Debt Consolidation – Discipline is Required if Consolidating with Home EquityWritten by Charles Essmeier
Debt consolidation is a popular topic these days. The average American carries nearly $10,000 in credit card debt and credit card debt of $100,000 is not all that unusual. New legislation that takes effect in October 2005 is going to make it harder for those with problem debt to file for bankruptcy, so many people are trying to find ways to consolidate their debt instead. One of most popular ways to do that is through a home equity loan, but borrowers need to be careful, as there are potential problems with borrowing against your home to pay other debts.The concept of debt consolidation is simple. You transfer debt from one or more high interest loans to a single, larger loan at a lower interest rate. The most popular way of accomplishing this is to transfer debt from a credit card, which often carries an interest rate of 20% or more, to a home equity loan with an interest rate of less than 10%. By doing so, you can reduce your debt payments by as much as several hundred dollars a month. Those taking out home equity loans for such purposes should be careful and be aware of following potential problems. Consolidating through a home equity loan trades unsecured debt for secured debt. Credit card debt is unsecured by collateral. Should you fail to pay, credit card companies can send a collection agency after you to collect their money, but that’s about all they can do. If you transfer debt to a home equity loan, debt becomes secured by your home. If you fail to pay that debt, you could have your home repossessed. For those who have problems paying their bills, this could represent a substantial risk.
| | Student Credit Cards 101Written by Jeremy Zongker
Almost all students have and use student credit cards. Some of students use them wisely and build for them an early credit history but others accumulate lots of debts that would have to be paid off once student life is over. Students that have a credit card should learn how to take charge and manage their own finances as soon as possible, because time between teen years and adulthood is very short. So, sooner a student starts managing his own financial matters sooner he will develop useful financial skills. Student credit cards are no longer a privilege for wealthy students but now are considered a social entitlement.A student can very easily obtain a student credit card. Offers for student credit cards are everywhere students are: in campuses, at social functions, in their mail boxes, in bookstores, etc. That is because credit companies consider students to be good customers. First of all they are loyal; once a student obtains a credit card, he is likely to keep this particular card for years to come and instead of getting other new cards they upgrade it every time they fill need to do it. Nowadays, conditions to obtain a student credit card are very weak, so more and more students have access to them even though they don’t have a steady source of income. And this is a second reason why credit card companies offer more and more credit cards to students: they usually can’t repay their debts in time. And this is what credit cards companies rely on; they make lots of money from late payment penalties, interest fees on unpaid credit card balances, annual fees and more. So, students that don’t repay their credit card balances in full each month are best customers. Every college freshman wants to have at least one credit card because it will help him very much during his college years; student will be able to rent a car, buy books or concert tickets, provide himself help with medical or other emergencies and more. Apart from financial help during college years, student credit cards offer other types of help by building a credit history. Credit history is record of all that happens in your financial situation throughout years. Credit scoring is a system based on all that happens to your accounts: late payments, bill paying history, number and type of accounts, outstanding debts and more. If credit history and scoring are good student will more easily obtain a house or a car loan, certain types of financial jobs, insurance premiums and more other benefits. So, student must pay his bills in full or in time, in order to benefit later of their first years of credit history.
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