What Is Debt Consolidation?

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What is debt consolidation? Can debt consolidation help reduce my high-interest debt? Debt consolidation is a type of refinance where you take out a loan in order to pay off other high- interest debts, such as credit cards. This allows you to have one single payment for all your debt that can help you better manage your payments, and hopefully, a lower interest rate to save you money or improve your cash flow as well. Listed below, you will find some pros and cons of debt consolidation. Pros of Debt Consolidation • Simplify Payments: The advantage of debt consolidation is that you can simplify payments by merging them into one bill. This can help you avoid missed or late payments as you would just manage one bill versus multiple bills. • Save on Interest: By moving all of your high-interest debt into one payment, you may be able to receive a more favorable interest rate or simply have one interest rate for all of your bills, which allows you to reduce your potential debt. • Improved Cash Flow: Having one payment each month versus multiple payments should improve the amount of cash you have available to you at the end of each month. If you have a surplus of cash, you may be able to apply some additional amounts to outstanding debt. Cons of Debt Consolidation • Remaining Bills: Bills don’t go away when you consolidate, you will still have to pay back the debt. If you’re a frequent shopper, you will have to consider a long-term solution to better manage your spending habits to avoid falling back into debt again. • Additional Interest: You could end up paying more in interest. Sometimes you may need to extend the payback period to a longer term in order to pay off your bills. Extending the time to pay off your debt will increase the amount of interest that you will pay in the long run. • Excludes Secured Loans: A disadvantage of debt consolidation is that it may not include secured loans such as an automobile loan. Debt consolidation may only apply to unsecured debt like credit cards, personal loans, or medical debt. If you have other debt, you will still have to add that amount to your monthly budget. There are a number of options for credit card debt consolidation, including using your home’s equity in connection with a cash-out refinance, home equity loan, home equity line of credit (HELOC), or a debt consolidation credit card. Before you choose which option is best, learn more about how to consolidate debt and whether it’s a financially smart move. Freedom Mortgage’s experienced loan advisors are here to help you find the best solution for your financial needs. Call us at 877-220-5533. CALL FREEDOM MORTGAGE AT 877-220-5533 TODAY! .

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Your Ultimate Guide to Debt Consolidation Table of Contents
Your ultimate guide to debt consolidation Table of contents 1 What is debt consolidation? 2 The benefits of debt consolidation 3 Are you a good candidate for debt consolidation? 4 The best types of debt to consolidate 5 Types of debt consolidation loans 6 Conclusion What is debt consolidation? Before you decide whether debt consolidation is the right option for you, let’s cover the basics. Debt consolidation combines some or all of your debt into a single debt obligation. It’s beneficial if you have substantial debt or are paying high interest rates. Often, these types of debt include: Credit cards Medical bills Car payments Payday loans Here’s how it works First, you’ll use your debt consolidation loan to pay off this high-interest debt. Then, you’ll make fixed monthly payments toward a new loan — typically at a much lower interest rate. As a result, debt consolidation makes managing your finances easier and less stressful. The benefits of debt consolidation Consolidating debt offers plenty of benefits. While each person’s situation is unique, here are the most common benefits that can come from consolidating debt: A defined timeline 1 Unsecured debt often has no timeline for an eventual payoff, which can cause a lot of stress. One of the benefits of consolidating your debt is a structured timeline with a clear endpoint for when you’ll pay off your debt in full. A single monthly payment 2 Juggling multiple monthly payments is stressful. By combining your debt, you’re effectively paying off all your creditors, leaving you with one manageable monthly payment.
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Tips on Choosing a Reputable Credit Counseling Agency
NATIONAL CONSUMER LAW Consumer CENTER INC 77 Summer Street, 10th Fl Boston, MA 02110 for Older 617 542-8010 www.nclc.org Facts Americans Tips on Choosing A Reputable Credit Counseling Agency There have been a lot of problems with credit counseling agencies in recent years. For example, the vast majority of credit counseling agencies are non-profit organizations, yet many behave like for-profit businesses. These non-profits in disguise spend huge amounts of money on advertising and aggressively try to sell “debt relief” products to consumers. You should be careful if you think you want to go to a credit counseling agency for help with credit card debt. Credit counseling can be very useful in some cases. Unfortunately, not all credit counseling agencies are acting in your best interests. Below are a few tips to help you decide whether credit counseling is right for you and to help you find a reputable agency. Do You Need a Credit Counseling Agency? 1. Are You In Financial Trouble? Some warning signs of financial trouble are clearer than others. For example, if you are consistently late in paying bills or are already behind in paying some debts, you probably know that you need help. Other warning signs of financial trouble are not so obvious. If your total debt payments, excluding your mortgage and car, are between one-quarter and one-half of your after-tax income, you could benefit from credit counseling or other forms of financial assistance. You should consider seeking assistance even if you are current on all bills.
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Dynamics of Secured and Unsecured Debt Over the Business Cycle
Dynamics of Secured and Unsecured Debt Over the Business Cycle Paul Luk∗ Tianxiao Zheng y Abstract Firms have heterogeneous debt structure. High-credit-quality firms rely almost ex- clusively on unsecured debt and borrow with lower leverage ratios than low-credit-quality firms. In this paper, we develop a tractable macroeconomic model featuring debt heterogeneity. Unse- cured credit rests on the value that borrowers attach to a good credit track record. We argue that borrowers and lenders are more cautious in the unsecured debt market, so high-credit-quality firms have lower leverage ratios. Moreover, our model generates procyclical unsecured debt and acyclical secured debt, consistent with the US data. Our model with heterogeneous debt has a smaller amplification effect than a model featuring secured debt only. JEL Codes: E32, E44, G32 Key Words: Secured debt, unsecured debt, corporate debt structure, financial accelerator ∗Department of Economics, Hong Kong Baptist University, The Wing Lung Bank Building for Business Studies, 34 Renfrew Road, Kowloon Tong, Hong Kong, China. E-mail: [email protected] yShanghai Advanced Institute of Finance, Shanghai Jiao Tong University, 211 West Huaihai Road, Shanghai 200030, China. E-mail: [email protected] 1 1. Introduction Standard macro-finance models (such as Bernanke, Gertler and Gilchrist(1999), Carlstrom and Fuerst(1997), Gertler and Karadi(2011), Jermann and Quadrini(2012) and Meh and Moran (2010)) often assume that capital structure is uniform and that all firms borrow with identical debt contract and leverage. This is despite the fact that debt heterogeneity is a common feature of both theoretical research and the real world.
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Student Module 13.1 Bankruptcy Page 1
STUDENT MODULE 13.1 BANKRUPTCY PAGE 1 Standard 13: The student will evaluate the consequences of bankruptcy. Managing High Levels of Debt Montana and Carolina could not wait to graduate from high school and get married. They planned to go to college, if they could get student loans. In their premarital counseling class on debt, they each were shocked to learn how much the other person owed. Montana had a new truck. He borrowed money on his credit card for the down payment, tag, and title. He also booked their $5,000 honeymoon to Mexico on his credit card. Carolina drove an old car. It was a “money pit,” constantly costing her much money on repairs. She charged those repairs on her credit card, along with her clothes, shoes, dinners with friends, and Lesson Objectives everything else she wanted or needed. Her Identify ways to deal with high levels of personal debt. charges totaled $8,000. Compare the costs and benefits of filing bankruptcy. Is this a good way to start Recognize the impact of filing bankruptcy. a marriage? What do you Explain the importance of reestablishing positive credit recommend Montana and history. Carolina do to get control Demonstrate the steps to rebuilding positive credit over their debt? history. © 2008. Oklahoma State Department of Education. All rights reserved. Student Module 13.1 2 Personal Financial Literacy Vocabulary Bankrupt: A person or company with insufficient assets to cover their debt. Bankruptcy: A state of being legally released from the obligation to repay some or all debt in exchange for the forced loss of certain assets.
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How Does Access to the Unsecured Debt Market Affect Investment? Kizkitza Biguri†
ADEMU WORKING PAPER SERIES How does access to the unsecured debt market affect investment? Kizkitza Biguri† September 2016 WP 2016/041 www.ademu-project.eu/publications/working-papers Abstract This paper examines the relation between debt structure and investment, by exploiting differences in secured and unsecured debt holdings. In order to address endogeneity concerns, I exploit two sources of exogenous variation for identification. From the firms' side, the Jobs and Growth Tax Relief Reconciliation Act of 2003 represents a negative shock to firms' creditworthiness. From the credit market's perspective, the asset-backed commercial paper market collapse of 2007 caused a temporary shortage of unsecured commercial paper. Each of these shocks to debt structure is analyzed combining a difference-in-differences approach with an instrumental variable estimation (Waldinger (2010)), which allows studying i) substitution patterns among debt types and ii) the impact on investment. Results show that greater access to unsecured debt leads to larger investment. When firms face more restricted access to the unsecured debt market, they substitute toward secured debt, and reduce investment. The reason behind this result is that unsecured debt is more cost-effective in terms of spreads and covenants. These findings suggest that collateral is not key to finance investment, as instead has often been claimed in the literature. Creditworthiness rather than collateral is key to access unsecured debt. Additionally, I shed light on how access to the unsecured debt market relates to the balance sheet and credit channels of monetary policy. _________________________ † BI Norwegian Business School. Email: [email protected] Keywords: Unsecured debt, debt structure, financial constraints, investment, collateral.
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Debt Securities Product Overview Brochure
Debt Product Overview We make home possible. In 1970, Congress chartered Freddie Mac to fulfill a public mission — to stabilize the nation’s mortgage markets and expand opportunities for homeownership and affordable rental housing. Since then, we’ve financed homes for more than 50 million American homebuyers. Freddie Mac doesn’t make mortgage loans directly to homebuyers. Instead, we make it possible for primary market mortgage lenders — such as commercial banks, mortgage companies and savings institutions — to make mortgage loans to homebuyers by creating a constant flow of funds that lenders can use to finance mortgages. Investors play an important role in this process. Investing in the U.S. Housing Market When a homebuyer obtains a mortgage loan from a primary market mortgage lender, the lender may sell that loan in the secondary mortgage market. The lender then uses the proceeds of that sale to make new loans to other homebuyers. As a leader in the secondary mortgage market, Freddie Mac is one of the largest buyers of mortgage loans in the United States. We purchase mortgages that meet our underwriting and product standards, then bundle them into mortgage-backed securities that can be sold to investors around the world. We then use the proceeds to purchase additional mortgages from primary market mortgage lenders. This provides a continuous flow of funds to primary market mortgage lenders, enabling them to originate new mortgage loans and, ultimately, to make the lending process faster, more convenient and more affordable for homebuyers. At times, Freddie Mac also purchases mortgage loans and mortgage- related securities for our investment portfolio, which enables us to fulfill our housing mission.
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Debt Consolidation Vs Bankruptcy Which Is The
CONTENT Introduction 01. Debt Consolidation 02. Debt Settlement and Debt Management 03. Why is Bankruptcy Typically Saved for the Last Resort? 04. More Options and Tips for Winning the War of Debt INTRODUCTION When you’re facing what feels like a mountain of debt, seeing the other side can feel like an impossibility. When will you ever overcome your current situation? Is there such a thing as life on the other side of your debt? The answers to all of your questions can be found by speaking with a financial professional, but along the way, you will surely encounter numerous paths you can take to achieve your ultimate goal of being debt-free. Even with the guidance of a knowledgeable professional, it will still be up to you to decide which options are in your best interest. To do that, you’ll need to know more about each option. Here, we’ll examine some of the most common options you have when facing significant debt, including how each option impacts your life and finances for the future. Debt Consolidation Debt consolidation is one of the most popular alternatives to bankruptcy when it comes to reducing personal debt in America. However, it is not without its own balance of benefits and drawbacks. Weighing these can help a person decide whether this avenue would be a good fit for their situation. Oftentimes, consumers find that bankruptcy may be a better option. First and foremost, it’s important to know that debt consolidation involves taking out a loan to pay down the rest of your outstanding debts.
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Covered Bonds As a Source of Funding for Banks' Mortgage Portfolios
COVERED BONDS AS A SOUrcE OF Funding FOR BaNKS’ MORTGAge PORTFOLIOS BANK OF CANADA • FinANCIAL SYSTEM REView • JUNE 2018 37 Covered Bonds as a Source of Funding for Banks’ Mortgage Portfolios Toni Ahnert Covered bonds funded only about 3 per cent of the assets of the largest banks and 9 per cent of Canadian mortgages in 2017. Instead, banks have been relying primarily on relatively cheap government-guaranteed mortgage funding options. An increasing portion of mortgages are uninsured and not eligible for government-guaranteed funding, creating the need for alternative funding sources. Covered bonds may fill part of this need, helping to generate a diversified and stable funding mix for mortgages. Overcollateralization requirements and dynamic replenishment of the col- lateral pool can increase risks to unsecured creditors. This could add to the fragility of a bank in the face of negative shocks, with potential spill- overs to other parts of the financial system. Several policy tools are available to help balance the costs and benefits of covered bonds. These include simple issuance caps and adjustments to the pricing of deposit insurance premiums, as well as other types of prudential regulation. Introduction Banks’ choices for funding mortgages and other business activities have an important effect on how efficiently they provide banking services and how effectively they manage risks to their own business and to the financial system. Canadian banks typically use a broad array of funding sources, including equity, deposits and wholesale funding instruments (Chart 1).1 The terms of funding sources differ, ranging from short-term deposits and money market instruments to longer-term funding, including covered bonds and 5- and 10-year debentures.
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The Global Securitized Debt Market Opportunities Often Reside in the Debris of Crisis
Brandywine Global Investment Management, LLC Topical Insight | May 23, 2014 The Global Securitized Debt Market Opportunities Often Reside in the Debris of Crisis New issuance of private-label securitizations remains at nearly non-existent levels today despite more than five years of improving investor risk appetite since the Financial Crisis. While other spread- product markets reclaimed considerable new issuance momentum shortly after 2008, many investors today are still scarred from the miserable failures of private-label securitization during the housing crisis. Convolutedly packaged collateralized debt obligations (CDOs), backed by poorly underwritten subprime collateral, not only delivered steep price declines during the Financial Crisis, but market liquidity dried up quickly which impeded investors from exiting positions at reasonable valuations. Despite recent price gains in legacy securitized issues—those issued prior to 2008—neither the economics nor the tarnished reputation of securitization will justify a vigorous rebirth of the private- label new issue market anytime soon. As a result of the slowdown in new issuance and investors’ past trouble with these complex securities, many are choosing to fully avoid the legacy securitized market—eschewing exposure to both the private-label market and the more complex areas of the government-securitized market, called “agencies.” For that reason a large, under-owned, and under- followed collection of legacy securitized issues are available at attractive valuations. The legacy securitized market exhibits many of the inefficiencies that exemplify a distressed market. Those inefficiencies include all kinds of dislocations in the form of rating disparities, pricing anomalies, information asymmetry, ongoing regulatory uncertainties, unresolved legal settlements, abnormal servicer behavior, and an unclear future for housing finance.
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Unsecured Debt and Reit Capital Structure*
UNSECURED DEBT AND REIT CAPITAL STRUCTURE* Timothy J. Riddiough Massachusetts Institute of Technology Center for Real Estate, W31-310 Cambridge, AL4 021394307 (617)[email protected] April, 1998 * I am grateful to the Real Estate Research Institute for funding this project and to Fred Carr at Penobscott Group for providing much of the data. This research extends a series of earlier studies, done under my supervision, that were completed by master's students at the MIT Center for Real Estate. In particular, Josh Anderson, Josh Marston, Michael O'Connell, Ian Ponniah, and Mitchell Yuden deserve recognition for their fine research work. EXECUTIVE SUMMARY REAL ESTATE RESEARCH INSTITUTE "UNSECURED DEBT AND REIT CAPITAL STRUCTURE" Timothy J. Riddiough Massachusetts Institute of Technology Many REITs have recently touted the advantages of debt financing-in particular, the use of unsecured debt as an alternative to secured debt and equity financing. The primary argument for unsecured debt as a substitute for secured debt is that it increases operating flexibility due to the ability to "reshuffle the asset deck" at any time. An important implication of this argument is that use of unsecured debt is value increasing since it lowers the firm's weighted average cost of capital. This study questions the received wisdom by pointing out that unsecured debt is also flexibility reducing is several respects. Relative to use of secured debt, it decreases the firm's option value to defaulting on individual assets and bond covenants impose firm-wide restrictions on future operating and financing policy. If these flexibility costs are important to investors we might actually observe an increase in the firm's weighted average cost of capital when unsecured debt is first issued.
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Glossary of Bond Terms
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Americans May Face a Crisis with Past Due Debt in 2021 Credit Card Defaults and Delinquencies Are Expected to Rise Next Year
Americans May Face a Crisis with Past Due Debt in 2021 Credit card defaults and delinquencies are expected to rise next year. If you focus solely on cold numbers, it looks like Americans are doing exceptionally well when it comes to consumer debt. The St. Louis Federal Reserve shows that credit card delinquencies were on the decline in the third quarter of this year, the third quarterly decline consecutively. That follows a 0.2% decrease in household debt in the second quarter of 2020. However, experts are warning that the headway consumers are making against debt may run out quickly next year once the second stimulus passes. According to Ted Rossman, a credit analyst at Bankrate, the stimulus and ongoing Congressional relief efforts from the CARES Act are, "keeping a lid on delinquencies." Essentially, the Economic Impact Payments and deferment and forbearance programs granted through the CARES Act have contributed to helping consumers stay out of credit card default. This year, consumers have been able to defer their credit card payments up to 180 days due to financial hardship. What’s more, many Americans used their stimulus to pay down debt. The issue is that once CARES Act protections run out, consumers may be on the hook with more debt than they can handle. And while a second round of stimulus would help, many experts say it will only delay the inevitable. “Unless the job market can bounce back significantly over the next few months, many families will be facing a crisis once stimulus checks and other consumer protection programs run their course,” warns Gary Herman, President of Consolidated Credit.
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