Consumers who find themselves in a financial bind often turn to debt relief companies to aid them in the recovery process. With professional assistance, cash strapped consumers may find that debt settlement services can provide the help that they need by extinguishing their debt, lowering their credit card interest rates, or coming up with some other plan to help them manage their finances better.

Debt Settlement

Unfortunately, what consumers sometimes discover is that the debt settlement services don’t always explain what they do for the consumer nor do some understand that they can handle the bulk of these tasks themselves.

For example, if the most significant problem you have is the high interest rate on your credit card, you can get it lowered simply by asking. Lucy Lazarony advises, “A five-minute phone call to your credit card issuer could save you hundreds, even thousands, of dollars in interest charges.” (see Bankrate.com: Want a lower credit card rate? Just ask)

Though there isn’t any reason for a credit card provider to lower your interest rate, if you politely make your request known to them you may get the lower rate. If you find resistance from the bank, explain your financial position. Better to lower your interest rate than to have you file for personal bankruptcy which means they’ll lose everything.

Lump Sum

Another way that you may be able to help your cause is by offering your creditor a lump sum to settle your account. Instead of making monthly payments which may last for many years, you can ask your creditors to accept a lump sum in exchange for paying off your obligation and closing your account.

According to Sarah Rubenstein, debt settlement companies “…often charge high up-front fees, and their strategies can drag down clients’ credit scores and even make their debt burden balloon.”

You think you’re paying off your debt, but there is no guarantee that the settlement company is negotiating with your lenders, sending off payments, and settling with your creditors. Worse, your credit may be trashed for many years to come. (see The Wall Street Journal: How to Fix Your Life in 2009)

Nonprofit Help

Some consumers are attracted to the nonprofit status of a debt relief company thinking that this assures them of receiving good service. Harry Weisbaum urges, “Don’t rely on names or the claim of a non-profit status. Check them out with the Better Business Bureau or your local consumer protection office.”

What’s more, you need to learn what fees are charged including set up and monthly maintenance fees for this service. According to Weisbaum, the Consumer Federation of America identifies a $50 set up fee and $25 monthly service charge as being fair. (see MSN Money: Debt relief deals ‘preying on consumer’s trust’)

Do Your Homework

When hiring any debt relief or debt settlement company (these names are often used interchangeably) you need to find out what services are offered, fees charged, and how this company can help you get back on track.

In any case you can do much of the work yourself including following the debt reduction tips offered on our related SayLending.com website. And, download copies of your free credit reports at AnnualCreditReport.com to make sure that all debt obligations are correctly reported.

Deutsche Bank, which is also one of the largest and most respected financial institutions in the world, recently made a prediction that by 2011, nearly half of all US homeowners with a mortgage will be “under water” by then. Under water (or underwater) is a financial term which indicates that a home is worth less than what is owed on the loan. Holders of these types of loans are considered “upside down” and would lose money if they were to sell their homes.

When the real estate market has a significant number of underwater homes, default rates rise. With more defaults, lenders lose money and borrower’s find that their creditworthiness has plummeted. All of this bodes poorly for the economy which is very fragile right now and poised to absorb trillions of more debt should Congress pass its national health plan.

The thinking coming from Deutsche Bank regarding home loans two years hence is that quite a few adjustable rate mortgages (ARMs) will be resetting in 2011, which means that homeowners will be faced with higher mortgage payments. That problem began to surface in 2006 and 2007, when ultra low-rate variable mortgages began to reset, forcing the first wave of what is now millions of homeowners to default on their loans. Faced with the twin problems of higher mortgage payments and a loss of income, homeowners have been losing their homes in droves. Deutsche Bank sees that problem surging once again in 2011.

Steps To Strengthen Your Position

But with any national problem, the issue is certainly individual although the collective collapse of the housing industry could lead to the ruin of our nation. Though 2011 isn’t so far away, homeowners who believe that they will be underwater now should keep some things in mind and take action as appropriate including:

Review Your Mortgage Terms – When will your mortgage rate reset? At what rate do you expect it to rise to at reset date? Use a mortgage calculator to compare your current monthly payment with your anticipated monthly payment to see what your price differential will be. Perhaps in your situation the difference won’t be so great, allowing you to absorb the increase.

Keep Tabs On Your Market – The Deutsche Bank survey makes a broad assertion, but as most everyone knows housing conditions are localized. Even in your regional market, a home in one neighborhood could drop in price more significantly than a home in another neighborhood. As always, location is the key as is home condition, neighborhood attractiveness, local job availability, etc. A strong job market can stabilize the housing market.

Work On Your Bottom Line – If you’ve lost your job or have taken a significant salary cut, then you’re immediate priority is to make money. If you are beginning to fall behind on payments to your lenders, communicate to them that you are working to resolve the problem as soon as possible. If you are working right now, then examine your spending habits to see what can be scaled back. Apply for a lower, fixed rate mortgage if your credit is good. In other words, be proactive – not reactive.

The forecast made by Deutsche Bank is, on the surface, a frightening one. But it doesn’t have to be the fate of every homeowner. Though we can’t impact what happens on a national level on a very personal level you may be able bring about the right kind of change to help improve your situation.

Adv. – Are you considering a loan modification? If so, this mortgage medication website could offer just the prescription you need to improve your financial health.

See Also — 48% Underwater? Lawler Challenges Deutsche Bank Report

Consumer, media and market research firm Mintel recently confirmed what some analysts have been suspecting: America’s love affair with credit cards is on the decline. Instead, consumers are being a lot more careful with their spending, choosing to use a debit card to make many of their purchases. When using a debit card, money is immediately withdrawn from the consumer’s checking account with no payments due later. All the consumer has to do is track withdrawals much as they already do in a checking account ledger to avoid overdrawing their accounts.

Debit Cards Aren’t Always The Best Approach

As with anything, there are draw backs with using a debit card. Some minor, some major. Let’s take a look at what you need to know about using a debit card, particularly if you plan on shifting your purchasing behavior over from credit cards.

Why Using A Debit Card Makes Good Sense – Perhaps the best reason for using a debit card is that you don’t have to carry cash. This is particularly useful if your purchases are being made in the US, though most debit cards are accepted wherever credit cards are used. In most cases all you need is the “Visa” or “MasterCard” imprint on your card to give the merchant the confidence that your card is good. And, thanks to technology, your debit can be immediately confirmed through the same digital device used to make a credit card payment.

Why Using A Debit Card Can Present A Challenge – Most new debit card users find that they must get used to tracking their purchases much in the same way they track deposits and withdrawals from their checking account. This means updating your check registry frequently, something you can do between receiving monthly statements by logging in to your account online.

Why Using A Debit Card Can Be A Bad Idea – If you use a credit card, you have certain protections you may take for granted. For instance, if you have a problem with a merchant such as not receiving services rendered or there is a problem with the item you purchased, most credit card providers offer payment protection at no additional cost. With debit cards you don’t usually have that protection for the simple reason that the bank treats debits just like a check being drawn against your account.

Points Programs May Not Be As Generous

Finally, with a credit card you may be able to obtain other benefits, such as points which can be redeemed for rewards while most debit cards do not offer these programs at least to the same degree. Still, the trend to debit card usage is a good one as consumers take control of their debt and manage their lives carefully with each purchase.

Source: Mintel

Adv. — These days it pays to shop around for a best buy as it is a consumer’s market when it comes to purchasing many of your favorite items. Whether shopping for Rubbermaid storage items, office organizing equipment, kitchen cleaner products, or a sonic scrubber, it pays to comparison shop. Check the supplied links to find value priced products and save!

These are stressful times for many consumers who are finding it difficult to keep up with their bills and manage their debt. For some, the only way out could be personal bankruptcy, an option being considered by as many as one in nine Americans, according to a survey conducted by FindLaw.com.

The number of consumer bankruptcy filings has nearly doubled in the last three years, from 573,000 in 2006 to 1,064,927 in 2008, according to the National Bankruptcy Research Center.  In addition, the FindLaw survey revealed the following about what Americans are doing regarding their own finances:

• Ten percent of Americans say they have considered filing for personal bankruptcy at some point in their lives.

• Two percent of Americans say they have actually filed for personal bankruptcy at some point in their lives.

Do you feel as if you're in a money trap? Well, you're not alone. Lots of people are finding themselves in debt, but you don't have to stay there. Five tips to help you take control of your money and live a fuller, more enjoyable life.

We’re in a recession, we’re not in a recession. Depending on who you listen to and what barometer of measurement they use, we’ve either been in a recession since December 2007 or the country is still on the outside of one looking in. Perhaps we’re somewhere between the two.

Regardless of what the experts say, what it all boils down for the average consumer is where they’re at financially. Some people are employed and expecting bonuses this month, others are holding onto a job and facing a pay cut, salary freeze, or even the threat of losing employment, while still others are unemployed and are now looking for work.

For every consumer, controlling personal finances is the key to monetary health, a way to build up wealth and an important strategy in gaining independence. After all, if you’re in debt then you basically are owned by your creditors. And, forget bankruptcy as a viable option – changes to personal bankruptcy laws a few years back has made that a bad option for most people.

What can you do to get your debt under control? Several things including the following:

Pay off credit cards – Lots of people are carrying around credit card debt and paying big bucks in interest each month. If you are running balances on several cards, try not to add additional debt. Pay off the card with the smallest balance first and then use those funds to attack the next largest balance. Your debt repayment will “snowball” as you knock out one increasingly larger balance at a time.

Renegotiate interest rates – If your credit cards charge high interest rate and you cannot get a new card with a low rate (to transfer balances) consider asking your credit card issuer to lower your rate. Be careful if you ask for a “hardship rate” where your interest will be knocked down to zero in exchange for automatic monthly repayments – some card companies report this information to the credit bureaus which can adversely impact your credit report or score.

Pay down your mortgage – If you have a home equity loan or a mortgage (or both) work toward paying these debts down faster. Housing prices have dropped, a lot of homeowners have negative equity in their homes, and if you should need to sell, you’ll have more profit to show if your overall home debt has been reduced.

Trim spending – Whether laid off or on the receiving end of a salary drop, you’ll need to trim expenses accordingly. Now is the time to shop around for the best deals on insurance, communication, food, etc. in a bid to keep your expenses in line with what you make each month.

Take charge – Banks and other lending institutions are clamoring for consumer dollars, especially ever since credit has tightened. Make sure that you aren’t paying an annual fee for a credit card, that monthly bank fees are reasonable, and certainly don’t agree to pay other charges which are unreasonable. Threaten to take your business elsewhere if the lender won’t budge.

Some analysts are suggesting the current economic climate will last until next summer with others suggesting that early 2010 will be the soonest date when we’ll see some relief. No one can say for certain when the economy will improve, but don’t wait to act: you can take control of your finances today!

Adv. – How about a card you need that fits your financial objectives? Whether you are a savvy consumer or first-time user, there is a credit card that will meet your buying-power needs. Please visit nBuy.com to conduct your smart credit card search.

Photo Credit: Nusrin

Here’s a silly question — do you enjoy being in debt? Well that answer should be obvious: of course not. However, getting out of debt can be a long, drawn out process. It may have taken you just a few months to a year to get into debt, but the solution to your debt problems can take many years to resolve.

Fortunately, you have some options to help you get out of debt, four of which we’ll discuss here. One or more solutions could provide the help you seek, so take care to understand what each choice means:

Home Refinancing. Interest rates are near historic low levels making the refinancing of your mortgage an attractive option, perhaps netting you hundreds of dollars per month via lowered mortgage payments. You can take the monies saved and use those funds to pay off your other debt.

Consumer Counseling. Consumer credit counseling companies want your business. This might be an attractive option for you, but you’ll need to shop around to find the best plan out there. Some credit counseling companies charge outlandish fees, doing work for you that you can do for yourself. As an alternative, some government entities and non-profit organizations offer credit counseling too. A middle ground is to find someone who can provide assistance to you, but at a fixed rate.

Loan Or Debt Consolidation. Those high interest credit cards can sap your wallet, therefore replacing them with one, low interest rate credit card is one way to consolidate debt. If eligible, you may also want to visit your local bank or credit union to see if you qualify for a debt consolidation loan. Be careful: some banks will charge you an application fee, but your credit card issuer will usually not levy this fee.

Cash Out Your Equity. An alternative to home refinancing, you may have enough equity in your home to cash out and pay off all or some of your debt. Importantly, though credit card debt is not tax deductible, a home equity loan is. In most cases, you can reduce your debt as well as reduce your tax obligation by cashing out. Check with your financial adviser to confirm the best option for you.

No Quick Solutions

Reducing your debt won’t happen quickly and involves a lot of work on your part. Once you begin to take control of your finances, you’ll soon be able to measure progress and be one step closer to overcoming your money problems.

By Heather Johnson

They act like magic wands opening doors for you and letting you buy anything you want, but be warned that these seemingly innocent pieces of plastic have the power to tie you down irrevocably with chains of debt. The day you wake up to this fact and decide to get rid of all but one or two of your credit cards, you find yourself with two problems:

• Canceling credit cards can hurt your credit score.
• Once you cancel the cards, no matter what the consequences, you’re left wondering how best to dispose of them so that they are not misused.

The first issue is relatively easy to deal with:

• Cancel the cards that are relatively new and keep the ones that you’ve had for a while. This helps you establish a longer credit history.
• Once you cancel your cards, you will see a dip in your credit score, but with good credit behavior where you pay all your bills on time, do not exceed spending limits and limit your expenditure, your score will rebound to its original status within a few months.

Now that you’ve cancelled your cards, one problem has been taken care of.

The next thing to do is to make sure you don’t lend your cards to misuse by miscreants. Simply throwing them in the trash can is the worst thing you could do, especially in these days when it’s so easy to have your identity stolen. Use your ingenuity in disposing of cancelled credit cards:

• Shred your cards or tear them into small pieces before you throw them out. Spread the pieces into two or three trash bags so that they cannot be put together again.
• Scratch the magnetic strip on the card with a knife or any other sharp object.
• If your card has an embedded smart chip, dip it in water and microwave for a minute to destroy the data on the card.
• If you are still paranoid about your card holding personal information, dip it in a solution of acid, nitric or hydrochloric.

Whatever method you choose, make sure your cards do not end up leaving you penniless even though you no longer use them.

If you’re considering refinancing your home, you’re not alone. Some homeowners are scrambling to beat a pending mortgage reset while others are simply wanting to find a better deal. A third group is even looking to consolidate some debt and are thinking of a new mortgage, an equity loan, or a equity line of credit to wipe out other expenses.

Tempting as it is to make a quick decision about home refinancing, it is always best to do your homework and weigh your options first. That mailing from a national mortgage lender, the email from a local broker, or the pop-up you got when visiting a personal finance site may be enticing, but better deals could be available to you.

Two key components should be considered when evaluating any refinance offer:

• What will your costs be to refinance?

• How much will you save each month by refinancing?

Some homeowners have been shocked to learn just prior to closing that they are responsible for thousands of dollars in closing fees, money that could be best used for reducing their debt.

If you can refinance for free, then the first question doesn’t apply. However, “free” may exclude some charges including title insurance, application fee, and related expenses.

Other things to consider when calculating your costs are:

• How big is your current mortgage? If you can’t handle the higher costs of a mortgage reset, then refinancing is the way to go.

• How long do you plan on staying in your home? If for just a year or two, then refinancing may not make sense. However, if you see yourself living in your home for at least the next five years, then you should recoup the costs related to refinancing.

Keep in mind that rolling your personal debt into a loan could be helpful, but it will add to the cost of your mortgage and add in an additional monthly expense in the form of an equity loan/line of credit payment.

Finally, keep tabs on the current financing trends. If rates are trending downwards, waiting to refinance could save you additional monies, perhaps enough cash to help you tackle your other debts separately.

Are you feeling financially pinched? Are you getting sticker shock every time that you grocery shop? You’re not alone! Higher fuel prices and a flat economy are conspiring together to make many consumers feel ill at ease. Thankfully, there are some steps you can take to manage your finances during these slow times. Let’s take a look at some money saving tips to help you keep more of your money.

Shop Elsewhere — It could be time for you to ditch your favorite grocer or at least take the bulk of your shopping elsewhere. Speaking of bulk, warehouse stores such as BJs and Costco sell just about everything in larger quantities saving you 10-30% on your weekly shopping bill.

Eat Out Less — Mostly everyone enjoys eating out on a regular basis. You don’t have to stop this practice completely, but if you are in the habit of dining out two or more nights per week, then cut back to one night and pocket the savings.

Work From Home, Carpool, or Public Transportation — Will gasoline well above $3 per gallon and the average commute taking a half hour or longer, the hit your pocketbook takes every time you start up your car quickly adds up. You may not be able to convince your boss to allow you to work from home, but you could show her that once a week makes sense. Otherwise, carpool to work or consider public transportation.

Stop The Plastic – Using credit cards can be an expensive habit. Using them and keeping monthly balances will cost you plenty. That 25% discount you got when you bought your new wardrobe at Macy’s disappears if you don’t pay off your credit card balance immediately.

Cut Out The Excess — If you have cable television, do you need HBO or cinema options? Dump what you don’t use and save $10- $15 monthly. For your phone bill, combine your phone, long and local calling, cable, and internet access to one service provider — save $30 to $50 monthly. Cancel whatever magazine or newspaper subscriptions you do not need, buy your lattes from McDonald’s instead of Starbucks, and use coupons when food shopping.

Pay Off Your Debts — Wherever possible, pay off a car loan, a credit card, or other debt to free yourself of a financial burden. Use the savings to stay ahead of rising costs and always shop around before making any major purchase.

Saving money comes simply if you are determined to find ways to curtail your spending. Saving a little bit here and a little bit there will add up, keeping you ahead of the game and removing much stress from your life.

See Also: Debt Reduction Tips

Those ads on cable television seem to be played over and over again: companies offering debt management solutions to help you overcome your financial burden. On the surface, they sound like a godsend, but in reality what you could really be getting may leave a long lasting sting.

Even when the economy is humming along, there are plenty of consumers who find themselves over their heads in debt. Today, with the economy slowing to a crawl, the numbers are mushrooming, providing an ever growing customer base for “credit counselors” to work with.

Typically, when you use one of these companies you’ll sign on with the promise that they’ll get you better interest rates and lower your monthly payments. What you don’t always find out is that your credit rating will be wrecked in the process.

Debt Management And Your Credit

Specifically, if you use most debt management services and then apply for a mortgage, lenders will rate you the same as the consumer who filed for Chapter 13 personal bankruptcy. Why is that? Because in order to extract the better rate from your debtors, they will lower your creditworthiness to the point where your credit standing is, in effect, trash.

So what is the solution to overwhelming debt? Answer: develop your own get-out-of-debt plan. It isn’t easy to do, it takes time, and it is a lot of work, but it’ll do something for you that no debt management company can: preserve your creditworthiness.

For additional tips, please check the resources which follows this article.

Resources

Reduce Credit Card Debt

Reduce Personal Loan Debt

Reduce Mortgage Debt

Reduce Student Loan Debt