Advice on Consolidation Debt

The world and U.S. economies finished the first decade of the 2000′s in a major recession with large unemployment rates. If you have found yourself on the short end of consumer debt with too many bills to comfortably pay within your current income level, then you may want to consider seeking advice on consolidation debt loan options in order to better afford your monthly bills without having to examine bankruptcy options.

What is Debt Consolidation?

Debt consolidation is the general term used to refer to the act of taking out a single loan to pay off one or many debts. Normally debt consolidation loans are at an overall lower, fixed interest rate than the majority of your unsecured debt such as credit cards and other higher interest rate loans. Many times a debt consolidation loan will use an asset such as a home or other property that you own as collateral to secure the loan. This helps ensure that you obtain a lower interest rate than you would see with an unsecured debt consolidation loan. This reduces the risk you pose to the lender who can potentially foreclose on your home used as collateral if you fail to pay the loan. Other times, deb consolidation can come into play when you are in danger of bankruptcy with an existing loan. A lender may buy your existing consolidation loan at a discount in order to offer you a lower overall rate.

Why You Should Consider Consolidating Your Debt?

You should consider consolidating your debt if you are finding that you can not pay above your minimum payments on a significant amount of debt. If you can either consolidate your debt or pay it down, you will pay significantly less overall interest to lenders and credit card companies. Once you have been able to reduce your overall debt through consolidation or other means, you will also be able to have an easier time with future loans such as for a car, home, or recreational vehicle by having an overall lower debt load. More so now than in the mid 2000′s, lenders take a hard look at your overall debt load and ability to pay your debts. The greater the creditors and overall amount that you owe, the higher the interest rate that you are going to pay on a future loan…if you can get approved for the loan. Consolidating debt also gives you a better cash flow and allows you to use the money for investments, savings, or to improve your family’s quality of life.

Dangers of Debt Consolidation

Debt consolidation does not come without dangers unfortunately. Many have sought out debt consolidation loans to eliminate their consumer debt, only to fall into the trap of building up the credit again before the consolidation loan is repaid. Seeking multiple, subsequent debt consolidation loans may not be approved in the current economic environment, and you could find yourself staring bankruptcy in the face if you find yourself in this situation. Before you apply for a debt consolidation loan, you should seek advice from a financial counselor and ensure that you will be able to live within your means without relying on consumer credit to do so before seeking the loan.

Tax time starts to strike home every year as we approach the Super Bowl. In times of recession, most Americans look forward to this time of year even more if they normally get a refund. Before you start to take a look at you taxes, its general best to pursue federal tax help before you proceed. The following are some federal tax help tips that you can use to help you save time and maybe even some money this tax season.

Federal Tax Tip #1 – Find and Use Tax Software

Ok, so many of us just don’t have the money to seek professional accounting help in-person. The next best thing to save you time and money is to find a tax software or Internet solution that meets your needs. The majority of tax software programs will support the majority of the Federal 1040 tax form and schedules. If you are looking for an alternative for completing your business taxes, you will want to ensure that the appropriate schedules are supported by the software solution that you decide to purchase. Other factors to consider when choosing tax software are the price, if the company will save your return to import the following year, and what chat or help options are available in the event you need support with the software package.

Tip #2 – Straighten Your Records and Make a Filing System for Next Year

Lets face it, January is a bit too late to “get religion” and start a new filing system. Use the opportunity for collecting your supporting documentation for your taxes as a time to create a maintainable system for next year. Some folks do this on a daily basis, others on a monthly. When you just “save” receipts and forms to straighten out at the end of the year, you just create extra work for yourself when its time to complete your federal and state taxes. If you are having to seek federal tax help from a professional, they are going to demand that your files are in order before proceeding.

Tip #3 – Verify the Requirements for the 1040 EZ and 1040 long forms

If you are a middle class American and do not own a house, then you will likely be able to just use the 1040 EZ short form. If you own a home, bought or sold stock, etc you will likely have to use the 1040 long form. If you qualify for the 1040 EZ, then you will not need to itemize deductions unless you are going to exceed the standard deduction for the year. Many taxpayers fill out the 1040 form in error when they could have saved time by using the shorter EZ form.

Tip #4 – Free Tax Preparation and e-Filing

If you have an adjusted gross income (AGI) that is less than $56,000 then you may qualify for the free IRS online federal tax preparation software and e-filing. Don’t purchase a product before checking to see if you can use the IRS product for free. If you can’t determine if you qualify for the service, you can contact the IRS via their website (irs.gov) and you should hear back from a representative withing 72 hours. If you don’t, then try again before giving up.

Tip #5 – Get Federal Tax Help

Get help if you are not positive about how to proceed with your taxes. Even if you “Think” you know what you are doing, but have not seen an accountant in a number of years, this might be the year to use one. Many times, tax payers will miss significant changes in tax law that will benefit their refund. The extra amount that you pay an accountant (which is deductible if itemizing taxes) can well be worth it for many tax payers.

Tip #6 – Don’t Fib

Don’t give into the temptation to fib on your taxes. Who wants to compound their consumer debt with potential IRS penalties for claiming that “$10,000 Good Will donation” that you “lost” the receipt for? Not me. The potential increase in your return to help pay down debt to avoid having to consolidate debt or pay other bills just isn’t worth it!