How to escape debt

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Is debt consolidation for you
People with large debts always assume they just can't afford to get out from under their debts, so they let them pile up dollar-by-dollar, year-by-year. No one has to live with large debts, there is always a way out. Debt consolidation is for anyone who has debts and cannot currently afford to make their monthly payments. It's so easy for multiple monthly payments to add up to the point where you ... Read debt consolidation article



Debt consolidation - Your options on reducing debt
Studies show that Americans are now saving less than ever before. Along with that, Americans are carrying a heavier debt load than ever. It's easy for a home loan, a car loan and a few credit card bills to get out of hand, and many people are struggling with more debt than they can easily pay. To make matters worse, new bankruptcy legislation will make it harder than ever to file bankruptcy for th... Read debt consolidation article



How to escape debt
They were both just twenty-five, married for two years, and the financial noose of heavy debts was already closing in on them. They were over twenty thousand dollars in debt. This included angry creditors, harassing phone calls from collectors, and no one to bail them out.

"The truth is I saw it coming, and maybe I was even an accomplice," says Janet Listman. The Listman's live in one of Los Angeles' more affordable outlying communities, popular with young couples. "A few weeks after our wedding, we were visiting with a family who had just made major renovations and purchased new furniture. My husband kept whispering. "Look at that plasma TV. We should get one like that," or, "Look at that great living room set, I want it." We were both in our twenties. I did babysitting and my husband worked for the US Postal Service. These people had been married nearly twenty years and he was a successful businessman. But somehow, we thought we could be like them."

It started with expensive jewelry for our wedding anniversary and birthdays, the new SUV for our vacation trip, and the new glass enclosed living room wall unit and sectional sofa, all purchased on easy payment terms. Then the baby came, and it was "Only the best for our little princess."

And the money?

"That was the easiest part," Janet continues. "My husband quickly learned to manipulate credit cards and loans. The first $5000 worth of credit he acquired was so easy. It made him heady and thirsty for more. And I got such a lift every time I flashed my credit card. It made me feel so . . . grown up. I guess we didn't really think about how we were going to pay it all back."

Janet and Grey Listman relied on a halfhearted promise from a wealthy relative, who had hinted at the possibility of helping them out with the purchase of a new apartment. But when Grey approached him for help paying back his credit card debt, the relative's wallet was closed. The parents on both sides were helpless; they were barely managing for themselves. As their credit line was stretched to the limit and no one seemed to be forthcoming to bail them out, desperation set in.

But Grey was one of the lucky ones. He realized the financial quicksand into which he was sinking. He contacted a debt consolidation service and produced a debt recovery plan for himself. Today Grey works a grueling fifteen hours a day at two jobs, one at the Post Office and another as a night manager in a pizza store.

In the United States debt has become a way of life. Benjamin Taylor, a debt management counselor, calls it a plague:

"A couple generations ago, you knew who was poor by the patches on his clothing. Today everyone dresses well, and people don't want to be caught without the latest gadgets or trendy furniture. But they never learned how to live with debt. The code that "if you don't have you don't buy," has become outdated. Let's say a young person's main income is a regular average salary, but instead of living frugally within his limits, he sees it as natural that he should manage with credit card debts. For him it's not a bad thing because he probably sees other friends and family borrowing money as well. Perhaps at his age, the father has no debts and lived within his means, and this only happened when consumerism and fads recently settled in. But meanwhile, the son sees how easy it is to obtain credit, without thinking about the consequences."

Benjamin Taylor is a consumer credit counselor at Click Debt Consolidation, a Los Angeles based agency established to get people out of debt and keep them debt free. He is convinced that, even with below average salaries, people can find ways to make ends meet without borrowing blindly.

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Bill Consolidation for Freedom From Debt

Stated simply, bill consolidation is getting loan to pay for other loans so that the borrower is left with only one loan to finance. Debt consolidation is a step taken by borrowers for the advantages it may allow like lowered interest rates and focusing his payment to a single loan.

This often takes placing a property as collateral. When collateral is guaranteed the interest gets lower because the risk to the lending company is decreased. When the borrower fails to meet his obligations, the lending company forecloses the property as payment for the debt.

People with multiple credit cards often resort to debt consolidation. Carrying multiple credit cards is almost surefire formula to carrying high interest rates. Credit cards are one type of an unsecured loan. As such, credit cards carry high interest rates and people with multiple credit cards are often tempted to spend more than they earn.

One good way of solving this is through debt consolidation. Secured loans from the bank or a lending company (one that is covered by collateral) have less interest rates than the unsecured loans for credit cards. Paying then all his credit cards from a secured loan from the bank enables the borrower of saving from the lowered interest rate. As mentioned, this is a good way of doing it, if the habit of spending more than what one earns is not changed. The process starts again and the interest rates will soon start to climb, sometimes, worse than it was resulting to foreclosure of properties.

There are many ways to consolidate debt. There are for example the student's consolidation loans and the home finance debt consolidation. But no matter how it is termed, debt consolidation is little more like transferring one unsecured loan to another unsecured loan. The debt is still there and most people thought that by consolidating the loan, something has already been done. Again, nothing has been done if the habit that started it all is not resolved.

A better way to real freedom from debt is, when the debt consolidation has been done and is working, have a plan and stick to it. One of the generic approaches to that are the obvious:

Do not spend on that one single credit card the way you were spending when you have many. This seems to be very obvious and so people who have consolidated their loans starts out fine. After a while, the temptation to spend on loans starts. One of the many reason is that the interests are lowered, the other one is by habit. So once the debt consolidation is on, have the plan not to spend on the things that you can live without and stick to it.

Then, have a plan to pay for the loan that was secured with collateral. About 80% of the time, people who consolidated their loans dos not have a plan to assure the payment for the loan with an extra job and other ways of generating extra income. When emergencies strikes, the most convenient way is again to resort to additional lending and the debt grows back over time, higher interests are charged and the cycle continues.

The best way to get out of debt and gain back that freedom is to consolidate and then have a plan that one can stick to. No amount of loan consolidation will work if the habit that placed one in debt is not avoided.

Robert Thatcher is a freelance publisher based in Cupertino, California. He publishes articles and reports in various ezines and provides bill consolidation resources on http://www.about-bill-consolidation.info


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How to escape debt
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