Loans, Insurance & credit card information

Debts can mount up out of control quickly, to the point that you may even be considering bankruptcy. With the new bankruptcy laws making the filing of bankruptcy so much more complicated and expensive, you may be wondering what your options are. For those with good credit and stable income, consolidating revolving debt with 125% home equity loans, also known as 125 percent loans or simply 125 loans, can make sound financial sense. Rather than let your credit card debt spin out of control, consider refinancing that compounding interest into a 125% home equity loan.

125% loans are typically fixed rate equity loans, which save you money over variable rate loans over the long term. The rates are also typically quite a bit less than those of credit cards, especially if you are paying universal default rates. Universal default rates are provisions typically buried deep within the fine print of your credit card agreement where you can get charged exorbitant rates if you are more than 30 days late on any ONE payment to any credit card. These rates can also apply if you go over the credit limit on any ONE card. Consumer Affairs found default rates as high as 35% (Merrick Bank) and many others running close to 30%.

125% loans are second mortgage loans that allow you to borrow more than what your home is worth. E-Loan gives this example of how it works: if your home is worth $100,000 and your first mortgage is $95,000, you can borrow $30,000, for a total of $125,000. Thus, there is no equity needed to get a 125% loan. If you are planning to stay in your home for three years or more, the 125% second mortgage loan is a great way to refinance high rate credit cards, lower monthly payments and save money.

While it generally requires good credit to get a 125% equity loan, there are also loans available for those with bruised credit. With 125% loans, there generally are no lender fees or appraisal required. The purchase price of your house minus all mortgages and liens is generally used to determine how much equity you have. And, because lenders know how busy people are, they generally send a mobile notary to you to sign the loan papers. How convenient is that?

Rather than going through the expense and hassle of bankruptcy, why not pay off all of your credit cards, consumer loans, and other bills and combine those outstanding balances into one low monthly payment called a home equity loan? It will help raise your credit scores, too, because your debt ratio will be lowered significantly. As long as you do not re-incur the debts by using the cards, you will save money and enjoy the piece of mind of lowered interest rates and lower monthly payments.

Finding it hard to find unbiased information on student loan consolidation? Let me help with that. When I graduated from college, I had somewhere around $12,000 in student loan debt. Seeing how I would have multiple payments to different lenders, and fearing increasing rates over time (yes, your rate can vary depending on the loan type and the lender), I decided to investigate a potential consolidate student loan. But before I tell you what decision I made, let me give you a few benefits and problems with student loan consolidation:

Benefits

1. The ability to make a single payment with a single lender, thus reducing the headache of paying multiple lenders.

2. Most lenders offer a fixed rate of interest over the life of the loan.

3. Typically, consolidate student loan companies will offer a lower interest rate than many of your current student loans.

4. Lenders will usually offer a longer repayment period, thus allowing for a lower monthly payment.

5. Student loan interest is tax deductible, thus making a longer repayment period more attractive for tax purposes.

6. Some lenders will even offer an interest rate discount for good payers – more on this in a minute.

7. If you are struggling to find a job, many consolidation lenders will allow a deferment of forbearance, allowing you more time to acquire stable income, and may grant a lower interest rate for doing so, due to the lender accruing interest during the deferment/forbearance period.

Problems

1. Longer repayment periods. Yes, I know I mentioned it as a benefit above, but it can also be a problem. While longer repayment periods tend to reduce monthly payments, the overall interest paid over the life of the loan is more, sometimes much more.

2. Unwillingness to negotiate. During my repayment period, I called to ask if an agreement for a principal deduction could be reached or if there was help from other organizations to pay off the student loan, and absolutely no help was provided by the lender. I guess the felt I already got a good deal with an interest rate of 3.5%

3. Default – Do not, I repeat, do not default on your student loan. Bankruptcy, and any other legal attempts to welsh on student loan debt won’t work – student loans are like cock roaches, they just will not die. Be sure to pay your student loan back.

Alright, now that we understand a few of the benefits and problems, I am going to tell you what I did. I decided to do a consolidate student loan. I felt there were just too many benefits involved. The company I went with was Nelnet, and they offered a 15 year loan repayment period with 3.5% interest and a 1% interest rate discount if I made the first 36 payments on time. What a great deal! As with all things, be sure to research several different offers before selecting a consolidate student loan company.