credit and debt revealed

DISCLAIMER THE CONTENTS OF THIS MANUAL REFLECT THE AUTHOR’S VIEWS ACQUIRED THROUGH HIS YEARS OF EXPERIENCE ON THE TOPIC UNDER DISCUSSION. THE AUTHOR/PUBLISHER DISCLAIMS ANY PERSONAL LOSS OR LIABILITY CAUSED BY THE UTILIZATION OF ANY INFORMATIONPRESENTED HEREIN. THE AUTHOR IS NOT ENGAGED IN RENDERING ANY LEGAL OR PROFESSIONAL ADVICE TO YOU OR ANYONE READING THIS REPORT. IF YOU DISAGREE, STOP READING NOW AND THROW AWAY THIS MATERIAL. THE SERVICES OF A PROFESSIONAL PERSON ARE RECOMMENDED IF LEGAL ADVICE OR FINANCIAL ASSISTANCE IS NEEDED. WHILE THE SOURCES AND MATERIAL MENTIONED HEREIN ARE ASSUMED TO BE RELIABLE AT THE TIME OF WRITING, THE AUTHOR/ PUBLISHER ARE NOT RESPONSIBLE FOR ANY DECISIONS OR ACTIONS YOU MAY MAKE FROM READING OR APPLYING THIS CONTENT. THIS MEANS, YOU NEED TO CONTACT YOUR OWN ATTORNEY, ACCOUNTANT, FINANCIAL ADVISOR, AND/OR THE IRS FOR GUIDANCE AS TO HOW THIS MATERIAL MIGHT PERTAIN TO YOUR SPECIFIC SITUATION. THE IRS WEBSITE AND PHONE NUMBER ARE http://www.IRS.gov and 1-800-829-1040. NO PART OF THIS MANUAL MAY BE ALTERED, COPIED, OR DISTRIBUTED, WITHOUT PRIOR WRITTEN PERMISSION OF THE AUTHOR/PUBLISHER. ALL PRODUCT NAMES, LOGOS, AND TRADEMARKS ARE PROPERTY OF THEIR RESPECTIVE OWNERS WHO HAVE NOT NECESSARILY ENDORSED, SPONSORED, OR APPROVED THIS PUBLICATION. TEXT AND IMAGES AVAILABLE OVER THE INTERNET AND USED IN THIS MANUAL MAY BE SUBJECT TO INTELLECTUAL RIGHTS AND MAY NOT BE COPIED FROM THIS MANUAL. THIS MANUAL IS A GUIDE ONLY AND, AS SUCH, SHOULD BE CONSIDERED SOLELY FOR BASIC INFORMATION AND USED FOR ENTERTAINMENT PURPOSES ONLY. COPYRIGHT © 2009 JOHN MAZZARA. ALL RIGHTS RESERVED. http://www.MinneapolisStPaulHomes.com

INTRODUCTION: My guess is that you are reading this E-book because you want to purchase a home. You might be unsure as to whether you will qualify for a mortgage due to past or current credit issues. Call us to help you determine whether or not you are eligible to buy a home. As a mortgage broker, we know about many loan programs and have access to lenders that might be able to fund your home loan. If you aren’t qualified for home ownership today, we can make suggestions that will help you become qualified for a loan in the future. Application of this knowledge can make a big difference. Here’s the really good news-TIME AND EFFORT will fix all things. Let me define what I mean when I say this. Credit issues age over time and have less of an impact on your credit rating IF and ONLY IF you re-establish a good payment history again. Life happens. When it does, sometimes events are unavoidable and your credit will suffer. If that describes you, you may qualify for a “hardship” and be able to enter the credit markets within a fairly short period of time. If you work with us, we may be able to suggest things you can do to get a loan sooner rather than later. On the other hand, if being irresponsible with credit is really a lifestyle decision on your part, then don’t expect much in the way of credit until you change your ways. Your credit history is a measure of how you MAY pay your bills in the future. Granting credit is generally based on three C’s- Character, Capacity and Collateral. The first one-Character-is determined by your previous payment history and your willingness to pay on time. Capacity is your ability to pay. Collateral is the asset backing the loan. You are generally in charge of the first two. Both now and in the future you will have to show the lender that you are a good credit risk in order to have credit extended to you. Once you understand credit and debt you will be able to make better decisions. Unfortunately when you enter life as an adult you may not have a full grasp on the impact maintaining good credit will have upon many different areas of your life. It is never too late to get started. Credit won’t fix itself. You must make the effort. Think about this cliché as you make your way through life. Do you know how to eat an elephant? One bite at a time. It’s the same with re-establishing credit and becoming eligible for a mortgage after having bad credit. You will probably start with secured credit cards and work up from there. There are other things you can do as well. Read this book and check out some of the resources listed in the back of the book for ideas. We want to help you pursue the dream of home ownership. Call us to find out what we might be able to do for you.

TABLE OF CONTENTS VARIOUS ARTICLES

1) Debtors, Creditors and Debt Explained

2) Having Issues With Your Credit – Get Help Now

3) How Your Credit Score Is Factored – What Elements determine Your Credit Score

4) The Credit Bureau, Your Fico Score and Your Credit

5) Credit scores and Your Debt – How your Payments Directly Affect Your Credit Score

6) Ways You Can Deal With Having Too Much Debt 7) Getting Out From Under Debt – Ways to Eliminate Overwhelming Debt

8) Provisions and Laws That Can Help You When You Are Facing Overwhelming Debt

9) Lower Payments By Settling or Consolidating Your Debt

10) What You Need to Know About Filing For Bankruptcy

11) Legally Discharge Your Debt With Bankruptcy

12) Tips on Repairing Your Damaged Credit – It May Not Be As Difficult As It Looks

13) Credit Repair Resources – Educate and Empower

14) Credit Repair Services – Help When You Need It

15) Services for Credit Restoration and Rebuilding – What You can do to Help Yourself Repair Your Credit

16) Free and Clear – Repair Your Credit

17) Bad Credit Mortgage Options

18) Hard Money - What is It?

19) What is Asset Based Lending?

http://www.MinneapolisStPaulHomes.com http://www.VentureLoanApp.com

1 © John Mazzara 952-929-2577 [email protected]

As A Buyer Or Seller-Why Choose To Work with a Realtor? Today there are many people who think about selling their home on their own. However, many of them end up going with a Realtor for their needs. It's definitely a great idea to decide to work with a Realtor when you are selling your home or you are trying to purchase a new home. Many real estate agents are not actually Realtors, and Realtors have quite a bit more to offer consumers. Not sure that you should choose a Realtor when you are selling or buying a home? Well, here is a look at some of the top reasons that you definitely should work with a good Realtor. They are Experts in the Real Estate Field One great reason that you should definitely consider working with a realtor is because they are experts in the real estate field. Having an expert on your side is definitely a great idea. Many people out there today purchase or sell their homes with a realtor. Realtors come with a whole lot of experience and definitely will be able to use that experience to help you acquire a great home or to sell a home for a good price. Realtors Know the Community Another reason to go with a Realtor when buying or selling is because Realtors know the community. They are active in the community and they know the community that they are working in. This is important, whether you are purchasing or selling. You want someone on your side that really knows what is going on in the local real estate market. They Can Offer You Protection You'll also find that a good Realtor can offer you protection when you are selling your home or purchasing a home. They know the laws and the nuances of the real estate industry that are very important. Without a good Realtor on your side, you could end up making a mistake that will cost you in the long run. Realtors are Supposed to Be Honest Realtors have a code of ethics, which states that they are supposed to be honest. This definitely benefits you. After all, you want someone on your side that is going to be honest with you, no matter what. Even if it is something that you really don't want to hear, it's great to have someone that will be very honest with you. This is something you can count on. Required to Disclose Important Facts According to the code of ethics, Realtors are required to disclose any important facts to you as well. This means that any facts that you need to know, your Realtor will let you know about. They'll give you good advice along the way and give you the facts that you are going to need to make the right real estate decision.



They Have Your Interests at Heart A good Realtor will also have your interest at heart. This is one reason it is such a great idea to have a Realtor on your side. They will help to make sure that you get the best deal and the best home for your needs. A Realtor is committed to making sure that everything works out for you. This is definitely excellent for you. Realtors Have Resources Another reason to have a Realtor help you with selling or purchasing a home is because they have many great resources available. If you are looking for a home, they have a variety of different resources they can turn to, in order to help you find the home that you want. You won't have to spend time looking, but your realtor can do that job for you with the great resources that are at their disposal. Help with Negotiation Often in a real estate deal there is quite a bit of negotiation. This can include negotiation about the terms, financing, price, date of possession, repairs, equipment, and more. If you are not well versed in the art of negotiation, you may not get the best deal for you. With a good realtor to help you out, they can help you out with the negotiation so you get a deal that is totally fair to you. Explanation of Financing You'll find that a good realtor can help you to understand the financing options that you have available to you. They can explain different options and lead you in the right direction. They also have access to many lenders and can help you to identify good lenders for the financing that you are going to need. The Process is Smoother Going through a real estate deal is not always a smooth ride. Some times things crop up along the way. Using a Realtor can help you to make sure that this process is much smoother. They'll help to ensure that everything works out very smoothly so that you get through the deal as soon as possible without any problems. LET ME APPLY FOR THE JOB. WHEN THE TIME COMES THAT YOU OR SOMEONE YOU KNOW HAS A REAL ESTATE OR MORTGAGE RELATED NEED-PLEASE CONSIDER MY SERVICES. I’VE HELPED HOMEOWNERS AND INVESTORS SINCE 1986. SINCERELY, JOHN MAZZARA CFP CLU CHFC CEBS CMB MBA MS



ARTICLES #1) Debtors, Creditors and Debt Explained Reading through most financial institutions and lending company disclosures can be confusing. They throw a significant amount of legal terminology and often label specific individuals and groups of individuals by names such as debtor and creditor. This can make it confusing. These terms however are not difficult to understand and often when you understand these terms, what they mean and how they apply to the disclosure it can make it easier to read disclosures and understand your rights as a person who is obtaining credit and incurring a debt. There are a number of rights and responsibilities that people who are given the classification of debtor for the purposes of the agreement. The term or label of debtors tends to send up negative connotations in many people’s minds because of the stigma that is placed on the term debt. Debt in and of itself and being a debtor in and of itself is not a bad thing. It simply means that a debt has been taken out and the debtor is the person who has taken this debt out. More often because of these negative connotations, you may find debtor inner changed with lendee, in other words the person to whom money was lent. Alternatively, with credit cards you may see it interchanged with the term cardholder or applicant in some cases. In most cases, however the term debtor is usually replaced with borrower. All of these terms can be used interchangeably based on what type of document or disclosure is being used. A creditor is slightly easier to understand in any of its forms. A creditor is a lender, a credit card provider or financial institution when it comes to lending out money and providing line of credit. A creditor can also refer to a company who is attempting to collect a debt. This can be the original lender or it can be used to refer to a collection agency, which is in charge of collecting a debt. In some cases, a creditor may be a lawyer’s office or a separate company. There are a number of different types where you will find the term creditor. As with the term debtor, there are a number of negative connotations and reflections that are made when people hear the term creditor because it is so often used as a way to describe those who collect debts. Normally, you would have only minimal interactions with your creditors and this contact usually exists simply in the form of bill and payment. It is only when debts become overwhelming that the word creditor becomes something to avoid and the word alone because of the negative connotations attached to it, cause a great deal of stress and anxiety for people who are having difficulty with their debt. It



associated with a stereotype of calls that are received when people are having difficulty making payments. However, the term creditor covers a much broader base than this. Debt, it covers a wide range of different expenses. It primarily refers to credit purchases that are paid off over an extended period of time. For example, credit cards, mortgages, car loans, even leases can be considered debt. The biggest category of debt that is going to create problems for people is going to be credit card debt. The reason for this is that this type of debt has not only a variable interest rate but also one that can increase rapidly and quickly create a difficult situation. Debt however if managed correctly can provide you with a number of benefits. Being debt free is often considered to be an ideal situation however there are disadvantages to this. Everyone considers debt to be a bad thing; this is because it so often becomes something that creates stress, anxiety and financial difficulties. However, debt in and of itself is not a bad thing. In fact, it can be quite useful provided that it is not allowed to take over your finances. Many organizations at credit history, the way you managed your debt before they lease an apartment or approve you for a loan. This is because it shows a viable record that you made payments on a debt in a timely fashion. There is no way to measure this without debt and so in these situation you may end up having issues obtaining the approval you need because of a lack of history to prove that you have paid off credit cards and other forms of debt promptly and in a responsible manner. Debt can be something that overwhelms you or something that provides you with the means to lease a home or apartment purchase a car or obtain a personal loan. Many people when they first start out working with credit based purchasing do not realize the danger of credit card debt. They also do not realize how quickly credit card debt can get out of hand. It is important to ensure that debt is managed carefully in order to not allow it to get out of control. Once debt reaches the point where it overwhelms you, financially it can be difficult to get back under control and it has far-reaching effects. Many negatives stay on your credit report for years in some cases it can be more than a decade before a negative mark is removed from your credit and even more time before your credit score recovers. This is why it is important to make sure that you know what your rights are, what debtor, creditor and what debt is. These definitions and the various replacements for them such as borrower, lender and so forth are necessary in order to ensure that you know exactly what is written in the terms and agreements that you sign when you take out a loan or credit card. This is the first step to ensuring that you make the right decisions when it comes to the types of debt and types of lenders that you borrow from.



#2) Having Issues With Your Credit – Get Help Now Help exist for those that are experiencing credit problems and it is important to get debt relief now, as soon as possible rather than waiting while your situation continues to decline. There are a number of different ways that you can get credit help. One of the quickest is to consider consumer credit counseling services. These services cover a wide range of debt help from budgeting to settlements and repayment plans. The important thing is to get help as soon as you can rather than wait. The longer you wait the more damage you are going to end up doing in the end to your credit. It is a good idea to look into all the various options that are available to you. Credit counseling and debt help comes at a number of different levels. The first thing that any debt help is going to do is look at your overall financial situation. This means looking at your debt and your income as well as all your expenses and the amount of disposable income that you have available in order to repay debts. A repayment plan is usually then formed that pays back the debt in full. This is set up to fit within your current budget in order to make it easy for you to repay your debt. Consultations for repayment plans are usually available free of charge from most companies. It is a good idea to check out several different companies to find out the one that is going to provide you with the best repayment plan. Some repayment plans are going to be straight repayments without any negotiations. This means it can strain your finances and make it difficult to repay, as it leaves no room for any problems, which may come up. Other plans may offer you a reduced payment on your repayment plan because they negotiate with your creditors for reductions in payments, interest and the removal of fees. These types of plans and credit help may be more beneficial in the end. One of the reasons why it is important to seek out assistance as soon as possible is because of the severity of the situation as it grows. Interest rates can climb significantly and even after your account has been charged off or gone to collections, fees and interest can still be added to the account. If left too long it can become impossible for you to pay even with negotiations based on your disposable income. At that point, the only option to remove the debt is to file bankruptcy. The entire purpose however, of seeking out assistance with repaying your debt is to avoid this type of situation. Many credit-counseling services also offer debt settlement plans these plans are designed to help you pay off debts in a lump sum. These offer a reduced rate in exchange for the entire bill being paid off at once or being paid off in several large payments rather than small monthly payments. Debt counseling services also help you by consolidating your debt into single payments rather than a number of large payments. Debt consolidation does a number of things that can bring instant relief to your credit and debt troubles. The biggest thing it does is cut interest rates. When you have a number of debts, you are paying interest on each one of these debts. By combining them into a single payment often times the interest rate is drastically reduced because you are only paying a single interest rate on the entire amount rather than individual rates on the



smaller portions. This may not seem like much when you initially look at it but take into consideration that often minimum payments only cover interest and do nothing to pay off the principle debt as a result you end up making no headway on your actual debt. You may have already experienced this with trying to settle your debt on your own even paying minimum payments your debt does not seem to go down and in some cases may even continue to increase. This is another reason to seek out the help of debt relief services as soon as possible before you end up experiencing this problem or as soon as you begin to have problems making payments. It is not difficult to get in over your head help does exist in a number of forms. Many people who get into trouble with debt end up feeling as if they are all alone and that there is no help for them. They become overwhelmed by the numbers, the dates, the payments and the rising stress that goes with it. Organizations that help with financial management, debt consolidation, budgeting and settlements are there to assist you in getting out from overwhelming debt, relieve the stress it brings and get back on your feet. Research is one of the first things you should do, find a company that you work well with, that provides you with what you need and does it in such as way that you do not continue to feel overwhelmed or burdened. While it is not easy repaying debt and things may remain tight financially, a debt repayment plan should fall within your budget rather than strain it. If no repayment plan is able to do this, you may want to seek alternatives to your debt situation. Help is available for people who are suffering from overwhelming debt it comes in a variety of forms and fashions and can provide you with relief and help you to get back into paying off your debt and repairing your credit. You will want to seek out several different companies to see what they have to offer you before deciding on one. There are for both profit and non-profit organizations that exist to help people repay their debt. This may be done through repayment plans, consolidations, or settlements but credit help should be sought out as soon as possible.



#3) How Your Credit Score Is Factored – What Elements determine Your Credit Score When you read about credit scores one of the determining factors is the credit report and what information you have on your credit report but most people do not know what actually goes into creating their credit score and what aspects of their credit report are actually looked at when the credit score is calculated. There are a number of aspects that go into a credit score, these aspects cover everything from debt to income ratio to the various types of credit such as revolving and installment. Your credit score is going to be formed by the information on your credit report. This is why it is important to know exactly what is on your credit report. Damaged credit, payment history, the amount owed on each debt, the length of credit history, types of credit and inquiries for new credit. All of these elements pull together to provide the overall foundation for credit scores. Depending on the type of credit that is being applied for there are variety aspects that come into play. For example, payment history may factor in the credit score when you are looking at installment credit with greater weight than then types of credit while the amount owed and types of credit may factor in with more weight when looking at revolving types of credit. All of these aspects however factor into the credit score. The first thing that is looked out is the amounts owed based on the credit limits or terms. It is important to ensure that your debt to income ratio does not exceed a certain point if you want to keep your credit score looking good. This means that you should not borrow more of any type of credit than you can afford to pay back. For example, if you can only afford to pay $600 in installment credit such as a mortgage and $400 in revolving credit maintaining your debt to income ratio is to insure that you are paying less than this in installment and revolving credit. Going over these numbers would indicate that you have gone beyond your debt to income ratio and that you debt is too high. These effects your credit scores negatively. This is why it is important to keep track of the amounts owed. Having high credit limits actually helps your credit provided that you keep the amounts owed within the ranges you can afford. Payment history reflects this by showing that you are making payments in a timely manner and more importantly that you are paying off your debt. Your credit score will be affected negatively if the payment history shows that your debt increases despite payments being made or that you make only the minimum payments necessary and that you are not making headway against the principle of the debt. Types of credit also play an important role in determining your credit score. Credit types should be balanced and kept to a minimum in order to optimize your credit score. Having a large number of any type of credit can reflect poorly. As with anything else quality is often better than quantity, for example instead of having a store card for every store that offers one consider having cards only to stores where you shop frequently. This also



lowers that number of inquires that are made to your credit report. An excessive number of inquires can reflect negatively which is why it is important to select the credit you apply for carefully. The length of your credit history also plays a part in your credit score. The longer you have had credit and made payments the more there is to work with in determining your credit score. This factors in both positive and negative aspects such as a well-balanced sheet with a few late payments because it is spread out over the entire length of your credit history. Another thing that greatly affects your credit history and score over the entire length of it is damaged credit. Damaged credit is going to have an impact over the entire length of your future credit. This is because damaged credit has a greater impact on your credit score especially when the damage is severe. Most damage can remain on your credit history for upwards of a decade. This means that you have a black mark against you that can have an effect even seven or ten years after it occurred. Obviously, having only a few small negative marks is better than having larger and more noticeable marks. For example, a couple of scattered late payments are not going to have as great an impact when your credit score is calculated as having a defaulted credit card or charge off. Knowing how your credit score is calculated and the aspects that are looked at when the score is calculated can reduce many of the confusing aspects that come with credit scores. Credit scores look at the overall picture. They look at everything that can affect your credit but they are only going to be looking at the numerical values. This is why it is important to play things by the numbers when looking at your credit report. How long between late payments, how many payments to pay off a debt. What were the balances owed and one what types of debt. These are all things that are considered when a credit score is calculated. Your credit history and the information on it is directly related to your credit score because it forms the basis for the calculations. It gives creditors an overall picture of how well you handle debt. What type of debt you have and even how selective you are with your debt. Having a lot of credit from a large number of sources is not always the best way to go. It is better to have credit from selective sources that you use frequently and keep your balances to within your range of affordability doing this will provide you with the best possible platform for your credit score.



#4) The Credit Bureau, Your Fico Score and Your Credit Report Every time you make a payment on your credit card, your home or your car it is reported to one of three agencies, which are called credit reporting agencies. These credit bureau companies are designed to provide a record of all your credit related activities. It is this credit report that is pulled every time you apply for credit and determines whether or not you are approved. It is also directly related to your Fico score. This is your credit score or the number used to determine the risk factor that a credit or lending company has when they lend to you. The higher the number the less risk to the credit companies when it comes to you defaulting on your loan or credit line. You can think of your credit report or the credit bureau as a place where all the various lenders you borrow from report to compile all your information, which companies you have borrowed from, which debt you are paying on time, which you have been late on and so forth. All this information is sent to the credit bureau. When you go to apply for credit a query is made of one or all of the reporting agencies. Your credit along with your fico score and all pertinent information including addresses where you have lived in the past 5-10 years is presented to the creditor making the query. The information provided gives the creditor an overall look at your credit, from this they can determine your debt to income ratio and other factors that may come into play when deciding to lend you or extend you credit. This is why there is such a big fuss over credit reports and why everyone suggests that you check your report regularly to ensure that it reflects accurate information. Your fico score is the number, which is assigned to you based on the overall appearance of your credit. For example excellent credit, this means that you never miss a payment, always pay in full or pay more than the minimum balance, as well as ensuring that you do not exceed your debt income ratio may sit somewhere around 800. People with extremely poor credit, those who have charge offs, defaults, late or missed payments may see a credit score of 500 or even lower. The number may also change depending on the type of credit you are looking for. For example, the Fico score for mortgages is calculated differently than the scores for revolving credit such as credit cards. This is something important to remember when you are looking at your credit score. You might be significantly lower or higher based on the way the scores are calculated. There are number of different factors that go into the scores which is why the numbers can change drastically depending on what is counted and what is not in the score. The reporting agencies and the credit Bureau in an effort to make it easier to keep a track on your credit and your credit score allow you to obtain one free copy of your report every year. This allows you to check what is being reported to the credit agencies and make sure that everything is being reported correctly. Each time a query is made you usually can obtain a free copy as well in order to find out exactly what was reported to the company. When a company refuses credit it usually lists the reason why such as too much delinquency or too much debt. Obtaining a copy of your credit report can tell you what they were looking at when they made the decision.



This can allow you to find issues with your credit and make changes because you know exactly what is on your credit report. For example, say that you make payments on time but they were reported as late or alternatively, you paid off a debt in full but it is still listed on your report. These types of errors and differences are common. They normally occur because the company you have the credit with reports at different times. Some report at 30 day, some at 60 and some at 90 days. There are others that may report every week or only every 6 months. This can cause issues when debts being paid or payments made and not accurately reported. In order to avoid this, especially with settlements, consider requesting that the company report it immediately to the credit bureau. This will help to remove these types of discrepancies. To avoid late payments being marked on your account make sure to mail bills out as soon as you receive them or a minimum of approximately 10 business days prior to when the bill is due. This will allow the company to process your payments before the due date. These types of things are what are reported and listed on your credit report and the things you need to look for when you obtain your credit report from one of the reporting agencies. Your credit report and credit score are important when it comes to obtaining credit and keeping track of the credit, you do have. Your credit report is the repository that contains all the information on your credit history. This usually goes back about ten years and lists everything from credit cards to car payments to medical bills. Student loans and other forms of debt will also appear on your credit history. The fico score is the numerical representation of your debt. This includes the sum of all your debt including your debt to income ratio, late payments, delinquencies and charge offs. It also reflects things such as debt that has been paid off and how much risk you pose when it comes to lending or extending credit. The government allows one free credit report per year in order to facilitate making sure that information is accurate and up to date making it easy for you to manage your credit history.



#5) Credit scores and Your Debt – How your Payments Directly Affect Your Credit Score Credit scores are one of the least understood aspects of debt. How do they relate to your credit and why are they important are often questions that people who are looking into the need for debt management may ask. Credit scores are more important than you may realize. They are a direct reflection of how well or how poorly you pay off your debts, how much debt you have based on your income and the types of debt you have. It is the number by which companies determine how worthy you are, or how much of a risk you pose as a client when you are asking for financial aid and assistance from them. Every time you pay a bill on time, every time you pay one late it shows up on your credit history. This is turn is reflected in your credit score. Credit scores start out for the most part at zero when you become old enough to apply for credit. Once you have successfully applied for credit and received it usually in the form of a credit card, apartment or home rental or school loan, your credit score increases. This is because applications for credit that are granted provide a positive aspect to your credit rating or score. Each successful payment also increases your credit score. Late payments decrease your credit score and defaulting on a loan or other type of credit can have serious negative effects. The same goes for repairing your credit score. If you have had an instance where you have missed payments or defaulted on any type of credit whether it is a loan or a credit card and you have a low credit score there are a number of things that you will happen. You will start being denied credit, credit cards may be cancelled, and you may find that you are unable to purchase a home or even rent one. The same goes for cars and other types of credit. This is because your credit score is low enough that it indicates serious problems with your credit that you have obtained debt, which was not paid back. This increases the risk factor of it happening again and so other lenders and credit providers are unwilling to provide you with the credit you desire. Before this starts to happen you may want to consider things that you can do to repair and increase your credit score. Debt settlement can provide assistance to repairing your credit score and getting you back on track if your debt is in collections or if you have defaulted. Debt consolidation is also something to consider if you have a number of high interest debts. Debt consolidation combines all these debts into a single payment. This can be done a number of ways. If you own a home, consider refinancing or a home equity loan. This allows you to combine larger interest debts under a smaller interest and ultimately smaller monthly payment. This marks the high interest debt as paid off in full and allows you to make payments that can help to repair your credit score at the same time you repair your debt. If a home equity or refinance option is not available to you there are a number of credit counseling services that can provide you with what you are looking for when it comes to creating a repayment plan. They work with your creditors to remove fees and lower interest rates to make your overall debt smaller and arrange for you to make payments you can afford. Taking these options can give your credit score a slight negative hit



because it indicates that you are having problems repaying your debt as it stands but ultimately helps you to repair your credit score faster because it allows you to make on time payments that pay off your debt. Every little bit helps, one thing you do not want to do unless it is absolutely necessary is file for bankruptcy. This makes a huge negative impact and makes it difficult for you to repair your credit rating during the time you have the bankruptcy on your credit, usually 7-10 years. You can make on time payments and obtain credit while under a bankruptcy which can ultimately help you but the amount of increase to your credit score may be reduced because of the larger negative issues. It can however give you a clean slate to work with other than the bankruptcy, which for some cases may be what is needed to repair the credit score. Credit scores are a direct reflection, they increase and decrease and fluctuate based on what is on your credit report. There are a number of things, which affect them. It is not just applications for credit or defaults, which have an effect. The amount of debt and the type of debt you have, your debt to income ratio and so forth also have an effect. Each one of these aspects combines to create the entire score. Overall, however the things that have the most effect are going to be the amount of each type of debt you have and your ability to pay it off. While you may think making minimum payments is a good thing on your credit card it can actually only serve to create problems for your credit score. This is because your overall debt increases when you are only making minimum payments. Often time this is because the interest that is being charged to the account is greater than the minimum payment or is only covered by the minimum payment. In order to increase your credit score, repair it or maintain it you will need to make payments that reduce your overall debt each month. If you have a credit card consider paying the card off in full every month or when making large purchases ensure you can pay it off with all the attached interest within a few months. This will help to protect your credit score.



#6) Ways You Can Deal With Having Too Much Debt Having a debt is something that is a part of the majority of modern life. You may have credit cards, a mortgage, medical bills, student loans, and car payments. All of these can add up and with high interest rates, overage fees and late payment fees debt can quickly add up to being far more than you can afford. If you find yourself facing a situation where you have more debt than you can afford there are a few things that you can do to help reduce your debt and prevent the negative impact that defaults and late payments can bring you. One of the first things to consider is debt consolidation. Many people do not realize how much extra they are paying by having so many balances with different companies. You end up paying interest on each of these separate balances by consolidating these into larger balances even with the same interest rate you will still end up paying less overall. Debt consolidation can be obtained through a variety of means depending on your resources, current credit ratings and the type of debt that you have and are trying to consolidate. If you own a home, refinance may lower your monthly payments and offer you the ability to obtain a lump sum that can then be used to consolidate higher interest debt. You can also consider options such as home equity loans. Home equity loans are also known as second mortgages. Either these are given as lump sums or lines of credit, which can be reused as needed. It is a good idea if you are using them for debt consolidation that you consider the lump sum option. This places all of your balances, or a good percentage of them into a lower interest payment. This makes it easier to make payments within your budget because the interest rates would be significantly reduced not just on the one payment you are making but you are eliminating a significant amount in interest. For example, if you consolidate five credit card bills into a single second mortgage payment you are eliminating the interest from all five of those credit cards and putting an interest rate that can be as little as half of the interest from one credit card. This means that you can pay off the balances faster and with a less resources. You can also consider a variety of other options when it comes to debt consolidation. In many cases, you can take out personal loans that are designed to assist in reducing the high interest rates, which normally cause the biggest part of the problems with paying off debt. Another option is to consider things like debt consolidation groups, which in essence do one of two things. The first is that they will pay the debt off then you in turn pay them a monthly fee at a lower rate of interest on the total amount of debt paid. The other option is that they work with your creditors. You pay them a monthly fee, which is a lump sum that is then used to make monthly payments to each of the individual creditors.



There is also the option of debt settlement. Debt settlement works slightly differently than debt consolidation. This is the process by which a debt is paid off for a percentage of the total amount. This is usually done after the debt has gone into collection proceedings. Collectors may offer to settle a debt for a particular lump sum amount usually significantly less, in some cases as much as 75% of the original loan or they may be willing to work out a payment option to pay a reduced rate over a specified period of time to pay off the debt. This payment schedule may include payments that are at 0% interest or are at a reduced rate of interest. Payment schedules usually incorporate payment of the entire debt amount rather than a lump sum percentage. You can also choose to go to your creditors and present a debt settlement offer if you have the funds available. Debt settlements can take a considerable amount of time and there are a few things that you should keep in mind when going through the proceedings. Be sure to get all the documentation and agreements in writing. This means that you should send the settlement agreement, if you are presenting the offer, in writing. If you are accepting an offer, make sure to hold on to all documentation and ensure that they agree in writing to accept the settlement offer. Once you have made payment ensure that it is received either by transferring it using a bank or by sending it registered mail. This gives you documentation that it was received, also request that they send you written notification that they have received it as well as marked your account as paid in full. After the specified time, usually companies report every 30 days to credit reporting agencies, check to ensure that the account is marked correctly with the agencies that your credit card company or debt holder reports too. If not, check back to ensure that it is recorded properly. There are a number of ways that you can consolidate debt and settle a debt completely. You can consider second mortgages and refinancing if your credit is still good and you have a home. If this is not an option, you can consider debt consolidation companies or personal loans, which offer lower interest rates. You can also consider debt settlement options that can provide you with a way to settle the debt in total for a reduced price. These are generally subject to terms and conditions in addition to needing to be fully documented and monitored but can be offered through a number of sources. They can be offered by the collection agency, by a law office or by the person who owes the debt with equal chance of receiving a positive result.



#7) Getting Out From Under Debt – Ways to Eliminate Overwhelming Debt Getting into debt is not as difficult as many people many think. It is not a matter of accidentally missing payments many times it is simply a matter of climbing and increasing interest rates, finance charges and other fees. These added to the monthly balance can make it difficult to make ends meet and pay more than the minimum balance which means you balance increases rather than decreases every month compounding the problem. It does not take much and you may not have even been at your limit. Even a small expenditure can end up creating a massive debt if left unattended. There are a few things to do to prevent this from happening and to help get out from under it if you find yourself becoming swamped by high interest credit card debt. One of the first things to go is gather all the bills that you have. This includes regular household bills, since mortgages can often be the cause of debt problems as well and all the credit cards, medical bills and other debt, which can be compounding the problem and take a look at the whole pictures. It is easier to make a determination as to how to get out from under too much credit card debt and other types of debt if you know where you stand. Once you have everything laid out, you may find areas where you can easily improve your situation through a variety of methods such as creative budgeting or debt consolidation. If necessary, consult with debt counselors. Debt counseling companies exist to help individuals out from under credit card debt. In some cases, they can simply help you to create a budget that allows you to pay off your debts in a timely manner without increasing the overall principle of the debt. In other cases, they may be there to assist in arranging for payment methods such as consolidation, settlement or help you to negotiate and arrange payment plans with your creditors in order to reduce your overall debt. Credit card debt is not the only debt that can get people in trouble when it comes to overextending their budgets. Here are some situations including situations with credit card debt that can lead to ending up being overwhelmed by payments. Many people love a great deal especially on a mortgage. This is why many times they take an adjustable rate mortgage. After a certain length of time, the interest rate increases significantly. This by itself may not be enough to cause overwhelming debt but in many cases, it can cause individuals to have difficulty adjusting higher mortgage payments. This added to credit card and other debt types can often overwhelm an individual. To prevent this or eliminate the high and changing interest rate refinance to a fixed rate mortgage as soon as possible. This eliminates the overwhelming aspect and provides you with a steady and consistent payment.



Credit Card debt however is one of the largest forms of debt that can create an overwhelming situation. In these cases, there are a few things that can be done that can take your debt from overwhelming to manageable. Many credit cards offer an introductory rate. This is usually a low interest rate or in some cases no interest rate for a perfect of usually six months to a year. Many people use the card and since it has no interest do not have a difficult time paying it off. However, the problem comes in with many people when that introductory rate turns into an interest rate that ranges anywhere from 13 to 19%. Manageable bills can quickly become overwhelming. Many people also pay the minimum payment required on credit card bills. This does not reduce the bill since often times minimum payments are not even enough to cover all of the finance charges attached with each month. This causes the principle to grow in turn cased the amount that interest is charged on to grow. After a certain point fees are added because the card can quickly go over limit in this manner and people find themselves overwhelmed. The first thing to do is assess where you are. Once you know where you stand, consider speaking with a debt counseling company. These companies have individuals who are trained to assist you in creating a budget to help get you out from under overwhelming debt or to explain options for credit debt consolidation and settlements that can help not only eliminate debt but help to repair your credit rating, standing and score. There are a number of ways that these debt-counseling services can provide assistance and a number of different types of services or companies. There are some companies, which are non-profit, provide assistance for individuals who are in debt, having difficulties, and do not have financial resources. There are others that will charge a start up fee or will charge a percentage fee that is attached to each payment as part of the payment. Others may charge a larger fee, a yearly fee or may charge a separate fee for their services. They can however provide you with the necessary tools to get out from under overwhelming debt and turn it into manageable payments that you can handle within your given budget. These are the types of services that can take overwhelming debt, which can put both personal and relationship, stress on a family and turn it into something that is no longer a concern. There is also a sense of relief as the balances drop and debt is paid off in full. There are also other options such as combining debt into options such as refinance or home equity loans that may also be suggested through debt counseling service. It may also be a way to get out from under this type of high interest and overwhelming credit card debt and allow you to get back into enjoying life instead of worrying about how to make the bills.



#8) Provisions and Laws That Can Help You When You Are Facing Overwhelming Debt If you are having issues with debt, you may be worried that you have limited options. Many people do not realize that there are a number of services, provisions and laws that are set up to protect you when you are having issues with debt. They help to protect you and let you know what you could be facing. Many consumer protection laws include the incorporation of disclosures. These disclosures outline the details of your agreements with credit card companies, banks and other institutions that are involved in lending or collecting money. It lays out your rights as a consumer and what options you have when problems arise. There are many people who do not read these in detail when signing for credit cards and other debt. They are filled with legal language and can be confusing to read but they do contain important information regarding what happens when situations arise such as late payments and situations involving going over the credit limit. In the United States, there are a number of different laws that help to protect consumers. These are classified in some areas as consumer affairs laws. These laws, acts and provisions include the Fair Debt Collection Practices Act, The Fair Credit Reporting Act, and the Truth in Lending Act, the Fair Credit Billing Act, and The Gramm-Leach-Bliley Act. These acts are enforced by the Trade Commission and the Department of Justice. On the state level, the Department of Consumer Affairs handles issue with consumer protection and provisions that are designed to assist people in a variety of ways concerning their relationship with businesses. One of the first laws to be aware of is the consumer credit protection act. This act is designed to provide a strengthening of economic credit based spending by informing individuals on how best to use credit. This is the act, which requires the terms of credit be outlined to the consumer. It is also designed to protect individuals from being unfairly billed and against the inaccurate billing. This includes credit cards, leases on durable goods and automobiles as well as personal property. This allows the consumer to make informed choices when it comes to the terms of the leases and the credit terms. The consumer protection act also requires that creditors give adequate notice for debt collection. It is ultimately designed to ensure that you as the consumer know what you are getting into, what the terms are and what your rights are. The FDCPA or the Fair Debt Collection Practices Act prevents the abusive debt collection practices. It requires that the collection agency maintain accurate information and provides the consumer with a way of disputing debt as well as making sure that the debt information is accurate. It limits how debt collectors can conduct business when collecting debt and defines your rights as a consumer when dealing with debt collectors.



The Fair Credit Reporting Act deals with the length of time that items can stay on your credit report, where the credit companies can report too and regulates things such as delinquencies, bankruptcies, liens, judgments and late payments and how long they can remain on your credit report and have an effect. The Truth in Lending Act works with the consumer protection act and stipulates that everything must be laid out for the consumer. The Fair Credit Billing Act prevents unfair billing and provides for billing errors. The Gramm-Leach-Bliley protects consumers in the cases of mergers with financial institutions. The biggest help for people who are experiencing problems with debt are the debt laws and bankruptcy laws. These laws provide provisions when you need more assistance than the provisions and protection acts, which include appeal, and in some cases settlement options can provide. These are serious things to consider Bankruptcy remains on the credit reports for 10 years and can severely affect credit and purchasing power. It can limit where you can lease property, where you can purchase cars or other transportation and other credit based services. It also does not include some forms of debt. There are two types of bankruptcy that can be filed. These are chapter 13 and chapter 7. They stipulate what types of debt and how that debt is to be paid whether this is a complete charge off which wipes away all outstanding debts, wipes out only certain types of debt from certain creditors or whether it creates a payment settlement option. The individual states usually handle debt laws. This determines things such as wage garnishment amounts, maximum interest rates a credit company can charge. Keep in mind that these laws affect the company where it is based not where you are. For example, if you are in one state where the maximum allowable interest rate is 23% but the company you have a credit card with is a state that allows 32% then you can be charged a maximum of 32% interest based on your credit, your history with the company such as with delinquency, defaults and late payments. It is important to make sure that you know the laws and provisions not just in the state where you live but also in the state that the company you are applying for credit is located. Getting into debt can be difficult and there are a number of provisions, laws and acts that can not only help to protect you but help you know your rights when it comes to getting out from under debt. Check with your local state laws as well as federal provisions and remember to read over all disclosure and agreement changes that your credit card and lending agencies and institutions send you in order to know what federal and state protections exist to protect you against overwhelming debt. You do not have to lose your home, car or livelihood to debt if you know what your rights are and what you can do to protect yourself from creditors and debt.



#9) Lower Payments By Settling or Consolidating Your Debt It is not difficult for credit card and debt payments to get out of hand. Many people pay the minimum balance and in some cases that is enough to allow you to make a payment towards interest and one towards principle provided that your balances are kept small. However, the higher your balance and the longer that the balances remain on your card the higher the interest becomes, it does not take long for it to be impossible for you to pay off the principle as well as interest when paying just the minimum balance. Even the minimum balance can become too much for people to pay. They become overwhelmed with their debt. There are a few ways to deal with this. However, it should be dealt with as soon as possible before it gets out of hand and creates an issue for you and your credit. There are a number of options that can be considered when looking to create payments that are manageable under your budget. The first step is to create the budget, gather all your bills together and list all your payments and expenses. Payments are listed for credit cards and other nonessentials, expenses are for things necessary to live and work such as car payment, car insurance and rent. Movie rentals, monthly subscriptions, eating out and so forth are not considered essential and if you are having difficulties paying essential bills, these should be eliminated. This increases the amount of overall income you have to work with, within the budget. You can then budget this extra money into your debt payments. In some cases, you may find it difficult to manage this even with additional funds. This is where you may want to consider consolidate debt options such as unsecured credit card consolidation, secured credit card consolidation, a debt consolidation loan or credit card debt settlement options. Choosing which way to go when you are looking to eliminate or reduce debt payments to a manageable level depend on the resources that you have available. For example, if you have a home you can consider three different options for a secured credit card consolidation or a debt consolidation loan. The first is placing a mortgage on your home if you have a home that is paid off. This will give you the money you need to consolidate your debt placing the balances under a payment that contains a significantly lower interest rate and has all payments tied into a single payment. The second option is a refinance. This refinances a current mortgage. It should do two things for you. The first is that it should reduce the payments you make on your home. It does this in two ways. The first is that often times it is going to extend your loan. This means smaller payments. The second is that it is going to provide you with a lump sum of cash to work with. Use this lump sum to pay of credit card debt with a higher interest rate. The third option is to take out a second mortgage or what is often called a home equity loan, this takes the difference between your home’s value and the value left on your



mortgage and provides you with this amount as a lump sum or a line of credit. This does the same thing as a refinance but may mean a second house payment with a different interest rate. An unsecured credit card loan is also an option if you still have a decent credit rating and you do not own your own home. This is basically a personal loan, which is taken out for the purpose of debt consolidation. The terms are going to be stricter and the interest rate is usually going to be higher than secured loans because there is an increased risk to the lending institution. However, this is going to provide you with a lump sum that will let you pay off your higher interest credit cards, place all the balances into a single payment and have an overall lower interest rate. If you have gone beyond the point that consolidation is an option or consolidation options are not available to you there are credit card debt settlement options that are available under certain conditions. In these situations, there are usually two ways that debt settlements become available. The first is that you present a settlement offer to the credit card company in exchange for marking the debt paid in full. The second is that the debt collection agency presents the offer and you accept. If you accept and make the lump sum payment the debt is settled and marked as paid in full. Debt settlement options involve negotiations and need to be carefully monitored. It is important to double check to make sure that the payment is recorded and the debt is reported as paid in full and reflected on your credit history. There are usually three types of debt settlement options that are offered when a debt collection company presents its options to you. The first is going to be a lump sum. This is going to present you with the most discount. Depending on how long the debt has been outstanding, this can be as much as 75% off the total of the bill. It can also be as little as 10% off. The size of the debt also factors into this. The second option is going to be a short-term repayment schedule. This usually involves repaying the debt in several lump sum payments. The discount is less but the payments are smaller in the settlement. The third option is usually a repayment schedule that covers the entire amount of the loan. There is no discount on this third option. These are some of the major options that are available for individuals who are in need of debt consolidation and settlement options in order to reduce payments and eliminate debt.



#10) What You Need to Know About Filing For Bankruptcy Filing for bankruptcy is not something to be taken lightly. It should be considered as a last resort only when everything else has been tried. In fact, new legislation has made it almost impossible to obtain a personal bankruptcy without having gone through a variety of steps, which in turn set up bankruptcy as the final available options. New legislation dictates that when going through bankruptcy filing certain steps have to be taken before the chapter 7 or chapter 13 filing will be considered. When filing personal bankruptcy it is important to know the basics of each type of bankruptcy that can be filed and what guidelines dictate whether you qualify for bankruptcy at all. The first thing that is going to be required for chapter 7 and chapter 13 bankruptcy is credit counseling which is also sometimes called debt counseling. This must be done by registered services with the government in order to qualify as meeting the criteria for filing for bankruptcy. Credit counseling is going to involve the following steps. There will be classes in personal financing and budgeting. These are designed to have two effects. The first is to prepare a budget based on your income and expenses. The first step will be to remove all expenses that are not fundamentally necessary. The government regulations for bankruptcy also determines how much can be deducted for expenses based on family size. Once this is done and a budget is created showing the allowable deduction for expenses, the amount of disposable income is shown. If your disposable income is high, enough for you to make payments on your debt you are going to end up being denied for a chapter 7 bankruptcy because you will not qualify. In order to qualify for a chapter 7 personal bankruptcy you have to have less than a certain amount of income and less than a specified amount of disposable income over these amounts means that you must file a chapter 13 bankruptcy. Once you meet the qualifications for a chapter 7 bankruptcy you must go to court and argue your case. You have to prove that while you are willing to pay off your debts you are simply unable to do so. There are things to decide such as which debts will be paid off with the bankruptcy and which are exempt. There are some debts you may not want to include when applying for a bankruptcy in addition to the ones that are automatically exempt from bankruptcy filing such as student loans. Most people go for chapter 7 when filing for bankruptcy because it liquidates and removes all the debts that are listed. However, there are cases where a chapter 7 personal bankruptcy is not an option. In these cases, it usually involves having income over the guidelines for filing a chapter 7 or involves enough disposable income after allowable expenses that a repayment plan is an option.



Chapter 13 bankruptcy is a personal bankruptcy that uses a repayment plan to pay off the existing debt. Unlike a chapter 7 personal bankruptcy, a chapter 13 bankruptcy does no whip away any debt. It does have several advantages. The damage to the credit rating is not as severe and it remains on your credit report for seven rather than ten years which is the new standard for bankruptcy. In addition, this type of bankruptcy may help to keep you to repair your credit score so that you have, at the end of your bankruptcy repayment plan done a significant amount of repair to your credit. Unfortunately, this type of bankruptcy can only be done if there is enough disposable income and you meet the income guidelines that disqualify you for a chapter 7. Filing for bankruptcy at a chapter 13 when do not have enough money to make a repayment plan usually ends up having your bankruptcy rejected. This is one of the reasons why credit counseling and budgeting are required courses prior to filing for bankruptcy. They help you to determine the type of bankruptcy that you qualify to file. If you have, enough income to file a chapter 13 this is what is presented. You can still under some circumstances file a chapter 7 even if you have enough income for a chapter 13 repayment plan. However, the argument has to be made in court and the argument must be compelling enough to allow the chapter 7, it is rare for this to happen, this is because if a repayment plan is viable and offered to the court they will take this over a complete liquidation. Personal bankruptcy is something to be used as a last resort. You could consider it to be equal to a get out of jail free card in monopoly. It does however come at a price and for many people this price may be higher than they are willing to pay if other alternatives exist. This is also another reason why credit counseling and budgeting are criteria for filing. Many people end up with debt problems because of financial mismanagement and spending outside their means on nonessentials. By attending these types of courses, many people have the opportunity to avoid bankruptcy and still repair their credit, something that was not offered, available or in some cases suggested before it became a requirement for personal bankruptcy. As a result, many people filed bankruptcy when it was still possible to do something about their credit and debt. The biggest thing about the newest regulations is that they are designed to provide people with the information and skills they need to avoid bankruptcy. If bankruptcy is unavoidable they provide the skills necessary to show individuals the way to prevent falling behind and ending up in debt again after they have filed and been granted a bankruptcy. When filing for bankruptcy the best thing you can do is to educate yourself not just on bankruptcy but also on credit, debt and financial management.



#11) Legally Discharge Your Debt With Bankruptcy For some individuals bankruptcy may be the only option to be able to get out from under overwhelming debt. In some cases, it may be the only way to save your home, your car and other assets. New legislation has made it more difficult to obtain a full bankruptcy where all debt is eliminated with no effects other than a negative reporting on your credit report. In fact the new regulations stipulate the types and kinds of debt, which can be discharged, and in some cases the reasons. There some things, which are not considered to be bankruptcy debt, these are usually federally issued or managed loans such as student loans. These are not cleared under bankruptcy laws and cannot be applied for when applying to have debt liquidated under chapter 7 or placed on a repayment plan such as available through chapter 13. The new requirements for both chapter 7 and chapter 13 bankruptcy filings make it more difficult to obtain a chapter 7 which is total liquidation of debt and it makes it harder for bankruptcy attorneys to file for clients. This in turn makes it more expensive and a much lengthier process to file for bankruptcy now than in previous years. In order to be able to file chapter 7 bankruptcy you must meet a certain set of guidelines. These guidelines are that you attend credit counseling as well as personal finance and budgeting classes. These have to be from a registered provider and there must be documentation that you attended and made yourself available to the services they provide. It is also necessary that you meet income guidelines. This means that after allowable expenses are removed you do not have enough disposable income to make payments on a repayment plan. The key word in this is allowable. The government has set regulations on expenses. These regulations allow only so much of each type of expense to be deducted and it stipulates the types of expenses, which are allowable. Chapter 7, which is total liquidation of debt, is much harder to qualify for and obtain than a chapter 13. After you have obtained credit counseling and it has been documented that you do not have the income necessary to pay off your debt. There are a few things that occur. You must present your case in court where creditors often send representatives to argue for a dismissal of a chapter 7 or to remove their debt from the list of accepted debts that were to be liquidated. It is possible for some bankruptcy debt to be presented and not be ultimately included in the decision of the court regarding your bankruptcy. Chapter 13 bankruptcy is based on a repayment plan. This plan is usually set up by the credit counseling service and courses that you are required to take when filing any form of bankruptcy. This is the type of bankruptcy, which does not remove debt but requires creditors to adhere to a repayment plan and in some cases reduction in debt. This is done for individuals who have, after consideration, enough disposable income to pay off a portion if not all of the debt in a reasonable amount of time without causing an issue with their home, transportation or other necessary expenses. It is important to remember that the expenses that are deducted from your incoming cash flow are



determined by governmental guidelines and are determined in part by family size. Even if you are filing for chapter 7 bankruptcy you may not with these guideline actually qualify. There are recourses if your actual expenses are indeed more than the allowable by government guidelines however these require additional time and may require additional costs when it comes to court fees, legal fees and rising debt. How you handle credit and budgeting after bankruptcy is important. The number of times you can file is limited and in many cases one time is all that is allowable. Repairing your credit after either a chapter 13 or chapter 7 bankruptcies can be difficult. This is why bankruptcy credit card options exist. They are designed to provide you with the ability to be able to help repair your credit after you have filed bankruptcy and discharged your bankruptcy debt. There are a few earmarks of the type of credit card that can be classified as a bankruptcy credit card. One of the biggest is that it is a secured card. This means that your credit limit on the card is limited to the amount of money you place on the card. If you place $50 on the card then your credit limit is $50. Every time however you pay that back to the card and renew the total amount a positive report is sent to the credit reporting agencies indicating that you paid the card. This in turn improves your credit rating in regards to revolving credit. Revolving credit is characterized by having a renewable source of credit such as a credit card or line of credit style loan. Other things, which may characterize the type of credit card available, as a bankruptcy credit card is a credit card with a low balance and high interest rate that you are allowed to keep regular payments of this card have the same effect as a secured credit card. It is important with these cards is that you purchase no more than you can afford to pay off by the time the bill is due. This creates an even greater impact because you are paying the debt off in full at the turn of each billing cycle. Filing for bankruptcy may be a way to release you from overwhelming debt legally but it is not a decision to be made lightly and should be used as a final resort. It remains one of the biggest marks, which can negatively affect credit scores and ratings. The new legislation also makes it difficult to obtain a full liquidation leaving you not only with the debt to repay but also with the negative effects of a bankruptcy.



#12) Tips on Repairing Your Damaged Credit – It May Not Be As Difficult As It Looks Damaging your credit is easier than it may seem and repairing it can be too if you know what to do to fix your credit and get back on your feet. Credit repair can be done before serious damage is done or it can be done after a bankruptcy but credit is one of the most important financial tools and privileges that a person can have. It helps you to lease an apartment, home or car. It helps to pay for things you may not be able to afford in cash right away and helps you to be able to purchase a home. There are some jobs that look at credit history as a way of showing reliability; this is especially true of jobs within the financial industry. Bad credit repair and bankruptcy credit repair is going to be more difficult than repairing slightly damaged credit. Credit repair should begin as soon as possible. This helps to prevent long-term damage and severe damage. There are a number of things that you can do to help repair your credit. The first thing to do is to settle your debts and pay them off or get back on track making regular payments. Many credit card companies have plans that can help with repayment or they may reduce payments, interest rates and fees for a length of time in order to compensate for difficult economic times. This helps to repair credit that is already damaged but not seriously or severely. There are some conditions, which need to be met before these repayment plans become options for you. In some cases, you need to have a certain number of months of nonpayment or late payments or payments, which do not meet the minimum balance. This should be the first step. This often reduces the interest rate or in some cases removes the interest rate for a period of time. Making payments on time for an extended period can go a long way to repairing credit. Debt settlement options also help to repair credit quickly. This involves taking a lump sum and paying off the credit card completely either at the full amount or at an amount agreed upon by both parties. This can be done at any time and should be done as soon as possible as more often than not settlement options become readily available when the debt becomes the property of a debt collection service. This places it under bad credit repair or bankruptcy credit repair. It is not as valuable as repayment options. The reason for this is that many people or companies are looking for a steady repayment history since most credit is taken out to be repaid on a monthly basis. Paying it off in a lump sum after it has gone to collections does not present this type of picture and so does not have the same effect as repayment options do. Paying debt off in a lump sum however can help you to get out from under overwhelming debt and ultimately help you to begin to repair credit by giving you a clean debt to income ratio. Many companies are going to allow you retain your card or obtain a card with a lower limit and higher interest rate after you have done a debt settlement option and paid off the



previous balance. You can then use this to rebuild your payment history by making on time payments. It is preferable that you do payments that are in full in order to zero balance your card every month before the due date. This shows that not only are you repaying your debt but that you are not spending outside your means. This is not always possible for larger purchase. When purchasing larger items consider the amount of interest and work out the shortest way to pay off the entire balance. It should take no more than four months to pay off any one item on a credit card. This can be done with bad credit repair or bankruptcy repair. With bankruptcy, you may find it difficult to retain or obtain credit cards that are unsecured. Secured cards can be a great way to obtain the options you need to purchase items on credit and rebuild your positive credit history. Budget properly and start out small is one of the best ways that you can repair your credit without getting involved in negative credit issues. Each month that you make a payment and pay off your credit card, your credit gains a small amount on the positive side. Debt consolidation loans can also provide you with the same benefits. Simply pay off the higher interest credit cards and use the debt consolidation loan to rebuild your credit payment history with lower interest rates and ultimately lower monthly payments. You may have to start out with unsecured loans. These are loans that contain a higher interest rate and often have less than ideal terms but they can assist in helping to repair credit especially if you take out a low amount and pay it off quickly. Secured credit cards can help you to stay within budget while you are repairing your credit by limiting your credit line to money you have already put in. Consolidation loans though credit counseling services, consolidation services, and a variety of loan types can also provide you with a way to do quick credit repair. Whether you are repairing your credit before it is severely damaged, after your credit has become damaged or after bankruptcy, when you are attempting to restore your credit from its worst possible state, this can provide you with the assistance you need. Credit repair is not as difficult as it seems. It does require you to budget and manage your finances in a manner that allows you to stay within your budget and still make appropriate payments and may mean giving up some of the extras, you love for a short time in order to benefit your overall financial state however, and it is well worth the price.



#13) Credit Repair Resources – Educate and Empower Repairing your credit does not require you to have any special service or to find anyone to assist you. You can actually do quite a bit on your own when it comes to repairing your credit on your own. A credit repair book is a good place to start when it comes to finding credit repair secrets that can let you repair your credit without outside assistance. There are a few things that you should look for in a credit repair book to ensure that you are getting a book that is going to provide you with what you need to be able to repair your credit on your own. One of the first things to do is to preview the book. It is important that the book provide you with tools, tips and credit repair secrets that you can use on your own. This is the most important aspect. Many books will point you to the use of outside resources in order to repair credit however; outside resources are not going to be what you want in this case. You will want to look for things that you can do on your own without outside assistance. You may also be surprised where you find tips, tricks and credit repair secrets. You may want to look into books that offer you advise on budgeting or personal finances, as these types of books will often contain important information that can provide you ways to repair your credit. Some of the information to look for in these types of books are ways to budget. Creative budgeting is one of the first things to consider when looking to repair your credit. Books can provide excellent examples of this but you can also find a number of resources on the internet. There are even eBooks that can help you put together a budget that can get you started on the path to better credit. There are also resources available that can show you how to negotiate with your creditors to settle your debt. There are a number of ways that you can legal discharge your debt in full by paying only the principle or in some cases you may be able to pay less than the principle owed and still be able to settle your debt. In addition to debt settlement plans, many people do not realize that they can work repayment plans out themselves with their creditors. Many creditors have ways that you can reduce your payments without having to seek the help of a debt consolidation service. There are articles, courses, books and of course a wealth of information that can help you to repair your credit on your own. One of the most important things is that you believe that it is possible for you to be able to fix your credit and get your financial situation back under your control. Gain an overall picture of what your finances are like so you know where you stand. A good percentage of the worry and stress that comes from debt and overwhelming payments is not having a clear look at what you are dealing with in regards to your bills. The biggest thing you can do to empower yourself once you know where you stand is being able to think outside of the box.



Be creative there are hundreds of ways that you can alter your budget, rearrange payments or make extra money without putting in an excessive amount of time or energy and still be able to make additional income if this is necessary to be able to repair your credit. Education is one of the most important things that you can have on your side when you are busy working on credit repair. Knowledge empowers you to be confident in organizing, planning, budgeting, and even negotiating and working out repayment plans so that you obtain the benefit you want of increasing your credit score. Consider options that involve paying off or combining smaller debts. It may not seem like much or it may not seem like it is accomplishing a great deal but there is a sense of empowerment each time a debt is removed and each time your credit score increases. It also helps that most debt companies actually have plans that can help you with repayment without having to seek outside assistance. Many community centers and financial services offer courses to assist in teaching people how to manage their finances, budget and even how to handle issue with credit. There are also credit advisors. These individuals are different from credit counselors. Credit advisors are individuals who may or may not charge a fee for providing you with information on fixing your credit. These are different from credit counselors who charge a fee to provide you with a plan that repairs your credit. In the first case you are only provided with information that you need, in other words they are simply a resource. In the second instance, they are doing the work for you and you merely follow along. Repairing your credit yourself is not as difficult as it may seem but it is important to research and gain the knowledge you need in order to be able to handle your credit and finances. This is not something taught in school in fact most public or private education system for primary education do not include how to manage finances, budget or even balance checkbooks. In many cases, these courses are classified as business and limited to electives. This leaves many people unprepared for being able to manage their finances successfully as a result education is the first step in being able to handle your credit repair yourself. Along the way, you will find a number of credit repair book options including eBooks as well as resources that can supply you with credit repair secrets that can help you repair your credit without the use of outside services such as credit counseling and debt counseling services.



#14) Credit Repair Services – Help When You Need It Some people may want to take the time to learn how to repair their credit themselves. Education is important no matter what road you choose to take when it comes to credit repair. There are some cases where you may not want to take the time to negotiate and work out a plan on your own with your various creditors. This is where a credit repair service can come in handy. You can use a credit repair business to do the work for you when it comes to creating a budget, negotiating with your creditors and working out a repayment and settlement plan. These services usually change a fee but for people who are looking for a quick solution that requires minimal effort on their part and gets results this can be the perfect opportunity. There are however, a number of things you are going to want to look for in a credit repair service in order to ensure that you not only obtain the repayment plan and repair you require but it is done at a reasonable price. The first thing to do is talk to the credit repair consultant. This is the person who is going to be handling your account. You have the right to have someone you are comfortable with and can work with successfully. To this end, it is important to speak with them and get to know them before agreeing to the service. Many companies offer a free consultation where they go over your accounts, bills, and budget and determine if they can assist you and what they can assist you with based on the services they offer. These types of services also have a wide range of prices. A more expensive service does not always mean that the service is better than cheaper services. The important thing is that you do not add to your debt by paying for a service that is supposed to be helping you repair your credit and reduce your debt. There are a number of different types of credit repair business types. The first type is going to be a profit based business. These are usually going to be more expensive and they are usually going to have a lower amount of debt that they are willing to take on. They often work with a larger group of creditors and offer options, which may not be available through non-profit organizations. There are two main differences between these types of services. The first of these profit-based services is going to create a repayment plan by working with your creditors to reduce your interest rates and payments. This is usually conditional to you following the payment plan and making on time payments. These payments may be high at first and then as you show a steady payment history you may see a reduction based on a lowering interest rate. In some cases, interest rates are removed completely in order to facilitate the repayment plan. There is usually a monthly fee attached to this type of service. The second type is going to be a company that basically purchases your debt from your creditors or pays it off for you; in turn, you repay the company by making payments usually at a particular interest rate. This is how they make their money and in most cases,



these types of companies do not charge a monthly fee. They are usually competitive with the other style of non-profit business so between the two the option is up to the terms of the individual seeking service. Non-profit organizations also exist. These offer repayment plans and counseling. They usually charge a monthly fee and they do not in most cases have as extensive a network or set of options available. This is because they tend to be smaller in size and work with a limited cash flow. They do have options available that for profit companies do not such as additional aid that can assist with housing, food, clothing and so forth that may make it easier to repair your credit and get back on your feet. Any of these types of credit repair service options are going to provide you with what you need to repair your credit. The type of service or credit repair business you choose depends on the factors surrounding your individual case. Many people look to non-profit organizations first because they are usually the easiest to work with when it comes to requirements. They often do not have large debt size requirements that can be found with profit-based companies. For profit, companies have resources that are more extensive but they may have tighter restrictions, do not offer support in a number of areas that non-profit companies can assist in. They do have the benefit of having the opportunity to provide you with a credit repair consultant that is not a volunteer but someone more extensively trained and can provide you with a wider range of options. They also are usually more expensive and may offer a range of packages with a range of price tags to provide you with the services you need. Consultations for both however are usually free so you can check out a number of repayment plan and options before deciding on a company to go with. Choosing a credit repair business is a big decision. It effects the way your credit is repaired, how quickly it is repaired and ultimately not only how much you pay but how much you can save on your payments when it comes to paying your debt off and increasing your credit score. This is why it is important to take the time to make sure you are not only comfortable with the person you are going to be dealing with at the company of your choice but that you are comfortable with the company and with the options and terms they lay out in their agreement with you. Credit repair and the necessary steps to accomplish it are essential to creating a solid and stable financial outlook and to getting back on track with your credit purchasing power.



#15) Services for Credit Restoration and Rebuilding – What You can do to Help Yourself Repair Your Credit Getting into a position to improve credit is not as difficult as it may seem at first. There are a number of ways that you can improve your credit and repair your credit history and you do not have to do it alone. Consumer credit counseling and debt counseling services are available to you to help you accomplish your goals of setting your credit back on the right track. The first thing to do is make sure that you contact a debt consolidation service as soon as possible if you are having trouble with your credit. The sooner you begin repairs the sooner you can see an improvement in your credit history. There are a number of things to consider when you are looking into consumer credit counseling and accepting a service to assist you in making repairs to your credit history. The first thing to do is go through and do a search for counseling facilities, many of them have websites making it easy to find what you are looking for. It is important that you fit with the company you are working with and that you are comfortable with the service that you receive. Just because you have, bad credit does not mean that you should simply accept what someone tells you. Research and educate yourself so that you find the best option available to you. Before getting started, the first thing that you are going to need to do is to collect all of your bills. These should be all the bills that report to your credit as well as all the bills that you need for your every day expense. Go through them prior to talking to a consumer credit counseling agency. The reason for this is that it will speed the process up considerably. You should sort your bills out by type. These should be credit cards or revolving credit. Revolving credit is credit that you can reuse as you pay it off. Installment bills, these are things such as car payments, mortgages and medical bills. You are going to want to create another category that involves utility bills, factor in the average over the space of a year. This incorporates both the high and low seasons where air conditioning and heating costs cause your expenses to rise. You should do this for phone, water, electric and any other essential expenses. You will also want to do this with food expenses. Many people spend an average at the store every month. Factor this average or even take the time to record how much is spent on non-food items such as cleaning supplies and personal hygiene and how much is spent on food. Most credit counseling organizations are going to ask for this information. After this you are going to want to sort all your nonessentials, these are bills you can cut out and still have your car, home and so forth. These are things like eating out, trips to the movies, or the other nonessential items you may purchase for the house or yourself that are not strictly necessary. Most agencies will ask you to cut out most of all of these depending on the type of service or expense it is. The reason for this cut is because it increases the amount of disposable income that you have coming in. This in turn may be enough for you to start repairing your credit. However, there are many cases where this will not be enough to help you repair your credit. This is where debt counseling services can provide you with the necessary tools to get out from under overwhelming debt and repair your credit. After you have eliminated



all unnecessary expenses and totaled up your payments, you may find that your debt payments exceed the disposable income you have after you take out expenses. This is where consumer credit counseling can come in and assist you. There are usually some considerations and conditions for these services. The first is that you may find some services require a certain amount of overall debt after expenses. This is not monthly based but total amounts. For example, they require a minimum of $10,000. Some require less others more depending on the service. Research the service to find out first if they can help you and what their conditions are, this information is usually available online but you can also obtain it by calling the individual services. Consultations are usually free and they usually are willing to supply you with a repayment plan that shows how they can help you free of charge. Keep in mind that most organizations are going to charge you a service fee. This is usually attached to your monthly payment and is designed to defray the costs the company takes for negotiating with your creditors, handling payments and so forth. There are two main types of debt counseling services. The first is going to work out a repayment plan. These are going to be companies that work out a reduction in your overall bill, interest rates and other fees in order to make the payments more manageable. They may or may not consolidate those into a single payment, which you pay to them. They in turn make your payments for you to each of the creditors. The other type of company usually involves debt settlement. These consumer credit counseling services will pay off the debt at a negotiated price and then you pay it off to them. Similar to a buyout by a collection agency, the fees are then reduced and the interest payments usually become the payment for the services rendered. Credit counseling and debt counseling services can go a long way to helping you repair your credit by working with you to repay your debt in a timely fashion and restore your positive credit history with credit reporting agencies. Conditions for these services do apply so it is important to research each likely service to ensure that they are offering you the best deal as well as the service you need.



#16) Free and Clear – Repair Your Credit Obtaining bad credit is more often due to something creating a problem with your ability to make payments rather than your decision not to pay. This can make keeping up as well as engaging in personal credit repair difficult. Repairing credit is not difficult once the issue that is behind your inability to pay has been removed. It is important to start payments as soon as possible when you are finally able to begin repaying your debt in order to facility credit restoration. The first thing to do is get in touch with your creditors. Many of them offer a plan that can help you get back on your feet or they may offer settlement options for the balanced owed in order to bring your account up to date. Begin making payments as soon as possible and for the full amount agreed or slightly more. This is important because it shows the companies you have debt with that you are out of the situation that caused the problem in the first place and that you have a willingness to payoff what you owe. Many times the plans they offer will allow you to reduce your interest rates after the repayment plan has ended provided that you show a good history under the new schedule. This means that you make payments on time. In some cases, there will be an allowable number of times to be late provided you call and explain the situation. For debts, which do not have these types of plans, there are a number of other options that are available to you. The first is to budget and see if you can begin repayment without the need for repayment options. Depending on the type of situation, which caused the bad credit to occur this, may be possible. If not consider debt consolidation options such as refinancing. With bad credit refinancing will be harder than if it was done prior to the negative aspects being reported to the credit reporting agencies but it is still possible and can provide instant relief by allowing you to pay off all or part of higher interest credit cards and being credit restoration with a lower interest monthly payment. Repair credit can also be done through debt settlement options. These options are where you agree to pay off all or part of the entire debt in a lump sum or several large payments over a number of months. These options are negotiable and may offer you the best deal when it comes to repairing credit after a negative situation. These options are usually available in this manner only after the account has gone into collections and has been in collections for a number of months. You can however approach the credit card company or debt holder with your own credit restoration plan prior to this. For those with seriously bad credit from an extended negative situation it may be easier to do a credit restoration from the ground up. This means filing either chapter 7 or chapter 13 bankruptcy. This is not usually recommended and should only be used when significant damage has been done and when repayment options are not viable even after the negative or issue which caused the delinquency to occur has been removed. Chapter 7 is a total liquidation of debt. It takes significant time and involves budgeting and financial management courses.



It can however give you a clean though low slate to work from and allow you to obtain bankruptcy credit cards in order to help with personal credit repair. Chapter 13 bankruptcy allows a repayment plan with significant negotiation and reduction in many cases to be made. This allows you to repay your owed debts under terms that allow you to make payments without causing issues with the fundamentals necessary for living. These remain on your credit reports for 7 to 10 years but can offer significant benefits if done correctly. Once you have gotten your debt plan in place, make sure to make payments in full or over the minimum required amount. If necessary check to see if it is possible to pay in two, three, or even four payments per month of smaller amounts. This way you are not taking out a large chunk from any one paycheck. Start by paying off smaller debts first. Pay offs offer significantly greater credit restoration benefits than payments on smaller debts. The objectives of personal credit repair however is to show a positive payment history. In order to do that you must make payments. This is why it is important even if you obtain debt consolidation assistance or you work out a debt settlement plan that you keep at least one credit card or debt that is either installment or revolving. After six months of payments on a revolving credit card that are on time ask for a reduction in interest rate or ask for an increase in credit line. It is important that even if the credit increase is granted you do not spend beyond your means. However, the increase in credit line usually indicates that you are being held in a favorable light by the credit card company and can do a significant amount when working on credit repair. Credit repair begins after the aspect, which caused the negative, or bad credit to occur is removed. It is important to begin repairs as soon as possible and not to limit your options. Credit repair options come in a number of shapes and sizes and from a number of different sources. If you need assistance, do not be afraid to go after it and educate yourself on how you can accomplish a personal credit repair or credit restoration. Repairing bad credit can take a considerable amount of time and effort but in the end, it is well worth it. Debt consolidation, settlement and repayment options are some of the things to consider in addition to budgeting and financial management courses to provide you with the education you need to repair your credit.



#17) Bad Credit Mortgage Options Today you will find that many people are dealing with bad credit. It has been so easy to get credit in past years, and it's easy to get in over your head. With the current financial crisis, there are many people finding themselves having severe problems. If you need to purchase a home and you have bad credit, then you may be wondering how you can purchase a home. Well, there are some bad credit mortgage options out there that you can consider. With FHA loans, credit restoration, flexible underwriting, and other great credit solutions, there should be a way for you to get the loan that you need to purchase a home of your own, even if you do have less than perfect credit. Sub Prime Lenders You will find that there are lenders out there that offer flexible underwriting and who are willing to give mortgages to people who have credit that is less than perfect. These mortgages are usually known as sub prime mortgages. You'll definitely find that it is much harder to get a mortgage when you have bad credit. However, there are still some options out there today. After Bankruptcy If you deal with bankruptcy, more than likely your credit is going to be pretty bad. This is a big credit problem. However, if you do show that you can work on paying them back, you may be able to get FHA financing available in a chapter 13 after 12 months of on time payments. This allows even people who have gone through bankruptcy to work on things so they can get one of the FHA loans that are available, even though their credit may not be very good yet. Reestablishing Your Credit Before you are able to get the mortgage that you need, in some cases you may end up needing to reestablish credit before this is possible. There are a variety of things that you can do for credit restoration. This can help to restore and improve your credit so you have better luck finding the financing that you need for your home. There are definitely a variety of different approaches that can be taken to repair and reestablish your credit. First of all you will want to check out your credit report. Make sure that any problems are removed if they are mistakes. You'll have to contact the credit reporting agency in order to do this. This can definitely help to improve your credit. Errors are pretty easy to fix up. However, if there are other problems, then you may need to work harder on restoring your credit. Paying bills on time and working to pay off high interest debt can be a huge help as well. Work on getting out of as much debt as you can. If you are having problems meeting your bills, then consider getting involved in debt consolidation or in credit counseling. Many times you'll be able to lower interest rates or even the amount that you have to pay. Also, taking out a consolidation loan may be able to help you get your debt under control so you can work on making your credit better.



Getting a Bad Credit Mortgage In some cases you may still be able to get that mortgage, even with bad credit. However, one thing you need to consider is the price of a mortgage when you have bad credit. You'll find that people with bad credit usually end up paying interest rates that are much higher. Sometimes there may be origination fees that you'll end up having to pay as well. This will depend on the points on the loan. If you have one point on the loan, then you'll have to pay one percentage of the loan. However, those who have very bad credit can pay all the way up to 4-5 points on a loan, which means up to 4-5% of the loan that you need to take out. In some cases a hard money loan may be an option to consider as well. However, it can cost thousands just to even get that loan in the first place. The Best Option While you may want to go ahead and take out a mortgage, even with bad credit, you may be better off to wait a bit and work on finding credit solutions that will help you improve your credit score. You can definitely save a whole lot of money if you improve your credit. This way you'll have more options when you need a mortgage and the mortgage won't be as costly for you as well. There is less chance of being taken advantage of when you can go with a mortgage for people with good credit. So, if you can wait a bit, take the time to reestablish your credit. Then you'll have more options and a better chance of getting the mortgage that you need for a home.



#18) Hard Money - What is It? More than likely you have heard about hard money. However, you may not really be sure what exactly a hard money loan is all about. Well, essentially this is a type of asset based lending in which a person that is borrowing the money gets the funds, but they are secured by the value of a piece of real estate. Usually these loans come with pretty high interest rates, and usually commercial banks are not the ones that are making these loans. You'll find that hard money is a lot like going with a bridge loan, with similar criteria. However, usually a bridge loan is for investment or commercial properties. Hard money is a bit different because it is a loan that not only is asset based and it includes a very high interested rate, but there many be a financial situation that is quite distressed as well. Who Finances Hard Money Mortgages? You may be wondering who the hard money lenders are. Who would want to finance these hard money mortgages? Well, usually you'll find that these options are provided by private investors, since banks usually will not offer these options. Most of the time, the credit score of the person borrowing doesn't even matter, since the loan is taken out against the collateral property and its' value. When the loan is made, usually it is only given for about 65% of the value of the collateral. So, if the property is worth about $200,000, the loan amount would be about $130,000. This way if the borrower does not pay, the hard money lenders will be able to still make money and they will have the extra money to make up for the foreclosure proceedings they will have to go through on the property. Structures of These Loans Understanding the structure of this type of a loan can definitely be important. Usually this type of loan is a type of real estate loan that is made against the value for quick sale of the property. Usually the hard money lenders will fun these loans and will be in the first lien position, so that they are the first to end up getting remuneration of the borrower ends up defaulting. If they allow someone else to have the first lien position, this is called a mezzanine loan. The loan to value ratios on these loans is usually somewhere between 60% and 70%. If a lender was structuring the purchase of a piece of real estate, they would probably go for 65% in the hard money loan, 20% of cash or equity from the borrower, and then 15% of a seller carry back loan or another type of loan, such as a mezzanine loan. History of the Term You'll find that the term "hard money" is really only used in the United States as well as Canada. This is where these loans are very common. When it comes to commercial real estate, these types of loans became a last resort option for those who needed capital and they are able to get it against their holdings and the value of them. This type of lending started out in the 1950s; however, in the real estate crash in the 80's and the crash in the 90s, this industry had some real setbacks. Lower loan to value ratios are now in place since these things have occurred. Commercial Asset Based Lending



Commercial hard money, which is often known as commercial asset based lending, is much like traditional hard money as well. However, since there is a higher risk, they are usually on the more expensive side. Usually these loans are short term and sometimes are also referred to as bridge financing as well. You will find that the industry moves quite quickly, making it great for people who need to have funding fast. However, the prices of the loans have become more expensive because of this fact. The Expense of These Loans The expense of the hard money loans can definitely be steep. They are definitely a whole lot more expensive than sub prime mortgages. Usually there is more risk to them, and the interest rates can be high. Banks don't determine the interest rates that are paid. They are decided on the availability of the hard money and the current real estate market. Usually they end up ranging between about 12% and 21%. However, in some cases it can go all the way to 25% or even a bit higher. In some cases you could end up paying a penalty fee if you pre pay as well. Finding a Quality Hard Money Lender Finding a quality hard money lender to give hard money loans or no-doc/stated loans can be difficult. It's important that you are careful as you select a lender as well. This market is quite predatory, and the prices go high and sometimes there are lenders that charge very high fees in the beginning as well. It's usually not a great idea to go with a lender that asks you to offer them high fees up front. Unfair practices that occur should be reported to the attorney general office where you live. These loans can be helpful, but only if you get the right lender, so it's important that you choose very carefully.



#19) What is Asset Based Lending? Perhaps you have heard the term asset based lending. Well, this type of lending really refers to any type of lending where it requires the security of some kind of asset. This way if the borrower is not able to repay the loan, then the asset can be taken to help satisfy the money that the lender has lost. However, this type of lending usually more commonly refers to lending that is done to large corporations and businesses with assets that other loans usually don't use. These loans often are tied to things like equipment, accounts receivable, inventory, machinery, trademarks, intellectual property, and more. When is This Lending Used? So, you may be wondering when this type of lending is used. Usually it is done for companies that want to raise funds. Asset based lending is often a last resort when companies are not able to go through other lending options. In many cases this may mean that the company is dealing with very bad financial problems. This type of lending is much like sub prime lending. Usually you'll find that this type of a loan comes with interest rates that are very high. However, the lenders are often able to make quite a bit of money doing this type of lending. Features of These Loans There are a variety of features that come with asset based loans. One feature is an asset business line of credit. This is much like a regular line of business credit, but it is done with an asset to back it up. These lines of credit can fluctuate based on the balance that comes through accounts receivable, so the lender has to audit and monitor the borrower on a regular basis so it knows the size of accounts receivable. However, on the good side, it can allow for larger lines of credit as well, letting companies borrow larger amounts of money. Some other types of asset based lending include factoring of receivables and pledging of receivables. These types of asset lending make the receivables the asset that the borrower is borrowing against. Differences Between Commercial Financing and Asset Based Lending So, what are the differences between regular commercial financing and asset based lending? Well, the main focus of asset based lending is all on the collateral, giving leverage to the lender. Usually borrowers are given more liquidity when they go with an asset based loan. You'll also find that these borrowers have higher financial leverage than those who go with traditional commercial financing do. The Target Market Most lenders that do asset based lending have a target market. They provide solutions to meet financing needs of specific people. Usually the target market is for businesses that have revenue of at least $30 million, all the way up to about $250 million. These services are usually geared towards distributors and services manufacturers as well. Even those who do have revenues that are more than $250 million can be targeted as well. However, certain lenders usually have various specific industry groups that they want to reach out to, and this can vary from lender to lender.



Choosing a Lender For companies that want to go with an asset based loan, choosing a good lender is very important. There are a variety of things to consider when making this choice though. Most companies will want to go with a lender that does not charge pre payment penalties. Other products should be available as well when you are trying to find the right lender. Good lending companies will offer transitional capital, which can allow a company to go from an asset based loan to some other type of commercial financing if their finances get better and allow it. These are just a few important things to look for when choosing a great lender for an asset based loan. I hope you’ve enjoyed these articles! Let me know how I can help you. Sincerely, John Mazzara

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NON PROFIT SITES: Greater Minnesota Housing Fund

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http://www.hocmn.org HousingLink

http://www.housinglink.org Annual Free Credit Report

http://www.AnnualCreditReport.com

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