Tag Archives: debt
Debt Management: How You Can Master Your Debts
Managing numerous debts, when you hear it, seems like a Herculean task. But it is not. It is in fact easy to do it once you find out about the numerous programs that are dedicated to this purpose. Their common goal is to help you undo the shackles that your unpaid debts have probably placed upon you. They exist under a single banner- debt management.
Debt management is a program that can make repayment of your multiple debts an easier process. It functions in a simple way. All the debts that you have are merged into a single one. These may be credit card debts, huge unpaid bills or unpaid personal loans. This new consolidated debt can be paid off at an interest rate which is lower than you original rates. Now that you have a single debt, you can make a single payment to a singe creditor who will distribute it among your other creditors.
Through debt management, you get to avail advantages like these:
* A more manageable repayment method * Lesser overall payment * Some money can also be saved for use in other purposes.
Debt management can be easily achieved with the expert help of debt management agencies. Apart from the usual features, you also get valuable guidance as to how to manage your personal finance and regulate your expenditures so that you dont have to fall into debts again in future.
Debt management can also be achieved through the following forms, depending upon the seriousness of your debt status:
Debt consolidation: when your total debt crosses £5000 and you owe to two or more creditors. All you debts will be consolidated and a loan will be given to help you pay off the consolidated debt. Debt negotiation: when you cannot make the minimum payments. Your total debt amount is substantially reduced, sometimes by half. Debt elimination: when the only other option remaining is bankruptcy. Interest rates are reduced on all debts except one which can be paid off with the extra money saved from the other reduced payments.
Debt management, no matter which option you go for, certainly frees you off your debts.
Interest Only Loan Refinance
Refinancing of interest only loans simply means swapping one loan for another. It is an effective way to decrease the debt on existing loans. This is especially beneficial if the current interest rates are lower than the interest rates you are presently paying on the loan. Refinancing would enable you to convert your high interest debt into a low interest debt, as the amount of monthly payment would decrease. The extra money saved can be reinvested in something more lucrative like real estate or shares, or to pay off high-interest debts like credit cards. Refinancing is also done for converting an adjustable rate mortgage into a fixed rate mortgage. Refinancing has become so common in recent years that almost three quarters of new mortgages were refinanced loans in 2003.
Refinancing of interest only loans is very attractive, especially when the time comes for the loan to get amortized. That means the loan will have to be repaid at the current interest rate, along with the principle. Most people seek to refinance their interest only loan in order to buy more time, i.e. to delay the repayment of the principle further. However, this may also increase the risk on the loan, since the interest rates may go up further, the price of the house may come down or the economy may slump in the future.
Refinancing of interest only loans is ideal for people who are expecting huge capital gains in the next few years or are planning to sell their house by the time the interest-only period is over. This is a good alternative as long as the economy is good, the interest rates are steady and the prices of houses are increasing. Interest only refinancing is recommended for people who have irregular incomes like commissions or bonuses or those who are expecting a hike in their income in the coming years. The savings accrued from refinancing can also be used for home improvement, which will increase the value of the home in the future.
A few questions to be considered while refinancing are: how long do you expect to stay in the house? How much equity do you have in the house? Will you have to pay points for getting a low rate from the refinance? What would be the closing costs? Will the lower payments from the refinance enable you to cover the closing costs, points (if any) and the fees reasonably?
There are several lenders who are offering refinance options for interest only loans. The Internet is a good source for getting information about these offers and also to find out more about interest only loan refinance.