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Pitfalls of debt consolidation
In my mail box everyday I receive at least one or two mails regarding the debt consolidation companies and services and I always wonder how many people will be taken into these attractive statements without knowing much about the details. The luring claims of these companies include;
1. To decrease interest rate to almost a zero level.
2.50% lessening of monthly payments
3. A security to your company and debt.
If you are stuck into this whole system of unpaid debt these statements would look like a relieving pain killer or an exact ointment on your wounds. But before actually jumping on any of these services let me give a few drawbacks of this whole methodology that will compel you to think appropriately and then decide.
Zero Interest Rate
Well, zero interest rate is not possible humanly, because no fooling is sitting in these companies to let you spend all his money gaining no profit in return. Its just like you need to have a detailed calculation about the monthly payments you are going to make and the time period. Most of the times youll come to know that interest rate are as much as 22 to 25% high. You may be paying less monthly amounts but yeah the duration will be much prolonged.
Payments and their Share in these
You will pay your monthly amount to these debt consolidation companies and then lets see what can happen to those. First of all you may notice that they are having their share or fees in every payment and ultimately paying the creditor a lesser one. Then some of these companies are even notorious to make late payments or missed payments that will worsen your credit score and your rating for payments.
Balance Transfer Cards
These low interest balance transfer cards re very much into market these days even you can have dozens of them in your pocket. But what is the drawback? You ask for such a balance transfer cards and pay that low interest payments for few days, but after that time this interest rate is diminished and you have to either pay the original interest or even more than that thatll be devastating.
Negotiating
This is the part they said they are expert in, but actually they are misleading you so as not to involve you in this whole matter. The better option here will be to negotiate with the companies by you so that you wont have any doubts regarding the payments.
Top 5 Refinance Tips Your Loan Officer Doesn't Want You To Know (Page 1 of 2)
Yes! Getting a loan these days can be scary. Even experienced borrowers have been taken advantage of by unscrupulous loan officers. Don’t let it happen to you. I have five must read tips to fend off a potential loan disaster.
Before reading the tips, keep in mind there are credible, ethical, good guy (and gal) loan officers across America and they’re just as mad as you are about the rats that feed off of unsuspecting people. Make no mistake; great loan officers know it is in their best interest to make sure you are an informed borrower.
Here are some things BAD loan officers do:
· Manipulate borrowers to take loans and rates that pay the loan officer more than what is agreed upon.
· Charge much more in origination using random excuses (your credit’s not good enough, you can’t verify your income, you’re getting cash out, etc.)
· Convince people to do a loan when it’s not in their best interest.
Let’s weed out the bad guys! Here are the five tips…
Tip 1: Interview your loan officer
Ask for more than just rates. Bad loan officers will tell you anything to keep you on the phone — then change the details to suit them later. Instead, make them get real with you! Ask how long they’ve been in the industry. Probe them about their experience in the industry. Also, ask what their opinion is on the current market and where it’s going.
Listen closely. Do they have the patience to answer your questions or do they seem annoyed. Is their voice hesitant? Unsure? Pay attention to your instincts. If you have a “funny” feeling in the pit of your stomach, chances are you should move on. (More questions to ask while interviewing located in the free eBook)
Tip 2: Make sure the loan is in your best interest
Here’s the deal… most loan officers are paid on commission (many on commission only). That means they don’t get paid unless they complete a loan with you. The problem is “their loan” may not be in your best interest. You need to look at what’s being presented and decide if it meets your needs. Some things you should consider: How much is the loan costing you? Is there a term reduction? Are you adding too much to your balance?
You should do a cost-to-savings benefit analysis. This is where you take the total cost of the loan and compare it to the benefits of the loan (monthly savings, cash out, term reduction, etc). This will help you determine if the loan is worth it to you. (See examples of cost-to-savings benefit analysis in the free e-Book)
Tip 3: Consider your loan options carefully
You may be saying, “Yikes! There are so many to sort out!” True… there are many different loans out there to consider: 5/1, 7/1, 10/1 ARMs (Adjustable Rate Mortgages)… 30Yr, 20Yr and 15Yr Fixed rates… Neg Ams, Hybrid Option Arms, Helocs, etc. But, keep in mind that each loan has its own unique purpose and function. Choice is good and it’s the loan officer’s job to help you find the best loan for your purpose. That’s why it’s important that your loan officer explains the loans they are presenting in FULL detail. Again, take notes. Ask questions until you feel comfortable with the options presented.