Debt Consolidation: Is Like Buying Cheap Money? - Finance Today

The debt consolidation business is based in borrowing money from one lender to pay off outstanding debts with a better interest rates, one of the advantages of this process is that it starts to have one single debtor to whom will manage the monthly payments to the previous lenders.

These are the steps to consider in the debt consolidation process:

* Add the total amount you owe from every account you are interested in consolidate, you do this in order to know the total amount you owe. * Make a list of interest rates with each of your accounts, and calculate the average from all. * Start contacting your creditors (telephone, mail) and ask them the cancellation of the cash balances as of the date it intends to consolidate debts. * The entire amount of their balances of cancellation should be the initial amount to start the consolidation. * When looking for a lender, the rate you need to look for should be lower than average in the previous calculation. * Always be extremely careful about the terms of the loan; plan accordingly. * Once you have consolidated your debts control your finance and avoid getting in the same problem. The previous considerations applies to individuals living in countries that accept what is called the ?Toronto terms?, this name comes from the agreement established in the World Economic Summit in Toronto in June1988. They were applied to the countries designated by the World Bank as ?IDA-only? these criteria apply to people who have a very heavy debt, low per capital income and problems paying back their balances. The countries that can apply these measurements should have the next characteristic: A strong structural adjustment program that has been approved and supported by the IMF (International Monetary Fund).

The fundamental principles of the Toronto terms are basically two: 1. ? To define the terms of the debts of the development assistance. 2. ? For the debt that is not development assistance, create the introduction of the conditions for payment.

The debt of the ODA have two main characteristics a maturity of 25 years and 14 years of extension, the initial rate will be higher than the default interest rate. Debts different than the Development Assistance ones, the creditors can choose from a menu of 3 payment terms.

The first option is: 1/3 of the debt will be cancelled and returned with a maturity of 14 years for the remaining amount (with 8 years of extension); the market will define the default interests.

Second option: 25 years for repayment with 14 years extension and the market will define the interest rate in case of default.

Last option: The same than the first option (option A) but here the default rates is 3.5 percentage points below the market rate (depending on further reductions)

The Paris club agreed to add (In December 1991) the concessions for the countries with lower incomes plus the terms defined in the Toronto meeting (basically 2 options to reduce the debt and to re-negotiate the concessions). The option represents a 50% concession of forgiveness in present value terms in debt service payments, lowering the debt during the consolidation period. Additionally, it was agreed to establish a timetable for consideration of a potential debt reduction. Creditors have indicated willingness to consider restructuring the remaining time when the debt is cancelled on a date not later than 3 or 4 years. not later than 3 or 4 years.

Go to www.creditdebtconsolidationonline.com to get your Free videos about debt consolidation Toronto so you can start solving the problem now.

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Source: http://www.thefinancetoday.com/2012/02/22/debt-consolidation-is-like-buying-cheap-money/

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