How Many Credit Cards Should I Have

How Many Credit Cards Should I Have?

Credit cards make buying quick and easy. Earn airline miles or rewards for spending money! Apply for a credit card and get money off your purchase instantly! But whipping out a credit card to pay for impulse purchases or to make up income shortfalls can get you into a world of trouble.

In 2018, the average US household had $6,929 in credit card debt. If you live in Alaska, the average resident has an average of $14,000 of credit card debt – the highest in the US. The average American has 2.35 cards, some open and some closed but still factored into their credit report.

With those positives and negatives in mind, do you really need a credit card and if so, how many credit cards should you have?

Do You Really Need A Credit Card?

The answer to “do you really need a credit card” is maybe. There are great reasons to have a credit card and great reasons to avoid credit cards. It depends on you and how responsible you are with that tempting piece of instant cash in your pocket.

Positive effects include that responsible use can help build credit. Credit cards are revolving credit, which means the account stays open, unlike a car loan that has a set end date.  You want some revolving debt to show that you use your credit wisely and pay on time. Lenders will look at your credit utilization ratio to see if you are a good risk. Credit utilization is how much of your available credit you are using each month. The lower your credit utilization ratio, the better.

Late payments and/or high balances have negative effects on your credit rating. So, the answer is if you will be responsible, a credit card is a great idea.  

Contact Pacific Debt today for a FREE Consultation

Why Should I Have Credit Cards?

Hotels and airlines, to name two businesses, may insist that you pay with a credit card. Online purchases are easier with a credit card. They can be very convenient in an emergency.

If you are applying for your first credit card or routinely apply for every card that you are offered, there are a few things you need to take into consideration.

Every “hard inquiry” that a lender makes negatively affects your credit rating. A hard inquiry is a request for your credit report. Each new credit account will temporarily bring down your credit score. Lenders like to have older accounts and each new credit card (or loan) brings down the age of your report.

How Many Credit Cards Should You have?

How many credit cards should you have? Most experts recommend two from different networks (Visa, Mastercard, American Express or Discover). These two should offer a different type of rewards (for instance, airline, general purchases, cash back). Some stores (Costco) will only take one network (Visa). If you travel internationally, some networks (American Express and Discover) are not as widely recognized.

Is it bad to have a lot of credit cards? It depends on you. If you are using your credit cards wisely, a drawer full of credit cards may not be bad. However, if you max out one credit card after another, a new one won’t help you get out of debt.  

Some people are able to use balance transfer credit cards to help them lower their interest rate. These cards often come with balance transfer fees and startlingly high interest rates if you miss one payment. Always read the fine print!

Some credit cards come with incredible sign-up bonuses. These cards often come with annual fees that offset bonuses. Make certain you understand what you are getting “free” and what it costs.

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What Credit Card Should I Get?

If you have no credit history or bad credit, start with a secured credit card. These have a limit secured by money held in escrow. As you use and pay off the card each month, you improve your history. You are also building good habits.

Once you have that card and your behavior under control, you can add a second card. Look for one that has rewards that you will use and don’t expire. Consider an airline rewards card and a cash-back card.

Whatever you do, pay off your monthly balance and make all your payments on-time.

And finally….

READ THE FINE PRINT and UNDERSTAND WHAT YOU ARE GETTING INTO!!!

For more information, talk with one of our debt specialists today.

FREE CONSULTATION

The Best Debt Reduction Service for Credit Card Debt

The Best Debt Reduction Service for Credit Card Debt

The holidays are over and bills are rolling in. You spent way too much money Christmas shopping and your credit card debt has reached critical limits. If this is you, you’re not alone!

Most of us rack up ridiculously high credit card balances during the holidays. Now that the new year nears, you’re seeing the full financial aftermath of Christmas.

This is a great time to start on your most important New Year’s resolution- reversing your credit card debt. Get started now. It can’t happen fast enough!

The good news is that you have several debt reduction services at your disposal. The bad news is that there is no quick-fix and options may come with negative (but short-term) consequences to your credit score.

What is a Debt Reduction Service?

A debt reduction service helps you find legitimate solutions to effectively reduce debts. There are three basic types of services – credit counseling, debt consolidation, and debt reduction. Only one, debt settlement, helps you negotiate with creditors to reduce debts by up to 50%.

What are the Different Types of Debt Reduction Services?

There are three main approaches to debt reduction. Keep in mind that none of these are perfect and each may have a negative effect on your credit rating.

  1. Credit Counseling – These companies help you investigate assistance programs that help you reduce debt. They may help you qualify for these programs too. Credit counseling is not a debt reduction program because most agencies usually only help you reduce your future interest.
  1. Debt Consolidation – Debt consolidation consolidate debts into one easy monthly payment. It doesn’t really reduce debt, it just revises your account structure. In most cases, debt consolidation actually increases the term length, so you end up paying more. 
  2. Debt Settlement – Debt settlement works directly with creditors to settle debt for less than you owe. As part of the program, you accrue money in a 3rd-party escrow account. Once you have a certain amount in that account, debt settlement experts negotiate on your behalf to decrease your debt by up to 50% and pay off that debt completely. Debt settlement isn’t a quick fix. It usually takes from 2-4 years to complete.

Your debt settlement expert will guide you through the process and be in regular contact to help you through this difficult and confusing process. You have the responsibility to put aside money and forward all collections notices and bills and any harassment details to your debt settlement expert.

The Pros of Using a Debt Settlement Program

Using a debt settlement program can help you in many ways. The pros include:

  • Settling your debt for less than you currently owe. In most cases, the debt settlement company will help you settle your debt for up to 50% of your balance, depending on the creditor and their policies.
  • Guidance by a dedicated debt expert through the difficult process. In most cases, the debt settlement company has a long business history with your creditor, leading to a smoother negotiation process.
  • Avoiding bankruptcy. Debt settlement is a bankruptcy alternative, and is a last resort before declaring bankruptcy.
  • Avoiding the stigma of declaring bankruptcy.
  • Ultimately saving money.

The Cons of Using a Debt Settlement Service

  • The program isn’t quick and usually takes anywhere from 2-4 years to complete.
  • The account will generally appear on your credit report as settled for less than full balance.
  • You’ll probably encounter harassment by collection companies, ranging from scary phone calls to legalese-laden letters. Your debt settlement account manager guides you through this process to help make things easy for you.
  • Since there are fraudulent companies, make sure you research debt settlement companies and choose a reputable company like Pacific Debt, Inc.

Who is the Best Debt Settlement Company to Work With

Debt settlement can be scary and involve a lot of legalities and headaches. We recommend that you work with a reputable company, like Pacific Debt, Inc., that has positive reviews from both organizations like the BBB and from clients. Pacific Debt, Inc. has settled over $200 million in debt for their customers since 2002 and our ratings prove how effective our program can be.

  • A+ rating from the BBB with accreditation and certification
  • Ranked  as one of The Best Debt Settlement Companies of 2018 by US News and World Report
  • 4.8 star rating by BestCompany.com with over 1000 client reviews available online.

For more information, talk with one of our debt specialists today.

FREE CONSULTATION

If you are ready to reverse your debt, contact Pacific Debt, Inc to see if you qualify for our debt reduction program. The consultation is absolutely free and there is no obligation if our program doesn’t seem like a good match for you. You have nothing to lose.

See if you qualify for the Debt Settlement Program from Pacific Debt Inc. Start saving money today.

Disclaimer: We are not attorneys or accountants and can not give you legal advice. If you have legal or tax questions, you should contact the appropriate expert.

Here is what you need to buy a house

What You Need to Buy a House in 2019

You are about to embark on one of the most amazing and rewarding experiences that can ever come from spending money: buying a home. If you are buying a home in 2019, you should know that the entire process is not quick, but when all is said and done, there are few things more exhilarating than buying a house. This guide will help equip you with what you need to buy a house this year.

1. Check Your Credit Score

Before applying for a loan and certainly before ever making an offer on a house, you should know your credit score. Why is your credit score important? Well, it’s not only the difference between getting a low-interest rate on a home loan versus a high one, but it will also directly impact how much a bank or lender will actually loan you. There are several websites you can use to check your credit score, here are a few to consider: TransUnion, Equifax, Experian.

You can check your own score as much as once a day without affecting your credit, also known as a soft inquiry. Hard inquiries are when financial institutions check your credit score, typically when you’re applying for a loan or credit card. Hard inquiries lower your credit score a few points, so try to keep hard inquiries to a minimum.

2. Improve Your Credit Score

Maybe you just checked your credit score and realized it’s not as high as you had expected. Don’t worry, there are a few things you can do now that will help raise your credit score so you can capitalize on a great interest rate.

Though you can easily implement steps to help your credit score, fixing or raising a credit score doesn’t happen overnight. It’s imperative to start now so when you go to apply for a home loan your credit score will (hopefully) be where you want it. Here are three tips to help improve your credit score, and recommended by John Heath, Directing Attorney at Lexington Law:

  • Obtain and Closely Review Your Free Credit Report: In order to improve your credit score, you first need to know what information is on your credit report. The Fair Credit Reporting Act (FCRA) gives you the option to obtain a free credit report from each of the three nationwide consumer reporting companies once every twelve months. Your credit report contains information including your current and past residences, how you pay your bills, bankruptcies, foreclosures and more. Obtaining and understanding the information on your credit report will help you know what you may need to address in order to improve your credit score.
  • Use a Credit Report Repair Company to Dispute Errors: Your credit history is 35 percent of your FICO score, and according to a 2013 study by the Federal Trade Commission (FTC), more than 40 million Americans have something that is incorrect on their credit report. While a late payment or derogatory mark from a creditor may seem harmless, it can have long-standing consequences, in some instances staying on your report for seven years. If you have errors on your credit report, consider working with a credit repair company, who can navigate the complexities of credit repair, contact the credit bureaus on your behalf and help remove any errors as quickly as possible.
  • Spread Credit Card Debt Across Multiple Cards: If any of your credit cards are close to the maximum utilization point, it will be a red flag to lenders, who see this as an indication that you could be having financial issues. If you have multiple cards, spreading the balance out between them could make sense. For example, instead of having one card that is 90 percent maxed out while two other cards have a zero balance, having a 30 percent balance on each card can help your credit score. Reducing overall debt is always the best option, but spreading out your balance can have a positive impact.

“Improving one’s credit score may take time, but it can be done. Bad credit is not irrevocable,”

said Heath. “Developing good habits and repairing your credit report will help increase your

credit score so you’re able to secure a home loan or a great interest rate with confidence.”

3. Know What You Can Afford

The best way to determine how much house you can afford is to simply use an Affordability calculator. Though calculators such as these do not necessarily account for all of your monthly expenditures, they certainly are a great tool for understanding your larger financial situation.

After you figure out what you can comfortably afford, you can then start online window shopping for houses and really begin to narrow down what you want in a house versus what you can afford. Are you looking at specific neighborhoods? How many bedrooms do you want? Do you need a large yard, big deck, swimming pool, man cave, she shed, etc?

Understanding what you can afford in the area you want to buy will help keep you grounded and focused on what you actually want in a house versus what might be nice to have.

4. Save Up For a Down Payment

Unless you want to pay Private Mortgage Insurance (PMI), you really want to save up for a sizable down payment. PMI is an added insurance charged by mortgage lenders in order to protect themselves in case you default on your loan payments. The biggest problem with PMIs for homeowners is that they usually cost you hundreds of dollars each month. Money that is not going against the principal of your mortgage.

How much should you save for a house? Twenty percent down is typical with most mortgage lenders in order to avoid paying for PMI. However, there are other types of home loans, such as a VA loan if you have served in the military and qualify, that may allow you to put down less than twenty percent while avoiding PMIs altogether.

As an added benefit to having a sizable down payment, you may also receive a lower interest rate that will save you tens of thousands of dollars in interest over time. So start saving now!

Saving for a down payment

5. Build Up Your Savings

Lenders like to see a healthy savings account and other investments or assets (i.e. 401k, CDs, after-tax investments) that you can tap into during hard times. What they really want to see is that you are not living paycheck to paycheck. A healthy savings account and other investments are a good idea in general as it will help you establish your future financial independence, but it is also a necessary item on your checklist of what you need to buy a house in 2019.

6. Have a Healthy Debt-to-Income Ratio (DTI)

Another key component banks and other lenders consider when issuing loans, and at what interest rate, is your debt-to-income ratio. The debt-to-income ratio is a lender’s way of comparing your monthly housing expenses and other debts with how much you earn.

So what is a healthy debt-to-income ratio when applying for a home loan? The short answer is the lower the better, but definitely, no more than 43% or you may not even qualify for a loan at all. There are two DTIs to consider as well.

The Front-End DTI: This DTI typically includes housing-related expenses such as mortgage payments and insurance. You want to shoot for a front-end DTI of 28%.

The Back-End DTI: This DTI includes all other debts you may have, such as credit cards or car loans. You want a back-end DTI of 36% or less. A simple way to improve this DTI is to pay down your debts to creditors.

How do you calculate your DTI ratio? You can use this equation for both front-end and back-end DTIs:

DTI = total debt / gross income

7. Budget for Extra Costs

There are a lot of little costs that go into buying a house that are overlooked by new home buyers all the time. Though there are some things, such as sales tax and home insurance, that can be wrapped into a home loan and monthly mortgage, there are several little things that cannot be included into the home-buying package and need to be paid for out of pocket.

Though these items can range in price depending on the area, size and cost of the house your buying, here is a list of extra costs you should consider (not all inclusive):

  • Home Appraisal Fee
  • Home Inspection Fee
  • Geological study
  • Closing costs*
  • Property taxes**
  • Home insurance**
  • Utility hookup/start fees
  • HOA fees
  • Home remodeling/updating
  • Existing propane gas

*Closing costs can sometimes be wrapped into the home loan, depending on the agreement with your lender.

**Property taxes and home insurance can be paid separately or your lender could include it into your monthly mortgage payment.

8. Don’t Close Old Credit Card Accounts Or Apply for New Ones

Closing a credit card account will not raise your credit score. In fact, in some cases, it may actually lower it. Instead, try to pay down the balance as much as you can, while continuing to make your monthly payments on time. If you have an old credit card you never use anymore, just ignore it, or at least don’t close it until after you have purchased your new home.

Opening new credit cards before buying a home is also not a good idea. You don’t want creditors checking your credit or opening new cards under your name, as you may lose some points on your credit score.

The absolute worst thing you can do is max out one of your credit cards, even if the limit on the card is low. If you do, your credit score may plummet. Try tackling your credit cards with the highest interest rate first, then as one gets paid off, focus on the next card until you’re free and clear.

9. A Solid Employment History

If you haven’t gotten the picture yet, lenders like consistency, including your employment history. Lenders like to see a borrower with the same employer for about two years.

What if you have a job with an irregular or inconsistent pay schedule? People with jobs such as contract positions, who are self-employed, or have irregular work schedules can still qualify for a home loan. A mortgage known as a ‘Bank Statement’ mortgage is becoming rapidly popular with lenders as more self-employed or what has been referred to as the ‘gig economy’ has taken off.

10. Know the Difference Between a Fixed Rate and an Adjustable Rate Mortgage

The difference between these two types of mortgage rates really lies within their names. A fixed rate loan is exactly that, an interest rate that will never change the moment it’s locked in. You will pay the same amount the very first month you pay your home loan and will continue to pay that same exact amount over the course of thirty years (or however long the loan term is).

An adjustable-rate mortgage (ARM) is typically a mortgage that starts out as a lower rate than fixed interest rates but then is adjusted each year typically resulting in a rate higher than a fixed rate. A 5-1 ARM is a popular mortgage offered by lenders, which is a hybrid between fixed and adjustable rate mortgages. Your mortgage would start out at a lower fixed rate for the first five years, then after that time period has elapsed, the rate would then be adjusted on an annual basis for the remainder of the loan term.

11. Follow Interest Rates

It is important to know what interests rates are doing. The big question is are they on the rise or are they falling?

When the economy is good the Federal Reserve typically raises the interest rate in an effort to slow down economic growth in order to control inflation and rising costs. When the economy is in the dumps the Fed does the exact opposite. They lower the interest rate in order to entice more people to make larger purchases that require loans (i.e. land, cars, and houses) to help stimulate the economy.

As new soon-to-be homeowners, it’s a good idea to know how the overall economy is doing, and more importantly, how it’s impacting the interest rates you’ll soon be applying for. In 2018, after years of bottom of the barrel interest rates, the Fed raised interest rates three times and is projecting to raise it three more times in 2019.

Why are small hikes in interest rates so important to you? To put it into perspective, even a one percent increase in your interest rate on a home loan is the difference of paying or saving tens of thousands of dollars in interest payments on your home loan over time.

12 Know How Much Time it Takes to Buy a House

The home buying process from start to finish is time-consuming and very relative to individual circumstances and the housing market in your area. However, there are some general universal constants that you can expect, such as a cash offer on a house is usually much quicker than a traditional loan, and if there is a perfect house in a good neighborhood and at a great price, you better expect competition and added time for a seller to review offers.

Depending on the housing market in your area and possibly which season you’re buying in, it can take you a couple of weeks to find a home or more than a year. But after you find your home you can typically expect the entire process from making an offer on a house to walking in its front door, to be as little as a few weeks to a couple of months on average.

13. Find a Knowledgeable Real Estate Agent

There are several ways to find a knowledgeable real estate agent. Many people rely on recommendations from friends and family, while others look to online reviews. While both of these scenarios work really well and can land you a great real estate agent, the reason these agents rise above the others as the best of the best or the crème de la crème is because of their intentions.

A good real estate agent isn’t trying to get you into a house as quickly as possible so they can earn a commission. Instead, you want an agent that will act as your guide through the home buying process, while having your best interests in mind. A good agent will be able to tell you straight if they think a house is a good fit for you, or if you should keep looking. They should also be expert negotiators so that you get the best deal possible.

14. Find a Mortgage Lender

There are a few things to keep in mind when researching a mortgage lender. The first thing that comes to most people’s’ minds is what mortgage rate can they get. You may have to shop around to find the best rate because lower the rate the more money you save.

Secondly, how does that mortgage lender rate compared to other lenders? By looking at positive and negative online reviews you can usually establish a theme pretty quickly of the strengths and weaknesses of the lender, and what you can possibly expect for a level of service down the road.

Ask the lender what their average length of time is to close on a house after the offer has been accepted?  A good lender versus a bad one can be the difference of moving into your new home two to four weeks earlier. You want to find out how streamlined their processes are.

15. Get Pre-approved

When being approved by a mortgage lender, you should be aware that there is a small but relevant difference between the typical fast preapproval for a home loan versus an underwritten pre-approval.

The fast pre-approval usually encompasses a credit report and a loan officer review and can be done in less than a couple of hours. This basic pre-approval allows you to quickly know how much you can afford and then make an offer on a house that may have just come on the market.

The underwritten pre-approval usually takes about twenty-four hours and includes a credit report, loan officer review, underwriter review, and a compliance/fraud review. Though this process takes longer, your offer on a house is actually stronger. Eventually, if you’re planning on buying a house, you will have to go through the underwritten pre-approval process anyway, so it’s better to jump on it from the start.

16. Research Neighborhoods or Areas You Want to Live

There are many variables to think about when researching your future residents. The key to beginning your research is to determine those variables most important to you. Are you looking for a good school district, a large house, convenience to commuter options, or a specific neighborhood that is extremely friendly and ranks high on Walk Score?

Your real estate agent will most likely tell you to figure out your list of the things you absolutely want in a house versus the extra features that you would like to have, but wouldn’t deter you from a house if it wasn’t there.

Your list will help your agent narrow down the number of houses they’ll show you, saving you time by only showing you houses you’d actually be interested in.

17. Shop For Your Home and Make an Offer

Now that you know where you want to live and you’re pre-approved, the fun begins. You get to look at houses! Once you find the house you know would be a great fit for you and your family, you’ll want to make an offer.

There are numerous variables to consider and hopefully, your knowledgeable real estate agent will help you through this process. Understanding the market conditions, how houses have been selling in the neighborhood and at what price (above or below asking), and knowing if there are other competing offers will help you assess and determine how you’d like to make an offer.

Negotiating an offer on a house can be emotionally taxing, so do your research and rely on your agent’s advice so you come to the table prepared.

18. Get a Home Inspection

Congratulations are in order! The sellers have accepted your offer. Now you want to get the home inspected to make sure there are no underlying issues that could cost you thousands of dollars down the road, such as a bad roof or foundation. Usually, a home inspection is a contingency built into the initial offer, and your real estate agent will help you set this up. Though you can waive this contingency if you’re trying to make a competitive offer in a hot market. Just be aware that if you do waive a home inspection contingency, you may be taking on considerable risk.

There are several types of home inspections, but in general, a typical home inspection involves a certified inspector that will go in, around, under, and top of your house looking for anything that could be of concern. Though they will go into crawl spaces and attics as part of their inspection, they will not open walls to see if the plumbing or electrical is good. However, they look for signs that could possibly point to those issues.

Then they will put their findings into a nice little booklet for you with pictures that basically becomes a miniature instruction manual for your house. If there are fixes that need to be addressed, they will certainly let you know.

19. Have the Home Appraised

Home appraisals are an important part of the process because oftentimes house prices can quickly skyrocket when the housing market is hot, and banks do not like to loan out more money than what a home is worth. A home appraiser will not only tell you what the home is actually worth for the area and for the current housing market, but this appraisal will also directly affect the size of loan the bank will give you.

If the home appraisal comes back and states that the house is worth $300,000, but you made an offer of $310,000, the bank will most likely only lend you $300k. You will then either be stuck with paying the additional $10k out of pocket, or you may try to renegotiate the price with the sellers to see if they would be willing to come down. Or you may lose the house altogether.

Also, the mortgage lender will usually set up the home appraisal so you can take this time to focus on other home-buying tasks that need to be finished up.

20. Close the Sale and Sign The Papers

Congratulations, you’re a homeowner! Your real estate agent should help you map out the last details, such as when and where you should sign all the papers to take ownership of the house and, of course, the handing over of the keys. Welcome to your new home.

Disclaimer: We are not attorneys or accountants and can not give you legal advice. If you have legal or tax questions, you should contact the appropriate expert.

This article was written by contributing author Refin

How to deal with debt collectors when you can't pay

How to Deal With Debt Collectors When You Can’t Pay

If one of your debts has gone to collections, you will hear all sorts of things from the person on the other end of phone call. Not everything they are telling you is true. Here is what happens if you don’t pay a collection agency and some of your options to end the constant calls.

Ending Up at Debt Collection

If you have not been able to pay your debt for the last three to six months, the creditor may sell your debt to a collection agency. At that point, you no longer deal with that original creditor and your credit report will note that you have been sent to collections.

You still owe the entire amount. If you absolutely can’t repay the entire amount, the collections agency would rather collect some money than nothing. This may allow you to negotiate a deal.

Will it hurt your credit to negotiate? Yes, but so will defaulting on a debt.

Chat with one of our debt experts today to find out more about our debt relief program.

What to Expect If You Don’t Pay

If you cannot pay a debt collector, the following may happen:

  • You’ll be reported to credit bureaus, damaging your credit and ability to get loans
  • Someone will write or call you regularly
  • Assets may be repossessed or a lien placed on it – home, car, rent-to-own items, etc.
  • You may be sued – always respond!
  • You may be reported as in default or delinquent
  • You may end up at a different collections agency

Working with A Collection Agency or Debt Collector

The first and most important thing to know is that you have federally guaranteed rights and many states have similar rights. Here is what a debt collector cannot do under the Fair Debt Collection Practices Act (FDCPA):

  • Contact you between 9 p.m. and 8 a.m. without your permission
  • Threaten violence or using profanities when speaking to you
  • Contact third parties (family, friends and employers) about your debt or otherwise embarrass you
  • Speak to your employer except under limited conditions
  • Pretend to be a government official or an attorney
  • Send letters that look like attorney or governmental letters but that are not
  • Send derogatory messages about you to a credit reporting agency
  • Send information on a postcard or via social media
  • Attempt to collect an expired debt
  • Hire an unlicensed credit collection agency
  • Communicate with you if you are represented by an attorney

There are a few things that you SHOULD NOT do:

  • Make a good faith payment. This payment can restart the expiration clock
  • Be rude to a collector. It can work against you if the phone calls are replayed in court
  • Let your contact information get out-of-date (the debt collection agency can contact third parties to track you down)
  • Admit that it is your debt or promise to pay – it can be construed as a contract
  • Give out financial information like your social security number or the value of a property

There are things you SHOULD do:

  • Take notes when you speak to a debt collector. Write down date and time, debt collector name, which debt, and what the debt collector says
  • Keep all mail, copies of texts, etc
  • Tell the collector if you legitimately can’t pay. They may try to work with you
  • Tell the collector if the debt is not correct
  • Give them your current contact information
  • Consider telling the collector to stop contacting you. If you want to work towards a settlement, you may not want to take this step

Speak to one of our debt experts right away to find out more information

What Steps Can You Take Once in Collections?

There are several options to get a debt collector to go away.

Ignore the debt and calls. You may end up in court or the collectors may give up. This is not a good option.

Set up monthly payments – Because the debt collector bought the debt for less than it is worth, they may be willing to negotiate. If you want to try this, offer to pay 40 to 50% of the total amount. Make sure the get the following in writing:

  • The amount you agree to repay and what you are repaying – are you paying against what you owe or settling the bill once you pay
  • The name of the debt – make sure you are paying off what they think you are paying off.
  • The collection agency should have the name of the original creditor and account number.
  • The exact day the payment is due.
  • The exact name of the collection agency since debt can be sold
  • The effect on the account after payment. Will it be reported to a credit agency, etc.

Debt consolidation requires you to take out a loan to pay the original debt. It may not be possible to get a loan if you are in collections.

Debt management includes working with a credit counseling agency to learn to better manage money and pay off debts

Bankruptcy is a last resort to handle your bills. It is expensive and you need legal advice and representation.

Debt settlement includes signing up with a debt settlement company like Pacific Debt, Inc. If you qualify, a debt settlement company with negotiating with your debtors while you build a fund to begin repaying debts. You can also do this on your own, but it takes determination.

Pacific Debt, Inc.

Pacific Debt, Inc offers a free consultation. Our debt specialists will perform an in-depth analysis of your debt and advise you on your options. They ensure that you understand all options and all the program details.

Depending on your financial situation, Pacific Debt, Inc works with you to have you debt free in one to two years. We do not make money unless your debt relief program works for you. You have nothing to lose and every to gain by contacting Pacific Debt for your free consultation.

For more information, talk with one of our debt specialists today.

FREE CONSULTATION

How to Manage Debt during the Holiday Season

How to Manage Debt during the Holiday Season

Entering the holiday season with a mountain of debt is a terrible experience. It’s made even worse with the added weight of an abysmal debt-to-equity ratio.

For parents, the weight of responsibility to provide for your children is multiplied during the holidays — one of the few times other than birthdays when the kids expect to receive gifts.

For children, the excitement of past holidays and the expectations of opening presents on Christmas day can create a crushing experience if they feel disappointment. So, what does this mean for parents?

Are you expected to get deeper in debt just to avoid disappointing the children?

Should you buy just a few good gifts or many small gifts?

Is there a way to satisfy your kids’ expectations and avoid more debt?

Believe it or not, there are many ways to avoid getting deeper into debt during the holidays and it all begins with expectations.

The Root of the Holiday Debt Problem

Is it wrong to spend money during the holidays?

No, it isn’t.

But it can do damage in the future if you aren’t careful with how you spend. That’s why you need to cultivate a habit of smart gift giving. Smart gift giving is different from normal gift giving, because you focus on needs over wants and completely cut out holiday overspending habits.

To begin your path to smart gift giving, you’ll need to identify your overspending habits. There are two culprits when it comes to holiday overspending: avarice and love.

Parents/family either love their children so much that they hate to see them disappointed on Christmas — resulting in overspending on Christmas gifts — or they’re so preoccupied with “having nice things” that they willingly fall deeper into debt.

Debt and gift-giving have gone hand-in-hand for far too long — it’s time to break up these two highly unlikely lovers and forge healthier holiday spending habits.

Check out these great ways to avoid going deeper in debt during the holidays.

Contact us today and chat with a debt specialist free of charge.

The Gift of Giving

Yes, it’s cliche. But constant repetition hasn’t made this any less true — giving will always trump getting. And luckily for all of us, giving doesn’t necessarily mean paying.

There are important, fundamental financial lessons to be learned and developed through giving:

  1. A focus on needs over wants
  2. The true meaning of value
  3. How material things and money affect wellbeing

Through giving, you can actually learn how to save money when buying things for yourself.

Think about it.

If you approach every purchase with a budget in mind, a healthy perception of value, and a focus on your needs, your purchases will become smarter, saving you money in the long run.

Learning to give smart gifts can actually teach you to save money.

Most gift giving involves spending. But you can also give time, knowledge, experience, and care. For example, if you know how to play the piano, you can offer to hold free lessons for the kids in your neighborhood. This is both a gift of time and knowledge.

Whichever type of giving you decide to adopt this Christmas, you’ll likely need to be more outgoing and social than you were before. Opportunities for giving don’t just show up on your doorstep — you have to learn about other people to identify what they need.

I had a friend growing up who celebrated Christmas, but not like the rest of us. He didn’t wake up on Christmas to a mountain of presents under a tree. He wasn’t ever home during the holidays.

Every Christmas, my friend’s family would do charity work in neighboring towns and sometimes different countries. He made new friends and lasting memories of helping those much less fortunate than himself.

Though an expensive excursion may be out of the question for parents struggling with finances, the idea is the same and it doesn’t have to cost money.

Here are some great ways to give without spending too much money (or none at all):

  • Host a dessert swap with neighbors
  • Grow and give away fruits and vegetables
  • Get a charity-focused credit card
  • 12 days of Christmas; acts of kindness
  • Employer gift matching
  • Fundraising for local charities
  • Organize a neighborhood food or gift drive
  • Donate your old clothes, toys, and goods
  • Donate blood
  • Host a cooking day with your friends; make dinner for random families

More than getting gifts, your kids deserve the valuable lessons that come from giving. Yes, random acts of kindness can make a big difference for those on the receiving end. But just imagine the nurturing effect giving will have on your kids.

In time, your children will become givers instead of receivers. You will spend less money on Christmas gifts and more time on learning the meaning of Christmas.

The Gift of a Brighter Financial Future

Sometimes, gift giving is made even more difficult when choosing a gift for those suffering from financial troubles. After all, would you buy an Apple watch for someone who struggles to pay their bills?

There are some great ways to actually improves the lives of those you are giving to, without removing the spirit and festivity of the holidays.

Parents can educate their kids to live or at least desire to live a financially savvy life. Though financial wellness gifts may not make much immediate difference, they will relieve the stress of future holiday debt.

Use the best budgeting apps to manage your expenses during the busy spending season. An good budgeting app can save you some valuable dollars here and there that will make a difference in the end.

By Christmastime, you should at least have a bit of your tax refund set aside for smart gift-giving. When it comes to teaching your kids about taxes, it’s important to lead by example. Plan a family tax prep night, to teach your growing kids about the importance of keeping receipts and records of transactions.

Professional Preparation for the Holidays

In the months leading up to the holidays, offer to work extra hours to impress your superiors. Your hard work leading up to the holidays could lead to a bonus or a promotion.

You can even express your desire to your superiors to earn some extra money to save up for the holidays. You may qualify for a pay increase if you accept extra responsibilities at work.

Besides working extra hard in your chosen career path, you also have the option to make money on the side to save up for the holidays.

Spending the next month as an Uber or Lyft driver will put some extra cash in your pocket for those added holiday expenses.

The Motley Fool reveals that you can make between $371 and $1,853 per month by driving for Uber. Of course, it completely depends on the time you put into it, but you can actually make enough money to pay for Christmas.

Other possible side gigs include:

  • Freelance writing
  • Dog walking
  • Social media manager
  • Caregiver
  • Airbnb
  • Garage sales
  • Donate plasma
  • Party planning
  • Research study participant
  • Become a tutor

No matter how much money you have or how much debt you’ve accumulated over the years, there is always a way back. Yes, the holidays are a time of giving, but they don’t have to be a time of going into debt.

Practice smart gift giving by focusing on needs over wants, saving up money beforehand, making extra efforts at work, sharing good financial practices with your kids, and by focusing on the real reason for the holidays: family.

For more information, talk with one of our debt specialists today.

FREE CONSULTATION

Disclaimer: We are not attorneys or accountants and can not give you legal advice. If you have legal or tax questions, you should contact the appropriate expert.

What is a good debt to equity ratio?

What is a Good Debt to Equity Ratio?

Debt ratio is one of those terms that get thrown around when looking for loans. What is debt ratio and what does it mean for you and your debt? There are a couple ways to look at debt ratio, but first, we need some definitions of what actually is a good debt to equity ratio.

Equity

Equity, for people, is what you have that is worth money or that has grown in value. Homes are the most common types of equity. If you have a mortgage of $150,000 and the house is valued at $200,000, you have $50,000 in equity.

Cars and boats generally don’t have equity as they lose value over time. Stocks, jewelry, artwork, and similar items may or may not have equity. It depends on how much you bought it for and how much someone is willing to pay for it.

If you are would like more information on what a good debt to equity ratio is, contact us for your FREE consultation today. See how much money you can save with our debt settlement program.

Assets

An asset is like equity but includes your after-tax income. We are going to use asset and equity to mean the same thing.

Debt

Debt is what you owe. Loans, credit cards, mortgages, student loans, and similar items feed into debt.

Debt to Equity Ratio

A ratio compares one value to another. The debt to equity ratio compares how much debt you have to how much equity you have. The formula is below. Feel free to use the equation to find what your good debt to equity ratio is.

what is a good debt to equity ratio image

If you owe $100,000 and have total assets of $200,000, you have a debt ratio of ½ or 0.5 or 50%. If you have total debts of $200,000 and equity of $100,000, you have a debt ratio of 2 or 200%. The lower the debt to equity percentage, the better you are situated.

Debt to Asset Ratio

Most lenders use debt to asset ratio as a clearer look at debt to equity ratio. This adds in your after-tax income for a better idea of how easily you can repay your debts.

You can figure out debt to assets two ways. The first is all debt except mortgage. The second is with a mortgage. Let’s break it down with some numbers.

Without mortgage: Add together all debts (loans, credit lines, credit cards, etc.) and divide by after tax income. Let’s say you have $10,000 in debts and an after-tax income of $59,000 (the median US income). Your debt ratio is 0.17 or 17%.

With mortgage: Add together all debts plus the total of 12 monthly mortgage payments and divide by after tax income. Now you have $10,000 in debt plus $12,360 (based on US averages) in mortgage payments. Your debt ratio is now 0.38 or 38%.

What is a Good Debt to Equity Ratio?

Now that you have some numbers, what do they mean? The ideal debt to equity ratio, using the formula above, is less than 10% without a mortgage and less than 36% with a mortgage.

If you exceed 36%, it is very easy to get into debt. Most lenders hesitate to lend to someone with a debt ratio over 40%. Over 40% is considered a bad debt equity ratio for banks.

High and Low Debt Ratios

When you look at debt to equity ratios, a high ratio means you probably don’t have enough equity to cover your debts. A low ratio means you can take advantage of your equity to take out loans if you want.

How to Improve your Debt Ratio

Possibly the easiest way to improve your debt ratio is to pay off debt. If you have credit card debt in excess of $10,000 and are having trouble paying it down, Pacific Debt, Inc may be able to help you out.

Contact one of our debt specialists for a free consultation.

For more information, talk with one of our debt specialists today.

FREE CONSULTATION

Disclaimer: We are not attorneys or accountants and can not give you legal advice. If you have legal or tax questions, you should contact the appropriate expert.

Refferences

https://www.investopedia.com/terms/d/debtratio.asp
https://finance.zacks.com/personal-finance-debt-ratio-6256.html
https://www.cnbc.com/2017/10/27/what-average-or-middle-class-american-means-matters-more-than-ever.html

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