Free Credit Counseling

The Retail Credit Card Rabbit Trick.

    What, are we doing magic acts? Better think again. Well, not a magic trick but, a definate slight of hand. Let me explain. Exactly how long do you think it's going to take to pay off that big screen TV you just bought on a credit card at 23% interest. Lets take a look. You find the TV you must have. It is $3000.00, but by the time you ad the sound system, your up to $4,000. But , it's not over yet. You are not handy, so the store will come deliver it and set it up for an additional $250.00. You live in New York so there's a little matter of sales tax, at 8.5%, thats an additional $340.00. So, now you have spent a total of $4990.00 on that awesome surround sound big screen TV.

  Since you did not have great credit, good but not great, and since the retail store offered you financing at 23% per year, you did not hesitate to make the purchase. After all, the minimum payment on the retail card is only 114.00 per month, and thats a special offer because they like you and want to convince you how easy it is to own this baby. Sure, send all your friends in to buy one, or should I say enemies.

  Here is the deal, provided you never miss a single payment, or pay late and the interest holds at 23%.
That TV will have cost you $6053.00 in interest plus the original $4990.00 or 11,043.00, and will have taken 8 years to pay off. At the end of 8 years you will have paid $11,000.00 for an 8 year old TV. Thats assuming you have made all your payments on time.

    Lets explore further. You made all your payments onetime. But, you have a joint credit card with your wife. She misses one of her payments and so it is reported late on both your credit report and your wife's. This is a big problem. You have a universal default clause in your retail, bug screen TV account, and it says if you miss a payment on any credit card you own, the bank has a rate to increase the interest rate! Wow. You did not factor this in, so you call the bank screaming because they just raised your interest rate to 29.9%. Ouch. What you didn't realize you were really doing business with Uncle Vito.

  You threaten to throw the TV out the window before you will pay 29.9%, especially since you did not miss any payments. All the while the service representative calmly explains that you had a universal default clause in your retail agreement that stated any missed payments or new applications for credit would cause an escalation in the interest rate. So now you will be paying $4900., because the princpal is slightly less after some payments, at 29.9%. You will be paying back, $9918.00 plus the $4900. left on the balance or a whopping $14,818.00, for an additional 9.5 years. Since you already paid for 1 year thats 10.5 years and $16,186.00 for a 10.5 year old TV.

   Whats the alternative? How about you get a part time job that pays $100. on weekends and work for 49 weeks and save the money. At the end of 49 weeks you will  own the big screen TV, interest free, and will have saved a whopping, $10,000. in interest. First, why do we not teach this in our schools.We could give it a fancy name, like, Financial Education. Yeah, that would be good. That way we would not have to worry about getting that education when we have to go see the credit counselor, for free credit counseling advice on debt consolidation, debt settlement programs, debt audit programs and whether or not you are a candidate for bankruptcy! To subscribe to this blog and get more timely articles on credit counseling, debt reduction and financial education subscribe to our newsletter, it is absolutely free and confidential at: http://freecreditcounselingblog.typepad.com/creditcounseling/. We just need your email address, and you will not be spammed.

Written By:
Steven Ciantro
American Debt Enders
Help@americandebtenders.com
516-476-5903

This article may be reproduced in its entirety provided the entire signature line is used including this permission line.

Do This And Have Money Left Each Month!

      Lack of Financial literacy in the United States is at epidemic proportions. Debt burdens are the highest they have ever been in the history of the country. Home foreclosures are setting new records. Banks are legally able to charge usurious rates of interest which not so long ago would have been illegal except for a Supreme Court decision supporting their right to do it.

The financial reporting on these issues is always looking for a scapegoat. E.g. Foreclosures are high because banks were just giving away money and mortgage brokers are unethical. While there is no question our financial institutions have lost there moral compass. Could it be we need to shoulder some responsibility as individuals? Of course, things happen. Sudden illness, divorce, loss of a job, even I spend money to feel better. Any of the above can create a sudden financial catastrophe. The problem is we live from day to day, financially speaking. Money comes in and money goes out. It is the rare person who is prepared. When times are good, we act as though it will stay that way forever. Spending money we do not have for things we do not need but rather want has simply become to easy.

Believe it or not, there are only three things we must have to live in this world. They are food, shelter and protective clothing. Think about it for a moment. Looking at things in this needs context, will change your point of view in terms of how you spend your money.

      

If you are reading this chances are good you have a debt problem. Take a moment and consider how it came to be. Don’t just say, well that’s easy, I lost my job. Ask yourself, could I have been better prepared for this unexpected situation? Now that I lost my job have I formulated at least a basic plan in terms of how I will pay my bills? What will be the most important to pay and the least important? Is there a way to stop the creditor calls? Do I have a budget? Is the budget realistic? Which bills are my must pays? The answer by the way is that the must pays are your secured debts. Mortgage, car. Credit cards are not secured debts. Your home cannot be sold on the courthouse steps if you can’t pay them, same goes for medical bills and phone bills. Certainly, I am not suggesting you ignore these. They must become part of your new plan. Your new plan must be, how do I get things back in order?

Here is the good news. As badly as you may be feeling right now, it is possible to get things back in order and get out from under debt oppression. Short of contacting us and having a free counseling session with one of our counselors, here are some suggestions.

Make a budget-you can use. Here is a great budgeting software to get you started. http://www.personal-home-budget.com/

Be realistic when you do it. I suggest the following method for tracking your money.

Enter what you think you spend in each category on the worksheet. Then, print it out.

OK, now the real fun begins. Over the next 30 days (try to start at the beginning of a month. Record everything you spend in a small notebook you will carry at all times.

If you buy a soda in the vending machine, PLEASE, write it down. Use your credit

card statements and monthly bills as they come in to record the other expenses you have.

At the end of the 30 day period fill out another budget sheet. Compare the two. My guess

is you will be in for an eye opener. The second sheet will show much higher expenses than the first sheet.

For the final step, analyze the second sheet and take a hard look at where you can cut back. Remember, things you can live without must be at least temporarily eliminated.

If that means cutting back to basic cable, than do it! What about going out to eat? Do you

Use coupons to shop? After you make the changes, do the exercise again for another 30 days. This will set your budget in place. I guarantee that if you do this exercise, you will gain control over your money, and become self empowered to live a debt free life.

Written By:

Steven Ciantro

Credit Counselor

American Debt Enders

Help@americandebtenders.com

516-476-5903

This article may be reproduced in its entirety, provided that the entire signature line including this permission line is included.

Self Help Debt Relief Anyone?

So, you are a control freak who has gotten into a debt problem. OK, so just for kicks you consult with a credit counselor because the phone will not stop ringing, and your spouse has coerced you into seeking help. You reluctantly agree. During the credit counseling session, the counselor listens to your situation and then explains program options and perhaps non-program options. You think the problem with the program options is that they all charge a fee. It is of no relevance to you that the fee is nominal, compared to what the programs are doing for you. You are the type that is blinded by the fee. so, you thank the counselor and explain to your wife that you wish to go it alone. You Mr. control will take this on.

First, is it possible to resolve heavy duty debt issues through self help? Yes. Whether or not it is wise is not something I feel I can just lightly comment on. Self help can work. It is always very stressful, and always demands a learning curve. For example, did you know you can file a bankruptcy pro-se. That means represent yourself. And while people have done it, is it wise? Only, you the individual can make the decision to go with a professional or start reading and learning and do it yourself.

Do it yourself is actually the way my wife and I got our initial education in credit counseling. We could not afford payments of any kind, and had an aversion to bankruptcy. It took years. The debts were enormous by any measure, and it was very stressful. So, if you are going to go it alone, at least let me point you in the right direction.

First, lay out a budget. This is not the time for any big purchases. Nothing but the necessities. Food, shelter and clothing all come first. You need to tighten up while you are in this fight. When it's over, you can think differently. Consider cutting back on the cable TV. How many channels do you really need? Going out to eat should be reserved for celebrating the payoff or settling of a debt. Additionally, if you are going to try to file a bankruptcy yourself, then you need to visit the Federal courthouse nearest you, and ask to see the Pro-Se attorney. This is your tax dollars at work. He cannot represent you, but will provide the paperwork, and guidance in filling them out. No legal advice.

Once, you have laid out your income and expenses and gone into austerity, you need to decide which approach, if not a bankruptcy, you wish to take. Do you want to work out settlement agreements with your creditors or try to pay back in full, or a mix perhaps of both. If you are going to do settlements, my advice is to start saving, so when it comes time, you have the cash to make a one or three payment settlement for far less money then you actually owe. Be aware that, some collectors and creditors will offer long drawn out repayment plans. If you choose to go this route, be sure you can afford the payments and be sure you know when the debt will be paid in full. Will you be paying back interest or excessive fees?

Here is an excellent website for you to visit for self help:
http://debt-consolidation-credit-repair-service.com/forums/ This site is devoted to self help credit and debt problems. You can register and post your questions and learn from others who are in a similar situation. This site should be your best friend if you are going to go it alone.

You will also need to visit: http://www.fair-debt-collection.com/rules/fair-debt-collection-act.html
This is the Fair Debt Collection Practices Act, and you need to read it, as it will explain your consumer rights where third party collectors are concerned. You may also want to read more articles on the blog which this article came from: http://freecreditcounselingblog.typepad.com/creditcounseling/ as it contains some great articles about debt problems. Well, that should at least give you a head start on the process. Remember, you cannot be arrested for owing money in the United States, provided you did not commit fraud, which I'm sure you did not. Good Luck in your quest for debt freedom.

Written By:
Steven Ciantro
American Debt Enders
Help@americandebtenders.com
Credit Counselor
516-476-5903

Debt Management, Debt Settlement Bankruptcy And Your Credit Report

Americans have become addicted to the concept of the "Credit Score". The first question people ask when they are buried in debt and seeking a solution is: How will this effect my credit score? This is a perfectly valid question, however, it is usually asked by individuals with very low scores due to missed payments and mountains of debt, whose credit profile is more of a debt profile. OK, fair enough you say, but what about those individuals who may have very ideal credit scores and still have mountains of debt that suddenly accumulated through real fault of there own.

Here are the answers. If you enter what is commonly called a Debt Management Program, where you will pay back all your unsecured debt in full in about 5 years, at slightly lower interests rates, the impact will be as follows. You will receive a notation on your credit report which will say "account is managed by a DMP". This alone is not used as a calculation in your FICO score. However, your credit score will drop. Why? Because you will be closing your unsecured tradelines (credit cards) and anytime you do this you not only effect your debt to available credit ratio, but also effect negatively your credit history. These two occurrences can effect your score by potentially a whopping 40%. It is not uncommon for Debt Management companies to tell you about the statement on your credit report but not about the rest. As you start to eliminate and paydown some debts your score will then begin to improve.

If you enter a Debt Settlement Program, your credit score will also initially be negatively effected. In this type of program you will be paying a law firm or debt settlement company to be the intermediary between you and your creditors. They will be taking a fee, usually the first number of months of your payments and then put your money into an escrow account to be used to make settlements which they will negotiate on your behalf. Since during the early phase of this program your creditors will not be receiving money, they will look to put negatives on your credit report. This, of course, will negatively impact on your score. Of course, most people who utilize this type of program already have very low credit scores. If you are starting this program with a high credit score, then know that your credit score will drop in the early phases of this program. As settlements are made and your credit report reads "settled as agreed", as settlements are made, then the negative impact of doing the program will lessen considerably and your credit score will begin to improve as each settlement is made. Note: If you enroll in a debt validation/debt settlement program then negatives which were placed initially on your credit report may actually be removed as part of the settlement agreements.

What if you file Bankruptcy? Many misconceptions surround a bankruptcy and its effect on your credit score. If you file a personal bankruptcy, your credit score will drop. Again, as with the previous programs, this may be of little consequence, because your score may well have already dropped due to the debt situation. In all cases, after the bankruptcy is discharged by the courts, meaning, the filing is complete, you will begin receiving in the mail credit card offers. Why? Because the banks know you have to wait a full 7 years to file any second bankruptcy. The initial offers will be at very high interest rates. You will probably also be able to finance a car. Again, it will be at a very high interest rate. After 1 year, if you are wise and use your very expensive new credit wisely, you will after a year get slightly better rates. And, after a second year, even better. In terms of refinancing or purchasing a new home, a foreclosure is much worse on your credit report then any of the listed solutions in this article. Many banks will allow a refinance after a bankruptcy, of course, the rate will be less than ideal.

So, to sum up. Of course all three of the above listed programs will, depending on where you started, negatively impact your credit. Is this a reason not to do them? Not if you are in a dire debt situation.

Written by:
Steven Ciantro
Credit counselor
AmericanDebtEnders
Help@americandebtenders.com
516-476-5903

This article may be reproduced in its entirety, provided the full signature line and this permission line are used.