Posts Tagged ‘Debt’
European debt crisis live: reports of Greek debt deal
September 28th, 2011
Greek government and bondholders reportedly reach deal
IMF slashes global growth forecast
UK likely to be best-performing major EU economy in 2012
Today’s agenda
Good morning and welcome back to our live coverage of the world economy and eurozone debt crisis.
The International Monetary Fund’s latest forecasts have been leaked, as usual, ahead of official publication next week.
The IMF has slashed its global growth forecast for this year, blaming the eurozone debt crisis. It reckons the world economy will grow by 3.3% rather than 4% as predicted previously. Italy’s economy is forecast to shrink by 2.2% and Spain’s by 1.7% as tough austerity measures and weak bank lending plunge the countries into at least two years of recession.
“The global recovery is threatened by the growing tensions in the euro area,” the Fund said, according to a leaked draft of its World Economic Outlook.
“The most immediate political challenge is to re-establish confidence and put an end to the euro area crisis, supporting growth,” said the draft, obtained by the Italian news agency Ansa.
The eurozone as a whole will shrink by 0.5% this year, compared with the IMF’s last forecast of 1.1% growth in September.
David Cameron and George Osborne are likely to seize on the fact that the UK is forecast to outperform all other major economies in Europe with growth of 0.6%, rebounding to 2% next year. Germany, by contrast, is set to grow by just 0.3% and France by 0.2% this year.
China and the US will remain the main growth engines, with the US seen growing at 1.8%, unchanged from the IMF’s previous estimate, while China’s is now forecast to grow by 8.2%, down from 9%.
The troika of EU, IMF and ECB officials return to Athens today to discuss the terms of a second bailout, as talks between the Greek government and private creditors rumble on. The troika got a rough ride from the Irish press pack yesterday, even though they gave Ireland a favourable progress report.
Greece is racing to clinch a deal with bondholders on a bond swap, to secure its next tranche of bailout money before 14.5bn of bonds fall due in March. After a breakdown in talks last week over the coupon, or interest payment offered on new bonds, the two sides appeared to be inching closer to a deal last night.
“The atmosphere was good, progress was made and we will continue tomorrow afternoon,” Greek finance minister Evangelos Venizelos said after Thursday’s round of talks in Athens with Charles Dallara, head of the Institute of International Finance representing bondholders.
The IIF issued a statement echoing the minister’s comments, and described the discussions as “productive.”
According to Reuters, who quoted Venizelos, a large chunk of the bond swap must be agreed by noon today and formalised before Monday’s meeting of eurozone finance ministers.
“Now is the crucial moment in the final battle for the debt swap and the crucial moment in the final and definitive battle for the new bailout,” Venizelos told parliament on Thursday. “Now, now! Now is the time to negotiate for the sake of the country.”
Here is today’s agenda.
UK retail sales at 9.30am
Bank of England trends in lending at 9.30am
Greece locked in crunch talks with bondholders
Troika officials due to meet Greek finance minister Evangelos Venizelos, then prime minister Lucas Papademos at 4pm
Nicolas Sarkozy meeting Mario Monti
All times are GMT
After all the retail doom and gloom, Ikea has provided some cheer, with profits up 10% last year despite the eurozone crisis. The Swedish furniture retailer enjoyed a net profit of 2.97bn (2.5bn) in the year to the end of August, while revenues grew 6.9% to 25.17bn.
The chief executive, Mikael Ohlsson, said: “Today, when nations and people face economic challenges, Ikea is more relevant than ever.”
Ikea is casting an eye over India, where recent legislation will open up the country to foreign companies and allow large single-brand retailers to own 100% of their stores there.
European stock markets opened higher this morning but are now trading slightly lower after four days of gains, with the FTSE 100 index in London down 11 points at 5730, a 0.2% fall.
The Dax in Frankfurt has lost 21 points, or 0.3% while the CAC in Paris slipped 15 points, or 0.45%.
Ben Broadbent, who sits on the Bank of England’s monetary policy committee, said the committee is not pre-committed to more quantitative easing in February and it is irrelevant how quickly the Bank buys government bonds, known as gilts.
In an interview with Market News International, Broadbent indicated that the Bank is not trying to stagger its gilt purchases, and would have announced more QE if it had thought it necessary. He rejected the idea that a “speed limit” on QE – the assumption that if the Bank stepped up the pace of gilt purchases, it would create liquidity problems – has had any influence on his policy decisions. He believes the MPC is free to announce as much QE as needed to meet its inflation target without being distracted by concerns over gilt market supply.
Broadbent is scornful of the view the MPC has been simply biding its time until it completes the current round of asset purchases before launching the next round of QE in February.
If we had wanted to vote for more QE, as measured by the stock, and that is how we tend to understand its effects, then I would have done that in October and, indeed, the committee could have done it again in November or December.
[In October] I voted for 75[bn of QE] because I thought 75 was right.
If someone had said we can do it in two weeks, or someone had said we can do it in six months, it wouldn’t have had any bearing on what I voted for.
Broadbent, who joined the MPC last year having worked as an economist at Goldman Sachs, also said: “It is clear that the [UK] economy is broadly flat and therefore growing less than its potential rate.” But he also sees some positive trends emerging which make a pick-up in the economy in the second half a “reasonable” forecast. He added that the European Central Bank’s recent actions appear to have lowered downside risks for the UK economy.
The Bank is widely expected to announce more QE next month, after pumping 75bn into the economy in October.
In February the MPC will have a new set of growth and inflation forecasts. The previous predictions in November showed inflation heading back below the Bank’s 2% target, ending up at some 1.3% in two years’ time.
The sizeable projected inflation undershoot, and the belief that the February Inflation Report projections will be similar, have reinforced the view more QE in February is inevitable. Broadbent says the MPC is not in the business of fine-tuning policy and the balance of risks justified the October decision.
We are dealing in coarse, rather than fine-tuning, because it is probably, at the margin, harder to say what the impact of any policy change in the instrument [QE] is, because we are less familiar with the instrument.
Retail sales in Britain bounced back in December as shops resorted to heavy promotions – some slashing prices by up to 50% – to lure shoppers in the run-up to Christmas. Sales volumes rose 0.6% from November, taking the three-month growth rate to 1.1%.
The figures show shoppers splashed out mainly on clothes and food, and indicate that the economy as a whole may have avoided contraction in the final three months of the year, although strong sales are unlikely to persist into this year.
John Lewis is clearly an exception – it enjoyed a 14.4% jump in sales at its department stores last week on a year ago.
The retailer said:
The last week of clearance (sale) peaked with a fantastic sales performance of plus 14.4% on last year. We continued to make great headway against soft sales last year after the VAT increase and 20 branches were up on last year.
The Hungarian prime minister Viktor Orban has backed down on one of the key points of conflict with the EU that threatened to block a deal on aid with the EU and IMF. He said Hungary will ditch the planned merger of its central bank and financial markets regulator.
The forint climbed 1% on the news and prices of Hungarian bonds surged.
Here is some reaction to the strong UK retail sales numbers for December (although November was revised down slightly). James Knightley, UK economist at ING, said:
While today’s number is relatively encouraging, the outlook for the sector remains poor. Unemployment is rising, employment intention surveys are deteriorating, wages are still failing to keep pace with the cost of living and consumer confidence continues to fall. Consequently, we expect consumer spending to make a negative contribution to GDP growth in the first quarter, which will intensify pressure on the Bank of England to step up its stimulus efforts.
And Chris Williamson, chief economist at Markit, said:
The indications are that high street and internet retail sales rose in December only because retailers lured hard-pressed consumers with discounts at the expense of profit margins. This was particularly noticeable for clothing and footwear.
The big question therefore is how big the New Year hangover will be, as households retrench from the Christmas mini-spending spree. Households are still facing high inflation, which continues to run at more than double average employee pay growth, and is squeezing incomes in real terms. Pay is also rising at an annual rate of increase of just 1.9%. With inflation due to ease markedly in 2012, this may alleviate some of this income squeeze, but with unemployment hitting a new 17-year high and due to rise further in coming months, any boost to spending from lower inflation this year may be offset by a reluctance to spend due to rising joblessness and concerns about job security.
The sales figures therefore do little to change our expectations that next week’s gross domestic product data will show the economy flat-lined in the final quarter of last year, and that the Bank of England is likely to announce further stimulus in the form of additional asset purchases of 50-75 billion in February to help avert a slide back into recession. The Monetary Policy Committee may choose to postpone any further quantitative easing, however, if the business surveys show a further pick up in January, building on a tentative improvement seen in December.
Which banks made use of the European Central Bank’s offer of unlimited three-year loans? Why are banks parking record amounts of cash at the ECB’s deposit facility, which pays a near-zero interest rate? Aren’t the ECB’s liquidity injections inflationary?
Economists at ING have sought to answer these and other questions under the heading “Alice in ECB land – Q&A on the central bank’s crisis policy“.
1. Have the ECB’s liquidity injections helped to ease market tensions?
Yes, strains in the eurozone interbank market have eased, but the effect has not been dramatic. Indeed, while the spread between 6m Euribor and overnight rates has narrowed in recent weeks, it remains at elevated levels. Dollar funding strains have eased more significantly. The extra premium that eurozone banks have to pay to swap euros into dollars has fallen to 77 basis points, the lowest since August of last year.
2. Which banks made use of the ECB’s offer of unlimited three-year loans?
The available data clearly indicate that the take-up of three-year loans was strongly concentrated in peripheral banking systems. The second three-year LTRO [long-term refinancing operation] is scheduled for 29 February. While a broader range of collateral will be eligible as collateral, we would be surprised if demand were to exceed the 489bn take-up seen in the first offer.3. Why are banks parking record amounts of cash at the ECB’s overnight deposit facility which pays a near-zero interest rate?
The often-heard claim that eurozone banks are incurring a loss, because they borrow at 1% from the ECB and get paid only 0.25% at the deposit facility, is overwhelmingly incorrect. The banks that are borrowing from the ECB typically are not the same banks that are depositing money at the ECB’s overnight deposit facility. Banks in Finland, for example, borrowed 2bn from the ECB in December, but deposited 50bn at the overnight facility, according to national central bank data. In addition, they held 18bn at the ECB in one-week fixed-term deposits.4. Are three-year ECB loans used to buy sovereign debt?
We feel some of the money from three-year loans is being used to fund purchases of sovereign debt, judging by the successful Spanish and Italian bond auctions and the recent rally in (shorter-dated) Spanish and Italian bonds. Some of it is also surely being used to compensate for fleeing deposits. But we think banks will use most of it to meet their refinancing needs. In fact, the ECB’s January 2012 Monthly Bulletin confirms that medium-term refinancing needs may have had a significant influence on the bidding behaviour of banks in the three-year LTRO.We suspect that large, listed European banks will remain very reluctant to buy peripheral debt, given concerns about mark-to-market risks and possible reputation risks. Against this backdrop, we are sceptical as to whether the recent rally in shorter-dated Spanish and Italian sovereign bonds will sustain itself after the second three-year LTRO in February. The fact that bond market liquidity has generally remained low, as signalled by the still-high bid-ask spreads, reinforces our caution.
5. Aren’t the ECB’s liquidity injections inflationary?
No, they are aimed at preventing deflation. The ECB’s generous liquidity provision is predominantly aimed at averting liquidity shortages in the financial system. Such shortages could lead to a full-blown ‘credit
crunch’, which would further darken the eurozone’s economic outlook and might raise the spectre of deflation.
Once the extra liquidity created by the ECB starts to translate into strong credit generation to the non-financial private sector, inflationary risks would indeed rise. But given that eurozone banks are under pressure to increase their capital buffers, this is unlikely to occur in the foreseeable future.6. Is the ECB’s sovereign bond-buying effective?
The ECB has bought 220bn in peripheral government bonds since the launch of its Securities Markets Programme (SMP) in May 2010. This is roughly equivalent to 2.3% of eurozone GDP. Nevertheless, ten-year yields on peripheral sovereign bonds except for those of Spain are higher now than when the ECB started its bond purchases. This suggests that the ECB’s purchases have not been very effective. The ECB would probably disagree, arguing that yields would have been even higher if not for its intervention. A fair point, but we would still not be convinced. Why? The ECB has always argued that its interventions are aimed at “restoring the monetary policy transmission mechanism” the process through which interest rate decisions are transmitted to the real economy. However, bank lending rates (continue to) vary strongly across the eurozone. From that perspective, the ECB’s bond buying programme can hardly be called a success.
7. What further action is the ECB likely to take in 2012?
The signs are that eurozone inflation, boosted last year by higher oil and energy prices, is waning. The ECB will therefore have more leeway to ease policy this year. Consequently, the current ‘wait-and-see’ stance notwithstanding, we still see a possibility of (at least) one further 25bp cut in the main refinancing rate.
In addition to cutting short-term interest rates, we expect the ECB to (again) step up its bond buying, on the back of renewed unrest in European bond markets. A failure on the part of political leaders to successfully engineer a significant increase in the firepower of the rescue fund faculties (EFSF/ESM) in the wake of the latest rating downgrades might well prompt the ECB into more forceful action.
In extreme circumstances, we could even see the ECB signalling that it will cap bond yields.
The European Union has made its “fiscal compact” treaty tougher by adding fines to a draft proposal.
Under the revised proposal, the EU’s highest court will be able to fine a country that does not adopt a balanced budget rule in its constitution – with a penalty equivalent to up to 0.1% of GDP. The money would go to boost the resources of the European Stability Mechanism – the eurozone’s permanent bailout fund – which is expected to go live in July.
Britain won’t have to sign the treaty, but EU countries that do will have to introduce a rule, within one year, stipulating that their budget deficit cannot exceed 0.5% of GDP in structural terms. The new draft treaty is likely to be discussed by EU finance ministers next week and by EU leaders on 30 January.
The Greek government and private creditors have reached an initial agreement for a bond swap, the Athens-based newspaper Proto Thema reported on its website.
Both sides have agreed that new bonds to replace existing Greek debt will
be of a 30-year maturity and carry a coupon, or interest payment, between 3.1% and 4.75%, the paper said.
It added the Institute of International Finance’s managing director Charles Dallara is expected to announce the deal at a news conference in Athens today.
The FTSE nudged into positive territory when rumours of a deal in Greece first surfaced but has slipped back a bit again. It’s now up just 1.6 points at 5742. Germany’s Dax and France’s CAC are still down, by 0.4% and 0.5% respectively.
Reuters, meanwhile, is reporting that a deal between Greece and its private creditors is “in sight” and may be presented as a joint proposal at a meeting of eurozone finance ministers on Monday.
A source close to the negotiations told Reuters:
We are very close to wrapping it up.
Our correspondent in Athens Helena Smith confirms that a deal between Greece and its private bondholders has finally been clinched.
A senior official says that both sides are in the midst of “writing up” the agreement. Announcements are expected to be made in the next few hours. “It is [Evangelos Venizelos] the finance minister’s plan to present the broad outline of the agreement at Monday’s eurogroup meeting,” one well-placed source said.
“The morning has been spent discussing [the deal's] technical details.” With the bond swap exchange key to unlocking fresh EU/IMF rescue funds for the debt-stricken country, there was, he said, “relief all round.”
More details of the Greek deal are coming through on the wires – agreement could come late Friday with technical discussions likely to continue over the weekend, says Reuters, quoting “sources.”
The coupon on the new Greek bonds would increase over their life, says the agency. The “scaled-up” coupon structure would average out at around 4%.
The Greek government’s negotiations with bondholders will resume at 5:30pm GTMT.
On Wall Street, the Dow Jones has opened 25 points higher at 12649, a 0.2% gain. The FTSE is still treading water, down 2 points at 5738. Stock markets in Germany and France are also slightly down.
Our Athens correspondent Helena Smith says a senior official has just told her “there is definite progress” and that a huge jump has been made since the collapse of talks between the government and private creditors last Friday.
A framework of the deal — the basic stucture of the bond swap that the Greek finance minister Evangelos Venizelos wants to present at Monday’s eurogroup meeting — has been accepted by both sides, “put in place” and I understand committed to paper. But it would also seem that other aspects of the agreement – be them legal, technical or matters of substance — remain unresolved and will be discussed at negotiations that resume at 7:30pm local time [6.30 GMT] and look set to continue over the weekend. If Greece’s massive 360bn debt load is to be made manageable much will depend “on the inter-related role of all the interests at stake” insiders say. Even if a decisive agreement is reached, the proposal will have to be put to technocrats – given the complexity of the deal – and they could very likely change it again. “The outline won’t be the end of the beginning but the beginning of the end,” said another source again reqesting blanket anonymity because of the delicacy of the talks.
Right I’m off now. Nick Fletcher is taking over. thanks for all your comments and see you next week
Away from the eurozone for a moment, new US housing figures have breathed a bit of life into Wall Street.
The Dow Jones Industrial Average is now up around 64 points after US existing home sales rose 5% to 4.61m in December, an 11-month high. This is yet another sign of a slowly improving US economy, which should give investors a bit of hope amid the current global financial crisis.
Commenting on the housing figures, Teunis Brosens at ING Bank said:
These data chime with other indications that the US housing market is slowly taking a turn for the better. We emphasise that housing still has a long way to go. Existing home sales remain at very low levels and prices are still falling.
If the US labour market continues to improve and consumer confidence holds up, there is scope for a further upturn in sales and a stabilisation of prices.
At the risk of just adding to the confusion over what is or is not happening with the discussions between Greece and the private bondholders, CNBC is reporting no deal has been reached on the terms of a debt swap. Nor is there apparently a press conference planned for tonight.
However that does not rule out the idea that a framework has been agreed, and further details will be hammered out over the weekend, as we reported earlier.
As if Greece did not have enough to worry about, there is also the prospect of how a European ban on Iranian oil would affect the country.
Greece gets around 23% of its crude imports from Iran, and an EU wide embargo is set to be announced on Monday over Tehran’s nuclear programme. With austerity biting and protests on the streets, the last thing Greece needs is to run out of oil.
But Reuters is reporting an unnamed EU official as reassuring Greece it will still be able to buy oil on reasonable terms even after the proposed ban is introduced. It quotes the official as saying:
The financial situation of Greece at the moment is not the brightest one, and rightly they are asking us to help them find a solution. We have to find a way on Monday to give all the assurances and commitments that will allow Greece to say ‘okay’.
Of course it will be more difficult with alternative suppliers because of the present financial situation in Greece. They will ask for some guarantees.
Bill Gross, who runs the world’s biggest bond fund at Pimco, has tweeted on the continuing Greek drama:
Gross: Private Greek bondholders get a 68 cent “haircut.” Will the #ECB get a “trim?”
The EU’s tangle with Iran and prospect of oil supplies perhaps drying
up has definitely added to the despondency in Athens. But our
correspondent there, Helena Smith, says another interesting aspect of
Greece’s worst economic crisis in decades has been the come-back that wood-burning stoves and open fires have made.
Unable to keep up with bills, austerity-hit Greeks who this week are experiencing one of the coldest snaps in recent times, have been resorting to using wood to keep warm. Fire wood is selling like
hotcakes (one of the few commodities that are actually doing well) although people have also been spotted taking electric saws to trees — presumably because they can’t afford the seven euro it now costs for a box of wood at local gas stations and kiosks.
European markets have closed slightly lower as investors await confirmation of a deal between Greece and its private bondholders. Various reports suggest a framework may have been agreed but other aspects had yet to be finalised. So talks may drag on over the weekend.
The FTSE 100 is down 12.60 points on the day at 5728.55 but it is still up around 90 points since Monday, which is not bad given the market had to face the fallout of Standard & Poor’s downgrading the credit ratings of nine eurozone countries a week ago.
France, Germany and Italy have all edged lower but Wall Street has gained nearly 0.5% at the moment, in the wake of reasonable US housing data.
So with that we’ll close up for the weekend, but any Greek developments will be reported as we get the details. Monday sees a meeting of European Union ministers to reach agreement on the terms of the proposed new treaty, ahead of a full summit on 30 January. There are also EU consumer confidence figures due on Monday, and later in the week, the World Economic Forum shindig at Davos.
Have a good weekend and thanks for all the comments.
Posted in 
Tags: 
Greece on verge of breakthrough in deal to cancel 70% of debt
September 14th, 2011
Agreement secured on interest rate for new bonds
Athens hopes to brief EU meeting on Monday
Greece is on the verge of a breakthrough in talks with its creditors that could wipe out up to 70% of its debts and alleviate the crisis in the eurozone.
An outline deal, hurriedly endorsed by Brussels, came after a frantic three days of negotiations that at one time appeared to be heading for deadlock.
It appeared that Greece had secured a deal to pay an interest rate of 3.1%, rising to 4.75%, on new 30-year bonds created from its outstanding 360bn (300bn) debt burden. The effect would be for creditors to accept writedowns of up to 70% on many of their loans.
Sources close to the Greek government said it was still possible that major lenders could walk away if there was a failure to get agreement on some of the fine detail, but Athens was confident that further talks over the weekend would bring a comprehensive deal.
Before the news, trading on world stock markets was subdued, indicating the importance attached to a Greek deal as investors waited for the outcome before committing funds. The FTSE 100 finished the day down 12 points at 5728.55, closing before speculation surfaced that a Greek deal was imminent. The French CAC and the German Dax were also down 7 and 11 points respectively. The Dow Jones followed a more positive path closing up 96.5 points at 12720.48.
Greece has become the focus of tension in the eurozone for the third time in as many years after first announcing it was in trouble in the spring of 2010.
It was bailed out along with Ireland and Portugal, then in May last year it became clear that the 110bn Athens had received would be insufficient to finance its growing debts and that a second bailout was necessary.
German resistance to giving any more financial support without a sacrifice by creditors of at least 50% of their loans has held up attempts by Brussels to co-ordinate a second bailout.
Greece’s finance minister, Evangelos Venizelos, has spent the last two weeks locked in discussions with a team representing the banks, insurers and hedge funds that hold Greek debt. It is understood a framework deal is in place outlining the basic structure of a bond swap that Venizelos wants to present at the eurogroup meeting of finance ministers in Brussels on Monday.
He needs a deal in place, and approval for a second bailout plan, before a 14.5bn loan refinancing in March.
“The atmosphere of the talks is good, they are continuing today and we hope they will be concluded very soon,” a government spokesman said. “This is very important for the sustainability of the national debt and our ability to handle the debt.”
European Union ministers will be meeting in Brussels to reach agreement on a new pact enforcing stricter budget controls in the eurozone that could allow the single currency area’s highest court to fine countries that fail to adopt key rules.
The European Central Bank wrecked an earlier draft of the agreement after warning that the enforcement powers it proposed were weak and would fail to keep errant countries in line.
Under the guidance of Germany’s chancellor, Angela Merkel, Brussels has drafted a tighter pact that would allow the courts to punish a country that refuses to implement a balanced budget rule in its national law with a penalty of up to 0.1% of GDP.
Every EU country except Britain is expected to sign off on the pact when leaders meet at a summit on 30 January.
The debt talks in Greece were expected to continue into Friday evening to thrash out the fine print of the deal. Even if a decisive agreement were to be reached, the proposals will have to be put to the technocrats and they would be likely to change it again.
But the prospect of a deal seemed to encourage investors to move away from safe havens in favour of riskier assets for the first time in several months.
US bond prices slipped and German bonds followed suit, both on hopes for a deal and on more upbeat news from the US housing market.
Kevin Flanagan, chief fixed-income strategist at Morgan Stanley Smith Barney, said the drop in demand for US bonds, and therefore decrease in the price, “seems due to a combination of developments beginning with yesterday’s US jobless claims figures (which showed a sharp drop in the newly jobless) and reports that the Greek negotiations with private sector investors may yield results after all.”
Benchmark 10-year bond yields rose to 2.01% from 1.97% late on Thursday. The rise in the yield, which follows a decline in the price, were in line with a decline in German bunds, another safe-haven asset.
“Europe is calmer. Their auctions have gone OK, and the euro has responded,” said David Ader, head government bond strategist at CRT Capital Group. But he added that the “myopic focus” on rumours about Greece underscored the market’s general lack of confidence.
Earlier, France’s president Nicolas Sarkozy, warned that Europe remained at risk and urged Greece’s political leaders not to delay important decisions to stabilise their debt-ridden economy.
“The eurozone remains in danger. The whole of Greece’s political class must understand that it cannot put off decisions needed to resolve the country’s crisis,” he told a meeting with ambassadors.
Reduce Your Debt Get Control of Your Debt
February 17th, 2011
Nowadays, people are having excessive debt. The reason being that it’s easy to obtain, but hard to make the repayments. One of the better than the best available option to reduce your debt is debt consolidation. A person facing heavy debt burden can combine his debt using debt consolidation. It can help the person to reduce his debt by giving him an option to make lower monthly payments. There are some other ways that can help you low-down your debts. People who want to control their debt must control their spending. They must freeze their spending unless it’s too important that will help them control their expenses. The best idea is to stop making impulse purchases. A person who is facing heavy debt load must have some planning that will take him to debt free world. He must be aware of how much debt he is having? How long it will take to pay off the total debt? A person must be aware of all these things that can help him make a good plan to get rid of debt load.
People who follow the planning will not only reduce their debt, but eliminate it. Reduce your debt with proper planning. Large number of people are facing debt load now days. They are looking for number of options that can help them reduce or get rid of their debt. Lowering your debt payments is not as tough as it looks like when one is following some proper ways to reduce them. Yes, there can’t be any miracle that can get a person out of his debt burden. There can be some ways that can help the person to lower down his debt load.
One of the best idea’s available is to enroll in the credit counselor debt management plan. This will help to low-down the debt in an easier manner. Credit counselors will teach the money management skills that will help the person reduce his debt in a proper manner. Thus, there are numbers of ways available that can help a person stay away from debt burden. The need is to have a proper planning to follow. Reduce your debt and live a debt and tension free life.
Is Debt Settlement Better Than Bankruptcy
January 17th, 2011
Debt settlement is, in fact, a perfectly legal solution for consumers who are in too deep and seeking an alternative to bankruptcy. Debt settlement is also known as debt arbitration or debt negotiation. The process of debt settlement basically involves negotiation between the debtor and creditor. Debt settlement can be initiated by almost any person or organization who finds himself or herself incapable of making a full and final payment of debts. But having a debt-settlement company do the legwork for you is fraught with risk, not to mention outrageous fees. Debt settlement is a legitimate alternative to filing for bankruptcy. The reason for this is because debt settlement allows you to keep your assets, unless you have to sell them to cover your debts. But still then it allows you to pick and choose which assets you don’t mind giving up. Besides, a successful debt settlement is a win-win situation for both you and your creditors.
Negotiating away your bills is legal, but it may not be your best solution. And sometimes, hiring a debt settlement company to help you is a good an idea than doing it yourself. There are many settlement companies which work on the behalf of the debtors and borrowers to solve their problems. These companies have very successful ways of solving the problem of debt and also these companies provide many different debt repayment plans, which allow the debtor to pay back the money. So when the person is unable to pay back the debt on time or can’t make these debt payments at all then he should hire the debt settlement company to solve the debt related problems. Tim and Mary, the retired couple on a fixed income was just barely able to pay their bills each month when an unexpected medical crisis put them into a financial tailspin that they could not recover from. Being adamantly opposed to bankruptcy, this retired couple decided to sell a piece of property and used those funds to pay off their debts. The only problem was that the proceeds from the sale of their property were much less than what was needed to pay their outstanding debts in full. Therefore, they hired debt Settlement Company to negotiate settlements with their creditors for less than full balance. Financial settlement can be a really good way to reduce your debt as long as you are eligible for it. If you search a good company you can be sure to get a really good reduction over your debt. The reductions can be really big, from 50% to 70%, so think about that big opportunity.
The new regulation amended by the President Barack Obama has promoted various types of debt relief services in general. All these services are targeted to serve the consumers in such a manner so that they are able to overcome their outstanding liabilities. Debt settlement services are not uniform in nature and they aim to serve different people with different kinds of burdens. Basically, the regulation of Chapter 7 of the new amendment establishes legal recognition to the debt settlement programs. You can avail diverse debt relief services depending upon your hardship. For example, when you have loans with multiple resources, you can opt for a debt consolidation program. It will combine your existing liabilities into one place. You should convert the amount in such a way so that you have to pay a uniformed interest rate on the combined loan and also you should ensure the fact that you are able to convert all existing arrears to the account having lowest interest rates of all. Alternatively, a great means of liability reduction is debt settlement programs. You need to consult a settlement attorney for the best outcome. You can get exempt up to 70% of the total outstanding amount by dint of an effective repayment program. There are also credit counseling programs that offer consumers complete money management methods.
Most people are able to eliminate at least 50% of their unsecured debt when the process is complete. There are also other debt settlement options available which is why it would be wise to speak with a debt relief specialist. Don’t let debt get in the way of living. Learn to become free from debt and live the debt free lifestyle you deserve.
Debt Management: Problems And Solutions (Part- 1).
January 7th, 2011
If you think that you can be a victim of poor Debt Management but could not find the ways so that you can recognize whether you are victim of over indebtedness or not, check out the successive points and correlate them to yourself, if plain few are related you knack be in trouble.
* Are you spending one fourth or single fifth of your funds on credit payments? Do you reach maximum limit allowed on your credit cards?* Do you know that how much you owe? You are not totaling your debts because you are afraid of reality?* Do you know where your borrowings are going? Are you outstretched over of chief? You can know this by uses of your credit cards. If you are using your credit cards to pay insurance premium, different type of taxes again other huge expected bills, therefrom you may fall in this category. * Every occasion you try to borrow money from friends and relatives which can carry over a long expression of time. * Whenever you get a bill or credit overdue, you lick to pay the minimum due on your credit cards instead of making large payments. You do not try to make lofty payments and reduce the due amount over a short period of time. * You are applying in that new loans and credit cards to extend your borrowing capacity or you want to pay the existing borrowing stash the increased one. If you are worldliness so, it is an lift for you that related kind of acts may temporarily diminish your debt pressure, in crave run it competence change your economic property very badly. * Every time payments that you are making are getting delayed or becoming unpunctual over a period of time. Your payments are acceptance dilatory because you are running out of money?
Debt Management Plans
January 2nd, 2011
Each year, hundreds of thousands of people use informal debt management plans to try and resolve their debt problems. However, with these plans often lasting for many years, would debtors be better off considering an IVA or even bankruptcy?You can make debt management plan either yourself at its primary stage or take help of expert of the field. Generally if debts are smaller, you can work out a plan of your own to manage and get rid of them with cutting on expenses and saving money to clear debts. If, however, debts are larger, then plan should be made with an expert. There are few tips that you can follow for debt management. First and foremost, never ignore your debts. Make sure, you pay at least smaller monthly instalments. Ascertain your income and expenditure. You can also confer about your inability to repay the loan amount to your lenders. They may get ready to lend you a helping hand. You should never agree on an interest rate that you cannot repay.
Most debt management plans take you three to five years to repay your debts. This, of course, depends on the amount you owe and the terms set by your creditors. When you enroll, you should be given an estimate which lists all of your debts, the total debt owed to each creditor, the proposed payment to each creditor and the number of months estimated to complete the plan. You should short listed a few debt management plans offer by different debt consolidation companies; then, check these company’s rating and their past performance records from Better Business Bureau (www bbb. org). Eliminate from those companies that have an “unsatisfactory” rating at BBB. org. Serious and unresolved complaints will be noted, and you can learn what other names the company operates under so you can look them up as well.
In a debt management plan you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. It depends on your creditors to lower your interest rates or waive certain fees. You need to check with all your creditors to be sure they offer the concessions that a credit counseling organization describes to you. After you have talked to an expert, you’ll need to make a decision about contacting your creditors yourself to see if they will lower the interest rates on credit cards you owe. Another route is to hire a professional to put together a debt management plan. You’ll last option is to file for bankruptcy which is usually the only choice if your circumstances are that bad.
Debt Management Plan: Steps TO Make You Debt-free
December 28th, 2010
The financial plight and mental condition of a debtor is understandable by anybody who understands the value and power of money. Being under debt might incite many tumultuous thoughts and worries in a debtor’s mind, but the time would require him/her to think and act tactfully with practical and wise solutions to come out of all indebtedness. Federal Trade Commission and US government, has thus taken several initiatives and extended its helping hand by empowering and authenticating the Debt Settlement companies and Credit Counseling Agencies with their effective Debt Management Plans and Debt Relief options. A simpler definition of a Debt Management can be the regular practice of financial discipline and the habit of spending less than one earns, but in professional terms it implies the organized and legal method of bringing the debtor’s debts under control by a third party through application of relevant debt relief options like Debt Settlement, Debt Consolidation, Credit Counseling etc. Debt management is a structured repayment plan by the debtor to the creditor as a result of a court order or personal intention. Secured debts of car loans and home loans do not basically fall under debt management plan. The process involves a series of thoughtful and systematic steps by the Debt settlement company where they negotiate with the debtor and the creditor on some levels so that the debtor gets debt-relief without filing for bankruptcy and the creditor too is repaid an amount affordable by the debtor. Firstly, a list of all the creditors is compiled along with the amount owed to each by the debtor is totaled. Next, an assessment of the debtor’s total income and expenditure is made, such as car payments, rent payments, cost of living, household expenses etc and the same are totaled too. Later, the third party will fortify the debt settlement process by assisting you to determine the maximum amount of available money, allocable for debt repayment. In many cases the debt management plan attempts to reduce the debt amount to be paid and sometimes it waives off the high interest rates making it easier for the debtor to repay the amount, in case of high burdens to debts. One has to understand that participating in debt management can have an impact on the credit scores when for a period of time, the available credit may be inaccessible. Moreover, debtors having less than 10,000 dollars (USD) of debt are not applicable for debt management plan. However, after the changes in bankruptcy laws since 2005, many people find the option of debt management plan as a better debt solution option, rather than filing for personal bankruptcy. It is most likely that any debtor seeking for debt relief would opt for the best debt settlement option and thus should make it sure that the assisting Debt Management company is reputable and registered with the ‘Better Business Bureau’ and follow the rules and regulation mentioned by Federal Trade Commission’, which would ask for a small and nominal fee from the debtor for its debt management services.
Self-Motivation Helps to Reduce Personal Debt
December 27th, 2010
All legal and reputable debt relief agencies with their various debt cure options like debt consolidation, debt settlement etc have one thing in common; to reduce and eliminate personal debts through services like credit counseling and debt management plan. The root cause of all monetary problems actually lies within us. As one aspect of Money Psychology deals with our attitudes towards reducing personal debt, rebuilding credit and learning how to save more money, to achieve these financial goals, we need ample amount of positive personality and psychological motivation. Let’s find out the following incentives which would help us to reduce debts by focusing on personality and psychology: People tend to get more psychological motivation on finding themselves successfully teaching their children about money management and savings by reducing and eliminating their own real debts and overdue. Thus by being a financial role model to their own children, parents do self-motivate themselves to remain debt free forever followed by creating a benchmark of financial management to their children.
By doing this they not only achieve financial goals, but also realize the impact of this positive money attitude upon their children. Another fact that is furnished by researchers says that losing money negatively activates the area in our brains, which is associated with fear and pain and thus triggers the same in our mind, followed by the sense of depression and insecurities. These mental or emotional pains in turn encourage negative hormones to invite various heart related diseases, fatigues and stress. Thus avoidance of such distressful diseases is reason enough for motivating ourselves to remain debt free or to eliminate debts as soon as possible.
Psychological research shows that having enough money and least debts increases happiness and security which become inductive of a positive feeling towards life and satisfaction. So another way of self-motivation to reduce debts is to remind yourself of the joy, freedom and contentment brought by money indirectly when you can experience and share these happy moments with your loved ones. Knowing about his/her individual money psychology can highly motivate the person to gain control over his/her financial goals and purposes, as their attitude towards money can reveal a great deal about their personalities, their childhood and upbringing, their parents’ attitudes towards money and their current relationships, to others. And by not showing proper and wise financial knowledge and intelligence, they can put their own personal picture to the society at jeopardy. Thus it becomes mandatory for them to prove themselves as having safe and sound financial stability without overwhelming debts and dues. The first step towards debt free thus lies in self analysis, examining one’s inner psychological treatment of money and how they can rectify their money management skills with the help of the above mentioned motivational tools and ideas.