The process of not losing your home because of debt, really should begin when the homeowner first purchases a home. Considering how much money is coming into the household against what will be required to be going out (with the addition of a new mortgage), getting the best interest rate and being aware of how the interest rate, insurance and other factors could cause the mortgage payment to increase and trying to save money for times when the household income might decrease are all ways to assure that your house payment will always be something you can pay. There are times when these precautions are not taken or they are taken but situations happen to cause the homeowner to be 'in over their head'. The following are suggestions for those who find themselves in this situation and really want to keep their home.
1. Do not avoid the problem. Contact the mortgage holder as soon as you know there is going to be a problem. The mortgage lender is likely to work something out with you because they do not want the house and often have some programs to assist you in getting caught up. The sooner you contact the lender and work on the issue, the more likely you are to keep the home. Never avoid contacts by phone or by mail, from the mortgage lender. Some things the lender might suggest are as follows:
Forbearance- This is basically where the homeowner proves to the lender that 'the check is in the mail'. Examples would be that a home owner is getting a settlement, work bonus, tax refund or etc. and intends to surrender those funds to the lender to pay the mortgage payment. While waiting on the money, the lender might expect a lower payment or no payment at all, until the reinstatement date when the mortgage is paid to the lender all the payment which is due.
Repayment Plan- This is where the lender pays the minimum monthly payment and a portion of the past due on a monthly basis until the past due amount is all paid. After the past due amount is paid then the lender can start paying minimum amount due again.
Loan modification- This is where the lender attempts to make the mortgage more affordable by changing the number of years to pay the loan off, changing the interest rate from variable to fixed or adding on late payments to the balance of the loan.
2. Get the facts. Find the paper work that you signed when you took out the home loan and see what the lender is legally entitled to do when house payments are not made.
3. Look at other things to cut out to free up money for the house payment. Things like cable TV, memberships, dining out, movies etc. are possibilities .
4. Consider able household members taking on extra jobs to help pay the mortgage. Perhaps you know (and completely trust) other adults to whom you could rent an extra room to, such as a college student. That rent could go towards the mortgage.
5. Contact credit counseling services which are sometimes non-profit. Do this as soon as the problem becomes obvious.
6. Consider debt consolidation. Pooling the mortgage with other debts and creating a new loan might lower the monthly payments but there will likely be a fee for this action.
7. Consider selling non-essential property (extra car, jewelry etc.) to get money for the house payment. Consider cashing in whole life insurance policies to get cash for the mortgage.
There might be some extra efforts needed to avoid foreclosure on your home. Some efforts might be temporary (such as taking on a second job). These efforts will be worth it in the long run, especially if keeping your home is of great importance.
Have you been thinking about applying for a home mortgage refinance loan?
Perhaps you are in an adjustable rate mortgage, looking to consolidate debt, or even just lower your rate to a lower, fixed monthly payment. No matter what goal you are seeking to obtain at closing, one thing that you should stay focused on is how to save time and money when applying for a refinance of your home. However, all too often, many home owners make the common mistake of not being fully prepared.
Being prepared, what does that mean?
When applying for a refinance loan, you will want to be able to lock in your interest rate as quickly as possible when you see a low rate you want. Unfortunately, many homeowners lack the organization of the required documents and end up fumbling for them when they see a low rate, only to miss their chance to lock it in before the market changes, and even delay the closing of their loan which costs even more time, money, and heartache. Here's how to avoid losing your precious time and money:
Gather Your Employment and Income Information
Always have one month of your pay stubs and spouse on hand, and if you are self-employed you will need to have your tax returns for the past two years. You should also have your W-2's from your employers for the past two years also. If you haven't been working at the same place of employment for at least two years consistently, have your work history and employer contact information along with payment history available as well. This will allow you and the lender to quickly and accurately calculate a monthly average of income.
Obtain Most Recent Bank Statements and Other Asset Statements
Typically most homeowners will only need to show two months worth of statements from your bank accounts, IRA's, 401k, and any other investment accounts when applying for your home mortgage refinance. Documenting assets is a vital part of loan application which can also position you to get the lowest rate possible. Your lender will typically ask for the last 3 months of these statements to evaluate.
Get Your Homeowner Documents Organized
In many cases your lender will ask for the title insurance and home owner's insurance policy and may even inquire about the property taxes you pay on the home. In some instances they may also ask for to see the note to your home if you have an adjustable rate mortgage or prepayment clause. Also be prepared to show the lender the most recent appraisal and survey of your home in case they ask. One other important document to have on hand is also the most recent mortgage statement that shows the balance and monthly payments of any and all loans on your home.
You've got everything Together, Now What?
Good! Now that you've got all the necessary paperwork together, you're going to find that when you're applying for your home mortgage refinance, you're going to feel very confident and in control. You'll notice that nearly every possible question on the loan application will be easily answered because you are prepared with the necessary information and you're lender will be happy too! So get started and apply for your loan today knowing that you just saved yourself a great deal of headache, time, and especially money by simply getting organized!
Have you been thinking about applying for a home mortgage refinance loan?
Perhaps you are in an adjustable rate mortgage, looking to consolidate debt, or even just lower your rate to a lower, fixed monthly payment. No matter what goal you are seeking to obtain at closing, one thing that you should stay focused on is how to save time and money when applying for a refinance of your home. However, all too often, many home owners make the common mistake of not being fully prepared.
Being prepared, what does that mean?
When applying for a refinance loan, you will want to be able to lock in your interest rate as quickly as possible when you see a low rate you want. Unfortunately, many homeowners lack the organization of the required documents and end up fumbling for them when they see a low rate, only to miss their chance to lock it in before the market changes, and even delay the closing of their loan which costs even more time, money, and heartache. Here's how to avoid losing your precious time and money:
Gather Your Employment and Income Information
Always have one month of your pay stubs and spouse on hand, and if you are self-employed you will need to have your tax returns for the past two years. You should also have your W-2's from your employers for the past two years also. If you haven't been working at the same place of employment for at least two years consistently, have your work history and employer contact information along with payment history available as well. This will allow you and the lender to quickly and accurately calculate a monthly average of income.
Obtain Most Recent Bank Statements and Other Asset Statements
Typically most homeowners will only need to show two months worth of statements from your bank accounts, IRA's, 401k, and any other investment accounts when applying for your home mortgage refinance. Documenting assets is a vital part of loan application which can also position you to get the lowest rate possible. Your lender will typically ask for the last 3 months of these statements to evaluate.
Get Your Homeowner Documents Organized
In many cases your lender will ask for the title insurance and home owner's insurance policy and may even inquire about the property taxes you pay on the home. In some instances they may also ask for to see the note to your home if you have an adjustable rate mortgage or prepayment clause. Also be prepared to show the lender the most recent appraisal and survey of your home in case they ask. One other important document to have on hand is also the most recent mortgage statement that shows the balance and monthly payments of any and all loans on your home.
You've got everything Together, Now What?
Good! Now that you've got all the necessary paperwork together, you're going to find that when you're applying for your home mortgage refinance, you're going to feel very confident and in control. You'll notice that nearly every possible question on the loan application will be easily answered because you are prepared with the necessary information and you're lender will be happy too! So get started and apply for your loan today knowing that you just saved yourself a great deal of headache, time, and especially money by simply getting organized!
The past few months have amply demonstrated why the seller-held mortgage note niche exists, and why more people are opting to buy or sell mortgage notes and deeds of trust without getting the banks too involved. Now that the Big Bailout has passed, nobody really knows exactly what’s going to happen, except that mortgage borrowers are, in anything, an afterthought in the rush to save the very institutions that caused these problems in the first place.
The Treasury Secretary has $700 billion (at least) burning a hole in his pocket, and plans to buy up mortgage-backed securities: “investment products” that were put together by economists and traders to be as insecure as possible while still fooling credit rating agencies (who did, in all honesty, seem rather eager to be fooled, but that’s another story). The idea is that this will give the banks a basic amount of liquidity they can use to start lending money again – to other banks. But if you’ve got a bank-backed mortgage, you’re probably not getting a dime.
Politicians from both parties have proposed direct mortgage relief, but the response from the Treasury hasn’t been encouraging. Meanwhile, institutions don’t seem to be freeing up any money at all. They’re still foreclosing. They’re not renegotiating loans and in some instances they’ve even clawed back the worldwide rate cut to boost their margins.
While the situation depresses home and real estate prices across the board, the people who’ve been most able to weather the storm are the folks we work with every day – people who didn’t participate in the institutional system. Private note holders didn’t get their mortgages packaged with bad loans and shopped around. They didn’t encourage loan agents to engage in predatory lending because they took personal responsibility for terms. Good for them!
We can continue to buy mortgage notes in this climate because they’re not a part of the crumbling investment system. If you took the leap and got control of your own note, you have the opportunity to sell it at a competitive rate even though while the bank-run system haplessly lurches toward its handout. We won’t lie – overall values are down – but we know that private notes aren’t completely chained to what the banks did, or what the government is going to do. That’s an advantage you’ll profit from.
In today's faltering economy, homeowners are facing foreclosure in increasing numbers. With mounting debt, rising unemployment rates, and lack of accessibility to credit, many families are falling behind on their bills and are eventually left with no option but to default on their mortgages.
With home foreclosure a predominant topic in the news, it is important to understand what foreclosure means and how the process works.
Foreclosure is essentially the forced sale of a home. When a borrower defaults on his or her mortgage payments, the lender (or other lien-holder) then has the right, as specified in the mortgage agreement, to legally repossess the property. The mortgage holder may then offer the property for sale. The proceeds of the sale must be used to satisfy the outstanding loan balance. After the loan is settled, any remaining lien-holders are reimbursed, and the remaining equity (if any) is returned to the borrower.
The actual procedure of home foreclosure varies from state to state, but the same basic process applies in most cases.
First, the loan becomes delinquent, meaning the borrower has ceased to make payments; the borrower goes into what is called default. The default period lasts for approximately three months, during which time the lender attempts to contact the borrower to arrange repayment.
Once the loan is in default, the lender files a public Notice of Foreclosure announcing the intent to foreclose on the property. The borrower will then be notified, either by personal service or by publication in a newspaper, that the property is being foreclosed.
At this point, a date will be set for a court proceeding. While the court date is pending, the borrower may continue to negotiate with the lender to settle upon a repayment plan. During this period, the borrower may remain in the home. If no settlement is agreed upon, the foreclosure will generally be granted by the court.
Once the lender has been granted the foreclosure, the occupants may be evicted by the sheriff and the property sold. Foreclosure properties are sold either through normal real estate procedures or through public auction. Depending on the exact procedure for each state, the entire process can take anywhere from 2 months to a full year.
After the Notice of Foreclosure has been filed, a homeowner will receive many mail offers to refinance or purchase the home. Not all of these are legitimate, and it is advisable for the borrower to negotiate directly with the mortgage holder in any attempt to prevent a foreclosure.
Applying for the first home mortgage might seem like an easy process because people buy and sell home s every day. However, buying a home is not that simple, and applying for a home mortgage can be a long process requiring a lot of patience and fortitude.
However, if you know what to expect up front the home mortgage process will be much easier and a lot less stressful. Let’s start with the basic parts of a mortgage. Understanding these three elements will help you determine your financial situations, because the combination of these three elements will determine your monthly payment. These three elements will also ask for if you use an online mortgage calculator.
Interest Rate
The interest rate is the amount of interest charged on a monthly mortgage payment. It is a percentage of the principle loan amount. Interest rates can be very different depending on the type and terms of a mortgage. Your home mortgage interest rate will affect how much money you have to pay back over the term of loan, so the lower the better.
Size of the Home Mortgage Loan:
How much will you borrow? The size of your loan will primarily depend on your budget, your credit, and how much of a down payment you can afford.
Fixed or Adjustable Rate Mortgage
A fixed rate home mortgage loan (FRM) means that the interest rate you get upon loan approval is the interest you maintain for the life of the loan. The life of the loan is refereed to as a mortgage term. A mortgage can range anywhere from a six months loan to 30 years. The 30-year fixed rate mortgage is the most common terms. If the current interest rates are low, an FRM will prove to be a good choice as you will assure of locking in at a low interest all throughout your loan term.
Variable or Adjustable Rate Mortgage (ARM) is a home loan with an interest that fluctuations with market interest rates. Adjustable rate mortgage is given initially cheaper than FRM since the ARM involve greater risk. Adjustable rate mortgage is a great option if the current interest rates are high and you foresee them to lower in the coming years. If you know that you will stay in your home for a relatively short period, you can get a good deal with an ARM.
Understanding the basic parts of a home mortgage will help you plan financially for the home buying process. Build on the knowledge by learning about the various types of mortgage, how to interpret your credit score and other mortgage related topics.
Is your credit rating a little shaky?
If it's time to renew your mortgage, you may be wondering if you'll have problems finding lenders. Depending on your information, it is certainly possible (and probable) to get mortgage refinancing with bad credit.
Do you really need a bad credit loan? If the following statements apply to you then the answer is 'yes'.
* You have a credit score of 620 or lower
* You have missed two or more 30 day mortgage payments in the past year
* Or you have had at least one 60 day delinquency in the past two years
* You are struggling to meet your monthly expenses
If this describes your current situation don't panic, you're not doomed. You may well qualify for a bad credit mortgage refinance. In addition to the above facts, lenders take into consideration your home collateral and your ability to repay the loan. So, if your house is worth more than the money left owing on it and you can make your payments then you are probably a good candidate.
Believe it or not, there are even some positives to mortgage refinancing with bad credit.
* A bad credit home loan may help you to avoid declaring bankruptcy
* You may be able to free up some cash for home improvements
* It gives you a fresh chance to repair your credit
* It may be possible for you to consolidate your bills into one monthly payment
* Mostly, it can relieve the feeling of burden and pressure
Once you've decided to go ahead and refinance your home, don't just start applying haphazardly. Repeated credit applications and credit checks can actually hurt your chances at getting a bad credit mortgage refinance loan. Before approaching any lender, do your homework.
The first thing that you need to do is get a copy of your credit report. You can get it from one of the three main reporting bureaus: Equifax, Experian and Transunion. Check the report over to make sure all the information is accurate. If you spot any mistakes, get them cleared up before applying for your loan.
After you've done that, you'll have a realistic picture of your credit situation. It is copies of the final, accurate report that you need to give to the lenders when shopping for your bad credit mortgage refinancing loan. Do not let anyone do a new credit check on you until you've decided which lender you're going to work with.
Just because you're looking for a mortgage refinancing loan for bad credit does not mean that you should not use caution. Search out reputable lenders online and request information. Be sure that they're licensed.
Once you've chosen a lender who offers you an acceptable rate, get the quote in writing. That will lock in the numbers so they can't change if interest rates do before you finish the application process. The only thing that can influence your pro-offered rate is if your credit score has changed from what it was on the copy that you submitted for the quote.
As soon as everything is finalized, you'll have your mortgage refinancing with bad credit. It really is not that hard and the benefits can make your life easier.
In order to get the best deal on your home mortgage loan, it is a good idea to understand certain terms that are specific to the real estate and financial industry. The following are the common terms you’re going to hear when applying for your first mortgage.
Length of the Loan / mortgage term
Loan term is a period of time you have to pay back the money you borrowed from the mortgage lender. A mortgage term can range anywhere from six months loan to 30 years.
Points
A point refers to interest costs paid to the mortgage lender in order to reduce the interest rate. Points are paid one time and are generally equal to 1% of the loan principal. For example, if you were taking out a 100,000 mortgage and wanted lower interest rates, you might have to pay anywhere from 1-3 points (1,000 – 3,000 dollars) to get the rate. It is important to note that some mortgage lenders will advertise very low interest rates, and only if you read the print carefully, you will find out that you have to pay points in order to get the rates.
It’s not always a good idea to pay one-time points in order to get a lower interest rate. In some cases points are not even needed in a deal and are just a bonus for the lender. Always do the math for each mortgage option to find out what will cost you the least amount of money.
Interest Rate
Interest rate is a yearly rate that is charged on the principal of the loan amount provided by the lender. It is a percentage of the principal loan amount. Interest rates can be very different depending on the type and terms of a mortgage. The interest rate has a base percentage dictated by a national index and then percentages are added to this according to the amount of risk the lender is taking by giving you the money to finance the house. With mortgage loan, all of the interest is front loaded, meaning that for the first few years, every payment that you will make go mostly toward the interest.
Loan to value ratio
Loan to value ratio is a ratio that used by your mortgage lender to determine how much they can loan you. The ratio is found by dividing the loan amount by the market value of the home in consideration.
Most mortgage lenders will loan up to 80 percent of the market value of a home. However, there are lenders who will loan more than 80 percent of the market value in exchange for a higher interest rate.
Debt Service Coverage
Debt service coverage is a ratio used by the lender to see if you are capable to pay back the mortgage loan in addition to your other current debt. The ratio is determined by dividing your net income by debt. Most lenders look for debt service coverage ratios of 1.2.
These terms are specific to mortgage characteristic. Do some research or read some more to become familiar with the lending terms you need to know. There are also many mortgage companies online that can help you find direct mortgage lenders.
The problem with credit and store card debts is that you’re looking at high rates of interest for personal lending. Worse, it’s easy to get caught with penalty charges if you miss a payment. Debt consolidation always looks a good idea because you can roll up all the different high interest loans into a single package secured on your home. Because you’re paying this lump sum off over many years, the instalments are a significant saving.
The first time you should think about this is when you’re changing your home. Let’s say you are trading down. You have a good equity in the house being sold and the amount you’re paying for the new home will leave that equity largely untouched. Consolidating your existing personal debts into the mortgage loan can work well. You pay off all your other debts out of the sale price and free more of your income with the reduced repayments. Alternatively, you have an equity in your existing home and decide either to refinance your existing mortgage to include personal debts or you take out a second mortgage.
You need to use a mortgage calculator to see whether this makes commercial sense. It depends on exactly how much interest you’re saving, the length of time you expect to stay in the house and whether you are expecting the value of the house to appreciate. Then there are the tax implications and the extent to which other costs may rise, e.g. the mortgage insurance premiums.
Even more important if the calculation shows that the consolidation is favorable is what you will do with the amount saved every month. The best possible strategy would be to use every cent of the savings to accelerate repayment of the mortgage. The first worst strategy would be to treat this a free money to spend as if there’s no tomorrow. The absolute worse strategy would be to take on more personal debt. The thinking goes: house prices always go up sooner or later. When that happens, I can do another debt consolidation and write off all this new debt with another cash out. When you’re in a collapsing property bubble, this is a very bad idea.
These days mortgage institutions have become very popular but during the olden days incase if anyone wanted to have a home loan then they would just walk down looking in for a near by bank or savings and loan. Then in such a case if the bank had some of the extra funding then what they would do is that if they consider you as a good credit risk then in such a case they would lend you money from their own resources. But these days this is not the case anymore, majority of the money lending is done from the three major places or in other words three major mortgage institutions called as
• Fannie Mae (FNMA- Federal National Mortgage Association)
• Freddie Mac (FHLMC- Federal Home loan Mortgage Corporation)
• Ginnie Mae (GNMA General National mortgage Association)
But these days the system through which it works has completely changed, these days you need to talk to any of the lenders and then apply for a loan and after this all the proceedings are undertaken after which you would potentially become the owner of a home loan and in turn you would be entitled to pay all the mortgage payments. It is quite obvious that you need to pay the payments to the company who arranged your mortgage loan or to the company to whom your mortgage loan might have been transferred to some another institution. That is another fact that the company to whom you pay the mortgage payments will rarely be the actual owner of your loan. They are the people who are referred to as the servicer of the mortgage loan. They are called as the servicer because they are the ones who service your loan from the institution who owns the actual loan.
Have you ever seen behind the scenes of the institutions and they package the loans into a pool with a lot of other loans and then they are sold to the any of the above institutions which are mentioned above. The so called servicer of the loans is given a monthly loan fee by the investors of the loan so that the servicers of the loans are required to process payments and take care of the loans which the investors render. This monthly fee is nothing but three-eights of a percent of the loan, it is to be noted that the amount keeps on adding. There are many companies that function the loans of amount which is over billions of dollars worth home loans. However we understand the fact we come to know that three eights of a billion incomes is a very meager amount and hence this tiny income is required to be made little larger than what is it at present.
But to understand to the fact that mortgage lending is the real place wherein there is actual large amount of income earning. The entire system which is so designed has been designed with a view that all the mortgage intermediaries get the loan amount which is at a break even level. As the loan is packaged into the pools of Fannie Mae, Freddie Mac, or Ginnie Mae, lender gets the additional funds so that he can make more loans and even sell to the different institutions.
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by Barry Nielsen,CFA (Contact Author | Biography)
Some mortgage borrowers have only two things in mind: "How much can I afford?" and "What will my monthly payments be?" They max out their finances on mortgage debt and use an interest-only or negative-amortization mortgage to minimize their monthly payments. Then, they rely upon home price appreciation to eclipse the risks associated with a constant or increasing mortgage balance.
In many cases, if these homeowners are fortunate enough to accumulate some equity in their homes, they max out their finances again through home-equity loan or cash-out refinances and then use the proceeds to make additional purchases, pay down consumer debt, or even make additional investments. Sound risky? It is. In this article we'll show you how to make sure you have a mortgage you can afford and to build equity by paying it off quickly.
Making Mortgage Math Add Up
Every mortgage has an amortization schedule. An amortization schedule is a table that lays out each scheduled mortgage payment in a chronological order beginning with the first payment and ending with the final payment. (To read more on amortizations, see Understanding the Mortgage Payment Structure and Make A Risk-Based Mortgage Decision.)
In the amortization schedule, each payment is broken into an interest payment and a principal payment. Early in the amortization schedule, a large percentage of the total payment is interest, and a small percentage of the total payment is principal. As you pay for your mortgage, the amount that is allotted to interest decreases and the amount allotted to principal increases.
The amortization calculation is most easily understood by breaking it into three parts:
Part 1 - Column 5: Total Monthly Payments
The calculation of the total monthly payment is shown by the formula below.
Where:
A = periodic payment amount
P = the mortgage's remaining principal balance
i = periodic interest rate
n = total number of remaining scheduled payments
Part 2 - Column 6: Periodic Interest
Copyright © 2007 Investopedia.com
Figure 1
The calculation of the periodic interest charged is calculated as shown below:
The periodic interest rate (Column 3) x the remaining principal balance (Column 4)
Note: The interest rate shown in Column 3 is an annual interest rate. It must be divided by 12 (months) to arrive at the periodic interest rate.
Part 3 - Column 7: Principal Payments
The calculation of the periodic principal payment is shown by the formula below.
The total payment (Column 5) – the periodic interest payment (Column 6)
Copyright © 2007 Investopedia.com
Figure 2
Figure 2 shows an amortization schedule for a 30-year 8% fixed-rate mortgage. For the sake of space, only the first five and the last five months are shown.
The amortization schedule demonstrates how paying an additional $300 each month toward the principal balance of the same mortgage shown in Figure 1 will shorten the life of the mortgage to about 21 years and 10 months (262 total months versus 360), and reduce the total amount of interest paid over the life of the mortgage by $209,948.
As you can see, the principal balance of the mortgage decreases by more than the extra $300 you throw at it each month. It saves you more money by cutting down the months of interest charged on the remaining term.
For example, if an extra $300 were paid each month for 24 months at the start of a 30-year mortgage, the extra amount by which the principal balance is reduced is greater than $7,200 (or $300 x 24). The actual amount saved by paying the additional $300 per month by the end of the second year is $7,430.42. You've saved yourself $200 in the first two years of your mortgage - and the benefits only increase as they compound through the life of the mortgage!
This is because when the extra $300 is applied toward the principal balance of the mortgage each month, a greater percentage of the scheduled mortgage payment is applied to the principal balance of the mortgage in subsequent months. (Find out more about mortgage payments in our Mortgage Basics tutorial.)
The True Benefits of Making Accelerated Mortgage Payments
The true benefits of making the accelerated payments are measured by calculating what is saved versus what is given up. For example, instead of making an extra $300 per month payment toward the mortgage shown above, the $300 could be used to do something else. This is called a cost-benefit analysis.
Let's say that the consumer with the mortgage shown in the amortization schedules above is trying to decide whether to make the $300 per month accelerated mortgage payments. The consumer is considering three alternative choices as shown below. For each option, we'll calculate the costs versus the benefits, or what can be saved versus what is given up. (For the sake of this example, we're going to assume that leveraging any equity in the home through a home equity loan is not an option. We're also going to ignore the tax deductibility of mortgage interest, which could change the numbers slightly.)
The homeowner's three options include:
1. Getting a $14,000 five-year consumer loan at an interest rate of 10% to buy a boat.
2. Paying off a $12,000 credit-card debt that carries a 15% annual rate (compounded daily).
3. Investing in the stock market.
Option 1: Buying a boat
The decision to buy a boat is both a matter of pleasure and economics. A boat - much like many other consumer "toys" - is a depreciating asset. Adding household debt to purchase an illiquid, depreciating asset adds risk to the household balance sheet. This consumer has to weight the utility (pleasure) gained from owning a boat verses the true economics of the decision.
We can calculate that a $14,000 loan for the boat at an interest rate of 10% and a five-year term will have monthly payments of $297.46.
Cost-Benefit Breakdown
If the homeowner had made $300 accelerated payment for the first five years of the mortgage rather than buying a boat, this would have shortened the life of the mortgage by 47 months, saving $2,935.06 for 47 months, 313 months in the future. Using a 3% discount rate this has a present value of $59,501. Additionally, if the accelerated mortgage payments are made, the principal balance of the mortgage will be reduced by an additional $21,599 by the end of the five-year period. This early retirement of debt reduces risk on the household balance sheet. (To learn more about compounding's effects on your loans, see Understanding The Time Value Of Money.)
By deciding to purchase the boat, the consumer spends $297.46 per month for five years to own a $14,000 boat. The $297 per month for 60 months equals out to a present value of $16,554.
By putting the $300 dollars on the mortgage, this consumer would save $59,501 over the course of the mortgage. Buying the boat would mean spending $16,554 to pay for a $14,000 boat that is likely to have a depreciating resale value.
Therefore, the consumer must ask himself if the pleasure of owning the boat is worth the large divide in the economics.
Option 2: Paying off a $12,000 credit card debt
The daily compounding of credit card interest makes this calculation complex. Credit card interest is compounded daily, but the consumer is not likely to make daily payments. However, the calculation of an amortization schedule says that if the consumer pays about $300 per month for five years, that person can eliminate the credit card debt.
As in the first example, making accelerated payments on the mortgage of $300 each moth for the first five years will leave the homeowner with a present value of future payment savings of $59,501.
By paying $300 per month for five years to eliminate the credit card debt, the consumer can eliminate $12,000 in credit card debt with a 15% annual interest rate.
We know that if the consumer makes accelerated mortgage payments, the credit card debt will continue to accrue interest and the outstanding balance will increase at an increasing rate. If we compound $12,000 daily at an annual rate of 15% for 60 months we get $25,400. If we assume that after making five years of accelerated mortgage payments, the consumer could then start to pay down the credit card debt by $300 per month, it would take more than 50 years at $300 per month to pay off the credit card debt at that point. In this case, paying down the credit card debt first is the most economical choice.
Option 3: Invest in the stock market
We've already shown that the consumer will save a present value of $59,501 by making accelerated mortgage payments of $300 for the first five years of the mortgage. Before we compare the accelerated mortgage payment savings to the returns that might be made in the stock market over the same time period, we must point out that making any assumptions about stock market returns is extremely risky. Stock market returns are volatile. The historical average annual returns of the S&P 500 Index is about 11%, but some years it is up, and some years it is down.
Putting the $300 toward the mortgage means a present value of $59,501 of future mortgage payments, and a reduction of $21,599 in the principal balance of the mortgage over the first five years of the mortgage. This reduces the risks associated with debt.
If the consumer decides to invest the $300 monthly over a five-year period in the stock market - assuming an average annual return of 11% - this will yield a total portfolio value of $23,855 which has a present value of $20,536 (discounted at 3%), which is far less than the present value $59,501 realized by making accelerated mortgage payments.
However, if we assume the $23,855 will continue to earn an annual return of 11% beyond month 60 - until month 313, the point at which the mortgage payment would be eliminated - the total value of the portfolio at that point would be $239,989. This is greater than the present value of future mortgage payment savings at that future time, which would be $129,998.
We could conclude then that investing in the stock market over the long term might make more economical sense - but this would only be a given in a perfect world.
Conclusion
Homeowners need to understand that bigger mortgage is compared to the value of the home, the larger the risk they have taken on. They must be also aware that home price appreciation should not be relied on to eclipse the risks of mortgage debt. Furthermore, they need to understand that paying down mortgage debt reduces risk and can be to their economic advantage.
One of the key aspects of making accelerated mortgage payments is that each dollar reduction in the outstanding principal balance of a mortgage reduces the amount of interest paid as part of future scheduled payments, and increases the amount of principal paid as part of those same payments. Therefore, a simple calculation that sums up the amount of interest saved over a time period that ends before the loan is paid off does not accurately capture the entire benefit of making accelerated mortgage payments. A present value calculation of the future payment savings is a more accurate analysis. Additionally, every dollar of principal that is paid down early reduces risk on the household balance sheet.
Still interested in refinancing your mortgage? Then check out The True Economics Of Refinancing A Mortgage and American Dream Or Mortgage Nightmare?
by Barry Nielsen (Contact Author | Biography)
G. Barry Nielsen is a homeowner with a large household of six children. Nielsen holds the Chartered Financial Analyst (CFA) designation and has worked for several large mortgage lenders and financial institutions, including Freddie Mac, American General, Washington Mutual and Countrywide Home Loans. Nielsen owns and operates MortgageGraphics, Inc., a web-based mortgage calculator designed to help consumers make educated, risk-based mortgage decisions.
Interest on the average home mortgage will cost the homeowner nearly TWO TIMES the cost of the home.
If you were to purchase a $150,000 home with a $120,000 mortgage (80%), and you paid an interest rate of 9% for 30 years, you will have paid over $227,500 just in interest (in addition to the original $120,000). That's nearly two times the cost of the home!
A credit card debt of $7000 (now the average) at 18% being paid at the rate of $20 principal plus interest each month will take over 29 YEARS to pay off, almost as long as a home mortgage. Interest charged on this credit card debt will top $18,400, more than 2.6 TIMES the original debt!
If you work for a living, you know that when you are not working, you are not getting paid. But interest never gets sick, never takes a vacation and never sleeps. It is working against you 24 hours a day, seven days a week, each and every day of the year.
So what can you do?
You may not be able to pay off your debts or mortgage now. You may not have enough equity in your home for a loan. You may not be able to afford the refinancing costs or home equity loan costs. You may not be able to lower your credit card interest rates.
But you can make additional or extra payments.
So how does making an extra payment help lower your interest charges? Is it going to make next month's bill smaller? You can't scrape together too much for an extra payment so how is just $10 going to help when you owe tens of thousands?
The secret is in making early and consistent extra payments. For example, on the home mortgage shown above, if you pay an additional $100 each month you will save over $82,000 in interest payments. Not only that, but you will also have your home paid off nine years and two months earlier. You knock nearly 10 years off your mortgage just by paying an extra $100 a month.
How does that work?
Well, that $100 extra you pay the first month would have cost you about $270 in interest to borrow for 30 years. Since you have paid it already, you can reduce your last mortgage payment by $270. The next month's extra payment will reduce your last mortgage payment by $268. Each month as you pay that extra $100, your final mortgage payment will be reduced until you won't need to make a final payment, then the second to last payment, then third to last and so forth. Soon you will have shaved years and thousands of dollars in interest charges off your mortgage.
That's great, but maybe you can't spare $100 each month. How about $50, $25, or even $10? An additional payment of $50 each month will save you five years and seven months and about $52,000 dollars. $25 each month will cut your time by three years and three months saving you about $30,000. Just $10 a month will reduce your time by one year and three months and save you over $13,500.
Every little bit helps. Some months you may only be able to add $10 to your payment; some months you may be able to add $200. And this applies to interest on credit card payments or any other kind of debt repayment. Paying down as much of the principal (or amount you owe) each month will help reduce the interest you are charged and the length of time it takes to pay off the debt.
So why don't the credit card companies charge you more of the principal each month?
How would you like to be making 18% on an investment? Wouldn't you want this investment to last as long as possible? Of course! So do the credit card companies. They are happy for you to pay off your balance, but even more excited for you to keep paying them that 18% interest.
There are some other interest tips and tricks.
- One trick your mortgage company may have played on you is to include a prepayment penalty in your mortgage. If you try to pay off your mortgage early they may actually charge you for doing so. Or they may only apply part of your payment to the principal and take the rest as a "service charge."
- Make sure when you make an additional payment that you send a check separate from your monthly mortgage payment with instructions that the amount is to be applied toward the principal of your loan. Otherwise they may just apply it towards next month's payment and still charge you the interest.
- Generally you will not have this problem with credit card companies. But watch out for late payments or going over your credit limit. They may then use these "rule infractions" as cause to raise your rate to over 25%!
- If you are looking to refinance your mortgage, look for a mortgage that lets you pay on a bi-weekly basis. Since many people receive a bi-weekly paycheck this also makes it easier to budget your money. If you are paying every two weeks you will make an additional monthly payment each year (26 bi-weekly payments vs. 12 monthly payments). Also, because you are paying the principal down every two weeks rather than every month your interest charges will be reduced.
You CAN take control of your interest charges. Make those extra monthly payments. The feeling of being debt-free will far outweigh the temporary pleasure of that burger, movie or new DVD-player.
Debt management deals with the technique of keeping debts in manageable levels and eliminating them in the long term. It plays a vital role in curbing multiple debts resulting from nonpayment of credit cards, medical bills, personal loans, store cards, overdrafts, etc. A number of tools like debt consolidation loans, debt counseling, etc are used in debt management.
Debt counseling as a way of Debt Management is effective for smaller debts. It is a means of controlling spending habits and requires greater participation of the individual himself. One of the culprits responsible for uncontrolled spending among people is credit cards. Credit cards let people to buy now and pay later which results in unlimited spending. The user knows the credit incurred only when the bill arrives.
At this stage, debt management advices people to restrict expenditure proportionately to income. As credit cards charge very high interest rates, it is suggested that the number of credit cards in use should be reduced. Also individuals must supplement their income to support additional expenditure.
Debt counseling services thus advise borrowers on how to remain debt free in future. It also advises on how to plan expenditures to have enough money in hands to pay any debts. So while applying for debt management, it should be ensured that the agency approached, offers counseling also.
Individuals struck deeper in debt should take debt consolidation loans to eliminate debts incurring high interests. Debt consolidation loans condense multiple loans into a single loan having one single monthly payment. This reduces the overall interest paid, thus saving a lot of money. Also instead of dealing with multiple lenders, one has to deal with a single lender which saves time.
Numerous companies provide debt management services giving advice and actively involve people in controlling and eliminating debts. Whatever be the mode of debt management, at the end every thing depends on the borrower to keep within his limits and get out of the debt mess.
Getting into multiple debts is no longer an isolated case. Considering ever increasing expenses of day to day life anyone can take more than one loan to make ends meet. Managing them really becomes a headache after some time. But they can ease their tension by going for a debt consolidation loan.
Debt consolidation loan consolidates multiple debts into one single loan having a single monthly payment. Consolidation of loans has the following advantages:
• Reduced interest payments
• Waiver of late and overtime fees
• Reduced monthly payments
• Credit improvement
• More money is saved in the loan run
Debt consolidation loan is available in both secured and unsecured versions. In secured form of debt consolidation, a home or other property has to be pledged as collateral. But unsecured loans have no such requirement. Debt consolidation is recommended for people who have two or more lenders with £5000 or more of unpaid debt. The amount and term of the loan will depend on the current debt.
Bad credit borrowers having payment defaults, arrears, late payments, CCJs, IVAs, etc can also obtain debt consolidation loan. They can repay their debts with the help of this loan. Also they can improve their credit condition in addition to repaying their debts on time.
Borrowers should take debt consolidation loan after ensuring that the lender or lending agency is a reputed one in the market. Terms and condition of the loan deal should be considered thoroughly and any hidden costs or fees should be looked for. Before striking a deal, borrowers should negotiate with lenders for better interest rates.
Thus finding oneself in the midst of many debts is no longer a matter at all. With debt consolidation loan borrowers can easily come out of debt mess.
About The Author
Management plays a rewarding role in all spheres of activity and so in case of managing debts. Individuals trapped in debts accumulated from various sources to meet diverse needs can take the assistance of debt management solution. With established principles and policies, it helps in dissolving debts.
Debt management solution offers rational solution to wipe off multiple and bad debt. It also provides policies to check future unforeseen financial crisis. It helps in stabilizing the financial base of the debtors by concentrating on ways to pull out the debtor out of debt mess. It provides guidance to improve financial position.
Debt management solution providers assess the current repaying capacity of the debtor calculate the interest accumulated on the different loans. Then they will negotiate with lenders to consolidate all loans into one and lower interest rates. The debtor can then make a single payment to the debt management provider, which it distributes among different lenders. Thus the borrower is relived from the hassles off dealing with multiple lenders.
Debtors opting for debt management solution have to pay low interest rates than what they are currently paying. Consolidation of loans lowers the overall interest and thus saves a lot of money on interest payment. Also borrowers having credit card debts can open a new credit card at nil and shift all the debts into it which also saves a lot on interest.
Availing debt management solution requires only filling up a simple form online. The form will require the debtor’s name, his income, his debts and details of his lenders to be filled. The debt management solution provider itself contacts the debtor.
Before approaching a debt management solution provider, debtors should look for the integrity and reputation of the provider. The provider should be experienced in this field and have good standing with the customers. Also any hidden costs and charges should be looked for.
Debt management solutions provide practical solution to borrowers for getting rid of debts. But, above all, borrowers should try to cut down on expenditure and start saving. This is the most pertinent solution for not getting into further financial difficulty.
Debt consolidation is the method of reducing the burden of multiple debts in a systematic manner. It saves one from the hassles of making multiple payments by converting several loans into a single loan.
In debt consolidation, the borrower replaces two or more loans having higher interest rates with a new loan. By consolidation of loans, borrowers pay interest which is lower than the combined interest of previous loans. They have to pay a single monthly installment instead of several.
Consolidation of debts reduces hassles of borrowers in managing multiple lenders. It is very difficult to remember many due dates together. Any lapse in repayment spoils credit history and leaves a mark on the credit record. But with consolidation, one is free from such fears.
This method is usually employed in paying off credit card debts. Credit cards usually have very high interest rates. Despite this, they have become part of lifestyle. When one spends with a credit card, the debts snowball to a level beyond the affordability of the borrower. To control this debt consolidation can be effectively used.
Borrowers have the option to take secured debt consolidation loan against home, car or any other property. These loans have low interest rates because the lender feels safe in advancing the loan. In case of non payment, he can confiscate the collateral.
It helps borrowers who are unable to pay high monthly installments. They can improve their credit rating in the market by making timely payments through consolidation which increases their chance to apply for further loans.
There are many non profit credit counseling companies that assist borrowers in getting out of unbearable credits which they failed to pay back consistently. Borrowers can also take the help of a counselor to work out plans as per their needs.
Debt consolidation thus offers a very good option to manage multiple debts which otherwise create a lot of problems. A well thought our debt repayment plan can go a long way in providing relief.
Different technological advances have allowed individuals to lead more effective, efficient and convenient lives. This is also true when it comes to the simple act of applying for a credit card. While an individual used to have to either receive a letter direct from the credit card company, complete with a form which they could mail back to the company in order to learn whether or not they would be approved for the card, or go to a store in order to fill out the paper work there and have it processed at that store location, individuals are not able to apply online free for a credit card. There are a number of different reasons as to how this is much more beneficial than the processes that were previously available to people when it came to the credit card application process.
First of all, one is allowed a number of options as to companies they can consider when an individual opts to apply online for a credit card. No longer is a person limited to the credit cards that they are able to receive forms from. They are not limited to companies that specifically target them; instead the individual can easily research different companies and decide which credit card would be best for them and that which would be able to meet their own personalized needs and demands when it comes to having a credit card. It is even possible to do a side by side comparison of different credit cards and the companies that are associated with them. Some websites will also categories cards based on different characteristics, such as those for individuals with bad credit, people that need a travel rewards program or those that are looking to apply online free for a credit card that has a cash back program. When one opts to apply online free for a credit card that do not have anything to risk.
Another benefit of opting to apply online free for a credit card is that the individual is able to save a great deal of time when it comes to the application process and the response to their application. They can spend a few minutes on the application, and then instead of waiting days or weeks for a response, as was the case with mail in forms, the individual can often learn the results of their application within a number of minutes or seconds. Even if the company needs more time to process the individual, they are still able to save time in that they do not need to mail in their response, which can tack on several days to the process when it comes to time elapsed.
This makes the online application process much better of an option for people that are looking for an immediate response to their inquiries. This type of application process allows an individual to not only apply online free for a credit card, but it also allows the individual to immediately be aware of what their status is when it comes to a credit card. If they are declined, the individual is immediately made aware of this, and if they need to they can find a credit card that is more accommodating to their particular needs and qualifications. As a result, more people are able to enjoy having and utilizing a credit card in order to help with the purchase of goods and services that they may otherwise not be able to afford having to pay the entirety of the cost up front.
Every individual has the right to fulfill their dreams and various wishes. These wishes and dreams depend a lot on the availability of finances. If you are a service personnel looking for finances to fulfill some of the needs and desires, you can opt for personnel loan. This loan is specially crafted to meet your very demands at the best possible terms and conditions.
The amount obtained under this loan can be used to meet expenses on home renovation, purchasing your dream bike or car, meeting wedding expenses, paying college admission fees, going for a vacation or paying off all the existing debts to improve the credit score. This loan offers the necessary finances to take care of all your needs and wishes.
To make it more convenient and easy, lenders offer this loan in secured and unsecured form. The secured from of the loan can be availed if the borrower is ready to attach any valuable property such as residence, real estate etc as collateral. Lenders approve the amount on the basis of equity value of collateral. It means if you are placing collateral of high equity, you will be able to obtain a bigger amount. This loan option has larger repayment duration. The interest rates too are low as the amount is secured against an asset.
On the other hand, unsecured option of personnel loan does not have the clause of attaching any collateral. Instead of collateral, the amount is advanced on the basis of your income proof, employment status, bank statements etc. The amount is very limited and has short repayment duration. Without any collateral, the interest rates offered are slightly higher.
Bad credit individuals can also apply for this loan. However the interest rate offered will be slightly higher.
This loan can is easily accessible and can be sourced from lenders like banks and financial institutions. However to avail this loan at the cheapest possible rates instantly, it is preferable to use the online mode.
Personnel loan offers the best of finances to borrowers with the best of terms. This loan helps you to fulfill the various dreams and wishes without any financial constraint.
In the days of consumerism the tendency towards spending money has increased. Taking debts for maintaining an upfront lifestyle is no longer considered a sin. Instead focus has shifted to debt management help which controls debts to a manageable level and ultimately eliminates them.
Debt management help aims at effectively controlling spending habits through debt counseling and involves in eliminating debts forever giving borrowers the chance to start afresh. One of the many reasons of increased spending habits is the use of credit card which allows one to buy now and pay later. The user keeps on using it and awakes only when a huge bill reaches him.
Credit cards have unusually high interest rates which ultimately multiplies the total amount repayable. Add to it the fines of defaults; the picture becomes even grimmer. So the first step in debt management is to reduce the number of credit cards and control their usage.
For borrowers indebted to more than two creditors with debts amounting to more than £5000, debt consolidation loans offer a viable solution. Here all the loans are purged into a single loan. The borrower has to make a single payment to a single lender. The interest rate of debt consolidation loan is lower than the combined rate of multiple loans. This reduces the total amount of the loan to be repaid.
Borrowers can employ many agencies offering debt management help. They give professional advice to manage debts. Sometimes they negotiate with creditors to waive off high interest rates. They play advisory and active role in helping people in eliminating debts and improving their credit scores. An improved credit score enables borrowers in taking loans in future.
The greatest help, however, lies with the borrower himself. He has to make a budget and stick to it religiously. Control spending habits and then take debt management help to eliminate bigger debts.
The need of cash seldom arises when you are using a credit card. Cards are simple, readily available and does not cause too much of convenience. You can simply use it at any place at any time. When every other day you are getting lucrative offers on some other cards, definitely you will go for it. This is where it can cause a lot of problems. With increased used of multiple cards and their varying interest rates will create debt related problems. Instead of getting bogged by the debts, you can seek the assistance of credit card debt management program.
The main reasons for debts related to cards are simply because of its incessant use. Moreover, cards are a major source of high interest debts. So it is better to take precaution from the beginning itself. As a first step towards managing the debts, stop using your cards to meet unwanted expenses. It is better to rely more on cash transactions and prevents you from incurring further debts.
In the second and the final decisive step towards credit card debt management, you have to avail a debt consolidation loan. All your existing debts are merged in to a single amount which is then paid off with the help of the loan. The loan acquired needs to be paid back at a single interest rate. A single loan with a single interest rate is a better option rather having multiple loans with varying interest rates.
The debt consolidation loan can be acquired in both the formats of secured and unsecured. Secured form of the loan requires any valuable asset to be placed as collateral. It offers a bigger amount at very low interest rate. Whereas, unsecured from of the loan can be accessed without the need of advancing any collateral.
If you are having any confusion regarding the debt management, you can seek the advice of counselors who provide valuable suggestions regarding the debts. As of now you can use the online where in you can access loans and counseling as well.
Credit card debt management is a process which basically shows you how to manage the debts without loosing any financial credibility. Once you use the services, you can tackle the debts without any worry.
Most of the time, individuals do not take any precautionary measures while availing loans. Once they realize, it becomes quite unmanageable to handle. The pressure of debts is such that it takes a Herculean effort from the debtor’s side to get out of it. You may also face similar situation which will very much effect your financial position. If it occurs, then you can take the assistance of debt consolidation services which tries to offer solutions based on your prevailing circumstances.
The services under these programs are provided by lot of companies who specialize in handling this sort of crisis. These services programs provide a financial expert who will contact you. The expert takes a look in to your financial condition and will provide you a plan. The plan will provide you details on how to control your expenses as well as paying off the existing debts. Since the debts are of high interest rate, the financial expert will negotiate with the lender to lower the interest rate. In most cases, the amount paid towards the debts is always lower than what you were supposes to pay.
Moreover one advantage of availing these services is its accessibility. Even if you are tainted with a bad credit history such as CCJs, IVA, arrears, defaults etc can take the assistance of debt consolidation. Lenders knowing the financial condition, offers loans that too at very low interest rate and flexible repayment options. By resorting to this application, you get a chance to improve the credit score.
The modus operandi of these services is to combine all the existing debts in to a single amount. Instead of making multiple payments, all you are required is to make a single payment which assists you to save a lot of money.
Because of its beneficial feature and easy accessibility, these services programs are very much popular in the market at present. These services are also very much available and in fact can be obtained from the internet too. To get the best of the deals, you can look for online lenders who offer these services at the best terms and conditions.
Debt consolidation services help you to get out of debts and further assists in arranging the finances without any complexities.
You are completely seized within for your several debt burdens. These debts burden are staggering on your mind all time and baffling you continuously. You are unable to reach any conclusion, as your financial condition is tight and you are unable to pay the debts. You might have also irritated with unending debt burdens even after repaying it consistently. At that time, you need a specific advice to fight with your adverse situation. Now, you are helped with debt management advice that advises you for the best alternative and help you erasing your debt burdens easily.
Debt management advice can niche a plan to reduce your debt burden effectively. Assessing your credit situation and financial condition it can devise specific plan for you. Many agencies are providing debt management advice in the market and can be contacted offline and online both. Starting from the traditional banks and financial institution to several expertise agencies are working for your debt management. With the help of online method you can access a number of services providers that offer debt management advice at affordable cost.
Through debt management advice your outstanding debts are lowered effectively. The key process in this is to replace all your previous debt with a new one. This new loan carries a comparatively lower interest rate to that all of your previous debts. Thus, you have to now repay single installments for several of your previous debts with diverse interest rate. The key process of debt management is to lower your existing cost and make you capable on your exiting financial condition.
Debt management advice works to provide you with required help for your credit situation so that you can keep away from debt in future also. Considering your current financial condition these agencies can suggest or even arrange a specific loan plan for your solution. For that they can charge a certain fee or even work on the percentage.
Debt management advice not only helps you lowering your current debt burden, but it can also help you in your bad credit situation. In time when you have CCJs, arrears, defaults, IVAs etc., debt management can help you access the required financial assistance easily.
Debt management advice can certainly be an imperative solution when your outstanding debts have become unaffordable to your financial condition. Any delay in that condition can adversely affect your economic condition. When facing multiple debts, you need expert services which you can get with debt management advice.
Debts are caused very easily nowadays as the opportunities for getting money through loans are also on the rise. This is bound to happen with the increasing expenses that people have nowadays with comfort being the top priority. But they can still manage their debts easily with the help of online debt consolidation.
The borrowers can seek advice from professionals who will help them manage their debts. The services can be obtained through the online financial market so as to get better and quicker assistance. The professionals represent the borrowers with the lenders so that they can strike a deal of compromise to reduce the issues of debts.
There are various ways which the borrower can use to manage his debts. He can arrange such terms with the lenders such that he reduces the rate of interest on the debts. This will facilitate the repayment of these debts by the borrower and also help the lender in recovering his amounts.
The borrowers can also come to a deal where a lump sum amount is fixed by the mutual consent of both the lender and the borrowers. The lump sum that is agreed upon has to be repaid by the borrower to get relieved of his debts. With this way too, the debts of the borrower are easily managed. But of course, all the deals are first looked into carefully and only then are agreed upon.
They can even take up money through online lenders to repay their debts. This is usually done in cases where the debts of the borrowers exceed an amount of £5000 with two or more lenders. The new loan is borrowed at a lower rate of interest so this saves the money of the borrower as well. All these services can be availed online which will help in saving the money of the borrowers and get the assistance at lower cost.
Online debt consolidation facilitates the way you manage your debts. It is necessary to take all decisions very carefully and it is apt to have professional guidance for this purpose.
When there are so many opportunities to get money through loans available easily, then it is pretty much expected to see that debts are created for borrowers with an equal ease. The reasons for this may be numerous but the point lies in getting rid of them. So to remove these debts, it is easier that the borrower takes a debt consolidation loan for the purpose.
Through this loan, the borrowers can take up money for their purpose of removal of debts. This can be done by the repayment of the debts that are pending on them. The borrowers can use this opportunity for removal of their debts if they amount up to more than £5000 with two or more lenders.
This loan can be taken up by the borrowers in the secured as well as the unsecured form. It totally depends upon the amount that is owed by the borrower to the lenders. If the debts of the borrower amount up to £25000, he can take up the unsecured form of the loan. For this, the borrower does not have to pledge any asset with the lender. The money is obtained collateral-free and has to be repaid through monthly installments in a term of 6 months to 10 years.
If however, the borrower has debts more than an amount of £75000, then he has to pledge an asset like his car or house with the lenders to get the secured form of the loans. This form of money is required to be repaid to the lenders in a term of 5-25 years. The rate of interest for this form is however lower than the unsecured form due to attachment of collateral with the loan deal which assures the retrieval of the loan amount. Lower rates can be obtained with the help of online research and comparison.
With a debt consolidation loan, the borrowers can easily get the money that they need to repay all their prior dues. Financial issues can be easily stabilized through this way.
Managing debts efficiently is a very daunting task. It needs systematic and professional approach which later will assist in finishing off the debts. But without any prior knowledge and experience one should not go for it as it may create more problems. In case you do not want to get trapped further under debts, you can take the help of debt management services.
This program provides a systematic and practical approach towards handling the debts. You can access the services from various lenders and financial institutions that specialize in managing debts. Basically it is all about controlling the finances and remaining debt free for the entire future.
Under the services, you can seek the assistance of credit counselors who are experienced in their field. You can take counseling sessions with these experts on how to properly handle the debts. Moreover these experts take a stock of your problems and suggest ways which are suited best to your prevailing circumstances.
The same experts will also negotiate with the creditors to lower the interest rates on the debts on your behalf. This helps to reduce the monthly outflow of money which in turn will help you to save a lot of money on the interest rates.
You can also source a fresh loan from one of the multiple creditors or from a new one to consolidate all the debts. The loan is availed at a comparatively low interest rate. By paying off all the debts with the help of a single loan allows you a lot of benefits. Instead of paying multiple installments to multiple creditors, you will be paying a single monthly installment to a single lender. The debt consolidation loan can be availed in secured and unsecured form depending on your need and requirement.
The service program not only helps you in the present circumstances. It also provides a basic guideline to remain debt free for the entire life.
By availing debt management services, you should not consider that you will remain free of debts for the entire life. You are also required to take some cumulative steps in this regard. For instance, you should abstain from unwanted expenses and relying more on credit cards.
Most people more than one debt. You may have high interest credit cards, loans and mortgages. To pay off one debt you may need to borrow from someone else, creating yet another debt. The solution to this problem is debt consolidation loan. The concept of debt consolidation is quite simple. You take out a single loan which helps you to pay off entire of your liabilities. And then, you will just find one monthly payment plan to make. With the help of a financial expert you can lower down your monthly repayments by spreading them over a longer period of time.
You need to be a bit careful though. This kind of loan is considered to be the last financial resort. So if you start spending money again, then you better consider it again, since you could find yourself in a serious trouble. Most of such loans do require you to be a homeowner. No matter at all, if you are a tenant, you too can take advantage of such money provision with the help of unsecured form of consolidation loan process. On the whole, usually secured for of borrowing I is done against a piece of your worth property. Such money provision happens to be cost-effective and you get it at lower rates. On the other hand, unsecured form of money provision is obtained without any sort of pledging placing. you secure the provision well after a small personal check of yours like your credit records, your employment-ability, and of course your current financial circumstances etc. sometimes it is said that it is necessary for the loan to be secured. The reason is each person who applies for a debt consolidation loan is classified a credit risk and has a track record of getting into debt. To make up for this risk, the money lender will ask for security to be placed against the loan. In the event, if you fail to make your loan payments on time, you may lose your security.
To apply for debt consolidation loan is getting easier day by day. Now, you can apply for such loan online. You should first organise all of your pending bills and debts at one place. After try to contact a legitimate consolidation company. Furthermore, when you apply for consolidation service, you will be asked to describe the overall nature of your debt situation. Considering entire of the fact into account, the company provides you with the sum you need to repay your liabilities in full.
You may be facing unwanted harassing calls from your creditors for their loan repayment. There are calls for the commercial agencies to include warnings in their advertising about the fees they charge. In this prospect, performing an effective debt management programme means presenting a financial statement to creditors on behalf of debtors. In general, under debt management services you are suggested to consolidate all your debts into one lump sum and then negotiate with your creditors to pay it off over a longer period. Although the payments can seem less because of the longer repayment period, there can be sizeable fees involved and your credit rating could be damaged.
Sooner than going on with the process of debt reform, weigh up all the repercussions. After assessment, debt restructuring seems to be the only feasible way out to your immediate problems. You need to just keep in mind to practise caution along the way. Restructuring debt is helpful but it could also have a degree of harmful impact on your management service.
You always anticipate of lowering down you repayment plan. Working towards lowering you payments and interest rate is not a big deal. You can either contact your creditors or seek assistance of a financial expert to discuss it for you. Counselor is a financial expert who can help you best to deal with the severity of your debt elegantly. He will gladly set up a payment plan. In some cases, with reduced payments, and if you stick to it, your credit rating may be saved.
If you need debt management services, you will need to select a right creditor or a company to work with you. By selecting the right management services, you can enjoy debt-free life and a rational debt reimbursement plan. If you select the wrong company, you may have to experience higher debts, late fees, high costs, and in some cases, even legal action from your creditors.
So, take your time and make a good search for your debt elimination plan so that you may make your life debt-free.
As you might recall, these articles began with the premise that paycheck-to-paycheck employees generally do not earn enough money to live the lives they desire while working and to retire to the lives they desire as well. Unfortunately, most employees don't experience the lives they desire before nor during retirement because not earning enough money is really at the heart of not fully engaging in saving for retirement. The second premise is that employees are conditioned very early in life to be "employee-minded" and to look to the paternalistic Corporate and Public Sector companies and agencies to provide jobs for them. Only a very few escape this conditioning and move themselves to financial independence.
Premise number three is that over a person's life, the conditioning (the consistent thoughts, images, and habits) he or she receives constructs that person's Self-Image or Map of Reality. Nearly all people unknowingly allow the Self-Image to take control of the routine affairs in their daily lives, including what thoughts, images, and habits are called upon, so much so that their lives are on "automatic pilot" most of the time. The Self-Image becomes so dominant that it will only allow in a new thought, image, or habit with which it has a very strong affinity. At some point a shift must take place in the Self-Image to increase your opportunity to earn more money.
Premise number four is that even if a person becomes dissatisfied enough with her or his financial situation to attempt making a change, there is about a 95% chance that she or he will "try" to improve only for a short time. Without knowledge of how the mind works and without awareness of the presence of the Self-Image, she or he will soon find herself/himself "defeated' at every attempt to improve financially and will gradually return to her or his old "normal" life.
The fifth premise is that the use of affirmations is one of the most powerful ways to influence and change the Self-Image and condition the mind to attract more money into one's life. The Self-Image will not give up its seat of power easily, however, and will release tail-enders to counter each of the well-intended affirmations. A person will need tools to succeed. There are many tools available other than those I shared in the article entitled Saving for Retirement - Tools You Can Use. Most personal development authors, gurus, and life coaches offer tools including hypnosis, meditation, seminars, and retreats to name a few. Without tools to work with, bringing about a shift in the Self-Image is like climbing Mt. Everest; possible but not likely to happen.
The sixth premise is that the majority of paycheck-to-paycheck employees will have to live on retirement income that is significantly lower than their pre-retirement income.
Even though you earlier made a "do not want" list that you flushed out of your life (symbolically) and constructed a "do want" list which has become the things and conditions you now concentrate your focus on more, I want to introduce one more list. This list comes from a powerfully influential book called The Millionaire Mind by T. Harv Eker. Mr. Eker basically divides the people of world into two groups, rich and poor. You might also remember my reference to Robert Kiyosaki's rich dad defining the difference between rich and poor people by saying that their thinking is not only different but "opposite". The following is a partial list of the ways Mr. Eker contrasted the thinking and actions between rich people and poor people.
"Rich people believe 'I create my life.' Poor people believe 'Life happens to me.'"
"Rich people play the money game to win. Poor people play the money game to not lose."
"Rich people are committed to being rich. Poor people wish they could be rich."
"Rich people think big. Poor people think small."
"Rich people focus on opportunities. Poor people focus on obstacles."
"Rich people admire other rich and successful people. Poor people resent rich and successful people."
"Rich people associate with positive, successful people. Poor people associate with negative or unsuccessful people."
"Rich people are willing to promote themselves and their value. Poor people think negatively about selling and promotion."
"Rich people always focus on the opportunities in their problems. Poor people always focus on their problems."
"Rich people choose to get paid based on results. Poor people choose to get paid based on time."
"Rich people focus on their net worth. Poor people focus on their working income."
This is not the entire list, but I think you get the point. As you can see, the "poor people" statements are diametrically opposite the "rich people" statements. Here's a quick test for you. Read the statements again and imagine for a moment that all of the statements about rich people apply to you. Observe whether you feel any negative emotions, no matter how small, related to any of the statements. If you do, make a note to yourself that you had a negative reaction to whichever statement that applies.
Remember, you do not have to live on less in retirement. No matter where you are right now financially, you can build and enjoy a Million Dollar lifestyle retirement.
Get your Car loan approval with Bad Credit!
Know your Credit Score Before you apply
How bad is your credit? It may not be as bad as you think. If you walk into a car dealership without knowing your credit history you are at their mercy. They can basically tell you whatever they want and it will cost you when you get a high interest rate. Some car dealers will lie to you and tell you your score is lower than it is, thus justifying why your interest rate is so high. First and foremost you most know your credit score. Do not rely on the free credit reports because they will not give you your score. The money you pay for a complete report with the score included will be minor compared to what you may end up paying in excess interest for being ignorant. MyFico.com is one service that will give you all 3 scores.
You must run your credit report. There may be some things on there that will greatly affect your interest rate. Some bad credit can be corrected. First and formost get rid of any bad blemishes you can dispute. Close any open credit cards you don't need or use. Pay down or pay off your credit cards. Do not blindly apply for a loan and get declined or get a high interest rate because of factors you can control. If your score is below 620 you will a subprime buyer and you will pay the higher interest rates. Each lender has its own definition of what constitutes a subprime borrower.
Apply online for a loan first.
There are many lenders that will finance subprime buyers. It is in your best interest to get approved before you go to the dealer to buy. This way you know exactly what interest rate you should be paying. The dealer will not do what is in your best interests and you may end up paying more than you should. Shop around, because rates will vary from lender to lender.
If you want to use the dealer for financing.
It's ok to use the dealer for your financing as long as you are prepared for their tricks. Have a copy of your credit report in your hand so they cannot lie to you about your score. Know what the current loan rates are and let them know you will not accept a higher rate. Be prepared to get up and leave if they won't meet your demands. Most dealers have access to many lenders and if you push them hard they will shop the best rate. One place to look for the interest rates on cars is BankRate.com Just because you have bad credit does not mean you should be bullied into accepting a deal you are not happy with. Just say no thanks and go to another dealer.
Here is a list of questions you must ask when in the finance office:
1. What is the precise (to the penny) price I am paying for the vehicle?
2. What is the total amount being financed?
3. What is the dollar amount I'm paying for the credit (finance charge)?
4. What is the exact amount of each payment?
5. What is the total number of payments? Dont get sucked into a 6+ year loan to get your payment lower.
6. Very Important! Is this deal contingent on getting subsequent approval of the financing from a third party? Watch for the "Subject To Financing" clause on the contract. This is where they nail you. they send you home with a so called approved deal and call you several days or weeks later to inform you that the financing fell through and they can't get you the rate they quoted, but they found a lender who will cover the loan at a higher rate. Make sure the deal is approved by the lender before leaving the lot. If there's any question, tell the dealer you'll come back and get the car when everything is settled.
7. Is there a pre-payment penalty if I pay this loan off early?
We advise you to get your car loan online and bring it to the dealer. This allows you to focus on the selling price of the car instead of the monthly payment. You can also use your online approval as leverage against the finance office at the dealership. If they can beat your loan approval you can consider them for your financing.
Buy Here Pay Here as your last resort.
You have tried every lender and have been denied. You have looked at your credit report and know why you are being denied. At this point you must decide how bad do you need a car? There is one final way to get a car. There are many "Buy Here Pay Here" dealers so don't get strong armed into a car that does not fit your needs. Be very careful that you are buying a quality used car or you will end up with a piece of junk that is in the shop more than on the road. Many of the smaller dealers buy unwanted auction and wholesale cars that may not be in very good shape. You have the option to walk out of any dealer that is trying to sell you a high mile piece of junk. There are a lot of big dealers that sell quality used cars that offer in-house financing. Always explore your options before you sign anything. You should avoid any dealer that is offering 20% + loans. You should expect to pay around 18% or lower.
Bring the right paperwork to speed up the process. Most dealers want the following paperwork when you process a loan with them. Have the following items in your folder when you arrive at the dealer. Drivers License, Proof of Auto Insurance, Financial Info (bank and credit card account info), Social Security Number, References, Proof of Employment and paystubs, Proof of Residence, Current phone bill or other utility bill), and a down payment. We advise you to call the dealer first to get an exact list of what they require.
Find out what type of payment do they take? Do you have to deliver the payment or do they take payment over the phone or online? What is their late payment policy? If you are late on a payment you do not want to wake up and find your car has been repossessed overnight. Do they sell low mile quality vehicles? It is in their best interests to sell quality cars but there are dealers out there that sell junk. Do they report to the credit bureaus? You want your good credit history with them to be reported to help build your credit score back up.
Repair and improve your credit!
Bad credit can be fixed. It takes time but it is worth the effort. Although you may be in a high interest loan today, if you work hard at improving your credit your next car loan will be much lower. Watch out for credit repair companies that promise to fix your credit fast. If you are going to use a credit repair company make sure they are reputable.
Your Essential Starter Guide to INVESTING MONEY!!
If you have been working for some time, you probably have accumulated some form of savings, and the first mistake we don't want to make is to let the money stay idle.
Imagine your current savings like a little plant, you need to constantly give it nutrients and provide the right conditions for growth to take place. Hence, if you are someone who always place your savings under a normal saving account in a bank, it is time to relook at other alternative forms to grow your money - better and faster.
One approach is through Investment. Sounds like a taunting term, and one which many people do not understand and hence never got the chance to take the first bold move.
Today, I will be sharing with you an Introduction Guide to Investment, and hope to build up your knowledge and confidence in this field to take the right decisions.
What is Investing?
1) Investing involves the purchasing and selling through financial tools including stocks, bonds, options, certificates, and more.
2) Investing can be done through financial advisors or personally, although financial advisors will charge you additional fees for their services, but they could be valuable sources of information and help.
3) Investing can be easily performed at home with a computer with an internet connection.
How to start Investing?
To start investing, you must have surplus cash. Rule of thumb: You should have at least 3 months of liquid cash - i.e: ready cash to tide you over in terms of emergencies.
Given the tons of different stocks and mutual funds in the market to choose from, it is essential to follow a few methologies to ensure better selection and return on investments (ROI) in the long run.
3 Simple Investment Methologies
1) What to buy?
2) When to buy?
3) When to sell?
What stocks or funds to buy?
The entire market consists of over 10,000 stocks, so how can we narrow down our selection to the elite stocks, and make the right buying decisions? Luckily, we have indicators such as the Dow Jones Industrial Average, the S&P 500, and the Wilshire 500 among others on the New York Stock Exchange.
The Dow JOnes reflects the average stock prices of top 30 largest companies.
The S&P 500 reflects the average stock prices of top 500 companies, representing companies that are worth 75% of the entire stock market value.
The Wilshire 5000 reflects the average stock prices of top 7000 companies.
One proven worthy strategy is through index funds, i.e invest in the indicators itself. There exists a special mutual fund which is made up of all 500 stocks in the S&P 500. This means that only are you investing in the top companies, you are also diversifying and lowering your risks, and maximizing your potential gains in the future, given the proven track records of these companies in order to be listed in the S&P 500.
What about those professional managed funds? Are those worthy of consideration? See below for clear advantages of index funds over those professional managed mutual funds.
Index funds
Lower costs, 0.2 percent
Low transaction fees
Lower tax
Low portfolio turnover
Professionally Managed Funds
Higher Cost, >2%
Higher transaction fees
Higher Tax
Higher portfolio turnover due to higher risk
Hence, for a starter to investing, the safer and obvious approach is to invest in index funds given the lower costs, higher stability, and proven good past performance records.
Are you going to trust the financial advisor and give him your hard-earned money, for them to give you false promises of high returns, and charging you exorbitant fees to support their own commission pockets. NO !!!
Hence, ANSWER on what to buy is clearly combined "INDEX FUNDS".
When to buy those stocks or funds?
We all know the benefits of compunded interest, so the faster you start buying, the more money you get to compound.
ANSWER is "Right Now" !!
You dont need to have a big lump sum of money to start, you can also invest in a periodic manner, for example invest on a monthly basis. While doing that, you are also practising dollar cost averaging technique, which is a very powerful technique. Since prices often fluctuate, there are months where the prices are slightly lower and as a result you could buy more with the same monthly investment amount you have committed to. As a result, your total portfolio value will increase substantially due to more shares bought during lower prices.
The trick is not to freak out and do massively selling, when the stocks are going downtrends for that month. By buying the combined index fund, you are already lowering your risks, coupled with the power of dollar cost averaging, you can now ignore the fluctuation of the market totally.
When to sell those stocks or funds?
After knowing what to buy, and when to buy, you also want to know when is a suitable time to sell those stocks or funds.
ANSWER: The later the better.
Based on the stock market history for the past 50 years, it can be observed that the longer the investment, the lower the risk. Based on past data, we observe the following:
Holding Duration / Risk of loss %
5 years / 15%
10 years / 5%
15 years / http://investmoney101.blogspot.com/
No one likes to think about losing their job, but preparation is the best form of defence in financial matters. This is especially the case if you have monthly mortgage repayments to pay, or have loan repayments or credit card debts. Redundancy insurance could give you a lifeline if you found yourself unemployed.
Jobs are not safe today and sadly you could become a statistic. However, by having a policy to fall back on you could receive a tax-free income that allows you to continue financing your debt repayments. Payment protection can be taken out in the form of mortgage payment protection, loan payment protection or income protection. All these policies cover against being made redundant and for an extra premium you can also include being unable to work due to an accident or illness. You need to consider carefully which type of policy most suits your needs. Once you have read the terms and conditions and have determined the most suitable policy you can compare quotes for the cheapest premiums.
When looking at cover you need to be aware that all policies have exclusions that can stop you from being eligible to claim. The exclusions can differ slightly from provider to provider but there are some present in all policies. People who are in part time employment, are self-employed, or are suffering from a pre-existing medical condition or who are retired would probably not benefit from holding a policy.
Just as the policy details vary, so does the cost of payment protection insurance. A policy can be offered at the time of borrowing from the high street lender. However, often this can cost up to five times more than buying cover independently. If you can benefit from taking out a policy then get quotes from specialist providers. The quote a specialist provider gives will be based upon how much you wish to insure each month and your age. Quotes are given immediately and you have all the information needed to make an informed decision there and then.
If you have mortgage repayments to make then mortgage payment protection can give you peace of mind. It would allow you to receive a tax-free income once you had been out of work for between 30 to 90 days. Cover would then continue, providing you with enough to cover your mortgage repayments and related outgoings such as insurance for between 12 to 24 months. The income could stop you from getting into arrears with your mortgage and losing your home.
For peace of mind when it comes to loan or credit card repayments then loan payment protection can be taken. This would allow you to continue repaying any credit card repayments or loan repayments each month without the worry of getting into debt. Income protection would protect your income in general and provide you with a percentage of your monthly income. This would allow you to continue living your lifestyle without having to make drastic changes or struggle to find the money each month to pay your outgoings.
While you might think you would be able to live on the money received from being made redundant, this would soon dwindle away if you had to take care of your mortgage. Some individuals believe the State would step in and help if you lost your income. But to receive support from the State you have to qualify, and even then you receive very little help and usually have to wait for many months before seeing any benefit.
A specialist provider will always be able to give you the cheapest quotes for redundancy insurance but more importantly they will provide the key facts of the policies they sell so that you can make a suitable choice.
