Using a Debt Consolidation Program to Help you Out of your Financial Jam

Author: Jon Arnold | Posted: 22-02-2008 | Comments: 0 | Views: 1 |

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You don't want to think about debt consolidation. Sometimes debt can catch up with you before you even realize it has been chasing you for a long time. Most people do not intentionally dig themselves into a debt pit. But sometimes the financial obligations can be overwhelming to the point where you need to look at the best options to get back on track.

In fact, the majority of consumers in the US who find themselves with more debt obligations every month than they have income have found themselves in that position due to no real fault of their own, at least not directly. Most people find themselves in this very undesirable place due to circumstances outside of their direct control, such as a divorce, a job layoff, very high medical bills, and similar things that they have little to no control over.

But the reality of it is that sometimes you have no choice and need to keep yourself afloat financially. Typically, this period of hardship is hopefully a temporary one, where you just need to be able to weather this temporary setback until you can get back on your financial feet.

Seriously consider a good debt consolidation program. This is also applicable to new college grads that have a ton of student debt, where the same company can usually provide a student bill consolidation to accomplish the same purpose. A debt consolidation program is much better than taking out a personal loan, because with a personal loan you are simply digging your hole deeper, which is not the direction you want to go. Bankruptcy is probably not your best option either, since the long term negative effects of bankruptcy will haunt you for the next 7 to 10 years via a huge blemish on your credit report.

But be aware of what a debt consolidation company does and what they don't do. They do not pay off your debt all at once. You turn your bills over to them and then you make payments to them every month. They work with your creditors to lower each of your payments and reduce your interest. So if you had say $3000 a month going out before to satisfy your monthly bills, the bill consolidation company might be able to reduce that to perhaps under $2000 a month, giving you the financial breathing room you need right now.

These companies are very experienced in doing this, and can frequently also reduce or sometimes even waive the accrued interest that has built up on some of your outstanding financial obligations. This aspect in itself can save you a ton of money.

Another huge benefit to you is that you only need to make ONE payment each month, which is to the consolidation company. Compare this to making separate payments to 10, 15, 20 or more different creditors each month at different times of the month.

Seriously consider a debt consolidation program to help you out of your current jam. It's nothing to be embarrassed about and can put you back on the right track from a personal finance aspect.

Refinance Mortgage Loan: Shorten Your Loan Term

Author: Rony Walker

A 15-year loan term has many advantages, although it may appear to be expensive because of the higher monthly amortization. However, a shorter loan term assures you that you'll be free from this burden before or at the time of retirement and save thousands of dollars. Consider having your loan restructured to a shorter loan term.

Benefits of a Shorter Loan Term

The prospect of spending 30 years paying back a mortgage is discouraging. If you have 20 years remaining on your loan, the option to shorten your loan term to 15 can be tempting. Taking away 5 years from a 20-year loan means a higher monthly bill, but freedom from the mortgage after 15 years instead of 20 is definitely more appealing. But if it's only a matter of a few hundred dollars more, why not? Never mind if you'll be paying a higher monthly bill.

You'll be saving thousands of dollars from interests alone with the five years knocked off from the 20-year loan term. Another benefit is building your home equity faster. A refinance mortgage loan offers the chance to restructure your terms.

What's Involved

For a home mortgage, the lender will pull your credit record to check if you've been paying your debts on time. You'll also be paying the fees involved before, during, and after your loan is processed.

The lender will assess all the information to evaluate if you are a good risk for a shorter loan term. If you're dealing with the same lender, the process won't be as rigorous and as lengthy like it would be if you go to a new lender.

It's a fact that lenders prefer long-term mortgages because it rakes in more profits. To counter loss in future profits, lenders penalize borrowers for paying their mortgage ahead of term. This is why prospective borrowers should always inquire if the lender charges prepayment penalties.

Assuming that your lender does not charge penalties on prepayment, you have to contend instead with the closing costs for your refinance mortgage loan.

Others get a refinance mortgage loan to switch to a short term interest only loan. They are banking on the equity of the house and intend to sell it in the near future. The proceeds of the sale will go to the interest and they can still have extra money from the profit. In your case, you're looking at the full ownership of your home in a shorter time.

For a new loan, you can decide if you want a fixed rate mortgage or an ARM. An online calculator can compute how much you're going to pay the monthly bill in 15 years' time. From the calculations, you'll be able to determine the feasibility of a short term ARM or fixed rate refinance mortgage loan.

Short Term or Long Term?

A short term, or traditional loan, will always depend on your financial situation and future plans. A short-term refi is ideal now that interest rates are low. You'll be surprised that you'll be paying the same monthly fee as your first mortgage, so there's not much of a change in the monthly bills. The prospect of paying off your loan in 15 years, however, is imminent. For those who feel secure with the stability of the traditional 30-year loan term, switching from an ARM to a fixed rate refinance mortgage loan is recommended.