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A bridge loan is basically a short term loan — one that is repaid in under a year. A bridge loan helps the borrower to get the cash quickly while waiting for a long-term loan or other financing to come through. The instant money allows the borrower to pay for outstanding financial obligations while still waiting for a deal or contract.

Taking a bridge loan means you will be paying a high rate of interest, and you must back it with collateral. These types of loans, like their name suggests, bridge the gap from when the individual receives more long-term loan and his direct financial obligations. Bridging finance may be utilized in a variety of financial scenarios.

The owner of a business may secure bridging finance in order to secure needed working capital while he completes equity financing deals which can often take several months.

People commonly use bridge loans when they are selling a home. There can be times when the real estate market in a given area is moving slowly, or there can be a home that is proving a hard sell. The owners of the home who are selling the house and want to move may take out a bridge loan so that they can pay their utility and food bills, as well as other financial obligations, while they await the sale of their home and the proceeds that they get from that. Or they may use the bridging finance as “chain breaking”, meaning they purchase an already-desired new house while they are still awaiting the sale of their current house.

Another use for bridge loans is to repair one’s credit. A person may borrow the money needed to pay off creditors so as to increase one’s credit score, making it more probable that one can then get a larger, more permanent loan or be able to be approved to rent a new apartment. People also use bridge loans when they are in between jobs but fully expect to be hired very soon or are just waiting to start. Along those same lines, these types of loans may be used to finance a relocation for work related purposes.

Often, you can receive a bridge finance in just 24 hours, since the need for extensive background checks and risk consideration are minimized by the high interest rate, short duration, and collateral backing required.

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Debt elimination involves three steps:

1. Stop acquiring new debt. 2. Establish an emergency fund. 3. Implement a debt snowball.

Here’s how to approach each step.

Stop acquiring new debt (This step can be accomplished in an afternoon.)

This may seem self-evident, but the reason your debt is out of control is that you keep adding to it. Stop using credit. Don’t finance anything. Cut up your credit cards.

That last one can be tough. Don’t make excuses. I don’t care that other personal finance sites say that you shouldn’t cut them up. Destroy them. Stop rationalizing that you need them.

* You don’t need credit cards for a just in case. * You don’t need credit cards for convenience. * You don’t need credit cards for cash-back bonuses.

You don’t need credit cards at all. If you’re in debt, credit cards are a trap. They only put you deeper in debt. Later, when your debts are gone and your finances are under control, maybe then you can get a credit card. (I don’t carry a personal credit card. I don’t miss having one.)

After you kill your cards, stop all recurring payments. If you have a gym membership, cancel it. If you automatically renew your Xbox Live account, cancel it. Cancel anything that automatically charges your credit card. Stop using credit.

Once you’ve destroyed the cards, call the credit card companies that you just killed. Do not cancel your credit cards (except for those with a zero balance). Instead, ask for a better deal. Find an offer online and use it as a bargaining wedge. Your bank may not agree to match competing offers, but it probably will. It never hurts to ask.

Establish an emergency fund (This step will probably take several months.)

For many, this is counter-intuitive. Why save before paying off debt? Because if you don’t save first, you’re not going to be able to cope with unexpected expenses. Do not tell yourself that you can keep a credit card for emergencies. Destroy your credit cards; save cash for emergencies.

How much should you save? Ideally, you’d save $1,000 to start. (College students may be able to get by with $500.) This money is for emergencies only. It is not for beer. It is not for shoes. It is not for a Playstation 3. It is to be used when your car dies, or when you break your arm in a touch football game.

Keep this money liquid, but not immediately accessible. Don’t tie your emergency fund to a debit card. Don’t sabotage your efforts by making it easy to spend the money on crap. Consider opening a savings account at an online bank like ING or e-trade. When an emergency arises, you can easily transfer the money to your regular checking account. It’ll be there when you need it, but you won’t be able to spend it spontaneously.

Implement a debt snowball (This step may require several years.)

After you’ve finally stopped using credit, and after you’ve saved an emergency fund, then attack your existing debt. Attack it hard. Throw everything you can at it.

Some experts say to pay your highest interest debts first. There’s no question that this makes the most sense mathematically. But if money were all about math, you wouldn’t have debt in the first place. Money is as much about emotion and psychology as it is about math.

There are at least two approaches to debt elimination. Psychologically, using a debt snowball offers big payoffs, payoffs that can spur you to further debt reduction. Here’s the short version:

1. Order your debts from lowest balance to highest balance. 2. Designate a certain amount of money to pay toward debts each month. 3. Pay the minimum payment on all debts except for the one with the lowest balance. 4. Throw every other dime at the debt with the lowest balance. 5. When that debt is gone, do not alter the monthly amount used to pay debts, but throw all you can at the debt with the next-lowest balance.

I’m a huge fan of the debt snowball. It still takes time to pay off your debts, but you can see results almost immediately.

Supplementary solutions

You can do other things to improve your money situation while you’re working on these three steps.

First, focus on the fundamental personal finance equation: to pay off debt, or to save money, or to accumulate wealth, you must spend less than you earn.

Curb your spending. Re-learn frugal habits. (Frugality is something with which most college students are all too familiar.) You can find some great ideas on the internet. Also check Frugal for Life.

While you work on spending less, do what you can to increase your income. If possible, sell some of the stuff you bought when you got into debt. Get an extra job. (But don’t neglect your studies for the sake of earning more. Your studies are most important.)

Finally, go to your local public library and borrow Dave Ramsey’s The Total Money Makeover. Don’t be put off by the title - this is a fantastic guide to getting out of debt and developing good money habits. I rave about it often, but that’s because it has done so much to help my own personal finances. After you’ve finished, return it and borrow another book about money.

The most important thing is to start now. Don’t start tomorrow. Don’t start next week. Start tackling your debt now. Your older self will thank you.

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If you have a charge off it will cause your credit score to be lower. A charge off happens when an account is not paid on for 6 months.

An effective way of erasing a charge off from you credit history is to dispute the listing. This is accomplished by sending a credit repair letter to the credit bureaus.

In your credit repair letter tell them why the listing should be removed from your credit report. Common reasons are the: the account has been paid, information is wrong, or it’s not your account.

Our credit system is flawed and you are assumed guilty until you can prove otherwise. It is common for incorrect information to show on your credit history.

In response to incorrect information being reported congress passed the Fair Credit Reporting Act. This says that any listing that can not be verified must be removed from your credit report by the credit bureau.

It is also common for one charge off account to become many negative listings and ruin your credit score. Let me explain what happens to an account once it is charged off.

The delinquent debt is sold to a collection agency by the original lender. Then the collection agency tries to collect payment from you. If they can not then they will report a new negative listing on your credit report.

The collection agency will then sell your account to another collection agency. The new agency will also try and collect and if unable they will report yet another new negative listing.

This process can go on and on, depending upon how large the debt is. Thus you can see how one account can turn into many negative listings on your credit report.

With a number of negative listings it will ruin your credit score. This will also make it hard to be approved for any new credit lines.

This is good to know before you pay an outstanding bill because payment does not mean that the listings will be removed. Instead I would recommend disputing the charge off before you take any step to repay the debt.

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