Martin Lewis- Debt advice

Money Saving Expert Martin Lewis on whether debt consolidation is really worth it

Where do you go to find debt advice?

Apr 10, 2008 by Urban Kudos | Posted in Personal Finance

We all know that debt advice should be impartial. Other then government organisations, who do you trust to give you reliable debt advice?

Go to the public library and read a few books on getting out of debt. You can solve your own problems without spending money you don't have on "credit counseling." This is a very empowering option and you will use your new-found financial management skills for the rest of your life.

There are no "government organizations" offering financial services, debt counseling, etc.

There are non-profit counseling organizations, but be careful as many organizations claiming to help people become "debt free" or manage your credit card debt are organized as "non-profit organizations" but are expensive and hazardous to your financial health. There are too many and new ones crop up too frequently to track their names and too many ways to scam people to begin to list them all.

Where can I get free legal advice regarding credit card debt?

Apr 21, 2007 by Amy | Posted in Credit

I'm searching for a web site or phone number to get free legal advice for credit card debt. I need a place that will give me an immediate answer. Thanks for your help.

In most areas, attorneys will give you a free consultation. As this is a credit card debt, you may want to look for someone who does collection work for companies, as they are more experienced in debt law. A lot of "general practice" lawyers have not impressed me on their knowledge.

Who would I see for general financial and debt repayment advice?

Oct 20, 2008 by celisa | Posted in Personal Finance

I just graduated college and very soon I have to pay back my school loans. I want to look into consolidation, but I don't know if it's a good option and how to even consolidate. I want to know my options. I also want advice about future education investments as I'm going to further my education. Besides that, I just want general financial advice about how to manage my assets, being a recent college grad with a temporary job.

Who would I see about that? What's their title? What do I look up in the yellowpages?

Please do not consolidate. It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. There is a better way.

A. Have a garage sale and sell anything that you no longer need or want.
B.Get a temporary part time job, if you have one, get another. The holidays are coming and there will be plenty of temporary jobs available. It is better to have a no fun year or two than a no fun decade.


Here is a plan that can help you. If you work the plan, the plan will work for you:
1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut your spending and live on less than you make.

2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.

3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

To start :
Debt #1 (highest interest): minimum payment+ extra payment
Debt #2 (middle interest): minimum payment
Debt #3(lowest interest): minimum payment

Debt #1: paid off
Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
Debt #3: minimum payment

Debt #1: paid off
Debt #2: paid off
Debt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.

5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.

You can do it and it isn't as hard as you think. Just follow the plan.

I need advice about an old debt and my bank account?

Sep 11, 2007 by thomashonecker | Posted in Credit

I found out today that a hold was placed on my bank account with a large debt amount in my balance. When I went to the bank to inquiry about it, they said that a law firm put a hold on my account, that I must owe someone money. They gave me the number to the law firm, to speak to them when I called they said that I owe $1000 and change for an old credit card that I thought I paid up. My question is that can the legally do that put a hold on my bank account with out even contacting me first, I moved since I had that credit card but if they could find me and put a hold on my account, they could have spoke to me first I feel. Could anyone give advice on this matter and point me to sources where I can find out about my rights and legal options in this type of situation?

It sounds like they were able to obtain a judgement against you, after which they can take legal action to sieze assets or get money taken out of your paycheck. They found your bank account using your SS# but that doesn't mean they found where you live.

Call you bank and ask what authorization was used to put the hold on your account. They should be able to give you the information as to where the hold came from. Then its time to deal with the company to make arrangement to pay the debt. If there is a judgement, you will probably have to pay it before the hold is released.

Good luck!

In falling deeper in debt but pursuing my dream. Any advice on how to stay afloat?

Dec 19, 2006 by nappyhappiness | Posted in Credit

I've done the corporate thing, and although it made me a decent living, I was miserable. So I made the commitment to myself to pursue my music career, ALL THE WAY. Not trying to find time after a long hard days work at a stuffy corporation then come home EXHAUSTED and try to muster up some creativity to write some music. I just wasn't working at all. Since i've been unemployed my craft has gotten stronger, and I know its only a matter of time until it really starts to pay off (i've made a few bucks here and there, but it's not steady). Being unemployed is really starting to take its toll. I have montly benefit checks that come in but its not nearly enough to pay my ever growning debt. Any advice on how to take control over this situation? I know that getting a job is the most obvious choice but getting a job will take away from my music, which I am working full time on. It's tricky but I know it can be done... I just don't know how!
I recieved a BA in Music Business. When I completed school I interned for a major record company and then got hired there within a few months. Education is important, but to a certain extent. I already have a decent looking resume with impressive work experience. I don't need any more, that is not what is important to me. I'm not looking to get rich I'm just looking for financial freedom- no longer a slave to creditors. Once I have been set free I will then have the relief I need to take my music career, and overall self happiness to another level.

I know you're not going to like my answer but we have to be real here. You don't want to get deeper and deeper in debt. It's OK to dream but follow your dreams on your days off. On the weekend or when you get off work I know you're tired but following your dreams comes with great sacrifice as you know already.

I need some advice about debt settlement?

Jun 26, 2008 by wonkeee2008 | Posted in Credit

My husband and I have high credit scores and are not behind on our bills. But are overwhelmed with the amount of debt we carry, credit card debt that is. Should we resort to debt settlement or continue to make minimum payments for the next five years. At this point we can only make minimums. Any advice is appreciated. Any rude remarks will be reported. Thank you

Great question! The answer depends on your situation, your goals and what's most important to you.

Let's start with your situation...

The fact that you have high credit scores and have not fallen behind means you have something to lose (your perfect payment history) if you choose debt settlement.

But, let's first get clear about exactly how your credit will be affected, because along with the negative impact to your payment history, the other two important areas of your credit, your debt-to-income ratio and utilization, are both greatly improved through debt settlement.

Remember, credit "score" is not everything... Credit "worthiness" (your ability to get a loan) is more important, especially long term.

A question to consider is this: What do you do your credit for?

Most keep their credit in good shape so they can get into deeper and deeper debt, only to pay more and more interest.

But is your credit really "good" right now?

Having a perfect payment history (about 35% of your credit) and a good credit score is nice, but other factors could be crippling you.

Let's take a look...

Debt-to-income ratio is the amount of money that you’re obligated to pay each month towards your debt (that’s your credit cards + your car + your student loans + your mortgage + whatever you have = that monthly amount) vs. your net monthly income.

Now if that monthly amount is under a third of your net income then that’s GOOD. If it goes over a third then it becomes BAD and it's a problem.

You can have a perfect payment history (never have missed a payment), but if your debt-to-income ratio is too high then you’re effectively crippled when it comes to credit worthiness, or your ability to get a loan. You’re not credit “worthy”, even though you may have a good credit “rating”.

You want to keep your debt-to-income ratio at or under a third to be in the best light with lenders. Over 45-50% is crippling to your credit, regardless of score, because you simply cannot afford any more debt.

If your debt-to-income ratio is too high now, then concerns about debt settlement affecting your credit simply don't make any sense.

The third area of your credit to consider is your "utilization" or "debt-to-credit-limit ratio". The ways this works is very interesting. This is probably the least known factor that affects your credit, but is just as important as payment history to your score.

Each account you have has a credit limit and a current balance. If that current balance is less than 50% of your credit limit, that’s a positive factor. If you have an account that’s over 50% "utilized" (balance over 50% of the limit), then it's a negative factor and bad for your credit worthiness. If your balances get to the limit, or over the limit, then this is a crippling factor to your credit.

Take a look at your accounts.. are any balances over 50% of the limits?

Keep these three factors in mind when evaluating your credit worthiness: payment history, debt-to-income ratio and utilization.

However, most of the time, worrying about your credit rating when you’re drowning in debt is like worrying about how your front yard looks when you house has just burned to the ground.

I don't know how much debt you have or what your interest rates are. These are critical factors in your decision.

The suggestions about calling to lower your interest rates are good, however, since Oprah popularized this strategy in early 2006 with her "Debt Diet" series, millions of people have called their creditors to ask for their rates to be lowered, threatening to transfer balances etc... The reality you'll find today is that this rarely works anymore, but may be worth a shot.

Most important is this, the "BIG IDEA":

STOP paying interest and START EARNING interest, ASAP!

This is critically important if you ever want to retire, and makes all the difference between a life of wealth or a life of slavery (seriously).

You mentioned paying minimums for the next five years. If you could pay off your debt in 5 years with minimum payments, then a) you have a small amount of debt and low interest rates, and b) you don't have enough debt for debt settlement.

Take a look at the time it takes to pay off debt with minimum payments if you are paying what the average American pays in credit card interest...

Number of Years to Pay-Off Credit Card Debt at 19%

Debt: Pay Off (Principle & Interest): Number of years at 19%

$10,000.00 $26,276.59 42 years, 9 months

$15,000.00 $55,370.41 48 years, 11 months

$20,000.00 $74,464.22 53 years, 3 months

$25,000.00 $93,557.98 56 years, 7 months

$30,000.00 $112,651.77 59 years, 4 months

$35,000.00 $131,745.58 61 years, 8 months

$40,000 $150,839.39 63 years, 6 months

$45,000 $169,933.22 65 years, 6 months

$50,000 $189,027.02 67 years, 1 month

$60,000 $227,214.61 69 years, 10 months

$70,000 $265,402.22 72 years, 2 months

$80,000 $303,589.81 74 years, 2 months

$90,000 $341,777.43 76 years, 0 months

$100,000 $379,965.06 77 years, 7 months

$110,000 $418,152.62 79 years, 0 months

$120,000 $456,340.27 80 years, 4 months

$130,000 $494,527.82 81 years, 4 months

$140,000 $532,712.48 82 years, 8 months

$150,000 $570,903.04 83 years, 8 months

While credit is important, CASH IS KING, and CASH FLOW RULES, right?

So for you to make the best choice, you and your husband must decide what's most important: credit or cash flow.

Consider your goals.

If credit is ultimately most important to you two now, then you must cut your expenses to the bare minimum and put EVERY DOLLAR you can towards paying off your debt in an accelerated fashion in order to get out of debt ASAP.

You'll need an "accelerated debt pay-off plan" if this is the case...

Accelerated debt pay-off plans come in three main types. In each, you pay the minimums on each account, and put all the additional money you can afford towards ONE account. This is often called your "margin". The three approaches are:

1) List your debts in order of the highest interest rate and pay down the highest interest account first until it's paid off, then pay down the next highest interest rate account and so fourth, until your debts are eliminated...

2) List your debts in order of the current balance, paying down the account with the lowest balance until it's paid off, then pay down the next lowest balance account, etc., until your debts are eliminated...

3) Take the current balance of each account and divide it by the minimum payment (= division number), then list your debts by this division number from the smallest to the biggest, paying down the account with the lowest division number until it's paid off, then pay down the account with the next smallest division number, and keep going until you're debt free...

Any of these three approaches will usually get you out of debt in about 5-7 years IF you are committed to budgeting and putting as much money as possible towards paying off your debt. It requires self discipline and long term commitment. You will have no negative affect on your credit this way.

However, you mentioned you are overwhelmed with the amount of debt you have and can only make the minimums, so an accelerated plan doesn't sound like a solution to get you out of debt anytime soon.

Debt settlement can most likely get you debt free fastest. My average client is completely out of debt in 28 months.

Usually, debts are cut in half, and often payments are cut in half as well. Payments are almost always significantly reduced during the program.

While debt settlement has a negative impact on your payments history (more so if you've never been late, not so much if you've already fallen behind), debt settlement also has a POSITIVE AFFECT on your debt-to-income ratio and utilization because the accounts are paid to a zero balance on your credit report.

You can also do credit repair and credit rebuilding (usually within 6-12 months) after you complete debt settlement.

Of course, all that money you're currently paying in minimum payments will be back in your pocket, usually within 24-36 months. What would you do with all that extra cash flow? Investing these savings to EARN INTEREST can make all the difference for your financial future... and that's the BIG IDEA!

If you are shopping around for a debt settlement program, BE CAREFUL! The industry is filled with ignorant sales people who will steer you into a "bad program" for their own gain and your detriment. I'm serious, watch out...

*** Read this Debt Settlement WARNING: http://ezinearticles.com/?Debt-Settlement-WARNING!&id=1275007

Hope this helps!

Where can I find debt advice?

Jul 19, 2006 by rockinrobin523 | Posted in Personal Finance

I am looking for someone ( I am willing to pay a fee) that will just talk to me about my current financial situation. I just need a fresh perspective. I don't need to hire anyone to solve my problems or "Fix a budget" or give them my check so they can pay my bills. I already know how to do that. I just want to talk to someone. I keep hitting brick walls and I just want to talk to an outsider with a new look. Maybe tell me what I am missing? I know there is a solution to my financial problem, I'm just not coming up with it. Any ideas?

Credit counseling is a process offering education to consumers about how to avoid incurring debts that cannot be repaid. This process is actually more debt counseling than a function of credit education.

Credit counseling sometimes involves negotiating with creditors to establish a debt management plan (DMP) for a consumer. A DMP may help the debtor repay his or her debt by working out a repayment plan with the creditor. DMPs, set up by credit counselors, usually offer reduced payments, fees and interest rates to the client. Credit counselors refer to the terms dictated by the creditors to determine payments or interest reductions offered to consumers in a debt management plan.

Debt advice please regarding repayments?

Sep 23, 2008 by Dan | Posted in Personal Finance

Ok i would like some advice on where i stand with a debt owed from a year back for aprox £370. I am currently unemployed after leaving for health reasons with a heart problem and currently on benefit. What can they do in regards to requesting payment. I am willing to pay but i cant afford much until i recover.
Could you please define CAB? or private message me how to do this so that i can at least sleep easy and not tell my girlfriend as she'd worry.

I am considering entering a debt management program. Anyone have any advice?

Dec 06, 2007 by kas5292 | Posted in Credit

I am considering entering a debt management program because I am way over my head in credit card debt. I know it may not be the best solution but it seems I keep putting it off, getting no where paying down my debt. Does anyone have advice or comments?

Debt counseling is the best way to go instead of debt consolidation (which simply means one borrows more to get out of debt).
Here is a link to the FTC approved agencies. Some may charge a small fee and may not (depends upon your situation).
This will give you breathing time to catch up

http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm
Govt approved credit counseling agencies.

Good luck and hope this helps.

I am 25,000 in credit card debt. I own my home (no equity) - need help with loan advice or debt consolidation?

May 07, 2008 by legacygt48@sbcglobal.net | Posted in Credit

I have been transferring balances and making payments but I would like to know if there are any viable loan options to turn it into one payment without killing my credit score. Any help would be appreciated.

I don't understand how you own a home but say you have no equity--of course you do. Do you still have a mortgage? My hubby got us in this situation years ago, we were actually seperated at the time. When I came back it was to find that he owed money to a bunch of lenders who were charging outrageous interest.
We went to the bank that holds our mortgage and they were more than happy to consolidate all the loans and even asked why we had not come to them first. Good question. The interest at the bank was 10% lower than what my guy had been paying.
Happy to say we are out of debt and the house will be paid for in 3 years, yeah!

Debt Directory

DebtAdvice.org
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