Debt Consolidation – Good or Bad?

It seems that everywhere you look these days you can find ads trying to entice people to consolidate debts.

The usual catch-cry goes something like this: “Put all your personal debt (car loans, credit cards etc) into the home mortgage AND cut your repayments in half!”

Let me tell you – those ads are RIGHT. You really could cut your monthly repayments in half. Imagine how much extra money you’re going to have in your pocket each month if you just called a consolidation company or lender and let them fix it all up. What those companies DON’T tell you is that when you consolidate you could end up paying WAY more money in the long run for something you probably don’t even own any more.

How They Do It

Let’s look at the sales-method calculations used by consolidation companies and see how they really CAN halve your monthly repayments.

Home Mortgage: $120,000 at 7.5% over 30 years = $839.06 per month
Car Loan: $15,000 at 10.25% over 5 years = $320.55 per month
Credit Card: $5,000 limit at 18.25% = $80 per month (interest only plus small nominal payment)

Your total monthly expense for the example above is: $1,239.61 per month.

Now, your consolidation company would tell you that if you put your personal debts into your home mortgage and refinanced them, you could cut your monthly payments dramatically!

If you refinanced your home mortgage to include your personal debts, then your NEW loan amount would be $138,000 ($120,000 + $12,000 + $5,000 + $1,000 closing costs = $138,000)

New repayments for a loan of $138,000 at 6.5% over 30 years = $872.25 per month
That’s a potential saving of $367.36 every month. Wow! An extra $367 in your pocket every month. Imagine what you could do with that! No wonder those debt consolidation ads are everywhere you look.

Okay – we didn’t cut your repayments in half, but you can be sure that if I’d used bigger numbers and higher interest rates, I could have worked out a way to show you a GREAT sales pitch for consolidating your debts.

How We See It

The reality of the situation is a little different…

You see, if you continued to pay your $15,000 car loan at $320.55 per month for 5 years, then at the end of 5 years, you would own that car.

Paying $320.55 per month x 60 months (5 years) = You would have paid $19,233 for that car over 5 years.

But if you consolidate that $15,000 into your home mortgage, it will take you up to 30 years to pay off the same car. Let’s see what happens if I work out the cost now…

$15,000 at 6.5% over 30 years = $94.81 per month x 360 months (30 years) = $34,131.60 for the same car!
Would you pay $34,131.60 for a car you know should only have cost $15,000? I know I wouldn’t!

I’m guessing that in 30 years time you won’t even have the same car any more, so you’ll probably be paying off a different car (or two) by then AS WELL.

The same principle applies to your credit card. Will you even remember what you bought for $5,000 in 30 years time? Not likely?

Before you consolidate your debts onto your home mortgage, ask yourself if you couldn’t perhaps budget your current income just a little differently to avoid having to get into a situation that just keeps you in debt even longer than you already will be!

No equity loan

A no equity loan is known in the real estate industry as a “high loan-to-value (LTV) loan.” These are also known as 125 second mortgages, meaning that the borrower can obtain a loan putting his/her indebtedness on the house at up to 125% of the home’s value. It is a home equity loan for homeowners with no equity – a hybrid loan that is secured, but isn’t. A no equity loan is a high-risk venture for both borrower and lender, in the sense that everything has to go right in order for the loan to be repaid and the homeowner to get out of a cash-strapped situation.

No equity loans are not cheap. The interest rates on are extraordinarily high. They typically run two to six percentage points more than the rates for traditional home-equity loans – you can expect an interest rate in double digits. The fees for no equity loans are also going to be higher than for traditional loans. It is quite possible that a no equity loan will cause the mortgage insurance requirement to activate again, if it is not already present.

In the case of the 125 no equity loans, only a portion of the interest rate will be deductible. The IRS says that you can deduct interest payments on primary home debt equal to 100% of the home’s value. Any debt secured by the home beyond its value does not qualify for the tax deduction. It’s possible that your no equity loan won’t carry the tax deduction which is applied to both first and second mortgages that are secured by home equity.

A no equity loan is also going to limit your options with regard to mobility. If you take a new job in another state, you are going to have to sell a house that you will still owe money on after the sale. That means coming up with the cash balance to make the lender whole, in order to complete the transaction. People who are desperate enough to consider a no equity loan aren’t likely to have that kind of cash in the savings account.

The no equity loan is usually recourse for those people with serious cash flow problems. But defaulting on a no equity loan is different from falling behind in your credit card payments. In the case of the loan, you are in danger of losing your house. The fact that it is a “no equity” loan does not mean that the lender cannot come after the house, should you begin to miss payments.

Instant approval payday loans

The financial institutions in Florida that work with money often lend them to the people in need under the certain percent called interest rate. This lending of money is called crediting today, and has been known to the humanity for a long time, probably from the time when money appeared. And it is nothing weird in the fact that the one who has money gives it to the person who needs it at the moment.

Once only individuals dealt with crediting process, because the individual were the ones accumulating money. But step by step special institutions called banks were created. The more money was possessed by the bank, the more safety was requested from its workers and the more complicated the crediting process became. As the result today any person needs weeks to receive the approval of credit granting from the bank no matter what the amount he or she is asking for. And no one will go to the bank to ask for $ 100, also this hundred may sometimes be needed very urgently.

But our life goes on, and the needs for money may arise any time. What to do if the urgent bill in left unpaid? Not to panic, first of all. And to look for the help in the internet, where plenty of webpages are offering solutions for such situations, and the most popular answer is 30 day loans – this service is sometimes better then the bank credit because it is fast to apply for and to receive.

The simple application will require from you to indicate some personal information to identificate yourself and your job situation as well as to find out where to transfer the money. No complicated information and documents are needed, and there will be no waiting for the approval from many people. Instant approval payday loans are good because they are approved instantly, which means you’ll receive money very fast, sometimes in some minutes after you have applied.

The same way as for the other loans, loans till payday are returned in several weeks with the fee – the client may come in person or sign off the necessary sum from his or her account. After the first loan is returned the person becomes a constant client of the company, because the following loans can be ordered even easier by the phone.
For a 24 hour payday loan you do not need to send faxes or bring documentation. No one will ask you why the money is needed, so you can spend them on whatever is liked by you. Just fill in simple on-line application and enjoy the life!

So when you receive an unexpected bill, when your car broke down in inappropriate time, when you need to make a good deal, but you are short on money do not hesitate but use the convenient guaranteed payday loans service. With this you’ll save your time, nerves and get whatever you want in no time!

Short for rent this month? Get a payday loan

It is end of the month and most places you have to have until tomorrow (the 3rd) to submit your rent or you will get a late fee penalty. Penalty on rent can be costly anywhere from $25 – $75 in Florida. So if you think you’re going to be late on your rent simply because you don’t have enough cash until the next payday, we recommend looking into borrowing money from a friend or relative and pay them back when you get paid. But if that is not an option, there are other things you do.

Taking a payday loan from a trusted lender could be an option. Everyday, there are thousands of Americans that rely on these trusted online lenders to help them with their short term cash needs. And very often, payday loans can be less expensive than the late fees you be paying to your landlord.

In fact these are the reasons where you should consider taking a payday loan or other short term loans. If you have a credit card, you can take a cash advance but make sure you learn all about their fees and risks by reading the fine prints. Traditional credit card cash advance loans can be a lot more expensive than payday loans, because they will have an advance fee, also will have higher APR than your credit card balance. In addition, taking a cash advance from credit card could reflect on your credit and could possibly hurt it as taking a cash advance loan could be interpreted as a negative point on your credit history.

But the great thing about taking payday loans are that they are often given based on your paycheck not your credit, which means as long as you pay them back, they will never be reported to your credit and won’t hurt your credit. They are less risky to take than other short term loans, and they are fast and convenient.

Take advantage of a payday loan to make immediate debt payments

Are you in urgent need of cash to pay off your store, credit, utility or grocery bills? If yes, then you can take advantage of a payday loan to pay off debt and get momentary relief from your emergency financial crisis.
Payday loan – What it means

Payday loans are short term cash advances, which are generally given to you against your next months salary. You can take a payday loan to pay off debt toward any bill. You can even take the loan to make the minimum payment towards your mortgage.

All you have to do is give a post-dated check to the lender, this will include the loan amount, transaction costs and the interest. The lender will get back his money by processing the check on your next payday. The pricing model is very simple, for every $100 you need to pay a fee of $25. So, if you borrow $1500, you need to pay back $1850.

Eligibility criteria for getting the loan
Prior to giving you the loan, the lender takes into consideration the following factors:
• Bank account: You should have a valid bank account. You need to provide the lender with the bank statement of the last 3 to 6 months.
• Fixed income: You should have a permanent job and a regular income. As proof of your income, you need to furnish salary stubs for the last 3 months.
• Age and residence: In order to get the loan your age should be at least 18 years and you have to be an American citizen.
Benefits of a payday loan

Some of the advantages of a payday loan are:

• You can get the loan for any reason
• You may get the loan instantly
• You don’t need a very good credit score to get the loan
• Minimum paperwork is required to get the loan
• You can solve temporary credit problems with this loan
• You can apply for payday loans online

Nevertheless, you should remember to only take out a payday loan from a reliable and authentic payday lender. When you take out a payday loan, you should make sure to pay off the debt with your next paycheck.