Debunking the top 10 myths about debt consolidation

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Debt consolidation is one of those terms that gets thrown around a lot when people talk about money management and paying down debt. While it is a great strategy (at least for certain people), it is one of the least-understood money management approaches going.In fact, there are at how debt consolidation works least people in debt need to have that ten classic misconceptions about debunked.

Of all the financial plans available for people dealing with overwhelming debt, this is probably the most valuable and the least understood.In fact, you may already believe some of these common myths.The find out truth!

Myth # 1 debt consolidation is the same or similar to debt management, debt settlement, and bankruptcy.

Truth although the terms are thrown around a lot and even used interchangeably, there are some key differences.One things that set it apart is that it is not really a program (you can do it yourself if you want to) but more of a strategy.

In debt consolidation, you all of your debts together and repackage lump them.Debt settlement and debt management typically involve dealing with a company or counselor and the object is to reduce the amount you owe. Bankruptcy is a legal proceeding that involves a date with a judge.

Myth # 2 debt consolidation reduces your debt.

Truth no, it doesn't. If you owe a total of $80,000 on several credit cards and loans and you consolidate that debt, you still owe $80,000.

In the strictest sense of the term debt consolidation does not re negotiate, settle, write off, or reduce any of your debt.What possible advantage is re-organizing your debt like that?

If you have a lot of loans at high interest rates, repackaging those higher-interest debts into one larger loan at a lower rate reduces your interest and the amount you have to pay.This means you can either pay less a month or (even better) pay the same amount but get the debt paid off sooner.

Myth # 3 debt consolidation will hurt my credit score.

Truth if you do it properly, likely to have no negative impact on your credit score it is. In fact, it may even improve your credit score! That's because you'll be paying off a bunch of smaller loans and any time a loan is paid in full, that helps your credit score.

Myth # 4 debt consolidation requires getting help from an outside agency or a lawyer.

Truth while there are companies and counselors in the marketplace who will help you deal with debt (in many different ways), you can also consolidate debt on your own.

Of course, if you to handle want this on your own, you have to know a bit about how to do it and what the options are. But it can definitely be a do it yourself project for people good with money (or who are willing to learn enough to get good with money).

If you reorganize your debt yourself in that way, it is of therefore not necessarily visible to outsiders.Your bank, the credit bureau and other parties may not even be aware that you have consolidated debt. (However, if you negotiate or try to settle your debt, that will send up some red flags.)

Myth # 5 debt consolidation is something for financial losers and lightweights, not for people who know how to manage money.

Truth this is the most far out myth. Reorganizing and structuring your debt more favorably is a principle that is used in business and by the super wealthy all of the time.It is a way of organizing and structuring your debts in a way that is most advantageous to you.

Myth # 6 debt consolidation is just robbing Peter to pay Paul.you're just getting more debt!

Truth it is indeed a way for you to pay off one debt by getting another debt.But not all debts are equal.

As an example, let's say that you owe $10,000 and the loan is set up so that you have to pay 22% interest. For example, let's suppose that I go to my credit union and work out a deal to borrow $10,000 at 12% interest. While both debts are still in the amount of $10,000, the debt at 12% interest is a better deal for me. I won't have to pay as much per month or, if I make the biggest payments I can, I can pay it off sooner.

Myth # 7 debt consolidation requires you to be a homeowner.

Truth there is a grain of truth to this, in that owning a home definitely offers an advantage to anyone who wants to re-structure debt. (It doesn't matter if your home is paid for or not, but you do need some home equity.)There are ways to reorganize your financial obligations even if you do not own a house.

Myth # 8 debt consolidation will make it harder for me to get future loans.

Truth in most cases, it is unlikely that anyone but a forensic accountant could figure out that you have reorganized your debt (unless you go through a debt consolidation company that could leave a paper trail).

If you borrow money in one loan and then take out another more advantageous loan to pay off the first one, you're more likely to leave a paper trail of somebody who pays off debt responsibly.It is more likely to make you a desirable creditor.

Myth # 9 people who consolidate debt just wind up digging themselves in deeper in debt!

Truth it is absolutely possible to consolidate your debt and then spending and get yourself in a big mess keep.That's why you need good information and a plan to pay off your existing debt, manage your finances now and start planning for your financial future.

There is no reason that many financial management programs cannot work to get you out of debt for good, but you have to have a plan.

Myth # 10 debt consolidation will allow me to write off some of my debts and it will stop bill collectors from calling.

Truth Let's take these one at a time.

Unlike bankruptcy, true debt consolidation will not allow you to write off any of your debt not a penny of it whatever you owed as a debt before consolidation is the amount you'll owe after consolidation.

So why would anyone use this approach?Well, it is a new loan and it is structured in a more favorable way than the older loans.You do not get existing debts cancelled or decreased!Now it's true you can work that out in other debt management solutions (debt settlement lets you reduce debt, bankruptcy will let you write some debt off) but they come at a price.Both of these on your credit score approaches can have a negative impact, will make it hard for you to get future loans, and stay on your record for quite a while.Bankruptcy, in particular, is an extreme solution that involves actual court proceeding and a judge who has the authority to make certain decisions about your financial situation (including forcing you to sell some items to pay off debts).

If you regroup your debts in this way, it can only stop bill collectors indirectly.Here's how: Let's say you have six debts and you're getting calls all of the time.If you re organize your six debts into one large loan at more favorable terms, you'll pay off all of those littler debts.Bye-bye, bill collectors!

However, if you don't pay off your new bigger loan on time, the bill collectors will start calling again.

For straight talk about debt consolidation and whether or not it's right for you, zip over to http://www.MyDebtConsolidationAnswers.com

To grab a free report about your personal finance style visit http://www.debt-consolidation-diva.com

Ten Myths tourists when discovering House Scout on holiday

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You've planned that perfect vacation, you've chosen where to stay and you like it so much that you are staying for good! That's what tourists believe when they go house hunting for a vacation home. Most tourists first think of hotels, though vacation rental homes have gained in popularity as a place to stay. Whether you're looking for a beach side rental in San Francisco or a mountain home in Tahoe, looking around to find vacation home to buy can present many challenges.

Here is my all time favorite, top 10 Myths tourists should consider when going house hunting for a vacation home. I'll be interested to see where you fit currently in your planning.

Myth #1: You need to focus on areas you've vacationed before.

Fact: You can look in new geographic regions. You don't need to be confined to areas that you've visited previously. Here's a tip, locate an area that you've always dreamed of and rent a home for a season to make sure this is the area that you really like. Go online and search for rental homes for vacation and you'll find some fabulous help in locating a dream vacation area.

Myth#2: You need to be pre-approved for a mortgage before you can start looking.

Fact: Getting pre-approved will increase your chances and the amount of homes a realtor will be willing to show you. However, you can alternatively work directly with the seller, there are many sellers who list online or in the local papers. However, an important step, particularly if you already have a home loan and will add to your debt level, is to get started gathering the documentation you need for the loan. Look at what Fannie Mae has to say and the typical questions asked in a home loan application and the documents you'll need to begin gathering.  This is important to start early in the process because if you owe on your primary residence, you may be limited by what a lender is willing to give you for a vacation home mortgage. Alternatively, you might be able to refinance your primary residence at a lower rate for cash to buy a second home.

Myth#3: Your vacation home should be smaller than your primary home.

Fact: Think about what sort of vacation home you want first. Sometimes there are more choices of a type of home offered with vacation properties and sometimes there are fewer choices. For example, you could choose a cabin, a house or a condo. Condos come with additional issues, such as home owners associations (HOA). Cabins may have high maintenance as mostly those types of properties have to contend with environmental issues. Thinking about whether to choose a house versus a condo? That depends on you and the level of maintenance, liability and property taxes you want to pay. Also consider utility costs and look for vacation homes that have "green" in mind.

Myth#4: You have to pay more for a vacation home that is near the water.

Fact: Only you can decide whether proximity to water is important. As a rule, the closer you are to desirable attractions of a given area, the more you're going to pay for that convenience. However, there are many times where you can buy into planned communities near a lake that offer the conveniences of water proximity without the cost. You might have to try to locate sellers directly in more motivated situations, but is doable.

Myth#5: You need to choose a reputable brokerage company with a big name to help you locate a vacation home.

Fact: While a large real estate brokerage company will have many different agents to choose some you can also interview several local real estate agents of smaller brokerages before selecting one. Ask how many vacation home listings they have, how many years they've worked in the business, and whether they have a particular specialty. Make sure you're comfortable trusting the person you choose with your search. You will likely spend a lot of time with them. Also, ask them "what's your favorite vacation spot and why?", if their answer is similar to yours, you might have a good match with empathy.

Myth #6: You need to drive around and view 50 homes before you make a decision.

Fact: You don't need to waste all the gas and kill the trees by driving around town, however, I do recommend you learn about the hot spots. Here's a tip, before you begin your search in the car, view various homes in different settings online. Ask the agent or the Chamber of Commerce in that region to send you relocation brochures. Then visit those websites and sign up to get realtor listings to see what homes are available. Don't forget to check with craigslist.org and backpage.com in the region you desire for sale by owner listings that might contain a great bargain! Then select the top 5 and get in the car. This will help you get a sense of how location, size of the homes and other factors affecting price differences.

Myth#7: You can't maintain a vacation home from a distance.

Fact: Consider ongoing maintenance. How will you keep the house up if you're not there all the time, particularly if it's subject to a wide variety of weather conditions? Factor in the cost of hiring a local individual or service to look after the property in your absence. There are many property managers that will charge you up to 10% to manage your property and they have local contacts to get a repair completed quickly and affordably.

Myth#8: Renting a home every summer is a waste of money.

Fact: You need to do a rent versus buy analysis. Bankrate has a good wizard which will walk you through how to do this analysis at BankRate.com. Oftentimes, you'll be surprised by how much more economical it is to rent, however, the rent adds up and you also need to factor in that you might not get the prime rental home when you want it. Private units can be less expensive than you'd think. Think about it this way - if you're a family of 5, you'll likely need a hotel suite or two rooms to fit everyone in. If you stay more than one evening you'll be facing a large hotel bill at the end of your trip because hotels often charge extra for more than one person per room. A vacation rental home, however, is the same price no matter how many are staying in the home.

Myth #9: Vacation homes offer more privacy.

Fact: It's sometimes possible to find rentals with amenities like private pools and hot tubs to make your vacation as relaxing as possible. Booking a villa rental means you'll be able to enjoy your vacation to the fullest, all without worrying about other vacationers.

House or villa rentals offer more privacy than a regular hotel. Because many of the houses are single, detached homes, you won't have to worry about the noise from rowdy vacationers, housekeeping and slamming hotel doors. But if you have a lot of gear to enjoy the water or cabin environment, and a big family with a lot of friends and family that like to visit. Nothing beats a home of your own.

Myth#10: It's a bad tax idea to rent your home.

Fact: If you're in the vacation home only a few months or weeks of the year, regardless, if you rent out for more than 14 days in a year, the IRS categorizes it as an income property rather than a residence. You'll be paying taxes on the net rental income after expenses, which could bump you into the next tax bracket. See the IRS website for information on how this is treated.

This isn't necessarily a bad thing; discuss it with your tax preparer. Because you can also deduct expenses of the property in addition to management of the property, if out of your own home, certain expenses of your primary residence can offset this income providing a long term tax benefit.

Using vacation rental homes instead of hotels can add to the fun of a great holiday. These villa rentals can offer you more privacy, are great for large groups and families with young families and can reduce the overall cost of your holiday. Just relax and enjoy the adventure of owning a home, or renting, whichever makes more sense.

Greg Watson is a professor of business with research interests in entrepreneurship and ethics. You can learn more about various affordable vacation strategies, attractions, and events including Californian Vacation Homes at http://www.CaliforniaBeautiful.com