Debt Consolidation

Definition of Debt Consolidation – A loan, usually secured with the equity in a home, used to pay off other, higher interest debts resulting in one monthly payment. Debt Consolidation sometimes is also called Debt Management Plan. The difference is in Debt Management not all unsecured debts are accepted and only the interest rates are reduced, late fees are set aside then one payment is created. In Debt management or Debt Consolidation some one other than your self is making the payment.

Quick Fact Sheet

• Creates a TPI mark on your credit
• TPI is short for Third Party Intervention. It occurs anytime you pay an entity that then pays your debts.
• TPI mark reads more damaging than automobile repossessions on your credit report, but not as bad as a bankruptcy
• Lump some of the debt together, not all creditors accepted
• Creates one monthly payment
• Temporary lowers interest rate
• Does not reduce debt
• You stay in debt longer than before you consolidated your unsecured debts
• Highest Failure Rate of all programs

Often consolidation programs take an unsecured debt and roll it into a secured debt. An example would be credit card debt debt with a high interest rate of 18% rolled into a home loan at 6% interest rate, this is not advisable per the Federal Trade Commission. If you increase your cost of your home with unsecured debt, you increase the chance you could lose your home if you begin to miss payments. Even the FTC, Federal Trade Commission warns of this harmful tactic on it’s website.

In addition, the FTC has a number of warnings to be aware of when looking at a consolidation program. First watch out for high up front fees. Second if you feel pressure to make additional contributions that are for fees and not for your debt balance. Third if the consolidation program wants your credit card account numbers before setting a budget with you or teaching you money managements skills.

The best course of action is to seek information from a creditable, skilled individual. If there is someone you can see in person who meets the above criteria, that is ideal. There is much to be said for accountability, transparency and full disclosure counsel in person.

Consumer Credit Counseling

Before I give you the fact sheet for Consumer Credit Counseling I want to tell you my personal story. In the 1990’s my husband and I were living in Seattle, Washington and were making good money. At that time we had not developed the habit of creating and maintaining a budget. The lack of budget created a wide opportunity to live beyond our means. As a result we accumulated an unimaginable load of unsecured debt. The unsecured debt was beginning to increase rapidly with fees and interest fueling ever increasing debt load. Everyone we asked for help; family, friends, business associates, business accountant & church all told us to call Consumer Credit Counseling.

After entering the Consumer Credit Counseling program, we learned the truth. Consumer Credit Counseling places a CCC mark on your credit report. This fact was NOT disclosed to us at the time of entering the program. The CCC mark is a Third Party Intervention mark, which means that someone other than the debtor paid the debt. Consumer Credit counseling programs are set up to have you pay them and they pay your creditor. That is how the Third Party Invention mark appeared on our credit report. And why was that mark so devastating to us? CCC or TPI marks read in the mortgage industry as worse than repossession but not as bad as a bankruptcy.

A year later we were ready to buy a home on Lake Stevens, Washington. I will never forget that we could not get the mortgage due to the mark Consumer Credit Counseling created on our credit report. That house had a lake view, and backed into a reserve green belt. To this day I will never forget the loss of lot #4 and the potential for joy in the house that was never built for our family.

Quick Fact Sheet

• Make one monthly payment to Consumer Credit Counseling
• Creates a CCC mark – Third Party Invention
• CCC mark reads worse than a repossession, not as bad as bankruptcy
• Charge monthly fees for forwarding your payment
• Do not take all creditor unsecured debts
• Call themselves nonprofit but take back end fees from Credit Card Companies
• 75% Drop out rate in the first year
• Programs can be drawn out for 4-6 years
• Come under recent scrutiny from the IRS and FTC
• Fail to disclose credit effects
• Fail to create a budget

Every debt load is unique, feel free to call me for a free consultation. 512-919-2123.

Debt Consolidation

Ever watch the show on A&E channel “Hoarders”? It is about people who have accumulated so much stuff they can barely walk through or use their home. The spaces look like plies of junk. There is such a mass of unorganized stuff; some well-used and some with price tags chaos, disorder and clutter. What is apparent to everyone except the hoarder is that there is too much stuff and most of it needs to be donated or thrown out. The only way the hoarder is able to receive help is with a professional who helps the hoarder discover the yearnings to add more stuff. Then they work with the hoarder to create a plan with a deadline to change their behavior. The net result is often the hoarder becomes free from the chaos.

Debt consolidation is much like the “Hoarders” show. Instead of seeking help with a professional, the debtor adds to the mass of debt by entering a debt consolidation program. New debt is dumped on top old debt and renamed. No debts are eliminated and the underlying cause for the debt is never addressed.

The debtor is also left without the assitant’s of a debt coach. A debt coach can keep the debtor on track with thier debt elimination, handle the creditor calls and help the debtor to reach the goal to be debt free. It is no wonder debt consolidation programs failure rate is 75% in the first year alone.

Instead of seeking a debt consolidation program, sit down with a debt consultant who is going to find out exactly where you are in terms of monthly budget, debt payments, and total debts owed. Once you know what the numbers are, make sure your goals for your debt are thoroughly outlined and defined with a time frame. When you leave a debt consultation you should fee a sense of peace and be on the road to sound financial footing.

The Insatiable Appetite of Credit Card Companies

As the rise in US bankruptcies continue, the insatiable appetite of credit card companies grows. It reaches across over to Asia to feed.

China, Taiwan, South Korea, Philippines, Japan, Hong Kong, Singapore and India have seen a surge in credit card transactions of 158% between the years of 2004-2009. The new use represents a quarter of the global card volume. And 50% of all consumers in this region have one credit card, most have two credit cards.

Three factors are motivating the debt surge; Technology, Status Symbols & Government. The players in this new debt market are; Visa, Master Card, Citibank and American Express.

Technology; millions of cell phones are now equipped with credit card information. The appeal is speed from a smart chip on your cell phone, has drive the market. Any purchase can be made from public transit, movies or cars. Visa and Master Card have flourished in this new growth market. Citibank is capitalizing on this growing market and releasing cell phones with phone payment capacity in the next year. American Express is seeing a growth with their cards, especially in Japan where the card has to be paid off in full monthly. Local stores have added ‘store loyalty cards’ that are stored on cell phones as well as coupons.

Status symbols; having a platinum card is seen as the new status symbols. As the region becomes more affluent, the market for credit cards has increased. The amount of spending increases when you move from cash to credit transactions. Retailers are following the trend and adding merchant credit card processors to feed the demand.

Governments; an aggressive marketing campaign directed from the governments of these countries to shift the spending habits of consumers from cash to credit drives the market. The prorogated adage is for governments to ‘grow the economy’, when in reality they are only increasing their own citizen’s debt burden. In South Korea the demand for credit cards grew due to the government’s tax deductions, offered to consumers who purchase with credit cards. Across the Asia – Pacific credit card transaction added $1.1 trillion to the global GDP from the years of 2003-2008.

 No Longer a Debtor Lifestyle

Every summer holiday was a double bonus. Good weather, bbq and retailer sales!  The t.v would boom out those special deals, with balloons and fanfare. The glossy ads that came in the mail touted special lower prices for that weekend only! Oh the excitement, the room décor, the cars to select! 

There is one store that always stood out for sales excitement more than the others, IKEA.  IKEA can be magical for those that are in love with a new look. Your household can transform with a new vibe just by being inspired by those real life vignettes.  The first floor of an IKEA has many little rooms set up. Each room has three walls you may peer into the room and see how the many IKEA products can be assembled and recreated in your home.  It is real life magazine with the perk of being able to sit on the furniture, look at the price tag and yearn to fill your basket with those goodies.   And I did just that, over and over again. I was a little like the lady in the current IKEA ads who runs over her front lawn with a semi flat bed truck full of those little flat boxes.

 IKEA furniture comes in flat boxes, to save on shipping cost and they pass those savings on their customers. All it takes is an Allan wrench and BAM!  Fill your room with furniture.

But somehow this year my holiday sales drive was missing. Gone. Nonexistent. I had a calendar and could see the holiday coming; I heard the ads and got the mailers all to no avail.

 I imagine I am not unlike many American’s who ridden the road of the economic bubble only to have it burst with and leave me with the after taste of soap bubbles.  This suspension is back by, The International Council of Shopping Centers, sales volumes are down 3.3% this year on average following a 10.2% decline in sales in 2009.

Retailers are responding to this trend by offering deep sales discounts in order to move their merchandise. So if you are without debt, have an emergency fund, live within a budget and well insured, your purchase power will temporarily rise.

For me lure is gone, so off to the lake I go, happy and free!