Debt Consolidation

Many people have problems with debt - they start are using credit cards for convenience, and don't immediately appreciate that anything you charge has to be paid back! Of course, they know it in an abstract sense, but they are happy to not think about it. After all, they can afford the minimum repayment, so what's the problem?

I never got into any strife with credit as I always treated credit purchases as if they were cash - if I didn't have the money in the bank, or at least KNEW I'd have enough to pay off the CC balance in full at the end of the month, I simply didn't make a purchase. I was also luckier than most in that my uni studies didn't cost much (HECS only commenced after I'd started university, and cost around 1/4 of the full cost). However, many people use credit to buy goods and services they can't really afford at the time, or rely on using credit to make ends meet when some emergency arises. The big problem with using credit to get through an emergency or fund your lifestyle, is that once your credit is maxxed out you are in a worse situation than before - unable to maintain your lifestyle or pay for expenses, and yet lumbered with credit repayments, often at exorbitant interest rates.

While it would be nice to think you can dig yourself out of such a situation, it's usually helpful to get outside assistance. After all, good money managers seldom get into such strife, barring a major life crisis.

One source of help with credit card debt is NetDebt. Their website says that they "provide an easy, no-nonsense method of obtaining sound debt advice and an online help to eliminate debt problems". The website is nice and clean, although I was annoyed that the frequent question link just took you to an eligibility questionnaire (I made up some overdue debt figures to get to the next screen), and that the "how the program works" link took you to a talking head, sound-only pop-up. For such a service I'd want to read a full product disclosure with complete details of the fees, charges and costs involved. Although debt consolidation can help to eliminate calls from creditors, simplify multiple payments into a single monthly payment, and possibly get the interest rate reduced or some of the debt forgiven, there are many stories about people in debt who were actually worse off after using a debt consolidation service. For example, the cost of achieving lower monthly repayments may often be a much longer term required to pay off the debt. Especially since the cost of the debt consolidation service can be "invisible" - simply tacked on to the total amount owed, hence extending your repayment term, and the total amount of interest eventually paid, significantly. Anyhow, if you are in dire need for credit card debt settlement, NetDebt may be worth a look. But I'd make sure I was aware of the full cost before entering into any binding agreements.

Subscribe to Enough Wealth. Copyright 2006-2008

Reverse Mortgages can be a Wealth Hazard.

A recent phenomena in the finance industry has been the increased marketing and availability of "reverse mortgage" products for retirees to access the equity tied up in their family home, without having to sell their home. However, such loans are poorly understood by many retirees. A recent ASIC survey found that almost half of those with a reverse mortgage product did not know how much the loan would eventually cost. As there are around 31,500 such loans at present in Australia, worth around $1.8 billion, this could become a big issue. Retirees often have never had access to such a large lump sum of cash before, and can be in danger of spending it all and then having to radically cut their expenses when the money runs out. The loans are not particularly cheap (around 1% more than the standard variable home loan rate) and because the lender is taking on the longevity risk (Reverse mortgages are a form of equity release that allow retirees who own their own home to borrow against the property but defer all repayments until they die or the home is sold) the loan is often fairly small compared to the value of the property. If the lump sum is poorly invested or rapidly spent then the wealth tied up in the family home can easily be consumed by accumulating loan interest long after the initial loan has been spent.

For example, one retired man in his 70s spent more than $135,000 he obtained through a reverse mortgage in only two and a half years."I've been in business all my life and never had to budget. I might have to budget now.", Another woman borrowed $50,000 "in anticipation of needing it over the next three to five years", but then invested the money in a term deposit at a lower interest rate than the loan was charged. Other retirees were recently encouraged by financial planners (who were getting commissions of up to 10%) to take out home equity loans and invest the proceeds in mezzanine financing products that offered double-digit returns. The recent collapses of Westpoint property group, Fincorp and Australian Capital Reserve left such investors with nothing. While a reverse mortgage can be a good way to provide retirees with some extra income without having to sell their only significant asset (their house), it can be dangerous given the relatively poor financial literacy of the retirees being sold these products.

Copyright Enough Wealth 2007

Buy Now, Pay through the Nose Later

HSBC sent me a "special offer" in the post yesterday. If I use my credit card to buy a large consumer item from a major retail chain (they suggest a home theatre system as an example) I will get it "interest free" for 56 months! Now, there's nothing wrong with this offer IF a) you were intending to buy this item anyhow, b) you had the cash lined up to pay for it, and c) you invest that cash in the meantime and have it ready to pay off the purchase amount in full when it falls due in five years time....

BUT, I'm sure a lot of people who accept this offer can't really afford it, and will have been tempted to buy something they would have thought twice about if they had to start paying it off straight away. After all, five years before payment is due seems like an eternity. They probably only worry about making the minimum monthly payments, and won't think about the debt until it falls due in five years time. By then the home theatre will be outdated and worth practically nothing second hand. If they aren't in a position to pay it off in full at that time, the fine print states that the amount will then be treated as a cash advance and be charged 20.99% interest!

Copyright Enough Wealth 2007

Site Review: BadCreditOffers.com

BadCreditOffers.com is a website offering information to U.S. consumers with "bad credit" on how to find the best available credit offers. While this sort of information is helpful for those who need to rebuild their credit rating by obtaining credit, using it responsibly (ie. only charge normal monthly expenditure), and paying it off in full each month. there is always the danger that those with "bad credit" would continue to misuse any credit they did obtain, and thereby just dig themselves deeper into debt. The main page prominently features images of a big house and a fast, red sportscar - hardly the images of sensible use of credit by those in debt! However, the site does offer some useful content for those with "bad credit" issues - such as credit counselling services and how to obtain a report of current credit ratings. All in all, this site is dynamite. While it offers information and resources that can be extremely valuable to connsumers with bad credit, it could also lead to further debt problems if used unwisely. Handle with care.s

Copyright Enough Wealth 2007

Sign of the Times

It used to be that you could only borrow money if you were able to prove you didn't really need it. These days it seems that anyone with a pulse that can legally sign a contract is getting "credit" thrown at them, and so more and more people are getting in debt over their heads. An article in today's Sydney Morning Herald states that over 80% of the Australians surveyed that were already in debt feared that they would be unable to make repayments over the next 12 months and would end up further in debt. This at a time when unemployment is at it's lowest level for 33 years, and when real wages have been increasing for the past decade. With many pundits expecting a couple more interest rate rises over the next year, one can only wonder what will happen when the next recession bites.

Copyright Enough Wealth 2007

Review: Debt Consolidation Care

DebtCC is a get-out-of-debt internet community site with information about:
* debt consolidation
* debt consolidation loans
* credit card debt
* debt settlement
* collection agencies
* payday loans
* creditors
* budgeting

They have a "Ranking Chart", which lists over 150 debt consolidation companies that offer debt consolidation, settlement, counseling and budgeting services.

There are interesting articles available on solving debt related problems and there are handy calculators that allow you work out such things as the real APR on your debts, how long it will take to pay off debt with a fixed monthly payment, and the debt to income (DTI) ratio which is an indicator of your financial health.

There is a comprehensive forum section with the following topics:
* Debt Consolidation and Settlement (83446 Posts)
* Payday Loan help (13400 Posts)
* Dealing with Collection Agencies (45045 Posts)
* Credit Repair (6341 Posts)
* Bankruptcy (2184 Posts)
* Identity theft (3036 Posts)
* Getting a Loan (4906 Posts)
* Dealing with Student Loans (1270 Posts)
* Community Success Stories (1904 Posts)
* My story (2436 Posts)
* Creditors and collection agency database (22219 Posts)
* The Pub, feedback and announcements (31334 Posts)


With some new insurance policies many financial institution including federal tax department have to renew his policies. Now people can pay taxes online with the help of online credit card access. Many financial institutions including private banks have revised their policies about debt finance, so now people have some relaxation on debt consolidation. Now with the effects of new policies procedure of getting personal loans is more easy and quick. Also the interest rate is quite low.

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Copyright Enough Wealth 2007