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Overview of debt consolidation
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Debt is a dangerous problem. You would have taken out plenty of loans and other forms of credit from a number of sources without considering the long term effects of the same. Student loans, car loans, credit/store cards, bank overdrafts could end up costing you more than you can afford. The main problem is that these loans come with varying interest rates, the addition of which will put you into a debt trap.
Debt consolidation can help you emerge from bad debts with little or no effort from your end. Debt Consolidation companies will take care of the entire process for you once you have applied for a debt consolidation loan. But how does a debt consolidation loan help? It takes the set of debts that you owe and consolidates them into one. Simply put debt consolidation will help replace all your high interest debts to a single loan usually secured on your home. As a result you will end up paying less every month and you can choose repayment terms and conditions that suit your pocket.
Debt Consolidation Loan allows you to borrow any amount between 5,000 to 250,000 and up to 125% of your property value in some cases. Debt consolidation is an increasingly popular option. The reasons for this include:
Reduced interest rates: The basic purpose of a debt consolidation loan is to replace your high interest debts with a loan that comes
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A borrower has a variety of options when he/she considers debt consolidation. Home equity loan allows you to use your home to get a debt consolidation loan. It uses the value of the collateral you have placed as security against the loan amount. When you bring together all your high interest debts under the umbrella of a secured loan you are assured of low interest rates and preferential repayment terms. However if you opt for an unsecured debt consolidation loan, interest rates would be high and you might have to deal with stricter repayment terms and
Equity Stripping: The lender makes a loan based upon the equity in the debtor’s home. If the debtor cannot repay the loan, the home goes into foreclosure.
Their methods are again different, but both effective strategies when paying off your money owed. The Debt Snowball is something that Dave Ramsey believes whole heartedly in. Make a list of all of your debt excluding the mortgage, starting with least owed all the way up to your highest obligation. The first step is to save $1000 for emergencies. Dave Ramsey’s website then says this about his process, “You 'll use the debt snowball to knock out your debts one by one…Pay off the first one. Then add what you were paying on it to the next debt.” By the time you get to your last debt, you should be making a huge payment on it and have it paid off in no time. He also postulates that you don’t need to worry about how high the interest rate is. By paying off the smallest debt first, you’ll see progress and want to continue paying off your debt. Suze believes that paying off your highest interest rate loan makes the most sense. She even suggests that you should consolidate your debt, but only if you can find a lower overall interest rate. Her way of paying off debt is like Dave’s, but instead of starting with lowest amount owed, you start with the hightest interest rate and work your way down. You will be out of debt as long as you maintain your self discipline and keep working at getting your debts paid off. One of the differences between these two is that she still believes in building up your emergency fund
If you seriously want to get out of debt, you will use this method in your debt repayment plan.
When you get to the point where debt becomes too much you begin to search for a way out. There are many different options to get rid of their debt; one option is the debt snowball. This debt relief option sounds more unusual than it really is.
2 Find out if you qualify for bankruptcy. The qualification is based on your income and family size relative to the state you are filing in. This is done by filling out a federal form called "The Means Test". If you qualify, proceed to Step 3. If you DO NOT qualify, you're only option would be a Chapter 13 "debt consolidation".
This can actually be one of the most easy ways for meeting your requirements, while clearing a huge debt.
To understand the student debt crisis, one must first understand what caused it and what results from it. College undergraduates use student loans to finance the cost of tuition, room, board, transportation, and personal expenses while attending (Gage and Lorin). Student loans are different from other forms of debt because basic consumer rights like bankruptcy protection don’t apply to students who default on their loans. As a result, students are virtually locked into their debt, offering them little to no ability to refinance it. Solutions to debt problems like consolidation are available to students but that process doesn’t involve shopping for a better deal from competing lenders like it does in other debt areas. Therefore, interest rates often remain high and the loans remain with the original lender (Vanegeren). As Kayla Webley expl...
When you graduate from college that is the time you start your life but many are not able to. Some people want to get married or start a family but cannot afford it at the time. By the time they receive their first check they instantly have to start paying their loans back. They are not able to afford rent/mortgage, utilities, or transportation because of it. Mishory O’Sullivan and Invincible (2012), “Found the average single student debtor would have to pay close to half of his or her monthly income toward student loans and mortgage payments. As a result, he or she would not qualify for an FHA loan or many private loans” (Elliott). A Survey ASA did on college students stated, “Student Loans were created to be an engine for social mobility, but they are, in fact, limiting young people’s ability to achieve financial success” (The Impact of Student). A student graduate mentioned, “Student debt weighs on every decision I make from
In Cpcc’s online opposing viewpoints essay, “Student Loans”, it is argued that the methods of taking care of student loans have issues. The essay starts by making a point that borrowers get overwhelmed with debt. Consolidation would sound like a help, but really all it does is create more debt because it makes the payment period longer. The longer you wait; the more interest you accumulate. Then, the viewpoints in the article on student loans acknowledges that the government will continue to go even deeper in debt if no one repays their loans and gets saved by recovery acts. The essay ended by emphasizing that there is no way of getting away when you borrow. In the essay, I will argue that since loans are over burdening college students with debt, there needs to be more avenues to help them pay for education.
Dave’s second step is to pay off all of your debt. His method for this is called the debt snowball effect. You list every debt you have in order from smallest to largest, leaving out your mortgage. And you pay off the smallest debt first, once that is paid you take what you were paying towards that debt, and apply it to the next debt, and so on. This is exactly what the church advises us to do in the One for the Money Guide to Family Finance written by Elder Marvin J. Aston, in the debt elimination calendar. I believe that is probably one of the fastest ways to get out of debt
If the debtor does not become discharged through the creditors yeush, there is one of two ways to obtain a bankruptcy discharge through halacha. The first way is through liquidation. This is where the debtor hands over all his property, with keeping some exempt property, and this covers his debt to the creditors and he is now free of his obligation to pay them. The second way is through reorganization. The debtor makes a plan to repay his creditors over a number of years, with a minimum payment required for each year. When he has finished with these payments,...
So how do businesses like Ashley Furniture or General Motors (GM) use their assets to attempt to pay off their creditors and any other liabilities? Companies like these first have to file for a voluntary petition of bankruptcy through Chapter 7 otherwise known as liquidation. In this process the debtor is appointed a trustee who allocates his/her assets and equally distributes it to the creditors. Reorganiza-tions also known as Chapter 11 each company or organization must first file for bankruptcy. Failure to properly file for bankruptcy a creditor can potentially force a debtor into an involuntary bankruptcy if repayment of certain debts is not made in a timely manner.
With new repayment plans, students may find it easier to handle these debts. The two types of
John R. Roberts, a bankruptcy attorney, states that "bankruptcy is nothing more than a fresh financial start. It is designed to help those who are in debt beyond a reasonable means to pay" (online). This is only if the person in debt didn't get there through anything dishonest. People get in debt for a number of things like losing their job, accidents, and business failure. When that happens people have different options of bankruptcy or different sections of the banckruptcy ammendment to choose from. The most common is Chapter Seven. This section allows you to sell some of your assets to clear as much of the debt as possible. In most cases, it also permits you to keep your property. Chapter 13 is for those who are temporarily in debt. It helps to set up payments that are reasonable for the debtor. (online) Bankruptcy is a way for a person to regain their life. After getting so far in debt some people have no way out.
Chapter 7 bankruptcy can wipe out most of ones debts but certainly not all of them. Certain kinds of debt are not covered by the terms of Chapter 7. Some examples of debts that must be paid after filing for bankruptcy would include child support, alimony, income taxes and penalties, student loans, and court ordered damages due to unfair and unrightous acts. Bankruptcy courts handle your financial problems until the case ends. A court assumes control of all ones debts that are owed and all property that is not exempted. A person, trustee, is appointed to be in charge of your debt. The trustee collects property that can be taken and sells it to repay some creditors. That property can be surrendered to the trustee, one may pay the market value of it or one also may choose to trade exempt property with nonexempt property. A small number of people actually lose property when filing bankruptcy. If a person changes their mind about filing for bankruptcy they may ask the court to dismiss the case. At the end of the process the court would discharge most of the debts and one is unable to file for Chapter 7 bankruptcy again for at least another six years.