If you have multiple debts that you are struggling to deal with, you may have considered debt consolidation as one option. Debt consolidation is a good way of potentially reducing your monthly payments and simplifying your finances. But as with any debt solution, it comes with its downsides – and it’s always worth speaking to a debt adviser to discuss whether another debt solution may be more suited to your situation.

Debt consolidation: how it works

Debt consolidation is a way of combining all your debts into one, and then paying them off in monthly payments to only one creditor, rather than individual payments to all of your creditors. It is essentially another loan that pays off your existing debts -your lender will pay off your debts for you, and you will repay that lender accordingly.

An advantage of debt consolidation loans is that they can be scheduled over a longer period of time than your original debts, making your monthly payments lower. If your original debts included high-APR credit such as credit cards, there’s a good chance your overall interest rate will be lower too.

However, be aware that repaying a debt consolidation loan over a longer period of time may result in you paying more money back in the long run, as interest will be added for every month taken to repay the debt.

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Most financial consultants and advisors will tell you that a risk free investment strategy does not exist. Well I am a financial consultant and I am going to show you that it does exist.

Most homeowners do not think of their house as a risk free investment because it takes 30 years to pay it off and they will normally spend on a $200,000 mortgage at 6%, $431,676.38 plus property tax, plus insurance and in ten years we will only pay off $32,628.55 of the $200,000 mortgage.

If you could pay off the entire mortgage in about 7 to 12 years then it becomes a real investment.

To duplicate increasing your net worth $200,000 in 12 years requires an extra payment of $1000 per month above your normal monthly expenses and a return of 5 to 8 % which depends on your tax bracket because you will have to pay taxes on your gain.

The strategy allows you to not have to increase your monthly cash flow and it allows you to pay off your mortgage plus all your debt. This strategy is difficult to understand because it looks too good to be true and because you are paying off your mortgage in 7 to 12 years. The variables that come into play are your total house hold income, your total loan, how far into the loan are you, your total discretionary income and can you follow directions.

The basics of the program is to periodically pay lump sums of money towards your mortgage that will decrease your mortgage, decreasing the number of payments each time a lump sum is added to the principal.

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Unfortunately your credit rating plays a huge part in your financial future, and this is bad news for many people these days because many have seen their credit rating fall as a result of financial difficulties stemming from rising living costs and the global credit crunch. With petrol, food, energy, and other living costs soaring over recent months many households have struggled to keep on top of their repayments on bills, debts, and other financial commitments, and this has resulted in their credit history being damaged and their credit rating falling.

The state of your credit file and rating can affect your ability to get a loan, credit card, mortgage, car finance, or even a rental property, so as you can see the impact of having bad credit can be huge. Sadly it is far easier to damage your credit than it is to improve it, and many people may have seen their credit go quickly downhill over recent months. There are many things that can adversely affect your credit rating, and some of these are outlined below.

If you miss repayments on debts or payments on bills, or if you regularly make late payments, then your credit profile could be damaged and your credit rating will fall. Timely and accurate repayments are an important part of keeping your credit on track, so you should make sure that you make the required repayments on all of your financial commitments in order to avoid damaging your credit rating. Also, if you have debts that you have defaulted on, county court judgements relating to your financial situation, or if you have gone through an Individual Voluntary Arrangement or bankruptcy, these can also impact upon your credit.

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Millions of Americans have credit reports that reflect a less than ideal credit history. If you fall into this category, you’ll soon find that the cost of poor credit can penetrate deeply into your life. You may not be able to qualify for a small personal loan, secured credit card or computer loan. And it doesn’t end there. Lenders, employers, landlords, insurance companies, and other organizations often look at your credit report in order to evaluate your financial status.

Your credit worthiness is reflected by how well you manage debt and how often you make on-time payments. Every time you apply for credit to purchase high-value items such as a house or car, your credit history gets thoroughly reviewed. Most financial institutions consider your credit scores as a benchmark to determine credit worthiness. They take this figure seriously, and it is often the most significant factor in their decision-making process.

If you have a poor credit history or a low credit rating, a business may deny you the credit you request. Bad credit scores can take away your chances of getting approved for a mortgage, car loan, personal loan, or even a credit card. If you are able to get a loan, you may have to accept unfavorable terms and conditions. Some credit card companies might issue you a card, but only grant you a small spending limit.

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Perhaps the first thing to be said is that a prepaid credit card is something of a misnomer. If something has been prepaid, then it is not strictly speaking, of course, a “credit” transaction. But the name has caught on because prepaid “credit” cards can be used – for most intents and purposes – just like a standard credit card.

The principle behind the prepaid credit card is rather akin to the – now old-fashioned – idea of a book or record token, or a prepaid phone card. In other words, a payment is made in advance against an anticipated future purchase and, provided there are sufficient funds represented by the token or the prepaid card, the transaction can proceed without the need for any cash payment at the time of the purchase.

Prepayment is made by “loading” the card with cash paid in at the Post Office, a bank, a PayPoint or Payzone till. This can be made through an employer, a transfer through a bank, or by using a standard credit card. The prepaid card is then ready to be used in just the same way as a normal credit card would be used.

To complete a purchase, you will need to key in a PIN number at the shop counter and the amount of the transaction is deducted straight away from the balance on the card. The prepaid card can be used in the same way for shopping online.

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