(Small business websites) How you can get the lowest interest rate possible?…

October 30th, 2009 admin Posted in finance |

By eli

Next to winning the lottery, a debt consolidation loan is a debtor’s dream. With one monthly payment and a fixed monthly payment schedule, you can actually see an end to those monthly payments.

In reality, consolidating bills isn’t always easy. If you have a lot of debt, it can be hard to find a consolidation loan at a lower interest rate. And if you’re not careful, you can end up deeper in debt than when you started.

Your goal in consolidating your debt should be to lower your overall costs. To accomplish this there are two things to keep in mind:

1. Get the lowest interest rate possible

2. Have a plan to pay off your debts in 3 - 5 years.

Here are some of the best ways to consolidate:

Using Credit Cards

The good news about this method is that with a good credit rating, you may get a much lower rate than other forms of consolidation loans. And since credit card issuers don’t require collateral, you aren’t “risking the farm.”

Call your current issuer to ask what interest rates they will offer you if you transfer balances from other cards over to theirs. Go for a fixed rate if you can get it, and ask them to waive any transfer fees. If you can’t negotiate a low rate with your current issuer, try shopping for a new card at a site such as CardRatings.com. But be careful! Too many applications for credit in a short period of time can hurt your credit rating.

Once you do consolidate this way, be sure to set up an optimal payment plan so you can be debt-free in 3 - 5 years.

Home Equity Loans

With a home equity loan, you borrow against the value of you home, minus any other mortgages. The two major kinds are:

1. A Home Equity Loan - a fixed amount of money for a fixed period of time (sometimes at a fixed rate) and

2. A “Home Equity Line of Credit” where you borrow up to a pre-approved credit limit (interest rates usually variable) and can borrow again if you still have money available.

These loans can offer attractive rates, low payments, and the interest is usually tax-deductible if you itemize.

Many issuers offer no or low closing costs for these loans. Interest rates are often variable, however, and there’s always the risk that you can lose your home if you can’t pay.

Cash Out Refinance

Refinancing your home and taking out money to pay off bills (called “cash-out refinance”) is yet another way to tap the equity in your home. If you can refinance at a substantially lower interest rate, you’ll eliminate the high interest costs of the debts you pay off, and you could even come out with a lower payment than you have right now since rates are so low.

One option to consider: an interest-only loan. By lowering your monthly payment, you can free up money to use toward paying down other high-rate debt or building a retirement fund.

Make sure you understand the total cost of refinancing. Take any money you’ve freed up by paying off other bills and use that to create an emergency savings fund.

Traditional Debt Consolidation Loans

A debt consolidation loan is an unsecured personal loan, and the only collateral you are offering for the lender’s security is you. Because lenders consider them risky loans, they’re usually more expensive and not always easy to get if you have a lot of debt.

If the interest rate is too high to make it worth it and the repayment term is ten or fifteen years, you should probably consider another method of consolidation. However, if the term and interest rate are right, this can be a great way to actually save money in the end. (Check Bankrate.com for current averages). Remember, to calculate the total cost of the loan from start to pay-off.

Credit Counseling

Credit counseling agencies may help you get out of debt, though they don’t actually consolidate your debt.

Instead, payment plans (usually with lower interest and fees) will be worked out for all of your eligible debts. You’ll make one monthly payment to the counseling agency, which will pay all your creditors.

Participating in a credit counseling program generally won’t hurt your credit rating, and if you stick to the plan you can be out of debt in three to six years. But be careful which agency you work with. If the counseling agency pays your bills late, you’ll pay the price since you’re still responsible to the lender. It happens.

Debt Settlement

Debt settlement is another option that’s become increasingly popular with consumers who have a lot of debt and can’t, or won’t, file bankruptcy. You stop paying your bills and instead make a regular monthly payment to the settlement company. Your creditors contact them, and not you, about your overdue bills. As your accounts fall further behind, the negotiation company will settle your balances - usually for 50% of the balance or less (including fees) depending on the debt. Most people can be out of debt in less than two years or less using these programs.

It’s not perfect. Your credit rating will be hurt in the short run and you must be certain you’re dealing with a reputable company or the money you pay each month could disappear. Still, for consumers who can’t shoulder the burden of debt they have now, it can be a very good option.

Retirement Loans

If you have a 401(k), 403(b) plan or certain types of pension plans, you can borrow against your nest egg. (You can’t borrow against your IRA.) It’s easy, with no income qualifications or credit check.

The key here is to borrow against your retirement account, rather than withdraw from it early so that you don’t end up paying taxes and a 10% penalty. Also, if you leave or lose your job, you may have to pay your loan back immediately or pay taxes and penalties for an early withdrawal.

These loans typically offer low interest rates, and interest is paid to you, since you are the lender. While tapping your next egg like this can short-change your retirement, so can costly debt payments. If you are in your 20’s and 30’s,you obviously have more time to rebuild a retirement nest egg, but even if you’re in your 40’s or 50’s, you will want to weigh the cost of paying the high interest of the debts over time, versus borrowing from your retirement account. The return you get from paying off high-rate debts is guaranteed - while the stock market isn’t.

Rapid Repayment

There is a mathematically optimal way to pay your debts. Choose a fixed level monthly payment, and commit to it each month. Pay as much as you can on the highest rate debt first, while payment the minimums on the rest.

I almost always suggest consumers with debt start by creating one of these plans. Many people who do so find they don’t even need to consolidate to get out of debt in the next few years. They just need a plan and they can do it on their own.

Overview

The biggest mistakes people make when it comes to consolidation are:

A. Not having a plan for paying the debt off after they’ve consolidated, and

B. Procrastination. Waiting for the “perfect” solution to come along almost always means you’ll end up deeper in debt. Choose your approach, and start getting out of debt today!

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Obtaining Loans Is Possible Even With Bad Credits

By Nitin Article

If you have made mistakes in the past that have affected your credit you are not alone. In the past many people assumed that having blemishes on their credit history would keep them from obtaining a loan of any variety but that is not true. While it was very difficult for people with bad credit to get loans in the past many lenders have relaxed their rules just a bit and have made it possible for those that want to start improving their life to do so, regardless of their past credit problems. How to Get a Loan with Bad Credit If you have bad credit you may very well be able to get a loan whether you need a car loan, a personal loan, or even a mortgage. While you won’t have as simple a time as you would have if you had perfect credit, anything is possible today. You need to be prepared to jump though a few more hoops and do a bit more work, but if you are willing to do this you may very well find yourself with the funding that you need from a loan. When you apply for a loan you will need to provide all of the basic information such as your full legal name, your mailing address, your physical address, your social security or taxpayer identification number, and proof of income. In addition you will likely need to provide information about any debts that you currently have such as homes, cars, etc. This information will help a lender determine if you are eligible for any of their lending programs. Because you have less than perfect credit you may be required to get a few different letters of credit. Letters of credit are simple letters from those that have extended you credit or services in the past. You can get these from your utility companies, previous lenders, and anyone or any entity that you have dealt with in the past. You will obviously want to get these letters from services that you have had good experiences with, as they will show the lender that you are capable of paying your bills on time. You may be required to get as many as 10 of these letters of credit so when you know that you will be applying for a loan you should start sending out requests for these letters so you have them when you need them. If you have bad credit you should be aware that you may need to have a down payment on some loans and on other loans you may need to have a co-signer that has better credit than you on the loan with you. Many times a lender will require you to have a down payment so they know that you are serious about paying back the loan. Each lender is different as are their requirements, so just be prepared to provide a lot of information when requested in an effort to get the process completed as efficiently as possible.

The House and Senate have each come up

By speedin08

In 2001, the US economy had entered a recession and the government issued rebate checks to most people in hopes people would run out and spend them and help stimulate the economy. While the effectiveness of that move haven’t been proven one way or another really, congress is currently looking to run a similar program in 2008. The House and Senate have each come up with different rebate plans that are currently under discussion: The House would like to pass a plan that gives $600 to each individual or $1,200 to married couples with an additional $300 per child. The amount of rebates would be decreased for individuals who make more than $75,000 annually or for married couples earning more than $150,000 annually. The Senate is working on a plan with slightly lower amounts, with $500 given to each individual and $1,000 provided to married couples.

This plan also would provide an additional $300 per child. While the amounts are a bit lower in the Senate’s version of the rebate plan, more people would qualify for the money. The money wouldn’t start phasing out until income levels are about twice the House limitations; and the Senate’s bill for the rebates would provide money to people on Social Security as well as our disabled veterans- people who wouldn’t qualify under the House version of the bill. Before the bill can be placed on President Bush’s desk for his signature, the Senate and House need to agree on a compromised version to present. If approved by the President, it would be unlikely for the Internal Revenue Service to issue checks until at least mid-May- until after the rush of the tax season has ended. In 2001, research teams tried to decide what kind of impact the tax rebates had by looking at changes in the government’s Consumer Expenditure Survey. It seems that somewhere between 20 and 40% of the rebates were spent in the first three months of receiving it; with almost all of it spent within nine months of receiving it.

In a separate study, it was found that credit card debt dropped considerably soon after households received their rebates- but within nine months it had risen again as people began putting new debts on their credit cards. What’s interesting is the number of companies that have been polling people to find out what they’ll do with their rebates if they get them. The idea is to spend it and stimulate the economy of course, to help pull us out of what could be a bad recession; but the polls are finding that the majority of people are looking to pay off their existing debt with the rebates. In fact, depending on the site offering the polls, I saw responses as high as 51% claiming they would use the rebate to pay off credit card and other debts; as as many as 36% claiming they would invest it into long term savings options. Of course, what people say they’re going to do with their money and what they really do with it are often entirely different things.

Have you ever planned to save a portion of your paycheck and gone out to dinner instead? Probably everyone has made the “wrong” decision with their money at least a few times in their lives, despite having the best of intentions. The polls looked at are by no means done scientifically as they’re just based on visitors to a particular website; but it’s still interesting to see how many people hope to pay off debt with their rebates. What would you do with yours?

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