Wipe Your Debt Clean

When your emergency funds or other savings are gone and another financial crisis crashes down on you, a payday advance loan seems like a great way to take care of the problem. If you have a steady job and an active checking account, you can borrow anywhere from a couple of hundred dollars to a thousand – or even more – until your next payday. This, you think, is a fine way to fix the car, get the plumber to repair your broken water line or buy the medicine that your child desperately needs.

Payday advance loans, however, come with a very large price. The lenders are in business to make money. They charge anywhere from nine to twenty dollars (or more) for every hundred dollars that you borrow. This can add up to a very expensive doctor’s visit, car repair or utility bill!

You’ll pay even more fees if you can’t repay the original loan on your next payday. If you sign for an extension, be prepared to pay more for the original loan. The longer you take to repay the loan, the more you’ll end up paying.

Another important thing to know is that you usually have to write a check to the lender in order to obtain the cash advance. The check is written for the original loan amount as well as the fees that the lender charges. In essence, you’re supposed to “buy back” your check on your next payday – or just let the lender deposit the check and recover the loan from your account. Either way, the lender will get the money back – even if it means that you bounce a check.

For many people, there are better ways to obtain a temporary loan than going through a payday advance lender. These alternatives are generally lighter on your wallet and easier for you to manage.

• Is there any way that your emergency can wait until payday? Example: if your car is broken, can you take public transportation or ride with a coworker for a few days? These alternatives are inconvenient, sure, but they’ll end up being a lot more affordable than taking out a cash advance.

• Many creditors will grant you an extension on your bills. You shouldn’t rely on this very often – only when it’s necessary – but asking for an extension might give you a few extra days. You should also check on late fees: in many cases, paying the late fee on top of the bill will be cheaper than borrowing the money and paying the bill on time.

• Can somebody else loan you the cash that you need? Generally speaking, friends and relatives won’t charge you interest or late fees. If you can get your sister to float you a loan, you’re probably better off.

• Do you have a credit card? Most financial advisors will tell you not to use your plastic unless you’re certain that you can pay off the full balance every month. However, an emergency is an emergency. If you have a credit card with decent interest rates and low (or nonexistent) yearly fees, you have more breathing room than you’ll get with a payday advance. You have the rest of the credit card’s billing period to pay off your charges. If you can’t pay off the entire balance at the end of the month, you can repay a big chunk of what you owe and thus lower your bill for the next month.

• If you have decent credit, talk to your bank about a small loan. This has two advantages: you have more time to repay the money and your credit score improves if you repay the loan on time. Sure, you’ll still have to pay fees and interest, but you’re improving your credit: something that won’t necessarily happen with a payday advance loan.

• Many employers offer emergency loans, often at little or no cost to the employee. Your company’s payroll or human resources department should have information about this option. In some cases, your payments are automatically deducted from your next few paychecks, which is convenient for both you and your employer.

Sometimes you have to work out a long-term solution for the financial problems. If you’re borrowing money every week or two, you should consult a consumer credit counseling service to help manage your bills. You should also create a more realistic budget so that your money doesn’t run out just when you need it the most. Even if these things take time and require a bit of sacrifice on your part (packing lunch to take to work more often, for example, or eliminating one or more unnecessary bills), the long term reward – your financial freedom from costly payday advances – is well worth it.

Oftentimes, people who have incurred a considerable amount of debt come to a point where they have no choice but to file for bankruptcy. While filing for bankruptcy will clear most of your debt, it doesn’t mean you’ll be free of all financial obligations. Also, getting back on your feet after filing for bankruptcy can be a long and tedious process. Know that bankruptcy severely damages your credit rating and prevents you from getting a loan approval from most standard lending companies. But there are some special lending companies that cater particularly to individuals who are trying to recover from a bankruptcy. These lending companies, often called fresh start loan agencies, have loan packages that are suited for people who have filed for bankruptcy and are trying to get their finances back in order. By using the loans offered by these companies, you can gradually improve your credit rating until you’re once again qualified for regular loans and credit.

Tips for Rebuilding Your Credit Rating

1. After filing for bankruptcy, the first thing you have to tackle is the rebuilding of your credit rating. Most people are at a loss on how to do this, which is why fresh start loan agencies have experts who can help you figure out a method that’s most effective for you.

2. Once you’ve talked with a financial expert, the next step is to open a savings account. Each time your paycheck comes in, first make the required payments toward any debt you may still have and deposit the rest of the money to your savings account. By no means should you spend on unnecessary items until you’ve erased all your debt and improved your credit score.

3. File a fresh start loan application. If you don’t have any money, there’s no way you can improve your credit rating. A fresh start loan can give you the funds you need to start over, but you have to make timely monthly payments so you don’t fall back into debt.

4. Apply for a secured credit card. A secured credit card works the same way as a regular credit card. The only difference is that with a secured credit card, you’re required to make a monthly deposit to your account that is equal to your approved credit limit. A secured credit card will not only stop you from spending more than you can afford, it will help increase your credit score significantly if you’re responsible in making payments.

Advantages of Taking Out a Fresh Start Loan

With a fresh start loan, you’re given a chance to start over and redeem yourself financially. Fresh start loans have other advantages. When you apply for this type of loan, the lending company will check your finances and determine the maximum amount you’re qualified to borrow. You can then choose from highly flexible payment plans so you will essentially have some control over how much you want to pay each month. Because of the existence of fresh start loan agencies, filing for bankruptcy need not be the end of the world. A fresh start loan can help you get back on your feet financially.

If you wish to repair your credit, your primary concern should be eliminating the negative information contained in your credit report and updating your payments on overdue or delinquent accounts. While such efforts can improve your credit rating after a few months, you may find it still isn’t acceptable enough for banks to grant you a new loan. If you want to regain your credit worthiness, you need to develop good  credit habits. Acquiring new habits, especially pertaining to credit, need not be difficult if you set your mind to it. You can begin with your use of credit cards and once you’ve started using them wisely, you can look forward to rating higher in your credit score.

Knowing the proper use of credit cards may not come naturally to everyone but you can learn the basic rules and understand the consequences if you fail to use your credit cards wisely. Here are a few do’s and don’ts in using credit cards. When you’ve adopted them into your financial life, you can expect your credit report to reflect just how responsible you are in handling your credit and managing your finances.

1. Don’t charge to your credit card your daily purchases particularly food, clothing, and gas. Make it a habit to pay in cash for your daily needs. If you’d rather not carry cash around, use your debit card instead. Keep in mind that your credit card isn’t a substitute for cash. It’s hard when you have long consumed what you bought and you’re still paying for it several months after.

2. Do pay more than the required minimum payment stated in your monthly credit card statement. When you pay only the minimum amount each month, you are prolonging the time you have to pay off your account since the interest keeps compounding.

3. Do learn how to curb your impulses to buy anything you take a fancy on. Know how to differentiate a “want” from a “need” and when it’s okay to use a credit card. Making frivolous purchases on your credit card indicates irresponsibility, which is what you’re trying to eradicate. Buy only what you need and pay for them in cash as much as possible.

4. Do keep all your purchases within your budget limits. Don’t attempt to charge on your credit card expensive items you know you can’t afford. To live off borrowed money is to court financial ruin. You don’t want to reach that point where you regret having purchased all those expensive things because you can’t pay for them anymore.

5. Do pay all your monthly obligations on time. If you can’t, you should inform your creditor in advance about your predicament. Most creditors are willing to work out an arrangement if you’re honest and give them advance notice. The “I forgot” excuse simply won’t do so phone your creditor with your explanation and inquire if any late fees can be waived.

6. Don’t max out your credit card. A good rule of thumb is to keep your credit card balance below 30% of your card limit. If you have a credit limit of £5000, make sure your balance never goes more than £1500. Your credit score takes into account just how much in debt you are so if you keep it to a minimum, you’ll be viewed as one credit worthy person.

Bankruptcy is often the last resort for individuals who are unable to manage a growing amount of debt. Both Chapter 7 bankruptcy and Chapter 13 bankruptcy can help debtors either dispose of or manage debts without the fear of being sued. Filing for bankruptcy, however, comes with consequences. A bankruptcy will appear on your credit report almost immediately and have a negative impact on your credit score.

Bankruptcy is Reported to the Credit Bureaus

A bankruptcy is a public record that can be accessed by anyone. Not all public records will appear on your credit report, but public records pertaining to debt, such as a bankruptcy, almost always will. Unfortunately, if you change your mind and withdraw your bankruptcy petition, or if your petition is dismissed by the court, the public record illustrating that you filed for bankruptcy will remain on your credit report until the federal reporting period expires.

The federal reporting period for all items that may appear within your credit history is dictated by the Fair Credit Reporting Act. A Chapter 7 bankruptcy will remain on your credit report for 10 years while a Chapter 13 bankruptcy is typically removed after 7 years. Should a bankruptcy filing appear on your credit report in error, you may have the entry immediately removed regardless of the reporting period.

Keep in mind that the reporting period of a bankruptcy notation begins on the date the bankruptcy is originally filed, not on the date it is discharged. Should you opt to file for Chapter 13 bankruptcy, you may have the notation removed from your credit report a mere two years after your bankruptcy is discharged by the court.

How Bankruptcy Affects Credit Scores

A bankruptcy is considered to be a negative item on a credit report by every credit reporting formula. The reason for this is that a bankruptcy demonstrates an inability to manage debt. Future lenders, therefore, will assume a much higher risk by lending to you. The rationale is that an individual who filed for bankruptcy may encounter the same debt management issues again in the future and fail to meet his or her financial obligations.

The amount that your credit score will drop after you file for bankruptcy will vary depending on how high your credit score was before you filed. Individuals with particularly low credit scores will often find that their scores drop less than 50 points after filing for bankruptcy. A moderate to high credit score, however, can take damage in excess of 150 points.

The low credit score that bankruptcy causes is not permanent. You can work to improve your credit score even if a past bankruptcy still appears on your credit report. Negative entries on your credit report cause less damage to your score over time. A recent bankruptcy, therefore, will have a greater negative impact on your credit than a bankruptcy that occurred several years ago.

Further Negative Consequences of a Bankruptcy on Your Credit Report

Although it is possible to improve your credit score with a bankruptcy on your credit report, you may not remove the bankruptcy prior to the expiration of the federal reporting period unless the notation is being reported in error. It is likely that during the reporting period you will need to have your credit report reviewed by a lender. Even if you have managed to improve your credit score in the time period since the bankruptcy occurred, your lender will consider more than just your credit score.

A Chapter 7 bankruptcy makes you a much higher risk for lenders than a Chapter 13. This is because individuals who file under Chapter 7 are permitted to discharge the majority of their debts whereas Chapter 13 filers must repay those debts over time. Lenders do not want to lend to individuals without being reasonably certain that the debt will be repaid. Making an attempt to repay your debts through a Chapter 13 demonstrates to lenders that you are capable of taking responsibility for your debts and honoring your obligations to your creditors. Thus, you are more likely to get approved for a new loan or line of credit in the future if you file a Chapter 13 bankruptcy rather than Chapter 7.

Although bankruptcy will negatively impact your credit rating and your future buying power, it can protect you from lawsuits that would have an even greater negative effect on your credit score. If your financial situation improves, you can discuss this with future lenders. You may also provide them with evidence that demonstrates you have a steady income and are able to pay back the debts you accrue. You cannot file for bankruptcy without it appearing on your credit report, but you can work around it until the reporting period expires and the negative entry is removed from your credit history.

Repairing your bad credit is essential if you intend to continue to borrow money at any time in the future. The negative information that is sitting on your credit report lowering your score isn’t just going to go away on its own. It needs a little push, which you can provide. Consumers should use a responsible strategy such as following these simple tips for repairing bad credit if they want to join the ranks of consumers who are able to borrow money freely.

Knowing where you are starting from and just how bad your credit score is a good place to start. Obtain your credit history and accompanying score by contacting one of the three major credit bureaus, Experian, Trans Union, or Equifax. You can visit their website or call them to get the information that you need. Of course, you will need to provide a few sensitive pieces of data, so make sure that your computer is virus and spyware free before filling out any online forms.

Once you obtain your report, check it carefully to verify the information that is contained on it. Look at the negative information and check its accuracy. If it is accurate, there’s not much you can do except to avoid identical credit behavior or activity in the future. If it is inaccurate, then you can file a complaint to dispute the information and have it removed. Typically, you should contact the credit card company and their staff members will check out the transactions for you. You should also contact the credit bureaus with the proper documentation per their guidelines.

While all of the above is happening, make sure that you are paying your bills in full and that you are paying at least the minimum amount due on each bill. Check your credit report several times a year to ensure that this activity is reflected accurately on your credit report.

While you are checking into your credit report to check its accuracy and repair your bad credit rating, you will also be taking the proper steps to safeguard yourself against identity theft. If you discover fraudulent activity such as unauthorized and invalid transactions early on, then you can take the proper steps to put a stop to such transactions. This will nip identity theft in the bud, another great tip for repairing your credit score or preventing it from experiencing a downturn due to negative activity.

Changing your name might seem like a good option for writing off large debts that are being held in your name, but will it actually work?

In the USA, your debts are tied to you via your date of birth and Social Security Number (SSN) to deal with the complications that would otherwise arise when people have the same or similar names. Because of this, changing your name will not make your debts disappear as you will retain the same SSN and date of birth as before. Your SSN is very difficult to change unless you have been the victim of identity fraud. When officially changing your name, the legal documentation of many US states will make it clear to you that this will not exempt you from paying your debts, and you will be required to sign documents that confirm your honest intentions regarding your change of name. In some US states, you will need to legally swear (under oath) that you are not doing so to try to dodge your creditors. If you go on to use your change of name to avoid paying debts, this is deemed to be fraud. In theory, the ‘statute of limitations’ in the US dictates that you cannot be sued by your creditors after three to four years have passed (depending on the US state in question). However, there is nothing to stop your debts from being sold on to another company, who can then continue the search.

In the UK, creditors will usually ask for you to divulge any previous names (for example, maiden names if you have got married or your previous names if you have changed your name via Deed Poll) on credit applications . If you refuse to do this, you can be seen as having misinformed them and this is viewed in much the same manner as fraud. As in the US, you will have to sign documents to confirm that you are not changing your name to avoid paying off debts (or other illegal motives). While some people have been able to evade their creditors after officially changing their name by Deed Poll in the UK, this is a pretty big gamble to take as there are many more people who have been tracked down despite changing both their name, address and bank account(s). Problems are likely to arise if you need to open a new bank account or be approved for a mortgage or new credit under your new name as you are likely to be asked for previous names and addresses in any applications and this can make it easy for you to be traced. In addition, getting appointments with a GP or at a hospital will be difficult if you are no longer using the name that is linked to your National Insurance (NI) number. This is a similar story to the SSN in the USA as it will still be attached to you and can lead your creditors to you – even though your debts are not usually linked to it.

Recovery methods are becoming increasingly sophisticated, so there is every chance that your creditors will manage to find you sooner or later, especially if they use the services of a debt collection agency. In the meantime, your new life will undoubtedly involve constantly ‘looking over your shoulder’ and living in fear of your past catching up with you. For example, the credit bureaus will often feature a list of your ‘alias’ connections at the top of the bureau to act as a reference point for the credit companies and these can be used to find you. If this method does not work, debt collectors may use a tracing agency or even go as far as hiring a private investigator to track you down.

Changing your name in an attempt to walk away from debt troubles carries several big risks. There will always be a few lucky individuals who choose this route and never experience any repercussions with their creditors or the law, but they are far outnumbered by those who are tracked down and have to face the consequences of their actions. If you are currently in debt, it is much better to face up to your situation and negotiate with your creditors to agree a more manageable repayment plan.

Credit cards are quickly taking control of the global commerce system. From merchants that only accept credit cards to online purchases devoid of other payment alternatives, the world is brimming with opportunities to pay by credit and almost empty when it comes to any alternatives. Sure, there are debit cards, but with no anti-fraud protection they are no good for online purchases. Similarly, direct banking is not the wonder that it once was — with credit cards everywhere ATMs are slowly moving away from direct banking and towards credit.

With this worldwide move towards slick and easy credit, millions of people are getting caught in difficult situations due to their credit cards. To get out, you’re either going to spend a lifetime paying away at the debts or invest widely in a credit counseling program. These six methods could save you years of fighting through debt.

#1: Use a snowball strategy to pay off your debts.
This method has been championed by numerous personal finance experts, and is commonly accepted as a great way to fight debt. By taking on the smallest debts first, you can eliminate your individual debts one by one. Start with the smallest debt, typically credit card payments or hire purchases, and then move on to your mortgages, student loans and car costs.

#2: Eliminate credit cards from your wallet.
It is worthwhile keeping a credit card for major online purchases and for when you need customer support, but otherwise a credit card is simply a tempting debit card alternative. If you are struggling with self discipline, minimizing your interactions with a credit card is a great way to avoid spending anything. Keep your credit card in your closet, not your wallet, and only use it when you know you can afford it.

#3: Use credit counseling programs to minimize debt levels.
Did you know you can often dramatically cut down the amount that you owe by using a credit counseling service? From slashed interest rates to frozen payment plans, there are some wonderful options available with credit counseling services. Check them out if you’re struggling with your credit card payments already.

#4: Use debt consolidation to make payments simpler.
Simply put, dealing with one debt is a big enough deal. Dealing with ten is just a nightmare. If you’re fighting off multiple loans at once, it is worth looking at a debt consolidation loan. Many credit counseling programs will be able to offer debt consolidation as part of their program, along with other debt fighting tools and tips.

#5: Negotiate directly with credit card companies.
Credit card companies have a reputation for being difficult to deal with, but they’re often more willing to negotiate than you can imagine. If you are struggling with debt, it might not be too hard to strike up a payment deal with your credit card company. You could end up with better rates, and if worst comes to worst you’re in the same position as when you started.

#6: Once you have paid it off, eliminate it.
Relapses are common in the world of credit card debt and personal finance. The most important part of recovering from credit card debt is staying healthy. Invest in credit card counseling and education, and ignore the offers from banks to help you with easy credit and massive interest rates. Education is always the best medicine, and credit card education is an increasingly important part of today’s personal finance canon.

Given today’s troubled economic climate we all know that owing money on our credit cards is not a good thing. Many of us are worried about how we’ll cope if we fall victim to the recession — over the coming year, for example, it is likely that more and more of us will lose our jobs. But, over the last few years getting credit has been easy and we have all been able to spend freely on our credit cards. Problem is, many of us are now finding that the money we owe is causing us a lot of financial pressure. But, there is a solution that could see you clear all the money you owe on a credit card that is perfectly legal.

Credit card debt is one of the most difficult debts to clear. There isn’t a problem, of course, if you pay off what you use on a credit card every month and don’t carry over a balance. But, if you can’t do this (and most of us can’t) then your debt will rollover every month and will have interest added to it. Even if you put a stop to your credit card spending the amount you owe will keep increasing as interest will be added every month until you manage to clear your balance completely. This can take years for a lot of credit card users.

It’s not a well known fact yet but there is a way to have your credit card debts cleared for you perfectly legally. Recently, there have been changes made to the Consumer Credit Act of 1974. This Act governs the way that companies can work with consumers in the provision of credit. In very simple terms this means that the way that credit card companies deal with their customers has changed and they are now legally bound to provide customers with specific types of information when they enter into a credit agreement with them.

So, how does this work in your favour? Well, if you took out a UK credit card before April 2007 then there is a chance that you weren’t given the right information in accordance with the changes to the Consumer Credit Act. For some people this simply means that the credit agreement that they made with their credit card company is unenforceable and you could negotiate to have some or all of your debts written off for you. In some cases you could also receive cash compensation in addition to this.

This also applies to a range of other credit products such as Store Cards, Loans, Car Finance, Hire Purchase Agreements and insurance products that you may have taken out in tandem with a credit product such as Payment Protection Insurance. Again, if you took out a product before the deadline then you may well have a valid case.

So, how do you check to see if you can wipe off your debts here? The easiest way to do this (as it is a complex process to take on for yourself) is to use a specialist service that can help you out. Many solicitors and specialist web companies have moved into this field. Bear in mind that there may be a fee to pay here for their services but most reputable companies will give you a free assessment or will refund your initial fee if their assessment shows that you do not have a case. And, many companies now will work on a ‘no win, no fee’ basis so you could take on your credit companies with no risk at all on your part!

A couple of years ago, things were looking rosy – you had a wonderful car, house and life. Weekends were a blur of retail therapy and if you maxed out one credit card, it didn’t matter because there were plenty of companies just handing out more. Credit was just being thrown at you and, if you were like most people, you used it. What could go wrong? Then the global recession hit and suddenly, the credit floodgates closed. Maybe you or your partner were laid off and, even if you weren’t, you found that there were no new credit cards, no more robbing Peter to pay Paul. Basically, if you’re like most of us, you ended up having to suddenly live within your means. All of a sudden, having the latest home stereo or jeans seems pretty pointless – you can’t eat them after all – and you just can’t seem to get ends to meet.

What do you do now?

STEP 1 – FIND OUT THE EXTENT OF THE DAMAGE

It may be scary, but you need to know exactly how much you owe and what your installments are. Find out what interest you are paying on each installment. Check what date the debit orders go through.

STEP 2 – START FORMULATING A PLAN

Draw up a list of all your expenses and income for the month. Keep a daily list of everything you spend money on. Is there anything you can cut back on? Take a look at your old cd’s, books, and appliances. Are there any that you can sell?

Split your expenses into critical, eg- food, rent, car and pure debt, eg- credit cards, etc. What is the absolute minimum you need to survive? Whatever is left over is going to be used to service your debt. Take your list from Step 1 and start allocating your left over income to the accounts. Will the left over cover the minimum installments? If not, how much can you afford to pay each?

If you haven’t got enough to pay the minimum installments, approach your creditors and explain that you will have problem paying – before you fall behind in the payments. Creditors are generally understanding as long as you approach them before the payments fall behind and you make every attempt to pay. Be sure to keep to any special arrangements you make.

If you have enough to pay the minimum installment on each account, identify the account that attracts the highest interest rate and target that one. Pay all extra funds into there until it’s paid off and then start on the next highest one.

STEP 3 – BE RESPONSIBLE FOR BANK ACCOUNT AND CREDIT CARDS

Look through the debit orders on your account and cancel those that are non-essential. If your debit orders go through before your salary does, change the date to your salary date to avoid possible unpaids and excess fees.

If your account might overdraw, contact your bank manager. Do not simply withdraw you whole salary, hoping the bank will honour your debit orders. They are under no obligation to do so.

Use your credit card responsibly. If you are impulsive with your credit card, wrap it in plastic and hide it in the freezer. This way you have to defrost it overnight in order to use it. This will stop a lot of impulse buying.

STEP 4 – JUST PERSIST AND HANG IN THERE

Carry on until your finances are back on track. This will no doubt take some time and mean a lot of sacrifices but if you continue to make more debt, you will spiral into bankruptcy.

One of the best strategies to take when deciding whether or not you have a problem with too much debt is to learn the signs that indicate you are in financial trouble. Once you recognize the signs of having too much debt attached to your name, you can incorporate a few changes to alleviate the problems associated with it. Some of the changes might be minor ones that are easy to implement into your lifestyle, while other changes might be major ones that are not quite so easy to incorporate.

What Are the Signs That You Have Too Much Debt?

Each of the following is a warning sign that debt is beginning to take over your life:

• You have not been able to pay one or more bills on time.
• You are borrowing money in order to make the payments on your monthly obligations or debts.
• You only pay the minimum on your credit card accounts each month.
• You rarely pay any credit card account in full on any given month.
• You are receiving extra bank charges due to insufficient funds and an inability to cover your withdrawals.
• Late fees are another of the charges that reduce your monthly funds and these fees appear more frequently.
• If you had an emergency fund in the past, you have already spent it to pay your debts.
• You avoid making appointments with the doctor because you do not have the money to pay the expense.
• You cut back on your spending and yet you still cannot pay your bills on time.
• You are beginning to worry about having the money to pay your monthly mortgage, motor vehicle installments, or insurance costs for your home, motor vehicle, or life policies.

Weathering a recession or a decrease in your available funds is not an easy task. Once you recognize that you have a financial problem and begin to make changes in your lifestyle, you can start to get yourself out of this dilemma.

Reducing Your Level of Debt

Once you identify the problem areas in your financial spending, make changes that will immediately impact your level of debt in a positive way. The first strategy should be to stop borrowing more money to pay off debts that were created by borrowing money in the first place. In order to do this, you might need to put a temporary halt on new purchases. If you eliminate new debts, then you can decrease the monthly debt level for the following month.

The next step is to train yourself to pay your bills on time in order to reduce the number of late fees and accompanying interest charges that you receive. Write yourself a reminder or mark payment dates on the calendar. Pay the bills off in the order that they become due to avoid paying one of them late. Once you trim late fees from your accounts, you will have additional funds to pay off those debts that you were not able to pay off in previous months.