How a Debt Consolidation Loan Can Save You Money.
If you continuously find yourself going month to month paying the absolute minimums on your credit card and other revolving debt accounts, there is a way to start making a dent in all this debt. You have a variety of options to pursue from pursuing legal advice, debt negotiation, or simply creating a payment schedule that helps you to organize a structured payoff.
You've probably noticed your principal balance rarely, if ever decreases. WHY IS THIS? The answer is simple. The longer the banks and finance companies keep us in debt, the more PROFIT they earn. When we pay 18%-21% on our revolving credit cards, it's extremely difficult to pay any additional principal payments to reduce the actual balance owed.
Let me give you an example. Assume Mr. and Mrs. Smith have $15,000 in total credit card debt at an average of 19%. Their monthly minimum payment (which consists of 65% interest and 35% principal) would be approximately $375. Here is where it becomes very tough to get ahead. Of that $375 minimum payment, only about $138 of that goes towards actually paying off the $15,000 balance. When next month comes around, they start out owing $14,862, plus any additional charges they make during the current month. This is where many consumers get in trouble.
Sooner or later Mr. and Mrs. Smith will find themselves having to make a choice: which bill they will pay this month and which bill will have to wait until next month. This is how many of us start building troubled credit records. We simply have to make tough choices and pay what must be paid.
A Debt Consolidation Loan can help. Whether YOU consolidate your outstanding debt into a new first mortgage or create a new second mortgage to pay off all of your outstanding debt, you can benefit in a number of ways from this type of transaction:
Most importantly, you will save on your monthly payments. Usually between $100 and $400 every month, while simultaneously reducing the principal on your debt. (This will vary based on how much debt has been consolidated).
The rate on the new loan will be anywhere from 5%-10% lower than the existing rate on credit card and other revolving debt.
While the interest portion of your monthly credit card and revolving debt is not tax deductible, the government still allows us to deduct the interest on most mortgage payments. (Check with your accountant to see what portion of your loan may be deductible.)
The rate at which you amortize your balance will increase dramatically due to the much lower interest rate you are paying. This allows you to get out of debt much sooner than you would have, had you continued paying high monthly minimums on your credit cards.
Even if Your Credit is TERRIBLE, You can be helped!!
Don't be left hanging every month. Regardless of your past credit history, there are a number of different ways to get you financed at reasonable rates.
SLOW PAYMENT RECORD
A majority of Americans have at some time made late payments on their outstanding debts. These late payments have become part of today's "easy credit culture". Of course, the number of these delinquent payments varies widely among the population.
Most refinancing companies understand the financial pressure and burdens placed on consumers today. What does this mean to you?
This means you should never decide not to qualify for a loan just because you've made various late payments over the years. Even if you've had severe financial setbacks that have forced you to skip mortgage and revolving debt payments, never assume you can't qualify. Give the debt consolidators the opportunity to go to work for you.
According to bankruptcy experts, you should definitely start to rebuild your credit right after bankruptcy. The lenders will be looking to see if you have demonstrated good financial management since your bankruptcy. If your bankruptcy was discharged as little as 24 months ago and you have re-established good credit since then, you may qualify for our best programs. If it hasn't been a full 24 months, you may still qualify for a program with only a slightly higher interest rate.
Escaping debt requires sacrifice. You cannot buy or renovate a new house if your have debt to pay. You must wait. One of the most painful aspects of buying on credit is paying off the bill. But getting out of debt is critical if you want to get on the fast track to financial independence, financial experts say. It will take time. It will involve sacrifice. But the sooner you can eliminate debt the sooner you can start really saving and investing for retirement........read more.
If you've had a foreclosure that was recorded 36 months ago and have re-established good credit since then, you may again qualify for the best programs. If it hasn't been a full 36 months, you still may qualify for a program with only a slightly higher interest rate. Bankruptcy and foreclosure cases will depend greatly on the circumstances of the individual.
If your credit history displays unpaid collection accounts, some institutions will require you to pay off unpaid collection accounts before closing their new loan. Other institutions may allow you to close their loan without repaying the accounts in full. Although collections may appear on your past credit history, this in no way automatically restricts you from receiving some of our best programs. Once again, this depends on your individual situation.
HIGH DEBT TO INCOME RATIO
If your debt to income ratio is high, don't worry. Mortgage Brokers have programs that allow borrowers to go as high as 65% on their loan. In other cases, they can recommend programs that will bring your ratios down for the first year simply to qualify you for the loan.
Documents Required When Applying for a Mortgage.
Different programs require different documentation. Below is a fairly complete list of documents one may need in processing mortgage loan. REMEMBER – Some loans require very little documentation, while other loans require a great deal. We will let you know what is needed in your particular situation.
Two Most Recent Year To Date Pay Stubs
Last Two Years W-2 Forms
Three-Month's of Bank Statements
Insurance Declaration Page
Plat Of Survey
Title Insurance Policy
Most Recent Monthly Statements For All Obligations
i.e., credit cards, loans, department store charge cards, etc.
Year End Or Most Recent 1st Mortgage Statement Showing Balance
Last Statement For Checking, Savings, Money Market and any Stock or Investment Accounts
Copy Of Real Estate Tax Bill
Second Mortgage Disclosure Papers if one Exists
If Commissioned Employee: Last Two Years Complete Personal Tax Returns With all Schedules and Evidence of Year to Date Earnings
If Self Employed: Last Two Years Complete Personal and Business Tax Returns With All Schedules, Year to Date Profit and Loss Statement and Current Balance Sheet
If You Own Any Rental Properties-All Leases Pertaining to the Property
Copy of Sales Contract if you are Purchasing a Home
If you are Requesting a Large Sum of Cash Out of the Loan, a Quick Letter Explaining What you Plan to do With the Proceeds
Copy of Divorce Decree if Applicable
If you are Not a U.S. Citizen - Copy of Your Green Card or H-1 or L-1 Visa if you are Not a Permanent Resident Alien
Bankruptcy Decree and Dismissal Decree if Applicable