Tips to Handle a Cash Flow Crisis

Summary:
You never know when a financial shortfall can happen. So it’s better to be prepared. Debt management program helps you tackle the economic crunch.

Debt management solutions

There are no guarantees in this current economic situation. With the recession and unstable stock market, things are getting worse day by day. In such a situation, financial shortfall can happen even to the most economically secure person. One wrong move can saddle you with debt problems. But debt management programs teach how to handle cash flow so as to avoid any shortfall situation. Here are some debt management solutions helpful for managing crunch cash flow situations

Readjust your budget

The first thing you learn with a debt management program is to adjust your budget. Normally you maintain a budget, but that’s not enough, especially when you are on the threshold of financial crisis. Experts of debt management teach you to cut out unrestricted expenses – anything that’s not absolutely necessary to survive. Stop eating out, partying, buying designer clothes and everything that you can do without. Instead, use this money to pay off your credit bills.

Maintain a finance calculator
It’s very important to keep track of your expenditures. For that, debt management solutions experts suggest a finance calculator. Keep details about every expenditure you make specifying the date and amount. It’s just like any financial ledger and will help you know how much you owe.

Build an emergency fund
Counselors of debt management programs strongly recommend building an emergency fund which will take care of unexpected emergencies like an accident or job loss. This is one of the most effective ways to strengthen your financial security. It’s ideal to have a minimum of 3-6 months of living expenses in the emergency fund so if any cash related crisis arises, you can cover it.

Approach creditors
If your debt amount is very high and you are unable to make even the minimum payment at the end of month, then debt management solutions experts recommend approaching your creditors. Explain to them your financial predicament and request to lower your monthly APR. Although there is no guarantee that creditors will agree, most often this trick works as creditors just want to have their investment returned, even if slowly.

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Top Five Myths of Debt Management

Summary:
There are a wide variety of myths associated with what to do and what not to do about improving your debt structure. Debt management solutions agencies clear the myths associated with debt management.

Debt management myths
Rumors related to credit scores and debt management strategies can be confusing. It is a catch-22 situation where you have no idea whether to act based on myths or stick to your debt payoff tactics. Experts of debt management solutions have outlined the top five myths and the ways to tackle them.

Closing old accounts improves credit score
If you are dealing with debt problems, you must have encountered this suggestion from friends and family. So if the same suggestion from various sources makes you contemplate whether to close accounts or not, here is the fact. According to debt management experts, closing old accounts will not improve your credit score; rather it will have the opposite effect. If you cancel your old credit account, your credit history will appear shorter. As a result, your credit score will be lowered. You can opt to close a new account if you are set on reducing your credit levels.

Paying off debt adds 50 points to your credit score
There is no such magical formula to add up your credit score. There are several factors which are taken into account to derive the credit score. If you have a high credit score, even one non-payment or late payment of debt can cause the score to drop significantly. However, the case is not the same for low credit score holders. Debt management experts suggest paying bills on time and taking care not to have a bad credit report will automatically bring positive points for your credit score.

Negative payoff record gets removed from credit report
It’s a common misconception that once you pay off your collection accounts or declare bankruptcy, the charges will be removed from your credit report. Even if you have paid everything off, they remain in the credit report for a period of 7-10 years. The only change you notice is they will be marked as “paid.”

Soft inquiry can harm your credit
This is considered a false debt management myth. Checking your credit report doesn’t affect your credit score in any way. Rather it is your right to know your credit status. Just take care not to make multiple hard inquiries within a short time interval as it might irritate your creditors.

Co-signer is not accountable
As a co-signer of any loan, you have certain legal responsibilities towards the credit amount.  Any good or bad credit interest for this loan will show up on yours as well as the account holders’ credit reports.

A Debt Management Solution Can Bring Peace of Mind

In these times of economic recession, experiencing financial trouble is nothing new. But on the positive side, this recession has also led many people to find new ways to save money and pay down their debt.  For some though, regardless of the budget put into place, life has ways of making the economic struggle even worse. They might have to deal with job loss, pay cuts, shorter working hours or even sickness. For people in debt, the thought of dealing with reduced finances can be particularly worrying. Rents or mortgages, utility bills, gas, food and all the other essential everyday expenses that seemed so easy a few months ago might suddenly be a real challenge.

When you find paying back debt difficult or even impossible, a debt management program may be just what you need to finally overcome your financial troubles.  There are many debt management solutions available on the internet for comparison and consideration.

Remember, getting out of debt does not have to be difficult if approached in an organized manner with proper counseling assistance from a debt management solutions company. Their counselors are trained and experienced on such financial issues, so you can disclose all the details of your existing debts to them. The counselor will work closely with you to understand your situation and come up with a personalized plan that fits your needs and helps you get out of debt more quickly. 

Benefits of a debt management solution include the lowering of your interest rates and monthly payments, the slashing of your over-the-limit fees or penalties, stopping collection calls, and the consolidation of multiple bills that you are juggling into one singular monthly payment. They enable clients to take charge and take control of their financial situations by supplying them with helpful and easy to use financial tips. Get easy to follow tools and resources that can help you evaluate and track your situation and make some important decisions. 

All this sounds very simple, and it is if you find the right debt management plan. There are non-profit debt management companies dedicated to helping people like you get out of debt. However, make sure you deal with a reputable company by checking their background and reading reviews to find out what people are saying about their debt management program before you finalize.   

Don’t accept any solution unless it fits your needs. Make sure that the plan designed for you is acceptable to your creditors. Finally, once everything falls into place, remember to never be late with your payments.
Again, getting out of debt is easy if you have the right debt solution. It is better to work with a customized plan and regain your financial health than to struggle and fail.

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Fixed Rates vs. Variable Rates

A credit card can either pave the way for a good spending plan or make you a spendthrift drowned in debt. Hence, before accepting a credit card, a major factor for consideration is the type of interest rate you will pay on the credit card. There are two types of interest rates – fixed interest rates and variable interest rates. If you are confused about what kind of interest rate is right for you, it is important to know your options well.


Fixed Interest Rate


If you are a card holder with this option, you always know your interest rate. The credit card company can increase this interest rate after one year, but is liable to notify you 45 days in advance. You have the privilege of canceling the card and paying the balance at a much lower rate. 


Credit card issuers can increase your rate under the following circumstances:

• You have delayed a credit card payment for more than 60 days
• You had a promotional rate that has ended
• You have completed a debt management program your underlying interest rate has changed and you now have a variable interest rate

Unless it is for one of the reasons stated above, credit card companies cannot increase your interest rate within the first year. This type of interest rate can provide stability in making monthly payments because the APR (Annual Percentage Rate) remains consistent.


Variable Interest Rate 


A variable interest rate tends to fluctuate with the prime interest rate. Since it is linked to the underlying rate, it tends to go up and down. In this case, credit card issuers are not liable to send you any notifications of the changing rate. Unless you pay attention to your billing statements, you will not be able to know the change in interest rate on your credit card. However, if the credit card company increases the margin portion of the interest rate, they are liable to send you a notification in advance. The margin portion is the difference between the variable interest rate and the index rate. In this case, the rules of fixed interest rates apply. You also have an option to opt out of the interest rate.


The primary advantage of a variable interest rate is that if the interest rate goes down, your payment can become easy. If the margin portion is increased, you will always be notified. However, it is important that you pay close attention to the fluctuating interest rates. 


Choose Wisely


Choosing the appropriate type of interest rate is part of a good debt management plan. Determine your financial resources. If you can afford to pay a fixed interest rate, go ahead with that option. On the other hand, if you want to play with the odds and take full advantage of fluctuating rates, choose the variable interest rate.

If you know more about visit debt management services and how to solve debt problems.