(ARA) – Until recently, Ken Goins of Woodland Hills, Calif. was like most Americans — he carried a balance on several credit cards. The weight of the balance became heavier and heavier, and Goins just wanted to end his debt.

The average American has 13 credit obligations on record at a credit bureau, and 36 percent of Americans carry more than $10,000 of non-mortgage debt, according to myfico.com.

Credit card debt is often necessary for large or emergency purchases, but as interest rates climb, carrying the debt long term can become unmanageable and unwise. Goins hit that point a few months ago, when he was making little headway trying to pay off $65,000 in credit card debt at a painful 12 percent interest rate.

The downturn in the economy has been a wake-up call to many debt-heavy consumers like Goins. More than ever before Americans are examining their options for paying off debt faster, or lowering sky-high rates. Typically these options include:

* Continuing with minimum payments.

* Playing the costly balance-transfer game.

* Using outside debt consolidation services.

But now, there’s a better option. Consumers are turning to their social networks for affordable financial relief — and a light at the end of the tunnel. A loan from a relative or friend usually means a lower interest rate (which adds up to significant savings over time) and more flexible terms. Because these kinds of loans have been known to strain even the fondest relationship, it’s a good idea to bring in a third party, like Virgin Money, to help document, service and automate the process.

A social loan managed by a third party is similar to a traditional debt consolidation service. For example, consumers can combine multiple high interest-rate credit cards or other debt into one loan. The big difference is that the borrower and lender agree to their own rates and terms. Credit reporting is even available, enabling the consumer to improve their credit score while paying off their now-affordable social loan.

Goins’ friend wanted to help him out with his debt, and had read about how he could make the loan official with Virgin Money. Here’s what they investigated:

* Continuing with his $700 monthly payments, it would take Goins more than 22 years and $120,000 in interest — paid to the card companies — to get him out of debt.

* When Goins looked to his network, he connected with a good friend and a sibling both willing to help him out. For a few hundred dollars in fees, he was able to arrange a loan with each, formalizing the agreement and automating his repayment.

* All parties agreed to a 7 percent interest rate, higher than the two lenders were receiving on their fixed income investments, and significantly lower than Goins’ credit card rate of 12 percent.

* Goins now makes those same payments of $700 a month, but will be done in 11 years for $28,000 in interest — money paid to those he loves.

With a social loan, Goins’ repayment is not only much cheaper, but also hassle-free thanks to Virgin Money’s e-mail reminders, electronic funds transfers, online accounts, year-end reporting and free credit reporting. “We’re thrilled to help consumers get the best deal possible and empower them to be in charge of their debt. That’s exactly what we’re here for. What better way then to get a friend or family member to invest in you?,” says Asheesh Advani, chief executive officer of Virgin Money on the sharp rise in use of the company’s debt consolidation products in recent months.

Learn more about debt consolidation or refinancing at www.virginmoneyus.com.

Courtesy of ARAcontent

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The concept of consolidating a person’s debt is not new and has been used by many people to help them avoid bankruptcy and face the loss of their home, their car and more importantly their self-esteem. With debt relief consolidation, all of the person’s individual debts are consolidated into one loan and a monthly payment is made on that loan until the debt is resolved.

Some companies, instead of offering loans, will contact lenders and negotiate for lower balances on the owed debt and then accept a payment from the debtor and make small payments to each creditor. In this type of debt relief consolidation, the individual accounts remain open and if the debtor opts out of the plan, in most cases, the balances revert back to their original amounts.

Some Debtors Have Been Taken For A Ride

Some of these companies have met with consumers and promised them all sorts of ways to get them out of debt. Typically, the debt relief consolidation service required an upfront administrative fee to get the ball rolling on their case and with promises of low down payments, people handed over their cash. It was not until their creditors continued to call them and tell them they have not received any money that the consumers became suspicious. Attempting to reach the company they may have found they went out of business and left town with their money.

When looking for a debt relief consolidation company, check with the local Better Business Bureau about any possible complaints against them and also check with the state Attorney General for any known problems. Also, when meeting with someone to discuss debt relief consolidation always make sure the fees and any administrative charges you have to pay are identified and spelled out in the contract. The fees could end up costing more than paying off the debt on your own.

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A lot of people find that the struggles of having too much debt can tear apart personal relationships and the self-esteem of those in trouble financially. Struggling with bills can cause a lot of conflict between married couples and it has actually been documented that money troubles are one of the main reasons for divorce no matter how shocking that may seem. So by seeking the help of a debt consolidation management service, you are not only helping to restore your financial situation, your credit rating, but maybe even the wellness of your family and your own emotional well being.

Where to Look

Looking for a great and legit debt consolidation management service does not have to be a hard task as there are currently so many companies out there advertising their services to those in need. With the increase in financial problems in your average household, these types of companies are coming out of the woodwork and trying to help everyone they possibly can. A debt consolidation management service that is non-profit is generally your best bet but you still have to understand that there are going to be fees involved.

Use television commercials, Internet advertisements, and ads in your local phone book to find a debt consolidation management service near you. And make sure that you call a few different agencies because one debt consolidation management service may understand your needs and be able to help you at a cheaper rate then another debt consolidation management service. Do your research and before you give anyone your money, make sure you research them especially with the Better Business Bureau to make sure that you are not being scammed or taken advantage of in any way. Take your time and soon you can have the experience and advance of highly trained individuals helping you make ends meet.

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What Happens When You Are Down and Completely In the Red?

You are faced with two options – (1) file for bankruptcy or (2) check out the debt consolidation and management solutions.  Let us look at both these options. When you think of filing for bankruptcy you need to keep in mind that this would be on your credit record for a minimum of seven years no matter what you do.  That means that you would not be able to get a decent loan from any bank or financial institution as you would be considered a high risk proposition. It also means that if you do get a loan, you would pay in incredibly high rate of interest – which would further put strain on your finances.

The second option is to check out the debt consolidation and management solutions and see whether that could save you from filing for bankruptcy.

 What Is Debt Consolidation and Management In the First Place?

There are two components in the debt consolidation and management solution. The first one – debt consolidation – is in fact a loan which consolidates all outstanding debts you have into one large debt to the debt consolidating agency. This agency would then enter into negotiations with your lenders and improve the terms and conditions wherever possible. Besides, they will also try to waive the late fees, and other such things thereby saving you a large amount of money overall.

The second part of the term debt consolidation and management pays attention on how the finances would be managed after the debt consolidation. Both these aspects are important and interdependent as one cannot exist without the other. Management is a critical factor if you plan to stay debt free after the debt consolidation is put into action. Without proper management of finances and debt, you would tend to slip back into debt and related problems.

This is why debt consolidation and management is very often a life line for those people who have experienced the paralysis of extreme indebtedness and the helplessness of being forced to file for bankruptcy. 

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Are You Neck Deep in Debt?

Bills over bills, groceries, rent, credit cards, telephone, gasoline, children’s allowance, baby sitters, and oh, so many bills that keep on pilling up. You just get through the second week when you run out of cash. Does this sound familiar? When you are cornered by bills from all possible direction and your purse is thinner than a dry wafer you do not need to be Einstein to know you are in financial trouble. The question is what now?

There are many solutions out there out of which the debt consolidation and debt management for bad credit is a very good one.

What You Get With Debt Consolidation and Debt Management for Bad Credit?

First of all you get a chance to breathe easy; and there are many, many more. You would notice that in debt consolidation and debt management for bad credit you are having two separate services – (1) debt consolidation, and (2) debt management for bad credit.

Debt consolidation is a method whereby you get a loan from special organizations that would cover all your debts. This money would be used to repay all your debts as per their schedule (by the debt management organization) while you pay only one installment according to your capacity to the organization which issued you this loan. In this manner you would be able to repay your debts on time thereby rising your credit score and at the same time freeing you from debt.

The other half of the debt consolidation and debt management for bad credit looks into the management of bad credit. This is done through opening negotiations with the lenders to reconsider the terms and conditions so you could get the best discounts and rates of interest. They would also be able to waive off late fees if any and therefore save a lot of money in the process.

The main thrust of the debt consolidation and debt management for bad credit,
as you can see is to help you get free you from debt and at the same time improve your credit record with timely and regular payment of debts.

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Balance Transfer To A New Card

You may get offers like this in the mail all the time and they really are not a bad offer except for the fact that you are taking on yet another credit card to do this.  This way of unsecured credit card debt consolidation will offer you something like a book of checks that you can write to other credit card companies and consolidate that debt under your new card.  To make it more attractive the new credit card company will usually offer 0% interest on all transferred balances which is a great help.  If you can avoid using that new card then you just did a great thing but if you start using that new card then you just added to your debt while simultaneously reducing it at the same time.  Just be careful with this and use it to do unsecured credit card debt consolidation but then cut up the new card and never use it.

Debt Consolidation With A Finance Company

This is the worst way to do this because inevitably the interest rates for this will be astronomical and probably pushing 25% a year interest.  That is probably more than you were paying on any of the credit card you are paying off and they way they do it is by combining all the principle you owe on cards and then spreading it out over a period of at least 10 years.  A ten year loan at 25% to pay off credit card debt is probably the worse kind of unsecured credit card debt consolidation there is.  You are better off with the credit card consolidation deal mentioned previously than doing this method.

Credit Unions

Avoid banks at all costs because it is banks that keep running up the interest rates on you in the first place.  If you are not part of a credit union then join one and talk to them about unsecured credit card debt consolidation.  The results you get by taking the time to work with a credit union will far surpass anything a bank could ever do for you and will more than likely be a first step to putting you on the path back to where you financially need to be.

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One common suggestion for breaking this vicious circle is to employ debt consolidation. For thousands, this has seemed like the way out, the way back to financial health. But there are pros and cons to debt consolidation, no matter what form it takes. Being aware of those will help you decide if it is the salvation in your particular circumstances.

First, what is ‘debt consolidation’? At base, it’s a simple proposition. Gather all your multiple sources of debt into one debt and make a single payment every month to a single debtor.

But for that to be helpful several things have to take place at once. After all, whether you pay $150 + $50 + $25 to three debtors or $225 to another it’s the same amount. With online bill payment it isn’t even necessary these days to make out three checks. You aren’t even saving on postage stamps!

In order for debt consolidation to be useful one or more of the following has to occur: (1) either the total monthly payment has to decrease , or, (2) the net amount of interest has to decrease, or, (3) the actual total debt has to go down as a result of consolidation. Which, if any, of these take place depends on the specific debt consolidation plan you have planned.

In the ideal case, which rarely happens, all three take place. The most common scenario is that the monthly payment is lowered. This has several advantages to the debt ridden. When the payment is lowered, you have a much higher chance of being able to pay it consistently.

That helps prevent piling more debt (interest and late charges) onto existing debt. You also have a much more relaxed frame of mind, knowing you can meet the monthly debt obligation without sacrificing other needed items.

The risk is that if the payment is too low, some of the psychological factors that led to excessive debt in the first place can rise again. Thinking you have lots to spare can cause you to relax too much too soon. Continual worry is not healthy, commitment and concern are – if your goal is to become debt free.

Unfortunately, many plans lower that payment by extending the life of the loan long enough to cover paying off the entire original amount owed. That leads to more interest paid over the long term. That’s fair to the lender, since you do owe the money. But some will settle for less if they have good reason to believe they will actually get repaid. Try to negotiate a lower settlement, then consistently make the agreed on payments every month.

Losing debt is like losing weight. Consistency, and a commitment to lower it, and keep it lowered, is the key to long-term success.

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Tell the consumer reporting company, in writing; what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report that you dispute, state the facts and explain why you dispute the information, and request that the information be deleted or corrected. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, return receipt requested, so you can document what the consumer reporting company received. Keep copies of your dispute letter and enclosures.

Consumer reporting companies must investigate the items in question — usually within 30 days — unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer-reporting companies so they can correct the information in your file.

When the investigation is complete, the consumer reporting company must give you the written results and a free copy of your report if the dispute results in a change. (This free report does not count as your annual free report under the FACT Act.) If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that the information is, indeed, accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider.

If you request, the consumer reporting company must send notices of any correction to anyone who received your report in the past six months. A corrected copy of your report can be sent to anyone who received a copy during the past two years for employment purposes.

If an investigation doesn’t resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. Expect to pay a fee for this service.

Tell the creditor or other information provider, in writing, that you dispute an item. Be sure to include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider reports the item to a consumer reporting company, it must include a notice of your dispute. And if you are correct – that is, if the information is found to be inaccurate – the information provider may not report it again.

When negative information in your report is accurate, only the passage of time can assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. There is no time limit on reporting information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.

Your credit file may not reflect all your credit accounts. Most national department store and all-purpose bank credit card accounts are included in your file, but not all. Some travel, entertainment, gasoline card companies, local retailers, and credit unions are among those that usually aren’t included.

If you’ve been told that you were denied credit because of an “insufficient credit file” or “no credit file” and you have accounts with creditors that don’t appear in your credit file, ask the consumer reporting companies to add this information to future reports. Although they are not required to do so, many consumer-reporting companies will add verifiable accounts for a fee. However, if these creditors do not generally report to the consumer reporting company, the added items will not be updated in your file.

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There are basically two types of student loans – those made by the federal government and those made through private sources.    The interest from the federal student loans is tax deductible; however, the private sources are not.  Having thousands of dollars looming over your head can be rather stressful, especially when starting your first job right out of college.  You have a credit history to worry about now as well as worry about how those student loans will affect your eligibility with attaining other loans like for an automobile or home. 

In order to save money in the long run, consolidating your student loan debt is the best course of action.  You can combine all your loans into one easy payment, typically at a much lower interest rate than what you are currently holding now.  Be advised that you should not consolidate any federal student loans with the private loans.  The reason for this is because when you consolidate, your interest rate is determined by an average that is weighted. So if one of your loans has a small balance but a higher interest rate than the others, that higher interest rate could affect the outcome of your consolidated rate, usually not for the better.  It is definitely something to keep in mind. 

Everyone has heard of student loan debt consolidation and knows it can be a good thing. However, not everyone knows the reasons WHY consolidation can be advantageous to you.  Therefore, here are a few reasons why you should consider consolidating that student loan debt:

1.  Consolidation takes the pressure off a bit. Some graduating students might have multiple loans that will have to be paid, all with different balances and varying interest rates.  It can be confusing.  By consolidating those loans into one easy payment, you are saving yourself a bit of time as well as money.  Having that one payment versus four of five is definitely less stressful and easy to keep track of.

2.  Build your credit score and history.  By having multiple loans outstanding, your credit score will be lower.  However, if those student loans were consolidated into one loan payment, your credit score will rise.  And by staying on course and paying in a timely manner, you can build a solid credit history.  In fact, after a period of time with no late payments, some lenders will give you a little rate break, sort of as a reward for “good behavior!”

3.  Save money in the long run.  If you have multiple loans outstanding, some will have higher interest rates than others.  You are actually saving money by eliminating those higher rates and consolidating into one new low rate. And since you are a recent college graduate with a new job, chances are you need all the money you can get for living expenses.

When deciding on the student loan consolidation route, be sure and shop around for not only a great rate, but a great lender as well.  There are so many scams these days, so do not fall prey to one of them. You will not only be out of money, but you will also still have all those loans to pay off.  Do your research, especially on those lenders that you have never heard of.  Contact your State Comptroller and see if there are any bad reports on the lender.  Call the Better Business Bureau and see if the lender is a member and if they have any outstanding complaints against them. 

Before signing on the dotted line for a student consolidation loan, it might be a smart move to meet with a financial counselor.  Many times, you can get a free consultation through your bank.  Knowing your options as well as any potential risks can enable you to make a sound fiscal decision for your future. 

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In theory, debt consolidation is a great idea.    A lender pays off all the consumer’s bills and lumps them into one loan.  Instead of sending out twelve different checks to twelve different creditors a single payment is made.  Consumers feel empowered and relieved to have all the debt under one lender, and psychologically there can be a feeling of accomplishment as though the debts have been paid off instead of shuffled around.  The problems arise, however, when the consumer does not change the behavior, which racked up all the bills to begin with.  If the credit card balances are all paid off, but then the credit card accounts are not closed, this can be a recipe for disaster.  This whole situation can result in the person using all the credit cards again, maxing the cards out, and then winding up right back where they started before the consolidation happened.  The only difference is that this time there is the consolidation loan payment to contend with.  This forms a brutal cycle that will likely end with a person simply not being able to afford all the payments.  After all, there are only so many consolidation loans a person can be approved for before creditors start saying no.

Yes, debt consolidation can be a smart move, but only if done correctly.  A consolidation should not be done simply as a means of getting finances in order; that is, if the loan isn’t going to be at a lower interest rate than the existing bills are then it isn’t worth it.  Sure, it is appealing to only have one loan, but at what cost? Ease of payments can be achieved in other ways, like automatic bank withdrawals and online bill paying.  Don’t accept a consolidation loan offer just because it seems easier.  Make sure the interest rate is desirable.  Don’t be lured in by low interest home equity consolidation loans unless this is a last resort; yes, it may seem very appealing to put all your debt under the umbrella of a tax deductible loan, but remember that this is all tied to your home.  If you can’t pay a credit card, annoying creditors will hound you over the phone and through the mail.  If you can’t pay a home equity loan, though, they’re going to come and foreclose on your home.  Think long and hard before accepting a loan of this nature.

After accepting a consolidation loan the next crucial step is to methodically close every single credit line that has been paid off by the loan.  Simply tucking the credit cards away in a lockbox for emergencies rarely works, because the credit cards have a nasty way of weaseling themselves out of the box and back into the wallet.  Close the accounts, shred the cards, and don’t accept the offers the companies will undoubtedly present.  Many companies will offer lower interest rates or higher available balances when a consumer attempts to close an account.  These are merely attempts by the credit card companies to retain customers, and many times they are very effective ploys.  Debt consolidation, however, is certainly not going to work if the paid off credit lines are suddenly resurrected, especially with higher available balances. 

In order for a debt consolidation to be successful a borrower needs to be dedicated and steadfast.  Ridding yourself of high interest credit card debt can be a freeing experience, but the exuberance will be short lived if changes aren’t made with spending habits and the way which bills are paid.  If the eventual desired outcome is to be debt free, and you’re willing to stop acquiring credit and pay everything off with a vengeance, then consolidation can certainly be an answer for getting out of a financial mess.  You may even save some interest payments while you’re at it.

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