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How does a debt management plan work?

If you’re currently struggling to meet your unsecured debt repayments, you may be thinking about arranging a debt management plan. This is an informal agreement that reduces the amount you pay towards your unsecured debts each month, in order to make them affordable again.

You may qualify for a debt management plan if:

- You cannot afford your existing unsecured debt repayments
- You would still be able to repay everything you owe within a reasonable period of time if your payments were reduced
- You can still commit to regular monthly payments

Step-by-step guide to debt management

Talking to a debt adviser
Before you try to arrange a debt management plan, you should talk to a debt adviser to discuss whether it’s the right option for tackling your debts. There are a number of solutions that can help with different circumstances, and it may be that another solution is more appropriate.

Planning your new repayments
If your adviser feels a debt management plan would help you, they’ll help you put together your new repayment plan. Your new monthly payments will be calculated by looking at what you can afford after you’ve covered all your other essential costs (your ‘available income’).

To begin with, your individual payments to each lender will normally be based on how much of your overall debt is owed to each lender. So if you have three unsecured lenders, and you owe 43%, 37% and 20% of the total debt to each of them respectively, the same proportions of your available income would go to each of those lenders each month.

Your debt management plan begins
Assuming you and your lenders can agree on repayments, your debt management plan can begin. You’ll keep making payments through the plan until your debts have been cleared, or it could end earlier if your circumstances improve enough for you to make the original payments again – or if you or your lenders aren’t happy about the way it’s working out.

Things to remember

A debt management plan could be a big help if you simply can’t afford your unsecured debt repayments, but there are disadvantages. Failing to make the debt repayments you originally agreed will impact on your credit rating, and your reduced repayments will also mean that your debts take longer to pay back. The longer repayment period could cost you more in interest overall, unless your lenders agree to freeze interest and other charges (which they often do).

4 February 2011 at 09:58 - Comments

Your Questions About Loan Modification News

James Your Questions About Loan Modification News

James asks…

Half of U.S. Home Loan Modifications Default Again. Should we get ready for another meltdown?

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVYxPZ56vjys

The perfect storm is rising….Obama set the final stages for that with ObamaCare.

Joe answers:

No, of course not. We’ll just keep printing money, and bailing people out.

<<<<Typical liberal thought pattern

Oh, and while we're at it.. Isn't it time to raise the minimum wage again?

Daniel Your Questions About Loan Modification News

Daniel asks…

Better mortgage deal for my mom?

Since loan modifications are everywhere in the news these days can anyone help us? My mother pays 1600 dollars monthly to our lender with only a hundred dollars principal. So that means she pays 1500 interest! But the lender says it makes sense because we owe more than 300k.

Joe answers:

Any additional payment she makes, 100% of the extra amount will go to principal.

John Your Questions About Loan Modification News

John asks…

What do I tell countrywide when updating my financials?

I am behind on my mortgage and I have the sub prime/arm loan you hear about on the news. When I called C.W they wanted me to update my financial info. Do I make it like I break even every month or should I be up a certain amount of money. When I told them my finances, they calculated that I was negative per/month and said I didnt qualify for a modification. What should I say?

Joe answers:

The truth. First you should go over your budget and see where it could be cut. If you can show it is possible to make a reduced payment, you may have a shot at modifying the loan.

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18 May 2012 at 07:15 - Comments

Your Questions About How To Get A School Loan For Graduate School

Sharon Your Questions About How To Get A School Loan For Graduate School

Sharon asks…

How do I pay for private graduate school?

I’ve applied to grad school and I’m still waiting for responses, but I don’t think I’m going to get into the state schools I applied to, which are about $15,000 tuition a year. I already got accepted into private schools which are about $35,000 a year average. How did anybody pay for grad school? With loans, is it worth it? It seems to me it would be if I went to the state school, but I’m not so sure about 35K a year. Maybe I should just forget it?

Joe answers:

It really depends on:
- What your motivations are for going to grad school
- What you’ll end up making when you come out
- Whether or not you really need that particular grad degree to get where you want to in your career* (I want to talk about that later)
- The prestige of the program

For example, if the $35k per year was for Harvard Business School or Yale Law, then yes, it’s worth it to go, because the earnings potential coming out of those programs is amazing.

But if you’ll be getting a masters degree in social work, then it’s more complex. No, you won’t earn huge money just out of the program, but you do need that degree to be able to work at the level you want to in that field. So for some, that makes it worth it.

But for a masters degree in English? That’s a more personal decision. Most people won’t be using an MS in English to get a job. It’s not going to wow most employers in many fields. So it’s a more personal decision, in those cases.

* Here’s where I want to talk about whether or not you really need that grad degree. I see a lot of students go on for a masters degree in, let’s say, liberal arts, thinking that having a masters in any field will get them more $$$ and jobs. That’s not the case. You need to investigate what the specific masters you’re looking at will do for you in your field or in other fields. You need to look at the value of the subject you’re studying as well as the school you’ll be studying it at, and then judge.

In any case, talk to the school about applying for research and teaching assistantships, as well as any other sorts of aid/scholarships they may offer. Also investigate any independant, private scholarships for grad level study in your field.

But yes, for the most part, people pay for masters degrees (as opposed to PhDs) with loans. So the program really needs to be worth it to you, both in terms of your career and personally.

Mary Your Questions About How To Get A School Loan For Graduate School

Mary asks…

Student loans for graduate school?

My parents are paying for my college tuition for 4 years. But after that they won’t pay anymore. I have to go to graduate school before I can get a real job. I don’t currently qualify for financial aid because my parents make too much money I guess. How or where should I apply for financial aid when my parents have the money but won’t pay?

Joe answers:

As a graduate student you will be eligible for $20,500 of student loans per year from the fed. Government.

$8,500 of these loans can be subsidized (interest paid by the govt while you are in school)

To qualify for the subsidized loans you need to demonstrate financial need, which you probably will if you go into graduate school straight out of undergrad. As the person above me stated, as a grad student you can file as independent, and unless you make a lot of money while you are attending school (which i doubt haha) then you will demonstrate enough financial need to get the subsidized loans.

Paul Your Questions About How To Get A School Loan For Graduate School

Paul asks…

Will guys not want to be with me because of my school loan debt?

I went to college and graduated leaving me with 40,000 of school loan debt. I went an extra year of post graduate school. Anyways i am wondering does my debt automatically have to become my husbands debt if i ever get married? I am ashamed of my debt and really wish i NEVER went to college right now. It is hard finding a good job even with this sorry degree. I mean i hear of people avoiding others with alot of debt……….but i mean if you end up married………why can’t i just work to pay down my loans and HE not worry about it. I probably won’t be able to help out on getting a loan for a morgage but…………..well can anyone explain this to me? Anyone been in my situation? Advice please. And how does this marriage thing work when someone has debt???

Joe answers:

Sounds like you skipped the class “Get A Life 101″
You need to get over yourself. Welcome to what we all are face in life at one time or another.
Go shopping!

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17 May 2012 at 07:45 - Comments

Your Questions About How To Fix My Credit

Susan Your Questions About How To Fix My Credit

Susan asks…

How do I fix credit score? ?

What is the best and quickest way to fix my credit score? I plan on getting all 3 credit reports, and fixing errors. Also have items in collection due to divorce. What do I pay off 1st. Need new car and can afford monthly payment, but need to get into loan and do this 1st. Thanks in advance.

Joe answers:

Find out your credit with those credit reports.

Get a big piece of paper and write all your debts on it, with the interest rate next to them. Rank them with the highest rate at the top and the lowest rate at the bottom.

Now, to pay them off, you need to pay extra on the highest rate debt and the minimums on the others. Do it in that order. When the highest rate debt is clear, move your money to the second highest, and keep paying them off til you are debt free.

Now, I would go get some financial counselling about the items in collections. Laws and rules differ wherever you live, so find out from an expert. Since they are in collections, they might not have any interest rate, and if that case, just pay the minimum on them you need to.

Get a cheap secondhand car. That will set you back less. Take an expert friend with you when you make the purchase, and get it checked out for roadworthiness.

You might have some serious trouble getting a loan if your credit is shot to bits right now. Work on improving your debt burden. Once it is clear, then you can get a credit card with a low rate or an interest free period, and make regular purchases with it. When you use it, pay it back the same day, paying extra. So if you spend $50, pay back $52. Try internet or phone banking for this. Doing this will improve your credit history over time. Be prepared for it to take months or even a couple of years for your credit history to come back up.

In the meantime, get your debt under control, and don’t overborrow for the car. Since cars go down in value, money borrowed to buy them is ultimately wasted. You don’t get your money back when you resell the item. So stick to modest vehicles. A smaller vehicle, perhaps ten years old, will give you good fuel economy and won’t cost you heaps in interest. I personally wouldn’t touch a car loan with a 12 foot barge pole, but then, I don’t mind driving a 30 year old car.

Best wishes

Mary Your Questions About How To Fix My Credit

Mary asks…

How to fix credit score of 450?

I have tried all the internet quick fixes and nothing has worked. I became very ill and had no insurance and it killed my score, and suggestions?
Last year I became sick and was only able to pay my current bills, ie, rent, utilities, child care etc. no junk spending. Once the medical bills hit it was to late. I then took on raising my 2 nephews with no extra income and was unable to apply for assistance as they said my income was to high

Joe answers:

Having a good credit score now is more important than ever so I’m glad to know you’ve taken an interest in fixing your financial viability!

Here are my 10 steps you can use to build your credit score quickly. I raised mine to well over 700 points fro 500 using these steps in less than a year:

1. Know and Track Your Credit Score (be sure to sign up for the free trial of your credit score monitoring listed below. It really helped my get my score up.)
2. Never Miss a Payment, Starting Today
3. Never use more than 20% of your Available Credit
4. Keep Credit Cards that Have No Annual Fees Open For as Long as Possible
5. Extend Your Credit Limit on Cards You Already Have before You Get New Ones
6. Get Credit Cards that Have CashBack Rewards to Contribute to your Balance
7. Transfer Your Balance to a Credit Card with a Lower Interest Rate and a Higher Available Credit-
8. If You Think You Are Going to be FORCED to Pay a Bill Late Ask for an Extension or Payment Plan
9. Take out a Small Personal Loan and Repay it Over a Year
10. Ask Someone With Good Credit if They will Account Shadow you

When you’re trying to build a solid credit score it’s important to get a comprehensive view of what is actually effecting it…

Your Credit Score (also known as your MyFico score) is calculated with the following breakdown:

* 35% -> History of Payments
* 30% -> Debt to Credit Ratio (available credit)
* 15% -> Credit History (length of open accounts)
* 10% -> New Credit (are you expanding your credit)
* 10% -> Credit Types in Use (varied credit types from loans to credit cards)

If you excel in one area and lack in another, only fixing the areas which you lack are going to improve your score.

You can read more about these tips on my blog: How Can I Increase My Credit Score

* http://millionster.com/articles/debt/increase-fico-credit-score/

Hope this helps!

Ruth Your Questions About How To Fix My Credit

Ruth asks…

Does anyone kno how to fix credit for someone who dosnt have any money? I know its bad but can you please help

I am 13 and my parents credit score needs to be fixed im desparte I have tried everything please give me a way i can fix it without having to pay them off or i mean make them pay it off because wear having a hard time moving into a place. If you can’t say it on hear email me imteetee2004@yahoo.com thank you

Joe answers:

Let them read over this link, lots of useful information in there.

Www.creditinfocenter.com/rebuild/

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16 May 2012 at 08:00 - Comments

Your Questions About Credit Repair

Susan Your Questions About Credit Repair

Susan asks…

who is the best Uk based Credit Repair company to use to remove late payments marks on credit file?

i am looking for a Credit Repair Company in the UK that can help me remove late payment marks from my credit file.

these late payments are now 12 months old but it is still effecting my credit report.

Joe answers:

If the late payments are legit then they can’t be removed. Credit repair companies don’t do anything that you can’t do yourself. They will dispute the late payments. The marks will temporarily disappear from your report. The creditor has a set number of days to validate. Most validate within a few days to a couple of weeks. The negative payments will then begin to show again.

Your best bet would be to try a good will letter to the creditor asking them to remove the late payments from your report. It is your credit and you earned it so you will be asking a huge favor of them. Be polite.

Ken Your Questions About Credit Repair

Ken asks…

Is there any way for a credit repair company to set up an account to pull credit for its clients?

I am trying to start a credit repair company but I have not found a company to go through to pull credit. All the companies seem to only work with mortgage companies. HELP!

Joe answers:

I agree with the poster above, why not have the clients pull their own accounts (they can do this for free three times a year).
Be ware however, that credit repair is a hard market to serve….most often they want YOU and your company to be magicians….
Is there another kind of business that you can run on the side…I really think that this business will be more trouble than it is worth.
With that said, I was of the impression that anyone can pull anyone’s credit with the subject’s permission. Work with a lawyer and have them create a consent form for you. I just checked my credit report and it was pulled LITERALLY 12 times in the past 7 months. 9 of these pulls were ‘soft pulls’ meaning that I did not initiate any of them.
Saying that to say that there is a way. I just dont know what it is

George Your Questions About Credit Repair

George asks…

How well does the credit repair company work? Does any body have any good/bad experience with their services?

There’s so many credit repair co. out there and I don’t know which have a good credentials or does it really work like they advertised?

Joe answers:

If you are looking for the best credit repair site, check out this site

http://best-credit-repair-service.com/

Here you can improve your credit score rating and reduce your debt with the help of an expert.

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15 May 2012 at 08:15 - Comments

Your Questions About Student Loans Bankruptcy

Donna Your Questions About Student Loans Bankruptcy

Donna asks…

If you file for bankruptcy will your student loans go away?

My sister just got married about 3 months ago. She had $15,000 in student loans and he said he had $15,000 in student loans too.

She recently found out that his actual debt is about $50,000 or more. I told them they need to see a professional to really have their situation checked out. They are newlyweds with one car each and they rent a house and so I don’t think they have any assets.

Would filing for bankruptcy make their loans go away?

Joe answers:

No. Only if repayment is causing you financial hardship, but in most cases, bankruptcy won’t get you out of paying them.

Mandy Your Questions About Student Loans Bankruptcy

Mandy asks…

Question about bankruptcy, student loans, due hardship, credit cards…?

My husband is planning on filing for bankruptcy. He has student loans of about $100,000 & has already exhausted deferments. We have to prove due hardship for student loans to be considered. I have about $5000 in credit card debt. My family has offered to help me pay off my debts, but i’m wondering if my debt will be considered when he attempts bankruptcy. Would it be in our benefit for me to have this debt to prove due hardship? Would my debt be covered if he did get bankruptcy, so I should save my family the $? Thanks for the feedback.

Joe answers:

Student loans cannot be discharged in a Chapter 7 BK filing. Student loans can be included as part of a Chapter 13 BK filing, which is a court supervised repayment of the debt.Chapter 13 does not discharge debt…it does make paying back the debt easier as it freezes interest rates at a low level. If he files for Chapter 13 then you can most likely include your credit card debt…this would simply be added to the amount that you’d have to pay back under the court supervised repayment plan.

Joseph Your Questions About Student Loans Bankruptcy

Joseph asks…

If I file bankruptcy (not to include student loans) is it likely that I can get *private* student loans later?

I have seen many people here ask if they can get student loans after a bankruptcy, and I have seen many people answer that yes, it is possible and the federal loan application process does not consider bankruptcy. However, I need to know if a private lender (such as Sallie Mae) follows the same rules (i.e. doesn’t consider credit or a bankruptcy) in the application process? I live in California.

Joe answers:

Call and ask financial aid, I had no problem with getting government student loans, but a couple of years had gone by and this has been 9 yrs. Ago. Unless your in serious debt, I would consider other options, there are also some new repayment options for your student loans as of July 1. 2009. Whatever you do, do not default your student loans. Of course bankruptcies will not do away with government student loans or IRS debt.

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14 May 2012 at 08:30 - Comments