Before you think of debt consolidation take a stand and try avoiding debt and look at other options that may help you turn your finances around. It’s vital to be aware of alternative actions you can take to avoid financial problems and steer clear of debt consolidation.

Why? Debt consolidation looks tempting but due to the high interest rate, you’ll be paying back a lot more than you think. And all the clauses and stipulations in a debt consolidation loan package are not advantageous to the consumer and you could end up with nothing.

If you’re experiencing financial woes, try avoiding the following debt traps which will ultimately lead you to the downfall of a debt consolidation loan:

• Don’t ignore your most important debts. For reasons that are obvious like utility shut-offs, evictions and repossessions, it’s dangerous to ignore your secured debts and certain types of unsecured debts. When you can’t pay everything, remember what’s important in your life…shelter, warmth, food always comes first.
• Don’t continue to use credit. Regardless of whether you are experiencing a temporary cash shortfall or you’re having more serious and long-term money troubles, avoid using credit until you say goodbye to your financial woes.
• Never make a promise to any creditors that you can’t keep. If you are feeling overwhelmed from a creditor about past-due debt or you feel guilty about being unable to pay what you owe, try and work out favorable payment arrangements, but never say you’ll pay any amount that you know you cannot fulfill. When you don’t pay what was agreed to, the creditor will ultimately begin more aggressive payment options.
• Do not obtain a risky loan. Some finance companies, for-profit credit counseling agencies, and other types of fix-it firms are in the business solely for setting you up with some form of risky loan. They’ll promise and promote loans that sound good on the surface but usually come with very high interest rates and require you to use something as collateral. Often the contract you sign is vague and confusing and you wind up in a debt trap.
• Do not sign up with a disreputable credit counseling agency. Now-a-days you’re able to repair your own credit. It’s easy to become educated and help repair your own situation. Why pay a for-profit or non-profit agency that benefit from you financial problems?

Today’s economy certainly has not made it easy for avoiding debt traps and many are signing up for debt consolidation loans. Many of us panic and are not sure just how to handle a sticky situation.

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A debt consolidation loan will rarely reduce the amount of money you owe. There will be new loans costs added to your balance. Your interest will also go up because you will be taking much longer to pay off the new loan. Consolidation borrowing almost always adds to your debt. In other words, you can’t borrow your way out of debt. In other words, you can’t borrow your way out of debt.

Let’s imagine your current bills total $10,000 and it will take five years to pay off a consolidation loan as a payment of $250 per month. With this loan structure, your new debt, with interest, equals $15,900.

The act of debt consolidation usually results in a somewhat lower monthly payment, but this payment must be made for a much longer period of time. For example, you could also consolidate that same $10,000 debt so that your payments would drop to half the $250 that we previously said. This would make your new payment only $132.50 per month.

Sounds great, doesn’t it?  Think about it, though. The term of the lower monthly payment will now be 12 years instead of five years. So, your true total debt will go up over $19,000.

Consolidation by a bank or finance company usually will not reduce your total cost in terms of time served to pay off your debt. These institutions almost always charge a higher interest rate because your risk of default or bankruptcy has increased since you made the original loans.

Debt consolidation is just another way of enslaving you in further debt. The lender is the one who benefits, not the borrower. Debt consolidation is done for three basic reasons:

1. It discourages bankruptcies
2. It gives the lender a chance to adjust the interest rate upward.
3. The lender has the opportunity to add collateral to the loan.

The only exception to debt consolidation is if you can get the interest on your total bill reduced. The debt would be paid off quicker because more of each payment will be going toward the principal and paying off the balance of your loan.

Again, you cannot borrow your way out of debt; you can only borrow your way deeper into debt.

By: Shannon (Guest writer)

Let’s begin with Guarded Secrets #3 that Debt Collectors try and hide from consumers. The biggest secret that Debt Collectors and Debt Collection Agencies don’t want consumers to find out is many debt collection agencies cannot try and collect any money from you.

Note: Part 1 of this two-part article is published here.

Many of them are doing business illegally. You see ALL debt collectors must be licensed and bonded. You can go to your State Assessments website to check the debt collection agencies license. Remember, having a business license is the first step. They must also be bonded. In lieu of checking via the internet, you can call your state attorney general’s office to check and see if they are licensed.

If you find that the debt collection agency is not licensed simply write them a letter explaining that according to your Attorney General’s office, that company is not listed and you do not support or encourage unlicensed businesses in your state.

Therefore, you are unable to provide any further information until that Debt Collection Agency can show that they are licensed and bonded in your state. Funny right!  Yes, I have sent many letters like this and never heard from the Debt Collection Agency again.

An unlicensed company that is doing business in your state can be sued, and you can inform them of this just to let them know you are educated in your consumer laws.

Guarded Secret #4: Many consumers don’t know anything about Statute of Limitations. This is the time period that any legal action can be initiated. Once the Statute of Limitations runs out your obligation to repay expires.

For example, you get a credit card and don’t pay the balance off and 10 years go by and suddenly you hear from a debt collection agency telling you they are collecting on this past credit card debt. They cannot legally collect because the statute of limitations has passed. Simply explain that the statute of limitations has passed and hang up the phone. No other explanation is necessary because the Debt Collector will know exactly what you’re referring to.

Each state has their Statute of Limitations, so you should check into your specific state information.

These are simple legal strategies that every consumer is afforded. No one is willing to tell us that most of our debt we do not have to pay back. We must educate ourselves and learn how to stay ahead of the curve. If you don’t you could be paying a lot more than you have to.

Don’t forget to check out part 1 of this article if you missed it.

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 Which credit repair course shows you little-known ways to legally remove negative items from your credit file? Find out now at Credit Secrets Review.

Most people know very little about debt collectors and debt collection practices and what is legal and what is not. When you become caught up in a downfall of unpaid bills, harassing phone calls from debt collectors and not knowing what to expect from debt collectors you fall into a category with millions of other consumers.

There is no gimmick; no tricks and no mystery to what debt collectors can do and what they can’t do. While the law is on your side, you really must decipher exactly what the law can do for you and how to enforce your rights. So here are some consumer rules for you to follow when debt collectors began harassing you. These are laymen’s terms for consumers.

• Debt Collectors and Debt Collection Agencies that have been hired on commission to collect on bad debt are considered third party. You do not have to deal with a third party collector. Just tell the debt collector that you do not deal with third party collections and you only deal directly with the original creditor…then hang up. Its that simple.
• Debt Collectors and Debt Collection Agencies can own the debt if the original creditor sells them the debt. Many creditors understand the time and expense it will take to collect on bad debt, so they simply sell it to a debt collection agency. The debt collector begins harassing you to recoup that money. But now, they are the creditor. Even with this in mind, you can dispute the account and tell them to send proof.

**Here is guarded secret #1. When creditors sell an account, it’s usually an old account and they usually (about 90 percent of the time) do not transfer all pertinent paperwork with your file to the new creditor. Or, the new creditor, in haste, misplaces the original documents, thus, now they are unable to prove that you owe the money. In order to prove the account is yours, detailed information is really needed because if you go into court they must prove that this account is 100% yours. This is why you ALWAYS deny, deny, deny and dispute any recollection of that account.

• Debt Collectors will call you and go through the charade of starting legal proceedings if you do not pay that day or that week. They will try and force you to send money via Western Union and they are always willing to negotiate to a lesser amount or a repayment plan over a few weeks. Do not fall for this tactic. Never pay and Never promise to pay any amounts. You always say you do not recollect any account and you need proof.

**Here is guarded secret #2. If you pay on any account, even the smallest minimum, this can re-start your obligation to pay that account all over again. See, the courts see it like this; if the account wasn’t yours you would never send money to pay on it, therefore, you are acknowledging the account by paying money towards the balance. This is why you NEVER, NEVER pay.

These are a few tactics Debt Collectors and Debt Collection Agencies will use to get you to obligate yourself in paying a debt. Once you obligate yourself, it can then be listed on your credit report. When dealing with Debt Collectors and Debt Collection Agencies, never provide any information and never promise to make any payments.

Your goal is to raise your credit score so you can enjoy lower interest loans, lower insurance premiums, a more affordable mortgage, and all the other benefits of good credit.  You have already gotten copies of your credit report, and identified the negative items that are bringing down your credit rating.  You have submitted forms to the credit reporting bureaus, disputing the negative information that they have been distributing in your credit report.  And now, you have just gotten back rejections of your credit disputes.  What should you do next?  That is the focus of this article.

Don’t be surprised that it isn’t easy to erase the bad news from your credit report.  It seems that they make it hard, on purpose.  But with a little perseverance, you can be successful. 

First, check the dispute letters that you had originally submitted.  Were you concise and accurate in stating your case?  The credit bureaus and lenders get a ton of dispute letters every week.  In order to make sure your letter is actually read and understood, keep it short and to the point.  Do not include details that will only confuse the situation. 

Don’t try to impress or scare them by quoting the law.  You may be tempted to include legal wording in your dispute letters, particularly if you feel that they have violated the law.  But a personal letter will be much more effective.  Maybe an exceptional circumstance, like an illness or divorce, forced you to default on your debt - tell them that.

Did you include documentation with your letter?  Always include anything that backs up your case.  Do you have cancelled checks or bank statements that prove you made a disputed payment?  Of course, never send the originals - make copies of all your documentation. 

If your dispute letter was rejected by the credit bureau, be sure to correspond with the lender or organization that reported the negative item to the bureau.  If you’ve ever contested a charge on your charge card, you know how they play this game.  You ask the credit card company to delete a charge you think is wrong.  The credit card company says they will suspend the charge while they investigate.  They check with the merchant who recorded the charge, and - surprise! - the merchant says the charge was valid, and the credit card company re-instates it on your bill.  Thanks for nothing.  Well, you’ll probably get a similar run-around when you contest items on your credit report. Try a different angles in your follow-up letter.  You should try dealing with a different department in the lender organization to see if they are more sympathetic to your cause. 

Persistence will pay off.  If you deal with the credit bureaus and financial institutions in a professional, but firm way, you are more likely to be successful in your dispute.  Remember, that although your dispute is with an organization, a person will be reading your letters.  If you connect with them in a personal way, they are more likely to understand your position.

Courtesy of: The Credit Secrets Bible

Hundreds of readers search for causes of consumer debt and how to deal with it. There’s nothing scientific about consumer debt or how to get out of debt. Many will choose debt counseling to help with their debt elimination; some will try debt consolidation and yet many will just bury their heads and wait. The first step for eliminating your debt is understanding the root causes.

1. Decrease in Income. Many times we’re caught off guard with a job termination, an on-going emergency, reduced work hours or overtime but we keep the same lifestyle. The sooner you learn to adjust to life’s new reality, whether it be temporary or permanent, the sooner you’ll decrease that debt.

2. Poor Financial Management. Unless you have droves of money and no worries, you need a monthly spending plan. Without a plan, you have no idea where your money is going. You may be spending hundreds of dollars unnecessarily. Your spending plan is no more difficult than writing down any of your expenses and income and integrating the two to see where the money is going. How would you know if someone has been stealing your money if you never check?

3. Divorce. Many marriages fail and bring about a financial tragedy. When you decide to divorce, so does all the money; bank accounts; real estate and anything else of value. For many, bank accounts can be frozen meaning no money coming but the bills will still pile up.

4. Saving too little or nothing at all. The easiest way to avoid unnecessary debt is being prepared for unexpected emergencies by saving three to six months of expenses. With a cushion in place, a job layoff or illness will not immediately cause you financial turmoil and increase your debt.

5. Poor Money Communication Skills. It’s extremely important to communicate with your spouse or significant other about finances. Be realistic with immediate family about what you can and cannot accomplish. Discuss financial goals and spending habits. If you’re a saver and believe in preparing for uncertainties but you’re married to a spender who lives for the moment, you will want to create a strategy for both to get what you want. Become knowledgeable about household and each other’s personal expenditures.

The stories can drive even the hardest hearted of us to tears. Families that once lived the American dream have been turned into virtual paupers. The pain, dereliction of abandoned homes, many of them vandalized… it’s all there to be seen. We’re talking about the mortgage meltdown

The American dream is now, for many Americans, the American shame: With no resolution in site. And don’t forget Katrina victims are still clinging on to hope that help might come some day. Read this article about this sad shame.

JACKSONVILLE, Fla. — The house on East 24th Street was the worst of the six that David Law and Trey McCallister worked on the other day here. The front door had been kicked in so many times that the dead bolt was exposed and bent. Trash littered the front and back yards. A copper pipe was gone.

Full story

>????????ou are in serious debt, it would be worthwhile for you to know how to file for bankruptcy and how it will affect your credit. Bankruptcy is something everyone has heard of, and has a vague idea about, but little knowledge about how to go about it or its actual effects.

Before filing for bankruptcy, make sure there are no other options.

Under current United States law, any person filing must receive credit counseling from a person or group approved by the court-appointed bankruptcy trustee to ensure that all other available avenues are reviewed. The law also provides a “means test” to review what capability you may have to repay you debts.

If this legal test concludes it is feasible for you to repay, you may be forced to file under Chapter 13, instead of Chapter 7.

Under Chapter 7, most of your assets are sold to make partial payment on your debts and the rest are written off, with the creditors being prohibited from seek any further repayment. It can stay on a credit report for up to ten years, though seven is typical.

Your attorney must certify that what you say in the documents you use in court, including your income, is true.

This negative impact on your credit can be reduced with some sensible financial practices. Making all bill payments on time can be a large help, as most lenders look to the last year or two as an indicator of creditworthiness.

A secured credit card, which is credit backed by a bank account, can also be a large help in restoring credit after bankruptcy. It may be wise to start the credit restoration process as early as possible.

Not all legal assistance is created equal. You should retain a lawyer who clearly understands how to file for bankruptcy and how it will affect your credit. Just like you would want a specialist physician to perform a major surgery, you should find specialist help that understands the process and ramifications of your decision.

Once assistance is retained, refer all of your creditors to your lawyer. After your case is filed, they may not contact your directly, under threat of financial and legal penalties.

If you are considering filing for bankruptcy, do not use your existing credit lines or seek to expand them, or else the court may exempt that “system gaming” from the bankruptcy write-offs.

After filing a petition with the court, you will be required to hold a creditors meeting and a trustee will review your assets to determine what is eligible to be sold (Chapter 7) and if you are able to work with a payment plan (Chapter 13).

After these steps are finished and the results returned to the court, a decision will be made about what debt should discharged. After that, your creditors have sixty days to challenge the decision regarding any particular account.

Certain debts cannot be written off in a bankruptcy. These include child support, student loans (except in severe circumstances), taxes (federal, state and local), and debts arising from driving under influence (DUI).

Knowing how to file for bankruptcy and how it will affect your credit before deciding to file can save you a lot of trouble and confusion.

Debt Collection is an industry that works for the creditor to recover all the money you owe. They will do anything to recover their money; harassment via daily phone calls, threats to expose your debts and letters, many letters to recover the principal and interest owed.

Sure, there are federal and state laws to help the consumer, but when consumed with guilt and overwhelmed with the financial pitfall we’ve created it’s often easier for us to give in to their threats, not knowing we don’t have to.

And even those obvious laws don’t stop aggressive debt collectors. Don’t expect them to share the rules and regulations with you. But what about the little known tips and tricks that can stop them dead in their tracks?

Did You Know;

1. Debt Collectors cannot legally collect a debt unless they are registered in your state?

2. Debt Collectors must register with monetary regulators in your state before they can collect any debt or contact any consumer.

3. They must position a usury bond before performing any business in that state.

4. Third, the majority of debt collectors are not the owners of the bad debt; they are only working for the original creditor to recover what is owed.

When a debt collector contacts you, there are some specific questions you must ask before responding to them. Keep in mind, a debt collector is calling to (a) talk or threaten you into paying your debt (b) calling to get as much information on you as possible. There are various ways to deal with these scenarios.

1. Ask the debt collector what is the original creditor’s name.

2. Tell the collector point blank, you do not recall incurring any debt with that named company.

3. Most importantly, request proof or validation of the debt. They will have 30 days to send you proof.

4. Do not give out any other information. Debt collectors will ask to verify information. They only want to make sure you live and work at the same place and they are able to keep in contact with you.

Very important: Never acknowledge a debt with a collector. Doing this can restart the statute of limitations, that is, the time limit that a creditor has to sue you for non-payment, as well as the seven year credit-reporting limit.

Another technique you can try, that will only stall the collection cycle is telling the collector, “I don’t deal or discuss any debts with third party agencies and I must contact the original creditor to converse about this.”

And finally, there are many debt collection companies that purchase the debt for pennies and then try and collect on it. Your debt was sold primarily because the original creditor could not successfully collect on it.

But just think about it. If the original creditor could not collect on it, how would a debt collector become a better source to recovering old debt? They can’t; but consumers don’t realize this and by the time it makes its way onto the credit report, consumers give up.

You can stop debt collectors in their tracks, without giving up your hard earned money. The learning process is easy if you’re willing to fight back.

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Download a free special report that reveals hot insider tips and tricks of how to deal to deal with debt collectors and how to restore your credit. Click here for more details.

Most consumers with bad credit are banished from the “A” credit club where everything and anything is available for the asking. Bad creditors are pigeonholed into searching for sub-prime services and relinquished to years of high interest rates.

The majority of creditors search for free credit repair. Regrettably, there are no services that will repair your credit for free so, if you are looking for “free credit repair” you will have to do it yourself.

There are also some reputable, economical credit repair services offered for consumers who don’t have time to learn the credit repair process. However, completing this task yourself has its advantages and most people who learn about the credit game have better chances of not getting into a credit dilemma again.

When you are ready to begin your credit repair journey, you could start by getting a free credit report from all 3 credit bureaus. But there is a drawback to getting a free report: it increases information verification period time for disputed accounts, which can be a huge disadvantage to you.

Equifax, Transunion and Experian, by law must give you a free credit report, once per year, upon request. Repairing your credit means knowing which creditors you owe; what positive and negative tradelines (that is accounts) are listed; and how much debt you owe.

Next, become familiar with the laws and guidelines to follow when repairing your credit. Learn about disputing negative tradelines, the amount of time credit bureaus have to respond to consumers and how to negotiate with creditors.

Lastly, review the credit repair forums. A credit repair forum is a discussion group made up of individuals with common interest. There’s tons of information online – be cautious – there’s lots of misinformation online as well. Remember; always research your questions thoroughly online with different sources.

After hours of research, I’ve realized that credit repair is one of the most misunderstood topics online. Much of the information is misunderstood and repeated to the masses, therefore, convoluting the message. While many try and help, valuable time is wasted and people become financially damaged.

Free credit repair means doing the legwork yourself. Consumers must take the initiative to learn all options of credit repair.