What you should do and what you don’t while having a debt-management services 1
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Your current debt burden can anytime rise up, without any intimation. It can be happened because of your unnatural financial behaviors. However, there are few ace debt-management professionals who can save you from severe debt problems. But unfortunately, at present there are some people also who will try to con you in the name of debt-management. If you check the federal records, you’ll find more or less 255 cases where several poor people were the victims of fraud by these debt-relief providers. The FTC along with the state enforcement revealed a data about those debt management companies, abusing people who are already knee deep in debts.
So, let’s check all the Do’s and Don’ts you should have keep in mind while opting a debt-management service :
To be continued……
Hi folks…Hope you are enjoying my posts, I am honestly trying to provide you as much information as possible in within a concise version. Here goes the 3rd and final part of my last post, enjoy.
There is nothing like more adventurous and exciting than buying a new house. But many prospective homeowners, forget about their financial responsibilities as a homeowner due to the sheer excitement. There is no other opinion that a mortgage loan is the biggest housing expense. But there are several other expenses which sometimes still exists even after the mortgage is paid off. So, as a smart buyer, keep this costs also in your mind :
Cost of Utilities – You can not avoid the cost of light, water, heating, sewage, garbage disposal, cable, phone services etc. While calculating the DTI ratio, these costs will not be included in the front-end as well as in the back-end ratio. But no homeowner can avoid these expenses in any circumstances.
Cost of Maintenance - No matter what you do, your new home won’t remain new forever. Even your costly major appliances like cookers, dishwashers and freezers will also depreciate time to time. The same applies to the exteriors like furnace, roof, driveway, walls and the paint on it. You may found yourself in a hazardous situation, if you consider yourself as ‘house poor’ while taking on first mortgage payment. It is because your finances haven’t improved when you need some major cash for some major repairs.
Cost of Furniture and Décor – If you look around at your neighborhood for new homes after the dark, you’ll see some interiors with big, empty rooms. It is because those big, beautiful houses didn’t use any coverings like window curtains or furniture. Before you buy a new house, check all rooms and places which need furnitures and decoration. Many homeowners spent all the money and focus for buying the house, they often forget or can’t afford to do the decoration work initially.
Cost of Association Fees – In some housing communities, homes are charged with monthly or yearly association fees. Sometimes these fees are quite higher than any other costs. starting from $100 to several hundred dollars per month. So, check for association fees before making the house deal. Know about its coverage like lawn maintenance, snow removal, garbage disposal service, community pool and other services.
Think Before purchasing. Cost of having a house is quite big. So, while making this cost do not underestimate the other essential expenses that can incomplete your duties as a homeowner.
Hi folks…Hope you are enjoying my posts, I am honestly trying to provide you as much information as possible in within a concise version. Here goes the 2nd part of my last post, enjoy.
The term ‘house poor’ means you cannot pay for maintaining your home. Normally if you have to pay up a large portion of your earnings towards your home, you may not have enough funds left to support your family and maintain other expenses. Many people wanted to become an ‘house poor’ because they have the trust that it’s a good decision to buy a valuable home that they can afford. They might ignore the fact that they are going to stretch their financial boundaries a little further. The concepts is like that, in future the total earning will increase through continuous raises and promotions, the old expensive mortgage will be getting smaller day by day and consume a very small part of their monthly income.
Clearly, people eagerly waiting to be ‘house poor’ have their own personalized and customized self-protection depending on what kind of loan they are afford..
Your personal choice always matters while deciding whether to be a “house poor” or not. You may get approved for a mortgage loan, but it doesn’t mean that your future monthly payments will be affordable for you. So, in addition to the lender’s criteria, you must also keep in mind some personal issues and set some specific factors of your own:
1.Income – When judging your own capability to repay your mortgage, ask yourself the following questions: –
Do you have to depend on two separate income sources for paying down your bills?? Do you have a stable job? If required, do you have the guts and chances to get another job with same or better income?? You can assume your current debt expenses through calculating the back-end-ratio, but what about those expenses which you haven’t generated yet? Will you have children in high-schools or in college in near future? Do you have plans to buy a boat, truck or a new vehicle? Does your enjoy a vacation with your family every year?
2.Lifestyle – Will you compromise with your lifestyle just to get your dream home? If you can limited your shopping and tours to the mall, tighten your budget to match up with a higher back-end-ratio, it might work for you. But If you can’t live without a fresh “Subway” burger every morning or a chilled beer every evening, you might have to wait long enough to fulfill your dream of a good home.
3.Personality – Different individuals have different personalities regardless of their earning. Few people can take a nap without worrying about their $6000 per month payment for the next 25 years. But there are some more people also who will not take a deep breath until they pay back the larger part of their dues. While opting for a refinance, this quality can make a big difference about your decision. If you can keep your nerves steady, without worrying do the shopping for your home, I am sure you’ll be very much pleased and satisfied with what you have done. It will give you a mental peace also.
To be continued….
Hi folks…Hope you are enjoying my posts, In this post I have tried to provide you as much information as possible about mortgage affordability within a concise version. If there is any modification required, regarding my information or my writing, please don’t hesitate to post your suggestions.
It doesn’t matter where you reside, how much is your monthly income or the type of home you are looking for. Whenever your seller makes the price quote, you’ll be surely reacting something like this – “My god! too much price it is” You are right, eventually. In today’s market, prices are rising much quicker than you can imagine, mainly in the 5star areas named – New York, Boston, Las Vegas etc. In those places, even homes with small areas will be carrying high price tags.
Normally, most of the potential home buyers can easily afford a mortgage loan which costs more or less 2 or 2.5 times more than their gross earning. According to this concept, an individual can afford a mortgage between $400,000 and $450,000, if he has the income of $200,000 per year.
Finally, for getting a mortgage loan, you surely have to consider few deciding factors. Initially, you need to understand what your lender thinks about your affordability. The lender would always want to gain a perfect assumption about the size of the mortgage which they can approve for their clients. Lenders for this reason normally uses typical formulas which are little complex for a common man to get through. Next, you need to determine your own criteria by an evaluation process so that you have a precise idea about your finances by keeping your preferences intact.
Criteria of the Lender : Debt-to-Income Ratios
From a lender’s eyes, your affordability to buy a home depends upon the below given factors:
1. Front-End Ratio – The percentage of your yearly gross income which you will be paying towards your monthly mortgage payments is called the front-end-ratio. You might know that your monthly payment has 4 crucial parts, those are – principal, interest, taxes and mortgage insurance. There is a good rule regarding the mortgage insurance part, it should not exceed 28% of gross earnings. Sometimes, many lenders allows borrowers to cross the limit to 30%, and even exceed 40%.
2. Back-End Ratio – The debt-to-income ratio (DTI) is also called Back-end-ratio. It calculates the percentage of your gross income which is required to manage your debt payments. These debt payments may include your credit card payments, mortgage, child support and any other loan payments. Most of the lenders would recommend you to maintain DTI less than 36%. According to the ratio, if you want to calculate your monthly debts, you should multiply your gross earning by 0.36 and divide by 12. For example, if you income is $200,000 per year, maximum monthly debt you may have is $6,000.
3. Down Payment – As down payment you must provide 20% of your home value, it will reduce the requirement of mortgage insurance. Many lenders lure the buyers by letting them purchase a property with small down payments. The down payment has a direct impact on your mortgage payment. The bigger your down payment will be, the interest rate will be lower. Larger down payments gives buyers the chance to go for more expensive properties.
To be continued…
Hi folks… Hope you are enjoying my posts, I am honestly trying to provide you as much information as possible in within a concise version. If there is any modification required, within my information or my writing, please don’t hesitate to post your suggestions.
Today I am going to discuss with you about Debt to Collateral Ratio. To get a best interest rate on a special loan you might have to deposit a collateral so the lender can recover some of his loan amount if you get defaulted. Whether you are borrowing money to pay for a house or car or to expand your business, understanding how lenders evaluate loan applications will increase your odds of securing the funds.
Collateral – A collateral is nothing but an asset. Normally the borrower deposits a part or his assets to the lender. The lender will keep this asset and will legally occupy it in case of default. The most common example of a collateral is a home bought with a mortgage. You will be the owner of the home, but the lender can seize it and resell the property if you fail to pay your monthly installment. You can not sell the collateral without lender’s permission. You as a borrower must look after the collateral because it will ensure the chances of winning a great deal and lender’s security. If your mortgaged collateral is a car or house, insurance is a must thing on it.
Down Payment – Lenders always prefer lower loan amount compared to a collateral. It would be easier for you to get approved by the lender, if your collateral is worth greater. Not only the approval, if your DTI is lower, you have to pay much lower interest out of your pocket. For an example – you have to put a downpayment of $6000 to borrow $14,000 for purchasing a car of $20,000. But if you have a high value collateral, you might have to pay only $2000. Therefore, borrowing a loan against a collateral is always a wise decision. It gives a balance between mortgage qualifications and interest.
Debt to Collateral Ratio – DTC or debt-to-collateral ratio is the most important factor which lenders consider. If you wish to take a bank loan for buying a home worth $100,000, very small number of banks will come forth to help you. So, The home will be the collateral in this scenario, and the bank or lender can seize it in case of default.
Importance of Debt to Collateral Ratio
The debt to collateral ratio seems very critical from the lender’s point of view. It will fix the chances of recovering the loan if the borrower fails to pay back. If the DTC is high, the loan amount will be nearly equal or less than the collateral. But if your DTC is low, you can get a loan approved which may be higher than your collateral value.
Hi folks…This is the continuation of the last post, enjoy and share if you like it. Hopefully this post will enlighten your ways to fight against your debts through debt consolidation option.
Disadvantages of using secured loan for debt consolidation
There is a big disadvantage to consolidating unsecured debts into single secured loan. You need to first put any of your assets as a collateral. You are actually putting the pledged property at risk. If you become unable to pay the loan, your property will be seized by the lender. That means your house, cars, insurance policies, may be retirement savings or other assets will be taken over by the bank. Few assets, like life insurance or retirement savings will also not be there when you need them until the loan is not paid back.
The total time frame of a secured loan is always longer than the debts you are having. So, it will make the total interest greater than the interest you might have paid on the unsecured debts. It will still be higher even your monthly payment is considered much lower than the usual.
Consolidating your debts through unsecured debts
Today unsecured personal loans are quite common, but unfortunately they are not so easily available to the common mass. Normally, to get an easy unsecured loan, you need to have a very good credit score. For this reason, a low interest credit card sometimes may be used as a substitute for an unsecured loan.
Debt consolidation using an unsecured loan – Advantages :
The main advantage of an unsecured debt consolidation loan is that you don’t have to pledge any property as collateral. For this reason, the interest rate becomes a little higher compared to a secured loan. But it is also lower than the different card charges, so it is quite popular for lowering payment.
Debt consolidation using an unsecured loan – Disadvantages :
An unsecured loan for debt consolidation purpose will be difficult to get, unless you have a sterling credit. Most individuals who required debt consolidation loans may not get the approval for this loan. Normally, interest rates are quite high compared to a secured loan. So, you may have to pay higher interests per month, that means a big amount of installment. Apparently your payments are not going low enough, so it would not help to improve your financial situation.
You might think twice before using the balance transfer method on low interest credit cards. You might have to pay a transfer fee which will be deducted from your balance. There are some associated rules also which makes it difficult to avail. If you ever utilize the low interest credit card apart from paying down the debts, it will generate charges like additional interests. Payments will be applied initially to the no-interest balance, so as the interest also. Above all, the bill payment period of the no-interest card is shorter and limited normally. If you decide not to pay the debts during this time, you will sure have to end up paying heavy interest as soon as the special offer period ends.
If you want to start consolidating your debts through a single monthly payment, you’ll get the benefit of affordability as well as lowering your monthly installments. Apart from that you’ll have financial and emotional relief along with a confidence to know your financial status. But beware, this situation may also lead you to take wrong decisions and occur additional debts way before you pay off your existing debts.
Hi folks..How are you doing today? Today I am gonna discuss about a very common but important way to get rid of your debts. The option is called “Debt consolidation”. Most of us already know what debt consolidation is all about. But those who are just now fallen into a debt trap, for them I would like to repeat the basics.
Debt consolidation is a process of paying your debts easily. Here you’ll avail a single loan to pay off your other multiple debts through a monthly single payment. By this way it is easier to handle your total debt amount. The most important benefit of the debt consolidation is that it can lower your total monthly interest while paying the total debt amount way before your actual time without getting any kind of negative impact on your credit score.
Two ways toward debt consolidation
There are two separate kind of loans which can be normally being used while consolidating debts in different scenarios. The first one is 1) Debt consolidation through unsecured loans, and the next one is 2) Debt consolidation through secured loans. Both methods have their own specialty and benefits. Let’s have a look on these loans and their characters :
Through Secured Loans – You can get several options for using secured loans while consolidating your debts. You can easily opt for refinance option, take out a 2nd mortgage, or pick a HELOC (home equity line of credit). On the other hand you can get a car loan by using your vehicle as a collateral. Your assets can be a big source of funds to payoff your debts. You just have to use them as security. Even your retirement fund can be used for taking a 401K loan. Insurance policies with cash values can be treated as collateral for getting a loan. More or less, several financing firms can also provide you support, and grant you a loan against annuities, lottery winnings and lawsuit claims.
Now the question is it a right option for you? It can only be determined if we come to know the pros and cons of taking a secured loan for consolidating your debts.
Benefits of using secured loans for debt consolidation
a. Sometimes secured loans have lower interest rates compared to unsecured loans. This option will help you to cut off several dollars from the monthly payments and save your money a lot. So basically, lower rates of secured loans will make the monthly installments much affordable than usual.
b. The interests sometimes considered as tax deductible. There are many cases where the interest payment is allowed to get the tax benefit if the loan is secured by a real estate property.
c. Secured loans are easy to get as they are carrying less risk than an unsecured loan. A lower monthly installment, an affordable payment once in a month, and lesser risk for the lender makes it a wise option to select.
To be contd…..
In the previous post, I have discussed with you regarding the common ways to rebuild your credit. Now in this post we will continue the discussion to its end.
Please read below for few more tips:
6) Avoid closing credit card accounts - You have managed your payment history to a good level. Next, you need to focus on your credit amount. First you may pay off your debts as soon as possible. Do not close any existing credit card account. The amount you are payable to the credit card company is a percentage of your total amount of credit. But do not open lots of credit accounts within a short timeframe. It will not increase your available credit but can hurt your credit score very badly instead.
7) Don’t close old credit cards - Closing the cards which you are maintaining since a long time, can hurt the length of your credit history. If you possess a card which have an annual fee, ask your credit card company to switch the card status from “with fee” to “without fee” status card instead.
8) Avoid any new credit creation – If you start looking for a new credit, it will surely can damage your credit score. If you require an urgent loan, you need to make it quick. Get your loan within a stipulated time. A search for a single loan for short period of time.
9) Ask credit bureau to freeze on your credit – It will be required to saving your credit from possible identity theft. So, you must consider asking each credit bureau for a security freeze. This will prevent you to get a new line of credit, until you ask them again to unfreeze your account. It is normally gets more effective than any other temporary alert. Freezing your credit can cost you $10 or less per bureau depending on your state. It will cost you another $10 to unfreeze it. If you think that credit freeze won’t be helpful for you, you might also go for buying more comprehensive identity theft protection service.
10) Don’t forget to monitor your score - You can avail a free copy of your credit score. Apart from that, you can get other important and potentially convenient tools which may assist you to track and monitor your score. There are several sites which can do the trick for you, especially names like quizzle.com, creditsesame.com and creditkarma.com.
Today we are gonna discuss one of the most important aspect of our financial status..the credit score. On an average, 90% of the US citizen are suffering from credit score related problem. You can not avoid the situation when you would apply for mortgage or car loan or new credit card. So, let’s have a quick look on how you should act to protect, rebuild or repair your credit score.
Check out the below given points which you might have not used yet :
1) Check your credit report to locate errors – If you have taken any wrong financial decision previously, you will definitely get penalized for that in future. But it will be not suitable that you will pay the price for that mistake which you didn’t commit. It is statistically proven that 70% of the total credit report issued have critical error within it. So, there is no reason that yours will be exempted from the errors, you may have the difficult one.So, it is advised to follow your report in detail to avoid any kind of error or wrong entries. You can get your free copy of credit reports each year 3 times.
2) Catch up your missed installments – If you’re having trouble with your debt payments, you can work out a plan to catch up with your payments. First you might need to ask your creditors, if he doesn’t co-operate then consult a non-profit credit counseling agency to negotiate on your behalf.
3) Make sure to be continues on every debt payments – Your monthly debt payment history plays a significant role in maintaining your credit history. When you apply for credit, you might be able to receive letters of recommendation from the credit card companies. Because of this situation, you might interested to consider that your payments may automatically deducted from the checking account. Make sure you do not draw more than your limit from the account. If somehow a payment is missed, then promptly ask the creditor to remove that late payment from your account, if he is willing to do that.
4) Go for a secured card if possible – It is not possible to build a good credit history without an existing credit card account. You can initially begin to check whether you can make arrangements from your bank to allow you a secured credit card. These credit account will need you to deposit a certain amount equal to the credit limit you are allowed. It will become a special kind of savings account which will protect you from not making a payment. The credit card company can collect the payment if there are any missed payments. This will minimize the bank’s risk and it becomes easy for you both.
5) Try for an unsecured card after making timely payments regularly - You can apply for a department store cards. These cards are quite easy to qualify for. You can pay your dues in full and try to make them before time each month. After doing this for 6-12 months and then apply for a regular credit card after building a goodwill.
To be continued…