Debt Consolidation Tips

Debt consolidation consists of rolling all of your debt into one loan or line of credit. This consolidation allows you to make one monthly payment at one fixed interest rate. Usually the interest rate on the new debt is lower than the original loans, which creates a long-term savings. Following some debt consolidation tips and guidelines can help ensure that your debt consolidation is a successful venture.

Get a Big Picture View of Your Debt

In order to understand the debt you’re in, make a thorough list of all the debts you have and want to consolidate. Include the interest rates for each debt and the balance you owe. Creating a written list allows you to see where your spending weaknesses are and account for every dollar of debt. The written list lays out a road map for you to determine which debts should be tackled first, allowing you to put together a plan of attack on consolidating and getting rid of high interest debt first and then working your way down the list.

Select the Right Company

Although you can consolidate on your own, a debt consolidation company is an option for some who cannot manage consolidation alone. Shop around for a company that is well established and highly experienced. Debt consolidation companies charge fees to help you create a written plan on how to consolidate debt and then to help you implement the plan. Make sure that the fees are not exorbitant. Ask the company for references and then contact the references, if possible. By law, debt consolidation companies have to provide you with a written agreement that spells out your working relationship, including fees.

Choose the Best Plan for You

Several debt consolidation options exist. Credit card counseling can help you to lower your interest rates on credit cards in order to pay off the balances more quickly. Credit card consolidation places all of your debt on one lower interest rate credit card. A debt management plan involves you depositing a sum of money with a debt consolidation company each month. The company uses that money to pay off your debts on a schedule that they have negotiated with your creditors. A consolidation loan is a personal loan to pay off all of your creditors, leaving you with just one payment each month.

Be Patient

The debt did not accumulate overnight and it is not going to disappear overnight. Once you have a plan in plan, stick with the program until the debt is completely paid. Keep track of the total and watch the amount come down each month. Each payment brings you closer to financial freedom.

Make Payments on Time

The debt consolidation process is a prime opportunity to train yourself to be wiser with money than you were previously. Put your monthly budget on paper, so you can see income and expenses. Make every effort to pay your bills on time, every month. Check with your former creditors to ensure payments from the debt consolidation company are on time. If the debt consolidation company is not paying on time, it can hurt your credit further.

Stop Spending

Many think that debt consolidation solves financial problems. It does not. It helps a debtor pay off outstanding debts at a specific time in his/her life. Debt consolidation does not account for continual spending after the process has begun. Some programs offer financial counseling to help you build appropriate spending habits, but the overall goal of debt consolidation is to get you out from under the current debt. Do not use this opportunity to go out and spend more. Instead, look at the habits that caused your debt and train yourself to avoid those pitfalls.

Employment Credit Checks

Most people know that when they apply for a loan or credit, the lender or creditor is going to check their credit. What may not be common knowledge is that some employers also run a credit check as part of the employment process. When a potential employer runs a credit check on a potential employee, it is typically called an employment credit check.

Types

A potential employer has the right to pull a credit report or to run a credit check on an employee before offering employment. An employer also has the right to run a credit check before deciding to promote the employee, give the employee a raise or deciding whether to continue employment of the employee. According to the Employee Issues website, an employer has the right to run a credit check because there are currently no laws that exist that prohibit discrimination based on the status of the credit report.

Identification

The employer requests credit information from the three credit agencies: TransUnion, Equifax and Experian. An employer is typically privy to pulling a full credit report on an employee, which can include personal information and information pertaining to credit and debt accounts held by the employee. Information the employer can obtain from a credit report may include the year the employee was born; current and previous addresses; marital status and name of spouse; names of current and former employers; bankruptcy, liens and judgments; child support and alimony obligations; payment history on any account listed; a credit score; and other companies that have checked the credit report.

Permission

The Fair Credit Reporting Act does govern how employers can obtain a credit report on employees. An employer has to inform an employee that a credit check is going to be run and the employer has to obtain written permission from the employee. If an employee does not provide consent to the employer to check credit, the employer won’t be allowed to run a credit check, but this may also mean the potential employee does not get the job and an existing employee may not get to keep their job.

Use

The Fair Credit Reporting Act also requires employers to provide the employee with disclosures before taking action based on the credit report. For example, if the employer intends on letting an employee go, the employer first has to hand over a "pre-adverse action disclosure," which includes a copy of the employee’s credit report and a written summary of the employee’s rights under the Fair Credit Reporting Act. After the employer takes adverse action against an employee, the employer then has to provide the employee with an "adverse action notice," provide the name and complete contact information of the credit agency the employer received the credit report from, the employer cannot disclose the credit check results to anyone else and is not allowed to place the information in an employee’s personnel record.

State Laws

In the wake of the downturn in the economy that began in 2007 and the high unemployment rate, many consumers were not able to pay their bills, which left many of these employees or potential employees with negative credit reports. Some states have proposed bills that prohibit discrimination on employees based on the findings of a credit check by an employer.

Freelance writer at ZSB (Las Vegas, NV)

Freelance writer at ZSB (Las Vegas, NV)
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Elastic Credit with New Credit Card Laws

Credit cards have long been a source for quick and easy cash when needed—making this type of credit very elastic. Credit cards are getting a facelift with the new credit card laws, which makes credit card purchases and cash advances more elastic than ever before.

One way that credit cards are becoming more appealing to cardholders is due to the new credit card laws passed by the Federal Reserve. The new credit card laws help to protect consumers from being charged high late and penalty fees by card issuers. The changes are due to take effect on August 22, 2010 and are the closing act to the Credit Card Accountability and Disclosure Act introduced by Congress in 2009.

New Credit Card Fee Limits

Credit card issuers can no longer set and charge their own rate fees. The new credit card laws limit late payment fees to a maximum amount of $25. The only exception is if a cardholder has made a late payment in the previous seven months, then the late fee limit does not apply. The penalties charged by the card issuer also have to be proportionate to the minimum payment due. For example, if the minimum payment due is $15 and the cardholder makes a late payment, the card issuer can only charge a late fee of $15. Cardholders who have credit cards that they do not use also do not have to worry about being charged fees for inactivity because inactivity fees are eliminated with the new law.