debt consolidation loans PAY DAY LOANS - WHO BENEFITS? Based on the warnings issued by federal and consumer organizations it is clear that using pay day loans or cash advances from these businesses can often lead to more debt and problems. Some sites were reported to automatically roll over the loan and only withdraw the renewal fee on the pay date. Other sites surveyed by the CFA required customers to agree in contract to not participate in class action suits or to file for bankruptcy. For those who are having debt problems it is recommended to seek no- or low-cost credit counseling from a local non-profit organization. These organizations can help with reducing current interest charges and lowering monthly payments. If the problem is budget, you should look to a financial planner who can help you to manage the money you do have and avoid using credit at all. Strategies To Protect Yourself Against Identity Theft Identity theft is a serious crime that is growing each year. If you're a victim of identity theft you may spend months, even years, trying to repair a ruined credit history. A seriously damaged credit report can compromise your chances of getting a new job, a bank loan, insurance or even rental housing. It's even possible to be arrested for a crime you didn't commit if someone else has used your identity to break the law. Unfortunately, many of the methods that thieves use to steal identities are beyond your control to guard against. Although it's rare, even store clerks have been known to use their position to pass along information to identity thieves. There are some measures you can take, however, that will make it harder for a thief to steal your identity. Protect Your Credit Card Number When Making Purchases After you make a purchase and your credit or debit card has been swiped through a credit card terminal, check to make sure that the printed receipt hides all but the last 4 digits of your credit card account number (usually there will be Xs in place of the first 12 digits). Some terminals still print receipts that show all 16 digits of an account number, and may even include the expiration date as well. After your card is swiped, you're permitted by law to hide the first 12 digits of your account number on the copy of the receipt that the vendor keeps. Use any marking pen that will do the job. When you go to a restaurant, it's especially important to make sure that the first 12 digits of your credit card number are hidden on your receipt. You might be in the habit of signing it and then leaving the restaurant's copy on the table after your meal. An identity thief can easily steal the signed receipt before the waitperson comes back around to pick it up from the table. Don't take any chances. Do You Really Need To Give Your Social Security Number? Another important way that you can guard against identity theft is to avoid giving out your social security number unless it's absolutely required. Although you need to share your social security number when you apply for credit or for a bank account, sometimes a store or an organization will want to use it as an ID number, simply to identify you within their system. This is a common practice even though the law says that social security numbers aren't to be used as ID numbers. In these situations, use your judgment. There's usually an alternative if you ask. Destroy Documents That Contain Sensitive Personal Information Buy a paper shredder and use it to destroy documents you're throwing away which contain personal information such as credit card numbers, social security numbers, phone numbers and dates of birth. This is important to do both at home and at work. Identity thieves aren't above going through someone's trash to find valuable personal information that can help them obtain credit in your name. If The Worst Happens If you do become a victim of identity theft, take the following steps immediately: * Contact your credit card companies, close your accounts and ask to have new cards issued to you. * Place a fraud alert on your file with any one of the three major credit bureaus. The other two will be notified automatically. * File a police report. You may need it to show to creditors as proof of the crime. * File a complaint with the FTC, which maintains a database of identity theft cases used by law enforcement agencies for their investigations. Debt Consolidation – The Common Approach Unfortunately debt consolidation is the most common solution people think of when they fall victim to financial problems. It is a sad fact that about 75% of people who consolidate their debt find themselves in much deeper financial trouble than they were in to begin with. All consolidation loans do is transfer debt from one place to another and is invariably a short term fix with long term pain. A debt consolidation loan will not reduce the amount you owe. You will still pay back 100% of the loan plus interest. This is not going to get you out of trouble and most of the time will only make things worse. Again, consolidation is not a plan to get out of debt but is instead just getting new debt to pay off old debt. If you were to decide to consolidate, you would need to qualify first. Qualifications include equity in a home you own or other valuable, good credit and debt to income ratio. Most people burdened by debt find that even if they wanted to consolidate their debt they couldn't qualify for the loan anyway. Once you have taken out this loan, you have just gone from an unsecured debt to a secured debt - and gambling with all your assets. Consolidation loans are spread out over a 15 - 30 year period, leaving you exposed to losing your assets over the life of the loan. If you run into further difficulty in the future you stand to lose your home, car, and valuables. The fundamental problem that people run into is that once the debts are paid off by the loan, they discover they have a new line of spending potential: empty credit cards. It's not long after these accounts are cleared that they are run up to the limit once again. This will leave you with both the consolidation loan and maxed out credit cards to repay. How are you going to repay the loan and the credit cards when you were unable to pay the previous debt in the first place? You will find yourself back in the bank for a second consolidation loan, extending your debt and making your debt problem even worse. Bear in mind that being in debt leaves you with less cash you need to buy and plan for life's necessities. Although a consolidation loan may give you a lower payment and a little more breathing room, consolidation is not going to leave you with the cash to get you and your family through the next 10 to 30 years. Consumer Credit Counseling Services (CCC) – Feeling of False Security Consumer Credit Counseling Services (CCC) programs have a failure rate of 85%. They simply aren't effective. Here's why; you meet with a counselor who analyzes your monthly budget. The counselor will submit a proposal to your creditors for a reduction in the interest rates. You would then pay a monthly payment to them and they would then distribute that monthly payment to your creditors. These programs generally take 5-7 years to complete. The theory here is that your overall payment per month is lower due to the counselor's success at obtaining lower interest rates and more favorable terms with the credit card companies and banks. This approach is most often recommended by the banks themselves. Here are the facts: CCC Services were created in the late 1970’s when credit card and loan companies began to notice that many people were having problems making their minimum payments and defaulting on their debt. In short, the so-called "non-profit" companies are owned by the credit card companies and banks! CCC agencies are funded by commission by the credit card companies based on the debt recovered from you, normally around 12 - 15%. This means that for every $1,000 you give them, they can take as much as $150. If you're paying them a service fee of $20 per month, and the creditors are paying them $75, you can quickly see that CCC agencies are not working for you but for the creditors. In addition, you have no insight into what the CCC agency is doing on your behalf and no control over the repayment process. They send in their single monthly payment, with no idea of how much is going to which creditor. Since most counselors are busy people who work based on high volume, getting a return phone call can be difficult. It’s key to know that with CCC programs, you still pay 100% of the debt plus a lower interest rate. The debt you walk in the CCC is what you walk out with. With all things considered, it works out to be about the same as your current minimum payments. Bankruptcy – The Last Straw Today more people than ever are turning to personal bankruptcy as a way of solving their financial problems. Estimates indicate that 2003 will see nearly 1 in 70 Americans filing for bankruptcy. People owing as little as $5,000 are unknowingly filing, not knowing of alternative methods of eliminating their debt. The reason people take this hasty action with such a low debt amount is the harassment and overwhelming pressure from impatient collectors trying to recover their money. In the case of Consumer Credit Counseling agencies, once they find that they are unable or unwilling to help, they will suggest bankruptcy as the answer – unconcerned of the effect it will have on your future. In bankruptcy, a court order forces all commercial creditors to cease and desist from attempting to collect the debts you owe them. Depending on the bankruptcy declared (Chapter 7 or 13), it stops wage garnishment, reverses judgments, and generally wipes out debt. For some people, bankruptcy is the only sensible option. If you have $60,000 in debts, and you'll never earn more than $1,200 per month, then you're broke! The sooner you eliminate the debt, the sooner you'll have a fresh start. With more than 1.4 million bankruptcy filings in 2000, Congress is passing legislation that will make it tougher to declare bankruptcy. In bankruptcy, certain personal property is treated as exempt. The banks and creditors cannot touch that property in attempting to recover the money owed to them. Your home, car and other personal effects like clothing, and other assets are considered exempt, but this varies from state to state. Any property that is not exempt is liquidated and distributed to the creditors under the supervision of the court. Since most people entering bankruptcy have only exempt property anyway, there's usually nothing left to distribute, so the creditors typically get nothing. Seems like a good deal? Many people mistakenly see bankruptcy as a good, low cost way to rid themselves of debt. There are other costs associated with bankruptcy that make it a very bad solution for most people. The cost of filing bankruptcy itself is minimal. Depending on what state you live in, you can expect to pay anywhere from $400 on up to $1,600 for the whole process. That’s just the beginning. The bankruptcy will stay on your credit report for 10 years – and on your court records for 20 years. The seemingly “low cost” method will cost you dearly as it will follow you for the rest of your life. If you ever apply for a loan, job, apartment or insurance, one of the first questions normally asked is "Have you ever filed for bankruptcy?" And, for the rest of your life, you'll have to answer "Yes." You might be able to eliminate your debt, but the effects emotionally and the effect on your personal life will last for many years to come. Consider applying for a terrific job after you have filed bankruptcy. These days, employers will run a credit report to determine how you faired financially. This will effect whether the employer will give you that dream job or not. Even if you do get the job and your employer later runs a credit report on you, you will still have to explain the bankruptcy. While employers can’t fire you because of a bad credit report, they can certainly limit your future promotions. Future purchases are affected as well; after several years, you may opt to purchase a home. If you're in sufficient shape at that point to qualify for a mortgage, you'll pay a higher interest rate than the average consumer who has never filed for bankruptcy. Assume you want to purchase a $100,000 house a few years after filing bankruptcy. You make a $10,000 down payment. This will result in applying for an $80,000 mortgage. While your “good credit” neighbor would obtain an interest rate of 4.5%, you would get a rate of 7%. While it seems that the extra 2.5% difference is not bad for having filed bankruptcy in the past, it’s what you will pay monthly where you will feel the pinch. That extra 2.5% on a mortgage will increase your monthly payment by $200 per month with the total of your payments reaching more than $70,000 over the 30-year life of the mortgage. Besides being a devastating blow to your credit, a bankruptcy can also be a very stressful and embarrassing decision to continually have to explain to every potential lender. If you have no choice, then you should proceed, understanding the consequences. However, the majority of people who take this method of debt elimination don't know what they're getting themselves into or the consequences thereafter. They are desperate, and they get talked into filing bankruptcy by the collectors or attorney without understanding the impact on their financial future. Keep in mind that personal bankruptcies are usually unnecessary as there are better options available. Many people are forced, against their wishes, to file bankruptcy to protect themselves from aggressive creditor tactics or attorney. Ultimately, bankruptcy still means failure to employers and creditors. Debt Negotiation - Light at the End of the Tunnel Few people realize that there is another solution to burdensome debt, an approach that levels the playing field between you and your creditors, without having to go to court. The debt negotiation strategy will put you back on the road to financial freedom and in control of your life again. The Negotiation Strategy allows you to turn that $25,000 of credit card debt into $12,500 or even as little as $9,000. In most cases, our clients have debts totaling $8,000 and have successfully saved them thousands while maintaining a reasonable credit rating. With a professional debt negotiator working for you, your debt can be cut in half or less. How it works: Put yourself in the shoes of a manager of a collection department for a major credit card company. You know that bankruptcies are at an all-time high and that the chances of collecting on the outstanding debt worsen as the debt ages. You have the opportunity to close your books on a delinquent account by collecting 50 pennies for every dollar owed by the debtor, or take a chance on never collecting a single penny by trying to hold out for the full value. You also realize that once the debt leaves your bank (usually after six months or so), it will go to a third-party collection agency. The agency will take at least 15%-20% commission right off the top of whatever they collect, and they are unlikely to collect more than 70% of the debt even with the most aggressive tactics. So you'll probably never retrieve much more than half the money anyway. When you look at it this way, collecting 50% now doesn't seem like such a bad deal. The way it’s described, it sounds easy. You might be thinking, “I’ll the collectors and do this myself." You'll reach the "customer service team" and the representative will inform you that other banks may settle for 50%, but their bank never settles under any circumstances. Of course, they do have that “great” hardship program for you. After you've called a few times and received the same treatment, you’ll probably end up with the idea that debt negotiation doesn't work. The banks will rarely take a debtor seriously. They simply don't believe you and they think your hardship story is phony. The banks are quite prepared for the amateur do-it-yourself negotiator. They have the telephone scripts set up so that by the time the conversation is over, you will feel guilty about the money owed, and their lame hardship plan sounds like a great deal after all. Having a third-party professional on your side makes all the difference in the world. Once your creditors realize that they are talking to a professional, someone who knows the laws and regulations, they quickly change their tune. A negotiator will obtain better results than you could ever obtain on your own, simply because all of the bank's tactics are stymied by the fact that they can't talk directly to you. They can't apply psychological pressure to you since this is filtered out by your Professional Debt Negotiator. Consider this: Creditors pull out all the stops when you fall behind. They have gangs of collectors ready to pressure you with carefully scripted techniques and mind games. They have attorneys and collection agencies ready to step in and go after you full throttle. You need to level the playing field. The best and only way you can concentrate on improving your financial future is to let a professional deal with the aggravation of the nonstop phone calls. Bottom line - If you're looking for the most effective, low-cost, and fastest way to terminate your debt problem once and for all - Negotiation is the answer. About The Author Drakeport Financial will host a free Debt Management Seminar for people who wish to correct existing debt problems or avoid the possibility of such problems developing in the future. Seminars are held Saturday mornings from 9 to 11 a.m. at locations throughout the United States. Call Drakeport Financial today toll free at 866-676-4945 for more information. You may also visit the website: www.drakeport.com Stop Debt Collectors By Omar M. Omar Can you stop debt collectors ? . . .You better know you can You can stop debt collectors under the law provided by the Fair Debt Collection Practices Act. If you use credit cards, owe money on a personal loan, or are paying on a home mortgage, you are a "debtor." If you fall behind in repaying your creditors, or an error is made on your accounts, you may be contacted by a "debt collector." You should know that in either situation, the Fair Debt Collection Practices Act requires that debt collectors treat you fairly and prohibits certain methods of debt collection. Of course, the law does not erase any legitimate debt you owe. What debts are covered? Personal, family, and household debts are covered under the Act. This includes money owed for the purchase of an automobile, for medical care, or for charge accounts. Who is a debt collector? A debt collector is any person who regularly collects debts owed to others. This includes attorneys who collect debts on a regular basis. How may a debt collector contact you? A collector may contact you in person, by mail, telephone, telegram, or fax. However, a debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves of such contacts. Can you stop a debt collector from contacting you? You can stop a debt collector from contacting you by writing a letter to the collector telling them to stop. Once the collector receives your letter, they may not contact you again except to say there will be no further contact or to notify you that the debt collector or the creditor intends to take some specific action. Please note, however, that sending such a letter to a collector does not make the debt go away if you actually owe it. You could still be sued by the debt collector or your original creditor. May a debt collector contact anyone else about your debt? If you have an attorney, the debt collector must contact the attorney, rather than you. If you do not have an attorney, a collector may contact other people, but only to find out where you live, what your phone number is, and where you work. Collectors usually are prohibited from contacting such third parties more than once. In most cases, the collector may not tell anyone other than you and your attorney that you owe money. What must the debt collector tell you about the debt? Within five days after you are first contacted, the collector must send you a written notice telling you the amount of money you owe; the name of the creditor to whom you owe the money; and what action to take if you believe you do not owe the money. May a debt collector continue to contact you if you believe you do not owe money? A collector may not contact you if, within 30 days after you receive the written notice, you send the collection agency a letter stating you do not owe money. However, a collector can renew collection activities if you are sent proof of the debt, such as a copy of a bill for the amount owed. What types of debt collection practices are prohibited? Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact. For example, debt collectors may not, use threats of violence or harm, publish a list of consumers who refuse to pay their debts (except to a credit bureau), use obscene or profane language or repeatedly use the telephone to annoy someone. False statements. Debt collectors may not use any false or misleading statements when collecting a debt. For example, debt collectors may not: * falsely imply that they are attorneys or government representatives; * falsely imply that you have committed a crime; * falsely represent that they operate or work for a credit bureau; * misrepresent the amount of your debt; * indicate that papers being sent to you are legal forms when they are not; or * indicate that papers being sent to you are not legal forms when they are. Debt collectors also may not state that: * you will be arrested if you do not pay your debt;* they will seize, garnish, attach, or sell your property or wages, unless the collection agency or creditor intends to do so, and it is legal to do so; or actions, such as a lawsuit, will be taken against you, when such action legally may not be taken, or when they do not intend to take such action. Debt collectors may not: * give false credit information about you to anyone, including a credit bureau; * send you anything that looks like an official document from a court or government agency when it is not; or * use a false name. Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt. For example, collectors may not: * collect any amount greater than your debt, unless your state law permits such a charge; * deposit a post-dated check prematurely; * use deception to make you accept collect calls or pay for telegrams; * take or threaten to take your property unless this can be done legally; or * contact you by postcard. What control do you have over payment of debts? If you owe more than one debt, any payment you make must be applied to the debt you indicate. A debt collector may not apply a payment to any debt you believe you do not owe. What can you do if you believe a debt collector violated the law? You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, you may recover money for the damages you suffered plus an additional amount up to $1,000. Court costs and attorney's fees also can be recovered. A group of people also may sue a debt collector and recover money for damages up to $500,000, or one percent of the collector's net worth, whichever is less. Where can you report a debt collector for an alleged violation? Report any problems you have with a debt collector to your state Attorney General's office and the Federal Trade Commission. Many states have their own debt collection laws, and your Attorney General's office can help you determine your rights. About The Author © Copyright. http://www.deleteuglycredit.com Omar M. Omar is the owner of http://www.deleteuglycredit.com. The website is dedicated to provide credit consumers with information about their credit right and how to dispute inaccurate information on their credit report. Omar M. Omar is also the author Of "The Credit Repair Bible" book. You have permission to publish this article electronically or in print, in your Newsletter, on your website, or in your E-Book, as long as the author's Resource Box is included with the article. omar@deleteuglycredit.com ARE YOU AN AVERAGE AMERICAN?If you find yourself drowning in credit card debt, take heart, you are not alone. Americans charge over one trillion dollars per year on Visa, Mastercard, Discover and American Express. All these purchases "on plastic" would be fine if we all paid our balances in full each month -- but that's not the reality. In the year 2000, the average American household with at least one credit card carried a balance of $8,123.