Monthly Archives: February 2010

Dealing with debt can be a stressful experience – especially if your debts have become unmanageable. If this is the case for you, it is important that you find the right way to deal with those debts.

There are several debt solutions available, each of which is designed to help people in different situations, and each of which has its pros and cons.

For borrowers who simply can’t afford to keep up with payments towards their unsecured debts, two of the most common debt solutions are IVAs (Individual Voluntary Arrangements) and debt management plans.


What’s the difference between an IVA and a debt management plan?

IVA:
An IVA is a formal debt solution – a legally binding agreement between you and your unsecured creditors. If you can agree on the terms, you will commit to repaying as much of the debt as you can afford over a set time period, and they will agree to write off the rest at the end of the IVA (as long as you’ve fulfilled your side of the agreement).

One of the benefits of an IVA is that because it’s a formal debt solution, your creditors can’t decide to opt out once the agreement has begun. You will know the terms of the agreement from start to finish, and can rest assured that your payments will fit around your other essential costs (mortgage/rent payments, utility bills, food, etc.).

However, there are drawbacks to an IVA. For example, entering an IVA will show up on your credit report (it’s a form of insolvency, after all), and will stay there for six years. This will affect your ability to obtain further credit for this time. What’s more, if you’re a homeowner, you may be required to release some of the equity in your property during the final year of the agreement – this will be used to repay more of your debt.

In most cases, an IVA would not be suitable for you if you could not commit to making regular payments.

Debt management plan:
A debt management plan is an informal agreement between you and your unsecured creditors, in which you will make reduced monthly payments towards your debts, based on an amount you can afford to pay each month without taking up funds you need for your other essential costs.

It is important to note that by arranging to repay your debt in smaller amounts (i.e. more slowly), you will be in debt for longer, and may end up repaying more overall due to interest – although your creditors may agree to freeze interest.

You can, if you want to, arrange a debt management plan by negotiating with your creditors on your own, but because of the volume of work involved, many people prefer the convenience of letting a professional debt management company negotiate with their creditors on their behalf.

Your creditors are not obliged to agree to the terms of the debt management plan, and once the plan has started, they will usually only be committed to it for a set period of time, after which they’ll decide whether it makes sense to continue with the agreement.

So a debt management plan may offer less certainty than an IVA, but it will have a smaller impact on your credit report – you may be defaulting on your original agreements, but you’re not entering insolvency.

A commercial mortgage is similar to a residential mortgage in many ways. The basic difference comes in the fast that commercial mortgages are used to buy commercial properties rather than domestic houses. You can purchase hotels, restaurants, shops and other commercial properties using such type of loans. You can also use these loans for refinancing. People find it an ideal way to develop a business by flexible and affordable financing solutions offered by commercial mortgages.

Since commercial loans are meant for business real estate, the collateral are business buildings rather than residential property. Consequently, such loans are generally closed by businesses and not individuals. Thus borrowers have to present with solid creditworthiness to receive such substantial loans. Commercial mortgages vary greatly in different regions in terms of length of loan, length of time allowed and so on. However the most pronounced variation comes in the interest rates, which are generally established by the local market. Such loans are very difficult to get as the credit given is solely decided by the lender. This always depends on the borrower’s credit history. The interested rates are also high in such loans.

To get the best out of your commercial mortgages, you have to judge the right mortgage rates at the time of taking and the time for repayment. There are basically two types of mortgage rates available to you in the market – fixed rate mortgage and variable rate mortgage. To take the advice of a specialist mortgage lender is the best option you have. This is because only he can guide you to the right source of mortgage loan considering your present financial situation. He will help you decide which one of the mortgage rates is best suitable for you.

On the other hand if you already have purchased a property for your business but have not enough capital to grow your business, the best option is to go for a refinancing or remortgaging the loan. This will help you to build up a capital which you can use to grow your existing business. Remortgaging a previous loan will also lower down your interest rates of your previous loan and help you in the repayment ease. Another way that you can raise fund is to arrange an equity line where the lender may lend the borrower the difference amount of the current value of the borrower’s commercial property and the amount that the borrower owes on the current mortgage.

Commercial mortgages have many advantages over a business loan. Unlike business loans which have a short repayment time, commercial loans have an elongated time generally varying over 15 – 25 years. In most circumstances, the proceeds of the loan are not considered to be taxable income and so the interests are tax deductible. There are a number of lenders available in the current market. You can search them online and get the quotes also from different lenders online. After this you can compare the various quotes of different lenders and choose the best quote lender from among the list.

How can you stay away from credit repair scams?

Credit score is very important when you want to get a loan to buy a house or a car or any other kind of loans. Your credit score actually shows your credit worthiness. We all know that the better credit score we have, the better rates and terms will be offered to us to get the loan but the problem is many of us do not have a credit score more than 700 or 680. So sometimes we opt for credit repair service from a credit repairing company. But most of the companies charges huge fees and still we do not find real boost in the credit score. These nothing but loosing your hard earn money through the credit repair scam.

What should you do to protect yourself from credit repair scams?

• You should not depend on a company which asks you not to contact with credit bureaus.

• Check out whether your company gives you a copy of Consumer Rights.

• The company should be listed with Better Business Bureau. Otherwise do not opt that company.

• If any company says that they will create a new Social security number then better don’t trust that company because creating a new social security number is not at all possible.

• The credit repair company should give you a copy of the contract before you sign it. If they do not give it, there must be something fishy about it.

• Do not send the payments before you get the service.

Even if you choose a credit repair company, then you should better choose a company that is well-known and have good reputation in the market. You can check out if there is any Rip off reports against that particular company.