With the new bankruptcy laws being in effect since last October, credit card companies are doubling their minimum payment requirements. For people already stretched to their financial limits, this can be devastating. The new laws also make it more expensive and time-consuming to file for bankruptcy, which has consumers looking for alternate means of debt relief. According to Fair Isaac & Co., by paying down the balances on your credit cards by 34% you could raise your FICO score almost 20 points. Imagine how much more it could be by paying them off completely, especially if you refrain from using them. These home equity loans are popular ways of consolidating high interest debts into a single loan with lower payments. If you have good credit, you may qualify for an unsecured personal loan. Credit unions can offer offer lower rates than banks. However, most credit unions are very limited with loan programs. They don't offer 125% second mortgages, and typically will only go to 90% CLTV with good credit. If you're a homeowner, why not put your equity to work for you? Even with rising interest rates, you can still get lower rates than the 20%-plus you now pay to the credit card companies. If you have an adjustable rate mortgage (ARM), mortgage refinancing to a fixed mortgage rate loan may be for you. Even with interest rates rising, it's still a better deal than what your rates could soon be once the adjustment period starts. If you have a second mortgage (home equity loan or home equity line of credit), you may save money by combining your 1st and 2nd mortgages into the refinanced loan while still cashing out for debt consolidation. If the rates and terms on your existing mortgage are good, a second mortgage loan may be a better choice for you. Loan terms are typically around 15 years, giving you time to get back on your feet financially. If you currently have a variable rate 2nd mortgage, you should consider refinancing your 2nd. It could save you money. Simple Interest or Standard Mortgage? If two loans are exactly the same but one is simple interest, you will pay more interest on it unless you systematically make your monthly payment before the due date. Standard mortgage rates are calculated monthly, as opposed to daily like simple interest mortgages. Thus, if you are late, but still within the grace period on a standard mortgage, your rate remains the same. With a simple Interest mortgage, you are charged extra interest for each day you are late, which adds up in the long run. |
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