Eight Ways to Consolidate Debt

Next to winning the lottery, a debt consolidation loan is a debtor’s dream. With one monthly payment and a fixed monthly payment schedule, you can actually see an end to those monthly payments.

In reality, consolidating bills isn’t always easy. If you have a lot of debt, it can be hard to find a consolidation loan at a lower interest rate. And if you’re not careful, you can end up deeper in debt than when you started.

Your goal in consolidating your debt should be to lower your overall costs. To accomplish this there are two things to keep in mind:

1. Get the lowest interest rate possible

2. Have a plan to pay off your debts in 3 – 5 years.

Here are some of the best ways to consolidate:

Using Credit Cards

The good news about this method is that with a good credit rating, you may get a much lower rate than other forms of consolidation loans. And since credit card issuers don’t require collateral, you aren’t “risking the farm.”

Call your current issuer to ask what interest rates they will offer you if you transfer balances from other cards over to theirs. Go for a fixed rate if you can get it, and ask them to waive any transfer fees. If you can’t negotiate a low rate with your current issuer, try shopping for a new card at a site such as CardRatings.com. But be careful! Too many applications for credit in a short period of time can hurt your credit rating.

Once you do consolidate this way, be sure to set up an optimal payment plan so you can be debt-free in 3 – 5 years.

Home Equity Loans

With a home equity loan, you borrow against the value of you home, minus any other mortgages. The two major kinds are:

1. A Home Equity Loan – a fixed amount of money for a fixed period of time (sometimes at a fixed rate) and

2. A “Home Equity Line of Credit” where you borrow up to a pre-approved credit limit (interest rates usually variable) and can borrow again if you still have money available.

These loans can offer attractive rates, low payments, and the interest is usually tax-deductible if you itemize.

Many issuers offer no or low closing costs for these loans. Interest rates are often variable, however, and there’s always the risk that you can lose your home if you can’t pay.

Cash Out Refinance

Refinancing your home and taking out money to pay off bills (called “cash-out refinance”) is yet another way to tap the equity in your home. If you can refinance at a substantially lower interest rate, you’ll eliminate the high interest costs of the debts you pay off, and you could even come out with a lower payment than you have right now since rates are so low.

One option to consider: an interest-only loan. By lowering your monthly payment, you can free up money to use toward paying down other high-rate debt or building a retirement fund.

Make sure you understand the total cost of refinancing. Take any money you’ve freed up by paying off other bills and use that to create an emergency savings fund.

Traditional Debt Consolidation Loans

A debt consolidation loan is an unsecured personal loan, and the only collateral you are offering for the lender’s security is you. Because lenders consider them risky loans, they’re usually more expensive and not always easy to get if you have a lot of debt.

If the interest rate is too high to make it worth it and the repayment term is ten or fifteen years, you should probably consider another method of consolidation. However, if the term and interest rate are right, this can be a great way to actually save money in the end. (Check Bankrate.com for current averages). Remember, to calculate the total cost of the loan from start to pay-off.

Credit Counseling

Credit counseling agencies may help you get out of debt, though they don’t actually consolidate your debt.

Instead, payment plans (usually with lower interest and fees) will be worked out for all of your eligible debts. You’ll make one monthly payment to the counseling agency, which will pay all your creditors.

Participating in a credit counseling program generally won’t hurt your credit rating, and if you stick to the plan you can be out of debt in three to six years. But be careful which agency you work with. If the counseling agency pays your bills late, you’ll pay the price since you’re still responsible to the lender. It happens.

Debt Settlement

Debt settlement is another option that’s become increasingly popular with consumers who have a lot of debt and can’t, or won’t, file bankruptcy. You stop paying your bills and instead make a regular monthly payment to the settlement company. Your creditors contact them, and not you, about your overdue bills. As your accounts fall further behind, the negotiation company will settle your balances – usually for 50% of the balance or less (including fees) depending on the debt. Most people can be out of debt in less than two years or less using these programs.

It’s not perfect. Your credit rating will be hurt in the short run and you must be certain you’re dealing with a reputable company or the money you pay each month could disappear. Still, for consumers who can’t shoulder the burden of debt they have now, it can be a very good option.

Retirement Loans

If you have a 401(k), 403(b) plan or certain types of pension plans, you can borrow against your nest egg. (You can’t borrow against your IRA.) It’s easy, with no income qualifications or credit check.

The key here is to borrow against your retirement account, rather than withdraw from it early so that you don’t end up paying taxes and a 10% penalty. Also, if you leave or lose your job, you may have to pay your loan back immediately or pay taxes and penalties for an early withdrawal.

These loans typically offer low interest rates, and interest is paid to you, since you are the lender. While tapping your next egg like this can short-change your retirement, so can costly debt payments. If you are in your 20’s and 30’s,you obviously have more time to rebuild a retirement nest egg, but even if you’re in your 40’s or 50’s, you will want to weigh the cost of paying the high interest of the debts over time, versus borrowing from your retirement account. The return you get from paying off high-rate debts is guaranteed – while the stock market isn’t.

Rapid Repayment

There is a mathematically optimal way to pay your debts. Choose a fixed level monthly payment, and commit to it each month. Pay as much as you can on the highest rate debt first, while payment the minimums on the rest.

I almost always suggest consumers with debt start by creating one of these plans. Many people who do so find they don’t even need to consolidate to get out of debt in the next few years. They just need a plan and they can do it on their own.

Overview

The biggest mistakes people make when it comes to consolidation are:

A. Not having a plan for paying the debt off after they’ve consolidated, and

B. Procrastination. Waiting for the “perfect” solution to come along almost always means you’ll end up deeper in debt. Choose your approach, and start getting out of debt today!

When It Comes To Credit Cards - More Choice Doesn't Have To Mean More Confusion

When It Comes To Credit Cards - More Choice Doesn't Have To Mean More Confusion
By Andrew Regan

When it comes to choosing a credit card, your options are numerous. But all too often, an abundant set of choices can cause confusion. Should you choose a low introductory rate or a low standard APR? Is it worth considering a loyalty, reward or point-based credit card? And what are your choices if you've experienced bad credit ratings in the past? Amidst countless facts and figures, there is a way to make sense of all the credit card offers on the market: use a credit card comparison tool and you'll have all your choices conveniently set in front of you.

Credit card comparison tools are commonly found on consumer comparison sites - sites specifically designed to help consumers sort through an abundant set of various market offers. But instead of merely listing all the offers on one comprehensive site, comparison tools help consumers locate offers that cater to their specific needs. For example, if you're new to the credit card market, different offers will apply to you than if your credit is fairly established. Similarly, if you've experienced credit problems - such as arrears, CCJs, defaults or bankruptcy - in the past, you'll be more suited to certain types of credit cards which will help you stay on track with payments. A consumer comparison site will ask you to enter initial credit card requirements, and will then produce matching offers for you to browse through. So no matter what your circumstances are, you're sure to find an offer which suits you.

With the right comparative tool, you can choose a credit card based on the features which are most important to you. For example, you can pick whether you'd rather find credit cards with a low introductory rate or a low standard APR. Similarly, you can restrict your search to credit cards offering a loyalty bonus or cash back reward, or those which are affiliated with charity programmes. You can even apply for your credit card of choice online - making the search and application process even easier.

If you're looking for a quick and simple way to make sense of all the credit card offers on the market, why not utilise a consumer comparison site? You'll be able to enter your initial requirements - regarding anything from rates to rewards - into a search facility, then view the available offers side by side. Whether you need to find a new credit card or transfer a credit card balance, a simple search with a comparative service can help you track the best deals and rates from providers all across the UK.

Andrew Regan is an online, freelance journalist.

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Benefits Of A Debt Consolidation Loan

There are many benefits in choosing a Debt Consolidation Loan, some of which are listed below:

May be able to reduce your monthly payments.

Can take off some of the pressure you may be under from your existing creditors.

You will have only one creditor to deal with.

Lower monthly repayments than unsecured loans

Ability to borrow more money over a longer period of time.

If you find that you are unable to meet your monthly repayments to your creditors, one option is to apply for a debt consolidation loan. The principle behind these is fairly simple - you borrow a large lump sum to repay your creditors and are then left with one creditor and one monthly repayment. This monthly repayment may be lower than the sum you are currently paying, however, you will continue making the repayments for a much longer period.

If your objective is to reduce interest rates and lower your monthly payments, avoid bankruptcy, consolidate your bills and have one monthly payment, or simply get out of debt the fastest way possible, then a debt consolidation loan could provide the answer.

Debt consolidation loans can give you a fresh start, allowing you to consolidate all of your loans into one - giving you one easy to manage payment, and in most cases, at a lower rate of interest.

With a Debt Consolidation Loan you can borrow from £5,000 to £75,000 and up to 125% of your property value in some cases.

A Debt Consolidation Loan is a low cost loan secured on your home. It frees up the spare capital (or equity) in your home to repay your store card and other debts.

There are also disadvantages to a debt consolidation loan such as:

Can pay more over a longer period.

May incur additional costs for setting up the loan.

If secured, your property may be at risk.

You will be left with only one creditor - this can make it difficult to negotiate should you have further problems in repaying your loan.

If the loans you are consolidating have all the interest added at the start you may in effect be paying interest twice. The interest charged for the first loan and the interest charged for the consolidation.

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The Georgia Student Finance Authority

The Georgia Student Finance Authority (GSFA) is a full service lender that provides "One Stop Shopping" for educational loan needs for high school graduates who are planning to attend college. At the Georgia Student Finance Authority we pride ourselves for the streamlined application and origination processes, as well as providing customer service oriented loan servicing. This means that you get your money when you need it. Then, once you begin to repay your loan, the loan servicing representatives will make sure the process is hassle-free.

Everything you need to know about receiving educational loan assistance to go to college is right here, at your fingertips. Educational loans are one resource available to help you fund your college education. Be sure to explore service cancelable loans, scholarships and grant possibilities, as well as seeking an educational loan. The Stafford Loan is available to students who are eligible to borrow under the FFEL Program. The Georgia Student Finance Authority provides a streamlined process for applying for these educational loans. Then, once you enter repayment, the Georgia Student Finance Authority, with a committment to customer service, will assist you regarding your repayment options.

The Authority offers a variety of repayment options. They are:  Standard  Graduated  Income Sensitive We will work with you to determine which option is best for you. Please remember the following points when making a repayment option selection:  The longer the repayment period, the more interest you will pay on your loan(s). You are encouraged to make the largest payments you can afford to keep the total cost of the loan(s) down;  You can repay the entire loan or make larger payments at any time without penalty;  The minimum monthly payment for any FFELP repayment plan is the amount of interest that accrues monthly;  You must select a repayment plan within 45 days of receiving your repayment options packet. If you do not select a plan, your loans will remain on standard repayment.

Standard Repayment:
Every borrower who enters repayment is initially set up on this repayment option. In order to be converted to graduated or income sensitive repayment, you must contact Loan Servicing at (770) 414-3000 or 1-800-776-6878 and request a repayment options selection packet. Standard repayment is encouraged because you pay the least interest with this option. This plan allows for up to ten years to repay the loan(s), with substantially equal payments. The standard, minimum monthly payment is $50. If you do not select another repayment plan option within 45 days of receiving your initial repayment schedule, your loan(s) will remain on standard repayment. Fixed Interest Rate: If your loan(s) carry a fixed interest rate, you will pay the same monthly payment amount during the repayment period. The final payment may be slightly more or less than your regular payment, depending on your repayment history.

Variable Interest Rate: If your loan(s) carry a variable interest rate, you will pay the same monthly payment amount during the repayment period. The changing interest rate will affect the amount of each payment that is applied to the principal balance on your account. You may be granted an extension of up to three years to repay due to the effect of the variable rate on your account. GSFA Servicing also has the option of changing your payment amount with each interest rate change.

Graduated Repayment: Under this plan, you will pay increasingly larger payments during the repayment period. No one payment can be three times larger than the smallest payment. The smallest payment cannot be less than the monthly accrued interest. Otherwise, there is no minimum payment, and the repayment period cannot exceed ten years.

Income-Sensitive Repayment: Under this plan, your monthly payment will be based on your expected monthly gross income and will be re-examined annually. The smallest payment cannot be less than accrued interest, and the repayment term is ten years. If your income sensitive payments are less than the standard principal and interest payments, you may receive extensions of the repayment term for up to five additional years. If you wish to receive the extension, you must provide GSFA Servicing with documentation of your most recent monthly gross income. Income-sensitive repayment may significantly increase or decrease the total financing cost of the loan(s), depending on your principal loan balance and income.

GEORGIA TUITION EQUALIZATION GRANT OBJECTIVE:

1. To promote the private segment of higher education in Georgia by providing non-repayable grant aid to Georgia residents who attend eligible independent colleges and universities in Georgia.

2. To provide non-repayable grant aid to residents of Georgia who live near the State borders to attend certain four-year public colleges out-of-state, so that a four-year public college is equally available to all Georgians.

FUNDING: State Appropriations

ELIGIBILITY:

1. Enrolled as a full-time (12 hours) student at an eligible private college or university in Georgia; OR be a junior or senior enrolled full-time in an eligible four-year public college outside of Georgia, that is within 50 miles of the student's home residence and there is no four-year public college located in Georgia within 50 miles of the student's home residence;

2. Be an undergraduate student in program of study leading to a college degree;

3. Maintaining satisfactory academic progress;

4. Legal resident of Georgia and U.S. Citizen or Permanent Resident Alien;

5. No defaulted student loan or refund due on a state grant or scholarship;

6. Meet Selective Service requirements;

7. Be in compliance with the Georgia Drug-Free Postsecondary Education Act.

APPLICATION PROCEDURES:

1. Complete Georgia Student Grant Application.

2. Complete an affidavit to verify mileage (out of state only).

3. Deadline - date is set by the school.

AWARD: $1,000 per academic year

AMOUNT AWARDED FY 98: $24,935,887

NUMBER AWARDED FY 98: 29,486

To view even more programs offered by the Georgia State Student Finance Commission, you can visit them and apply online at http://www.gsfc.org/

Student Loan Review

Student loans are an unfortunate fact of life for an increasing number of American students. It is not the aim of this page to scare you about student loans but rather, to give you some information so that you can make the choice that is best for you in regards to getting a student loan. Knowledge is power, and the more you know about what you are getting into when you sign those loan papers, the better you will be in the long run.

A survey by the National Council of Higher Education Loan Programs (NCHELP) confirmed that student loans continue to be the largest source of student aid, with approximately $29 billion for the 1995-96 federal fiscal year provided to students to meet their postsecondary educational costs. Private lenders financed over 68 percent of the total, or an estimated $19.8 billion, under the Federal Family Education Loan Program (FFELP - formerly Guaranteed Student Loans), according to the National Council of Higher Education Loan Programs (NCHELP) survey.

The most popular form of financial aid for students is Student Loans. While there are a variety of loan programs available, the largest programs are the Subsidized Federal Stafford Loans and the Unsubsidized Federal Stafford Loans.

Subsidized Federal Stafford loans are Big Business and Big Profit for a huge number of banks and finance corporations in America. While you are attending school, the Federal Government (read: The Taxpayers) pays the interest charges that accumulate on your loan.

If you have a subsidized loan, you do not pay this accumulated interest back. If your loan is unsubsidized, the accumulated interest must be paid during the term of the loan, or it can be "deferred" until you begin making payments.

For both subsidized and unsubsidized loans, most students do not make any payments on the principle OR the interest until six months after they graduate, leave school, or drop to less than half-time. If you attend school for four years and do not begin repayment until six months after you graduate, assuming you received a maximum loan every year, this can be as much as $5,200 that the Government has paid to the bank to cover your interest charges. With a subsidized loan, this is also a SAVINGS of $5,200 of the total interest charge that you would pay.

The average college undergraduate leaves school $10,000 in debt, an increase of 15 percent from last year, says the nation's largest student loan guarantee agency. The Indianapolis-based USA Group attributes the increase to higher college costs, expanded loan eligibility and the growing amount of student aid offered through loans rather than grants. Education Daily - August 14, 1996 by Rebecca S. Weiner

Unsubsidized Federal Stafford loans are also big business, except that YOU are responsible for the interest payments while you are in school. This can greatly increase the overall cost of your loan. While payment on the principle can be deferred until six months after you leave school, you are required to make payments on the interest (usually quarterly) while you are in school. In some cases, you may be permitted to defer all interest payments until you begin making payments on the loan.

Banks may encourage you to take advantage of deferring principle payments, as this increases the overall amount of interest (read: profit) that they make over the lifetime of the loan. Remember... interest will accumulate on the deferred interest! Unsubsidized Federal Stafford Loans also have a higher maximum amount that you may borrow... and ultimately pay back.

...$50.3 billion in total aid from federal, state and institutional sources was available to students in 1995-96, an increase of $3.3 billion over 1994-95. The study notes that most of that increase was in the form of loans rather than grants and that most of the increased borrowing was unsubsidized. Grants now represent 42 percent and loans 57 percent of total federal, state and institutional aid, compared with 10 years ago... College Board study, "Trends in Student Aid: 1986 to 1996

REMEMBER: YOU HAVE TO PAY BACK THE LOAN EVEN IF YOU DO NOT GRADUATE. This seems like a simple enough concept, yet in 1996 the Federal Government lost $2.7 BILLION to student loan defaults. The Government is not "guaranteeing" your ability to finish school. It's just guaranteeing that you will pay back the loan.