What Are Some Tips When Applying for a Debt Consolidation Loan?

If you're considering a consolidation loan, it's vital that you prepare for the process by making sure you need the loan and that you're really using it because you're ready to pay off your debt, not just because you're going to contribute further to your debt. Once you decide that the loan is right for you, find the lowest rates by making yourself a viable candidate and by shopping around.

Improve Your Credit Score

Get your credit score up. Often, the ultra-low interest rates advertised for consolidation loans are only available to those with very high credit scores. Order your credit report for free from the Annual Credit Report website (see Resources), then go through it with a fine-toothed comb. If you discover any mistakes, report them immediately in writing to both your creditor and the credit bureau. Include a letter and documentation of the error. This is one of the fastest ways to improve your credit score.

Lower Current Interest Rates

Request lower interest rates on your credit cards. You may find that the interest rates offered by your credit card company end up being better than the rates you're offered with a consolidation loan. Because consolidation loans are viewed as potentially negative to lenders, it's better if you can resolve your debt without one.

Shop Around

Check on consolidation loan rates at credit unions. According to Bankrate, credit unions are often more lenient and offer better interest rates than banks. Shop around and compare all your options, then calculate whether the loans offer you enough of a decrease in your interest rate. Lenders may be hesitant to offer you new credit when you're on a consolidation loan, so the decrease in interest must be dramatic enough to be worthwhile.

Commit

Make sure you're 100 percent committed to paying off your debt. According to Cambridge Credit Corporation general manager Chris Viale, 70 percent of people who take out debt consolidation loans end up with the same amount or more debt just two years later. People often fall prey to the lure of using the newly freed credit that comes from old balances being wiped out by the loan. If you're not dedicated to paying off your debt and keeping it off, you may get yourself into even more trouble.

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How to Find a Payday Loan With No Credit Check

Payday loans are among the most expensive loans available. In 2011 the Federal Trade Commission pointed to an example of a typical payday loan with a whopping 391 percent interest rate. Payday loans typically do not require a credit check because of the exorbitant interest rates. People willing to pay the huge interest rates usually have poor credit scores and are not eligible for standard loans from banks and credit unions. Payday loans, although controversial, are widely available.

Instructions

1

Find payday loans that do not require a credit check by visiting stand-alone check cashing stores. The stores are usually located in strip malls. They also advertise on radio or TV. Enter the check cashing store and ask about payday loans without a credit check.

2

Check with banks and credit unions. Some may offer so-called "checking account advances" to established customers with active checking accounts and regular direct deposits. The checking account advances are somewhat similar to an overdraft, with repayment of the loan made through the next direct deposit of a paycheck or some other regular deposit.

3

Investigate any online service. Make sure that you check the business out with the local Better Business Bureau or look for complaints online or lodged with your state's department of consumer affairs.

4

Contact a credit counselor certified by the U.S. Department of Housing and Urban Development. The counselors specialize in housing related issues as well as credit problems unrelated to housing. Counselors likely will try talking you out of a payday loan and may suggest alternatives to your financial problems. However, the Federal Trade Commission acknowledges that some people are forced into payday loans because of their situation and that if you do take a payday loan you should borrow only as much as you can afford to pay back on your next payday. Tell the counselor that is your plan as you ask for help finding a payday loan locally that does not require a credit check. Find a government-approved credit counselor in your area by checking the HUD website.

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What Does a Debt Consolidation Loan Do for You?

Debt consolidation loans are one of several debt management tools of which you may choose to avail yourself. This type of loan allows you to make one monthly payment to settle your debts instead of paying several creditors each month to keep current with all your debts. This kind of loan can either help or hurt your financial situation, depending on the terms of the loan.

Resolve Credit Problems

If you have poor credit due to being behind on several debts, consolidating your debts might help you to resolve the credit problems. Under a debt consolidation plan, a creditor pays off a number of your debts and you then make one payment to that creditor each month until you have paid off your debt. This can help raise your credit score if you make the consolidation payments on time.

Warnings

Debt consolidation is not an easy fix for your credit problems, however. You still must make payments on time to preserve your credit, and you may end up paying high interest rates for your consolidation loan as opposed to paying lower interest rates on several loans. In addition, if you use your home as collateral for a consolidation loan, you risk losing it if you cannot make your payments on time each month.

Alternatives

If you do not want to consolidate your debts, you may consider filing for bankruptcy. While bankruptcy negatively affects your credit for several years, it offers you a chance to start over if your debt is overwhelming you. You also may consider negotiating individually with each of your creditors to obtain lower interest rates or monthly payments that you can better afford. Finally, you may be able to refinance some debts, such as mortgages or auto loans, without affecting the rest of your debts.

Best Types

MSN Money reports that taking out a home equity loan is the best type of debt consolidation program. This type of loan uses your home as collateral, so make sure you are able to pay before you take out a loan. However, home equity loans offer lower interest rates than most other loans, and you may be able to deduct your interest payments from your taxes. If you cannot afford a home equity loan, consider using a reputable debt management service to handle your consolidation so that you can get the best rates available.

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How to Settle a Judgment for Less

Credit judgments occur after you default on a debt and a creditor sues you in court. A judge in court may rule in favor of a creditor if you fail to appear in court, or if evidence shows that you owe the debt in question. A judgment remains on your credit for up to seven years; if you fail to pay a judgment, your creditor can take action to begin garnishing your wages, or place a lien on your bank account. Fortunately, you can possibly settle a judgment for less than you owe.

Instructions

1

Review your personal finances. Look at your budget and money to determine how much you can afford to send your creditor to satisfy the debt.

2

Speak with your creditor directly, or contact his attorney. Discuss plans to satisfy the debt, but mention that you can only afford to spend a certain amount on the debt. Offer a settlement for less than you owe the creditor. Be specific and let the creditor or attorney know how much you can afford to pay.

3

Negotiate with your creditors or the attorney. Be ready for the creditor or attorney to reject your offer or counter your offer. For example, if you owe $6,000, but offered to settle the judgment for $3,000, the creditor or attorney may counter your offer and agree to settle the debt if you pay $4,000.

4

Ask the creditor or attorney to put the terms of the new agreement in writing. If permitted to settle the judgment for less than you owe, do not send a payment until you receive the new terms in writing from your creditor or attorney. Keep a copy of the letter as proof that the creditor agreed to settle the judgment for less.

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How to Answer Debt Collectors

When you miss a debt payment, a representative from your creditor or collection agency might call you to try to persuade you to bring your account current. Receiving a call from a creditor or debt collector can be a stressful experience; however, handling a collection call correctly is essential for minimizing confrontation and resolving your delinquency. Simple strategies can help take the stress out of dealing with collection calls, and may make the collector more willing to work with you.

Instructions

1

Ask the caller to identify himself and the company he represents. This helps ensure that you are dealing with a legitimate debt collector instead of a telemarketer or scammer. If the caller refuses to give you his name or information about the company he represents, do not give him any information.

2

Compare the amount that the collector claims you owe against your statement from your creditor to make sure the amounts match. If there is a discrepancy, ask the collector to explain why there is a difference.

3

Provide honest information about your financial situation. Even if your current finances are less than ideal, the collector will be more willing to work with you if you accurately disclose your income and financial obligations. This can reduce the collector's expectation to collect more money than you can afford to pay, and keep you from making a payment commitment that you cannot honor.

4

Ask the collector to list the options available for repayment of your debt. The collector's job is to compel you to pay your past-due balance as quickly as possible; however, if you do not have the funds immediately available, the collector may offer to break up the past-due amount over several months or accept a post-dated electronic check to give you more time to come up with the necessary funds.

5

Offer possible repayment solutions if the creditor does not suggest a solution you can afford. Suggesting a solution helps the collector understand your willingness to bring your account current, and may allow you to reach a repayment agreement with the collector without straining your finances.

6

Ask the collector to recap the terms of your repayment agreement at the end of the call. This can prevent misunderstandings that can create conflict between you and your creditor later.

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The Statute of Limitations for a Debtor's Suit in Texas

Facing a lawsuit is never a pleasant prospect, all the more so because the laws surrounding lawsuits can be complicated and confusing. In Texas, debtors facing a lawsuit should know that there are laws, known as statutes of limitation, that limit how long your creditors can sue you. The limitations that apply to you and your case can differ significantly based on the kind of lawsuit filed against you and your individual circumstances.

Statute of Limitations

A statute of limitations limits the amount of time a party has to take a specified action. In creditor/debtor situations, this legal ticking-clock typically starts once a debtor defaults on a loan obligation. For example, if you have a credit card and fail to make the monthly payment, the statute of limitations clock begins once you fail to meet the payment deadline. After that, the creditor has a limited amount of time to sue you.

Limitations on Actions

Debtor lawsuits typically fall into one of three categories: open accounts, written contracts and promissory notes. An open account is an ongoing loan where the debtor can continuously use more debt, such as a credit card. A written contract is a contractual debt obligation where both parties make concessions, while a promissory note is a written promise a debtor makes to repay the creditor. In Texas, open accounts and written contracts have a four-year statute of limitations, while promissory notes have a six-year statute.

Judgment Limitations

A judgment is what a court renders once it determines the outcome of a case. If a court holds in favor of a plaintiff, the judgment states which damages the plaintiff is entitled to receive from the defendant. The plaintiff then has a limited amount of time to collect that money through various means, such as wage garnishments or property seizure. In Texas, the statute of limitations on both Texas judgments and out-of-state judgments is 10 years, though it is renewable.

Procedural Limitations

In any lawsuit in Texas, there are also procedural time limits that both parties must meet. For example, if you file a lawsuit and want to change the details, you have to file an amended motion, known as a pleading. However, if you want to amend your pleading within seven days of the trial, you have to first ask the court's permission by filing a motion to amend the pleading.

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Can Social Security Benefits Be Used to Offset an Overdraft Balance?

Many consumers use one financial institution for all their banking needs: checking, savings, loans, overdraft protection and mortgages. When a bank holds a consumer's deposit accounts as well as credit obligations, it has a legal right to take the money from his checking or savings account to offset (or to set-off) a loan balance if a payment is past its due date.

Exemptions

A creditor may not take certain types of funds to pay a consumer's debt. Such funds include, but are not limited to, Social Security, disability, unemployment, worker's compensation, veteran's benefits, retirement, public and private pensions, public assistance, alimony, spousal and child support. A debtor may use any part of his income to pay down his credit obligations, but a creditor has no right to take it to offset any credit obligation. An overdraft protection is a line of credit that covers any deficiency balance in a consumer's checking account.

Filing an Exemption Claim

If a bank uses exempt income to offset any credit obligation, a consumer should first notify the bank that the funds come from Social Security or other exempt source. If the bank refuses to return the funds back into the consumer's account, the consumer can file an exemption claim form with the local court. At the court hearing, he should present the documentation that shows the source of exempt income. The court will issue an order to the bank to return the funds.

Exceptions

Although banks have the right to offset a consumer's loan accounts with his deposits, the federal law prohibits federally chartered banks to do so with credit card accounts. State chartered banks and credit unions have more freedom to offset debtors' accounts as they abide by state laws. If a debtor believes that a bank wrongfully seized his money to offset his debt, he should contact an attorney in his state to find out what the law states. Also, the loan agreement should state if a bank has a right to offset a past-due debt.

Filing Bankruptcy

A consumer may be able to get back the funds the bank took to offset a debt if he files bankruptcy. He should take this step only if he cannot keep up with the payments. A bankruptcy attorney can assess the situation and determine if a consumer qualifies for a debt discharge under Chapter 7 or will need to negotiate a repayment plan under Chapter 13. If a consumer files for Chapter 13 and sets up a repayment plan, the bank may still be able to use his deposits to offset the debt.

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