Student loan consolidation, also known as student loan refinancing program, can be termed as an effective debt clearance strategy. Apart from clearing the debt, a student can also save a good amount of money through student consolidation loan since this loan is offered at lower interest rates and requires the student to pay lower monthly repayments. However, one needs to consider certain facts while opting for a student consolidated loan.

Financial Counseling:

Consolidation loan is not the only solution for student debt management. There are other viable options that can be used as an alternative. Information about these options is available with the financial-aid office. Hence, it is important for students to consult a financial counselor before considering a student consolidation loan.

Refinancing during grace period:

Federal loans such as Stafford loans provide students with a six-month grace period. This grace can be availed even after the student has graduated from the school. Loan repayment starts only after the grace period has ended. This is the right time to consolidate a student loan as the interest rates during the grace period are far less than the rates after the expiry of the grace period. Once the student is employed, interest rates are determined based on the income.

Lender Initiatives:

So as to sustain in the market and be competitive, several financial organizations and private lending firms offer a variety of packages and promotional offers so as to attract customers. Some of these include reduced interest rates, flexible repayment options, reduction on on-time payments and auto debit option. Since, there are several lending firms providing consolidated student loans, it is better to shop around so as to get the best deal.

Another useful strategy is to opt for a variable interest loan during the initial years. Once the interest rate decreases to a considerable level, the variable interest rate loan can be switched to a fixed interest rate loan. Federal and private student loans should never be combined while opting for a consolidated loan. Under certain exceptional situations, students with Perkins loans are not required to pay back their loan amount if they work for a prescribed number of hours in professions such as teaching or community service.

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Some people seem to accumulate their bad credit debt load like a sport. Typically, they start on this course because something has gone wrong. Say you’ve hit hard times. Perhaps you lose your job, or you’re surprised with a large, unexpected medical bill. It could be anything like that.

So to keep your financial boat afloat, you feel you have no choice but to max out your credit cards. At this point, your credit rating isn’t bad yet; an ugly credit debt load builds as your financial situation creeps in. Eventually, you use your good credit rating to take out a couple more credit cards. Pretty soon, you’ve maxed those out too and begin to get a credit debt load that spirals out of control as you start to find it difficult to make your monthly repayments.

Call Off The Creditors

Once you miss a few payments you accumulate a severe credit debt load as you simultaneously acquire a bad reputation for not repaying your debts. Your creditors are probably starting to get a bit antsy now; their calls will become less friendly, no doubt, as your debt load builds. Suddenly, you’re running out of options for consolidation since loan companies won’t touch you with your bad repayment record.

You would be wise at this point to stop and gain control of your finances before your finances get completely out of hand. You need to settle your credit debt load with the right kind of debt consolidation.

How Will Another Loan Help?

Consider the logic of it. Say you have 10 accounts which are overdue. You are paying interest on each of those, while the interest rate you are paying is likely very high. A bad credit debt load can be paid off with the right consolidation loan. You’ll only be paying one loan, and you should be able to find a debt consolidation loan that has a manageable interest rate.

Your creditors will be getting paid, so they will stop chasing you for their money, and your credit score can be rescued. Do you see now how a bad credit debt load can be eased with the right loan? This avoids all the unpleasant and long-lasting effects of bankruptcy.

Once you ease your credit debt load with such a loan, your new lender will negotiate a reasonable payment schedule with your creditors. The payments you then make on your credit debt load will be passed on to your creditors. This is done for you so that you cannot choose to spend your new loan in any other way but to pay off your creditors. Consequently, your credit debt load becomes an ordeal of the past, as well as the new loan. With payments organized for you, the temptation to spend your money elsewhere is resolved until you eventually are out of debt. That is a happy day of freedom!

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Start Lowering Your Interest Rates

High interest rates make it nearly impossible to get a handle on large credit card balances. But by lowering your interest rates, you can increase your payment on those cards’ balances without increasing your overall payment.

The two most common ways to reduce your rates are to open a new credit card or consolidate with a loan. Transferring balances to an introductory low or no rate card is a no cost solution. Consolidating bills with a home equity or personal loan provide long term low rates with some closing costs involved.

Develop A Payment Plan

Once you get your interest rates under control, develop a payment plan to get out of debt. One course is to make extra payments on the lowest balance. Then when it is paid off, use those extra funds to pay off the next lowest balance.

The other option is to make extra payments on the highest interest account. Even though it may take longer to close out an account, you will see a long term savings in your interest costs.

Get Help Before It’s Too Late

Before you start thinking about bankruptcy, look at a debt management company to help you deal with your debt. For a small fee, they will pay your bills,lower your rates, and structure a debt elimination plan. While your credit score may temporarily decrease, debt management is better than a credit report with a bankruptcy or foreclosure.

Evaluate all of your options before settling on a credit card payment plan. The greatest savings are often found with the do-it-yourself approach of debt consolidation and budgeting. However, debt management companies provide a valuable service to those who need more structure to get out of debt.

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Written by: Carrie Reeder

Of all the things you can do to resolve your excessive credit card debt, the first thing to do is to stop creating more. I’ve seen more than one person get out of debt briefly, only to fall back into it. Start changing those habits. Regardless of how quickly you change your habits, though, if you have the debt, you want to knock it down. Here are some suggestions.

Excessive Credit Card Debt Can Be Discounted

You may be able to settle debts for a discount. When I collected debts for a living, we often took 50% as payment in full, when we thought it was the best we could do. The point is that if you really can’t handle your payments, you may be better off to borrow from family to settle your debts for 20% to 60% of face value. Credit card companies sometimes take 50% or less as payment in full if they are convinced you are headed towards bankruptcy. (Note: this is still possible, but more difficult now with the new bankruptcy laws.)

Send a nice letter explaining your situation, and how you will get the money for the pay-off. Tell them you’ll most likely be filing for bankruptcy, but would like to settle up with any willing creditors before that happens. That let’s them know they may be left with nothing if they say no, and you split your remaining assets between other creditors.

How To Pay Debt Most Efficiently

When trying to dig your way out of debt, always pay high-interest cards first. If, for example, you have $200 budgeted to apply to your cards each month, pay the minimums only on all others, then put the rest of the money towards the card with the highest interest rate. When that one is paid off, work on the next highest.

This powerful technique saves a lot on interest charges. Suppose you have three cards. You would pay the minimum of (let’s assume) $40 on two of them, and apply the other $120 to the highest interest card. When that card is paid off, you continue to put $40 towards one card, and now apply $160 to whichever of the two remaining is the higher interest credit card. It is the fastest way to pay down credit card debt.

Excessive Credit Card Debt – Other Tips

Never buy the credit card insurance. This insurance typically stops your payments when you are injured or unemployed. It’s one of the most over-priced insurances out there, and doesn’t eliminate the debt, but just delays it.

Never buy credit card security insurance. This insurance pays for unauthorized charges when your card is stolen. Since you are only liable for the first $50 if you report the theft in any case, and many cards already have 0 liability, this isn’t needed.

Be careful with consolidation loans. Never consolidate debt into a home refinance unless you have a definite plan for paying the loan off early. 10% isn’t cheaper than 18% when it is for 30 years instead of 5.

If you’ve tried some of these techniques without success, and just can’t seem to do it on your own, consider contacting a credit-counseling service. Sometimes they can help you negotiate lower rates with your banks, and otherwise counsel you on how to reduce your excessive credit card debt.

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Being in debt is not just a financial burden, it’s an emotional one! It seems to control every avenue of your whole life.
It’s a well known fact that a high rate of divorce is due to money problems. Depression and even suicide is also heavily linked to debt worries.
So, how do you deal with debt?

Well, there are many options available to you, but it really depends on the extent and type of debt that you have.

Firstly, you need to assess your situation. Get a grip on yourself emotionally and step outside of yourself and look at your finances objectively. Look at your debt as an outsider looking in. You cannot be objective about your debt when you are emotionally overwhelmed.

Once you have established the extent of your debt, you can then start looking for ways to firstly, control it and secondly, eliminate it. By controlling your debt, I mean ‘not adding to it’. The most common mistake people in financial trouble make is to bury their heads in the sand. By not wanting to know exactly how much money they owe and kidding themselves that they owe less than they do, they carry on spending and adding to the increasing amount of debt already accrued.

What’s done is done! You can’t turn the clock back, but you can DEAL with the problem and eliminate it.

There are several different solutions to debt elimination. If you are finding it hard to get your head around your debt problems or are having difficulties with lenders, then a good first port of call could be a debt counsellor. There are many organizations around and some of these are non profit making organizations.

Looking at ways to make savings in your day to day life is the next option. Maybe getting a second income to reduce the debt so it is more manageable. Selling some of the things that got you into debt in the first place could go some way to reducing the debt. Car boot sales, garage sales, in fact anything that will start you on the right road.

If your debt really is so bad that your home is at risk and you face bankruptcy, then maybe a debt consolidation loan is your final option. With a debt consolidation loan, you lump all of your existing loans into one payment that is spread over a longer period of time.

There are pros and cons to this type of loan. The initial relief is immediate. You feel in control and also free up some of your income once again. But the downside is, the temptation is there for you to borrow and spend more money yet again. You have not learned how to control your finances yourself, and are therefore in danger of repeating your initial mistakes.

The other factor is that you will be in debt for a long time and pay a lot of interest over that period of time. You really do have to look down the road with this type of loan.

Take time to sort out your debt problems, they took a long time to mount up, they won’t disappear overnight. But with a well thought out plan and some good advice, you could be get that debt solution and be debt free a lot quicker than you thought possible!

Debt simply means that money was transferred between two parties. It implies that at a future date the loan will be repaid according to the repayment terms. Every time an item is bought we immediately go into debt. If the item is small, we can generally pay immediately and not see any long-term debt. Of course, there are many larger items that we all need but cannot pay for with cash. It causes us to go into debt for months if not years in order to repay.

Debt is not a terrible thing to avoid at all costs. Some people feel comfortable paying for everything right up front. Drive used cars, rent an apartment and pay for school once you have the money for it. All items that we buy either appreciate or deprecate in value over time. Buying a brand new car loses could lose 10% in value the second it leaves the dealership’s parking lot. At that point, if you sold the vehicle, the value of the car would not even pay for the remaining balance due on your auto loan. Even if the driver uses the vehicle for several years and finally sells it, they may still sell upside down which means they did not receive enough money from the sale to cover the loan. Perhaps you need to take out an additional loan to cover the original auto loan. This scenario is a great example of bad debt. A great financial rule is to never go into debt to buy something that loses value over time. One could make an argument that if you wait long enough the value of the car would start to appreciate again. This could happen after waiting several decades. Investing that money into bonds during that same period could result in smarter investment.

On the other hand, good debt is buying an item that appreciates over time. Upon sale, you will have money to pay off the loan and receive additional money to pocket. There are many examples of good debt including buying some homes in a buyer’s market. Working out the math on buying a home to see if you will make money in end is complicated. You can deduct many things including mortgage interest but if you are buying in a seller’s market and selling in a buyer’s market, you may turn good debt into bad debt. The alternative is renting where of course, nothing is tax deductible and you throw rent money away each month. For most people who own a home and fall in the 25% tax bracket, they throw away 75% of the interest they pay each year so there is certainly a trade off. Figuring out if taking on a house debt is more financially healthy than renting is complicated but it could help you decide which one makes more sense.

As college tuition rises, more students want to work first and then go to school so they can pay for it. Perhaps for them the sound of debt is scary but looking at your salary difference should be the reason behind the decision. For example, if you make $20,000 ($10 an hour) before college and $50,000 ($25 an hour) after college that is a difference of $30,000 a year. By waiting to go to school and make money before you go you are actually costing yourself $30,000 every year you delay graduation. You can also look at the ROI, return on investment. College could put you in the red lets say $60,000. If you make $30,000 more per year it will only take 2 years of post college employment to cover you debt. A 2 year ROI is certainly good debt and it will pay off. Simply looking at the word debt without doing some math could result in passing up an opportunity to take on good debt.

Remember to look at the long turn implications of your decision and always observe if buying will incur a debt that will pay for itself and net you a profit.

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