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October 13th, 2010

Consumer debt legislation falls short

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The final phase of federal legislation offering protection to debt-swamped consumers became effective October 27, but may not be stringent enough to fully protect consumers from debt settlement and debt consolidation scams. Although for-profit debt settlement/debt consolidation companies are required to disclose cost, potential negative consequences to consumers (for example, negative credit reporting of past due accounts) and how long a proposed debt settlement or debt consolidation plan will take to complete.

Financial guru Michelle Singletary points out in her blog, The Color of Money, that debt consolidation, debt settlement, and consumer credit counseling services will no longer be allowed to collect fees up front, but are allowed to keep any fees collected regardless of whether consumers complete their debt reduction plans. Additional provisions of the legislation include:

  • Debt settlement companies selling services over the phone cannot receive payment for their services unless and until the debt is settled.
  • Funds set aside to settle debt must be deposited into a dedicated account owned by the consumer, who is free to withdraw funds at any time.

Finding Debt Help: Looking out for yourself and your finances

  • Don’t accept unsolicited offers of help: Legitimate firms that offer credit counseling and other debt settlement services typically do not solicit consumers via phone calls or over the Internet. Avoid unsolicited offers of help from firms or individuals unfamiliar to you.
  • Sounds to good to be true? There are no miracles. Although it’s possible for credit counselors and other debt relief providers to negotiate lower interest rates and to obtain waivers of late fees in some cases, few credit card companies agree to settle credit card debt for less than what you owe. There are also no legitimate means of “erasing” bad credit. Credit counseling and debt settlement can help you avoid bankruptcy, but partial and late payments made during your debt settlement or credit counseling plan are reported to credit bureaus.
  • Get referrals and check company references: Consumer credit counseling and debt consolidation services, as well as debt settlement firms, should be able to provide references. It’s a good idea to check with the Better Business Bureau for complaints against companies you’re considering for debt help. If you know anyone who has completed a debt consolidation or debt settlement program, ask for a referral. In today’s economy, many people have fallen on hard times; it’s likely that someone close to you may have a lead to the help you need.

Your instincts and common sense can serve you well when considering debt relief options. Ask questions, take notes, and don’t give into pressure when interviewing debt help providers. It’s a good idea to consider multiple options and find a good fit for yourself and your circumstances.

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October 11th, 2010

Reduce debt by refinancing your vehicle

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Among the debt solutions you should consider, a particularly useful one is refinancing your auto loan. Refinancing your vehicle makes sense if you received a high interest rate on a car loan not long ago, but have seen your credit score improve since then. Refinancing could cut down on the total amount of interest you pay over the life of the car loan, saving you a significant amount of money.

Debt help by refinancing

Another reason to refinance a vehicle is to free up more of your income. The money you save by refinancing a car can be redirected to credit card debt, student loans, and other types of debt. It’s important to examine all aspects of your finances to find debt solutions that work towards improving your overall situation.

Keep in mind the following things about refinancing an auto loan:

  • You don’t need an appraisal to refinance your vehicle
  • Your refinance depends on your credit score, so take a look at your credit report before applying
  • You probably won’t be able to refinance with the same lender who financed your current auto loan
  • Shop around to find several lenders who refinance auto loans to compare deals

Debt management plan

If you want to pay off your car sooner, you can refinance to get a lower interest rate but continue to make your old monthly payments. This gives you the benefit of a lower interest rate while you pay off the principal faster. Make sure you specify that the amount you pay above the minimum payment should go towards the principal.

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  • Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score. Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management. He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others. He can be contacted by visiting his personal site, GoodCreditLiving.com.

  • Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.

  • Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno. She enjoys writing informative articles about debt management and personal finance.

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