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The debt consolidation business is based in borrowing money from one lender to pay off outstanding debts with better interest rates, on the other hand this lender will manage the monthly payments to the previous lenders, and one of the most obvious advantages of this system is that the clients just have to deal with a single monthly payment.

Steps to consider when consolidating debts:

* Add up the monthly payments on the accounts you want to consolidate. * Make a list of interest rates with each of your accounts, and set the average of this rate. * Call your creditors and request cancellation cash balances as of the date it intends to consolidate debts. * The sum of their balance of cancellation should be the initial starting amount for consolidation. View loan options. * The interest rate should be lower than average in their exercise of the previous calculation. * Take into consideration the term of the loan and planning. * Once you have consolidated their debts to avoid entering the same situation. Remember that controlling your finances is in yourself. This applies to individuals, who are now in the countries where there are certain terms that should be taken into account which are called Toronto terms, because they are words that were established in the World Economic Summit in Toronto in June1988. They were applied to the countries designated by the World Bank as IDA-only borrowers who had a very heavy debt, low per capital income and balance of payments problems. These countries should have strong structural adjustment programs supported by the INTERNATIONAL MONETARY FUND.

The fundamental principles of the Toronto terms are basically two: 1. To define the terms of the debts of the development assistance. 2. For the debt that is not development assistance, create the introduction of the conditions for payment.

The debt of the ODA have two main characteristics a maturity of 25 years and 14 years of extension, the initial rate will be higher than the default interest rate. Debts different than the Development Assistance ones, the creditors can choose from a menu of 3 payment terms.

The first option is: 1/3 of the debt will be cancelled and returned with a maturity of 14 years for the remaining amount (with 8 years of extension); the market will define the default interests.

The other option: twenty five years repayment and fourteen years extension and the market will define the interest rate in case of default.

Option C: The same terms like the option A, but the default interest rates will be 3.5% points below the market rate set (according with the market and depending on the reductions)

In December 1991 the Paris Club agreed to add to the menu of concessions to countries with lower incomes, (the Terms of Toronto added) that there are essentially 2 options to reduce debt, plus the option non concessional new conditions of Toronto. The option represents a 50% concession of forgiveness in present value terms in debt service payments, lowering the debt during the consolidation period. Additionally, it was agreed to establish a timetable for consideration of a potential debt reduction. Creditors have indicated willingness to consider restructuring the remaining time when the debt is cancelled on a date not later than 3 or 4 years.

I got a call from a client this week, we will all him “John.”

Here is his problem

-       He has over $41,000 in credit card debt.
-       He has other unsecured loans totaling $12,000.
-       Although he hasn’t been late on his bills yet, he can’t seem to get caught up and doesn’t think he will ever dig himself out of this debt.
-       When he puts his debt into a debt reduction calculator, it says that it will take him 21.6 years to pay everything off at his current pace.

(Can you say …. STUCK?)

He emailed me and asked for my advice… I explained to him his three options:

Option #1 – Continue to pay the bills for 21.6 years.
Option #2 – File for Bankruptcy
Option #3 – Negotiate his debt with his creditors.

Let’s review…:

Option #1 – Continue to pay, which needs no explanation. This client did call the credit card company and got his interest rates lowered, however, by following their payment plan; he will be paying for 21.6 years.

That is like being held hostage by your credit card company for 21.6 years.  I say “held hostage” because I believe that.

Yes, he took out the debt, but to pay on $41,000 in credit card debt for 21.6 years… is a crazy thought and in my opinion, other options need to be looked at.

Option #2 –Bankruptcy. If he qualifies for a Chapter 7 bankruptcy, he will have no more debt, however, the bankruptcy will be on his credit report for 10 years.

He can easily repair his credit (to 720+) after the bankruptcy, which can be done in 1 ½ to 2 years.

There are two downsides to this option;

1) The bankruptcy on his credit report.  That will impact his ability to borrow for the next 2-3 years.

2) Does he qualify for a Chapter 7 Bankruptcy?  Believe it or not, many people cannot qualify for a bankruptcy because their income is too high.

If this is the case, he will have to file a Chapter 13 Bankruptcy.  That means he will have to repay all his debt plus have a bankruptcy on his credit report.

Let’s move on to Option #3.

Option #3 – Renegotiate his credit card debt with the credit card company.

Here is what I know for sure:

1)    Your credit card company will not negotiate with you unless you stop paying your bills.  They may tell you differently, but this is what I know to be true.

2)    Your credit card company will lie to you so you continue to pay.  I’m sure this is not their “policy,” but when you combine eager employees looking to get their bonus with vulnerable debtor – this happens.

3)    Once delinquent, they will put your phone number into an autodialing systems.  This means you will get up to 8 calls per day trying to collect payment. … Ouch!

4)    If you understand how to negotiate with your credit card company (and I don’t), I hear from numerous clients that they will offer you a settlement somewhere between 15-40%.

Meaning, if this gentleman did it right, he would pay off his credit card debt for between $7,950 $21,200.

You read that correctly, he would pay off $53,000 in debt for between $7,950 and $21,200.

5)    After you pay off your debt, our clients are getting back to a 720+ credit score in approximately 18-24 months.

The biggest problem with Option #3, is having the stomach to handle the negotiations… because it is very stressful and daunting.  And, if you don’t know the proper way to negotiate, you will pay more than you should.

If this sounds like your situation, listen up.

I’m going to put together free information designed for those that have more than $20,000 in debt and would like to know and understand all their options.

If you want to be informed about this information, give me your name and email here at this website.

Once I do the interviews or webinars, I’ll email them to you.

According to a survey conducted by TransUnion, the consumer credit reporting bureau, an estimated 56% of American consumers have not conducted a personal credit check during 2011.

Credit scores are the core of a consumer’s financial stability and since less than half of American’s with a credit history are not following through with financial expert advice – to check credit reports at least annually, if not every 6 months. Those working to improve their credit score should be checking scores more frequently.

It this day and age, consumers are doing their financial stability an injustice by staying in the dark about their credit score. Consumers will need to spend more money for basic services and products they use in their daily life if their credit score continues to stay low. More industries are looking at credit scores before providing services like utilities, rental properties, cell phones, and even employment opportunities. Low scores will guarantee more upfront security deposits and higher interest rates on personal loans and mortgages.

Financial experts have also pointed out that nearly 80% of consumer credit reports contain some kind of inaccurate information or mistake. For this reason, consumers are encouraged to regularly review credit reports and file disputes with the credit bureau in order to correct data. These corrections can help to improve credit scores significantly.

Consumers are entitled to receive a free copy of their credit report annually and any time they have been denied credit for a period of up to 60 days. It is in the interest of all consumers, whether they plan to seek financing or not, to stay on top of credit scores and report information to ensure their financial stability for both the short and long-term.

Experts also recommend that consumers establish better payment histories with the creditors, eliminate as much debt as they can, and utilize available credit carefully to improve existing credit scores.

The rising child care costs has become a heavy burden for cash-strapped parents, particularly in these states, where it averages at least 15% of a familys annual income.

Avg. annual cost of child care: $16,500

Cost as a % of median income: 16%

Massachusetts is a pricey state where salaries and housing costs are high. Its no wonder residents have to shell out big bucks to keep their kids in day care here.

Child care workers are paid more in Massachusetts than elsewhere in the country. Since payroll accounts for about 80% of a programs expense, that drives up the price of care, said Dave McGrath, deputy commissioner of field operations for the states Department of Early Education and Care.

Another factor: There can be no more than three kids per teacher and no more than seven in a class. Plus, child-care providers are required to spend 20 hours a year on professional development. Thats great for kids, but it comes at a price.

“Regulations in Massachusetts are recognized as national standards and there is a cost to that,” McGrath said.

Avg. annual cost of child care: $13,650

Cost as a % of median income: 15.7%

Theres more of everything in the Empire State, except space, and that keeps child-care costs high.

Programs in New York City, for example, must pay rents that are among the highest in the country.

And just like in Massachusetts, strict rules on the number of children per caretaker lead to higher overall costs.

“We really do have strong regulations and thats a challenge,” said Marsha Basloe, executive director of Early Care & Learning Council in New York.

Still, many centers recognize the issue and are trying to make it easier for parents feeling the squeeze.

“Child care programs are doing what they can to keep it affordable with modified hours or flexible schedules for parents that cannot afford full time.”

Avg. annual cost of child care: $12,600

Cost as a % of median income: 15%

Theres a lot to love about living in Hawaii, but if you want to raise your little one here, its going to cost you.

On these islands, steep housing prices and high wages contribute to the overall tab. Then theres the regulations. For example, a family child-care provider can watch no more than two babies at a time. Not to mention rules about space and proper equipment.

Whats more, relatively few child-care centers can afford to operate in the state.

Despite the costs, “about a third of the parents that call us report that they cannot even find a vacancy,” acknowledged Katy Chen, executive director of PATCH, Hawaiis statewide Child Care Resource & Referral Agency

Avg. annual cost of child care: $12,400

Cost as a % of median income: 15%

It may be a wonderful place to raise a family, but all of that fresh mountain air doesnt come cheap.

In Colorados high-end ski communities like Vail, Aspen and Telluride, prices are high for everything from chai lattes to child care. And while you might expect child care in cities to be more expensive, its the rural resort areas that help put Colorado in the top 5.

“They can charge more for care because theres a captive audience and parents are willing to pay for it,” said Gladys Wilson, president and CEO of Qualistar, Colorados Child Care Resource & Referral agency.

Avg. annual cost of child care: $12,900

Cost as a % of median income: 14.9%

Ironically, the state known as the land of 10,000 lakes has a drought of child-care options. In fact, it has fewer than 1,000 licensed centers.

Most of those centers are based in the Twin Cities, where rent and labor costs are higher, according to Ann McCully, the executive director of the Minnesota Child Care Resource & Referral Network.

“We do like to think our quality is higher but thats not necessarily the reason for the cost difference.”

Tune into Talk Credit Radio this week with Credit.com’s personal finance expert Gerri Detweiler, live from 4-5 ET/1-2 PT on WSRQ. Additional ways to listen are listed below.

Mind Traps That Can Hurt Your Credit

Do your beliefs really affect your credit—or is that just a bunch of “psychobabble?” This week on Talk Credit Radio, investment advisor and author Marc Pearlman dives headfirst into the subject and makes a compelling case for ways your money mindset may be contributing to your credit problems. He’ll explain common beliefs that keep people in debt, including the main reasons people overspend, how they sabotage their own financial futures and why poor relationships often lead to debt. And of course, he’ll offer concrete strategies for getting on track.

Marc Pearlman is the author of the Positive Money Mindset and is a sought after speaker who specializes in the area of money motivation and limiting beliefs. Marc has been quoted in the major media including Smart Money, CNN and Fox Business News. His work has been featured in numerous publications including Entrepreneur magazine and he regularly contributes to About.com, a division of the New York Times.

Currently, Marc maintains a successful investment management practice in New York and is the host of the Your Money Matters! radio show, which may be heard in 19 states.

Also this week on Talk Credit Radio, Gerri will share information on a new program that may put money in your pocket if you’ve been in or through foreclosure in the past few years. And you’ll find out why the mortgage rate quote you see may not be what you get—and why.

Finally, if you’re thinking about switching to a credit union on Bank Transfer Day, but you think a credit union can’t give you the kind of service you get from your bank, you may want to think again. She’ll share surprising facts about today’s credit unions.

Call in live or submit a credit question for Gerri or Mark Rukavina to answer on the show, and if it is used on the air, you’ll win a free copy of your choice of her books, Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights or Reduce Debt, Reduce Stress: Real Life Solutions for Your Credit Crisis. Call into the live program at 941-373-1220 or send your question by email to creditexperts@credit.com. (Be sure to note your question is for Talk Credit Radio.)

There are those who would have invested in a Traditional IRA before they were made aware or realized the advantages and benefits of a Roth IRA. Refer to this page: roth-ira.org to find out which IRA makes more sense in your scheme of things. In such cases one can always choose to convert the Traditional IRA into a Roth IRA. The conversions, immaterial of what the method might be, are all treated as a rollover to which the IRS attributes certain condition.

The path to the other side
Upon satisfying the conditions that apply to rollover, a person who has invested in a traditional IRA can convert to a Roth IRA by contributing the distributions that they gain from a traditional IRA to a Roth IRA. However, this contribution must be done within 60 days of receiving the distribution from the traditional IRA.
The conversion can also be carried out through your trustees. When a trustee of a traditional IRA is authorized to transfer an amount from the account to the trustee a Roth IRA the account is conversion is automatically carried out.

In case of a common trustee for both your traditional and Roth IRAs you can authorize him/her to make the transfer between the two IRAs. In converting a Traditional IRA into a Roth IRA using a common trustee, one can simply re-designate the traditional IRA as a Roth IRA instead of opening a new account or issuing a new contract.

Updating yourself with the IRS guidelines help you make the most of the IRAs, to that effect those who held back from converting their accounts owing to the fact that converting into a Roth IRA was not allowed for those who draw an income that exceeds $100,000 be they single or married can now convert their accounts. The income limit was repealed by the IRS in 2010.