Dialogue on Debt Consolidation and Using Credit to Pay Credit
I was recently asked to help answer some questions about debt consolidation. The first task before deciding a strategy to reduce the debt was to gather the information using the templates in the MoneyMinding Makeover eCourse. This plan will ensure that all the details are known before deciding which solutions will work best and what resources are available to work with.
Below is some of the dialogue that went back and forth between myself and the client. My comments are in bold. The client questions and comments are in italics. Questions like these are discussed on the weekly MoneyMinding Mentorship Q and A program. If you would like to know more, or have your own questions, then please email or call to find out about this benefit as part of the new and upcoming MoneyMinding Membership.
The first page I happened to glance at and the first sentence that I read was without a structured process to eliminating debt, the thoughts and behaviours that created the debt will return and continue indefinitely. This is why a debt consolidation is perhaps the worst solution.
BINGO ah yea!!!! It seems so logical but when you have no 'money skills" you don't know what a structured process is and it seems that everywhere you turn they said consolidation is the answer. Thankyou for that statement alone - I am already feeling better cause I was beating myself up over you think I would have learned when I did the consolidation but yes it is the same thoughts and behaviours.
The consolidation was the "easy way out" I know that when I can rid myself of the stress of no money, my business will run better, because then I will "attract people" instead of coming across desperate.Which no one intends on doing but I think it comes across anyway.
Sorry for so many emails, but I'm excited to take back my power. It is going to be a long road but a worthwhile one.
Great aha!! I do alot of discussion on on debt consolidation when I speak on credit issues. Many times it's the only option available to banks, and the other strategies aren't taught in the financial curriculum. In order to really adequately determine what your best options are you need to have as much info as you can on each of the credit facilities open to you - balance, interest, minimum payment, total available, etc. And the quicker you can get a plan in place, the quicker you can get more focused on your business. You might want to try thinking of the non-financial assets and resources while you're gathering the info on your credit. It will help you see how much you're really worth and what potential opportunities are available to you.
One question I do have though that a gal in the states did. When you have the application forms that come in the mail to transfer your credit card balances to a lower interest card for 3% or whatever for a short term, if you do that does it effect your credit rating if you are switching around to different cards. Apparently she did it for a year and paid off all her credit card without having to pay any interest or at least a very low interest?
This is actually a bit of a loaded question because it can work - but it depends on the whole picture. That's why you need to have all the details before deciding on a strategy. The short answer about affecting credit score - is yes - getting new cards to pay off old ones will negatively impact your score. Everytime you apply for credit a bureau is pulled and that drops your score by a few points. Also, having alot of open credit available is not looked on favourably, and frequent applications for credit is also not a good idea and is not looked at favourably.
But, in some situations it could be helpful because, yes, the low or no interest for a period of time will make a big difference. So, that said - gather the info and I'll help you look at a strategy or strategies to make everything work in a way that's right for you. Talk to you soon - you're actually further along than you might think simply because you are open minded about seeing possibilities and asking questions. That's where it starts - cos remember - a 1% change carried out consistently is what will produce the big results long term!! Congratulations!!
Tracy
Copyright© 2006 Tracy Piercy. Written Permission is required for reproduction. Thank you.
Below is some of the dialogue that went back and forth between myself and the client. My comments are in bold. The client questions and comments are in italics. Questions like these are discussed on the weekly MoneyMinding Mentorship Q and A program. If you would like to know more, or have your own questions, then please email or call to find out about this benefit as part of the new and upcoming MoneyMinding Membership.
The first page I happened to glance at and the first sentence that I read was without a structured process to eliminating debt, the thoughts and behaviours that created the debt will return and continue indefinitely. This is why a debt consolidation is perhaps the worst solution.
BINGO ah yea!!!! It seems so logical but when you have no 'money skills" you don't know what a structured process is and it seems that everywhere you turn they said consolidation is the answer. Thankyou for that statement alone - I am already feeling better cause I was beating myself up over you think I would have learned when I did the consolidation but yes it is the same thoughts and behaviours.
The consolidation was the "easy way out" I know that when I can rid myself of the stress of no money, my business will run better, because then I will "attract people" instead of coming across desperate.Which no one intends on doing but I think it comes across anyway.
Sorry for so many emails, but I'm excited to take back my power. It is going to be a long road but a worthwhile one.
Great aha!! I do alot of discussion on on debt consolidation when I speak on credit issues. Many times it's the only option available to banks, and the other strategies aren't taught in the financial curriculum. In order to really adequately determine what your best options are you need to have as much info as you can on each of the credit facilities open to you - balance, interest, minimum payment, total available, etc. And the quicker you can get a plan in place, the quicker you can get more focused on your business. You might want to try thinking of the non-financial assets and resources while you're gathering the info on your credit. It will help you see how much you're really worth and what potential opportunities are available to you.
One question I do have though that a gal in the states did. When you have the application forms that come in the mail to transfer your credit card balances to a lower interest card for 3% or whatever for a short term, if you do that does it effect your credit rating if you are switching around to different cards. Apparently she did it for a year and paid off all her credit card without having to pay any interest or at least a very low interest?
This is actually a bit of a loaded question because it can work - but it depends on the whole picture. That's why you need to have all the details before deciding on a strategy. The short answer about affecting credit score - is yes - getting new cards to pay off old ones will negatively impact your score. Everytime you apply for credit a bureau is pulled and that drops your score by a few points. Also, having alot of open credit available is not looked on favourably, and frequent applications for credit is also not a good idea and is not looked at favourably.
But, in some situations it could be helpful because, yes, the low or no interest for a period of time will make a big difference. So, that said - gather the info and I'll help you look at a strategy or strategies to make everything work in a way that's right for you. Talk to you soon - you're actually further along than you might think simply because you are open minded about seeing possibilities and asking questions. That's where it starts - cos remember - a 1% change carried out consistently is what will produce the big results long term!! Congratulations!!
Tracy
Copyright© 2006 Tracy Piercy. Written Permission is required for reproduction. Thank you.
posted by Tracy Piercy at 8:14 PM
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