What Is a Debt Consolidation Loan and How Do You Use It

What Is Debt Consolidation?

First Published Date : November 10, 2011 ADawnJournal.com

A debt consolidation loan is a loan to consolidate all your debts into one single loan and one payment. For example, let’s say you have four credit card balances, two retail store credit card balances, and other consumer loans for which you pay several monthly payments to each of these loan providers. A debt consolidation loan would pay all these loans and you are left with one single payment – which would be a lot less headache and a better money management option to handle your daily finances.

Advantages of a Debt Consolidation Loan

Lower Monthly Payments – If you were previously making 10 payments , making one payment will likely lower your monthly payments.

One Single Monthly Payment – You will be saving time and hassle by making one payment every month instead of many payments.

Save Money on Interest – Interest charged by your loan provider will be lower than those of your credit card or store card loans, thus saving you a lot of money on interest.

Disadvantages of a Debt Consolidation Loan

Further access to credit – A consolidation loan will free up your credit or store cards and you will have access to more credit than before. If you are not able to control yourself, you will likely end up sinking yourself more into debt.

Collateral – Your financial institution may ask you to provide some sort of collateral against your consolidation loan.

A longer term – Because you are dealing with one large payment, your payment term will be longer and it will take you more years to payoff your loan in the end.  

A Few Things to Remember

– Don’t forget that not all debts are eligible for a debt consolidation loan. An example would be your existing mortgage. Your financial institution where you are obtaining this loan from will be able to tell you what types of loans are eligible and what types of loans aren’t.

– Also, you may not be eligible to obtain a debt consolidation loan if your credit score and other circumstances do not meet the requirements of your financial institutions’ eligibility criteria.

– Don’t forget to make a list of your all outstanding loans and take this list with you when you visit your financial institution.

– Don’t take your consolidation loan before checking with a few financial institutions. If you shop a few of them, you are likely to find a better rate then just taking it from the first institution you walk into.

If you can discipline yourself to not wrap yourself up with more loans, a debt consolidation loan is worth considering and it is your first step to take control of your personal finances and walking out of debt.

Waiting Too Long To Save For Retirement

The Cost of Waiting to Save

First Published Date : March 7, 2011 ADawnJournal.com

As more and more people spend more and more of their money each year instead of saving for retirement, we are seeing a growing number of people who have no money for retirement, or are putting money away too late. This is a serious problem and it means that the retirement age of 65 could be moving up to 70 as many couples have trouble quitting working and living off the meager money they have saved over the previous few years.
The longer you wait to save, the more money you are going to have to save each year. If you are a late starter for retirement, you could see large portions of your income going towards paying for your impending retirement. For example:

·    If you earn more than $100,000 and you do not save for retirement until the age of 55, you will end up paying 40 per cent of your income towards saving for retirement to catch up on what you need.

·    If you earn more than $80,000 and you do not save for retirement until the age of 55, you will need to save 37 per cent per year.

·    If you earn more than $40,000 a year and do not save for retirement until the age of 55, then you will need to put aside 27 per cent of your income to have enough money for retirement.

This is why it is so important that you start putting money away very early on because it will allow you start putting small amounts away that will grow over time. If you put $2,000 away every year in your 20s, you will have $20,000 saved by the time you are 30. If you then put $3,000 away every year in your 30s, you will have $50,000 saved by the time you are 40. At this point, you can probably start putting away more, because you will usually be making more. That means, you can put away $5,000 a year until you are 60 and you will have saved a total of $170,000 totally since you began saving money at the age of 20. That is just a quick example of how easy it is and it does not figure into the interest you gain, any investments you have and more.
Saving just a bit of money from the beginning can really help but if you don’t, you need to be prepared to sell items you don’t need, cut back on expenses and put away a large portion of your income towards saving money for retirement. You do not want to be 70 and still working because you did not save for retirement. Too many people are in that situation and you do not want to be one of them so do not let it happen to you. Begin saving now and if you don’t, make sure you put as much as you can away once you near retirement age.

NB – All figures shown above are for illustration purposes only and may not be accurate.

Do You Need A Financial Advisor When Going Through Debt Management?

Is A Financial Advisor Right For You?

When you are going through debt management, one of the things you have to look at is how your money is being spent and whether or not it could be spent in a better way. One way you can do this is to create a budget, which is free but the temptation to break your budget is always there.

When you decide to lose weight, you will go to the gym and get a personal trainer. The purpose of the personal trainer will help you lose weight, but at the same time they will help keep you on the straight and narrow, educating you in weight loss and getting fit. From that same philosophy, you can look at getting a financial advisor to help you when you are dealing with debt. A financial advisor will work like a personal trainer. The financial advisor will meet with you and help you do several things. First, and possibly most importantly, the financial advisor will educate you on your finances. They will tell you what you are spending too much money on, what you can save money on and how you can build up a savings that will pay off your debt quickly and easily.

Like a personal trainer, the financial advisor will also keep you on the straight and narrow. When you have a budget, sometimes the desire to go off budget is there but a personal financial advisor will keep that from happening. They will watch your finances and alert you when you are getting close to reaching your budget limit.

A personal financial advisor can be your best friend but you must remember that they will be costing you money. Financial advisors do not do their business for free and it may seem counter-productive to pay someone to help you save money but financial advisors can really do a lot to help you. They are trained to understand finances and debt and to help you understand them as well.

When you are looking for a financial advisor, you may want to talk to friends and family to know who they have gone through. Trusting your personal advisor is very important because that will ensure you will follow their advice. If you are going to work with a financial advisor, do your research and find out what credentials that they have. If they have good references, they may be the best help you can have when dealing with debt management.

Don’t be afraid to talk to other clients of the financial advisor to learn how the advisor does business, how helpful they are, how open they are to questions and more. Just by doing these things, you can find a financial advisor who will help you get rid of your debt, understand your finances and get back on the road to financial recovery. Sure, you pay a bit extra for a financial advisor, but it is well worth it considering how much you can save.

How To Find Extra Money To Pay Off Debt

Ways To Make Cash To Pay Off Debt

First Published Date : March 16, 2011 AdawnJournal.com

If you have too much debt and most of your current income is going to paying off that debt, you may be just treading water as you wait for the debt spiral to pull you down. This is why it is so important that you find ways to bring in some extra cash to help you pay off the debt. The more income you have, the quicker the debt disappears.

So, what can you do to make some extra cash?

The first thing you can do is to lower what you spend on everything. This can be done by not eating out and having dinners at home, using coupons, buying store brands and not name brands. In addition, walk as much as you can, take public transportation and telecommute whenever you can. This will save a lot of money on gas. You should also look at possibly moving to a place where you pay less rent, that will save you a lot of money. You can also talk to your bank about refinancing at a lower interest rate. The bank does not want you to go into foreclosure so they will work with you to make sure you can pay your mortgage.

Also, look at cancelling things you don’t need like cable, internet, any needless cell phones and if you have more vehicles than you need, sell them.

Now, when you want to make some extra cash, the first thing you can do is to talk to your boss about getting a raise. This is not always an easy thing to do but an increase in your income of just $100 per month, or $1200 a year can increase the chances of paying off your debt sooner. For example, if you make $40,000 a year and have a $15,000 debt and get a five per cent raise, you will be making an extra $2,000 per year. That means, using just your raise to pay off the debt, you can pay it off in as little as seven and a half years. Of course, finding other ways to increase your income will help pay it off.

One of the less desirable but most effective ways to pay off your debt is to get a second job. A second job, even on the weekends, can make you a lot of extra money. For example, if you work at a full time job during the week, you can get a part time job on the weekend. If that job pays $10 per hour and you work 10 hours a week, you are now pulling in an extra $400 per month and an extra $4,800 per year. On a $15,000 job, you will be able to pay it off in just over three years.

Just doing these simple things, along with holding garage sales and selling what you don’t need, can result in you paying off a debt in as little as one year. It can be just that easy.

NB – Figures shown above are for illustration purposes only and may not be accurate.

Should You Rely Only On Your Pension?

Relying  Only On Your Pension

First Published Date : March 20, 2011 ADawnJournal.com

Many retirees, along with saving a bit of money, rely heavily on their pension fund to finance them during their golden years. However, is this really a good idea? If the recession has taught us anything it is that pensions are not always a safe. Many investments were made, with allegations of fraud, which caused pensions across the United States to be completely lost.

This should show you that pension plans are not always safe and you should look at finding alternatives to making sure you have enough money when you retire. Do you really want to put all your eggs in one basket with your retirement? No you don’t. What should you do to ensure you don’t just rely on your pension?

The first thing you should do is start saving from a very early age. If you start saving when you are 20, then you can have a lot of money. Save $2,000 every year from the age of 20 to 65, you will have saved $90,000 easily. That is if you never add anything else to your savings. If you increase the amount you save every single year by 10 per cent, you can end up saving a lot of money.

The next thing you can do is to make your own investment portfolio. Do not rely just on your pension fund portfolio because you really don’t have much of a choice about what it is invested in. Before the financial crisis, pension funds only invested in AAA rated stocks, which were considered very safe. Turns out, many bad investments got AAA ratings and when everything collapsed, many lost their entire pensions. So, you should make your own investments because you have control. You can ask questions, you can make the decisions and you can ensure what you invest in is safe. Having an investment portfolio and a pension portfolio is not out of the ordinary. It is quite common and many who did this ended up weathering through the financial crisis much easier than others.

As you get closer to retirement, begin to cut your expenses as well. Sell that other car, pay off your mortgage early, sell anything you don’t need. Doing that can free up some extra cash, even thousands of dollars worth, that you can put in your retirement fund.

When you retire, you will also find that you suddenly have a lot of time on your hands. You can use that time to your advantage by pursuing hobbies that will make you money. If you are good at leatherwork, make some products that you can sell at farmer’s markets. If you are good at painting, make it a hobby that can bring in money for you. In the years leading up to your retirement, practice your hobby so you can hit the ground running once you retire.

If you are going to rely on your pension fund only, you are taking a big risk. This is why you should always have some backup plans in case you suddenly find your pension is gone one day.