Jean Chatzky Quotes
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A consolidation makes sense only if you can lower your overall interest rate. Many people consolidate by taking out a home equity line loan or home equity line of credit (HELOC), refinancing a mortgage, or taking out a personal loan. They then use this cheaper debt to pay off more expensive debt, most frequently credit card loans, but also auto loans, private student loans, or other debt.
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If you default on an unsecured debt, you won't lose anything (except points on your credit score).
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Most people don't know this, but if you settle a debt for less than the amount you owed, you are potentially responsible for taxes on the forgiven debt. Look at it this way: You received goods and services for the full amount of debt, but you're only paying for a portion of it - sometimes less than 50%. Anything more than $600 is generally considered taxable, but the IRS will sometimes waive the tax if you can prove that your assets were less than your liabilities when the debt was settled.
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In most cases, if you've gotten to this point, you've already received a letter or phone message from your creditor with the name and extension of a representative. If you haven't, you can call the toll-free number on your bill, but keep in mind that the person who answers may not have the power to negotiate a settlement. Ask to speak to someone who is either a supervisor or in the settlement department, if the creditor has one (as many do).
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Pay cash. For some reason, it's harder for people psychologically to part with their cash than it is to swipe a card. Maybe it's the act of physically seeing the money change hands, or maybe it's because you don't want to break a $20 for a $2 cup of coffee.
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Don't let the fact that you're spending time getting organized result in late fees on your credit card bills.
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If you have even a smidgen of doubt that you'll be able to stay away from racking up additional debt, don't do it.
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If you are able to settle, you'll be getting off rather easy. Debt settlement companies can sometimes get you off the hook for a large percentage of your debt - in many cases, up to 50% will be written off.
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Take the cards out of your wallet. A debit card is accepted just about everywhere that credit cards are, and you'll be spending money you have - always a good thing.
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You fall a bit behind on a credit card bill, your interest rate soars, your minimum payment rises, and you start falling more and more behind every month. You don't see an end. But you don't want to file bankruptcy either. What you can do - and should do - is negotiate.
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Unless you have multiple accounts that you need to negotiate and you think the project is just too big to tackle on your own, you're better off just calling your creditors directly.
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You won't be caught off guard and you won't feel guilty, because you'll be spending money that you've allocated for the occasion.
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You really don't need to hire a debt settlement company to negotiate with your creditors.
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You also need to understand that when you consolidate credit card debt into mortgage debt - like a home equity loan or a HELOC [ home equity line of credit ] - you're taking an unsecured debt and turning it into a secured debt.
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You need a clear, legitimate excuse for why you're behind [the bankruptcy], such as a layoff, divorce, or medical emergency. Be prepared to back up the circumstances with supporting documents. Anything you have to substantiate your story - including proof that you have, for instance, been actively looking for a new job - will help.
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Buy experiences, not things. Spending on experiences makes people happier than spending on things. Things get broken and go out of style. Experiences get better every time you talk about them.
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When you default on a secured debt, the creditor takes the asset that backs up that debt. When you convert credit card debt to mortgage debt, you are securing that credit card debt with your home. That's a risky proposition.
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Save for your goals. Take note of what's coming your way - vacations, the holidays, what ever is going to cost you money - and start saving ahead of time so that you have a stash when the time comes.
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Sometimes a creditor is willingto do this as a bargaining point - you give the creditor cash in hand, it gives you a positive listing on your credit report - even though you haven't paid the full amount. Get this agreement in writing.
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Once the settlement is completed, the credit card company will report it to the credit bureaus, which will then make a notation on your credit report that that account was paid by settlement. That's going to signal to future lenders that you left the last guy hanging. That's why, as with bankruptcy, debt settlement is an extreme option, one you shouldn't take lightly. It's not just an easy, cheap way to eliminate debt.
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No company can promise an end date, but if you have multiple debts, the first one should be settled within a year.
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You must be sure - and I mean absolutely positive - that you have the willpower to pay off those credit cards and not use them again.
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Turn down offers for new cards or credit line increases on your current cards. Credit's tight, and chances are, you're not getting many offers anyway. But if you do, remember that the less credit you have available, the less trouble you can get into.
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You settled a debt instead of paying in full will stay on your credit report for as long as the individual accounts are reported, which is typically seven years from the date that the account was settled. Unlike with bankruptcy, there isn't a separate line on your credit report dedicated to debt settlement, so each account settled will be listed as a charge-off.
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You can have a do-over starting today. But you have to get over the feeling that it's too late
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Even in the days of the tightest credit in 2008, HELOCs [ home equity line of credit ] and home equity loans were being made.
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By definition, saving - for anything - requires us to not get things now so that we can get bigger ones later.
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Debt settlement companies work as a middleman between you and your creditor. If all goes well (and that's a big if), you should be able to settle your debts for cents on the dollar. You'll also pay a fee to the debt settlement company, usually either a percentage of the total debt you have or a percentage of the total amount forgiven.
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The debt settlement company will direct you to stop paying your creditor and instead send the money directly to them each month. The company's goal is to demonstrate to your creditor that you don't have the money to pay up - that's your leverage. After a few months, the company will typically go to the creditor and say, "I'm holding X dollars on behalf of your customer. He doesn't have the money to pay you, so you should take this amount as a settlement or you'll end up with nothing." If the creditor wants to get paid badly enough, it will take the money.
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Get your friends involved. Let your shopping buddies know that you're on a tight budget, and they can help you out when your willpower starts to weaken at the mall.
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