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Debt Management

The Wrong Ways to Pay Off Your Debt

Being in debt can be stressful, no one denies that. And the pressure can place you in a range of challenging positions, forcing you to cave in and make the wrong financial decisions. Embracing the right ways to pay off your debt is more than mandatory.

But how do you know which are those? Well, you must get acquainted with the practices that should be avoided, and this is what we’re going to discuss in today’s article. Keep on reading to discover the wrong ways to pay off your debt.

Consolidate with a high-interest loan

Debt consolidation makes sense when the financing solution provided by the lender is actually favourable. If the loan terms are convenient for your financial situation, you should go for it. Nonetheless, choosing debt consolidation for the wrong reason and failing to analyse the implications of the term will do you more harm than good.

In the case in which the only loan you can obtain has an interest rate that is higher than your credit card debt, you should leave it aside.

At first, you may believe that your monthly repayments appear lower with debt settlement. Nonetheless, that is only because the loan has an extended timeframe. If you were to calculate the interest you’d end up paying during the life span of the loan, you might come to realise that such a solution is not the best. So, this is definitely one of the wrong ways to pay off your debt.

Misusing your home equity loan

The second on our list of one of the worst ways to pay off your debt: choosing a home equity loan. Even though you may assume that this could be the answer to all your problems, this is not always the case. Of course, there are many situations in which this option actually works. As always, everything depends on each person’s financial conditions.

However, if you’re struggling with high-interest credit card debt, you should pinpoint the root of the problem. For example, your debt situation might be a result of reckless spending and poor money management skills. If you don’t aim at solving the problem from its root, you are prone to end up in this exact scenario in a year or two. So, it goes without saying that a home equity loan won’t work as long as you don’t fix the underlying issue. In the case in which the loan ends up being unaffordable, you might lose your home as well.

Choosing the support of a debt settlement company

Accepting the guidance of a debt settlement company is, without a doubt, one of the most unfavourable ways to pay off your debt. As it is expected, these kinds of businesses advertise as being the solution to everybody’s money related problems. Nonetheless, after you manage to settle your debts, by paying significantly less than you owed, your credit rating is terrible, and you’re back where you started. Not to mention that we’re talking about a lengthy process. Even if your attempt is successful, you’ll have to work on rebuilding your credit score for years.

So, try to stay away from the methods mentioned above. There are other ways to pay off your debt without affecting your credit score in the process. Speak with a financial expert like Australian Lending Centre who offers free consultations on paying off debts and managing people’s finances.Save

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Debt Consolidation

When Is a Debt Consolidation Loan Feasible?

Debt consolidation loans are meant to pack multiple small loans into one that is more manageable. It is one of the most common forms of debt relief. However, not many people seem to know when a debt consolidation loan is feasible.

There are some things you must take into consideration when you’re tempted to amass your loans into one.

So when is a debt consolidation loan feasible?

  1. When you pay extremely high-interest rates

Credit cards, usually, have the highest interest rates. When you need to pay a lot of interest, the debt is growing at an alarming pace, faster than you can repay it. Debt consolidation loans, on the other hand, might offer you better interest rates altogether. If you pay more than you can afford in interest, you should definitely consider a consolidation loan.

  1. An endless number of bills

Getting tons of bills can make it so easy to forget to pay a certain debt. You simply cannot keep track of everything. A consolidation loan is feasible if you’re in such a situation since you’ll be receiving just one bill until you’ve dissolved your debt. This will automatically lead to better management of your time and money.

  1. When the loan is unsecured

If a loan is “unsecured,” it means that it is not attached to any of your assets, like your house and car. Secured ones are certainly not a good idea because if you fail to repay the debt, you could get homeless or devoid of the asset you’ve secured the loan on. Try to stay away from secured loans at all times. It’s just better to find another way to pay your debt without risking your house as collateral.

  1. When you’re willing to repay for a longer time

Debt consolidation loans allow you to pay less than you paid on your previous debts, but that means that the repayment is going to take longer. Are you willing to do that? This can be a hassle for some people who want to get it over with as fast as possible. Still, if you have no problem with that, then you should consider taking such a loan.

  1. When you don’t end up paying more interest

Yes, it is possible to end up paying more interest on a consolidation debt than you would’ve paid for all the other separate loans. Surely, that will impact your credit score if you fail to pay. And before you know it, your credit rating will be so damaged that you will find it even harder to get another loan in the future.

Debt consolidation loans can truly be a great help, but you must know when you need them. Moreover, there are many other aspects that come into play, like the ones mentioned above. So, review your situation thoroughly before you take such a debt consolidation loan because it can have disastrous consequences if you go for it lightheartedly.

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Debt Consolidation

Are You Falling for these Debt Consolidation Traps?

Do you feel burdened by several credit card debts and other outstanding loans and you think debt consolidation could provide some serious relief? Debt consolidation is a new loan that allows you to pay off your multiple balances in one monthly payment. It doesn’t erase all your debts but simply makes it easier for you to repay. So, if you want to have a clean slate for keeps, make sure that you don’t fall into these debt consolidation traps:

Ignoring the cause of your debt problems.

Debt consolidation helps people manage the repercussions of bad debts. But it is just a temporary solution to your problem. Addressing the root cause of your debts, such as your lifestyle, money-management issues and other related things can help you analyze why you sunk in debt and how you can get out of it.

It is important to ask yourself, “What got me into a pile of debt?” Remember that it takes a while before debts become unmanageable. It is almost impossible to come up with a quick solution to internal debt issues when you fail to see where and how it started.

Debts did not grow overnight so unless you come up with a concrete idea with what got you into a financial mess, the same situation is likely to repeat itself.

Australian Lending Centre has in-house professionals to help you in retracing your financial actions. We can help you with our debt management plan and debt consolidation loans to deal with your present debts as we help you identify your spending habits.

Perhaps you were taking high-interest loans without knowing it or you are not paying your loans right. In other cases, the problem could be as simple as forgetting the due dates or the existence of debts itself.

Not making a proactive effort in searching for the best consolidation loan.

Here are some factors that you need to consider when choosing a loan consolidation program:

    • all of your outstanding debts
    • interest rates
    • lenders’ willingness to negotiate a lower rate
    • consolidation options

Consolidating debts has its own implications. Some lenders offer rates and fees that creep up over time. Others will charge you hefty fees that may put your assets in line in exchange of deceiving interest rates.

Australian Lending Centre gives you different options to pay for your debts. If you want to pay a lump sum to settle all your debts for less than what you actually owe, we can help you do that. You can also talk to us about our debt management program and see whether or not it can work for you. A debt management plan usually involves making an agreement with your creditors to consolidate the full amount of your loans. The negotiation is successful if you get lower interest rates or longer repayment period.

Thinking that you are finally out of debt.

Debt consolidation is still a loan. While you no longer have to deal with angry collection calls and you are not pestered with high-interest credit card bills, you cannot go back to your old habits. One of the big debt consolidation traps is forgetting he your debt problems were caused in the first place. Avoid falling back to maxing out your credit cards once again. Don’t give in to the temptation of charging all of your credit cards with zero balances once again, especially if there is no urgent need to do so.

Bear in mind that you still have a substantial amount of outstanding debt. So, if you cannot close most of your credit cards leave them at home and put only your low-charging credit cards in your wallet for emergencies.

Call us today!

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Credit Card Consolidation

Credit Card Spending was up in 2010

2010 saw Aussies coming out of the Global Financial Crisis (GFC) with their credit cards surging.  In July, there was a banking report that stated we charged goods to our credit cards an astonishing 131 million times for the month.  This figure is greater than any July in history and 3% higher than July 2009.

In addition to putting more on our cards, we are also being more careless about increasing our debt.  In this same report in July, Aussies owed $47.8 billion which is approximately $3,268 per credit card.  These figures were up 6.5% from 2009 or $159 per card.  These are signs Australians spent 2010 thawing from the financial crisis and seem to be spending at a fast rate.  If these figures continued in trend, Aussies may find themselves deep in debt.