This happens every time you are in debt: you wake up at 6 am and the first thing you notice when you pick up your phone is 8-10 missed calls from the same number. You are, however, not surprised as you know who it is. The point is, why do you have to answer their calls?

One of their useful techniques to get back creditors’ money is to call you continuously and harass you until you get the money. Hence, you shouldn’t expect their call to stop suddenly. One simple way to avoid them is either not picking up the phone when you are sleeping or doing something important work, or to switch off the phone when not required. Dealing with debt collection agencies is easy when you don’t bother about them.

Another way to avoid them is reminding them about your rights. They are not supposed to call you during late night hours or at your workplace. Talk to them with authority and tell them not to call when inconvenient. Pick up their call in the morning and tell them you will call them up during lunch or in the evening.

One of the things you will have to learn, however, is managing your phone. You will keep getting their calls no matter what you promise or what you threaten them with. Collection agencies are never polite or soft-hearted. That’s they reason they are appointed with such task. A better option is to keep you phone silent and do not pick up the calls, if you have addressed them once.

If they want to talk to you about something important, they would leave a message. In most cases, they won’t. They only thing want to talk to you about is your money.

Besides, these options too are viewed as not-so-helpful solutions due to various misconceptions incepted by people. One such myth is credit card debt consolidation service would ruin the credit score of an individual.

A proper understanding of how a credit score is derived and what are the factors that influence it, wouldn’t have led to such misconceptions. One of the most important factors that affect your score is the available balance of your credit limit. If you use your lines of credit up to the maximum credit limit, your score is radically affected. A credit card debt consolidation service, however, works toward lowering this balance, and increase your score gradually. It would take some time though.

Another factor that determines your score is the length of time an account is held. Older accounts are generally good for your score. People believe seeking help from debt consolidation services would mean closing down all the accounts, which is farthest from the truth. Those people are financial experts with superior knowledge. They work toward reducing the debt on each account. And if any account needs to be closed, it would be the new ones. Old accounts, in all instances, are kept open.

Although such consolidation companies report the bureau every month, it wouldn’t reduce your score. They maintain a good relation with the rating agencies and inform them about your progress, not uselessness. Hence, it is a great opportunity for people with bad credit to improve their credit score along with repaying the debts.

However, it cannot be denied that seeking help from credit card debt consolidation services reduces your score. But it’s only temporary, and marginally. And it is better than living with huge debt, struggling to repay, and continually ruining your score, and eventually filing for bankruptcy.

Hence, if you owe huge debt, and are planning to approach credit card debt consolidation company, but you are afraid it might ruin your score, stop worrying, and go ahead.

And I transformed… from a complainer to a doer, from passive to active, from poor to rich.

All that was required was change of habits, because with these habits, it was impossible to be rich. I now look at people and grin; people resisting change, people refusing transformation, people having these habits:

1. Eating out regularly:
   How do you expect to see a big amount in your checking account at the end of the day if you spend a huge amount just by eating out? You believe you are living life king size. Is this belief helping you to pay your bills?
2. Many television sets, all with cables:
   Watching TV is a waste of time and money. Moreover, having TV’s in all your rooms is only helping you to ruin your family’s habits. And having premium cable channels in all the TV’s is achieving highest level of foolishness.
3. Avoiding exercise and being obese:
   Well, if you eat out all the time, obesity is you life-long companion. And then you purchase those weight reducing kits, medicines, and equipments. Many say they don’t have time. Yeah right, those TV shows are more important than your health.
4. Being trendy:
   Here, I am not asking you to wear your grandfather’s 1900’s trousers. Be a normal shopper. You, however, prefer to buy big brands, latest gadgets, new video games, and many other junk things. Well, keep doing it. You don’t want to be rich, do you?
5. Not owning a home:
   It common sense, instead of paying rent every month, you can pay mortgage. Over a period of time, you will have your own home. But you want a new address every year; you want a bigger space every time.
6. Not having a budget:
   You don’t know where your money goes every month simply because you don’t keep a track of it. You keep grumbling but you don’t want to take action. Obviously. It demands change, it demands transformation.
7. No emergency back-up:
   At least once in once in our lives, we face financial emergency, and we all know it. Yet, you don’t bother to create a back-up, which compels you to borrow.

If you have these habits, I am sure you wouldn’t like this post. You would probably never visit this blog again because I have just revealed a harsh truth. And know your next move: you will search other posts on the web that doesn’t challenge your behavior, even if you know they are no good. At least, those articles make you feel good and help you to create an illusion that you are rich. This is why you never have money.

Here are three factors that can really make you pay up your bills:

Motivation

“Where there’s a will there’s a way”. If you are motivated to pay up your debts, there’s nothing that can come in your way. As mentioned already there are very few people who are in the habit of paying up debts in time. Most of us are procrastinators and we need to change our ways which is not a small thing to do by any means. Think about ways in which you can really get motivated to pay up your debts. One way is to focus on the interest and how much money of yours is going on it. When you plan to pay up the loan over a long period time, naturally the rate of interest is going to be pretty high and the amount of money you ultimately pay up inclusive of the interest is going to be 2 or 3 times the original loan. . Also, by spending a lot on interest you are wasting a lot of your time earning money which you could have put to better use. Won’t it be a better proposition to pay up the loan in a shorter period of time so that you don’t have to waste money on the interest?

But motivation is not the only factor that can make you pay up your debts, you need to have resources for paying up

Financial Resources

Motivation without adequate financial resources is not going to help you pay up your debts however strong it may be. So in order to build up your financial resources you need to budget your expenditures and save up money for paying up your debts. You need to deprive yourself of your essential expenditures for this, but just identify areas where you are spending a lot on and spend a little less in those areas.

Devise a Concrete Method

Debt payment can be done using a concrete method of payment that works well for you. One method is to make a list of all your debts one by one chronologically and concentrate on them one by one. Ultimately there will come a time when all your debts will be paid off.

The group of people that suffers the most is graduates. They are already laden by debts of student loans and other loans for education where now the credit card debt is adjoined even before they start their work life. Debt enters quite early in student’s life. An astonishing piece of news some decades ago, credit card among high-school kids is quite common these days.

Is studying so expensive these days? Yes, if it is equipped with latest thingamajig they buy to outdo their classmates or room full of designer clothes. Starting their career with enormous debt is a bad idea and this has led many among this generation to go broke.

Recent research says that a debt through credit card is now a trend among college students. An average balance of this age group is over $2000. This is just an average figure. Many of these students have an amount of more than $5000 unpaid, the high interest rates of which keeps accumulating, digging a giant hole for themselves.

The fact is that college kids are not much aware about the consequences of high debts and not much serious about the repayment of the loans, at the time when they use the money. And let’s face the fact for a moment. A college kid cannot really comprehend it. He is glad after buying his new cell phone, outfits, college books, breakfast, and starts studying for his semester now because he wants to practice basketball later in the evening. He is quite sure that the large numbers of his credit card debt would be paid as soon as he graduates and accepts a top-notch job. He is not taught by the college professors about the outcomes of not repaying the debt nor will he listen to his parents. How can you blame this innocent guy or the entire generation?

Young people are noticed paying the minimum amount every month for infinite years. They do not realize that the already high interest rate keeps bounding with every minimum payment as they are not contributing much to the capital amount. They are not informed that a poor credit score or late payments are quite big reasons that can keep them from getting a decent job. Almost all companies now-a-days perform a background check and view your credit history before hiring any employee at any level. They still think they will grab the top-notch job.

Today, times are tough. We are barely out of recession. High paying jobs are limited and we have witnessed many employers turning insolvent. Almost every working employee has experienced pay cuts. In such situations, if a graduate doesn’t have decent savings, he is sure to further entangle in the web of debts. For the rest of his life, instead of trying to buy a car or new house, he will keep fighting to survive and pay the bills regularly.

Am I scaring the youths? Nope. I am warning them about the severe consequences they could face. But it isn’t late yet. A good piece of advice I can provide to avoid these consequences is – calculate how much the aggregate debt is and start paying it off quickly. Do not try to acquire further loan or shop much on your credit card. It would be a wise decision if you don’t think of any loan or debt until you start working and are able to repay the amount. Start saving today. Don’t spend unnecessarily on useless gadgets and parties. Remind yourself about the real difficulties that you could face later.

Are we living our lives just to strive and pay the bills regularly? Don’t we deserve something better? Focus on investing early rather than piling early debts. You have a pretty long life ahead. Start investing a small amount like $80 per month and you will enjoy fabulous benefits during your retirement. Do you want to continue this bill-fighting even when you are 65?

Another tip is to learn a bit about managing your money like debt management, budgeting, etc.

The best way to avoid entrapping yourself is to pay the credit card amount in full.

The lenders are not after you for repayment after on and off. On the plus side, you get to stay in the mortgaged property. You need not worry about repayment of the loan at all. If you have the money, you pay back the loan. The lender gets your property after you die. Till you leave your house or sell it off, you don’t have to pay the loan. Since I’m not going to leave my house or sell it off, I need not bother about repaying the loaned amount right? Well, in most cases this is true. But its not that reverse mortgage is the right choice for all seniors. Just consider the situations in which a reverse mortgage is beneficial for you.

• If you are contemplating a house shift, a reverse mortgaged property might turn out to be a burden for you. Think for a while that you are staying all alone now in your own house and need nursing care due to senility and ill-health. Your daughter invites her to stay with you in her house and you want to change. Then in such a situation if you’ve taken a reverse mortgage on this present house, you cannot sell it off or leave it till you pay back the loaned amount. But if you have no other place to shift to, reverse mortgage might be a good option for you since, you’ll get money on hand when there is no other source of revenue.
• Reverse mortgaging is a great option if you want to see some hot currency in your hands during old age and want to live a good life with that money. You get the money and you don’t have to bother about repaying it till death if you are staying in the same house, but if this is not your priority then you are better off without going for a reverse mortgage.
• You can use the reverse mortgaged amount to pay up your extra expenses such as medical bills or home renovation etc. After you retire you may not be having sufficient finances to support yourself in a decent manner. Under such circumstances, a reverse mortgage is going to be of great help to you for meeting the extra expenditure.
• The mortgage comes very handy for meeting your household expenditure for the rest of your life after retirement when you are not fit for working to earn your livelihood. Even if you haven’t saved up for retirement or don’t get a pension, the reverse mortgage can serve as a good financial cushion.
• Reverse mortgage gives you peace of mind as it ensures security to you in old age. Go for it, if you don’t have any other option for earning money. You can also invest that money in a wise way so that you generate some finances for yourself. After getting the necessary financial cushioning and reserve you can also payback the loan and free your property from the mortgage once again. Here’s an infograhpic from Mintblog that answers most of your questions on reverse mortgages.

The recent recession and many other episodes of financial depression have made the governments of different countries to sit back and chew upon the idea of bridling the individual nature of financial discipline. They feel it should not be left to entirely to the individual alone. Take the example of the largest source of consumer debt – our dear old plastic money – yes I’m, talking about the uber-utilized credit card. Is there a limit on the number of credit cards that a person can own? In an age where the crediting business is flourishing well, crediting companies are vying with each other to get more and more clients. So here you have people with half a dozen credit cards with the total credit limit reaching up to more than their salaries can repay. This is the reason there are so many credit defaulters. Shouldn’t there be a check on the number of cards an individual can possess? Also shouldn’t the issuing of  credit cards be done by companies only after verifying the number of cards a prospective client already possess and his credit limit in those cards ?

Some countries, such as the UAE, have already started taking good measures in this direction. During this recession, they have stopped issuing money from their foreign ATMs, drastically curtailed the credit limits, and also stopped all lending practices under dire circumstances. The clients might have felt uncomfortable, but they couldn’t have taken better measures under such circumstances.

Making credit reporting mandatory is another way in which financial discipline can be encouraged. The action taken against financially undisciplined people might look very cruel to us, but that’s the only way they learn. Of course, the present economically lean period might have prompted people to take loans from institutions but even then you should be able to take only as much as you can repay.

Financial institutions along with government patronization are coming up with financial literacy and discipline programs for youth and children so that they learn proper financial etiquette and keep their financial health good. On the whole, I feel a bit of stringency and mandation in financial laws is required because we, as humans, have the tendency to learn some things under pressure and not out of free will.

You should have a clear plan of repaying your loan and should be able to stick to it. Taking debts is an art and you should exercise your judgmental skills while doing it. Never be over optimistic while taking a debt even for a positive purpose. When taking a loan the immediate gratification that you get due to increased funds at your disposal is quite often misleading. Whenever I take a loan, I always think about how I’d pay back the money as a top priority to-do task. Right from the first day of loaning I always start implementing my plan. I always set a clear time frame in which I’m going to pay back the money and also chalk out any installment schemes which I can comfortably stick to. If there’s no installment facility, I save up the amount of money that I’ve got to pay back after the time agreed upon. Your repayment planning should also include the interest that you’ve got to pay in addition to the debt. Many people ignore that taking it as a small side amount, but over a period of time this might actually accumulate.

One way for saving yourself from bad debt is to get out of the bad habits that increased consumer credit facilities encourage in us. These days consumer credit is available in abundance. Credit card facilities, bank financial aiding, and private mortgaging facilities is making money easily available on loan. In fact money lending has become a lucrative business now. What we as borrowers are failing to see is that with easy availability of loans we are getting into the bad habit of being dependent on external financial aid for our monetary needs. A  infographic from Billshrink on this shows that personal savings has dipped down to remarkably low levels and consumer debt has risen up to remarkably high levels due to easy availability of consumer credit. A Finance Metrics blog analyzes the reasons for low personal savings.

Well, I’ll not  really blame the lending agencies for making cash easily available to you, though they do play their part in luring you to take loans by offering you attractive repayment schemes, such as, zero percent interest or a low monthly EMI. Even if they offer it’s you who is supposed to be careful. Many lenders and banks, as seen in the recent property purchase funding schemes seem to have given loans without assessing the repayment capacity of the loaner. This will only put you in bad debt. It is you who should be careful.

At the end I can say, loan is good provided you use it for a constructive purpose and repay it in time.

Positive Debt

I do agree that under some special conditions you need to debt, and the situation need not be always negative. When you take money on loan for starting a new business venture, for higher studies, for going abroad or for purchasing a new property, you are borrowing for a positive purpose with the intention of earning higher returns from them in future.

Borrowing money for funding your further development is something positive as you are sure to get your returns back. But here too you should be very careful. Don’t dream high especially when it comes to business ventures you should always measure your pros and cons before jumping into new projects. I know of so many people who are firm believers in business. They are over optimistic about things. They don’t study the niche market and their capabilities and invest in projects that ultimately don’t lead to success. Many dabblers in business are always led by their acquaintances or funding agents who show them a green picture regarding a business project. Don’t be led by others. Invest in a venture in which you have passion and you feel that you’re going to make it big. Also don’t venture out to make investments when you don’t have sufficient cushioning to take care of your survival in the event of a failure. There was this gentleman I knew, who invested some thousands of dollars in a project which failed during recession. He does not have financial cushioning to support himself and now he’s out on the streets drowned neck-deep in debt.

Negative Debt

Taking debt becomes negative when you are broke and need money to meet your expenses. In such a case you should first analyze why you’re broke in the first place. This shows that you haven’t been planning well. This is where you need to learn some money management skills to live within your income. Most of us want to live beyond our means. If you want to buy that new posh car that your neighbor bought you need to save up for that carefully and then buy.  Don’t give in to social pressure and lead a life beyond your means. It’s not necessary that you own the same commodities that your neighbors have to prove that you are of the same financial status as them. Respect is not built on the material that you possess but on your personal worth. Of course, I do agree that these days, society weighs a person’s worth on the fatness of his wallet, but its not that always it’s like that.

Don’t Buy Things on Installments

Nowadays, I’m bombarded with requests from retailers who want to offer me household goods on an EMI. Don’t you see those newspaper ads where they say “Buy a refrigerator at $1 at 0% interest?” Don’t trust these ‘0% interest schemes; they’re going to suck money out of you towards the end. Also the ones with very low EMI rates have the intention of extracting high amounts from you much more than what you would have paid by paying all at once.

My principle was to save up for a new item and go for it only when I have the money to purchase it. I don’t believe in gratification when there’s money due to someone. Better save up for it and them buy without a care in the world about any payments. What’s the hurry? Will you die if you don’t buy that new car today? Can’t you save up a bit and buy it a bit later?

Credit Cards Will Give You Money, But Remember you’ve got To Pay Back Too!

I’ve known many friends who are credit card addicts. From a pack of chocolates at the local supermarket to diamonds from posh stores, they buy everything under the sun by swiping credit cards. In fact, purchasing things on loan by using credit cards has become a habit with many people now.

Remember that crediting companies are very sweet with you as long as you pay your dues. But they can be the bloodiest hounds when it comes to chasing you for non-payments. They harass you and you might be jailed too for evading payments. There were cases of people selling their body organs to pay their credited dues.

Why do you need a credit card at all? I don’t own one because I don’t find the necessity to. Shopping is not particularly my hobby and whatever purchases I make, I do so with cash or bank check payments. But I do understand some people need to own a credit card. A friend of mine who’s a freelance web developer needs a credit card to have a verified account with Paypal to receive her payments. Also, if you happen to go out of your country regularly, you’ll need a credit card to make payments. If you own a credit card, see to it that you make ethical and appropriate use of it. Don’t use the card unless absolutely necessary.

Mend Your Attitude!

Last but not the least, I’ll say that many debtors borrow money or don’t make payments out of habit. I know a school friend who had the habit for asking for a loan and forget paying it back. Another example is of those people who open monthly accounts with grocers and utility merchants and postpone payments. These annoying habits can cost you a lot. Get out of the habit as soon as possible. Today, I can say that I don’t have a single dollar on debt because, whenever I’d take money, I always keep in mind that I owe someone money and make it my goal to pay them back at the earliest. You might think you’re being very clever by procrastinating payments by making up excuses, but these games don’t last for long. You’re going to be a victim of your own game one day. So better watch out!

I would like to conclude by saying that debt is not about borrowing money, but about re-paying it. There’s nothing wrong in borrowing money at the time of necessity, but see to it that you payback in time.

• Be in the good books of the credit agencies

Here, take this advice from financial expert, Housser, who opines that the damaging currents of the foreclosure flood should not be allowed to permeate your other financial spheres. Keep the waves confined to its domain. Build a wall of good credit payment history around your other financial spheres and you’ll see that your credit score will again rise back almost to its normal stature in a couple of years. Generally with a foreclosure, you have a credit restriction for about 7 years. But if you have good credit profile in other areas, your FICO scores will again bounce back.

If you have a good credit history and foreclosure was a rare event, your lenders will be willing to give you another chance for a new mortgage after 5 years of the foreclosure. Take the words of Professor Alan M. White, Valparaiso University School of LAW, Indiana on this, whose opinion is reflected in the above lines. Pay up your credit dues well in time and you can be immune to the effect of foreclosure which is going to lose its grip on you with time. Always remember that you should always try to pay back the foreclosed amount. You should be able to pay up the normal mortgaged amount.

The best way for you would be to avoid foreclosure. Now, how can you do that?

• Bargain for time from the lender – Before you agree for mortgaging any of your property, talk out the terms for the loan with the lender. Recently, I suffered a huge business loss owing to recession and I had to mortgage my house. I talked out the terms with my lender. I told him that I might have to delay payments for a specific period of time owing to my financial crisis. He agreed. If you have a problem, its better to notify the lender, otherwise, he might get the wrong message that you are actually not having the money for repayment and he should attempt foreclosure. These days, one might be in financial problems due to a lot of reasons such as recession, unemployment, high medical bills, personal trauma etc. and lenders can be expected to be more empathetic towards your problems.
• Go for a mortgage forbearance agreement – Lenders are human after all. Even if they are not, law will ensure that they behave like humans. If you’re having a problem just ask the lender to go for a forbearance agreement with you, which will enable you to postpone or eliminate payments for a pre-agreed period of time. The lender should not touch your property till the given time, but he can think about foreclosure later. In the meantime, you should improve your financial status and start making payments.
• Loan modifications- If it suits your lender, there is no better clause for mortgage than this. This relaxes your loan repayment terms. You can either pay less or extend the loan period for a longer time. As this is an attractive feature of growing the money lending business, many lenders are using it as a tool to rope in more clients.
• The mortgage deed-in-lieu foreclosure – This is another good option. The lender can take possession of your property, but that will not help because you’ll be in bad credit history for about a decade. However, you’ll be given the facility of keeping your current account clear and if you maintain a good record, your credit score will hike up rapidly.
• Mortgage refinancing is another strategy that you can use to modify your mortgage payment to a lower interest/ lower monthly payment one. If you already have defaulted payments then this relaxation is not given. The interest rates remain high and monthly payments are lower. You can always use online rate comparison tools to know about which refinancing scheme is suitable for you and which company is offering it.
• Mortgage Short Sale Facility is one where you pay lesser than the actual amount you had agreed as a part of the mortgage deed owing to the depreciation in the property value. If this happens during foreclosure, the foreclosure and monthly payment details will show up in the credit report and you’ll still be barred for 10 years from taking any financial loans.
• Mortgage Chapter 13 Bankruptcy can be resorted to when you fail in negotiations with the lender and you have to move court for justifying your economic poverty. This allows you to continue with your mortgage payments after sometime. The arrearage can be paid as per the 13 bankruptcy norms.

You might be able to appreciate now that though we fear foreclosure, there are many ways to cope with it. There is no need to panic or misunderstand the entire process. If you can, always try to avoid foreclosure, otherwise use these strategies to deal with it.