Archive for December, 2015

Debt Consolidation Warnings

Sunday, December 27th, 2015

Debt consolidation is a great way to get your financial situation back on track. However, there are some organizations out there thatmediation are less than idea. You should be careful to avoid them.

Many agencies claim to be nonprofit, but that doesn’t mean they don’t charge money or work with for-profit companies. Inquire about the fees the company charges. Is there a setup fee? Monthly payments? Does the company keep the first payment, or does some of it go towards your debts? Fees should fall within your ability to pay, and any agency that is trying to help you will know this. A company that charges hundreds or thousands of dollars in setup fees is probably not interested in anything other than your money.

Ask the counselor how he or she is compensated. A salary or hourly wage is a good answer, but you should be suspicious if they are on commission or earn incentives by steering you towards expensive debt consolidation programs. A good counselor should direct you towards solutions that help you, not solutions that earn them more money.

Will your creditors work with this agency? Call your creditors directly and ask them if they will negotiate with the specific agency you’re seeing. Counselors often state that they can get your creditors to lower fees, restructure debt or lower interest rates. Can they? Call the creditors yourself to be sure.

Make sure that you get all of the counselors promises and terms in writing. Anything that he or she tells you verbally isn’t binding, so don’t believe it if it isn’t written down.

Make sure your agency provides you with monthly reports that state how much you have paid them and who is receiving the payments. Don’t take them at their word that your bills are being paid; verify it.

Check with your local Chamber of Commerce or Better Business Bureau to make sure that there are no outstanding complaints against this agency. The counseling business is full of fraud, and complaints are common. It’s smart to inquire.
By taking your time, asking the right questions, and doing proper research, you should be able to find a helpful and reputable credit counselor who can help you reduce or eliminate your debts. Thousands of Americans are victimized each year by predatory counseling firms, but there’s no reason why you should become a victim of one. If you have problem debt, you have trouble enough already without looking for more.

Before you do anything, perhaps you should have a consultation with Carolyn Secor.

Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida.  For more information, go to our web site
or call (727) 254-1704.

Using 401K to Pay Bills

Thursday, December 17th, 2015

OK, so you are behind on your credit cards, and the bill collectors are pressuring you. You might be thinking about using your 401Kcredit card debts to get them off your back. Think twice before doing that. If you use your 401K, you may never be able to replace it. You might be jeopardizing the quality your retirement by doing that. Perhaps you should have a session with Carolyn Secor to discuss your options before you do anything.

Some 401K plans allow you to borrow against them. However, are you going to be able to pay back that loan?

Not all 401(k) plans have a loan provision, but if yours does, you might wonder whether you should take advantage of it to pay off your credit card debt. Borrowing from your retirement to pay off consumer debt is a hotly debated topic, so you should hear both sides before you make your decision.

Tied to your company: If you quit or lose your job, you typically have to repay your 401(k) loan in full soon thereafter, regardless of the original loan terms. If you’re unable to pay by the deadline, the loan is treated as an early withdrawal and is taxed at your current income tax level, in addition to a 10% penalty.

Even if you’re not planning on switching employers, you may still want to consider that your perspective or factors outside your control may change over time. A career shift could put you right back where you started, or worse. A 401(k) loan — or any other debt consolidation product — won’t change your spending behaviors. If you feel that paying off your balance may tempt you to max it out again, seek credit counseling.

Alternatives for paying your credit card debt

In most cases, a 401(k) loan should be a last resort to pay off your credit card debt. Here are a few less risky options to consider:

Personal loan: Depending on how high your credit card interest rates are, you may be able to find a personal loan with a lower interest rate. But like a 401(k) loan, you have a limited amount of time to pay off your balance. If you think you would be at risk of not being able to make the monthly payments, it may be better to pay more in interest than to have your credit damaged by a delinquency.

0% balance transfer card: Credit card issuers offer an introductory 0% APR on balance transfers for a limited time on some of their cards. Some 0% APR periods can be almost two years long, giving you time to take a serious swing at your debt without interest. However, many 0% balance transfer cards require excellent credit and have a balance transfer fee, which is typically 3% of the balance transferred. Before applying for a card, make sure the amount you save in interest is greater than the upfront balance transfer fee.

Home equity line of credit (HELOC): If you’re a homeowner and have equity in your home, you can use a HELOC with your home equity as collateral. You’re likely to get a better rate than with your credit cards because you have collateral, and the interest you pay is tax deductible. However, you should proceed with extreme caution if you plan on using this option. If you default, you risk losing your home.

Regardless of how you choose to pay off your credit card debt, the most important thing is to take the time to create a plan to pay it off as quickly as possible. Consider how much of your budget you can direct toward debt payoff and when you intend to have it paid off. Then review the pros and cons of each option and find which one fits your plan.

Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida.  For more information, go to our web site
or call (727) 254-1704.

Why Your Credit Score is Important

Sunday, December 6th, 2015

Your credit card score has a huge impact on your everyday life and the amount that you pay for necessities.

Look at the chart below, which shows your expected interest rate on a 30-year fixed rate mortgage, depending on your current credit score:

Credit Score Interest Rate
760-850 3.90%
700-759 4.10%
680-699 4.30%
660-679 4.50%
640-659 4.90%
620-639 5.50%

So with a credit score of 620, your interest rate could be as much as 1.6 percent points higher than if you had a score of 760. Now, you might think it doesn’t matter because, really, there’s not much difference between 3.9% and 5.5 %.

Wrong. For big purchases, like houses and cars, such a seemingly small difference can result in almost unimaginable extra costs over the life of the loan. Let’s take the 30-year fixed rate mortgage loan above as an example, on a home-loan of $200,000. Here is what you can expect to pay, based on your interest rate:

Interest Rate Monthly Payment Interest 30 Yrs
3.90% $944 $139,684
4.10% $969 $148,906
4.30% $990 $156,350
4.50% $1,015 $165,455
4.90% $1,067 $184,095
5.50% $1,134 $208,356

So, let’s think about that

Yes, you read that right. A lower credit score can cost you an extra $68,000 on a 30-year home loan. And you’ll see similar (though not as drastic) effects on auto loans and other large purchases.

Now that we’re all in agreement about the importance of understanding your credit score, we can dive into the details…

Credit scores are compiled by the Fair Isaac Corporation (FICO), and for that reason they’re often called FICO scores. Lenders rely on these scores and the accompanying credit reports to determine your likelihood of defaulting on a loan. When you apply for a loan, the bank or lender will pay one of the three main credit bureaus (Transunion, Experian, and Equifax) to obtain your report.

The question is, how can you easily improve your credit score to save yourself money in the long run?

Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida.  For more information, go to our web site
or call (727) 254-1704.