Category Archives: Debt & Finance

Good debt vs. bad debt

Good debtMost of you might be confused between the two notions of good debt and bad debt. First of all the meaning of a debt must be made clear. Debt is something that a person is bound to pay back. But there is a difference between good debt and bad debt.

Good debt is something that the person cannot afford to pay up-front but he has the money to pay it up on a scheduled date as in home equity loan or mortgage. Bad debt is something that the person cannot afford to pay as he has not saved enough money to repay the debt and hence he has to apply for a loan.

The most usual and common form of bad debt is known to be the credit card. They should be used with utmost care. The best way to prevent yourself from getting into a debt after using your credit card is to pay it off as soon as the bill arrives. This will show to the companies that you are a responsible customer. The other examples of bad debt are personal loans and cars. It is better to buy a used car and maintain it for one or two years instead of buying a new car that depreciates with time.

The best examples of good debt are business loans and mortgage. Anything that is borrowed and can be measured in monetary terms can be a good debt. The value of the car depreciates and its value is always less that what you had bought it for. Student’s loan is another example of a good debt as it helps you to attain higher education and hence have higher income in terms of job. This money can be used to pay off the loan.

Bad debt has no value or its value tends to decrease over time whereas good debt tends to increase the value over time.

Can you reduce your debt

Debt reduction, debtDebt is like quicksand as more you struggle, further you keep drowning inside it. However, the difference between quicksand and debt is that you can pull yourself out of debt if you follow some rules. Of course there are ways to get your debt reduced but for that you have to be disciplined.

First of all, you will have to make a list of your debtors and lost them according to the amount you them. Try to save your money and clear off with the biggest amount at first. This will boost your confidence as you move on to the next big amount. You have to accept the fact that till the time you are free of debt, you are not supposed to indulge in luxury. Therefore, even if the world thinks you are miser, you have to practice being one. Management of your personal finances will play a key role when you are trying to get your debt reduced.

Learn what a credit debt management plan is

Debt management has emerged as one of the primary issues in the context of modern economy. Many people are not well acquainted with credit debt management plan, and the various methods of how to go about it. Basically, it is an excellent tool for the elimination of debt. But you need to consult an authentic debt management planning agency to sort out your debt issues. For obvious reasons, you will have to shell out money as service charge.

A proposal letter will be sent to a creditor by the debt management service, so as to ask for their approval regarding enrolment of their accounts in the management plan. Then, a valuation of your assets will be taken into consideration, including living expense, net income, list of creditors, repayment dates and so on. This forms the systematic approach towards formation of the management plan. Generally, it takes about 3 to 5 years for successful implementation of credit debt management plan.

Disinvestment – Interesting option to cut liability

Disinvestment is a non-violent tactic of opposing policies. It entails liquidating of assets and stocks. Many countries and companies use this method to take off their hands from white elephants. They liquidate certain assets they seem worthless and try invest the returns for profitable ventures. Of course, this is a critical issue, and there are many regulations to curtail its volumes.

Disinvestment is an interesting option to cut liability, as it is done on assets with a rapidly depreciating value. It is no rocket science to assume that post disinvestment; the value depreciates further in sensitive index, and affects the actual position of the operator.
It started off as a manner of effective economic boycott to ensure that the government is pressurized into taking certain positive steps. Abolition of apartheid in South Africa is indebted to Nelson Mandela in a bigger way; and to this process of disinvestment in a smaller vein.

Consolidation of debts

Debt Consolidation is a term that symbolizes shifting hats from one head to another. Many times, people get embroiled in a deep mess of debts and find it hard to emerge. Then, it seems prudent to shirk off an old-standing debt in lieu of a fresh one. This keeps credit history in good books and the debtor relatively easy in mind.

People use the method of securing loans either against assets or other unsecured loans. Sizeable assets come in handy for such operations as they act as good collaterals. This way, there is a considerable reduction in loan rates and the difference is taken as savings.

It is only logical that people will try to consolidate their high-interest debts with bank debts, as their rates are often reasonable. There is also the chance of gaining grace periods citing monetary instability. Banks are even known to give healthy rebates to choice customers who may be on the verge of bankruptcy.

Distressed debt investing

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When a company or a government entity is at default or is in the process of becoming bankrupt the new investors may buy the securities of that company.
Distressed debt investing is a way to get the maximum profit as the investors in the distressed securities try to restructure the debts of the old company and narrow its focus which ultimately results in profit.
If you hold or come to know that some companies are on the verge of bankruptcy buy those securities at lower prices. You are bound to get them cheaper as many people will sell their securities at lower costs to evade loss. Once you invest in these securities, wait patiently for some time before new investors take over the company.
More often than not you will find that you have struck gold as the value of these securities will increase certainly and you will gain a lot of profit.

How consolidation of student loans work

Student Loans, Finance, Investments,Often students require the aid of loan for getting ahead with their studies. This is good in terms of continuation and furtherance of studies but this also leaves a student with a great burden when its time to leave college. At times, these can also be in form of multiple loans from various lenders.

Loan consolidation can be a great help in such a case. It implies converting your entire loan into a single loan and then asking for an interest rate rebate or a better monthly Mortgage structure. Paying 2000 USD each to 5 different lenders is worse than paying roughly 9900 USD to a single lender. It will keep you away from multiple worries and also help you with a lesser cumulative payment.

Often such consolidated student loans provide pliable plans of repayment and offer no prepayment penalties. Maximum value that such consolidated interest rates can assume is 8.25 percent.

Why shouldn’t you ignore debt collectors?

Finance, DebtHere we are, trying to make our both end meet and towards the end of the month, comes calls from the debt collection agencies. This makes life more stressful. Dealing with these people is sort of hellish experience. No matter how much you try to explain, they will not budge from their stand. Therefore, it is better to understand what your options before wasting your efforts are.

Trying to escape from the debt collectors will even complicate the situation. This is what most of us do when a collection agency calls or a person from the collections knocks at your door. Face them so that they feel that you intend to pay the debt back but cannot as you do not have the sufficient funds.

The best method that I have used and would like to share with others is to work out a new repayment plan. They will be more eager to do so if you catch them during the month of fiscal closures. They may even often offer you rebate on your overall debt. Ignoring will not solve the problem but lead to more because once they are convinced that you are avoiding the debt, you mail will soon bring in a legal notice.

Free Grant Money to Eliminate Debt

Debt, FinanceMany of us do not know about the different government schemes. There is a government grant scheme that may help you in paying off your debts. But due to lack of knowledge, all these money is wasted every year. If you have accumulated a lot of credit card debts and other private debts, you may avail these grants. Get ready and start gathering about this grant scheme so that you can breathe easy in the next year.

There are several types of grants. If you apply to the incorrect one, your application may be rejected. You have to find this out by visiting the government related websites or simply google the government grants on the internet. Once you have the results, check out all of them, and select the one that best suits you. Make a note of contact information and other formalities required.

Today or tomorrow, you will need to pay off the debt. In case you do not, you will be suffering the legal process initialed against you. When you have the facility of grants, make good use of it, and use it to get rid of the debts.

How to Deal with Debt Settlement Warnings?

Debt settlementWhen anyone fails to pay loan, or credit card debt, the creditors increase the interest rate even though it is delayed by one day. If this happens repeatedly, people often find themselves in financial crisis or more often file for bankruptcy.

Individual Voluntary Arrangement (IVA)

It is a method which can be tried once before filing for bankruptcy. You need to do before creditors file CCJs against you. If you receive any threatening calls, you can consult IVA debt counseling agencies.

What Do They Offer?

Individual voluntary arrangement is a contract between you and your creditor, where in you reach a common point to settle the debt. There will be legal stamp on the contract, so that creditors cannot harass you before the time duration.

For this purpose you can hire an IVA expert, who can chalk out plan for you to come out of debts. The expert is normally insolvency practicing paralegal.

These experts negotiate with creditors and draft a debt plan for you. This draft is then stamped by court and everyone, including you, has to follow the rules. If you follow the rules and plan given by them, you can easily come out of the debt.