Why Nobody Gave Me This Facts Before I Got Into Debt Consolidation?

Posted by Miguel Pancardo

February 12, 2010

The debt consolidation business is based in borrowing money from one lender to pay off outstanding debts with a better interest rates, on the other hand this lender will manage the monthly payments to the previous lenders, one of the most obvious advantages of this system is that the clients just have to deal with a single monthly payment.

Important steps to consider if interested in the debt consolidation process:

* Add up the monthly payments on the accounts you want to consolidate. * Make a list of interest rates with each of your accounts, and set the average of this rate. * Call your creditors and request cancellation cash balances as of the date it intends to consolidate debts. * The sum of their balance of cancellation should be the initial starting amount for consolidation. View loan options. * The interest rate should be lower than average in their exercise of the previous calculation. * Take into consideration the term of the loan and planning. * Once you have consolidated their debts to avoid entering the same situation. Remember that controlling your finances is in yourself. This applies to individuals, who are now in the countries where there are certain terms that should be taken into account which are called “Toronto terms”, because they are words that were established in the World Economic Summit in Toronto in June1988. They were applied to the countries designated by the World Bank as “IDA-only” borrowers who had a very heavy debt, low per capital income and balance of payments problems. These countries should have strong structural adjustment programs supported by the INTERNATIONAL MONETARY FUND.

The Toronto principles are basically two: a) Terms for the debts of the Development Assistance b) The introduction of a menu of conditions for payment of the debt that is not development assistance.

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: the third part of the total amount of debt will be canceled and returned in the first 14 years (that is the maturity date) there is a 8 years extension, nevertheless in case of default, this interest rates will be defined by the market.

Option B: repayment in 25 years with 14 years of extension and default interest will be marked by the market.

Option “C”: The same terms like the option “A”, but the default interest rates will be 3.5% points below the market rate set (according with the market and depending on the 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 canceled on a date 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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