Discover Debt Freedom!

Everyone knows someone affected by the recent mortgage crisis.  When the mortgage bubble collapsed, it took away home equity from many, but a large percentage of the foreclosures were due to the borrower taking out an exotic mortgage on a house they could not afford.  The adjustable, teaser rate loans seemed reasonable when they thought they would be able to find a buyer to purchase the home easily and they thought the value of the home would continue to increase.  Unfortunately, these borrowers were seriously mistaken and their inability to fully understand their mortgage terms resulted in financial disaster.

Do Not Count On A Quick Sale To Save You

Many borrowers got in trouble when they could not quickly sell their home before the interest rate reset to a higher rate or for more than they had paid for it.  Many of these people found themselves with a home that they could not sell and owed more on the mortgage than they could comfortably pay.  A tsunami of foreclosures occurred across the country and many future borrowers realized the importance of educating themselves about the mortgages before signing for one.

Choose A 30-Year, Fixed Rate Mortgage Loan

The 30-year, fixed rate loan is considered one of the most reasonable loan products available for mortgage loans.  The loan payments remain consistent for the entire life of the loan and the cost of the home is spread over a long period of time, making the monthly payments more manageable for fixed incomes.  If you are unable to afford the mortgage payments at the 30-year, fixed rate for the loan, there is a good chance that the price of the home is too much and will place an economic hardship on you so you should not be buying that particular home.

Debt elimination is very important to future financial security, leading many individuals to wonder how to obtain debt relief so that their high debt level will stop affecting their life.  Learning how to obtain debt relief is not hard, regardless of how bad your debt situation may be and knowing where to look for these techniques and how to take advantage of what is offered are things that everyone should know.

Finding A Debt Relief Company

There are many sources of debt relief that you can use to reduce or eliminate your debt.  The company chosen to help you reduce your debt levels will depend on what prompted you to seek assistance in the first place.  There are many companies that offer debt relief programs and debt elimination counseling and some of them work in conjunction with government programs created to help individuals get out of debt.

After a consultation with the company, the person chosen to help you specifically will submit your information to any companies owed money, trying to get them to accept a reduction in the amount needed to satisfy the account.   Some companies have meticulous programs in place to determine whether borrowers are eligible for any programs that could reduce the debt owed.  Many of these programs provide help such as reducing the interest rate on the account, forgiving some of the fees that have been charged, or accepting a percentage of the amount owed to close out the account completely.

Finding A Debt Relief Program

Another option is to review one of the debt relief programs that can be found on the internet.  These programs offer information about things a person can do to reduce their debt and computer software that can be downloaded to assist the person in their endeavor.  Some of these programs have a phone number listed on the website that can be used to contact the company to ask questions and solve problems that arise.  Individuals supply their personal and financial information so that the program can evaluate the person’s financial situation and will be able to give the best advice for those particular circumstances.

If you are interested in refinancing your home, it is important to learn all that you can so that you will completely understand the loan you are getting.  One of the biggest mistakes you can make when refinancing your home is taking out an exotic mortgage loan that you do not understand because it can significantly affect your finances for many years after the decisions have been made.  Educating yourself about the different types of loans available is the only sure way to obtain the best refinancing loan for your financial situation.

Lenders have created several different types of loans to be used for refinancing a home in order to appeal to a wide range of consumers.  Traditional loan products are the loan types that have been used the longest and are generally the most stable types of loans available.  Traditional loan products typically have a fixed interest rate and the payments remain consistent over the life of the loan.

Some people view exotic loan products as being more beneficial for their financial situation because of the differing terms that can be obtained with the loans.  Exotic refinancing products are a recent innovation, with many types originating after 2002.  Exotic refinancing products can have variable interest rates that change from month to month, fluctuating payments, and shorter loan terms than more traditional products.

The most common reason for refinancing a home is to obtain better terms than what the borrower has on the original loan for the home.  Refinancing a mortgage can lower your monthly payments, decrease the amount of interest paid to the bank, and shorten the amount of time that it takes to pay off the entire mortgage amount.  A reduction of a few percentage points on the interest rate can save you thousands of dollars over the life of the loan while a reduction in the amount paid every month frees up more of your income for paying down debts or other needs.

One of the biggest debates among financial professionals is whether you should pay off your mortgage early. There are pros and cons and the answer will depend on your risk tolerance and alternative investing options.

Arguments for Early Payoff

The biggest argument for paying off your mortgage early is that doing so allows you to actually own the place where you live. There is a great freedom associated with owning your home yourself and not owing the bank. It can protect you if you hit a financial rough patch, since you won’t have to worry about losing your home. It ensures that you should always have a place to live without fear, even if you are suddenly faced with a situation where you cannot make monthly payments.

When you pay off your mortgage early, you also eliminate a monthly debt payment on your secured loan, freeing up your cash to put towards other things. You can then use the extra money you have each month to save or to accomplish other financial goals and dreams. Other things, such as early retirement or quitting your job in favor of a lower paying dream position, can also be possible if you don’t have a house payment to worry about.

Finally, another argument for early mortgage payoff is that you get a guaranteed return on your investment equal to whatever your mortgage rate is. For instance, if you were paying 5 percent a year on your mortgage and you pay it off early, you are essentially gaining the 5 percent of your money that would have gone to interest every year.

Arguments Against Early Payoff

While the arguments for early payoff are good, there are equally strong arguments suggesting you shouldn’t pay off your mortgage early. One of the biggest is that mortgage debt is generally low-interest debt, as it is a secured loan. This is especially true now with interest rates at record lows. You should be able to invest the money you’d spend to pay off your mortgage in another investment that pays a higher rate than the interest you pay to your mortgage lender. For instance, if your mortgage interest rate is 3 percent, but you can invest your money at five percent, you’d be giving up the extra 2 percent you could make by investing the money elsewhere. Mortgage interest is also tax deductible, so this needs to be taken into account as well when comparing the value of paying off your mortgage early to save on interest.

Opportunity cost associated with lost investment time is another reason to avoid early payoff. When you invest money and earn interest, that return can then be invested and begin earning more interest for you. This is referred to as compound interest and it allows you to keep making more and more money without investing any additional cash. When you spend years paying off your mortgage instead of investing the cash, you lose out on the magic of compound interest for your lost investment dollars. It can take a while to catch up on all that interest you would have made.

Making Your Choice

Ultimately, it is up to you whether to pay off your mortgage early or not. Remember, since mortgage debt is a secured loan, your home is always at risk if you can’t make the payments. However, if you have a large nest egg saved, you could always tap into that nest egg to repay the mortgage if something happens in the future that prevents you from doing so.

The number of people using credit cards to make everyday purchases has skyrocketed over the past few years, leading to many finding themselves with out of control credit card debt and few prospects for reversing the situation.  Some of the common issues found with credit cards today include reductions in credit limits, high interest rates, and minimum payments doing little to bring down the balances of the cards.  Fixing the situation can be accomplished with some hard work and dedication, but many of the people who find themselves in a dire financial situation have no idea where to begin.  Here are some tips for getting your credit cards under control.

Cut The Number Of Credit Cards Used

Having multiple credit cards that are used on a regular basis is one of the most common ways that people overspend and find themselves in debt trouble.  Using multiple credit cards for purchases increases the risks that you will spend more than you can afford to repay, that you will accidentally make a payment late, or that you will pay an astronomical interest rate for the money borrowed.  If you have multiple credit cards open in your name, you may want to consider closing newer accounts and any store branded credit cards to simplify your spending and accounting.

Reduce Or Eliminate High Balances

Having a high balance on one or more of your credit cards can reduce the amount of your income available for spending by a significant amount.  High balances often incur high finance charges and interest charges until the balance is paid off, a process that can take many years if you are only making the minimum payment required.  To get rid of these high balances, make a repayment plan that pays off the highest balances with the highest interest rates first and continue until each balance is reduced to a more manageable amount or eliminated completely.  Balance transfers are only a good idea if you pay off the balance before the introductory interest rate expires.

As if choosing a college and moving away from home for the first time wasn’t stressful enough, many college students are also faced with the choice of getting their first credit cards and beginning to build their credit histories.  Many lenders offer credit cards designed with students in mind and relentlessly push new applications on the new students on campus.  While a student credit card can be a wonderful way for a college student to build a credit profile, there are some pitfalls for the unwary that can cost the student a lot of money over the long haul.  Here is one of the most important things to look for in a student credit card.

Before signing up for any credit card, it is important to know what the interest rate for the credit card would be.  A high interest rate means that you will spend more money for the purchases placed on the credit card, especially if you are not able to pay off the entire balance every month.  A credit card with a low interest rate will generally have a rate of less than 10% while a credit card with a high interest rate could be as high as 30%.  You should look for the student credit card with the lowest interest rate and the highest credit limit you qualify for.

Some student credit cards offer students an introductory interest rate of 5% or less in order to entice them into signing up for the credit card and using it for general purchases.  Unfortunately, after a set period of time, the interest rate increases dramatically and is applied to all future purchases that are made on the credit card.  Be sure to read the terms and conditions of the credit card application carefully so that you will know what the interest rate will be during the introductory period and after.

Now that the holidays are over, there are probably two numbers in your life you currently aren’t happy with. One is the balance of your available funds, and the other is the set of digits displayed to you when you step on your bathroom scale. The beginning of the new year means it’s time to get this figures back to where they belong. But what seem like daunting tasks are a much simpler mission to accomplish considering that by getting into shape and eating less, you’re likely to save quite a bit of money.

Consider for example the following six ways getting into shape will save you green this year:

Cheaper insurance: When it comes to health insurance and life insurance, most companies calculate BMI into their determination of your available policies and the premiums that are attached. The healthier you are, the more likely you are to see cheap insurance quotes. You could shave off $50 or even $100 from your monthly insurance payments thanks to diet and exercise.

Less spent on groceries: By adhering to a strict diet, you’re guaranteed to spend less on food even if the specialty health items themselves are a little pricier. You’ll skip the vending machine at school or work, as well as that muffin with your morning coffee. Over time, this amounts to serious savings.

Less spent on wardrobe replacement: Gaining weight means gaining more clothes in your wardrobe as you stop fitting into your old stuff. Not only that, but larger apparel these days tend to cost a few dollars more than regularly priced items to account for the extra fabric and work to make them. Cut out this strain on your budget by staying in shape.

Less spent on fuel costs: 30-50 lbs of extra weight hauled in your car everyday adds up to extra fuel being used to move your vehicle. Losing that means less spent on gas in the long run. But not only that, committing to walking and cycling more as you attempt a healthier lifestyle is also sure to lower the amount of money you spend on fuel by cutting down how much you’re driving your car.

Less on cooling costs: It’s obvious science – the more fat you have on your body, the hotter you’ll get as the temperature increases and the harder it will be to cool you off when the AC is turned on. Help yourself stay cool in the summer without relying on the air conditioner by cutting out the fat that keeps you hotter than you ought to be.

Free time is free: Instead of watching pay-per-view, fetching rentals, or buying the latest video games, go outside and play around in your backyard. Assuming you already have a pigskin and a radio, throwing the ball around while the big game is playing in the background is an active way to enjoy a few hours of your weekend that doesn’t cost a dime.

Take the first few months of the new year to get yourself in shape, both physically and financially. Taking on both at the same time is much easier than you think. Losing weight and eating right is a sure way to see more money in your wallet, which is a welcome sight in the wake of the onslaught of holiday spending.

We have all heard the horror stories of debt collectors harassing debtors to the point that they cannot take it anymore, but many people do not know that there are rules governing debt collection that all debt collection agencies must adhere to or face severe penalties.  If a debt collection agency that is contacting you is breaking any of these rules, you can report them to the Federal Trade Commission for a violation of the Fair Debt Collection Practices Act.  You may be entitled to financial compensation and damages due to the actions of the debt collection agency.

No Misrepresentations

A debt collection company is not allowed to misrepresent who they are when they contact you.  They cannot claim that they are from a credit monitoring bureau, an attorney’s office, or government agency if the information is not completely true and honest.  They are not allowed to claim that any document sent by them is a legal document if it is not.  If they are asked, they must state their name, the company that they work for, and the reason for calling the individual.

No Verbal Abuse

The representatives of collection agencies cannot use abusive or profane language when they are contacting a debtor about a debt that they are attempting to collect.  Obscene language, threats of violence or bodily harm, and even threats of arrest are prohibited by the Fair Debt Collection Practices Act and can result in the company being fined a significant amount of money for each occurrence investigated by the Federal Trade Commission.  If a debt collection representative becomes verbally abusive on the telephone, hang up and report the incident as soon as you can.

Verification Requests Must Be Honored

If you do not believe that the debt is valid, you can request that the debt collection agency send you verification in writing that you owe the money that they are attempting to collect.  This information must be sent within five days of the request and should include a description of the debt, the total amount owed, and the steps that can be taken to dispute the debt if the person believes that they do not owe any money or if the information provided is inaccurate.

If you are unprepared when an emergency occurs, you may find yourself having to resort to expensive debt to handle the problem.  This can quickly lead to financial devastation and great difficulty repairing your finances for years to come.  It is better to prepare yourself financially ahead of time so that you can handle any emergency that occurs without having to resort to borrowing money from anyone.  Here are some steps that you can take to prepare yourself.

Start A Savings Account

The best thing that you can do to be prepared for financial emergencies is to start a savings account and begin diverting money into it from your paycheck.  This will provide you with a financial cushion that can be used when unexpected expenses arise that are more than your regular paycheck can handle.  Having the savings available will ensure that you do not have to use a credit card to handle the issue, where interest charges and financing fees can cost you tons of money before the balance is paid off.

Keep Financial Records

Keeping accurate financial records will help you keep track of how much money you are spending and whether spending can be cut anywhere to provide more money for saving.  All financial transactions into and out of your bank accounts should be noted with the date, the amount, and a label for the transaction.  Tracking your transactions shows you where money is being wasted so that you can formulate a plan to turn those wasted dollars into saved money.

Create A Budget

Creating a budget will help you get a handle on your finances quicker than any other method of financial management.  The budget should include all of your expenses for the month and the amount that you are paying for each expense.  This will decrease the risk of you overspending in any category and may even identify areas of saving that you did not identify before.

Overdraft charges are one of the most expensive bank charges that can be levied against a checking account and cost consumers billions of dollars every year.  It has been estimated that nearly 25% of checking accounts experience an overdraft at some point over the course of a year and the fees average around $35 per occurrence.  Avoiding overdraft charges is not impossible and by following a few simple tips, you can ensure that no overdraft charges will be charged to your account.

Keep An Accurate Checking Ledger

Keeping track of the amount of money available in your account is the best way to avoid being charged an overdraft fee because you will always know how much money is in the account.  All deposits and withdrawals should be noted in the checking ledger, including any purchases made using a debit card, and the ledger should be balanced regularly.  Many people choose to balance their checking ledger at the end of every day because it only takes a few minutes of time and it is always up to date.

Add Some Additional Padding To Your Account

Another good way to avoid overdrafts on your checking account is to add two or three hundred dollars to the account that is not reflected in the checking ledger to pad the account.  Adding this additional money will come in handy if a paycheck is delayed and automatic payments are withdrawn from the account or if a transaction is missed in your checking ledger.  Act as if this additional money does not exist and do not plan to spend it for purchases.

Sign Up For Low Balance Alerts

Many banks have added low balance alerts to the services available on their websites.  This service sends you a text or email when the balance of your checking account falls below a certain threshold, alerting you that you need to make a deposit and restrict your spending until there is more money in your account.  The amount of the threshold is chosen by the account holder when they sign up for the alerts and can be set for amounts ranging from $50 to $500.