Debt Management Companies Cash In on Loan Crisis

When it comes to debt settlement or debt management companies, according to CNBC:

Hit the brakes before you contact a debt settlement company to grapple with your student loans — some may be in hotter water than you are.

NerdWallet, a personal finance website, compiled a watch list of 130 entities, representing approximately 100 companies, that provide debt management and consolidation services for student loan borrowers.

In all, about 44 million people owe more than $1.4 trillion in college loan debt. More than 4 million debtors were in default last year, up from 3.6 million in 2015.

Debt settlement companies charge borrowers a fee to complete and submit paperwork to the Department of Education in order to help students consolidate their loans.

The catch is that this information is already available free of charge from the Education Department. Borrowers can also contact their lenders directly for consolidation and income-driven repayment options — and they can apply for them for free. And while many of these companies work with federal loans only, some also handle private loans.

The firms NerdWallet highlighted are facing enforcement actions and lawsuits from state attorneys general, liens for back taxes and other woes of their own, according to the analysis.

“Some of these firms are charging upfront fees, monthly retainers or a percentage of a borrower’s total balance to put them into programs borrowers can apply for on their own for free,” said Brianna McGurran, who specializes in student loans at NerdWallet….

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Is a Balance-Transfer Credit Card Consolidation Plan a Good Option?

Nerd Wallet comments on a credit card consolidation trick that many borrowers could find useful:

Whether a credit card is the best way to consolidate debt depends on how much debt you have, your credit score and even your personality.

If you can pay off your debt relatively quickly, and your credit is good enough, then a balance transfer credit card may be your best choice. If you might need help staying on track or if you’ll require more time, then a personal loan with fixed payments may be a better approach.

With a balance-transfer credit card, you move high-interest debt to a card with a 0% introductory interest rate. Once that 0% period ends, interest rates can be quite high, so it’s best to use the card only if you can pay off the balance within the introductory time.

With a personal loan, you borrow a sum of money to pay off debts. The interest rate you qualify for is determined by your credit score, credit history and the ratio of your debts to your income. Ideally, the rate should be lower than the one for your existing debt…

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Understanding Credit Card Debt Consolidation

From a Nashville, TN (PRWEB) release on credit card debt consolidation:

Credit card debt can be managed a lot better when consumers choose to consolidate their payments and this is what National Debt Relief explains in a recent article. The material released May 4, 2017 and titled “Questions to Ask Before Consolidating Credit Card Debt” aims to enlighten people more about credit card debt consolidation.

The article starts off that for most consumers who are struggling with debt payments, they run the risk of taking drastic financial decisions just to get out of debt. It is understandable in these situations why people would want to move forward and put debt behind them. However, they still need to make informed financial decisions unless they want to end up in an even bigger debt hole.

One such decision is rushing into a debt consolidation loan. As beneficial as it is for consumers, there are still a lot of things to they need to understand about the program. For one, the article explains that consumers need to work with a lender in getting a loan large enough to pay off all their debts.

The article points out that one challenge for consumers would be to qualify for a loan with a decent interest rate especially if they have been having problems repaying their debt. If they have been sending late payments, their credit score would have taken a dip making it challenging to get low rates.

One important thing consumers need to understand as well is to look at how they can change their spending habits. Regardless how beneficial debt consolidation is in their repayment strategy, if they do not change their spending ways, they will still end up with unmanageable debt payments.

To read the full article, click

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Personal Vs. Debt Consolidation Loans

A discussion of how personal loans compare to alternative debt solutions like payday loans, debt consolidation loans, and more:

When you’re facing a large, one-time expense and don’t have the cash on hand to pay it, taking out a personal loan could be an attractive option.

How Personal Loans Work

Personal loans are unsecured, meaning that they aren’t backed by collateral. By contrast, a home mortgage is secured by your home, and a car loan is backed by your car. If worse comes to worse and you fail to repay those types of loans, the lender knows it has an asset it can try to seize and sell.

By contrast, your eligibility for a personal loan is likely to be determined by your credit score from one of major credit bureaus, as well as such factors as your employment history, income, and debt-to-income ratio.

Personal loans generally carry a fixed interest rate and require that you pay the lender back in monthly installments over a specific term, such as two to five years. Because no collateral is involved, the interest rates on personal loans tend to be higher than on many other types of borrowing.

The average interest rates on personal loans recently ranged from 10% to 32%. People with excellent credit scores (720-850) were likely to be able to obtain loans with average annual percentage rates of 10% to 12.5%, while those with poor credit scores (300-639) faced average APRs of 28.5% to 32%.

If you’re eligible for a low-rate personal loan, you might also consider using one to pay off other, higher-interest debts, such as credit card balances. But bear in mind that the personal loan will have to be paid off in its entirety by a certain date, while your credit cards do not. The federal Consumer Financial Protection Bureau also cautions against debt consolidation loans that start off with low “teaser rates” that can shoot up after a period of time.

You’ll also want to be sure you know about any additional fees. For example, many lenders charge an origination fee of 1% to 6% of the loan. Others may impose a prepayment fee (otherwise known as an exit fee) if you want to pay your loan off early.

An alternative to a personal loan for paying off credit-card debt is a balance-transfer card. These allow you, usually for a fee of 3% of the balance, to transfer your card balance to a new card with a different bank that offers 0% APR for a specified period.

Where To Get a Personal Loan

The first place to go shopping for a personal loan is your local bank or credit union. If you already have a relationship there, you may have less trouble securing a loan. Credit unions, in particular, are known for their relatively reasonable interest rates.

Your next stop should be competing banks (and another credit union if you belong to more than one), to compare rates.

Online lenders are another possibility, but make sure you’re dealing with a legitimate one, as this field is rife with scam artists whose websites may look perfectly respectable. In fact, they may not be in the loan business at all but simply collecting personal financial information from unwary borrowers that they can use to commit identity theft.

To protect yourself, the Federal Deposit Insurance Corporation suggests checking with your state attorney general’s office or the state or local consumer affairs department to see if they have any complaints about a particular lender. The Better Business Bureau also has ratings on many lenders.

Loan Alternatives With Drawbacks

You may have other sources of emergency cash besides a personal loan, though not all are ideal. Here are some to be wary of, and consider only as a last resort:

Credit-card cash advance. Taking a cash advance on a credit card is a fast way to pay off a big, unexpected bill. But it’s also a very expensive one. You’ll typically pay $9 or 4% of the total as an upfront fee. The APR on the loan is 24%, which is far higher than on purchases. And, unlike with purchases, there’s no grace period; you’re charged interest from the time you receive your money.

A home equity loan or line of credit. If you have enough equity built up in your home, you may be able to borrow against it. A home-equity loan typically provides you with a lump sum that you agree to pay back on a set timetable. A home equity line of credit makes a sum of money available to you that you can borrow from as needed. Home equity loans and credit lines may have more attractive interest rates and terms than personal loans, although they may also take longer to obtain. Remember, too, that you’ll be risking your home if you find yourself unable to repay.

Payday loans. This form of financing, in which you borrow against your paycheck, may be the worst option of all. Payday loans charge exorbitant fees and interest rates, with APRs regularly topping 300% to 400%. They also have short payback terms of only a few weeks, making it all too easy to fall into a debt cycle. In fact, payday loan borrowers are more likely to declare bankruptcy. Because of this, some states have moved to ban or significantly limit payday loans.

Finally, one way to avoid needing a personal loan in the first place is to establish an emergency fund that you can use for those big, unanticipated bills. Many financial planners suggest saving at least three to six months of living expenses in an account that you can get cash from quickly, such as a bank savings account or a money market mutual fund.


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Debt Counselling for Elder Borrowers

Excerpt from article suggesting debt counselling for aging baby boomers will be increasing:

….What will be the solutions to pensioner debt? Debt counselling seems to be shunned by later-lifers according to the evidence available, with younger cohorts more likely to use it, which does not help.

For homeowners, equity release providers could ride to the rescue, but for those aged around 60, only 20% or so of the property value could be realised. For some, this may be enough, but not for others.

Credit card debt could be consolidated into a personal loan, provided there is enough income to service the repayments without further impacting standards of living. Finding work to increase income may help, enabling debt to be cleared in a structured fashion and reinforcing pension income receivable.

But the saddest thing is what should be the most relaxed, care-free and enjoyable years of your life may turn out for many to be laden with worry, stress and money problems. None of these extend your lifespan. And for ‘generation rent’ it could be much worse.

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Numbers seeking debt solutions in Ireland continues to grow

The number of personal insolvency applications in Ireland has more than doubled when compared to same period in 2016, while the number of people availing of debt solutions continues to grow.

These are the main findings of a new report from the Insolvency Service of Ireland highlighting statistics for the first quarter of this year.

The report goes on to reveal that for quarter 1 2017, as compared to Q4 2016, applications are up 16% with personal insolvency arrangements up 10%.

The report of an analysis of 100 Personal Insolvency Arrangements shows almost half of arrangements are completed in a year or less, in over 90% of cases where a family home is involved the debtor remains in their home and where the solution involved the write off of mortgage debt the average write off was €93,338.

Commenting on the report Mr. Lorcan O’Connor, Director of the ISI, said the number of people availing of the debt solutions available through the ISI continues to grow.

“The number of applications has increased significantly since the launch of Abhaile, the State funded service for people in home mortgage arrears, under which borrowers can avail of a free consultation with a Personal Insolvency Practitioner.

“The Personal Insolvency Arrangement analysis published today demonstrates that the key objective behind the Personal Insolvency Legislation – keeping debtors in their home – is being achieved”.

Mr. O’Connor encouraged anyone with serious debt issues to consult a Personal Insolvency Practitioner or an Approved Intermediary, details of which are available on or by calling 076 106 4200. People can also freetext GETHELP to 50015 for a call back from the ISI.