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Calculate Debt to Income Ratio

Calculate Debt to Income Ratio

What is the Debt to Income Ratio?
The Debt to Income ratio is a financial calculation used to reveal the percentage of a consumer’s monthly gross income. As a result, the solution of the debt to income ratio will yield the individual’s income that goes toward paying debts. The debt to income ratio, however, will generate a figure that can cover more than just the individual’s debts; the solution can include certain fees, taxes and insurance premiums as well. Nevertheless, the debt to income ratio is a phrase that serves as a convenient calculation.


Types of Debt to Income Ratios
There are two fundamental types of debt to income ratios; both calculations are expressed as a pair using the notation x/y. The first debt to income ratio, labeled the front-end ratio, will indicate the percentage of income that goes toward housing costs, which for renters is their rental payments and for homeowners is their mortgage principal plus interest, their hazard insurance premium, property taxes, homeowner’s association dues and their mortgage insurance premium. 
The second form of the debt to income ratio, known as the back-end ratio, indicates the percentage of income that aims to satisfy all recurring debt payments, including those covered by the front-end debt to income ratio and other payments, such as credit card payments, student loan payments, car loan payments, child support payments, legal judgments and alimony payments.


How do I calculate my Debt to Income Ratio?

In order to calculate the debt to income you must first select what type of debt to income ratio you are attempting to use. For mortgage payments or rental costs you must compare all of your housing debts, which may include your mortgage expense, home insurance, rental payments, taxes and any other housing-related expense. 
Once you have added your monthly costs you have appropriately calculated your total housing expense. Following this calculation, divide this amount by your gross monthly income. For example, if you earn $2,000 per month and have a mortgage expense of $500, taxes of $200 and insurance costs of $150, your debt to income ratio is 42.5%. 
The more encompassing debt to income ratio will include all other expenses associated with recurring debt payments, such as those listed previously. When these figures are added in, your ratio will increase and the remaining percentage will quantify your monthly disposable income—monies left over after all debts have been paid that are required to by food, clothing and personal items. 

Understanding the Process of Debt Collections

Understanding the Process of Debt Collections

What is Debt Collections?
The process of Debt Collections is a legal procedure that involves the owner of an outstanding debt – which can range from a lending institution or a private collections agency, and a debtor – the classification of which can range from private to commercial in nature; a debtor is defined as an individual in possession of an outstanding debt requiring repayment:


Lending Institutions vs. Debt Collections Agencies

A lending institution, may be defined as the original entity owed repayment concerning the debt or debts in question; not only the origin of the debt in question, but also the formulation of the terms and conditions concerning the furnishing of the loan to the debtor took place through this institution
While the lending institution may undertake the furnishing of a debt settlement, it is not uncommon for a lending institution to sell outstanding debts to debt collections agencies
Debt Collections agencies range from independent to Federal agencies that specialize in the undertaking of retrieving payment concerning outstanding debts, defaulted loans, or repayment requirements; a collection agency will typically purchase outstanding debt from lending institutions for reduced prices
Once purchased, these agencies formulate and develop debt settlement plans in order to render profit, repayment, or both


Types of Debt Collections

However, the debt collections process is an extremely broad one, which may involve a vast expanse of measures, strategies, and methodologies employed in order to enact debt collections; examples of these measures include the following:

Debt Settlements

The creation of a debt settlement plan, which allows the individual debtor the opportunity to furnish repayment of an outstanding debt at a decreased rate; however, the stipulations included in the undertaking of debt collections through the use of debt settlement plans may require the debtor to furnish the full – albeit reduced – amount upfront and in full


Repossession

The undertaking of repossession efforts is commonly employed by debt collections agents in the event that an individual debtor is either unwilling or unable to furnish the prompt or required repayment of an outstanding debt; although the legality surrounding repossession varies in accordance with applicable jurisdiction, this method of debt collections allows the owner of a debt to legally claim assets or property belonging to the debtor in order to satisfy the outstanding debt or debts in question – however, the applicable legislation varies in accordance with the requirement of the debt collections agents to provide notice with regard to these reclamation efforts.
Legal Assistance for Debt Collections
The adherence to debt collections legality is of the utmost importance – mistakes, oversights, and misfiling can prove to be costly for the individual not versed in debt management and resolution. In the event that you require assistance or counsel regarding this process, debt attorneys may be available for hire on the basis of a sliding scale in order to meet your financial needs and abilities; in other cases, pro-bono and non-profit legal assistance may be made available to eligible applicants.

Guide to Debt Collection Agencies

Guide to Debt Collection Agencies


What is a Debt Collection Agency?
A debt collection agency is an organization that pursues debt payments owed by borrowers who secure loans or financing avenues. These collection agencies operate as agents of creditors; lenders often hire debt collection agencies to expedite the debt collection process. A debt collection agency will attempt to collect debts of a borrower for a fee or percentage of the total amount owed.
Types of Debt Collection Agencies:
First-Party Agencies: These types of debt collection agencies serve as departments of the company that holds the original debt. A first-party debt collection agency will incorporate itself earlier in the debt collection process and have a greater incentive to maintain a constructive customer relationship. 
Because the first-party agency is a part of the original creditor, this type of debt collection agency is not subject to legislation that restricts third-party collection agencies. In most cases, a first-party agency will attempt to collect debts for several months before selling the debt to a third-party or writing it off as a loss for tax purposes.
Third-Party Agencies: These are the basic types of collection agencies. The basic collection agency will assume this model because they are not a party to the original contract. In this format, the creditor assigns accounts directly to the agency on a contingency-fee basis. This schedule will cost nothing to the creditor or merchant, save for the cost of communications. 
This relationship is dependent on the individual service level agreement that is created between the collection agency and the creditor. In most cases, the agency is entitled to a percentage of debts collected; the collection agency will only profit if the debt is collected. Furthermore, the relationship and the fees associated are dependent on the type of debt, the age of the account and the number of attempts to collect the debt.  A debt collection agency will charge between 10-50% of the original amount owed.

Process of Collection Agencies

Process of Collection Agencies

What is a Collection Agency?
A Collection Agency is a financial institution that operates with regard to acquiring of debt from individuals who have failed to satisfy expenses incurred as a result of the use of products or services. Typically, a Collection Agency will not be the initial owner the debt in question; Collection Agencies negotiate with businesses or commercial operations who are the owners of respective debt belonging to consumers who have patronized the products and services offered by an individual business – however, for varying reasons, those debts failed to be satisfied. A Collection Agency can be made aware of outstanding debt and negotiate the transfer or sale of a respective debt; this transaction allows the Collection Agency to become the legal, rightful owner of the debt in question.

The Collections Process

Once a debt is purchased from a business, to which is typically referred as the ‘third party’, the Collection Agency will attempt to retrieve the debt from the individual who had incurred it. However, due to the legislation with regard to debt and collections, individuals cannot be incarcerated as a result of the accumulation of debt; this can result in a Collection Agency attempting to settle a debt through the following means:
The creation of a payment plan through which an individual can make period, scheduled payments
The consolidation of the preexisting debt into a smaller amount that will be required to be satisfied in a single, lump-sum payment
The sale of a debt to an institution specializing in repossession

Fair Debt Collection Practices Act

Fair Debt Collection Practices Act

What is the Fair Debt Collection Practices Act?


The Fair Debt Collection Practices Act is a United States statute that was formally added into the Consumer Credit Protection Act in 1978. The purpose of the provision was to eliminate abusive practices in the collection of consumer debts and to promote a fair debt collection process. Furthermore, the Fair Debt Collection Practices Act aimed to provide consumers with an avenue for disputing and obtaining a validation of their debt information for the purpose of ensuring the repayment schedule’s accuracy. 
The Fair Debt Collection Practices Act created guidelines that elucidate upon how a debt collector may conduct business. The statute explicitly defined the rights of those consumers involved with debt collectors and prescribed penalties and remedies for violations of the Act. As a result of these provisions and regulations, the Fair Debt Collection Practices Act is sometimes used in conjunction with the Fair Reporting Act. 
What does the Fair Debt Collection Practices Act Prohibit?
The Fair Debt Collection Practices Act prohibits certain types of abusive and deceptive conduct regarding the procedures utilized to collect debts, including the following actions:
The Fair Debt Collection Practices Act prohibits collection agencies from contacting consumers by telephone outside of the hours of 8:00 a.m. to 9:00 p.m. local time.
The Fair Debt Collection Practices Act prohibits collection agencies from communicating with consumers in any way after receiving written notice that states the consumer wishes no further communication or refuses to pay the alleged debt, with certain exceptions, including advising that collection efforts are being terminated or that the collector intends to file a lawsuit or pursue other remedies where permitted.
Debt Collection Agencies are prohibited from causing a telephone to ring or engaging any consumer in a continuous fashion with the intent to abuse, annoy or harass any consumer
The Fair Debt Collection Practices Act prohibits any debt collector from communicating with the consumer at their place of employment after they have been advised that this is unacceptable or have been prohibited by the employer
The statute impedes any debt collection agency or collector from misrepresentation or deceit; misrepresenting the debt or using deceptive tactics to collect the debt is illegal.
The use of abusive or profane language related to the debt is illegal
The Fair Debt Collection Practices Act bars any collection agency from seeking unjustified amounts, which include the demand of any amounts not permitted under an applicable contract or as provided under applicable law. 
The Fair Debt Collection Practices Act outlaws a collection agency’s attempt at revealing or discussing the nature of debts with third parties (individuals other than the consumer’s spouse or attorney); collection agencies are allowed to contact co-workers or neighbors but only to obtain location information. 
What does the Fair Debt Collection Practices Act require Collection Agencies to do?

The Fair Debt Collection Practices Act requires all debt collection agencies to identify themselves and notify the customer, in every form of communication that the attempt revolves around collecting a debt. Furthermore, the statute requires the agency to give the name and address of the original creditor, provide verification of the debt and notify the consumer of their right to dispute the debt. 

Everything to know about Debt Collection

Everything to know about Debt Collection

What is a Debt?
Debt refers to something a financial or moral obligation. In general, the term will refer to assets or services owed to an individual or entity. In terms of financial obligations, debt is a means of using future purchasing power to finance a purchase now. Debt, because of this characteristic, is used to finance a number of assets, including one’s home, business, vehicle or education.
Debt is created when a creditor (institution or individuals lending monies or assets) lends assets or finances to a borrower. In the majority of modern economic systems, debt will be granted with a repayment schedule. The repayment plans, affirms the borrower’s promise to repay the lender, through specific due dates, interest rates and pay-off amounts.
Before a debt contract can be finalized, the borrower and the lender must agree on the manner in which the debt schedule will be satisfied. The payment plan is denominated as a sum of money, but can also be represented by goods or services owed. Repayment can be satisfied in increments over a period of time or via a lump sum
Types of Debt:
A business will use various kinds of debt to finance its operations. These different types of debt, can be categorized as such: secured and unsecured debt, 2) syndicated and bilateral debt , 3) private and public debt syndicated and bilateral debt, and 4) other debts that possess one or more of the above characteristics.
Common debt obligations are secured; in this arrangement, the lender must back their financing with a tangible asset. If the lender defaults on the repayment schedule the creditor can usurp the asset as a means of recouping their debt. A common example of a secured debt is a mortgage–the borrower’s home is the collateral. In contrast, unsecured debt refers to a financial obligation, where a creditor does not have recourse to the assets of the borrower if a default is realized.
A basic loan is regarded as a simple form of debt. In a basic loan agreement the borrower will be givena  lump sum–this amount is known as the principal. The borrower will agree to repay the principal in monthly installments, plus added interest charged by the lender. Common forms of these loans are student loans, credit card agreements and personal loans.  In a commercial agreement, interest is calculated as a percentage of the principal sum per year. 
What is Debt Collection?
Debt collection refers to the process undertaken when an individual fails to meet their respective repayment schedule attached to their loan agreement. Consumer debt collection is the term typically applied to various procedures or strategies that are utilized by the lender to recover or collect the outstanding debts owed to them. 
Different strategies are implemented in debt collection; however, the process is only enacted when a creditor  believes that a consumer will not honor the terms and conditions of the loan agreement.
The Debt Collection process will be initiated with the delivery of reminders and notifications. If the borrower ignores these notifications the collector will hire a debt collection agency to facilitate the repayment process. 
If payment is still not received, the lender or debt collection agency will involve take the debt to small claims court–note this is only initiated for larger debts. This maneuver allows the debt to be collected through the intervention of a court system. 
 
The debt collection proves will begin with an effort by the lender to communicate with the debtor to elucidate upon the reasons for the delay in payment. The lender will work with the borrower by offering payment plans or breaks on the total amount owed.  If these attempts fail, the lender may demand the entire current due, while also closing the debtor’s account to prevent further use. If the debt is tied to a tangible asset, such as a car or home, the lender has the ability to repossess the asset. 
All attempts at debt collection must be conducted in compliance with the particular debt collection laws of the respective jurisdiction; these laws must be identified in the terms and provisions section of the loan agreement.

The World of Debt Collectors

The World of Debt Collectors

What is a Debt?

Debt refers to something owed; usually assets owed, but the term can also encompass moral obligations and other interactions that do not revolve around money. In the case of assets or financial obligations, debt is a means of using future purchasing power in the present. As a result of this characteristic, many companies will use debt as a part of their overall business strategy.
Debt is created when a creditor (institution or individuals lending monies or assets) lends a sum of assets to a borrower. In American society and the majority of modern economic systems, debt is typically granted with an expected repayment schedule. In the majority of repayment plans, the borrower is responsible for repaying the debt in full, plus interest.
Before a debt can be solidified, both the borrower and the lender must agree on the manner in which the debt schedule will be satisfied. This payment plan is typically denominated as a sum of money, but can also be denominated in terms of goods or services. Repayment can be satisfied in increments or via a lump-sum payment at the end of the loan agreement. 


What do Debt Collectors do?
When an individual fails to meet the repayment schedule of their loan or secured debt obligation (payments on a car or house) the creditor will contact the borrower to inform them of their current situation. If the borrower continually fails to make payments or pay-off the loan agreement the lender will utilize debt collectors—a third party agency that mediates and expedites the collection of a debt. 
Debt collectors institute the debt collection process by contacting the borrower and informing them of their current situation. In most instances debt collectors will offer the individual a break and allow them to pay-off their debt for a reduced amount. The process is engaged when a lender hires a debt collector for an amount that is typically less than the loan or lending amount. 
The idea is that the lender can hire debt collectors to collect the debt and assume their regular business without having to worry about hassling borrowers for repayment. In turn, the debt collectors assume the responsibility, for a payment, of collecting the debt. To expedite the collection process debt collectors will offer the repayment at a rate lower than what was originally agreed upon the loan agreement. 
As a result of their function and the nature of the business, debt collectors are required to institute a collection process in accordance with the respective jurisdiction’s laws on debt collection. More specifically debt collectors must abide by the rules outlined in the Fair Debt Collection Practices Act, which specifically prohibits a debt collector from partaking in any harassing or vulgar means to collect a debt.