File A Complaint About A Debt Collector
Report any problems you have with a debt collection company to your State Attorney General’s Office, the Federal Trade Commission , and the Consumer Financial Protection Bureau . Many states have their own debt collection laws that are different from the federal Fair Debt Collection Practices Act. Your state Attorney Generals office can help you find out your rights under your states law.
Are There Any Government Debt Relief Programs
No, there are no government debt relief programs for individuals struggling with debt in general. In fact, government organizations like the Consumer Financial Protection Bureau and Federal Trade Commission warn consumers against using debt relief companies.
Thats because debt relief companies often dont disclose the risk of their programs. Since these programs usually require you to make monthly repayments which many enrollees already struggle with many people arent able to complete them in full. In some cases debt relief clients can face lawsuits for nonpayment and end up filing for bankruptcy.
How Can I Get Out Of Debt
Start by making a budget, a plan for how youll spend your money each month. It will help you see how you spend your money now and how you might spend money differently.
To make a budget:
- gather your bills and pay stubs
- look at receipts to see what you typically spend on things like groceries, entertainment, transportation, clothing, and everyday expenses
- add up all of your paychecks and any other income, and subtract your expenses from that
When youre done, look for things in your budget you can change so you have more money left over each month. Your goal is to stop adding to your debt, and also to pay down the debt you already have, if you can. You can find information about budgeting and money management techniques online, at your public library, and in bookstores.
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Advantages Of A Debt Consolidation Loan
Here are some of the advantages that come with taking out a debt consolidation loan they should help you make the best choice for you and your financial situation.
- Your payments will be fixed installments that are affordable and easy to remember.
- Often youll be able to consolidate at a lower interest rate.
- Youll know the exact amount of time itll take to pay all your debts off
- Services charges and extra fees are typically very low
- Youll build credit with each on-time payment.
Borrowing From Friends And Family
- Interest rates: No change in interest rates.
- Requirements: Asking family and friends for help.
- Debt reduction: Varies depending on how much family and friends help you.
- Fees: None.
When all options but bankruptcy are off the table, your family and friends might be able to help you out. For obvious reasons, you wont have to deal with credit checks, fees, or credit damage.
But a commodity more valuable than money is relationships and money can strain or damage your relationships with friends and family.
Unfortunately, borrowing money from family and friends can strain your relationships with them. If youre unable to pay back the loan, the lender will either have to forgive the debt and take a loss to keep the relationships, or insist on repayment and potentially eliminate the relationship between you two.
Your family especially may value your relationships too much and will consequently refuse to lend you money and complicate the relationship.
Even if a friend or family member does lend you money, you may be putting undue stress on them. They may need the money for their own expenses, yet feel guilty saying no to you.
Although borrowing from friends and family could work for some people, it can be detrimental to others even if their friends and family are willing to lend.
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What To Look For In A Debt Consolidation Program
While there are benefits to using a debt consolidation program to pay off and get out of debt, you should be on guard for credit repair and debt payoff scams. If an offer or program sounds too good to be true, it likely is.
When searching for a debt consolidation program, a few things to pay attention to include:
- Whether the agency is nonprofit or for-profit.
- Customer service. They should provide you with clear answers to your questions and be able to provide a record of success. Read online and customer reviews to understand how they treat their customers. They should also offer some sort of education service to help you make a plan for avoiding debt in the future.
- Compensation. If the counselors receive bonuses for selling additional services, or try to talk you into things you may not need, they may be a scam.
- Cost of fees.
- Their website should provide information like how long theyve been in business, program options, costs and fees, program time frame, eligibility requirements, and company contact information.
On the other hand, some things to avoid include:
- Companies who claim nonprofit status when they are actually for-profit.
- Guarantees to settle your debt.
- Demanding fees for service before reaching a written agreement with creditors.
- Aggressive selling.
- A promise for quick fix solutions.
What Does Filing For Personal Bankruptcy Do
People who file for personal bankruptcy receive a discharge a court order that says they dont have to repay certain debts.
Bankruptcy is generally considered your last option because of its long-term negative impact on your credit. Bankruptcy information stays on your credit report for 10 years, and can make it difficult to get credit, buy a home, get life insurance, or get a job. Still, bankruptcy can offer a fresh start for someone whos gotten into financial trouble.
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Work Directly With Your Creditors And Your Financial Institution
Contact your creditors to discuss your financial situation with them directly. Your creditors are the companies you owe money to.
They may offer:
- a lower interest rate on your debt
- to extend your payments over a longer period of time and reduce your minimum monthly payment
- to consolidate your debts into one loan
Debt Consolidation Loans Faqs
Can I get a debt consolidation loan with bad credit?
Will a debt consolidation loan hurt my credit?
What kind of debt can I pay off with a debt consolidation loan?
Do I need collateral to get a debt consolidation loan?
Why was I rejected for a debt consolidation loan?
Can I get a debt consolidation loan without a job?
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Other Factors To Be Aware Of:
- Private loans are not eligible to be consolidated in the Direct Loan Consolidation Program.
- Spousal consolidations are not eligible to be consolidated in the Direct Loan Consolidation Program.
- A PLUS loan made to the parent of a dependent student cannot be transferred to the student through consolidation.
The Interest Rate Is Fixed
Direct Consolidation Loans have a fixed interest rate. Since July 1, 2006, all federal student loans have a fixed interest rate. But if you have federal loans, except Perkins Loans, that were disbursed before this date, you might have a variable interest rate on one or more of your loans. If the variable rate loans that you’re consolidating currently have low rates, you can lock in a fixed low rate by consolidating. Again, the new interest rate is determined based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of a percent.
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How Do I Check Out A Credit Counseling Agency
Just because an organization is a non-profit doesnt guarantee its services are free or affordable, or that its legitimate. Some credit counseling agencies charge high fees, which they might not tell you about.
A reputable credit counseling agency should send you free information about its services before you say anything about your situation. You can check out agencies youre considering with your state attorney general and local consumer protection agency. They can tell you if they have any complaints about them. Even if there are no complaints, its not a guarantee that theyre legitimate. Also ask your state attorney general if a company is required to be licensed to work in your state and, if so, whether the companies you might do business with are.
The U.S. Trustee Program keeps a list of credit counseling agencies approved to provide pre-bankruptcy counseling, but it doesnt endorse any particular agency on the list.
After youve done your background investigation, interview the final candidates. Choose an agency that:
- has credit counselors that are accredited or certified by an outside organization
- offers a range of services, including budget counseling, debt management classes, and free educational materials
- will give you a specific quote in writing for any one-time or monthly fees
- will help you even if you cant afford the fees or contributions
Be sure to get every detail and promise in writing, and read any contracts carefully before you sign them.
What Is A Government Debt Consolidation Loan
A government debt consolidation loan is a loan given by a government program or agency in order to help a person pay off debts he or she owes to multiple institutions simultaneously. The debtor basically surrenders all outstanding balances to the government entity, which will pay them and issue a new loan representing the balance owed, plus some degree of interest in most cases. People often like this sort of structure because of its convenience. They can make just one payment instead of many, and they dont have to keep track of multiple due dates. Depending on the type of loan the interest rate might also be less.
These sorts of loans arent available in all places or even for all debt. The United States typically offers the most robust debt consolidation services, and most programs there are designed for student loans, which is to say loans incurred for university education. Sometimes debt associated with home mortgages, car payments, and even bills can be consolidated, but not always. A lot depends on jurisdiction and local laws.
How It Works
Risks and Warnings
What If Im Having Trouble Paying My Car Debt
Most car financing agreements say a lender can repossess your car any time youre in default and not making your car payments. They dont have to give you any notice. If your car is repossessed, you may have to pay the balance due on the loan, plus towing and storage costs, to get it back. If you cant, the lender might sell the car.
If you know youre going to default, you might be better off selling the car yourself and paying off the debt. Youll avoid the costs of repossession and a negative entry on your credit report.
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Check And Monitor Your Credit Score
Lenders base loan decisions largely upon the condition of your credit. Generally, the lower your credit score, the higher the interest rates lenders will offer you on financing. To qualify for a debt consolidation loan, youll have to meet the lenders minimum requirement. This is often in the mid-600 range, although some bad-credit lenders may accept scores as low as 580.
Many banks offer free tools that allow you to check and monitor your credit score. Once you know your credit score, its easier to identify lenders that may be willing to work with you. Not only are there lenders that specialize in loans for people who have bad credit, but many list credit score requirements on their websites.
Takeaway: Check with your bank or credit card issuer to see if it offers tools that allow you to check your credit score for free.
Debts That Can Create Financial Issues For Older Adults
Today, the top two types of debt held by most seniors are medical bills and credit card debt.
Unfortunately, studies show that these unsecured debts debts that are not backed by collateral are among the most stressful types to carry. The stress of carrying any debt at all can damage the physical and mental health of seniors.
This is just one reason older adults are concerned about retiring with debt. In fact, a survey from AARP and the Ad Council found that paying off debt was the highest financial priority among people aged 40 to 59, even more so than saving for retirement.
Tip: Before sending money to debt collectors, seniors should check and see if theyre judgment proof, meaning theyre exempt from legal action by debt collectors. People who live on fixed government benefits or minimal income often fall into this category.
Debtors should also check to see if their states statute of limitations has passed since they last made a payment toward the debt, since they may no longer be legally required to pay.
Make A Plan To Pay Back Your Family Or Friends
If you have a personal loan with family or friends, talk to them about the money you owe. Commit to a payment schedule that works for you and the person who lent you money.
You may want to consider writing post-dated cheques or setting up automatic money transfers in order to stick to the payment plan. This will also show that you’re committed to repaying them.
How To Get Approved For A Debt Consolidation Loan In Canada
Like with all loans and financial products, it all depends on your unique situation. But, there are things most lenders are looking for, which can help you be prepared when applying for a debt consolidation loan.
If you approach a bank for a debt consolidation loan youll need to meet the following requirements:
- Not have an excessive amount of late payments on your debts
- No big black marks on your credit report, like
- You have an income thats high enough to handle the loan
- You dont have an astronomical amount of debt
We know most of those requirements seem intimidating. But the good news is that getting a debt consolidation loan from a bank is only one of your options. You could instead look into getting a personal loan from a private lender or even ask someone to co-sign a debt consolidation loan.
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Consider A Secured Loan
Personal loans for debt consolidation are typically unsecured, meaning they dont require collateral. If youre having a hard time getting approved for an affordable unsecured debt consolidation loan, a secured loan might be worth considering.
Secured loans require some form of collateral, such as a vehicle, home or another asset. The collateral usually has to be worth enough to cover the loan amount if you default. Because of this, its typically easier to get approved for a secured loan than an unsecured one, and you may even qualify for a better interest rate.
Takeaway: To increase your loan approval odds and chances of landing a lower rate, shop around for a secured personal loan.
What Is The Interest Rate On A Direct Consolidation Loan
The interest rate is fixed for the life of the loan. The rate is calculated based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of a percent. So, the interest rate on your new Direct Consolidation Loan might be higher or lower than the interest on your loans before consolidation.
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Is There A Credit Check Before Approving Me For A Federal Consolidation Loan
No. There is no credit check to obtain a Federal Consolidation Loan. However, you must not be in default on a Federal Student Loan.Eligible for Federal Loan Consolidation
- Federal Stafford Loans
- Federal Direct Loans
- Federal Insured Student Loan
- Auxiliary Loan to Assist Students
- Federal PLUS Loans
- Federal Supplemental Loans for Students
- National Direct Student Loans
- Loans for Disadvantaged Students
What Is The Repayment Term On A Direct Consolidation Loan
The repayment term on a Direct Consolidation Loan is up to 30 years and depends on the amount of the consolidation loan, your other student loan debts, and the repayment plan you pick. You start repaying the loan 60 days after the loan gets disbursed. Though, if any of the loans you want to consolidate are still in the grace period, you can delay the processing of a Direct Consolidation Loan until the end of a grace period if you make this selection in the application.
Because the repayment term is extended up to 30 years, you might be able to lower your monthly payments through a Direct Consolidation Loan.
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