Getting out of debt and taking control of your finances should be your number one goal. This does not mean that you can’t take out loans or lines of credit, but rather means you must do so within your means to repay. Many people believe that loans are the reason they are in debt; this may not necessarily be the case. Loans do play a role in getting us in to debt, however they can also be the key to getting us out of debt. Through helping us to consolidate debts as well as to buy things we need, like houses and cars, loans are the key to controlling our debts.

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The recent events in Ohio show us that the stress of debt can lead to a sad situation. Terry Thompson of Zaneville, Ohio took his life Tuesday, which may have been due to the $68,000 he owed to the IRS. (more…)

Many file bankruptcy as a last resort to free themselves from their debt. This means starting over financially and after you file you have to rebuild your credit from nothing. Filing under chapter 7 bankruptcy allows you a fresh start. Although bankruptcy usually carries a black mark, there is no shame in recognizing you have a problem and doing what you can to get on the right path.

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The ABI or American Bankruptcy Institute is a non–partisan and multi-disciplined company dedicated to research and education on issues related to insolvency.

Founded in 1982, the goal of ABI is to educate the public on issues of insolvency by giving unbiased analysis. The ABI also analyzes information accurately and presents them to the United States Congress for them to use in further projects.

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There are some steps that anyone can take to help change poor debt management habits into good ones. By getting our financial lives under control and having a good understanding of what triggers you to spend and save, you can begin to reign in your financial woes and get control of your finances. Some experts may tell you to get rid of all your credit cards but the truth is that this is not really a panacea for bad debt management. Cutting up credit cards and closing accounts can have a detrimental effect on your FICO score, which could cost you in higher interest and insurance rates. So what can you do?

Here are some steps to get you started:

1. Get some expert advice.
2. Reduce your debt as quickly as possible.
3. Manage your income and expenses proactively.
4. Look at what financial tools you use.
5. Understand your own money psychology.

Get Some Expert Advice

If you are in debt, go to a credit counselor. There are many free local services that can help you get a handle on your finances. Do not pay for these services and be careful whom you speak with. Always check out any financial adviser with the Better Business Bureau and through references. Once you have some advice, you can start to see what your options to get out of debt are.

Reduce Your Debts Quickly

Long-term credit card debt is never good; this is the one area that financial experts agree upon. If you have a long-term debt you are trying to pay or if your credit card debt has turned into long-term debt, it may be time to find a solution other than a credit card, which has variable interest rates. People who end up with large balances on their credit cards have turned a short-term solution into long-term debt. This carries the risk of default, late payments, or taking many years to pay off. The goal is to shorten the amount of time you are in debt while limiting the risk of potential interest rate increases on large balances.

If you are looking for a long-term solution, you should try to convert the debt to a shorter term, fixed rate, solution and make it a priority to pay it off. If you have a mortgage that has an adjustable rate, you can refinance to a fixed rate and save money; If you have credit card debt, you can convert it to a fixed rate consolidation loan and this will also help you pay it back faster. The only time when a refinance or consolidation loan incurs more risk is when it is tied to an asset like a home, as in the home equity loans. However, even this option has its uses and needs to be evaluated on an individual basis.

Manage Your Income and Expenses

If you don’t have a budget, now is the time to start one. If you start doing yearly budgets, it becomes easier to see what has caused financial roadblocks over the years and how you spend your money. A budget can also provide some insight into expenses that might occur in the future, due either to seasonal expenses or maintenance costs.

Look At Your Financial Tools

There are different financial products out there for a variety of different situations. There is no “one size fits all” financial solution and credit cards are no different. People who are very wealthy often carry a couple of credit cards not because they need them but because they use them as a useful tool in certain situations. Credit cards make it easy to pay for things online and offer some security against fraud, unlike a debit card. They are accepted most anywhere you travel and can come with some great reward perks. These can include miles for purchases, discounts on vendors approved via special promotions, and a host of other kickbacks. However, they can be mismanaged, just like any other financial tool in your arsenal.

Credit cards come with variable interest rates, which make it easy to get into trouble with them. Make a late payment and your interest rate can go from less than 5% to 30% overnight. That doesn’t mean they are necessarily bad, it means you have to follow the rules to get the best use out of them.

When experts advise you to dump your credit card debt, they aren’t necessarily saying that credit cards are hurtful. What they are saying is that any long-term debt is not going to help you build wealth. Debt with variable rates are also a sure way to get in trouble because you will find it harder and harder to pay off the debt the larger the balance is and the higher your rate becomes. Be sure you understand each financial tool you are using to leverage and repay your debt and follow the rules to avoid penalties and late fees while shortening your time in debt.

Understand Your Own Psychology

You alone know your financial psychology. Do you tend to spend every cent that comes your way or are you a disciplined saver? Do you budget or are you less careful with your finances? Are you a compulsive shopper or can you wait to make a decision on a purchase? Do you have a weakness for a specific commodity like electronics or beauty treatments? How successful are you with long-term financial goals? All these things contribute to how well you might or might not do with your finances in the long term. If you are disciplined but overly-conservative with spending, having a credit card will probably not appeal to you or cause you to get into debt like others who use it to splurge on unnecessary items.

Is There Really Good Debt and Bad Debt?

Isn’t all debt bad? Some people who don’t understand the money market might think that any amount of debt is bad. The fact is that debt comes in all flavors and is rated differently by the credit bureaus too. What you may think is bad debt might actually be good debt that doesn’t impact your credit score as much as imagined.

Good debt is generally any debt that will help you accumulate wealth in the future. This debt is tied to an asset that appreciates or an education that increases your market value. It is not debt that has provided a one-time benefit and that will not help you meet your aims to increase your wealth. Good debt can also be debt incurred to increase your credit score by paying things back and showing a positive entry in your report. These are purchases that are made strategically in order to help build credit, not purchases made on a whim.

Bad debt is any debt that provides no lasting value in the form of assets or increased market value. It is usually long-term debt that you can’t see yourself paying back soon and that will impact your credit standing and your net worth for a long time. Some things that can be bad debt are long-term credit cards debts and car loans.

What Is Good Debt?

First, let’s pinpoint what some experts believe is good debt. Mortgages are usually considered good debt if the value of your property is appreciating. We are now seeing markets where the home value is depreciating and this has changed the rules in terms of qualifying mortgage as good debt. If you are not behind on your mortgage and can ride out the next few years of erratic real estate values, you are probably going to see mortgage stabilize again as good debt.

Another form of good debt is education loans. We’re not saying just any school debt, though, but any debt incurred to help acquire an undergraduate or graduate degree at a four year accredited college pays off significantly in increased earning power for the holder of the diploma. You do have to check the school’s qualifications and choose a field that will assure you a good job to pay off the debt when you graduate. School loans are not rated the same way on your credit report as other forms of loans like credit cards. So, even if you have thousands you need to pay back, it may not keep you from moving forward in life and can propel you past everyone else who didn’t get a degree.

What Is Bad Debt?

A car loan may seem like a good debt, but it is actually bad debt. It does hold the car as an asset, but a car is an asset that depreciates over time. Only antique cars appreciate and no one is going to take the risk of driving those everyday and ruining their investment. Another reason why car loans are bad debt is if you wreck the car you will end up having to pay the loan back and buy another car. New cars cost thousands of dollars and depreciate the moment you drive them off the lot. They are not long-term investments cost a lot of money every month.

Another form of bad debt is credit cards. You may have a lower monthly payment on a credit card, but it can balloon to huge balances and keep you buried under a mountain of debt. If you make a late payment, the interest rate can sometimes hike up over 30%. This is unmanageable for most people in the middle-class and will impact their reports adversely as they struggle to make payments.

A Balanced Portfolio

If you are trying to build wealth, increase your assets and decrease your liabilities. Don’t shun all debt as bad debt. Instead, seek ways to leverage good debt to help your net worth grow over time without having to work for that money or to front a larger down payment for the same benefit. As you appreciate in the market, your wealth increases and your debt burden will decrease. You will be able to pay debt back faster and have more experience on how to manage a balanced portfolio that doesn’t get you into financial trouble.

Settlements Can Affect Your Credit Score

Some people mistakenly believe that if they can’t pay a debt, they are better off ignoring it and waiting for it to hit collections. They’ve heard that once a lender gives up on a debt that they might be able to settle the account for pennies on the dollar. Depending on your initial credit rating this can be a very bad thing to do. You may eventually be able to discharge your debt for less, but your credit report will indicate that it was not settled for the full amount. Your history of delinquent payments will no doubt have caused your credit rating to plummet. Most lenders won’t even consider a settlement until the account becomes way past due. That information can stay on your credit report for many years. How it impacts your credit rating depends entirely on what your credit score started at.

Bad Credit Rating

If you have a bad credit rating, then settling a debt will probably push your score up. It will still take time to restore your credit rating, however. You will need to show good payment history and you probably won’t get past the mid 600’s. The best you can hope for is an average credit rating a year after you settle your debt. That’s if you don’t get into further trouble with other accounts.

Good Credit Rating

If you started out with a good credit rating and you are having a dispute with a lender, the more you become delinquent the more your credit score plummets. By the time you or they make a settlement, your credit may have been trashed. Don’t ignore an account just because you are certain that you don’t owe a debt or you don’t have the money to pay for it. Instead, call up the lender and try to figure out a mutually agreeable plan to keep the account in good standing. This will save your credit rating and will keep bad information off your credit report.

Be Proactive Not Reactive

Always get a copy of your credit report yearly, preferably from all three credit bureaus. Remove or dispute old information that should be updated. This can help bring up your credit scores. The fact is once you settle your account; your lender may not be very quick to update your credit report. So, you may have to do the legwork yourself if it is important to you.

The holidays are near, that means it’s once again almost time for new years resolutions. Are you in debt? Maybe getting out of debt can be your main focus for next year. Looking to remodel or get a new home? Then, you might want to focus on having the necessary funds to meet these goals. By reviewing how you did in the past year and understanding how to position yourself, you can make next year your best financial year ever! Once you have a firm basis on what to expect in the New Year, then you can strategize and begin to look at the many financial tools from automatic savings deposits, to loans, or refinancing loans.

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Debt is a fact of life that can be avoided, but it does make life a bit easier when it is available and used responsibly. Debt can come in many forms. If we have a mortgage payment, we have debt, the same with a car payment. These debts are backed by collateral, but we often also have debt that is not backed by any collateral such as credit card debt or student loans. Education can be very expensive, so these types of loans are common amongst young adults that are trying to establish themselves in the world. As the government guarantees that these young adults, and even older adults trying to switch careers, have access to these loans regardless of their bad credit or lack of credit altogether, the loans roll in and they start their career with heavy debt. But there is a fine line between debt that is manageable and completely drowning in debt. That distinction must be made to assure your overall financial stability. Too much debt can lead to a less-than-stellar existence and difficulty saving for your retirement without resorting to cash advances. (more…)

Payday loan companies will differ from state to state, and from company to company.  One thing that determines how a payday loan will be is the state regulations.  Regulations on online payday advances have not been clearly defined in most states.  This is one of the reasons the interest can be so high on these types of loans.  The companies are not held to the same parameters as your regular loan.  It is partly due to a loop hole in the fair lending practices in which payday loan companies insist they are not like a bank or regular lender.  Another reason is that there is a regulation that was passed that negated the above 30 percent law.  The law stated no loan or line of credit could be above 30 percent, but in 2000 another law changed this allowing for interest to increase.

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You have just received a pink slip, your spouse has already lost their job, and you need to feed your kids.  Any situation like this or one that is not as severe can still make you feel desperate for a solution.  You are trying to find some way to pay the bills over the next few months.  Your savings is already depleted and you’ve called in every favor you can think of.  Instead of turning to online payday advance you do have other options.  It may not look like it at the moment, but there are solutions which can help you until you get another job.

The internet has opened up so many possibilities that you really can find a solution even in the bleakest of times.  In fact the internet is a place where you can become an expert in almost anything and get paid for it.  If you have a high degree of morality there are still options available online.  They may not be the most desirable, but they are better than going for an online payday advance just before you stop working.

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No matter where you live in the United States you can find an online or store front business that can give you cash until payday loans.  Not all of the companies that you find online can work in your area, so it is important to find this information out first.  There is no sense filling out an application if you can’t hope to get the payday loan because you live in the wrong section of the country.  Some payday loans will be nationwide while others are regional.  It is best to get a quote for your emergency payday loan from several lenders so that you can choose the right one for your circumstances.

You may find a better interest rate if you take the time to look at more than one lender.  Most of the lenders use computerized technology so that you can apply instantly and find out if you have been approved in about twenty-four hours.  That means that you won’t be wasting any more time by checking out a variety of lenders than if you just take the first one that you find.  If you have poor credit, bad credit or even a bankruptcy you should be able to find a short-term payday loan to see you through an emergency.

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