erase credit card debt

There has been a huge increase in recent years in the number of companies that offer credit card debt solutions. This should come as no surprise given the huge increase in the number of people with credit card debt problems. A lot of people with debt problems really don’t know how to solve them and so they turn to these companies. This can be a good idea for some people, but for most it is usually just as effective and far cheaper to do it themselves.

How Debt Management Companies Help

The most common way that debt management agents help you with your credit problem is by negotiating with your creditors to reduce the amount of debt that you have. For doing this they will, of course, charge you a fee. This fee is usually a percentage of the amount that they reduced your debt by. If you have a lot of debt this can be quite expensive. It is entirely possible to negotiate with the credit card companies yourself and save some money.

What you save in money you will probably end up paying in time. It takes time to put together a proposal and negotiate a settlement with your creditors. This is why a lot of people hire a professional, they would rather pay the money then spend the time doing the work. If you really don’t have the time to work out a settlement then you probably should hire a debt management agent.

How to Reduce Your Credit Card Debt

The first thing that you will need to do is work out a plan before you approach your creditors. When you contact them you want to have a proposal already worked out that you can present to them. In order to come up with a proposal you will need to figure out how much you afford each month to pay down your debts. This is going to require you to come up with a realistic budget, one that you can stick to. Once you know this you can contact your creditors and present your proposal. They may accept it as it is or they may want to negotiate with you. Make sure that any agreement you come to is put down in writing and make sure that you keep a copy.

Research How to Reduce Your Credit Card Debt

A lot of people have figured out that they can make money by helping people deal with their credit card debt. In most cases they do provide a good service and can help you to reduce your debt. They will also charge you fair chunk of what they save you as a fee. If you do some research there really is no reason why you can’t do this yourself and save some money.

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If you’re having problems making payment of all your outstanding debt, and are looking for ways to consolidate debt, why not consider consolidating your debt using one of the following common debt consolidation methods:

1. Consolidate Debt – Credit Card

   If you have more than one credit card, chose the credit card that has the lowest annual percent rate and annual fees (look at the APR rate quoted) and then consolidate all of your credit card debt on the one card.  If you consolidate debt onto one credit card, you’ll find it much easy when it comes to time to make your monthly repayment. Compare credit cards here

2. Consolidate Debt – Personal Loan

   If you still have a good enough credit rating to obtain an unsecured personal loan from you local bank, you could find this a useful tool to consolidate debt as, although you still don’t offer any security over the outstanding debt, you’ll likely find that the interest rate is much less than as a consolidate consumer debt – say in the form of store cards or credit cards, which are much more expensive to fund.

3. Consolidate Debt – Home Loan Refinance

   A home loan refinance is where you ask a lender to lend you money in return for you providing the lender with a mortgage.  The proceeds of the loan can then be used to pay off your existing home loan, with the excess used to pay off your outstanding debt.  All of your debt will then be consolidated debt in the form of a home loan refinance.

4. Consolidate Debt – Second Mortgage

   Another way where you can use the equity in property to consolidate debt is by means of a second mortgage.  Unlike a home loan refinance, when you consolidate debt by means of a second mortgage you are not looking to repay your original home mortgage lender but are providing a new lender with a second rank mortgage over the equity in the property.  As with a home loan refinance, choosing to consolidate debt with a second mortgage will, most likely, mean that you have less interest to pay to service your debt as you have provided the lender with security in order to consolidate the debt that was previously unsecured.

5. Consolidate Debt – Equity Lender

   One final, and some would argue risky, means to consolidate debt is to borrow against equity and then use the proceeds to repay your outstanding debt, leaving one larger consolidated debt to be repaid.  Equity loans work by allowing the debtor to borrow against investments; such a mutual trusts, shares, pension fund payments, etc.  Again though, this is often a criticised means to consolidate debt as it offers few additional advantages, beyond immediate rest-bite from your creditors, whilst risking your economic future.  Nonetheless, there are a number of people who would prefer to consolidate their debt in this manner rather to consolidate debt by means of a second mortgage or home loan refinance.

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The world of personal finance can be a real minefield: even if you do you know what you are doing and where you have no immediate money worries.  Imagine, then, what it must be like if you are worrying everyday how you are going to pay your next bill, where the money will come to pay the rent, and what to do if the bailiffs turn up at the door.  If you find that you are in this position, the time for debt counselling may just have arrived.

What Is Debt Counselling?

Basically, debt counselling is where you go and see a financial planner, the financial planner takes a look at your income stream, looks at your liabilities and advises you on the best way to consolidate your debts so that you can make arrangements with your creditors to repay them.  In most cases the debt counselling will include the debt counsellor contacting your creditors on your behalf and acting as your agent to arrange making repayment to your creditors.  Once matters between your debt counsellor and creditors have been arranged, you then make a periodic (usually monthly, but can be weekly) payment to your debt counsellor, who then arranges for that payment to be split amongst your creditors in accordance with the debt repayment plan you and your debt counsellor have made during your debt counselling process.

Debt Counselling Sounds Great!

Yes, debt counselling works for those who have immediate financial concerns and who are very inexperienced in money matters.  However, debt counselling, as advertised on the internet, may not necessarily be the best form of debt counselling you need.  You may find it just as useful to seek debt counselling with your bank manager as with a specialised debt counsellor.  Only, in the case of your bank manager, the fees for conducting the debt counselling may be a lot less than will be applied by the debt counsellor.

So, Debit Counselling Costs?

Again, yes!  Unless you are seeking debt counselling from a charitable organisation, it is extremely likely that debt counselling is going to cost you.  Moreover, in most cases debt counselling will cost as a percentage of your outstanding debt when you first go to see the debt counsellor.  Therefore, if your debt counsellor manages to get a reduction in your debt, for example by getting your creditors to agree to an interest rate reduction, this could mean more money in the debt counsellor’s pocket and less in yours.

Debt Counselling – It’s Not Advisable Then?

Not at all!  In certain cases debt counselling certainly works.  What you need to consider is whether or not you have the capabilities to discuss your current debt problems through with your creditors on your own.  Sometimes this can be overwhelming and your creditors seem unlikely to accept your position.  By seeking debt counselling, your creditors are more inclined to believe that you are trying to remedy your current debt situation – and, so long as you continue to keep making your periodic repayments to your debt counsellor, you need no longer worry about your creditors, who’ll deal directly with the debt counsellor.

On the other hand, if you do have the capabilities to discuss your current debt circumstances through with your creditors, arranging a personal debt counselling session with your creditors directly, then it is likely that you’ll save money in the long run, but with the additional worry of knowing that you’ll have to continue to deal with your creditors throughout the entire period of your debt repayment program.

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Reduce credit card debt

When you are looking at a mounting pie of credit card bills with larger and larger amounts, you might start to think that it is impossible to eliminate the debts you have incurred. However, you will be surprised to know that it can be done with only a little bit of work. Nevertheless, you will have to be determined and do a good amount of planning to get rid of your credit card debt. Determination might be the most important trait that you can have. It is easy enough to be determined because there is so much to gain from getting rid of your credit card debt. You should consider how much easier your life will be if you are debt-free and living a comfortable life. When you realize all of the benefits, your resolve will be that much stronger.

Before anything else, you must plan on how best to eliminate your credit card debt. This is the most crucial part of the entire activity as you will have to be sure to develop a workable plan and stick with it. To have a clearer picture of what you must do, you should determine what exactly you are facing. Make a list of all the credit cards that you currently have and their corresponding APRs. When you add up all of the balances along with the APRs, you will see exactly how much credit card debt you have. Also, check to see if you have been paying any additional fees for being late with your payments and if you have defaulted on any of them.

The next thing that you will have to do is to take a look at your current financial status and then try to determine what your future is like. Take a look at all of the financial offers that you might have received to see if there is anything to be gained from transferring balances. This will help you in figuring out how much time it is going to take you to get out of debt. Also, look at how much you will be able to pay across all of your credit card debt and check to see how much you can probably pay at present. Of course, during this time, you should try and avoid late fees that will add to your credit card debt and make your financial problem more difficult to clean up.

As soon as you have all of these details, you are ready to make your personal financial plan to eliminate your debt. As long as you are organized, it would be easy to develop a plan that you can work on. Remember that you will have to be determined to stick with your plan to eliminate your credit card debt or you’ll just be putting all your efforts to waste.

Once you have succeeded in eliminating your credit card debt, be careful with your future expenses. Develop a new plan to stay debt-free and your future will be set.

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what is an IVA

An IVA – or Individual Voluntary Arrangement – can prove to be an extremely useful way of bringing debt problems under control and heading off what would otherwise seem to be the only other alternative, namely bankruptcy. Despite the growing numbers of people forced down such a route, bankruptcy retains not only a painful stigma but several severe penalties, many of which can affect the bankrupt’s present and future employment prospects. An IVA, therefore, can be a very powerful device for avoiding such a fate.

In simple terms, the IVA is based on a recognition by both the debtor and his or her creditors that the repayment of a significant total of debt has become practicably unfeasible. Instead, the IVA represents the debtor’s commitment to making the best possible settlement of those debts, whilst acknowledging that the entire obligation to repay cannot be met. Through a comprehensive and honest declaration of his or her current and foreseeable circumstances, the debtor aims to convince the creditors that the proposed IVA represents the fullest repayment likely to be achievable. In return, the creditors agree to the repayment terms set out in the IVA and after an agreed period (typically five years) any remaining debt is written off.

In a nutshell, therefore, an IVA can be seen as a bargaining process in which the debtor commits to repaying a proportion of his or her debts, shown to be the most that can realistically be expected, and the creditors for their part agree to this amount being the most they are likely to recover.

If the creditors agree to such an arrangement, it becomes a legally binding contract. Once it has been drawn up, the proposed IVA becomes the basis on which the debtor can apply to the courts for an Interim Order which restrains the creditors from taking any further legal action to recover their debts. Instead, a meeting of all of the creditors is called in order for them formally to accept or reject the terms of the IVA. This requires three-quarters of the creditors, in terms of the value of the total debts owed, to approve the arrangement.

If the IVA is approved, it is the debtor’s responsibility to ensure that the agreed repayment terms are kept. Provided the debtor does so, at the end of the IVA’s term, the debtor is free from all of the debts, whatever amount has actually been repaid.

Given the formal and legally binding nature of an IVA, it must be drawn up and supervised by  a recognised and qualified professional. This might be a solicitor, an account or an insolvency practitioner. The appropriate professional fees will be charged for this service and these fees are typically incorporated into the total of the debts to be recovered under the terms of the IVA. Whilst this adds to the cost of an IVA, the financial penalty in the longer term is still likely to be less than that associated with bankruptcy.

Given its formal nature and the costs associated with setting up and managing an IVA, it is likely to prove a solution to problems arising from more substantial or intractable debts amounting to around £12,000 or more.

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