Specialized loans to consolidate consumer debt give individuals in a variety of financial situations the ability to restructure, borrow money, refinance and consolidate debt into a more manageable payment structure.

These loans can be secured (usually by some form of property) or unsecured and come with a range of options all with the common end result of eliminating smaller debts and rolling them into one monthly payment.

Do you qualify for a debt consolidation loan?

The “qualification” for each loan package comes down to the type of loan – secured or unsecured – current financial condition of the individuals seeking the loan and the options spelled out in the loan documents. For example, if the loan is secured against the equity in a property the loan could be limited to only a percentage of the equity amount.

Consolidation Loans Not a Fix All

To qualify for a loan for the purpose of debt consolidation is not much different than any other type of consumer loan. Any time you look to go into debt or be “granted an extension of credit” as some consider it, you need to take it slowly, examine and understand all the Terms and Conditions of the loan.

Once a loan application has been submitted it will be reviewed and given a thumbs up or down to receive closer examination. This is sometimes referred to as “pre-approval.” If the loan application makes it through the pre-approval process and moves to a full loan approval and finally the complete funding of the loan the real work begins. As the borrower and one guaranteeing payment the actions taken in handling the money and payments play heavy into your financial future.

Smart money management is the only way any consumer, which includes you, can rise above the “debt grip.”

It’s a good idea to spend some time with a course on money management before going deeper into debt. The reason for a consolidation loan is to restructure your debt. With lower payments, work your tail off to pay the loan back as soon as possible and DO NOT take on more debt. It’s time for a lifestyle/spending change. Pay with CASH or do not purchase.

If your spending habits do not change you’ll soon find yourself deeper in debt and feel a growing stress each day. The trip to the mailbox each day will take on a new dreadful anxiety. The potential of “bankruptcy” looms closer.

Before the Loan

Before the application process begins you need to know where your money is bleeding from you pocket every month. Develop a “spending plan” which use to be called the hated word “budget.” A spending plan does not mean you live as a monk and in a cheap house. A spending plan lets you tell your money where it is going to go before you receive it. It allows you to run the money instead of the money running your life.

Start tracking every penny you spend each day by writing down the date, amount, what it was for and payment method. The once per week begin to categorize your spending. You may soon find out that lunch is costing a small fortune.

What does all this have to do with a consolidation loan? Everything! Once you have a clear picture of where the money is being spent you’ll be in a better position to examine loans, payment options, interest rates and start shopping for the best loan package.

You need to know how you stack up financially before making any financial decisions. What you owe, how much cash is coming in and what you can afford to pay! Always, Always always seek out solid counsel before making any financial moves.

A material world indeed we live in. Rising levels of disposable income are not the only mark of our culture of consumption. It is also marked by rising levels of disposable income and a decline in personal saving by our rising consumer debts. An increased debt on the personal level is cause to worry even though economists say that consumer spending keeps the economy alive.

From 1985 to 2005 it was reported by the Federal Reserve Bank of Cleveland that there was a decline of approximately ten percent in personal savings in the U.S. At the same time the debt-to-income ratio nearly doubled. The household debt in Canada has also risen to twice the rate of the disposable income.

While we seem to think overspending is normal it is not wise. It can be disastrous. Recognize common financial mistakes and avoid them:

Unneeded Spending

A dollar at a time is how fortunes are lost. When you get that double iced mochaccino or go the movies or order something online you may not think it is a big deal but everything adds up. You spend $1300 a year with only $25 per week spent on dining out. Your mortgage or car payment could have been made with that.

Indefinite Payments

Cable television subscription radio and cell phones have continuous payments that leave you with nothing. Do you really need to keep paying for them?

Charging

It is now standard to live off borrowed money. Gasoline and groceries is just a couple of the things that will be gone before the bill is paid but people are willing to pay double-digit interest on them. The price of things charged to credit cards increases due to the interest charged for them.

New Cars

Few people can afford to pay cash for a car, but millions of them are still sold each year. Even if you can make the payments if you cannot pay cash for a new car you cannot afford one. You pay interest on depreciating assets when you borrowing money on cars. The cars value and what was paid for it become a wide gap now.

While the factory warranty is usually for ten years or 100,000 miles most people still trade cars every few years.

How Much Car Do You Need?

Most of us have to have a car. How many of us actually need an SUV? SUV’s are not only costly to buy, but to insure and gas up as well is a small fortune. Is an oversized engine worth it when you don’t have to tow a boat or trailer? If you don’t make a living with your SUV it isn’t worth the extra cost. Consider buying a car that uses less gas and is cheaper to insure and maintain when you get it.

Too Much House

When you buy a house, smaller may be better. A six thousand square foot homer is usually more than you need unless you have a huge family. Your monthly budget will decrease largely because of the taxes and upkeep of such a large house. Not to mention the utility bills.

Don’t Refinance

Your castle is your home. You give your house away when you refinance it. Thousands are spent on interest and fees. You shouldn’t be paying for eternity but building equity

Living Week to Week

You need everything you make when you overspend. This is a bad position. It could be a disaster if you miss a paycheck. It’s a matter of spending less not making more. The choice of saving should be a priority.

The Great Depression is the last time the U.S. household savings rate was at levels it is. That wasn’t even one percent in 2007. The savings rate in European countries is ten percent or more while in Asia it is about thirty percent.

Can You Really Afford a Purchase?

Small expenses add up. Begin keeping track of them to avoid the dangers of overspending. Larger expenses are next. Remember being able to make payments and being able to afford something are different. Before adding new debts consider them carefully and make saving a top priority.

Everyone has a credit history and a credit report that tells it. But do you really know what is in your credit report? Most of us are guilty of opening account after account trying to live an ideal life, however this has a major effect and takes a toll on your credit.

Information in Your Credit Report

Your credit report contains all sorts of information that is usually found in four categories, identity, credit history, public record and inquiries.

Under the identity section you will find your name and any aliases you have been known by and even some you have never been known by; your present and previous addresses as well as your date of birth and social security number. It will also list where you work at the present time and previously. Then if you have ever been married and had a joint account then some of your spouse’s information can also appear on your credit report.

The next area will give information regarding your credit history. Here it will list accounts with lenders and banks, credit card companies, utility companies, retail credit cards and any other credit account you have now or have had in the past. You will generally find that these accounts are placed in order according to the date the account were opened, the kind of loan it is, (i.e. mortgage, credit card, installment loans), loan amounts and credit limits. I will also list your payment history over the past 2 years.

Under the public records section it will list any state, federal, local and personal liens, judgments and bankruptcies. These will remain on your report for 10 years, even judgments and liens that have been satisfied will remain on your report for 10 years. Past due child support will also show on your credit report.

The section that list the inquiries made on your credit report tells the names of lenders, banks, credit card companies that you have requested credit from and will remain on your report for 2 years even if you did not receive the credit. These are referred to as credit pulls because these companies have pulled a copy of your credit record.

What is not in Your Credit Report?

There is some information (such as medical information) that should not be found in your credit report, unless you have specifically given permission for them to be listed. Other things that are not found in your credit report are your sex and race, interest rates you pay, your job position and salary.

Know Your Rights

You can get a free copy of your credit report from the three major credit-reporting agencies, TransUnion, Equifax and Experian, once a year and you have the right to know who has seen it. Everyone that has looked into your credit in the past six months will be included in the report you order yourself. A copy of your report is also available free if you have ever been refused credit.

If there is anything in your credit report that you do not agree with you can dispute it. You have the right to explain the circumstances surrounding a negative report. You can even keep the credit bureau from using the information in the report for marketing purposes. The credit agency does not decide whether or not credit is extended to you they just give the information to the potential creditor.

Use of Information

The information in your credit report not only allows creditors to decide if you will get credit, it can also decide if you get an apartment or insurance. It is vital to know and understand what is in your credit report. By knowing you are able to keep a better handle on your credit situation.