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New offers options to American consumers who need an effective debt reduction plan. We have settled over 150 million dollars worth of unsecured, credit card debt while saving clients thousands of dollars. AmeriGuard believes it is important to make an informed decision especially when it affects your financial health. Understanding your options can be overwhelming; that’s why we offer experienced, knowledgeable guidance along the way. provides the information you need to participate in creating a better future..

Tuesday, January 31, 2012

Can Any Debtor Garnish the Bank Account of a Joint Account When One Gets Social Security?

A debtor can garnish a bank account if he has authority from the court allowing the garnishment. Until recently, garnishment took place even when the bank account included Social Security funds, even though benefits are considered safe from garnishment in most cases. A joint account is not exempt from garnishment because the account is owned entirely by both people listed on the account. Special rules now apply if Social Security benefits are deposited in a recipient's bank account.

Garnishment by Creditors

    Section 207 of the Social Security Act prohibits garnishment of Social Security benefits for a debt. Debts, as defined by the act, may include personal loans, credit card accounts, a loan on your car or even your home mortgage. Creditors exploited a loophole in the law to access bank accounts where Social Security funds were deposited to collect past-due debts.

Garnishment Loophole

    Before May 1, 2011, when a bank received a garnishment order, it froze your account and collected fees for freezing the account, along with overdraft debits and other bank-specific charges. Although creditors did not directly garnish a benefit check, this garnishment loophole allowed creditors to garnish benefits if your Social Security check had been deposited in the account.

New Rules for Garnishment

    As of May 1, 2011, the United States Treasury Department enacted a rule that makes it more difficult for creditors to garnish bank accounts that contain Social Security benefit funds. The new rule requires banks to identify protected funds, such as Social Security benefit deposits, and preserve them from garnishment. Banks must now identify deposits made in the previous 60 days and guard the total of two month's Social Security benefits if the funds were deposited in that time frame. Other funds in the account may be attached under the garnishment order.

Considerations

    Social Security benefits may be garnished directly to pay domestic support orders such as alimony and child support. Additionally, the Internal Revenue Service can levy against benefits to repay a delinquent tax bill. Other federal agencies may also garnish your Social Security check for repayment purposes. Specific civil penalties, if levied under the Mandatory Victim Restitution Act, may cause garnishment of your Social Security benefits as well. If the person receiving benefits receives Supplemental Security Income, those funds, provided through the federal government's general fund, may not be levied or garnished for any reason.

Monday, January 30, 2012

How Long Before Collections Start Garnishing Wages?

How Long Before Collections Start Garnishing Wages?

If you have delinquent bills that are behind on payment, a creditor can seek to have your wages attached until the debt is paid. Since federal law controls the process, there is a strict procedure that must be followed. Some states act more quickly than others in moving a garnishment case through the court system. The debtor should also be aware that some government agencies, like the Internal Revenue Service, can garnish your wages or bank account without a court order.

Collection

    A creditor will normally exhaust all other avenues to collect a bill before turning to garnishment. He may pursue months of phone calls and threatening letters before beginning to consider pursuing legal action to force payment. The court process is tedious and often it takes months before the garnishment finally takes effect, therefore it is difficult to say precisely how long before money actually begins being withheld from your paycheck. Ultimately it depends upon how quickly the court acts.

Judgment

    To obtain a court order that requires garnishing of your salary, a creditor must first win a judgment against you. Except in the case of a few government agencies, garnishment cannot occur until approved by the court system. It begins with the creditor filing a lawsuit against the debtor in court. At this point in the process the person who owes money is afforded the opportunity to present his side of the argument. After listening to both sides, the judge renders a decision in the form of a court order.

Court Order

    The time span between the day the order is signed by the judge and received in the mail by the employer, called the garnishee, might be days or it might be a few weeks. Remember that your employer has no choice in the matter. If he receives a court order to garnish your wages, he must comply or risk legal action against himself.

Rights

    While having your wages garnished can be a frustrating and embarrassing experience, keep in mind that you do have rights. Primary among these rights is that no more than a certain amount can be withheld from any one paycheck. Generally, for third-party commercial debt, no more than 25 percent of your check will be taken for debt satisfaction. In some instances, usually regarding child support, a judge may order a larger amount. You should also know that you cannot be fired in retaliation over a single debt that is garnished. However, the employer can let you go if a second garnishment occurs.

What Happens When a Debt Collector Takes an Overcharge Off of an Account?

When a debt collector removes an overcharge from an account, it is generally a good thing as it means you owe less money. However, the removal of the overcharge can have additional consequences, depending on the nature of the overcharge and the manner in which the collector removes it. The overcharge removal might have a positive or negative effect on your credit report depending on how the collector reports it.

Overcharge As Error

    The best scenario for you as a debtor is if a debt collector removes an erroneous overcharge from your account. Typically, a debt collector buys your debt from your original creditor and has little if any knowledge about how you acquired your debt. Mistakes can be made in recording the correct amount of your balance when the debt amount from your original creditor is transferred to the debt collector. If you can document and validate the correct amount of your debt and present it to the debt collector, you may be able to have the overcharge removed without any penalty. The result is that you will owe less money than the debt collector originally reported to you.

Overcharge as Forgiveness

    Debt forgiveness or cancellation is another way that a debt collector can remove an overcharge from your account, but the consequences of this action are less favorable to you as a debtor. According to the IRS, debt that is reduced due to forgiveness or cancellation is taxable income to you as a debtor. This scenario may arise if you negotiate down the amount of debt you owe the debt collector. Any amount by which the debt collector reduces your outstanding balance counts as taxable income to you, including the amount of any canceled overcharge.

Credit Reporting

    One way or another, a debt collector will report the removal of any overcharge to the credit reporting agencies. If the overcharge is simply removed, the resulting drop in your outstanding credit balance may help improve your credit score. If the debt collector instead reports a cancellation of your overcharge, that may count as another negative mark on your credit report. Coupled with the problem of the taxation of forgiven debt, it is in your best interest to get the debt collector to simply remove the overcharge and report it correctly.

Bankruptcy

    If a debt collector will not remove an overcharge from your account for any reason, you can effectively force its removal by filing bankruptcy. Although a drastic step, a successful bankruptcy can discharge your obligation to pay any of your debt, including any overcharges. Bankruptcy will damage your credit but will not require you to pay tax on the amount of the discharged debt.

How to Settle a Charged Off Debt

How to Settle a Charged Off Debt

If you fail to make payments on a debt for six months or more, the creditor will generally charge off, or write off, the debt. A charge-off is an accounting procedure implemented for tax purposes. It means that the creditor views the debt as uncollectible and reports is as a loss. Charged-off debts normally fall off your credit report after seven years. However, if you choose to settle a charged-off debt, it's important to follow the right steps.

Instructions

    1

    Find out who owns the debt. Creditors generally either sell or turn over charged-off accounts to collection agencies. If the original creditor still owns the debt and is willing to negotiate with you, negotiate a settlement. Otherwise, find out from the creditor who is handling the debt and contact the collection agency.

    2

    Make a settlement offer. Determine how much you can afford to pay and offer less. Credit card companies often settle for 50 percent of the balance on the account. The older a debt is, the more that creditors will forgive.

    3

    Inquire whether the creditor or agency is willing to report the debt to the credit bureaus as paid in full. Make sure that the person helping you is authorized to approve a settlement.

    4

    Request a written contract once you agree on a settlement amount. Your creditor may pressure you to pay by electronic withdrawal. You might be told that the offer is only good for 24 hours. Don't give in to the pressure.

    5

    Inform the associate helping you that you have other debts you need to settle and a limited amount of funds. If you don't receive the written contract within a few days, they will need to wait until you come up with additional funds.

    6

    Make a copy of the written agreement.

    7

    Send your settlement check or money order via certified mail. If possible, write on the check that cashing it constitutes acceptance of the amount as payment in full. Save the copy of the agreement. Make and save a copy of the entire check.

    8

    Wait 60 days after sending your settlement check and check your credit report to make sure that it has been updated correctly.

Can I Get a Payday Loan on Unemployment?

Payday loans are high-interest loans that have to be paid back within a relatively short period of time. If a person fails to pay back a payday loan, he will usually face large fees that can quickly total many times the size of the original loan. However, payday loans are relatively easy to obtain. While some companies will not allow people without jobs to take out loans, others offer loans to people with few or no financial resources.

Company Policies

    One of the attractions of payday loans is that, compared to other types of loans, they are usually relatively easy to attain. While lenders making larger loans generally demand documentation that provides evidence of an ability to pay back the loans, payday lenders are often willing to extend credit to people who do not have a current source of income, or who only receive unemployment benefits.

Unemployment Benefits

    Unemployment benefits are a source of income, albeit a temporary one. As of January 2011, a person receiving unemployment benefits could only receive payment for a maximum of 99 weeks, after which she was no longer eligible until after she had be rehired for a period of time. Because payday loans are such short-term loans, some lenders are willing to extend loans to people who will be continuing to receive unemployment benefits in the immediate future.

Pay Stubs

    However, other payday lenders do not consider unemployment benefits to be a valid source of income. Instead, these lenders will demand that a borrower provide a recent pay stub from his job. Theoretically, a borrower who was recently fired from his job and who sought to take out a payday loan immediately after the termination could provide his last pay stub to the lender. So, while the borrower would be meeting the lender's requirements, his only income might be from unemployment benefits.

No Requirements

    In some cases, payday lenders have absolutely no requirements for borrowers. All borrowers have to do is provide either a bank account number or a post-dated check for the amount of the loan plus interest and fees. When the loan comes due, the lender will withdraw the money from the borrower's account. If the borrower does not have enough money in the account to cover the debt, she will face additional fines and, potentially, a lawsuit.

Sunday, January 29, 2012

Can a Collection Agency Add Interest to an Old Cell Phone Bill?

When a person incurs any kind of debt, either through a bill or a loan, he is obligated to pay it according to the terms that he agreed to when he signed the contract leading to the incursion of the debt. In most cases, debts, even debts drawn from cell phone bills, can be sold to outside parties, including collection agencies. These parties may attempt to collect on the debt, but cannot charge the debtor additional interest.

Collection Agency

    Collection agencies often purchase debt from companies that do not wish to pursue collection of the debt themselves. In some cases, companies will also hire debt collectors on commission, paying them a percentage of the money that they collect. Whether a company hires a collection or sells the debt to them, the collection agency is allowed to pursue collection of the debt in the same way as the original creditor was allowed to. He cannot, however, attach any additional charges.

Transfer of Debt

    When a debt is transfered, the person buying the debt is, in essence, taking the place of the original creditor. Just as the original creditor cannot choose to charge the borrower interest or other fees that are not specified in the contract, the buyer cannot decide to charge the borrower any additional money. This is true for any kind of debt, including cell phone bills, which may or may not allow creditors to charge debtor's interest.

Bill Terms

    Some bills will specify that the creditor is allowed to charge the debtor interest. This is particularly true for late payments on a bill. It is not uncommon for cell phone companies to require customers to sign a contract allowing the company to charge late fees for late payments. A collection agency can add interest to an old cell phone bill if the cell phone contract allows the creditor to assess interest on outstanding debt.

Considerations

    Under no circumstances can a creditor add interest, fees or any other kind of additional payment that are not specified in the contract that the borrower originally signed. Doing so is a violation of the Fair Debt Collection Practices Act, a federal law. Creditors who do this can face not just civil penalties, but may be sued for damages by the debtor.

How to Get Rid of Massive Debt

How to Get Rid of Massive Debt

Massive debt can consume your mind and create anxiety. But rather than let debt control your life, take charge of your finances and consider ways to eliminate debt faster and improve your credit score along the way. The amount you owe your creditors has a 30 percent impact on credit scoring, says MyFico.com. Once you control your spending and begin to reduce balances, you'll notice an increase in your personal score.

Instructions

    1

    Increase your monthly payments to reduce the principal faster. A routine of only forwarding your minimum payment doesn't reduce massive debt. If your creditor requires a $20 minimum from you each month, send in higher payments--perhaps $80 or $100 a month.

    2

    Resist the urge to add new monthly charges. It's pointless to make higher payments each month and then continue to use your credit card. Stop the debt cycle by destroying credit cards and only carrying cash in your purse or wallet.

    3

    Reduce spending. Carrying cash in your wallet isn't an excuse to buy unnecessarily. Rather than waste money, buy only what you need and use your extra income to pay down your massive debt load.

    4

    Take cash from your equity. Discuss equity options with your mortgage lender. Refinance your home loan and take cash from the equity to pay down debt, or apply for a home equity loan to help reduce or eliminate your debts.

    5

    Use all income from a part-time job to help get rid of debt. Work a few hours in the evenings or on the weekends to create extra income for debt elimination. Earn an extra $200 a week and you'll increase your monthly earnings by $800. This can pay off an $8,000 debt in 10 months.

Saturday, January 28, 2012

Is it Possible to Obtain a Loan for a Foreclosure Without a Down Payment & Bad Credit?

It is highly unlikely that you will be approved for a mortgage loan with bad credit and no money down. As of March 2011, people seeking to purchase foreclosed homes and other properties generally are expected to pay up to 20 percent down and have credit scores of 620 or higher.

Exceptions

    It is possible to purchase a foreclosed home for less money down and for a credit score less than 620. In 2011 the Federal Home Administration was backing home loans for applicants with credit scores as low as 500 and down payments as low as 3.5 percent. Although FHA offers flexible standards, most lenders take conservative approaches to mortgage approval, mandating significant down payments and satisfactory credit scores.

Considerations

    Requirements for purchasing a foreclosure are the same as qualifying for any other mortgage loan. You must have solid employment, income to support the anticipated mortgage payments and a credit report that shows a good payment history over the past 12 months to 24 months. Your report should be free of unpaid judgments charge-offs and collection accounts. Late payments on real estate loans in the past year will be closely scrutinized and could result in denial.

Rebuilding Credit

    This may not be the right time for you to buy a house if you have bad credit and cannot afford a down payment. Instead, consider renting for two years or three years while making steady on-time payments on all your bills. Work hard to pay down debt while also saving for a down payment.

Workshops

    Nonprofit credit counselors such as those affiliated with Consumer Credit Counseling Service often offer home-buying workshops. Attend a workshop in your area to learn more about credit requirements for purchasing a home and what to expect when applying for a mortgage. Find a credit counselor in your area by seeking a referral from a charity such as the United Way.

Friday, January 27, 2012

How to Erase Bad Credit Reports

How to Erase Bad Credit Reports

Your credit score has become one of the most important numbers that will affect the rest of your life. From buying or renting a home to even getting that job you have always wanted, your credit score can play a huge part in an acceptance or a rejection. Bad items on your credit report can happen quite easily, but getting them erased can be quite a trial. Here are a couple ways to try to erase the bad information on your credit report.

Instructions

How to Erase Bad Credit Reports

    1

    Obtain a free credit report. You are legally entitled to a free credit report from all 3 of the major credit bureaus at least once every year. You also are legally entitled to a credit report if you are denied credit for any reason, or if a company takes an adverse reaction against you. Without knowing what's in your credit report you will not be able to clean it up.

    2

    Dispute anything that doesn't look right. Look over your credit report carefully. Are there any new accounts that you didn't open? Are there any debts that you have paid off that are not shown as paid in full? Companies are notorious for only reporting your credit status with them when you owe them money. They quite often forget to take the time to report to the credit bureaus that you have paid them off. Most of the credit bureaus offer both online and over the phone methods to dispute an item on your credit report.

    3

    Check the statute of limitations. Collectors are given a certain amount of years to report a debt. If they stop reporting to the bureaus and its been past the statute of limitations, you can then ask for the item to be removed from you credit report. The amount of years varies from state to state, but it's usually around seven. A word of caution. Just because the debt is not on your credit report, does not mean that you no longer have to pay it. All it takes is a single phone call from your debt company (or a new collector who may have bought your debt) to the credit bureau and your debt will be back on your report.

    4

    Check the time passed on your debt. After you have paid a debt off the item can still remain on your credit report. This is especially true with judgments and bankruptcies. Sometimes they will still remain on your credit report even after the time is up. Disputing this item usually will cause the credit bureau to remove the item from your report. For judgments and bankruptcies most of the bureaus have the date the action will fall of your credit report listed next to the judgment.

    5

    Set up a payment plan. The tried and true way to fix your bad credit is to pay it off and treat your credit well from that point on. It's pretty easy to settle a debt or at least make a payment plan by calling the company that owns your debt. Most credit reports will at least give a name, if not the phone number as well, to the company that is in charge of your debt. Even after the debt is paid the item can still remain on your credit report for a certain amount of years, but at least it can't come back to bite you once those years have passed.

Laws on Interest After a Charge-Off

A credit card charge-off typically only occurs after a person has demonstrated a sustained unwillingness to make payments. Since a charge-off is an accounting notation, the repayment terms in effect before the charge-off are still valid. Both federal and state laws may apply to the interest payments that accrue after a credit card charge-off.

Charge-Off

    While charge-off may sound as if your creditor has absolved you of responsibility to pay a debt, in reality the charge-off is just a move to benefit the creditor. By writing off the debt as not collectible by declaring it charged-off, the creditor receives a tax benefit. As a debtor, you are still liable for the full amount of the debt. Interest can continue to accrue on a charged-off debt, as long as no laws exist prohibiting such collection. Examples of laws preventing the collection of interest after a charge-off are each state's statue of limitations laws, which stipulate how long a creditor may continue to charge interest and pursue repayment of a debt.

Interest Laws

    The Fair Debt Collection Practices Act governs how debt collectors and other creditors may act towards debtors. The Federal Trade Commission is in charge of the enforcement of the act. Section 808 of the Act prohibits creditors from collecting any debt or interest unless a law or agreement is in effect providing for such collection. Typically, when you open a credit card or take out any other type of loan, you must sign an agreement that includes pages of fine print that outlines the specific terms of the account. Under the law, these types of agreements permit the collection of interest on any unpaid debt, even those charged-off.

Collection Agencies

    Collection agencies often handle the administration of a debt after a charge-off. Whether the collection agency is a separate entity altogether or merely an affiliated company of the original creditor, you are still bound by the terms of the original agreement. If your credit agreement stipulates that interest can continue to accrue indefinitely, the Fair Credit Collection Practices Act, which is the governing law in this situation, stipulates that you will still owe the collection agency additional interest after the original charge-off. Collection agencies may be entitled to add additional collection fees as well.

Resolution

    Generally, interest will continue to accrue on a charged-off debt until some type of final resolution is in place. If you can avoid creditor wage garnishment or account levies until your state's statue of limitations expires, you will then no longer owe either the debt or the accrued interest. A bankruptcy discharge is another way you can stop all interest charges and repayment obligations. Paying off the full amount owed is the most direct way to eliminate the debt and interest.

Wednesday, January 25, 2012

If Your Company's Wages Are Being Garnished, What Can You Do?

When you owe money to a creditor and you work for an employer, the creditor could potentially have your wages garnished before you receive them. With this process, the creditor can continue taking money out of your paycheck until the debt is paid off. If you're faced with a wage garnishment, you have a few options to consider.

Quit Your Job

    When a wage garnishment has been put into effect, it typically continues to take money out of your paycheck until the debt is paid or until you no longer work at your employer. If you want to stop a garnishment, you could consider quitting your job. For example, if you could make money being self-employed, a wage garnishment would have no effect on you because you're no longer getting paid by an employer. In this case, the creditor could use other options to collect the money, but you don't have to worry about the garnishment.

Negotiate

    Another option that you may want to consider is negotiating with your creditor. Talk to the creditor to find out if you can set up a payment plan instead of using wage garnishment. For example, the creditor may be willing to stop the garnishment if you're willing to make regular monthly payments on the debt. Certain creditors may not want to do this because they already have the garnishment and can take money from you without your permission.

File Bankruptcy

    Although it's an extreme option, you may want to also consider filing bankruptcy. When you file for Chapter 7 bankruptcy, you can have all of your outstanding debts discharged; any judgments and garnishments are also wiped out. If you file for Chapter 13, the court sets up a repayment plan for all of your debts. With this option, the garnishment is stopped and all of your payments go through the bankruptcy trustee.

Borrow Money

    Another option that may be able to get you out a wage garnishment is borrowing money to pay off the debt. For instance, you could borrow money through a personal loan and use that money to pay off the debt with your creditor. Then the creditor with the garnishment is paid and you can focus on paying off your new lender. One issue with this strategy is that it may be difficult to get approved for a loan when you have a judgment against you.

How to Qualify to Have Student Loans Forgiven For a Registered Nurse

Though nursing has the potential to be an incredibly rewarding career, the financial cost to become a registered nurse (RN) can be high. Many RNs find themselves with tens of thousands of dollars of student loan debt and do not know how they are going to afford to repay their loans. Many RNs find themselves working in high-paying positions that they do not enjoy because they do not believe that they can afford to work for less because of their student loan debt. Fortunately, there are a variety of ways to have loan debt from Stafford and Perkins student loans forgiven.

Instructions

    1

    Work for a public service organization, such as a low-income clinic, public school or county hospital. Committing to working full time for a public service organization for 10 years qualifies you to apply for the Loan Forgiveness for Public Service Employees Program (see Resources). Participants of this program make payments on student loans for a period of 10 years. Any Perkins and Stafford loan balances that remains after this period are forgiven.

    2

    Agree to work at a critical shortage facility to two years and apply for the Nursing Education Loan Repayment Program (NELRP) (see Resources). Participants in the NELRP are eligible to have up to 60 percent of their Perkins and Stafford student loan balance forgiven in exchange for working two years in a critical shortage facility.

    3

    Volunteer with the Peace Corps (see Resources). Fifteen percent of your Perkins student loan debt can be canceled after volunteering for one year. Another 15 percent of your Perkins student loan debt can be forgiven after a second year of service. Twenty percent of your Perkins student loan debt can be forgiven after completion of your third and fourth years volunteering, totaling 70 percent of your Perkins student loan debt after four years.

How to Update Your Status on ChexSystems

ChexSystems is a consumer-reporting agency governed by the Fair Credit Reporting Act (FCRA). They are not a typical credit reporting agency, rather they handle account verification for financial institutions such as providing past banking history, the length of the opened account, and if the account was ever overdrawn. A person who has a delinquent account on ChexSystems will remain there for up to five years. If the information on your consumer report provided by ChexSystems is incorrect or fraudulent, you have the ability to dispute the report and get an updated status.

Instructions

    1

    Order your consumer report from the ChexSystem website. Read the terms and conditions on the request page and click "agree." Follow the steps provided on the website and fill out the form. Click "submit" once the form has been filled out and wait five business days for the report to be mailed to you. If the consumer report has incorrect information, you can file a dispute and have your status updated.

    2

    Download and print the dispute form titled "Consumer Request For Reinvestigation."

    3

    Fill out the dispute form with your name, address, social security number, drivers license number and the disputed information. You will need the account numbers and consumer ID number from your consumer report.

    4

    Mail the form to ChexSystems, Attn: Consumer Relations at 7805 Hudson Road, Suite 100, Woodbury, MN, 55125. You can also fax it to 602-659-2197.

Can Arrears in Child Support Be Collected From Unemployment?

The American courts treat child support as one of the highest obligations a person can have. Becoming unemployed doesn't change your child support obligations unless you get a new court order. If your loss of work causes you to fall behind on your payments, the state may garnish your unemployment payments to pay the arrears.

Child Support Obligation

    Child support is money you pay to the custodial guardian of your child to help with expenses related to his care. Child support can be paid weekly, bimonthly or monthly, depending on the way you receive your income. Child support isn't taxable and therefore isn't tax deductible. Child support can be a voluntary agreement you make with the custodial parent or a court ordered payment determined by a judge.

Unemployment Benefits

    Unemployment benefits are temporary benefits offered by the state to those who are unemployed through no fault of their own. Each state taxes the companies and organizations that do business within it based on its payroll. The state then uses that money to pay weekly or bimonthly payments to unemployment claimants.

Garnishment for Unemployment

    Unemployment benefits are subject to garnishment in most states for certain debts, including child support. The state labor office deducts a portion of each unemployment payment to pay your back child support. The amount can vary depending on the specific state laws. Some states only allow a small percentage while others will give your entire unemployment check to the garnishment.

Getting a New Order

    If you're unemployed or underemployed, avoid garnishment for child support by petitioning the courts to reevaluate your payments. Most states allow a noncustodial parent to go back to court every few years or when your circumstances change significantly. Losing your job qualifies in most cases. The judge issues a new payment order based on your new circumstances.

Tuesday, January 24, 2012

The Best Bank Loans

The Best Bank Loans

A bank loan is a source of money, tied to financial indexes, that one can tap into if certain qualifying stipulations are met. The most common bank loans available for residential, commercial and business purposes are the fixed, the adjustable rate (ARM), interest only and the jumbo. Depending on your needs as a borrower, one of these loan types will suit you well.

Fixed Rate

    As its name implies, the fixed-rate mortgage carries the same interest rate throughout the life of the loan, be it 15 or 30 years and is used by nearly 75 percent of home-mortgage shoppers in the U.S. Many borrowers feel this is the best loan type because it's predictable and easy to understand. Lenders view fixed-rate loans as more risky because of their higher monthly payment and long lifespan. This causes fixed loans to carry a higher initial interest rate than compared to adjustable-rate mortgages. A fixed-rate loan is ideal for borrowers who intend on keeping a home or building for many years.

Adjustable Rate

    Although this loan type has received a bad rap in recent years because of the number of borrowers defaulting on them, adjustable rate mortgages (ARMs) are a useful tool for savvy borrowers who want a lower monthly payment than a conventional fixed-rate mortgage offers. Typically, ARMs offer interest rates below the market norm in the first few years of the loan. When the rate begins to increase, its amount is tied to the U.S. financial market's prime interest rate. An ARM can increase a loan applicant's buying power because a lower rate facilitates a larger loan amount. It is also a popular tool for those who know they will move or refinance within a few years. Uncertainty is the trade-off for the lower interest rate and flexibility. As the prime index fluctuates so does interest rate. Many lenders offer ARMs because the loans generate revenue in the short-term.

Interest Only

    Ideal for borrowers who do not intend to pay off a mortgage, the "I.O." or interest-only loan works by requiring the borrower to only pay the loan's interest for the first thre, five or 10 years, for example. After that predetermined time frame, a portion of each monthly payment is allocated to pay down the principal. By only paying interest, the borrower reduces the monthly payment but will have to settle for a .250 percent to .375 percent higher interest rate as the bank considers the lack of reduction in the loan's principal as risky. Borrowers who do not intend to hold onto the property for a long time are attracted to I.O.s

Jumbo

    Jumbo loans have a loan amount that exceeds the accepted level as set by governmental mortgage-backing agencies Fannie Mae and Freddie Mac. For example, if you're attempting to purchase a home for $1 million and you need a loan of $850,000, you are automatically considered a jumbo-loan borrower. This loan type is not chosen, it's required for large loans because of the increased risk that comes with larger loans. Jumbo loans have nothing to do with overall home value or with the borrower's qualifying factors such as income or assets -- it simply comes down to the loan amount.

    Specifically, a jumbo or "non-conforming" loan in 2010 was defined as any loan that exceeded $417,000. In some 200 counties across the U.S., that number was increased to $729,750 to better accommodate higher home values in those specific areas.

    Because of the higher loan amount, again perceived by banks as more risky, jumbo 30-year fixed-loan rates are generally .750 percent to 1.250 percent higher than a conventional 30-year fixed loan. With that said, a borrower can expect a jumbo to work just like a regular 30-year fixed. Therefore, it's a safe and predictable loan that carries a slightly higher interest rate than a conventional mortgage.

Monday, January 23, 2012

How to Determine the Family's Size for a Pell Grant

Taking advantage of public sources for educational financial aid can make college a much more affordable reality for a student. To determine need-based award sizes for financial aid such as the Pell grant, the United States Department of Education takes financial information from enrolled students and their families. This financial information is then calculated into a figure known as the expected family contribution. Calculating this figure will help you determine your Pell grant award eligibility.

Instructions

    1

    Complete the Free Application for Federal Student Aid, and file it with the U.S. Department of Education (see Resources). The FAFSA must include financial information for both the student applying for federal aid and his parents, including income, assets, size of the household and the number of family members currently attending college.

    2

    Use the financial information included in your FAFSA application to find out what the expected family contribution will be for the student. Collect the information about assets and income for both the students and parents that appears on the FAFSA. Write them down if you don't want to keep referencing your FAFSA copy.

    3

    Calculate the net household income of the student applying for Pell Grant aid. The Department of Education considers net income to be the total of household income minus taxes and basic living expenses, including food and shelter. Add the total of your shelter bills, whether you pay rent or mortgage, as well as basic living expenses for food, utilities and other living expenses. This net income figure is considered to be part of the basis for the Pell grant's expected family contribution.

    4

    Calculate the expected parental contribution from assets. This is typically the sum of all cash resources and bank accounts as well as the net worth of investments. The Department of Education applies an asset protection allowance that reduces the asset contribution; this allowance can range from about $2,000 to $80,000 or more depending on the parents' age and number of children. The remainder is multiplied by a conversion rate so that only a percentage of available assets are considered part of the family contribution. As of 2011, this conversion rate was 12 percent (0.12).

    5

    Calculate the student's expected contribution through assets. This is basically the same calculation as the parental asset contribution, but the conversion rate is 20 percent (0.2) instead of 12 percent.

    6

    Add together the sum of the net household income, the parental contribution from assets and the student's contribution from assets. This total is considered to be the expected family contribution for a full-year of collegiate education. A low expected family contribution makes a student eligible for the maximum Pell grant award, which is $5,550 per grant as of 2011. (See References 1, section titled "Purpose")

What Is the Name of Student Loans That Don't Have to Be Repaid?

Once you take out a student loan in the U.S. you almost always have to pay it back, even if you declare bankruptcy. Some students even flee the country to avoid debt. You can get the government to forgive some student loans, but you cannot expect all of your debt to be forgiven, especially if you have a loan from a private lender.

Identification

    The U.S. Bankruptcy Code makes it nearly impossible to discharge student loan debt -- federal and private -- in bankruptcy court, because the government does not want people getting a free college education by declaring bankruptcy. You can eliminate student loan debt through bankruptcy if you become incapacitated. Otherwise, you will eventually have to pay it back -- the lender might sue for a levy or lien on your property if you stop payment on your loan. The only type of aid that does not have to be repaid is a grant or scholarship. (ref 2)

Forgiveness Programs

    The federal government offers rebates toward student debt for people serving in programs that benefit the public good. One of the most common programs is AmeriCorps, which sends volunteers to communities around the U.S. and offers up to $4,725 toward federal student debt after 12 months of service in 2011, according to FinAid.org. The Peace Corps, which has volunteer opportunities outside of the U.S., will cancel up 70 percent of student loan debt. The Army National Guard offers up to $10,000 in tuition rebates and military associations might offer additional assistance.

Career

    Some careers are in such need in disparaged areas that the government offers to cancel all of your student loan debt. Teachers willing to serve in underprivileged areas, for instance, might qualify for this if they teach certain subjects or special needs children in a public or nonprofit school. Hospitals and private health care practices might offer student loan repayment as a perk for signing an employment contract.

Tip

    Talk to your college's financial aid office about grants and scholarships they might offer. Also, depending on the cost of college and your family's income, you might automatically qualify for government education grants. The Pell Grant is the largest government college grant program; a student can receive up to $5,500 for the 2010-2011 school year. States might also offer their grants similar to federal programs. Good grades in high school gives you a better chance at a merit-based scholarship. Apply to as many outside scholarships as possible, because it does not hurt to try.

Sunday, January 22, 2012

Do It Yourself: Credit Report Repair

Repairing your credit score as a do-it-yourself project requires financial discipline and accurate information about your credit report. Federal law allows you to obtain your credit report information free of charge. Armed with this information you can begin to formulate a plan to make payments on your existing credit accounts and work to remove any potential errors on your credit report.

Get Your Credit Report

    The Fair Credit Reporting Act allows you to request a copy of your credit report from all three major credit bureaus for free once every 12 months. Reviewing the information in your credit report can help you find errors and determine which accounts need the most attention. If you find an error on your report, federal law requires the credit bureau reporting the error to investigate the notation within 30 days of your written request. If the credit bureau determines the notation was made in error, it must be stricken from your credit report immediately.

Timely Bill Payments

    Credit repair begins with making timely payments to all your debt obligations. If you have delinquent accounts, devote more money to your monthly payments for those accounts to bring the balances current. You can accomplish this by creating a monthly budget to help you visualize your spending habits. A budget also helps you determine how to distribute your finances to meet your credit repair goals. This may require some sacrifices, including fewer nights dining out or fewer trips to the movies, to bring your credit accounts current and begin repairing your credit score.

Low Revolving Balances

    High revolving credit balances significantly impair your ability to secure new credit. Paying your credit card balances down is a key element in repairing your credit score. Target one card at a time by making payments designed to pay the card's balance to zero over a short period of time. Begin with the card with the highest interest rate because it's costing you the most money each month. Once the balance reaches zero, roll the payment over into the card with the next highest interest rate and continue the process until all your cards are paid off.

Smart Use of Credit

    When your cards are paid off, keep the cards open and continue to use the accounts every few months. This keeps your utilization rate high and signals to creditors that you can use credit responsibility. It's important to only use each credit card to purchase what you would otherwise be able to afford with cash. This ensures you can pay the balance off each month and avoid the snowballing balances that landed you in credit trouble in the first place.

Can a Judgment Affect Renting an Apartment?

A civil judgment is typically a last resort for a creditor -- because filing a lawsuit against you for debt is expensive, creditors will usually exhaust all other collection efforts before suing you for debt. However, if you do not make an effort to bring a past-due account current, obtaining a judgment can be an effective strategy for forcing you to pay your debt. A judgment can have several negative effects, including the impairment of your ability to rent an apartment.

Rental Application

    When you apply for an apartment rental, the rental agency or landlord will typically obtain a copy of your credit file as part of the application process. Negative entries on your credit file may cause the landlord or rental agency to deny your rental application. Judgments like bankruptcies and other financially related public records appear on your credit report, and credit bureaus monitor civil court filings for new public-record entries.

Paying Off Judgment

    After you pay off a judgment, the judgment creditor must notify the court that the judgment has been satisfied, typically within 30 days. The court will then update your public records file to reflect payment of the judgment amount. The judgment also will appear on your credit report as paid. Although paying a judgment does not negate the effect on your creditworthiness, a landlord or rental agency may be more willing to rent you an apartment if you have paid the judgment debt.

Length of Effect

    A judgment will stay on your credit report for seven years regardless of whether you pay off the judgment in less than seven years. However, state laws vary regarding the length of time that judgments stay on your public record. A prospective landlord may access public records in addition to obtaining your credit file -- if your state's laws permit a judgment to remain public record for more than seven years, a judgment can continue to affect your ability to rent an apartment even after it has been erased from your credit file.

Avoiding a Judgment

    Because you can do little to mitigate the effect of a civil judgment, avoiding a judgment is the most effective strategy for maximizing your ability to rent an apartment. If you have fallen behind on a debt, contact your creditor and ask about alternative solutions to bring your account current. Your creditor may allow you to temporarily postpone payments or pay your past-due amount over time. Although past-due payments can still affect your credit, they typically have a less severe effect than a judgment.

Saturday, January 21, 2012

Can a Credit Card Sue Again if a Default Judgment Was Denied?

Credit card companies can continue a lawsuit against you after a default judgment is denied or vacated. After the default judgment is vacated a new hearing will be scheduled before a judge; the card company is not required to file suit again. The default judgment was automatically awarded when you failed to appear in court to defend yourself. A judgment is a legal decision requiring you to pay money.

Vacating the Judgment

    Default judgments can be rescinded by filling out a "Notice of Motion to Vacate Judgment" form and explaining why you failed to appear in court. The judge who issued the default judgment will consider your request and either vacate the judgment or allow it to stand. Default judgments are sometimes vacated because the person missing the court hearing was sick, had transportation problems or was not properly served a legal notice about the hearing. The motion to vacate form is available from court clerks and must be submitted to court officials.

New Hearing

    The new hearing restarts the process with you appearing before the judge along with the attorney for the credit card company. You can also hire your own legal counsel. However, there is little a lawyer can do if you owe the credit card company and have refused to pay. There are few successful defenses for credit card debt lawsuits. You could argue that you were the victim of identity theft and that you never opened the account. However, the judge would ask for proof of the fraud, such as police reports. Explaining to the judge that you simply couldn't afford to pay the bill is not considered a suitable defense.

Settlement

    Court should be avoided if you do not have a successful defense. Appearing before the judge will simply lead to another judgment if the card company proves its case. If possible avoid the court hearing by reaching a settlement with the card company. SmartMoney reports that credit card debt can be settled for 20 to 70 percent of the balance, possibly payable in installments. Have your attorney contact the attorney filing suit to strike a deal. Or contact the attorney yourself.

Credit Report

    Once you finish paying the settlement your credit report will be updated to show that the account was "settled for less than the full amount owed." That will hurt your credit score, but is less damaging to your credit than a judgment. Avoiding a judgment also ends the possibility of bank and wage garnishment. Garnishment allows the card company to receive a percentage of your check each payday and also to freely withdraw money from your bank accounts until the judgment is paid.

Friday, January 20, 2012

Consumer Credit Solutions

Using consumer credit wisely helps you qualify for loans and results in a higher credit rating. Sadly, some consumers don't know how to manage their credit and debt responsibly, which often leads to credit issues. Whether you are looking to improve your current rating or maintain a good one, there are solutions to ensure the best credit score possible.

Use Your Credit Cards

    Managing consumer credit well doesn't involve locking your credit cards in a safe and never pulling them out. True, this helps if you have spending problems and are trying to lower debt. But in order to improve a low credit score, you've got to occasionally use credit. Rather than impulsively pay for items with credit, plan out purchases and pay off the balance each month.

Stay Away from Your Credit Limit

    Maxing out your credit cards or keeping your balances close to the limit can pull down your credit rating and place you in a sub-prime category. Keep balances to a minimum and aim for a utilization of no more than 30 percent. For example, if given a $2,000 credit limit, accumulate no more than $600 worth of debt on the credit card.

Minimum Payments

    Asking for a small minimum payment each month is a trap to keep you in debt. Even if your credit card company only requires a small payment each month, voluntarily send in higher payments. This method helps reduce your principal faster, and you'll pay less in interest charges.

Regular Payments

    Consistent, timely payments to your creditors and other lenders help improve your consumer credit rating. And if applying for future loans, a good payment record helps you qualify for financing and get the best interest rates. Open statements upon arrival, make a mental note of due dates and make payments (online or through regular mail) several days before they're due.

Shop for Financing

    Develop a habit of always shopping for finance deals when applying for mortgage loans, auto loans or other installment loans. Interest rates issued by a lender affect your monthly payments, and keeping payments low often calls for finding the best rate on loans. Ask for free quotes from multiple lenders and compare offers.

Inquire about Rejections

    Lenders and creditors reject applications for various reasons. These can include a history of lateness, excessive debts and other credit problems. Ask lenders to explain their reasons for rejecting your application and then order a copy of your personal credit report. Reviewing your history helps you identify areas that need improvement and alerts you to possible fraudulent activity.

Can a Collection Agency Take My Belongings?

If you owe money to creditors and bill collectors have begun calling, you may be worried about what's going to happen next. Debt collectors cannot take your property without a court order; however, they may sue you for the amount of the debt and then garnishee your wages or, in some cases, repossess your property. Even if you are in default, you can still contact creditors to make payment arrangements to stop them from taking more serious collection actions.

Secured Debt

    If a debt is secured by property--for example, an auto loan--the creditor or collection agency can repossess it if you do not make arrangements to repay the debt. In most cases, the collection agency must go to court and get a judgment before it can repossess the property. Depending on state law, the creditor may repossess your vehicle without a court order if you consent to the repossession.

Credit Card Purchases

    Credit card purchases are unsecured debts. When you use a credit card, you are taking out a loan to pay for goods or services. Thus, you owe credit card debt to your credit card company, not to the company you purchased goods from. If you do not pay your credit card bill, your creditor has the right to collect the money it lent you. It does not usually have the right to repossess your goods, as they have already been paid for.

Illegality of Threats

    It is against the law as of 2011 for creditors or collection agencies to issue empty threats to pressure debtors into paying back debts. If a debt collector threatens to take your property, ask for a copy of the court order allowing him to do so. If the debt collector cannot provide a copy or continues making empty threats, report him to the Federal Trade Commission and your state's attorney general for unfair debt collection practices.

Avoiding Repossession

    The best way to avoid having your property repossessed is to pay all secured debts on time or make payment arrangements if you cannot pay your debts. If a collection agency goes to court and gets an order of repossession, you may be able to halt the repossession by paying the balance you owe on the property in full plus the creditor's repossession fees.

How to Keep Collection Agencies From Sending Notices to Credit Bureaus

Many collection agencies make regular reports to the credit-reporting bureaus. When a collection agency reports your account to one of the three major bureaus (Experian, Equifax and TransUnion), evidence of the debt then appears on your credit report. Collection accounts that exceed $100 negatively affect your credit score. In turn, this can damage your ability to obtain new credit. Negotiating with a collection agency early on can help you prevent the account from ever appearing on your credit report and lowering your credit rating.

Instructions

    1

    Contact the collection agency as soon as you receive notice that you owe an outstanding debt. The Fair Debt Collection Practices Act notes that all debt collectors must provide consumers with 30 days to dispute collection accounts. While a collection agency may report the account to the credit bureaus during this period, most do not.

    2

    Negotiate payment with the collection agency contingent on its not reporting the debt to the credit bureaus. If you cannot afford a lump sum payment, you can request a payment plan or debt settlement.

    3

    Ask that the collection agency provide you with a statement, in writing, in which it agrees that it will not report your account provided you submit payment as agreed. This protects you if the company reports your debt in error.

    4

    Make your payment or payments as agreed. Missing even one payment can result in the collection agency reporting your account to the credit bureaus.

How to Negotiate a Debt Settlement With Creditors

How to Negotiate a Debt Settlement With Creditors

Having good credit is always important, regardless of the state of the economy. Good credit is often the key to low financing when you are looking to buy a car or home. However, many have some credit challenges, and some may need to negotiate a debt settlement with a creditor when an account becomes delinquent. To ensure your credit report is not adversely affected, you want to gather some information and correctly approach your creditors. This will give you an opportunity to perhaps negotiate a palatable settlement.

Instructions

    1

    Get a copy of your credit report. This is always a good idea when looking to negotiate your credit card debt because the report will give you an exact picture of your debt and how it affects your credit. You can obtain one free credit report annually from annualcreditreport.com. The key in negotiating debt is to pay the least amount of money and obtain the most positive outcome on your credit report.

    2

    Note the amount of the debt, status, collection activity and how long the account has been open. Having this information will insure the information you need is readily available when you speak to the creditor. Your credit report will also ensure you speak to the right agency, in case your account has been referred to another agency for credit collections or sold to another company.

    3

    Call your creditor and discuss your debt. Creditors are willing to work with clients who initiate dialogue. Generally, collections occur as a result of no contact. Thus, it is always better to be proactive when credit problems occur. Be prepared to explain your current financial situation and reasons for your predicament, whether layoff, injury, family crises or others. Make sure you tell your creditor that it is important to you to clear negative debt items on your credit report. Maintaining a positive credit rating and reducing your debt should be paramount to you.

    4

    Evaluate your options when negotiating debt. You can pay all or some of your debt and negotiate with the creditor the rating you will receive on your credit report. Depending on the age of the account, you may be able to negotiate your debt before any negative items appear. The newer the debt, the more likely you can achieve a positive outcome on your credit score. The older it is, the more likely you can settle your debt for less money.

    5

    Advise the customer support rep that you want to negotiate a settlement to pay off your account. Increasingly, line level employees have some ability to negotiate the terms of your outstanding debt. This is often limited to interest rate reductions, lower minimum payments and/or providing you with an extended grace period. If this meets your credit needs, then you have resolved the issue. If it does not meet your needs, do not be afraid to request a supervisor.

    6

    Stress to the supervisor the importance of negotiating your debt and protecting your good credit report. Assuming your debt is in collections, you will have two options: Pay your negotiated debt in one lump sum or set up a payment plan. Paying a lump sum will give you the best bargaining power in asking for a positive credit reporting. If this is not possible, perhaps spread the payment over 60 to 120 days. For example, if your total debt is $10,000, you may offer to settle for 60 to 65 percent of the balance. You may make a lump sum of $6,000 or perhaps make payments over four months that will total $6,500. The most important thing is to negotiate for what you can reasonably do to settle the debt. You do not want to establish terms beyond your reach.

    7

    Obtain a written agreement for the new terms. You can type up your own agreement and send to the creditor for approval or you can ask the creditor to mail you an agreement. In either case, you will want a signed agreement from the creditor for the new terms. Ultimately, you want a "paid in full" on your credit report. However, you may have to settle for "paid as agreed" or similar. If at all possible, you will want to ensure that all collection activity is removed from your account.

Thursday, January 19, 2012

The Best Options for Credit Card Debts

Several options can help eliminate your credit card debt, but eliminating these debts quickly involves exploring different techniques and choosing the one that's right for you. The consequences of excessive debts include a reduced FICO score and reduced buying power when purchasing a home or car. Understand various tips to eliminate debt, and develop a plan to eradicate your balances.

Controlled Spending

    The ability to control your spending helps you win the battle against debt. Debt on credit cards can accumulate from unnecessary spending. Identifying your needs and wants, and learning how to put your wants aside can help you eliminate debt. The less you spend on credit cards, the quicker you can pay down your balances. Start by removing credit cards from your wallet and only carry cash and debit. Do whatever is necessary to reduce spending with credit, including cutting or shredding credit cards.

Paying Balances

    Do not leave charges on your credit card. Before pulling out your credit card to make a purchase, quickly assess whether you're financially able to pay off the new charge. If you're not completely confident in your ability to pay down a charge, you likely aren't able to afford the item and it's best to wait until you have the available cash. Charges or balances that remain on your credit card for several months will cost you additional money in interest.

Bigger Payments

    Minimum payments reduce the interest charges and principal balance. Unfortunately, these small payments only reduce a small percentage of the principal. If you're ready to put a dent in your balances and eliminate credit card debt, start making payments that are two or three times your minimum. Pay lump sums if you have the available funds. If you have funds in savings, consider using these funds to pay off your cards and then rebuild your personal savings over time.

Interest Rate

    Help your personal debt elimination efforts by asking credit card companies to reduce your interest rate. Companies aren't obligated to grant your request, but if you're a long-term customer, they may offer a permanent or temporary reduction. A lower rate combined with increasing your payments can quickly eliminate your debt.

Consolidation

    When you can't get your card companies to reduce your interest rate, explore debt consolidation options. You can likely get a home equity loan or personal debt consolidation loan at a lower interest rate than your credit cards. If approved, use funds to pay off your credit cards completely, and then make monthly payments to pay off the consolidation loan. Individuals who don't qualify for bank financing can possibly manage their credit card balances and consolidate with a credit or debt counseling company. These companies merge debts into one monthly bill.

Dangerous Beauty

How do I Find the Monthly Interest Rate on a 48 Month Loan?

How do I Find the Monthly Interest Rate on a 48 Month Loan?

There are generally two main loan types: closed-end loans and revolving loans. The most common closed-end loan varieties are mortgages and car loans. The most common revolving loan varieties are credit cards. A 48-month loan is a closed-end account. Some lenders hesitate to publish the monthly interest rates on their loan statements. Some claim privacy, but others simply make it a bit harder for consumers to know how much they are truly paying. Fortunately, finding the interest rate on any loan is simple.

Instructions

    1

    Collect all documents relating to the 48-month loan. This not only means your monthly billing statement (which presumably does not list the rate), but also a bank statement (if you have direct debits) and the original loan paperwork you signed at closing.

    2

    Comb through these documents, especially the original loan contract you signed. This contract must disclose the monthly rate and the type (variable or fixed). You may have lost this document, but if you have it, you will find your rate.

    3

    Log on to your online account, if applicable and/or available. To set up online access, you will need your Social Security number, address, name, date of birth, account number, telephone number and a unique password and user ID.

    4

    Choose the account from the list of accounts (if you have more than one) on the creditor's Web page. The rate may be listed next to your next payment due date, total balance and last payment amount.

    5

    Find the customer service number on one of your account statements if all else fails. You can speak with a customer service representative or an account servicing representative. Once your identity and account information is verified, the representative will tell you your rate.

Conversion from Annual to Monthly

    6

    Find the annual percentage rate on your 48-month loan. Use the steps above to acquire this rate.

    7

    Divide the annual percentage rate (APR) by 100. For example, if your APR is 10 percent, divide 10 by 100. The result is 0.1.

    8

    Divide this result by 12, the number of months in a year. Using the example above, this would look like this: 0.1/12. The result is 0.0083.

    9

    Multiply this result by 100 to convert it back to a percentage. Using the same example, 0.0083 x 100 = 0.83 percent. Your monthly interest rate for 48 months will be 0.83 percent.

How to Clean Your Credit Up Free of Charge

The failure to employ effective debt-management techniques can subtract thousands of dollars from your bottom line each year and even lead to bankruptcy. Beyond current expenses, prospective lenders may refuse to approve your applications for mortgage or consumer debt due to your poor credit history. Cleaning up your credit free of charge is a long-term process that begins with goal setting. From there, you must learn to organize your personal finances and locate sources of cash flow that can be used to make timely debt payments.

Instructions

    1

    Define detailed financial goals, which should include total costs and projected dates. Common financial goals often include retirement spending, tuition funding and a first-time home purchase. Perhaps you will need more than $1 million to provide for a Southern California retirement within 25 years. Financial goals should serve as motivation to get your debt under control and to begin saving money.

    2

    Order a copy of your credit report from Experian, Equifax or TransUnion. For free, you can also order one credit report per year through AnnualCreditReport.com. The credit report documents your history of making payments and categorizes your current debt according to amount and type.

    3

    Rank your current debt according to interest rates. It is important that you pay off the most expensive debt first to save money on interest charges.

    4

    Define good and bad debt. Good debt can be leveraged to build wealth, as it includes school, business and home loans. Good debt often feature low interest payments, which are also tax-deductible. Bad debt, however, is associated with credit cards and loans that charge high interest rates to finance consumer spending. When cleaning up your credit, focus on keeping bad debt to a minimum.

    5

    Contact each individual lender with the intent of negotiating lower interest rates. If a current lender refuses to lower interest-rate charges, you may be able to shop around and refinance old debt. To refinance, you will take out a new loan at a lower interest rate to pay off an old loan. Consider taking advantage of credit card specials, which sometimes offer low interest rates on balance transfers.

    6

    Review your current banking and investment balances. You may be able to use existing bank deposits and sell under performing investments to raise cash to pay off expensive debt. Compare debt-interest rates against expected returns when deciding to spend savings on credit relief. For example, it is more economical to spend cash to pay off a credit card that charges 15 percent interest than it is to take out a 3 percent certificate of deposit.

    7

    Analyze banking statements to calculate monthly cash flow. To do so, you will subtract monthly expenses from monthly income. To increase monthly cash flow, you may be forced to reduce your living standard by limiting your expenses to necessities.

    8

    Spend free monthly cash flow to pay off debt, prioritizing debt payments according to interest rates. Make the minimal payments on low-interest debt so you preserve the most cash to pay down the loan that carries the highest rate.

Wednesday, January 18, 2012

Debt Validation Strategy

As credit use continues to rise, many Americans are finding it difficult to pay their credit card bills. This delinquent payment history may lead to debt collection calls. Many people react to collection calls with compliance and do not realize that they have rights when it comes to challenging the collection of a debt. It is helpful to have a debt collection strategy in place to prevent becoming the victim of credit fraud when a debt collector calls.

Debt Validation

    In September of 1996 the United States Congress passed the Fair Debt Collection Practices Act, also known as the FDCPA. The FDCPA allows any company collecting debt for credit accounts that they have directly created for their customers to use any legal method of collecting that debt. However, a collection agency must provide proof that they either own the debt or are duly appointed representatives of the creditor before you have to pay them anything. A debt collection agency must provide you with the details of the collection by standard mail within five days of making phone contact with you, and you can contest that debt anytime within 30 days of receiving that phone call. This proof of debt is referred to as debt validation. If you do not ask the agency to validate the debt, then you take on the responsibility of paying it according to the terms agreed to by you and the agency.

Validation Paperwork

    The debt collection agency must respond to your validation request within 30 days of receiving it. The agency must send you the original contract that started the debt, the history of all payments up to the present day and either the proof that they own the debt or the contract they signed to become a duly appointed representative of the creditor. If the credit collection agency cannot supply all of this information then, according to the FDCPA, you are not obliged to pay them anything.

Procedure

    Send a letter to the credit collection agency based on the template offered in the resources section below. When you mail the letter, send it certified mail and require a signature for delivery to prove that the agency received it. While you are waiting for a response to your validation request, do some research on the collection company. Contact your state attorney general and see if the agency is licensed to operate in your state. If they are not, then report the agency to the state attorney general for illegally attempting to collect a debt. If you do not receive any paperwork back in regards to your validation letter, then send the collection agency another letter stating that they did not respond to the validation request and you now consider the debt to be invalid. Include a request in the letter to remove the debt as a negative event on your credit report. Be sure to keep copies of all correspondence in a safe place, because if the agency does not remove your debt as a negative credit event on your credit report, then you can sue them to make sure the debt is removed. It is not necessary to send any information to the state attorney general's office during this process.

Does Debt Relief Really Help?

With so many Americans in credit card debt, it's no surprise that debt relief companies are seemingly everywhere. An endless stream of companies advertise services, claiming they can help you with your debt. However, it's hard to know which companies are reputable, and it's even harder to tell if debt relief will do what it advertises.

Types of Debt Relief

    If you're in credit card debt, you have a variety of options available to help. These options come in different lengths and levels of acceptance; they also come in varying levels of success and risk. The main types of debt relief are debt consolidation, debt management and debt settlement.

Debt Consolidation

    Debt consolidation involves taking out a loan, usually a home equity loan or a personal loan, to pay off your credit cards or other debts. This practice is offered by most banks, and the goal is to get a better rate than your credit cards so you can save money. While this sounds like a good idea in theory, it can become much more difficult in reality. Because you're just shifting debt from one type to another, you're not realizing any true reduction in overall debt. Furthermore, since your credit cards will remain open, you're at risk of running your cards back up, which would double your debt load and hurt your credit score.

Debt Management

    Debt management programs aim to give you lower interest rates and get you out of credit card debt within five years. Debt management programs are offered by credit counseling agencies and are often owned by credit card companies, which are willing to offer concessions if it means getting paid. A condition of being on a debt management program is that you cannot use your credit cards and cannot apply for new credit while on the program; another negative is the high percentage of customers who drop out of the program before completion. If you stick with the program, though, debt management is a safe and legitimate way to get out of debt, even if it might take longer than you'd like.

Debt Settlement

    Debt settlement groups have grown in popularity in recent years, largely because they offer an enticing package -- namely, the option to settle your debt for less than what you owe. Doing this can save you money and get you out of debt quickly. However, the price you'll pay is high. Almost all debt settlement programs require you to stop making credit card payments in order to build leverage with your creditors, damaging your credit in the process. Furthermore, missing your payments means constant duress from collectors; it also puts you at risk of lawsuits and wage garnishment.

Tuesday, January 17, 2012

Free Legal Help for Debt Collection

Free Legal Help for Debt Collection

Debt collectors can be extremely persistent in tracking down claims and may be unscrupulous in their tactics and threats. In these situations, legal advice might be necessary, with a wide variety of free legal options available. For this reason, there is no excuse not to get the legal protection necessary.

Free Legal Advice Venues

    A number of ways exist to get free legal help for debt collection. A range of public websites offer information dealing with debt. These sites include Law Guru and the debt collection forum on Free Advice.com. Another resource is the National Foundation for Credit Counseling, or NFCC. On the foundation's website, you can find a number to call a counselor, meet with others in your area facing similar problems or just do research. The advice is on all kinds of debt, including mortgage, credit card debt and education loans.

Debt Collection Avoidance

    Avoiding debt collection is a no-win strategy. In the end, it will definitely affect your credit score and be almost impossible to escape. According to the NFCC, a much better strategy is to deal with your debt head on and try to arrange a settlement or payment plan. While this will still affect your credit rating, it is a much better option than bankruptcy.

Negotiating a Settlement or Consolidation

    If you know it is impossible to pay off your sky-high debt, a number of companies are available to negotiate your settlement for free. Use the NFCC as a resource to find a reputable company that offers this service. Such a company may be able to help you discount 25 to 75 percent of your debt at no cost, depending on your situation. One possible approach is to consolidate your debts, often at a discounted amount; you will make one payment to the organization consolidating your debt. The consolidator may take a small fee but will forward agreed-upon payments to your creditors. While there is a hit to your credit rating for using such services, they are options that you may want to consider.

Court Judgment

    Whether you have a good lawyer or no legal advice at all, in the case of a legal judgment you must comply or face bankruptcy. In those instances, the claimant has the right to garnish wages or use other methods to reclaim its funds. Therefore, it is imperative to avoid a court judgment before it gets to that point. Use the free legal advice available and improve your circumstances.

How to Pay a Bill With No Statement

How to Pay a Bill With No Statement

Bills are a fact of life for every adult and bill paying is a monthly ritual. Most bills are a regular occurrence, coming every month, giving you a sense of rhythm in managing your money. Occasionally, a bill may go astray, either through being lost in the mail or a mistake on the part of the company to which you owe money. Not receiving a paper statement doesn't mean that you don't have to pay the bill, though. Use an alternative method for bill paying to keep your accounts current.

Instructions

    1

    Call the company for which you're missing a statement to find out the total amount of your current bill. Check previous month's statements for a phone number, or look in your local phone book. Ask for a mailing address while you are finding out your bill amount, so that you can mail in a check. Write the check and mail it as soon as you can, as your payment might already be delayed due to waiting for your statement.

    2

    Go to the local office of your missing statement, if there is one. Cellphone companies have set-up offices so that you may pay your bill on site, as well as many city and county utilities. Find out the amount that you owe and pay it there on the spot.

    3

    Look for a website for the company to which you owe money. Cellphone companies, city utilities and even the IRS have sites online with the ability to receive payments in a safe and secure manner.

    4

    Contact your bank, either in person or online, to set up automatic bill pay for your recurring bills. If you have bills that are the same or similar amount every month, such as car payments and payments for your cellphone, arrange to have the same amount transferred from your bank account on the same day every month. Your bill will be paid on time every month, with or without a statement in the mail.

How to Loan Money to a Relative

Loaning money to a relative is a perilous task. While loaning money to a stranger is a relatively straightforward business transaction, a loan to a family member can easily result in blame, lost money and hurt feelings. If a stranger fails to repay a loan on time, you can simply hire a collection agency or take him to court--but that isn't so easy if the relative is your brother or your aunt. When considering a family loan, take a few basic precautions.

Instructions

    1

    Consider your relative's finances. Before agreeing to the loan, consider both what your relative wants the money for, and her current financial situation. If you don't know, ask. This will give you a better idea of the odds of getting repaid. If it doesn't look promising, keep the loan amount low.

    2

    Negotiate terms. If you agree to loan your relative money, you shouldn't consider it inappropriate to negotiate details of the loan, especially for larger sums. While the relative might balk at paying interest or putting down collateral, it's your money--so don't be afraid to call the shots. However, if you do charge interest, don't go much above the prime rate.

    3

    Define a payment plan. The worst thing you can do is leave the repayment timeline indefinite. While you're thinking, "six months," your relative might be thinking, "six years." Hash out a payment schedule that you can both live with.

    4

    Put it in writing. According to Bankrate.com, you can save a lot of trouble, both legally and emotionally, if you put the agreement in writing. If the relative is hurt, blame it on another party. Tell her your financial adviser absolutely insists--or that the IRS might audit you.

    5

    Keep it quiet. After you've agreed to the loan, insist that the relative keep it between the two of you. If he goes blabbing to other family members, this could create all sorts of familial conflicts--or more likely, a whole swarm of relatives knocking at your door.

Monday, January 16, 2012

What Does Consolidate Credit Mean?

What Does Consolidate Credit Mean?

Credit cards or credit accounts can come from a variety of companies and the amounts on all can add up. Some interest rates may be much higher than others, which can lead to paying much more even if you have the same balances on cards. Consolidating credit can help you by bringing your payments together on one lower interest rate account.

About Consolidation

    Consolidation allows you to bring together several accounts or payments under one payment or one account. This means that instead of having a number of payments you will have only one. The idea is that you can reduce the rates, reduce your payoff times and save money compared to what you would pay if you paid out the entire balances of all of the credit accounts.

Self Consolidation Options

    Generally you have a few options to consolidate your credit yourself. You can take out a loan or use home equity to get money to pay off the credit accounts, which would leave you with only the loan payment. You can use a higher balance credit card or open a new credit account to bring together all of your payments on one card. Or you can simply transfer balances from several cards onto one, and in turn eliminate the payments on those other cards.

Other Consolidation Options

    Some business and nonprofits offer debt consolidation services or options. Generally these companies will develop a plan with you to get rid of your credit debt. Some may offer to pay off your debt as a consolidation loan with them that is usually for a longer term and or lower rate than you are currently paying. The Federal Trade Commission says that you should look for hidden fees and costs and be wary of false advertising with debt consolidation companies. Some of these companies also work with your creditors to work out payment plans that can include reducing or eliminating interest or fees as you pay back bills.

When to Consolidate

    According to BankRate.com, people usually use credit consolidation to lower their interest rate or extend their loans. Many companies offer no-interest periods and consolidating your credit debt can eliminate interest for during these periods. BankRate.com notes that if all credit card accounts have the same interest rate, then consolidation will not help you save money.

Saturday, January 14, 2012

Can a Collection Agency Raise Your Debt?

Depending on your original credit account agreement, collection agencies can increase the amount of debt that you owe in several ways. Collection agencies include third-party debt collectors working in conjunction with the original creditor and debt buyers who purchase the debt from the original creditor. Not only can these collection agencies raise your debt, they can have a significant negative impact on your credit score.

Collection Accounts

    Debt collectors and debt buyers can list delinquent credit accounts as collection accounts on your credit report. These collection accounts often appear to have a different balance from the original creditor accounts because the collection agency added accrued fees that raise your debt. Original creditor accounts may also remain on the report and are most often listed as a charge-off. Both types of accounts impact your credit score negatively.

Accrued Fees

    Interest is the most common accrued fee that a collection agency can use to raise your debt. Accrued fees are limited by the specific wording of the original credit agreement. Other common fees include legal fees related to collecting the debt. The term "accrued" means that the fees are added to the balance at specific intervals, such as monthly for interest rates. Each time fees are added, your debt increases. As interest is added to the accrued balance, your debt can blossom over time if left unpaid.

Judgments

    Debt buyers and third-party collection agencies may choose to sue or recommend suing you for the unpaid debt, plus all accrued fees. If they win the lawsuit, they will receive a judgment against you. As part of the judgment decree, the court may add legal and court fees to the debt, effectively raising the debt on behalf of the collection agency. In addition, judgments accrue a specific amount of interest rate each year that the balance remains unpaid.

Timing

    The Fair Credit Reporting Act dictates the length of time during which collection agencies may legally report a debt. Debts may legally appear on your credit report for up to seven years from the last payment date on the original credit account. The seven-year time frame does not limit collection agencies from raising your debt through accrued interest and other authorized fees. Debt collectors can potentially increase unpaid debt indefinitely, but they may only report it for seven years. State statutes of limitations dictate the time frame during which collection agencies may win a judgment lawsuit against a consumer. If a debt is out of statute, past the SOL date, collection agencies can still win a judgment for the debt if the consumer neglects to defend his case.

How to Fight a Consumer Debt Lawsuit

If you've fallen behind on your consumer debt payments, there is a possibility that a creditor may sue to recoup the money they are owed. Whether or not a creditor will sue depends on a number of factors, but if you find yourself facing a creditor lawsuit it's important to know what steps to take to defend yourself.

Instructions

    1

    Read the summons carefully. As the plaintiff, the creditor is required to serve you with notice, which usually comes in the form of a written summons detailing who is suing you and for what amount. You may be required to file a response with the court or enter a defense before the case goes to trial.

    2

    Once you've identified who it is that is suing you, you must request validation of the debt by the creditor. This means that the creditor must provide written proof that you owe the debt in question and they have legal standing to collect on it. Under the Fair Debt Collection Practices Act (FDCPA), you have 30 days from receiving notice of a debt to request this validation. Once you make the request for validation, collection efforts on the debt must cease until the required proof is provided.

    3

    Request verification of the collection agent's license and check to see whether your state requires licensing to collect on debts. If your state requires licensing and the collection agent is unlicensed, they are in violation of state law and cannot bring the suit.

    4

    Check the statute of limitations regarding consumer debt in your state. Each state has different laws regarding the time frame for how long specific types of debts can be collected on after the date of the first missed payment. After this time period has passed, the debt is considered uncollectable. You need to check your credit report to see when the debt was first reported as delinquent and by whom, as some collection agencies will re-age debt in an attempt to work around the statute of limitations.

    5

    Document any harassment on the part of the creditor or collection agent, including any violations of the Fair Debt Collection Practices Act. If you are able to prove that the debt collector has violated your rights in attempting to collect the debt, then you may be able to file a countersuit in your defense.

    6

    You may consider making a settlement offer to the creditor as a show of good faith, but you should only do so if they have been able to provided documented validation of the debt and the statute of limitations has not expired. If you make any such offers and they are rejected by the creditor, keep a written record so that you can demonstrate to the judge that you have attempted to make good on the debt.

    7

    If you have exhausted all other avenues and have no assets to repay the debt, you will need to provide proof of this in court. If you can establish that you are judgment-proof, then even if a judgment is entered against you, creditors will be unable to collect until your financial situation improves.

Allowable Payment for Collection Agencies

Allowable Payment for Collection Agencies

Collection agencies usually have the authority to accept a repayment plan that makes sense based on a consumer's situation. As a result, an allowable payment is determined from the information that you provide the agent.

Misconceptions

    Do not send an arbitrary $5 monthly payment without a verbal or written agreement, as it may not prevent further collection activity on your account.

Prepare Your Budget

    Prior to negotiating a payment plan with the collection agency, calculate your monthly expenses to determine the amount you can pay on your debt. Know your income and expenses well enough to communicate clearly with the agent.

Communicate

    Contact the collection agency by phone to negotiate a payment plan. Explain your situation to the agent and begin your negotiation at a lower amount than you can afford; this will allow the agency to negotiate upward.

Escalate

    If the collection agent refuses your offered payment plan, then escalate your call to management and restate your case. If necessary, escalate your call to the management level at your original creditor for your resolution.

Know Your Rights

    Preview the Fair Debt Collection Practices Act, as it was designed to protect you against unfair practices involved with the collection of debt through a third party.

Friday, January 13, 2012

Can Charge Off Accounts Be Sold?

Creditors employ various collection methods. They contact past-due debtors for payment, but eventually charge-off accounts after six months, says Bankrate. This doesn't mean a creditor forgets a debt. Rather, creditors often sell these accounts to other companies, who then attempt to collect the debt.

What is a Charge-Off?

    Charge-offs indicate that a creditor has stopped collection attempts on a debt. This occurs once creditors exhaust collection attempts and feels that a debtor will not send in a payment. Debtors can communicate with creditors to avoid a charge-off. Charge-offs do affect credit scores and stay on reports for seven years. By charging-off a debt, creditors are able to write off the loss on their yearly tax return.

Collection Agency

    When a creditor sells a charged-off account, they often sell these bad debts to collection agencies. Collection agencies own debts after the purchase. If a debtor decides to satisfy the delinquency, he must contact the agency to make a payment. Creditors stop collection attempts after charging-off the balance. However, collection agencies resume these collection attempts and begin contacting debtors by letter or telephone.

Consequences

    In addition to a damaged credit rating after a creditor reports the charge-off, collection agencies report the collection account to the bureaus. In addition, if a collection agency files a lawsuit to receive payment, a judge could issue a judgment against the debtor. This information also appears on the debtor's credit report, causing further damage to his rating. A debtor may resolve not to pay the debt. However, his action can prompt further activity from the collection agency and the agency can perhaps garnishee his wages or seize his bank account.

Considerations

    Collection agencies and creditors do not delete charge-offs if you decide to pay the debt at a later date. In spite of that, paying off an old charge-off can help improve your credit history. Leaving an unpaid charge-off or collection account on your credit history can stop mortgage loan approvals and other financing opportunities (credit cards and auto loans). On the other hand, if you rectify a charge-off by paying the debt, the collection agency can change your current unpaid status to "paid."

How to Pay Down a Credit Card Balance With No Interest

How to Pay Down a Credit Card Balance With No Interest

Many credit cards offer 0 percent introductory interest rates on new purchases and balance transfers. These cards are a great deal as long as you pay your balance off within the introductory period. Transferring a balance from a high-interest card to a 0 percent interest card saves you hundreds and even thousands of dollars, depending on your balance. However, you must be careful to pay off your balance before the card issuer begins to charge interest on your account in order to make the savings add up.

Instructions

    1

    Determine what the introductory rate is on your credit card. Credit cards have 0 percent introductory rates for increments of three months.

    2

    Find out the balance you currently owe on your card. You can do this by checking your paper statement, calling the number on the back of your card or by logging on to the card issuer's website with your user name and password.

    3

    Divide the balance on the card by the number of months you have the introductory 0 percent rate. The resulting number is the amount that you'll need to pay each month to have the card paid off before the 0 percent interest rate expires.

    4

    Make regular payments each month until the card balance is paid off. If you have extra funds in your budget, make extra payments to pay off the card faster.