How we release Yourself From The Burden Of Debt?… (business news)

October 31st, 2009 admin Posted in finance |

By muzaffar

Do you feel like you are in debt prison? Are you in financial turmoil wondering how you can continue to keep everything from imploding on you? Did you know that there were actually debtor prisons in America before the Revolutionary War? Robert Morris, a signer of the Declaration of Independence, was imprisoned in the 1700’s for failure to pay debts. The bible also warns against borrowing more than we can afford to pay. Proverbs 22:26-27 says do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you. Credit card use has continued to grow in leaps and bounds. From 1996 to 2005, the total number of bank credit cards almost doubled. In 2004 alone, credit card companies generated $43 billion in fee income from late payment, over-limit, and balance transfer fees. The Federal Reserve reports that the total US consumer revolving debt reached 2.46 trillion in 2007. This large increase in card usage has created a “fee feeding frenzy,” among credit card issuers. The whole credit card industry has really evolved for the benefit of creditors in recent years, with the industry imposing fees and increasing interest rates if a single payment is late. Penalty interest rates usually are as much as 30-39%, while late fees now often are $39 a month and over-limit fees are as much as $35. If you consider how that can add up over just one year, it could be very expensive. Consider this: late and over-limit fees alone can easily rack up $900, and a 30 percent interest rate on a $3,000 balance can add another $1,000. The bottom line is, credit card companies want to issue as much credit as possible to as many people as possible and hope you barely make the minimum payment. Its the exact same way these cash advance companies all over town work. They couldn’t care less if you ever pay it off. In fact, they do not want you to pay it off. While most card issuers claim this is the cost of doing business, consumers should not be charged excessively for small errors. Ultimately we are responsible for our own financial choices and credit purchase decisions. However its clear to see that credit card companies will continue to entice and market low teaser rate introductory offers (the bate) and make it easy for us to use the cards. This is attractive to the consumer because they can avoid waiting and have the items or purchases they want now. But what price will we actually pay for these items? That said, roughly $355 billion in mortgage loans are set to adjust during 2008, to significantly higher interest rates. This means many borrowers may face additional difficulties. Hopefully the Bush administrations plan for a rate freeze for adjusting arms and foreclosure prevention will help many consumers avoid catastrophe. The combination of mortgage woes and credit card debt pileup has made many people feel as though they just walked out on a pirate ship plank with nowhere to turn. So, what is the best way to find the road to financial prosperity? First and most importantly, if you are in an adjustable rate arm loan, check the date that it is set to adjust in your paperwork from your title closing. If you closed two or three years ago and took one of these teaser loans it will adjust 24-36 months from the original closing date. This is very important because when it adjusts it can increase by two or three interest points. Your lender should notify you 30 days prior to your reset date and you may get reminders from lenders vying for your business. Dont get yourself caught in this self destruction. Mortgage interest rates are anticipated to remain steady or dip slightly in 2008; this may be a good opportunity to refinance into a 30-year fixed-rate. The FHA modernization act will make refinancing a good option for damaged credit borrowers to qualify for up to 95% of their homes value at competitive single digit interest rates and avoid incurring prepay penalties. The teaser arms sold over the past 2-3 years are under extreme scrutiny due to the explosive foreclosure epidemic and its effect on the overall economy. The FHA Secure is also a great option for those who need help to avoid foreclosure, allowing them to roll in the arrearage. The future of sub-prime lending appears to be bleak at best. Many borrowers had little options other than 2 or 3 year fixed rate sub prime arms over the last few years because of credit issues, and aggressive lenders pushing these loans on poor credit borrowers. Unfortunately, these same borrowers are now in trouble and imploding due to a cocktail of housing value depreciation, adjusting rates and maxed out credit cards. The bottom line to most of these issues is proper guidance and good decision-making. Additionally, it is prudent that you choose an advisor that will educate you about any loans that are different than the norm, like arm loans, negative amortization loans and loans that do not collect escrows. Now, if that is not upsetting enough, federal regulators pressured credit card issuers to double the minimum payment requirements on credit card balances. This can be both good news and bad news for many Americans burdened by debt. While it may force you to pay the balance down, it can mean disaster for many who cannot afford the extra out-of-pocket expense each month. Should you use a mortgage refinance as an Option to Debt Consolidation? If you are a homeowner with verifiable income, who pays their bills on time for the most part, but who would sincerely like to be debt-free and financially secure while still young enough to enjoy it, maybe even become wealthy. Whether you’ve had some credit problems and have a blemished credit report, whether you’re struggling now and need immediate help to avoid foreclosure, or are doing okay but wish there was a strategy to get out of debt and build some net worth. Then this could be a possible option. When you really analyze your financial situation, are you using too much of your income just servicing debt making the minimum payments? You absolutely can not build wealth overusing your credit cards you have to make a conscious decision not to make purchases with credit cards unless you can payoff the balance. While home equity has been reduced dramatically in some declining markets, many people may still be able to benefit from restructuring the way they pay their bills and by using their home’s equity as the means of accomplishing this. Do you have two loans with one of them adjustable? Consider consolidating your 1st and 2nd mortgage loans. Do you have high balance credit card in which you are being charged late fees, over limit fees and excessive interest? Consider paying off obligations such as auto or high rate credit cards, overdue property taxes or insurance premiums. This will wrap up your existing obligations into one tax-deductible payment and puts you back in control of your debt with one manageable payment. Consult your accountant or tax advisor on this as it could equate to a 20-30% savings in interest and your overall Net Effective Rate. If you can eliminate your credit card payments, late fees and penalties and start enjoying increased monthly disposable cash flow, you may actually be able to make financial choices that will help you build a positive net worth. Another way you can reduce mortgage interest further is by signing up for a biweekly repayment plan that splits your mortgage into two monthly payments, this forces you to pay down your mortgage interest much faster. I know, I know your friend said just make one additional payment per year to accomplish this, seriously! Who does this? I say forced biweekly, kind of like forced property taxes through escrows, you get the idea! Then take the savings, say for example $200 a month, and purchase an equity indexed life insurance policy that will protect your family if you die to cover the mortgage balance. More importantly, if you live, the account your premiums go into is tied to an investment account so that it will accumulate a cash value that could be drawn on at retirement, and essentially you could pay off your mortgage tax free. Imagine the benefits of having fewer bills to deal with every month and simplifying your financial life! Here are a few things to consider to decide if you could benefit from a refinance consolidation: Do you have equity based on a current appraised value? Do you have a home equity line of credit thats increasing out of control? Do you have a loan that does not collect escrows for taxes and insurance and have difficulty paying them at the time they are due? Do you have too many credit cards that are near or above the credit limit? Do you have an Adjustable Rate Mortgage on the brink of spiking Up? Do you make minimum payments on credit cards and are unable to make a dent in the balance? Are you saving and investing less than 15% of your income? Would you like to take advantage of the FHA Modernization and qualify for a great rate? Would you like to get out of that high interest rate sub-prime loan and qualify for a single digit 30 year fixed rate loan without a prepay penalty? Are there tax-deductible savings opportunities like pension plans, IRA, Keogh, Medical Savings Accounts, etc. that you are missing out on because you don’t have enough money after paying bills to participate in them? Would you like to take a really nice vacation or make some improvements to your home this year without going into debt to do it? Would you like to eliminate years off of your mortgage balance? Do you have a mortgage protection insurance plan to protect your home and family should you die or become disabled? If any of these questions apply to you, consider the following: The average personal savings of a retiree amounts to about $6,500. The average benefit check is about $968.00 according to the Social Security Administration. Baby boomers are expected to enter retirement starting in 2010 and considering people are living longer, it is expected that these funds will be exhausted by the year 2040 and will create a deficit in the trust, only providing 72% of what is needed. The key thing to consider with proper debt management is to make a conscious effort to avoid using credit cards for unnecessary purchases. If you cannot afford it, do not buy it! More simply said than done, I know. Look for ways to curtail extra activities such as eating out everyday, soft drinks, anything you can do without. Use the extra savings to pay off your high interest cards first. Contact a credible mortgage advisor to see if you qualify for a debt consolidation loan at a competitive interest rate. Transfer non tax-deductible interest from other debts to a tax deductible loan. If the loan will not create a tangible benefit to your financial picture do not do it. About the author: Christopher Beard is a specialist in helping people with credit issues through debt consolidation mortgages. He is the president of Trinty 1 Financial Group and works one on one with clients with planning mortgage and insurance strategies visit his site on the web

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How you can Negotiate Your Loan Modification With Your Lender To Get Approved?

By ALFAHAD KHAN

Having to negotiate with your lender when you are in default of your loan is a tough situation. Homeowners are worried about their financial status and it can be very intimidating to try to reach some sort of deal. Even though it is very stressful, you can be successful by keeping your cool and having a plan.

Before calling and putting yourself at their mercy, have a plan in place. The first thing is to explain why you should be given a modification. Compare your property with others in the area and figure out what your property can be rented for. This is a good starting point as the lender will see what other properties currently pay monthly and can work with your individual situation. It would also give them an idea as to how much they could rent it for if they foreclosed.

Find out what your home is currently worth on the market. Your lender might require an appraisal, but you can get an idea of what your home is worth on the web. Zillow.com is one reputable site that can give you an approximation of the property’s worth. Your lender will also send you an application package with other documents you need to sign and review. You will also have to provide current pay stubs and even bank statements.

Before you pick up the phone and make the initial call, have your plan ready. Review what you are going to say. Make notes on paper prior to calling to make sure you don’t forget anything. Keep your cool when calling. Don’t let your emotions get out of control. Getting upset will only aggravate the situation. Remember that they want to work with you, not against you. You are calling requesting help. Be polite and courteous, but be firm and confident as well.

You will probably have to explain your situation countless times to different lender employees. Make sure your story is consistent and don’t change the reason why you are in your current situation. Most conversations are recorded or entered into a computer base, so the next person who reviews your records knows what happened previously. Consistency is key to getting the modification. Once you are offered a deal, compare it to what you current have. Make sure your new payment is affordable and that it will have a sufficient term so that you can re-establish your credit and start the road to financial recovery.

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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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