YourCardinalPoint

Funda. Fun. Fulfilment

facebook google twitter rss

Monthly Archives: May 2015


BG006---Secured-and-Unsecured-–-Know-your-debts-before-consolidating-them

Secured and Unsecured – Know your debts before consolidating them

You have to confirm the truth before opting any debt settlement process. But most of the time, clients were confused..whether they are suffering from secured debts or unsecured debts.

So, let me clear up the confusion a bit. There are normally two basic types of debt which you may encounter in your daily life. One is called secured debt and the other one is named unsecured debt. Both of them plays a significant role in case of bankruptcy. Read below for getting an explanation on how you can distinguish between them. Simultaneously we can also learn some terms and concepts of debts.

Some debt terms which you need to know

Collateral – A kind of interest, given rights or submitted authority given by a borrower to a creditor. In return the creditor will give you a valued something, may be a loan. When you give any valuable thing as collateral for a loan, it is called securing the loan. It will reduce the creditor’s risk if any case the loan amount is not returned fully.
Mortgage -When a borrower gets some money by giving his valuable asset to the creditor, it is called taking a mortgage. The term “mortgage” is often used to mention the agreement or the loan.
Lien/Charge/Encumbrance - It is applied on an asset. The creditor has the right to hold a lien on his mortgaged property. It restricts the common rights for the borrower on his mortgaged asset.

You can definitely understand the various terms and their differences regarding secured and unsecured debts. A secured debt is always protected by a collateral. An unsecured debt does not have such collateral associated with it..

Secured debts

*The highest secured debt is the mortgage loan which most people takes during their life. The mortgage loan normally availed by the consumers due to purchase of a house. The loan is secured by a mortgage on the house itself.

*Another biggest secured debt is called car loan which is positioned in the second. Most of people preferred loan against cash buying while taking a car loan.

*As a borrower, if you didn’t pay off the loan, your creditor or lender can easily recover the money. They will use your given collateral and auction it to get their money back. This is called foreclosing. If the creditor gets more from the sale than he actually deserves, he has the duty to return the excess amount to the debtor. If the creditor gets less from the sale, the debtor will be liable to pay him the balance amount.

Secured debts are normally not get released in a bankruptcy. If anytime you will face bankruptcy, your mortgage will not be removed from your name. If you want to keep your house, even after bankruptcy, you must be current to your monthly secure debt payments..

Unsecured debts

Credit card debt is a kind of unsecured debt. Many of us think that after hitting by a bankruptcy, the unsecured debts will not be removed from your name, and the commodities will also be repossessed by the credit card company. Normally what you originally owe on your card is considered as unsecured debt.

But if you invest a huge amount towards buying furniture just before the day of bankruptcy filing, it make it a secured debt, because no lien was registered against your furniture.

Most of your bills will be considered unsecured debts. There are few examples like taxes, utility bills, and medical bills. All of these debts can be discharged by a bankruptcy.

Unsecured debts have much higher interest rate than a secured debt. It is because unsecured debts have higher risks, way more than secured debts. So it is better for you to pay off the unsecured debts first to save your money.

BG005---Crash-course-to-avoid-credit-card-debts-–-Change-your-card-using-habits-–-part-3

Crash course to avoid credit card debts – Change your card using habits – part 3

I hope you are enjoying my post, this is the last segment of the article. Today you’ll be knowing the final points.

8. Maintain active accounts - Banks and credit companies nowadays have taken an initiative to close inactive credit card accounts. They are doing it to prevent their exposer to risks.It doesn’t matter who closes the accounts, but it is definite that it will not good for your finances.

It is advised that you should pay off the debts on those cards, and lower your uses of those credit accounts as much as 10%. Only then you can think of closing an account. If you are not using them frequently, it may give a sign to the creditors that you are no longer interested to maintain the account. So, they might want to close the account permanently. The least you can do that use your card for a smaller usage each month or so, then repay the total credit balance in full. For an example – you can arrange your payments for the monthly internet bill, charge directly each month from your credit card account which you are not using frequently. By this way your account would be active regularly and your bill will be paid on time. After that you pay your credit account each month on time.

9. Choose the perfect rewards card – Rewards cards will be effective for you if you are not making the interest payments on the account. Avoid carrying balances in your cards. Those cards which normally packed with offers like cash back or free gifts may have higher interest rates; sometimes nearly 20%.

Research your options in different websites when you are ready to get your reward card. Check out theses two websites also – CardRatings.com and CreditCards.com for more information. Always choose a reward card which suits or matches with your needs, like – if you love traveling, there is no point to pick up cash back reward cards, you can choose free air miles instead.

Don’t forget to read the entire terms and conditions before choosing a rewards card. You must understand the limitations of your reward card to avoid extra spending. But one thing you must remember, don’t be a mindless fool. It is very easy to spend your money, but it is wrong to spend it just to get free offers or free air miles. Justify your expenses before doing any needless spending for the sake of earning points. Because at the end of the billing, you..and only you have to bear the entire balance out of your pocket.

10. Reduce your rate – Get a fair idea about your credit score, your payment record and also the duration of your account before trying to reduce your credit card interest rate. Contact the customer care service and apply for a lower rate based on your total time span while maintaining the account, credit score and payment history.

According to the stats, the average interest rate of credit card is 14.3%. So, it is your rights to enquire the reason if you’re paying greater than the average. If you don’t become successful at first try, don’t be harsh. Try again several times until you got a decent rate.

I hope if you realize how much credit card is important to you, you will definitely maintain those habits. It is essential to maintain your cards such a way so that you can be far away from unwanted debts along with enjoying a good financial life. Until next time… :)

BG004-Crash-course-to-avoid-credit-card-debts-Change-your-card-using-habits-part-2

Crash course to avoid credit card debts – Change your card using habits – part 2

I hope you have gone through my last post about credit card habits to avoid debts and liked it also. Today I am continuing the rest of the article…enjoy :) and let me know your feedback.

5. Transfer after consideration – You can transfer your balance if you have a low interest credit card. But you must also consider the ratio between the credit limit of your card and the transferred balance. You may hurt your credit score if you consider using all your available credit balances on the new account. Apart from that you will also be charged 3 to 4 percent fee as transfer charges.

But you must think twice…is it worth to harm your score just for getting the lower rate? Perhaps not. You can only try it if you have a decent credit score of 700 or higher. In this situation, you may utilize less than half of the credit limit towards the new card. The rate of interest will be much lower than current rate after the introductory period.

Before you initiate the transfer, contact your current company and instruct them to lower your rate. Ask them to cooperate as you are considering the balance transfer option. The company would do it if you have a good credit score and regular payment history. however, you may need to call back the supervisors and if they still hesitates, you need to research your ways to transfer balances in other accounts.

6. Stop unnecessary credit application – If you avail 2 or 3 credit cards and regularly pay them, you will see a significant growth in your credit history. It is the goodwill you are making through those credit cards and you are considered as a prime account holder. But there is a situation that if you acquire more cards, it may reduce your score. It is because, normally, a person might require more or less 2 or 3 credit cards to serve his all financial purpose. And if you are gathering more credit cards, you may have the tendency to accumulate credit more than you can afford. This behavior will affect on your credit score and gradually it became lower than you have expected.

So, deny any more offers when a credit card company gives you 20% off on your purchase in a new card. Don’t fill up any store credit card application forms just to see if you can qualify. Use your current cards rather than high interest store credit cards. These unless cards comes with expensive offers which will only put a load on your finances. It will not only lower your credit score but also generate new debt balances, for an example – offers like getting $800 off on a $5,000 freezer if you buy this through that shop credit card.

7. Open your accounts – You may think that closing all but one credit card accounts will solve your credit problems. But actually…it won’t. Because the damage is already done when you have opened the accounts in a first place. So, if you again initiate the closing of those accounts, it may actually drag your precious credit score down..even deeper. How ‘s that possible? Because when you close the available credit accounts, you will shorten the gap between your available credits and the amount you owe. So, if any way the total available credit goes down, your credit score will go down too.

So keep an eye on your cards. If anyone, whether he is a co-owner or any other authority, you must monitor the uses of your cards. Check regularly the frequency of the monthly statements and verify if there is any amendments in the specific terms and conditions of each card.

TO BE CONTINUED….

BG003-Crash-course-to-avoid-credit-card-debts-–-Change-your-card-using-habits-–-part-1

Crash course to avoid credit card debts – Change your card using habits – part 1

I hope you have gone through my first post about national debt. I was trying to show you the big picture regarding what our national debt is all about. Now we can discuss about our day-to-day common problems which may become a headache for your financial future.

Today I am going to share some small but effective tips which can help you to reduce your credit card debts. Every 8 out of 10 US citizens are facing this problem since their student life. The consumer credit world has changed a lot since past decades. The banks have changed their policies regarding credit cards and acted more aggressively since the last recession. The banks will continuously trying to snatch money from consumers pocket through fees & higher interests.

So, people…especially young one’s need to know, how to manage their plastic card. They need to do it such a way which can lower the chance of getting into debts & save a lot of their bucks. Using a credit card responsibly isn’t a difficult concept. The important thing is to make it as your daily habit.

Let’s get started with the basics:

1. Micromanage credit card accounts – Financial banks & card companies are now reducing their credit limits, charging enormous fees and deactivating consumer accounts. They must give you 15 days notice that they are changing the terms & conditions. But regularly check your e-mail for their mail, don’t miss it. To be on the safer side, adjust your priorities by signing up to website of your card provider. You’ll get notifications and updates through your online account. Regularly check your accounts for any modified rules or terms. If you ever wrongly charged any fee or penalty, contact the customer relationship service and notify your grievance with proper records of on-time payments.

2. Keep a low credit balance – If you use your credit balances up to the limit often, it is not a good sign for you. It will end up with your low credit score. Because of that whenever you opt for mortgage or insurance, the interest rate and the premium will always be higher for you. It will happen even you are paying the total balance every month in full. It is better to use not more than 30% of your allotted credit, it’ll boost your credit score also. Do few more things like comparing with other card providers, stopping new purchases etc. Pay up the large balances first, It will create a difference between your available credit & due payments.

3. Look before you pay – In case of soft copy billing or online billing, things might get little complicated while making payments. Normally credit card provider companies use a system which considers 0 penalties between the statement closing date and the due date. If you consider the paperless billing system or revolving balance system, you won’t know the due date and there is a possibility that you might be skipping the little 0 penalty gap. So, when it happens, your payments will be considered as late and you’ll be liable for late charges. So, better to verify the due date each time you are going to make the payments. If you are paying by checks, make sure to get your statement as a proof. It will be considerable if you are ever charges wrongly. Think this through and give it a trial, you’ll easily achieve your goal.

4. Credit limit increment – If you see that your monthly amount of credit is nearly crossing the limit, you can ask your card provider bank for a higher limit. If you are using this card for a long time and have a goodwill with the company, it will be easier for you. But make sure that increment of your card credit limit may also trigger the possibilities that your lender or bank (in case of a mortgage) may pull the credit history. It could definitely affect your score. Don’t go for your credit limit expansion unless it is very important for your transaction or spending.

To be continued…

BG002---Few-words-about-federal-debts

Few words about federal debts..

Today I am going to talk about the most happening thing we are facing now….our national debts. If we closely look over the past reports, we will see that our national debt has exploded in recent years. In my article, we’ll discuss about the reasons for which the debt level has increased drastically. We will also learn what will be the future of this situation. So, let us begin with some perspective.

The biggest debt obligation in the world is owned by America . There were some elements which enhanced the debt amount greatly. The U.S. debt-to-GDP ratio is 104.5% which is much lower than compared with Japan ( 226.1%). It might be considered modest perhaps, but if you can see the big picture, our debt index is rapidly going higher, and approaching to $18 trillion scale.

Do we have that capability to bear a debt burden worth of $30 or $40 trillion?
When the federal government increases their expenditure over what they are actually collecting, the “deficit” amount is added to the total debts of the nation. So, debt fiscal deficits due to overspending is the main reason behind debt exploration. As long as we are gathering deficit, the problem will continue rising. Now the question is, how it is happening to us?
From 1980 to 1991, the total national debt expanded in a great way, it was about 13.4%. The next largest increase came into effect during 1974 to 1979, it was about 10.9%.

In 2008 we had the 2nd largest expansion of debts , which is about (18.3%)followed to the 19.5% in 1982. So, I mentioned earlier, let’s look at the main reasons for which the deficits occur and added to the total debt of the nation.

Deficit Spending in today’s age

The national debt has rose up heavily over the past few decades. But why did the debt began to rise with so much intensity? One of main causes behind was decoupling the dollar from the gold standard, decided by the former President Nixon in 1971. The effect was massive on our economy. There was no limit on printing certain amount of money. The only thing that can back up the dollar was U.S. Government’s credit. The government became free to overspend since even gold cannot redeem dollar and they could get their authorization signed by the President.

From 1977, the fiscal year started to end at September 30 instead of June 30. The federal government generated fiscal-year deficit from June 30, 1965, and it continued through the recent fiscal year which ended September 30, 2014.

So, now the question is…what would be the future of our debts? Will our next generation be bearing such an huge national debt obligation upon their shoulders? What should be be our status in the global stage?

The Future Of America’s Debt Problem

The economic boom started since 1982, to the housing bubble burst and also the collapse of the stock markets was predicated on debt. This debt is the reason which led to some of the worst economic and financial crisis since 1930s. At the verge of the 2008 recession, nation’s total fiscal deficits crossed $1 trillion. In recent days, the deficit has been improving a lot. But is still more than $550 billion per fiscal year. So, the nation’s debt is continuously getting higher, but at a slower rate.