Needless Debt

Presently, the number of scam debt consolidation companies is constantly on the rise. Who doesn’t wish to assume that their debts would vanish once they complete two or three simple steps? People who’re bothered and puzzled about their debt condition often fall prey to scam debt consolidation companies. Choosing the best debt consolidation company for your needs is not something that you can take lightly. To choose the best debt consolidation company, you have to be pretty cautious and look out for warning signals of scam debt consolidation companies.

One of the most common scams performed by debt consolidation companies is asking for an upfront payment and not offering you the loan. Incidentally, U.S. and Canadian debt consolidation companies are not lawfully permitted to contact you and assure you a loan and subsequently request an upfront fee prior to the completion of the deal.

Another type of debt consolidation scam is to declare non profit status. The Federal Trade Commission has uncovered many suspect non profit consolidation companies like Debt Management Foundation Services and National Consumer Council that were channelizing funds to a profit consolidation company. Because of their misleading names, it’s not astonishing that unsuspicious consumers were ready to rely on them.

The preys to these scams got more into debt and struggled with an increase in interest rates, other penalties and their credit scores were also hurt. Some consumers also became bankrupt after being misguided by these scam companies. Furthermore, by concealing their so-called non profit status, these companies called numbers on the National Do Not Call Registry to promote their services. The Federal Trade Commission accused them of not only misrepresenting about their services, but also not disclosing the fees and penalties that would ensue.

Now that you’ve got a brief overview of debt consolidation scams, you should go through the preventive measures suggested by the Federal Trade Commission to select the best debt consolidation company:

• Explore the company and its services. It is good if it provides a broad variety of options and training on how to manage debt. You should also check companies with the Better Business Bureau.
• Watch out for companies that apply high pressure tactics to make you agreeable to a plan or give any assurances without assessing your particular needs.
• Go through the fine print; make sure to evaluate the agreement thoroughly. This is to ensure that it delineates the plans of the consolidation company and the time needed for them.
• Talk to your creditors to see whether they’re willing to work with the company.
• Prior to making payments to the consolidation company, make sure that the creditors have agreed to the plan suggested by the consolidation company. Till they do so, don’t stop making payments to your creditors.
• After you start the program, keep tabs on your statements and contact the creditors to make sure that they’re getting the payments
• Don’t select a company that is asking for excessive fees. These fees can accumulate and simply lead you to run up further debt.

Debt consolidation scams are plaguing the whole country. However, there are ways to avoid them. It’s time to alert to such scammers.

- Guest post by Jennifer Lohan

In our last post we looked at how you can use credit counseling to help get our of debt. In this post in the “Learning About Debt Solutions” series we are going to take a look at debt consolidation.

About Debt Consolidation

Debt consolidation is similar to the Debt Management Plan we discussed in the previous post about credit counseling in that you can combine your multiple payments under one new payment. A lot of times this new payment will have a better interest rate than some of your high interest credit cards. However, this requires taking out a new loan and generally is only available to those with at least decent credit. Sometimes these payments can take longer to amortize than your original debt even though the payments may be lower.

Cost

Many times debt consolidation should be seen as a method rather than a program. It is simply a loan that you take out and use to pay off your current debts and in turn pay the loan back over time instead. Therefore, the costs will be determined by the interest rate and amortization of the loan. However, as Dave Ramesy notes, this only treats the symptoms of your debt problems and many times you will find yourself right back into debt.

Affects on Credit

Debt consolidation in itself doesn’t have any effect on your credit as long as you make the appropriate payments on the loan you took out.

Conclusion

Debt consolidation is a good candidate for those that may have a history of good credit but may have unforeseen emergencies that came up and caused a lot of debt in a very short amount of time. Debt consolidation loans should be used with care as many of them are secured loans. This means that if you don’t make the payments on your consolidation loan you can lose the item that was used to secure it. For instance, if you took out a loan against your house and you don’t make your payments then you can lose your home.

Needless Debt is beginning a series of posts that will explore and explain the various debt relief options that you hear about. Many of these programs are becoming increasingly popular as big businesses are being built around them and advertising dollars are being spent. The series will be covering: credit counseling, debt consolidation, debt settlement, bankruptcy, home equity loans, credit card balance transfers, doing nothing, and finally we’ll examine a do-it-yourself program. The first entry in the “Learning About Debt Solutions” series will cover the topic of credit counseling.

About Credit Counseling

Credit counseling, also known as debt counseling, is a program that aims to educate the consumer about managing their debt and how to avoid debts they cannot repay. They will help you setup a budget and develop a plan for repaying your debt. Many of these programs also work with your creditors to create a specific debt management plan. These plans generally include a reduced interest rate and a reduced monthly payment paid over a longer period of time. These plans may also incorporate your multiple payments into one payment.

Cost

To get started in most credit counseling programs you will have to pay a one-time setup fee and usually you will also pay monthly fees to stay in the program. However, you will also see a lot of “non-profit” debt management programs being advertised. Be wary of these programs. There have been many accusations that these programs are being paid on the back-end by the credit companies themselves. Therefore, many of these programs are nothing more than debt collection agencies.

Affects on Credit

Simply enrolling into a credit counseling program will not affect your credit score or report at all. If you are just receiving advice and help about budgeting and a debt payment plan, you’re credit report will not even report this. However, if you do end up in a Debt Management Plan you may notice a difference. In most cases there will be a note on each account that you enroll into the Debt Management Plan showing your participation in such a program. While this may or may not directly affect your credit score, many lenders may use this in their decision to provide you with financing. The good news is that once you pay this account completely off, it typically won’t have any lasting effects.

Conclusion

Depending on your situation, debt counseling may be a solution for you especially if you are still current on your payments and heading into a period of hardship. This program is also helpful if you are just looking for some extra advice on your debt situation. However, if you are behind on your payments and cannot make your current monthly payments, you may consider another option. Also, you should be on the lookout for credit counseling companies that are really just collecting for credit agencies. Next time we’ll take a look at debt consolidation.

So you are ready to begin your journey towards financial freedom and you want somewhere to start. This post is for you. The formula for wealth building is very simple: spend less than you are making. Therefore, you have two areas in which you can improve to begin building more wealth. You can increase your income and decrease your expenses. One great way to reduce your expenses is to cut the fat out of your monthly bills. You should begin by assessing your current spending habits and recurring bills and debts. While there are hundreds of areas you can improve upon, let’s take a look at 5 financial obligations you can reduce or eliminate immediately.

1. Cable/Satellite Subscription

Okay, I know what you’re thinking. You already spent $2,000 using your credit card to get your nice LCD TV and have it all mounted on the wall. You’re not about to sacrifice your HD cable and you may not have to.  Cable and satellite TV companies have developed an art to sucker us into buying all of the high-end packages with 1 gazillion channels. The basic cable bill went from $49.99 to $130 really quickly. The fact is, are you really watching the sunshine channel? I’m willing to bet you spend 90% of your time watching channels available in the basic package (and you can generally get HD channels for $5 – $10 more). Cut this extra fat out and get your monthly cable bill back down to $60. You immediately start saving $70/month or more. Still want all those movies? Get Netflix for another $14.99/month and you are still saving $55.

2. Internet Service

If you don’t already have your internet packaged into your cable, you should check into that. This by itself can save you a significant amount of money. Aside from that, check to see what “speed” of internet you are currently paying for. If you have the ultra-premium high-speed package, do you really need this? No! If you are like the typical internet user you surf the internet, download music, and write e-mails. You don’t need the top of the line internet package. Downgrade and save, likely up to $50/month.

3. Cellular Plan

Again, I’m not asking you to give up your cell phone. Take a look at your current plan and see where the majority of your minutes are going towards. See if there are better plans that will fit your needs. Best case, go get a pay-as-you-go phone and stop being a slave to a monthly commitment. This will not only reduce your monthly bills but it will make you more aware of the minutes you are using. If you spend a lot of time “chatting”, check into a VoIP service. There are many extremely cheap or free services that will allow you to use your internet connection as a phone. One popular service is vonage.com.

4. Miscellaneous Subscriptions

The beauty of subscriptions from a business standpoint is that many people continue to pay on their subscriptions even after they stop using the service. Take a look at last few month’s bank statement and take note of any recurring payment that is being made monthly. Then ask if you really need this service. If the answer is “no” or even “maybe” then pick up the phone right now and cancel that subscription. You can always re-active it later. This can include internet services or physical memberships such as the gym. If you aren’t using it, stop paying for it and start saving an extra $120 per month (three subscriptions at $40 per subscription).

5. Bottled Water

Yes, bottled water. Over 30% of households purchase and consume bottled water. Let’s conservatively assume you drink only three bottles per day. Netgrocer.com lists a 12-pack of Dasani water bottles at $9.99 which will supply you with four days of water. This means your cost per day is $2.49 x 365 = $911 each year. K-Mart lists a Brita Base Water Filter Base Faucet Mount for $19.99. You may need to replace the filter at the most once a month which costs another $10/month maximum. Your annual total would then be $139.99 saving you $771.01/year or $64 per month.

These are some very simple and obvious things that you are likely throwing your money away on. Just by making these adjustments you could be instantly saving $300+ each month (your electric and utility bill combined). Alternatively, you might choose to see this as a $300/month raise on your income.

The bad news: Many people struggle in managing their finances and almost everyone has debt.

The good news: You can change this starting today. Before you know it you can be debt free and wealthier than you ever imagined.

I remember when I was a child I had the whole world in front of  me: No worries, just dreams; No responsibilities, just hope.  Then came the real  world with all of its bills and expenses and pressures. The next thing I knew, I was neck deep in debt and working 80 hour weeks with nothing to show for it. With over $50k in student debt, thousands in credit card debt and monthly living expenses,  I could barely keep up. Each week was there just to get to the next week and each paycheck was spent before I received it – and I was very unhappy. Does this sound familiar?

One day I finally decided enough was enough. I took stock of my life and began to set some short and long term goals. I learned to budget and I learned way to make extra income to supplement my job. Soon, I was living debt free and I was able to sleep at night due to my financial security. I can now afford to do the things I really enjoy in life like traveling and spending quality time with loved ones. I dare say I am even happy.

This blog contains information that will help you pay off your debts, increase your income, and improve your lifestyle. From debt management tips to budgeting tools and money making opportunities to new lifestyle perspectives, this blog can help you grow yourself and your finances while decreasing your debt. Stop living down there in Mediocreville when you can live happily in Success City. Let’s get rid of your needless debt so you can start enjoying life again.