Debt Consolidation Blog

Archive for April, 2010

During the housing market boom, it was very easy for property investors to grant loan to invest in properties. However during the present slowdown, it has become very difficult for home owner’s to meet the monthly mortgage payments on time. The reason might be your monthly payments are higher than what you earn? Or you owe more than what your property is worth? Or the monthly payments have gone up recently due to rise in adjustable mortgage rates?

If you are facing any of such situations and looking to modify loan in an effort to save your investment properties, then here is come helpful information that may be helpful when you approach your lender for loan modification.

The fact is that the economic condition continue to deteriorate, government has been coming up with many subsidy programs that are targeted to help primary residence homeowners and some programs for investors too. Therefore almost all banks are coming forward to modify more and more loans on all types of properties because the banks let the renters to vacant in the investment properties, it will hurt already slaughtered housing market and cost billions of dollars to banks if they don’t let the homeowners pay according to their budget.

Therefore, the lender modifies the terms of investment property loan also if they feels it make, sense to them to keep loan performing. The reason why banks take initiative to modify the investment property loans when the borrower approaches because they think that it will cost banks less in long run compared to foreclose if defaulting the home loans.

How will the banks determine which is the benefit for them? First, see if the approximate market value of the property is less than the loan balance if they try to sell the property, then you have some leverage. Secondly, if the rents do not cover the loan expenses that incur from the loan and have negative cash flow then prove this to lender as this will help you in getting the loan modified from the lender.

Keep in mind that your lender will try to collect debt in any circumstances and therefore anything you tell them about the property can be used either in favor of you or against. The big mistake many borrowers make while approaching lenders to modify loans is contacting lenders to apply for an investment property loan modification without learning how to do.

Here are the important steps that one must take before you approach lender for loan modification.

Prepare budget, your income and expenditure statement, financial statements and rental income and schedule before you speak with your lender. Doing so, you can have necessary information and have time to fine tune to make any changes to meet the guidelines for approval of loan modification.

Therefore, never contact lender before you have an idea bout what you are about to talk. Therefore investing a couple of hour’s time in preparing could mean the difference between getting your application approved or denied.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.

(begin Dollar Stretcher Blog)
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Winning Financial Info
The Dollar Stretcher Blog
by Gary Foreman

Hubby and I are a young couple with 3 children. My husband is hard working – 2 jobs and I am a stay at home mom. Things have gotten better over the years for us from where we first started out in life together but now that our children are growing older and we got a bigger house = higher rent and his work at his full time job has slowed down (no overtime), things have been getting tight. I have a busted windshield in my SUV and dead inspection for months on end now and my hubby’s car is on its last leg. He has a court date comming up in 2 weeks because our car insurence lapsed. So now we’ll more than likely have a huge fine we’ll have to come up with money to pay. Our electric is about to be turned off and rent is comming due next week. I do grocery shopping on Fridays and here it is Friday and hubby says he has no money for me to get food and things the kids need, once again… this is becoming a frequent thing. My SUV is on the verge of getting repoed if we don’t pay them by the end of the month. My husband is in almost cronic pain with neck and back problems caused by the strenuious work he does. We have insurance but he’s afraid to push the issue with fear of losing his job. I cannot work because I have a 2 year old daughter. I have no one to watch her and 2 boys to pick up from school each day at 2:30. My husband won’t let me help to set up a budget for us and control finances. He says there’s nothing to budget, money comes in money goes out. If he can swing it he gives me a little when he can to get food or diapers but that’s about it. I feel so powerless to help our financial situation. I have managed to put back $1100 from income tax return money which has now dwindled down to $500 but I have been hanging on to it for dear life because I hate to see it go. It’s all I got and so many places it could be used. Do you have any suggestions that would help me? Thank you.
Signed,
Powerless

“Powerless” has certainly given herself the right name. Given the current situation she is pretty powerless to do much to help their finances. But, she’s not alone. Her husband is powerless, too!

Right now there is no one who can help this family. The reason is simple. No one has enough information to know what the problem is.

Based on Powerless’ story we’d have to believe that her husband is a hard-worker. It’s also clear that they’re behind in their bills.

The key part of Powerless’ story is that her husband is unwilling to create a budget. I can understand why he’s reluctant. He’s probably already feeling closed in by the bills. He doesn’t need someone or something telling him what he cannot do. He’s got enough of that already.

But, he’s wrong about what a budget does. A budget doesn’t control spending. You control your spending. A budget is just a tool to tell you where you are spending money and whether your income is higher than your expenses. It’s really just a diagnostic tool. Nothing more.

Right now there could be a number of different reasons why Powerless doesn’t have money to buy food for her children.

Previous bills (think credit cards or personal loans) may be taking a large portion of their income. In that case, credit counseling or bankruptcy might be the best solution.

Their car payments could be too high relative to their income. Then the solution would be to trade to something with lower payments.

Hubby might be spending money before it comes into the house. We have to believe that Powerless’ mate is doing his best for the family. But, he wouldn’t be the first person to struggle with addictions or bad habits that consume his paycheck.

Or it could be that he just doesn’t make enough. Powerless might need to find a job in the evenings or create a way to make some money from home.

Based on Powerless’ email, you’d have to assume that they’re in pretty deep. Not the kind of situation where an extra few dollars each month would solve the problem. It would appear that only something significant could ease the continual financial pain.

So Powerless has a choice. She can collect enough financial data to determine what to do to fix their finances. Or she can continue to face a slowly worsening financial situation.

It might be hard convincing Hubby to go along. Perhaps if he can see that a budget isn’t a straightjacket, but rather a tool that he can use to solve the situation he’ll be willing to give it a shot.

Keep on Stretchin’ those Dollars!
Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website and enewsletters including Financial Independence Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom! Visit the site for more on how to get the most from a budget.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.

Due to slow down in economy many mortgage buyers are unable to keep up their monthly mortgage payments. Especially, with increased unemployment rate prevailing across the nation, foreclosure rate is constantly moving up. As the foreclosure causes the homeowner to lose home, many try to avoid foreclosure in difficult situation of inability to pay bills.

There are many options for homeowner to avoid foreclosure. Restructuring mortgage is one such option. Restructuring a mortgage is noting but changing the present terms and conditions, usually to accommodate your budget that allows you to pay off the mortgage bills regularly.

The obvious reason to restructure mortgaging is to save home or stop foreclosure that homeowner may face instance of not paying the monthly payments on time. You being here we realize that you are in financial troubles and looking for information to save your home.

Even if of restructuring the mortgage, the lender is particularly very strict about forgiving the amount and will depend on the home owner’s financial situation. Restructuring process is as follows.

Similar to first time homeowner, a homeowner attempting to restructure mortgage has to prove his affordability or in affordability for new monthly payments. Therefore start gathering evidence that proves that you are facing financial difficulties and submit them as a proof of evidence when you approach your mortgage lender for restructuring.

The evidences include last 3 to 6 month’s pay checks if you are still working and earning much lesser pay. You might also have your most recent tax returns, savings and checking account statements, credit card bills, student loans, personal loans, auto loans and documents related to any other kind of debt you owe. Once you have all the papers related to your debt make, copies of them and submit to lender you are approaching.

Having all the papers related to debt is not enough instead one must be capable to take your hardship to lenders. Draft a financial hardship letter. As the name suggest, it is a letter that describes the reasons you are looking to restructure your mortgage. Include the reason you lost the regular income that affects your monthly payments. The reason includes loss of job or your employer might have slashed your working hours or suffering from serious medical illness. Whatever may be the reason make sure to include in your request letter to restructure the mortgage or loan.

Contact your mortgage lender and convey your hardship to them. You can contact them over phone or in person. You can find the contact number in the recent statement of mortgage from your lender and ask to connect to concern person for restructuring. Explain the reason you are approaching them and what do you expect out of them to save your home during your financial setback.

After speaking to concern person over phone send the drafted financial hardship letter and necessary papers that support your statements.

If you are successful in convincing your lender, then your lender may reduce interest rate, lengthen or shorten the term of your loan or even reduces your principal balance as a result your monthly payments may come down to level that you can afford comfortably.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.

Any individual in debt usually have many creditors such as credit card debt, mortgage, personal loan, student loan, car loan etc. handling so many creditors will become toughest task for any person because each debt has different rate of interest and has different due dates. Having to pay each creditor and making sure the checks reach on or before due date is much difficult compared to having one creditor.

To overcome such difficult situations, credit card debt consolidation seems to be the best option. Debt consolidation offers several advantages that a person opted will definitely experience and frees you from the tensions of credit.

First advantage of credit card debt consolidation that one gets is one monthly payment. It means you will be able to sum up a long list of creditors under one big loan instead of maintaining number of loans for which you have to make payments to each creditor separately. For example, if you have 5 credit cards, one personal loan and medical and grocery bills for which you have to pay monthly instalments. Failing to pay one will lead to many consequences like interest rates are hiked or getting harassment calls from creditors or so.

Second advantage of the debt consolidation is one rate of interest for whole debt. The moment you consolidate all your debt, it will be charged with only one interest rate rather than many. For example, having debt on 5 different credit cards meaning you will be charged with different rate of interest as per the creditor rules and regulations as a result you debt may incur faster if the interest rate charged is higher. With debt consolidation loan as you are going to consolidate all your debt under one loan with one creditor, you will be charged with only one rate of interest.

Third advantage of debt consolidation is achieving debt relief quicker. It means paying debt that are maintained with different creditors meaning charging different rate of interest and charging higher rate of interest meaning incurring more debt. Paying off the debt that is incurred at higher interest rates usually takes 10 to 20 years. However, consolidating debt with low interest rate meaning debtor will become debt free with in 5 years since you are more focused on clearing that one loan and clearing it.

Fourth advantage of debt consolidation is getting rid of harassment calls from creditors. The moment you find hard to make payments monthly, I suggest you to go for debt consolidation because as your payments become due each month, the creditor start calling you in an effort to collect debt form you which may be harassing to you. It is because they will call irrespective of the time and threat you for not paying payments. In such instance you may try to ignore the calls from creditors which will ruin the situation further. Having consolidate all your debt under one roof, the debt consolidation company will handle such calls from the creditors and prioritize the creditors to be paid first in an effort to clear the debt faster.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.

The Dollar Stretcher Blog
by Gary Foreman

Dear Dollar Stretcher,
I read as article about “Biweekly Mortgage Payment Programs” and I have a question. I have read that I can do the same thing myself by just paying an extra payment every year for the same affect so why should I pay someone else to do this?

The thing that I don’t understand, is how is it beneficial for me to buy the service when I didn’t have to? I owe $276k and can do the biweekly for set up fee of $375 and $3 a month. I will shave 6 yrs and 4 months off of my mortgage. I have 27 years left. So over the course of this loan, I pay them about $1k to do this. In the meantime, I save $87k in mortgage payments and 6 yrs. But aren’t I really paying them $1k for something I could do myself?

If I didn’t go with them, I would end up paying an extra payment a year split up monthly, that would amount to about 2k a year. So if I did this, I would end up saving $87k in interest and 6 yr, but I would have paid $40k in extra payments. Am I wrong in seeing it as $40k versus $1k?
Eric

It has been said that the key to most magic is to distract your attention from what is really happening. While you’re looking one way, the real action is happening somewhere else. The same is true for many financial offerings. The salesman is so busy pulling rabbits out of a hat that it’s hard to pay attention to what’s important.

And, when you look at something like a bi-weekly mortgage plan, there does seem to be a lot of rabbits hopping around. So let’s see if we can’t trap a couple of bunnies and determine what’s really happening with a bi-weekly mortgage plan.

Rabbit #1. The length of your mortgage. Any prepayment of principal will reduce the life of your mortgage. Larger prepayments will have a greater effect than smaller prepayments. And, prepayments made in the early years of a mortgage have a bigger effect than the same prepayment made later in the life of the loan. That’s true whether you make the payments yourself or have someone do it for you.

Rabbit #2. 12 months = 52 weeks. You knew that one. Eric points it out, too. Making half of your monthly mortgage payment every two weeks is the same as adding one extra monthly payment per year. Or adding 1/12th of a monthly payment to each regular monthly payment. You don’t need anyone to do that for you.

Rabbit #3. Bi-weekly mortgage payments don’t create free money. If your monthly mortgage payment is $2k, by going to a bi-weekly program you’ll need to find an extra $2k in your budget each year to add to your mortgage payments.

Rabbit #4. Service fees. Any money paid to the company setting up the bi-weekly program doesn’t go to pay your mortgage.

Rabbit #5. Making two payments a month. Paying half of your monthly mortgage payment two weeks early will reduce the length of your mortgage. But not by a significant amount.

OK, so let’s see if we can’t help Eric to focus on what’s really happening with a bi-weekly mortgage. He’s exactly right in that by going bi-weekly it has the same affect as making an extra payment each year.

In this case about one extra $2k payment for about 20 years. And, that will be true whether Eric goes bi-weekly or just adds 1/12th ($166) to each monthly payment himself. So if he reduced the legnth of his mortgage to 20 years he’ll be putting in about $40k in total prepayments.

If he works with the bi-weekly mortgage company he’ll also end up paying them about $1k.

In either case he says that he should reduce about $87k in interest that he won’t have to pay the mortgage company.

So the real difference is whether he wants to pay $1k to have someone to perform the service for him. In fairness, companies offering bi-weekly mortgage plans do provide some services to earn their pay. The biggest one is that they make sure that the mortgage company applies the proper amount to reducing principal each month.

But you can do that yourself. Just a matter of checking your principal balance after your payment is applied and make sure that it was reduced by the amount of any prepayment plus the portion of your regular payment that goes to principal.

So to answer Eric’s question – it would cost him about $1k for something that he could do himself. Being frugal, we’d just add the extra amount to each monthly payment and skip the bi-weekly business. But, if Eric needs the extra discipline, then spending $1k to save $87 isn’t a bad deal.

Keep on Stretching those Dollars!
Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website and various enewsletters. Visit the site for more info on mortgage prepayments. Send your frugal living questions to gary@ stretcher.com.

Incurred heavy debt and unable to repay it? Yes, this is the situation of most people of America especially in the present unstable economy. Even if you are unable to repay the debt with present monthly income, the creditor will try to recover it from you under any circumstances. Yes it is true because why anyone will let their money give it to you and forgive it without any cause.

For this reason, lenders employ collection agencies to collect debt from you. Collection agencies are firms that are specialized in debt collection from people who defaulted in making payments. Some creditors will have in house collection team that acts according to guidelines of the creditors and some creditors sell the defaulted accounts to collection firms for partial amount with an intention to recover minimum amount of money they lend.

Debt collection is a business that collects amount on debts owed by debtors. Most collection agencies operate as an agent to creditors and collect debt on behalf of them which in turn charge a fee for the total amount owed.

Debt collection agencies while performing their business employ different methods to collect debt from the debtors. These methods can be threaten the debtor and feel harassed when the debt collector contact you. For this reason many are frightened of the debt collection term itself. Don’t worry every problem has a solution. If you are facing the debt collectors daily in an effort to settle the debt then you have definitely got a solution.

As more and more debtors are defaulting, lenders started to employ debt collection team to recover the amount. For this reason the number of people dealing with debt collectors has been increasing. In order to get rid of debt collectors many people are filling bankruptcy as they think this is the only solution to avoid them. But there are many other ways in which you can deal with debt collectors. Filling bankruptcy can spoil you credit in future – so don’t ever take this step to get rid of debt collection.

To deal with them, first know your rights as a debtor. The common opinion about the debt collection agencies is that they do not comply with rules. They keep making harassing phone calls and threaten you. Think once does any law permits anyone to threat others? No, then how can a debt collection agencies allowed to threaten you.

To know how to stop threatening you, start learning your rights with respect to law and start speaking law with them. Then they immediately close their mouth or speak smoothly to you. You can know your rights as a debtor by familiarizing fair debt collection practices act.

Second, know the statue of limitation of your state before confirming the call from the debt collector of that bill. If they keep calling then ask him to send the paper work regarding the bill. And if that entry is already for more than 6 and half years then it may drop from credit report. So for this reason don’t take any action with respect to that entry. It may drop of your credit report in other 6 months. To know this information make sure to ask for credit report from credit rating agencies and confirm the debt and know which are about to go off from the credit report and stay away from those.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice