Here are top 10 things you could do to reduce or pay off your debt:

1) You could enable automatic payment options by linking your debt account to your savings account. This is will ensure a certain amount of your savings clearing your debt on a regular basis. This is the best way to resist your temptation towards not paying off your debt.

2) Put an end to usage of your credit cards. The more you use them, the more you debt adds to your account. Remember a debt free life can offer you so much peace of mind that these credit card purchased luxuries would fail to do.

3) Analyze various methods of debt settlement plans and decide which one suits you the most. It is important to know the pros and cons of various methods before settling for one.

4) Treat yourself each time you set a milestone in settling a considerable amount of debt. Do not extra spend to celebrate.

5) Keep a jar, where you put all your changes at the end of each day. This can really help you make a payment for an important purchase.

What are you waiting for? Start right away and clear off your debt.

]]> http://www.8000credit.org/651/top-5-things-to-do-to-pay-off-your-debt/feed/ 0 http://www.8000credit.org/522/effect-of-consolidation/ http://www.8000credit.org/522/effect-of-consolidation/#comments Mon, 06 Jul 2009 18:08:56 +0000 Teena http://www.8000credit.org/?p=522 Any financial process consists of subsequent impact on a host of future financial dealings. In this article, we explain how your finances will be affected for the better or worse when you consolidate your loans. Broadly, consolidation makes its effect felt on the following areas: 

•  
  • Borrower Limit
  • School’s Default Ratio

On the Borrower’s Limit 

A student who possesses a consolidated loan automatically makes the consolidated loan amount, a determinant of future loan limits. The school can subtract the payment made to the loan from the principal borrowed and keep this amount as a reference for future borrowing. Simply put, if the result after subtraction is large, you may not be allowed to borrow a large amount of money and vice versa. Let us call this result after subtraction, as a ‘reference figure’ for ease of understanding. The subsidized as well as the unsubsidized amounts are considered for calculating the limit on the future loan amounts. Information about these loans are obtained by the school from several official documents like the consolidation paperwork, NSLDS (National Student Loan Data System) and by skimming the loan documents from the centre from which the loans were obtained. Majority of these loan documents can be easily accessed by the school from online resources as they are available on the loan centre’s database. 

On the School’s Default Ratio 

Cohort Default Rate calculation is not dependent upon the Federal Direct Consolidation Loans Federal Consolidation Loans. More than the loan, it is the status of the loan that determines how the cohort default rate is calculated. If all the loans that you have taken fall under the cohort default rate of the school, consolidation is insignificant. But, if there is an underlying loan that has not been falling under the school’s default rate calculation, even after you have consolidated it at a later stage, when the consolidated loan default may be considered as defaulted when calculated under the school’s default ratio. 

Let us consider this example for a better understanding. Suppose you have a loan called A. You have considered this loan under the school’s default ratio calculation. That is, when the school’s default ratio was being calculated, loan A was also under consideration. You now default on Loan A. This will have no impact on the school’s default rate. 

Let us look at a case when you have not considered loan A while calculation the default ratio. After the calculation, you consolidate loan A. You consolidate loan A and then default on it. This will impact the default rate of the school.

Few common questions regarding the consolidation process, eligibility criteria etc have been addressed in this article. As we have already dealt with the advantages of consolidation, we will not delve in to that topic.

1. What is the difference between FFEL consolidation and Direct Consolidation?

Differences if any must be checked with the office to which the consolidation application is being sent. If at all there are any differences, they will be mainly in the domain of the number of loans that you can consolidate, minimum amount for consolidation, requirement of documents for each type of loan, variation in the electronic debit system of repayment and repayment plans.

1. Eligibility criteria for a direct consolidation loan?

In order to qualify for consolidation, the borrower must be a holder of either the FFEL of the Direct Loan and at least one of these loans must be either under the grace period, deferred or have a default status. Loans under current repayment status may also be consolidated. In school loans cannot be consolidated under the direct loan consolidation. Borrowers having only direct loans cannot consolidate unless they include another loan along with the direct loan.

1. Consolidation of PLUS loans into direct consolidation loans?

Yes they can be consolidated along with the direct or the FFEL loans.

4. Can Health Profession Loans too be consolidated with a direct Loan?

• Yes, Health profession loans too are consolidated with Direct Loans if they have been sponsored under the US department of Health and Human Services. Some eligible health loans are
• Nursing Student Loans (NSL)
• Health Professions Student Loans (HPSL)
• Health Education Assistance Loans (HEAL)
• Loans for Disadvantaged Students (LDS)
• Health Education Assistance Loans (HEAL)

5. Can already consolidated loans be further consolidated?

Yes. Only under the condition that they are included with another direct loan. By doing so, you will be eligible for a lower interest rate and the advantages include lesser monthly payments, reduced repayment option and longer time to pay back the borrowed amount.

Keep looking at this section for further answers for common queries.

Before we move to answer this question, let us have a brief look at what consolidation means and what are the essential steps to consolidation.

What is Consolidation?

Let us explain this process using 3 characters; Anne, Mary and Rachel. Anne is a student who is a borrower of a direct loan and few other educational loans. Mary is the lender of the federal agent who has lent money to Anne. Rachel represents the US Department of Education. Anne has $1000 as her total borrowed amount from Mary. This is the sum of all the loans that has been borrowed from Mary.

Under the consolidation process, Anne consolidates all her loans with Rachel. Rachel pays the loan amount to Mary and provides Anne with a new loan and a new interest rate. Anne does this through two main processes:
The application process which consists of filling up an application form and a promissory note and submission of it either online or through mail

Verification of the loan which needs to be done by the loan holder by filling up few documents and returning it to the Department of Education within a stipulated time.

The next logical question that follows is ‘what is the advantage of this consolidation?’ process which brings us to the topic of our discussion.

Here are some advantages of consolidating your loan:

One monthly payment per lender

With just one payment to make for the borrower, managing his debt along with his income is easier. Imagine a situation when Anne has to pay three different amounts for three different loans at three separate times. Confusing, isn’t it? Consolidation removes this problem.

Repayment options are flexible

You need not necessarily pay a fixed amount as under the standard repayment plan. Here, the repayment is as per our income and size of the family. Borrowers are also given the flexibility to switch between plans which are not possible in the case of a standard loan. In addition, the monthly payments are also drastically reduced or can be reduced by choosing a suitable plan.

No bar on the loan amount to qualify for consolidation

Translated in to layman’s language, it just means that you do not need to have a loan of a million dollars for consolidation. Even if you wish to consolidate it for a loan of 100 dollars, you can do it. Plus, the consolidation is free!

Deferment options are flexible

Suppose you have exhausted the current set of deferment options, you can choose a new, more flexible set.