a good credit citizen means being responsibilities as a borrower, responsible to yourself and those who share your life. This starts with goals, a future vision of your life, and knowing which financial tools to use, in what measure and when.

Here are my top ten good citizen credit practices:

Set goals
Know what’s in your credit report and dispute out of date, inaccurate or just plain wrong information.
Know what your credit score what its means and why can do to make it better or keep it great.
Have a spending plan or budget
Use long term credit for long term uses. Don’t use a home equity line to buy sneakers or eat out.
Use short term credit for short term uses. Pay off your credit card balances as quickly as you can.
Save money for future goals and needs
Pay your bills on time.
Pay at least the amount due. Always set a time by which you will pay off a debt, don’t let the creditor set the time for you, because it may be forever.
Watch out for seven warning signs o bad credit and get help as soon as you think you may need it – not as last resort:

-Using credit cards for daily expenses and not paying the balance every month
-Not knowing how much you owe
-Using cash advances to pay credit card bills or daily expenses
-Only paying the minimum due on credit cards, or paying less than the minimum
-Getting calls from you creditors
-Spending more than 20 percent of your take-home pay on credit payments, excluding your mortgage.
-Arguing about money at home

Good Credit Citizen

How your credit score is calculated

2009-09-20T03:01:00.000-07:00

How your credit score is calculated
Credit score is calculated from data in credit report using a proprietary mathematical formula that is adjusted periodically as consumer change.

Credit score can be calculated based on the following criteria.

Payment history
This criterion takes into account payments on credit cards, retail accounts, mortgage, auto loan, etc - how many late payments, by how much time, and how much money as well as each current account that’s listed as “paid as agreed.”

It also takes into account any negative information in the public records section of credit report, such as bankruptcy, judgments, lawsuits, liens, wage attachments, collection items, etc.
The amounts you owe.
This criterion takes into account the amount of money you owe on accounts, the types of accounts, the number of accounts you have with balances, the portion of each credit line used, and the portion of installment loan amounts still owing.
The length of your credit history.
This criterion takes into account the length of time that each account has been open and the length of time since the last activity on the account.
New credit.
This criterion covers the number of newly opened accounts, the number of recent inquiries, the time that’s passed since last opened an account and the time since the most recent inquires about credit history.
Types of credit used.
This criterion considers the number of accounts and the types – car loans, mortgages, credit cards and so forth.

All this information is used in calculating credit score. However, payment history and the amounts owe count for about 65 percent of the score.

The amount of weight each pieces of information is given well dramatically from person to person, depending on his or her overall credit profile.

However, payment history – positive or negative - is typically weighted the heaviest in calculating the credit score. Thus, late payments and other negative information will lower your score, while a positive record of timely payment will boost your score.
How your credit score is calculated

Credit Card

2009-09-02T03:52:00.000-07:00

Credit Card
If you are not in debt of some kind, you’re unusual. For most American today, debt is a part of daily life.

Using a credit card, borrowing for college, applying for a mortgage to buy a house – taking on debts such as these may well be the first experience many of us have with a financial institution.

All the more reason to understand and master the dos and don’ts of debt.

Until you know how to manage debt, it’s almost impossible to save, invest, or build an intimate financial relationship with a life partner based on anything resembling as strong foundation.

Until your debt is in control and part of your life plan, you will not achieve financial freedom.

For many of us, credit card debt is a special trouble spot. To put it bluntly, credit card companies are in the business of separating us from our money.

They tempt us with monthly offers of “pre-approved” cards and once we’ve accepted their offers and accumulated a little debt they know how to lure us into trouble.

Credit card – in fact, any debt based on overspending – is bondage. It weighs on your spirits, occupies your mind and backs you into a corner.

At worst, it can bankrupt you.
Credit Card

Creating Budget

2009-08-09T15:26:00.000-07:00

Creating Budget
Call it a spending plan, if you like, but however you refer it, be sure to see it as a positive enabler, rather than a restriction or a barrier.

The purpose of the budget is to get you to arrive at your goal. If, for example, your goal is to take a beach vacation next year, putting money aside paycheck and limiting spending on restaurants and clothing are as important in getting you there as filling the gas tank before you leave for the shore.

Start with understanding of how much income you have to work with and then allocate it as necessary for living expenses. If you have debt, set aside part of your income to retire that debt just as quickly as you can.

Then just as important as your expenses and debt commitment, be sure you contribute to your own savings plans, one toward an emergency fund (in case of job loss or illness, fore example); the other, for your goals.

Make saving as automatic as possible (for retirement, for example); the money can come right out of your paycheck.

Use payroll deduction as an easy way to do this – and try to put at least half of your future raisers in savings.
Creating Budget

What is Credit Score?

2009-06-29T09:36:00.000-07:00

What is Credit Score?
Your credit score is a three digit number that express your creditworthiness.

In indicates to creditors or lenders the risk they’re assuming of they grant you credit or approve you for a loan.

A complex mathematical algorithm is applied to information in your credit report to calculate a credit score based on a variety of criteria each of which is weighted differently.

The result is a number between 300 and 850 that represents you as a credit risk.

The lower the score, the higher the risk. A credit score in the 300s or 400s is given to someone who’s considered an extremely high credit risk, a score in the mid-600s to low 700s labels a person as a good credit risk and anyone with a credit score in the mid to high 700s or in the 800s is an excellent credit risk.

The people with the highest scores get the best deals.

Lenders and creditors give different weight to these scores. However, when they make their decision to approve a loan or credit here’s how lenders and creditors generally perceive credit scores:

Over 750 = Excellent
720 or higher = Very good
660 to 720 = Acceptable (average)
620 to 660 = Uncertain
Less than 620 = High risk

When you apply for credit card for example, that creditor will check your credit history by reviewing your credit report from the credit reporting agencies, whichever it chooses.

In many cases, when you’re offered credit in less than five minutes, that decision was based exclusively on your credit score that came with the credit report.

The quick approval or rejection was totally automated decision.

When you apply for a more substantial loan, such as a mortgage, the mortgage broker or lender will typically access all three of your credit reports, then use the middle credit score in making its decision.

If only two credit scores are available, which is not unusual, the company will rely on the lower of the two.
What is Credit Score?

Dealing with a Thin Credit File

2009-05-29T05:45:00.001-07:00

Dealing with a Thin Credit File
A thin file means that you don’t have enough information in your credit file on which to base a credit score or make an underwriting decision.

Typically people who have just graduate from school, who are recently divorced or widowed, have a thin file.

The good news is this group of newbies is so large and potentially profitable in today’s comparatively saturated credit market that they’ve been given their own name – the underbanked.

Basically the underbanked are individuals who don’t have access to the basics of the banking system such as checking and savings accounts and credit services.

People who have just graduated or who just went through a divorce also often have thin credit files. If you fall into this category, you’re probably looking for way to build your credit history. In order to begin your journey, suggest you set some long term and interim goals as your destinations.

Financial goals, like travelling goals, make sense, if only to keep you from wandering aimlessly. A car, a better apartment, a home, a vacation are all good goals and reasons to save your money and use credit wisely.

Establish credit easily by using a secured credit card
You make a deposit into an insured bank account and are given a credit card with a limit up to the amount of your deposit.

This guarantees payment and allows you to have positive credit reported in your name. Soon, you’ll qualify you to have positive credit reported in your name. Soon, you’ll qualify for an unsecured card and larger credit lines.

Open a passbook loan
With a passbook loan, you make a deposit into a savings account and take out a small loan, using the account as security.

There is no credit card, just a lump sum payment to you. But you can build a credit history when you make your payments on time. Credit unions, in particular nature of the loan keeps costs very low. Credit unions, in particular, like these little starter loans.
Dealing with a Thin Credit File

Your Financial Goals

2009-05-03T11:30:00.000-07:00

Your Financial Goals
One of the components to using smart debt is to plan your financial life as well as possible. When you have short-term and long –term financial goals, you can determine when you will need large sums of money for major purchase and then plan accordingly.

Emergency may arise, of course, but you can prepare for them financially by building up an emergency savings fund over time and acquiring insurance to protect yourself and your assets.

You may know, for example, that in the next three to five years you plan to buy a home and will need mortgage.

Also, in the next six months to one year, perhaps you’ll need to finance the purchase of a car.

Maybe sometime in the next two years you’ll need to invest in a home computer or a washing machine and a dryer.

If you have young children, you also know how many years it will be until they graduate and may need money for college.

Consider how you’ll start addressing those needs now – by building up your savings, improving your credit score, increasing your income, and/or making sure you’ll be able to afford the monthly payments and fees associated with taking on new loans.
Your Financial Goals

Avoiding Default and Foreclosure

2009-04-08T06:29:00.000-07:00

Avoiding Default and Foreclosure
Foreclosure can be a shattering experience. Beyond the financial loss, your pride and self-esteem can take major hit.

Moreover, foreclosure can regally put a major dent in your credit history.

Being 90 days past due is a critical number in the transition from mortgage delinquency to the beginning of the foreclosure process.

Most mortgages have 14-day grace periods, so your mortgage payment is due on the 15th of each month rather than the first.

However, after you’re delinquent (make a payment after the grace period has ended or only make a partial payment), the grace period goes away, so your next payments is now due the first of the next month with no grace period.

Many homeowners are surprised when they think their payment won’t be seriously past due for another two weeks and they receive a foreclosure notice instead.

If you’re running late on making payment, don’t assume a foreclosure is inevitable. Here are some alternative you can pursue:

Forbearance: This may be an option of your income is reduced temporarily for example, your overtime is cut but you expect to resume in the near future. Your mortgage payments may be reduced or even suspended or a period of time. Both you and servicer need to agree on the time.

Repayment plan: This may be an option if you’re only missed a payment or two due to a temporary problem that is now resolved and you can afford your payment but not the rearrange in one lump sum.

Loan modification: if you can’t afford your current payment, either because it has gone up or your income has gone down, this option may be for you. It entails a permanent change to one or more of the terms if the mortgage to make your payments affordable. Modification may include reducing your interest rate, extending the term of your loan, or adding missed payments to the end of the loan or the loan balance.

Selling your home: Depending on the real estate market on your area, selling your home may be an option. Of your home value less than the amount owed, you can ask for a short sale or deed in lieu of foreclosure in which your lender takes back the property title and cancels the remainder of your debt.

Bankruptcy: If other debts are making it impossible to make mortgage payment and you have little or no equity, a personal bankruptcy may be worth looking into.

Avoiding Default and Foreclosure

Credit and Charge Balances

2009-03-19T12:04:00.000-07:00

Credit and Charge Balances
For many Americans, relying on credit cards has become a way of life.

Unfortunately, most people don’t use their credit cards responsibly and they rack up tremendous debt as a result of interest charges and the many types of fees and penalties associated with these cards.

Many people use the terms “credit card” and “charge card” as if there were no difference.

That’s not quite correct.

A credit card enables you to make purchases for which the company bills you later.

Most credit card accounts allow you to carry a balance from one billing cycle to the next- that’s revolving credit and they charge you interest on that balance.

A charge card is a kind of credit card for which you must pay the amount charged in full when you received the statement you cannot carry a balance and there is no periodic or annual percentage rate.
Credit and Charge Balances

Secured and Unsecured Credit

2009-02-11T02:59:00.000-08:00

Secured and Unsecured Credit
Many types of credit are available to consumers today. This is no surprise to you. There are many offers for various types of credit cards and lines of credit.

But despite the endless variations and terms there appear to be most credit can be classified into one of two major types:

Secured credit: As the name implies, security is involved – that is the lender has some protection if you default on the loan. Your secured loan is backed by property, not just your word. Generally rates for secured credit are lower and the term (the length of time before you have to pay it all off) may be longer, because the risk of loss is lessened by the lender’s ability to take back whatever you bought. In this category, fall house mortgages and car loans.
Unsecured credit: this type of credit is usually more expensive, shorter-term and considered a higher risk by the lender. Because it is backed by your promise to repay it – but not by property – lender are more vulnerable if you default. Credit cards fall in this category.

Chances are, you’ve always looked at credit from your own perspective 0f the viewpoint of the borrower. From where you’re standing, you may be the hero, saving the day for a business that’s begging you to buy.

You acquiesce to take some stock off their hands at their fire sale, going-out-of-business closeout, grand-opening special, or end of month clearance – and they make money.

From lender’s perspective, however, you represent a risk. Your business is sought after, but the lender takes a chance by giving you something new for a promise to pay later. If you fail to keep your promise, the lender loses.
Secured and Unsecured Credit

Mortgages and Other Loans

2009-01-18T19:21:00.000-08:00

Mortgages and Other Loans
Debts that are largest for most people – mortgages and other loams that are secured by home and property, such as home equity lines and home equity loans.

Mortgage
A mortgage is a loan for which a home is used as collateral. If the borrower fails to make the monthly payments on the mortgage, the lender could foreclose on the property.

In the past, a traditional mortgage was available from a bank, a credit union or a savings and loan and it had a foxed interest rate for 15, 20, 25 or 30 years. This is fixed rate mortgage.

To qualify, a borrower needed to have a high credit score, be employed, have enough money to cover a down payment of 20 percent of the property’s sale price, and meet other criteria.

Today there are hundreds of mortgage products available and the qualification requirement are dramatically different, in many cases less stringent. This makes it possible for more people than ever before to get approved for mortgages and become homeowners.

Home Equity Loan
A home equity loan is a type of second mortgage. A lender gives the borrower a lump sum of money, which he or she then pays back over a specified length of time, at a fixed interest rate.

This loan uses the borrower’s home as collateral. Like a fixed-rate mortgage, the monthly payments on a home equity loan remain the same. Interest rates on a home equity loan are typically higher than for a mortgage, but lower than for other types of loans, such as credits cards or car loans.

Home Equity Line of Credit
A home equity line of credit (HELOC) is also a type of second mortgage. The lender commits to making a specified amount of money available to the borrower for a specified length of time. The equity in the borrower’s home is used as collateral.

The difference between a HELOC and a home equity loan is that with a HELOC, the borrower can borrow any amount of money, up to the specified credit limit, pay it back over time and potentially borrow again during the term of the loan agreement.

The borrower decides how much to borrow and when, up to the specified limit on the line of credit and within the specified term. Another difference is that the rates for HELOCs are adjustable, not fixed, so the amount of interest to be paid on the loan will change.

A HELOC has an annual fee. Homeowners can use this type of loan as a financial safety net, only if and when necessary.
Mortgages and Other Loans

Defining Credit

2009-01-03T17:06:00.000-08:00

Defining Credit
Credit has its origins in the Latin word credo, which means, “I believe.” The real underlying issues of credit are: Do you do what you promise? Are you believable and trustworthy? Have you worked hard to have a good reputation? Little is more precious to a person than being a believed – and that’s what credit is all about.

Credit also can be defined as:

Recognition given for some action or quality: source of pride or honor; trustworthiness; credibility

To believe or trust; to bring honor or esteem; to reflect well upon

Permission for a customer to have goods or services that will be paid for at a later date

The reputation of a person or firm for paying bills or other financial obligations

The concept of credit is simple. You receive something now in return for your promise to pay for it later. Credit does not increase your income. It allows you to conveniently spend money that you’ve already saved – or to spend the money today that you know you’ll earn tomorrow.

Because businesses make money when you use credit, they encourage you to use it as often as possible. In order for creditors to make as much money as possible, they would like you to spend as mush as you can – as fast as you can. Helping you to spend your future earnings today is their basic plan. This plan may take them very happy – but it may not do the same to you.
Defining Credit