Hond Financial

Posts Tagged ‘debt advice’

It is really amazing that someone’s life can be drastically affected by three numbers. Here’s a crash course on what they are and what consequences they can bring.

You sit down to look at your credit report for the first time. Warm regards, if your scores are more than 720! You have excellent credit; stop worrying. If your scores are below 700, no problem—let’s get to work. Take solace in the fact that the national average credit score is around 676 according to the Gallup Organization. If you’re scores are below 400, 500, or 600, then you surely have room for betterment and only one way to go—up!

If the numbers I’ve mentioned don’t make any sense to you or you have no idea what they mean, don’t fret—I’ll explain. Credit scores range from 350 to 850. All three of the credit bureaus—Transunion, Experian, and Equifax—offer  FICO credit scores using a complex mathematical formula developed by Fair, Isaac and Company, but they each give the scores a different name: At TransUnion, the FICO is known as the Empirica; at Equifax,it is called the Beacon credit score; and at Experian, it is called the Experian/Fair, Isaac Risk Model.

If you have excellent credit means if your credit scores are above 720 you will be able to get the best interest rates available. The interest rate you will receive for a home loan will rise as your credit scores fall down, this is known as tiered pricing. The more of a risk the lender takes on you, the higher your interest rate will be. In addition, all investor have their own break points between tiers. What this means is that one investor may increase the interest rate if a score drops below 700, while another lender won’t give a higher rate until the score drops below 690.

In summation, you should do everything in your power to maintain good credit scores, and be sure to shop around and do your homework when looking for a home loan because all lenders are not created equal. I think you’ve already catched the moral of the article but just in case you have not, here it is: Good credit scores save lots and lots of money, and be sure to choose a moneylender wisely to get the best rate for your credit scores.

Seeing people buying food or shopping clothes using credit cards has been commonplace these days. Credit cards can be used widely from shopping to dining and in many more things.

Credit cards has become status symbol nowadays so everyone wants to use it. These sleek and slim cards are easy in use and can be used for buying anything instead of caring about how much money does one have in his pocket.

Short of cash and hungry? No grocery supplies? Going to a party but no money to buy that dress you’ve been drooling for? Don’t worry Your good ol’ credit can care of that for you. No worries.

Credit Cards: Not Free Money

But wait. A credit card spree may be fun, but that doesn’t free you from responsibilities in paying the expenses you incurred from using your credit card.Credit cards, after all, are interest loans in disguise. Many charges are associated with the use of credit cards, including:

“A finance charge, which is an interest charge for the unpaid portion of your monthly bill;
“An annual membership fee;
” Or you can be charged higher interest rate on the late payment fee.

In fact, many credit-card holders face credit-related problems. Unperfect buying decisions, lack of information on credit card fees, and disregard for upcoming credit payments are among the reasons why many credit-card users are often hard-pressed in paying their debts. Many of them cannot even pay the actual shopping charges, just barely managing to pay credit card company charges.

Before you get drowned in a sea of debt, here are some tips to help you manage your credit-related expenses:

“Be credit concious. Applying for a credit card application means you are ready to assume the responsibility for paying your credit. Paying off your credit expenses is your responsibility not of anyone else.” Use your credit cards wisely and sparingly. Remember: Paying goods and services using credit cards are more expensive than using cash or checks. Credit payments include interest and other fees. Use credit cards as sparingly as possible.

If you really need to use credit cards, carry only the cards that you will actually use. “Use credit only if you are sure you can repay it. Paying your debt on a credit card using another does not count.
” Avoid impulse shopping on your credit card.
“Use credit card only when you need it really .” Seek credit counseling as soon you see financial problems on the horizon.

Usually we apply for more credit cards then is needed. We feel like we have to be able to purchase almost any type of item at anytime, whether we can really afford it or not. Having several credit cards allows one to buy products and services at will. Is it right or wrong?

There are many companies offering credit cards and loans online, but all may not fit everyone’s needs. A credit card is a significant financial tool that needs to be used wisely and cautiously. Never allow yourself to get so far behind on your creditcard balance totals that you can only afford to pay the minimum payment amount or small amounts each month towards the reduction of your debt. That is the interest rate trap. Do not cross your credit cards limits otherwise you will get trapped in paying off your cards debt for years.

However, having credit cards can be a positive, productive personal finance tool and does not have to be a negative to your credit status or your lifestyle. A few key points:

• Convenient to use and carry
• Offers valuable customer protections
• Use it with caution and good judgement
• Each month pay your monthly bills fully, as it eliminates interest charges

Having credit cards is a priviledge and huge personal responsibility. You must utilize and manage your credit rating wisely and carefully at all times. The saying that if you can not afford to pay cash, then you can’t afford credit card is quite true and we should take care of this warning. Using creditcards in this manner makes them your friend and not your foe. Having credit cards in your name is not bad just take care not to go into debt for more than can repay. Doing so will only serve to damage your credit rating and it can and will create larger credit problems for yourself into the future that may be difficult or impossible to repair.

When shopping for a new credit card, comparison shopping is important, because it can save you money. Make sure that all the expenses and conditions related to credit card offer are under your knowledge. These can make a real difference in how much in fees and interest charges you will possibly be paying each month. Be sure to compare these costs with any of your existing financial instruments, cards, loans, mortgages, etc. You may be able to replace some of your current bills with less expensive options. Some of the costs and terms to consider are the annual percentage rate (APR) for goods and services as well as for any cash advances you may request, the annual fee, and the grace period.
Also compare other fees, late-payment charges, and over-the-limit spending fees.

Accumulating a large amount of debt is a pretty easy thing to do. When people use credit cards and store cards as if they don’t have to be paid back, debt problems are just around the corner. Paying off those debts on the other hand is not easy and not simple and can require a huge amount of effort.

A plan or program of debt management is basically a plan to achieve elimination indebtedness between a debtor and one or more creditors. A company is usually involved in the planning process of a debt management plan and they are responsible for handing out the money to the creditors. They may have made some kind of arrangement and this can usually save you a significant amount of money.

There are many ads that say “get rid of your debts in 30 days,” or something similar, but debt management programs are not a magic solution to your problems. You need a proper analysis of your financial situation, with planning and constant cooperation with the people they will monitor and professional assistance to solve them.

One of these plans can help you eliminate fees for late payments, lower your APR, and reduce the total of the original amount that you owe.

Most of the debt management companies negotiate with your creditors and reduce the principal amount of debt. Some management companies are able to arrange your debts so that you do not receive penalties for late payments, which in some cases are a significant amount of your total debt, so you save lots of money.

They will also help you decide exactly how much you can pay in a month. During the period of the program you have to pay a single monthly amount to the company to handle your debts. If you pay more, your debt will be paid off faster. The amount you have to pay per month is fixed by the debt management company depending on your financial situation.

The management of debts can also be planned for long periods of time, in such cases; you have the option of extending your period to 2 to 4 years or sometimes even longer, which is convenient for people who can not afford to pay off their debts in a shorter period.

The duration of a debt management program depends on the amount and type of debt we have and the monthly amount you can afford to pay. An adviser will devise a plan for payments in the long term; however, if you can not pay large sums monthly, you must follow a lengthy payment plan.

A normal case management of the debts of credit cards can take from 3-9 months. Some debt management companies may even lengthen the process to 4 years or more if you request.

As the financial markets continue to see worrying numbers, so to do the idea of having now and paying later. With good wages and a healthy economy that has not been a problem over the last decade but things have not looked so great lately.

A lot of people have starting using what is called the snowball method to deal with their debt problem. For a lot of people multiple debts have become a way of life, rather than an exception.

It can happen to anyone and starts in a similar way to this:

1. Make a list of all your debts, with debts that are smaller at the top of the list. Many times we deny that we have any real debts “to speak of” so when you list them on a piece of paper it can often come as something of a shock.

2. Set aside as much as you can from your monthly budget for use in the elimination of debts. I am allocating 20% of my income to kill my debts. I’d like to spend more, but for now I can’t, so I will have to cut my expenses, which is complicated but possible.

3. Just pay the minimum amounts for all your debts but for the one that you the most, pay the most possible for your current financial situation.

4. For that number one debt, pay the maximum amount you can, putting every penny of your spare cash into paying it off until the debt is cleared.

After that number one debt is killed, you can start looking down the list and taking care of your debts in that order.

This form of debt resolution is known as snowballing because as you pay off your first debts your other ones starting coming off too.

Every time you’ve paid a debt, the amount of money you can spend the remaining debts gets a little larger, like a snowball rolling on a hill. By getting rid of the smaller debt first, you have that small amount to put towards the bigger debts until they are all paid off.

It’s fair to say that a large part of this debt solution is the process is in your head. But saying that, it’s also a proven way to deal with your debt in a relatively short period of time.

You’ve analyzed your past expenses, put them into spreadsheets, loaded Quicken with all of your data and come up with a  financial budget. Now what? The tough part! You actually have to stick to your budget and put your plans into action. This is easier said than done. In many cases you will have forgotten about your budget and your financial goals 6 months or a year down the road. How do you keep this from happening to you? Here’s how. Remember to follow some of these ways below so this doesn’t happen to you.

1. Create a budget with achieveable targets – Let us assume that one of your budget goal is to not eat out for lunch or dinner regularly. If you are honest with yourself you may find this to be an unrealistic goal. Sometimes it’s a nice break to eat out and have a relaxing rewarding evening. In other words you can say that you will not keep such hard targets. Hard and unachievable goals are one of the main causes for unsuccessfulness of your financial budget.

2. Budget for expenditures that don’t occur on a routine basis – Make sure you remember expenses that occur once a year, such as holiday presents, birthdays, vacations, weddings, car maintenance costs, etc. These expenses don’t occur monthly and they will bust your budget plans wide open. Make a list of these events on a calendar and put a dollar figure to them. Make a advance planning of the unexpected expenses so that you can get along with them. The daily routine expenditures are not the reason your budget will fail. It is these “gotchas” that will wreck havoc on your budget if you don’t plan for them.

3. Put your budget in writing – Take the time to write down your budget plans. Making a mental note of your budget goals is a recipe for failure. Don’t assume that your financial future will take care of itself by making a simple mental note to yourself. If you have your budget goals detailed in writing you can review and remind yourself weekly and monthly of your financial goals.

4. If you have a bad month or week, don’t give up so easily! – Let’s say you have been reaching your budget goals for three months. In the fourth month, for whatever reason, you didn’t reach your budget goals. Maybe you even stopped trying to follow your budget! If this happens, don’t just throw your hands up in the air and admit to downfall. Everybody falls off the wagon sometimes. Your budget is a journey. There will be bumps in the road, so the key is to realize that everyone makes mistakes. This relates to a story I like about a great old time golfer named Walter Hagen. Before each round of golf, he told himself that he would have 4 or 5 wrong shots. During the golf round, if he hit his ball into a bunker, he would tell himself, “There is one of my bad shots that I was expecting”, hit the ball out of the bunker and move on. It didn’t phase him one bit because he had knew there would be some bad shots in his round.

5. Adjust your budget over time – This one is a biggie! It can take months or even years to fine tune a financial budget. When you initially made your budget plans, you probably had to guess at some of your figures. They might not have been in touch with the realities of every day life. For example, It might happen that you may have underestimated your monthly grocery or utility bills. If this happens, estimate all of the underlying money that was spend in this category to see if your initial estimate was unrealistic. If it was, try to come up with a more accurate number and then to stick to that new figure. It is this type of adjustment that is one of the keys to making sure you can stick to your budget.

6. Review your budget every month – This is where you will make any adjustments that are needed. Set aside the first day of each new month to review your income and expenditures and match them to your budget goals. By regularly viewing your expenses and comparing it to your budget, you can adjust your spending habits . This gives you a chance to analyze areas that exceeded your budget limitations and make the adjustments in your spending habits or your budget. The goal here is to not forget about your budget. One tip that has worked for me is to put a printout of my basic budget goals on the refrigerator. That way every day, several times a day, I would notice my budget goals sheet. I may not read it every time, but I notice it and it reminds me that I need to stick to my budget. That is why tip number 3 is so important.

7. Set specific short-term goals – Let us assume that one of your budget goals is to have all of your credit card bills paid off in two years. If your credit card balances total $20,000 that would be $10,000 a year. Divide that number further into quarterly reductions in your credit card bills, in this case $2,500 every 3 months. Now, this is a more tangible budget goal to shoot for isn’t it? I find that when I divide intermediate and long term goals into short-term tangible stepping stones, I am able to feel a greater sense of achievement and am more likely to succeed. This brings us to number eight.

8. Reward yourself – That’s right! Treat yourself when you reach some of your short-term goals. Since your financial budget is really a journey, take some time to smell the roses on your way. Sticking to your budget should not be a restrictive, unpleasant experience. Not only should you take the time to enjoy your financial achievements along the way, but use part of your budget for fun things that you enjoy. Just make sure your treats don’t end up breaking your budget!

9. Pay yourself first – I’m sure that one of your budget goals is to save and invest a portion of your income. One of the keys to make sure you succeed at this is to do what the IRS does with your paycheck, take it out of your discretionary income immediately. In this way, the money is saved very easily. Move the money immediately into a savings or mutual fund account. Many mutual fund companies can setup automatic deductions from your paycheck. Despite your best determination to save, the hectic, daily demands of life can reduce the amount you are able to save.

10. Attitude is everything – Mostly when people think of a budget, they picture restrictions and pain. Almost like a diet. You know what happens with most diets? They don’t seem work for long! First, if your budget is too strict, too restrictive on your spending, it won’t work either. However, you will need to limit your expenditure in some areas and this will take some adjustment in your attitude. I feel very limited and sorry for myself when I can’t purchase something that I want, I remember my financial goals I set with my budget. I think about the satisfaction I feel when I achieve those goals. Over time, you find that you don’t want to disappoint yourself by breaking your spending goals on a spur of the moment purchase. Now, I actually get more pleasure knowing that I am moving towards my budget goals when the thought of an impulse purchase crosses my mind.

If you follow these steps, your budget plans are more likely to be a great success. By taking some simple steps you will find that living within a budget is not as tough as you imagined. It can actually be fun and rewarding!

Too much debt is what too many of you know about right? Yes, debt can be painful when it comes to trying to make it financially, in this miserable world that we live in. Making smart choices and being knowledgeable about earning money, saving money, investing money and not getting into too much debt, are important issues of interest that should be noticed much more than they are by many.

Throughout this article I want to talk over with you all some helpful details that could potentially help to prevent you from getting into too much debt early on in your adulthood. Many people who are just coming out of high school or college often make the same error, they run right into too many unusual things that they can not afford to pay for, so they finance or charge it all!

Doing this is what starts this very serious and sometimes unpleasant cycle that is not going to do anything apart from cause you tension and struggle all throughout life. Knowing and understanding just how serious of a problem this can be is very important and finding out this kind of stuff early on in life can really be very helpful and can save you a great deal of heartache later on in life, when you are working on paying off many of your debts that you have collected over the years, for one thing or another.

Debt can destroy any persons life, so no matter how much money you have or do not have, be aware that without even realizing it quickly enough, debt can begin piling up, and start eating you alive. It is not something that many of us ever plan on having to deal with but unfortunately throughout life, some things do tend to happen that are out of control and often times that unlucky incident can cost you a considerable sum of money, money that you or nobody else can ever really afford.

Therefore It is very important for everybody to understand early on in life just how difficult your adulthood can be because of uncontrollably rising debts each month. This is why you should always know the fact that it can indeed happen to you, just as with anyone else that you know and if you are aware of all the risks surrounding you then you should most definitely be more prepared in knowing just what to do when and if that time does ever come for you, at any unexpected moment throughout the duration of your life.

Do not let debt to control you, you control all of your actions and try and be as responsible as ever, whenever it comes to how much and what you decide to spend your income on. Knowledge of your financial standing at all times, along with some good judgment, when it comes to spending those finances, will help to ensure that debt crisis’s will never be a part of your life.

When a borrower cannot repay their loans to the lenders, they face two options. The first is that they can apply for bankruptcy and go that route. If you go this path you have lose your home or business and even your reputation within the community. The second and a better option is to contact the creditors, explain his financial problems and reach an amicable settlement with them about the repayment of his loan. You will both be on common ground in this situation. While the borrower wants to avoid filing for bankruptcy and facing its consequences, the lenders also want to avoid this situation because if the borrower is declared bankrupt they will lose their money. A better option for many people is an Individual Voluntary Arrangement.

As the name states, an IVA is an arrangement that is voluntary between you and your lender. The arrangement is still legally binding and an representative known as an Insolvency Practitioner is still required to take part in the process. An Insolvency Practitioner extracts concessions in form of reduced payments from both parties and helps them arrive at an arrangement for the repayment of loan. The repayment term can be stretched to a maximum of five years.

Keep in mind that IVAs is different from Debt Management Plans or Debt Relief Orders. While the Debt Management Plan is not legally binding upon the parties, IVA is a legally instituted arrangement and is binding upon both the parties.

Individual Voluntary Loans can allow you to get as much as 75% of your debts written off so it is very helpful for many people. You interest charges also become frozen in an IVA. After the repayment is complete the court will submit am interim order. Thereafter the creditors cannot take any legal action against the borrower as long as the order is in effect.

Your Insolvency Practitioner will review the financial circumstances of the borrower while the IVA is going on to ensure that you are succeeding and to provide any guidance that you may need.

Debt Relief Orders (DRO) came into force only just recently in the United Kingdom but they’ve already seen much popularity. This new form of insolvency resolution allows people without any spare earnings or assets to solve their debt problems within one year.

To qualify for a Debt Relief Order an individual must have debts of no more than £15,000 at the time of application. A person cannot have more than £300 in assets is one of the other requiremenets. A lot of residents in England and Wales have been flocking to this new insolvency solution by the droves.

People are very interested in Debt Relief Orders because this solution is giving people with smaller debt problems a chance to get their life back on track. In just a few days of existence, a number of debt management companies have had many calls from people wanting DROs.

There are limitations involved in a DRO, including the debtors not being allowed to take on more than £500 in credit. The debtor is also not allowed to be involved in the management or formation of a company.

It would be possible to apply for a DRO without going to court and the fee is to be £90. The fee may be paid by instalments prior to applying for the Debt Relief Order.

The term of a DRO is characteristically set at 12 months but can be extended if needed. If a debtor comes into money during the term, then they could pay off their debts in an even shorter period of time.

New figures published this month expose that Citizens Advice Bureau has dealt with over 1.4 million new debt problems in 2005/06, an increase of eleven percent on the previous year.

As unemployment numbers rise in the UK, so to will the popularity of Debt Relief Orders.