Another typical day and as you sort out all your personal mails, you discover that your credit card balances now amounts to thousands of dollars. As sweat breaks on your forehead, you wince as you recall the shopping spree you went on a couple of weeks back. Now you regret buying those ridiculously expensive shoes. As you take a deep breath, you realize that you will now have to sort out these personal debts that you have incurred or risk being hounded by creditors for a long time.

In order to manage your personal debts, you make a list of qualities you must have in order to effectively solve this problem. After much thought, you come up with the following.

 Be Determined

As you compute the total amount of credit card balances you have to pay, you realize the enormity of your personal debt situation. But still, you promise yourself that you will do what it takes to pay off these personal debts. You know for a fact that situations like this require commitment and determination. You must prepare yourself for the sacrifices you have to make and things you have to give up in order to achieve your goal. You should also stand firm despite all these challenges.

 Be Creative

Now that you have made a firm resolve to clear yourself or personal debt, the next thing you have to plan is how to accomplish your goal. Of course, cutting back on daily expenses is a must. You realize that you have to be creative in finding ways to cut cost. You begin with your clothes and shoes and decide to resist the urge to buy new items for a couple of months until your income permits you to do so in CASH. You also cross out from your daily expenses taxis considering that your workplace is just a couple of blocks away. You reckon that you might even lose that few extra pounds and tone your leg muscles as you try to resolve your personal debt problems. Lastly, you realize that you will have to give up your weekly clubbing to maybe just twice a month.

 Be Realistic

Of course, your plan to pay off your personal debt should always be realistic. Not spending any money on food just so you can buy fashion magazines is not possible. Even your plans of selling old furniture and appliances will not be enough to pay for everything. You should make sure that your plans to pay off your personal debt are achievable and quantifiable. For example, if you subscribe to several magazines every month and it costs you hundreds of dollars then stopping your subscriptions will make you a several hundreds of dollars richer. Also, quantifiable are the amounts you spend on expensive lattes and lunch outs.

Looking at your list, you can not help but smile as you think of this as a learning experience; one that you have no plans of repeating ever again. You also imagine the great adventures you might encounter as you walk your way to financial freedom and erase personal debt.

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There are many reasons why people have trouble managing debts. Although it may sound easy, debt management requires much discipline. To be effective, you should be able to sort your finances regularly, stick to your budget and avoid late payments. If you have problems of paying your dues on time or budgeting, debt management can be very stressful for you. In order to address debt management problems, some people consider consolidation loans to be effective.

As the term suggests, consolidation loans are credit taken out to pay for all your debts so that you will only have one loan to monitor and manage. For many people, these loans provide them with much convenience as well as considerable savings. When you consolidate your debts, you enjoy the following advantages.

Reduced Interest Rates
Consolidation loans are perfect if you want to reduce the amount you are actually paying each month. If you have several loans or even credit cards, you will be surprised at the very high interest rates you have been paying all these times. Consolidation loans usually come with lower interest rates as they are really designed to help out people who need help in settling their debts.

Improved Credit Rating
If you avail of consolidation loans, chances are your credit rating will improve. Why? You will no longer make late payments or have trouble paying your debts because of the absurdly high interest rates. Without any negative entry on your credit report, you will enjoy even lower interest rates and higher credit limits should you decide to take out credit. Of course, it would be best if you wait until you have settled your consolidation loan before considering taking out a new one.

One Creditor
With consolidation loans, you will only have to monitor a single account. This means, you will never have to worry about due dates, late payment charges, delinquency reports and other things related to mismanaging your debts. In addition, you will only have to deal with one creditor and you can easily establish a good business relationship.

Less Risk
The nice thing about consolidation loans is that they pose less risk to your personal assets. You will no longer have to worry about losing your home, your car and other important things you have worked hard to own. Most consolidation loan companies do not require any collateral, only a good credit rating that will show your paying capabilities.

Consolidation loans are actually considered as excellent debt management tools for people who have difficulties managing several debts. Once you have been approved for one of these loans and you have rid yourself of the many debts that you have accumulated, you should remember to discipline yourself in order to pay off this loan according to the terms agreed on. If you manage your payments well, you will be on your way to total financial freedom. You just need to commit to your goals and make sure that you control your spending.

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Credit scores are very important especially if you are planning to buy a home by taking out a mortgage. If you have a high credit score, you will be entitled to higher credit line as well as lower interest rates. On the other hand, a low credit score will provide you with the opposite, limited credit line and high interest rates. This is primarily the reason why you should avoid negative entries in your credit report. Entries like collection accounts, charge-offs and judgments could cost you those very important points.

Judgments are entries that show you are being sued by your creditor for failure to settle a debt. You should avoid them at all costs. A judgment against you will stay on your report for seven years even if you have paid up the debt. It will only show up as “paid judgment” or “satisfied judgment”. In order to avoid these entries, you should do the following.

Check Credit Report Regularly
Your credit report should be used to check for any debts that have yet to be collected. It is recommended that you get a copy of your credit report once every month so you can keep track of negative entries. If there are any wrong entries, you should report them immediately and dispute the claims. You should make sure that all your financial documents are in order especially receipts in order to back up your claims of wrong entries. On the other hand, judgment entries that suddenly appear on your credit report should be reported also. The judgment process requires notification. If you were not served any summons, then you can file for a “motion to vacate”.

Negotiate With Judgment Creditor
You should remember that preventing a judgment entry is easier than removing one on your credit report. This is why you should negotiate with the judgment creditor before the court date. In fact, as soon as you got served, you must contact the creditor at once to work out a payment arrangement. In any case, show up at the date of the hearing to show the judge that you are sincere in your efforts to pay off your debts.

Check for SOL
The statute of limitation for debts is usually within 4 to 6 years. This means that if your debt expired and you were still served, you can use this to dismiss the case against you. On the other hand, the statute of limitation for judgments is from 12 to 20 years. If you do not want your creditor to demand payment for as long as this or worse, they could claim liens on your assets, you should at all cost settle the matter at once.

Not surprising, judgment creditors are usually very open to negotiation. If the entry has been made, then be sure to demand its removal from your credit report in exchange for the debt payment. You should put everything in writing so that you will have proof of the agreement in case the entry still shows up after a few months.

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Frank Bruno
http://www.DisputeDemon.com