Online Financial Tips

Archive for August, 2011

A car is one of the most prominent and big investment one may have yet it is somehow an achievement. In our society, having a car especially when it is a bit expensive can make a lot of difference in the owner’s status. Indeed owning a car can provide more advantages, but since it is a property that needs a comprehensive maintenance, it drags cyou along to many expenses and that includes the usage of gas. Now the red flag is up, here’s the challenge, how will you able to save up your money nowadays when all the products from essential to non- that-essential goods are all in a gold prices, gas in particular. This is the predicament that most car owners encounter.

Fortunately, we have now the gas reward credit card; it is one of the great ways to save energy as well as money at the fuel pump. Since this is actually new to the industry, many consumers are still hesitant to avail such. Why hesitate when the opportunity is now here waving in front of you? When gas credit cards and gas rewards were introduced, the gasoline industry and any business relating to it are anticipating that many consumers will provide this one great opportunity.

Gas reward credit cards are actually a good thing since many gasoline stations are now offering this reward. They usually offer three to five percent cash back rewards on gas but that depends on the bank that issues the card. This is one of the most common types of reward credit card. Gas reward credit card features rewards in every gasoline purchases, vehicle maintenance and services as well. If you’re a car owner, you’ll surely know how it works to keep your precious driving machine in tip top shape.

I had a recent conversation with one of my clients, Mr. Jackson, who is a finance savvy homeowner from Virginia Beach, VA. He asked me an interesting question that I wanted to share with you, because it seems to be a common dilemma for homeowners in many states.

What the best solution for refinancing my first & second mortgages? Mr. Jackson elaborated, “I have an 6% 1st mortgage with a balance of $255,000, and a second mortgage at 14% with a balance of $52,500. We did a 125% second mortgage to pay off some credit cards. If I add the loans together, we exceeded our homes equity, as the property was appraised at $280,000. We are satisfied with the 1st mortgage rate, but we wanted to lower the rate on the second mortgage. A few years have passed since we took out the 2nd loan back in 2002, and importantly our home’s value has increased to about $325,000.” He continued, “Should I refinance the second by itself and try and get a lower rate, or should I refinance the 1st and 2nd mortgage together for one mortgage payment?”

Wow, what a good question. I praised my client for consolidating his credit card debts with a fixed rate loan. He was very satisfied with his monthly savings with the 125% loan and because it exceeded his property value, he did not consider refinancing that loan until neighbor hood housing costs went up significantly. Now that his house has increased its value it appears that his combined loan to value was under 100%. His refinancing options become much greater with the increased equity from the home appreciation.

I asked Mr. Jackson a few questions so I could help him find the best solution. How is your credit? Do you know your credit score? Is there a pre-payment penalty on your second mortgage?
Does your first mortgage have a fixed interest rate?
Jackson answered quickly: 689 credit score no pre-payment penalty after 3 years, and his 1st mortgage is at 6% with a 30 year fixed rate.

Combining first and second mortgages into one loan can be challenging, but sometimes it makes sense financially as well as being practical. In Jackson’s case, the best option was to leave his first mortgage alone, and simply refinance the 125% home equity loan with a 95- 100% second mortgage to lower his monthly payments. So Mr. Jackson was approved for a fixed rate 2nd mortgage. He had inquired about a home equity line of credit, but I reminded him that they have adjustable rates that have been increasing rapidly in the last few years. Since he was paying off long term debt, a fixed rate loan with simple interest was the only way to go. I was excited for Mr. Jackson, because we were able to get him approved for a loan with no pre-payment penalty and we were able to reduce the closing costs, because of his credit score.

Depending on the home equity program, 2nd mortgages may cost you a few thousand dollars in closing costs. Most closing costs are tax deductible and getting the lowest possible rate pays off in the long run. For example, With a 15 year term, you would recover the cost of the second mortgage within a few years, so if you can get 1% or more better paying some closing costs, it would be better than a home equity loan with no points. The lending reality is that most no point no fee 2nd mortgages require credit scores over 700, and the combined loan to value will most likely need to be under 90%.

If you are able to get the second mortgage with no penalty for early payoff, then get that feature with your loan, because if your home’s value continues to increase, then in a year or two, you may find yourself ready to refinance because you are back at the golden 80% combined loan to value. If 1st mortgage rates happen to drop again, then you may find yourself in a great position to finally combine both loans together. If the 1st mortgage rates dropped to the 6% zone, and you still plan to live in your home for many years to come then make the move to refinance. It all comes down to what the rate are doing, when the time comes.

Consumer debt consolidation loans are becoming increasingly common in the United States as a way for Americans to escape nationally rising debt levels. With the average American holding 5 credit cards on top of other debts and bills, it’s no surprise so many are turning to professional help to get out of their bad financial situations.

What is Consumer Consolidation and How Does It Work?

So what exactly is consumer debt consolidation and how does it work? When you receive a consumer consolidation loan, all of your high interest bills will be transfered into one low interest loan, with one lower monthly payment. By consolidating all of those high interest bills, you will be paying less interest every month, and therefore, you will have more money to begin paying off the actual debt, not just the rising interest. These loans are also beneficial because they simplify your finances. Instead of having several varying bills every month, you will only have to worry about one simple bill every month. This results in much easier financial planning which will greatly reduce your end-of-the-month stresses.

Start by Comparing Free Online Quotes

Getting started with consumer debt consolidation can be a little overwhelming. There are literally hundreds of lenders out there, and they are all claiming to have the best rates and terms. However, as you can probably guess, a lot of them don’t have the best of intentions. What you need to look for is a company with a proven track record for helping clients get out of debt.

So how do I decide on a lender? Good question. The first thing you should do is request some free quotes from a few lenders, just to see exactly how much you will be able to save with a debt consolidation loan. If you decide that debt consolidation is right for you, which it probably is, you should go ahead and request a few more quotes from other lenders. The more quotes you get, the more confident you can be that you are getting the best possible loan.

No financial planner would ever recommend a mortgage refinance (one form of debt consolidation) to get out of credit card debt. It is substituting secured debt for unsecured debt and you could lose your home over a bunch of unsecured credit card debt if you get injured or can’t afford your new higher monthly payments.

Also, and these are verifiable published reports, 77% of all people who refinance their way out of credit card debt are right back at the same level of credit card debt 2.5 years later on average only now with less equity in their home. So it obviously isn’t fixing the problem.

why?

Because no behavior modification was needed. You made it too easy on them to just refinance out of cc debt. No financial planner will ever recommend that route.

In settlement though they have to go without using credit cards for 2 to 3 years and do go through behavior modication. Credit counseling entries on your credit report are as bad as bankruptcy entries. They will crash your FICO for 10 years and take you from a 700 FICO down to low 500′s literally overnight.

Debt settlement on the other hand is only a late pay on your credit report. Late pays bring down a 700+ FICO about 40-50 points, they bring down 600+ FICO’s about 30 points, and bring down 500+ FICOs about 10-20 points. But more importantly, the FICO goes back up more than the drop from late pays as we eliminate the debt so their debt to income ratio goes down to zero and their FICO is back up higher than it was before they joined a settlement program even with the late pays on there,
but we demand a withdrawal of the late pay entry as part of the negotiated settlement and get that 99% of the time.

Superior Debt Relief is the only debt settlement company that pays for three levels of credit restoration afterwards to bring the FICO up even higher.

Settlement is one of the methods used by mortgage consolidation people to get someone qualified into a home that was denied financing due to too high of a debt to income ratio.

With so many people struggling with credit card debt these days, debt settlement has become a very popular option.

And when researching debt settlement companies, many only offer their services in specific states. Which leads to the question: Is debt settlement legal in all 50 states?

From the perspective of the consumer, the answer is simple. Settling your debts with a creditor is perfectly legal. You can call or write to any creditor, negotiate with them to pay off your balance for less than you owe, and if they agree, you pay the lesser amount. And your credit card debt is paid off in full. You don’t need any special permission or license, and there is nothing illegal about settling your debts this way.

When hiring a professional debt settlement company to negotiate with your creditors, the answer is a little different. The laws vary from state to state, with some states clearly defining what type of debt help a financial professional can offer, and others having little to no guidelines. Unfortunately, is many states the laws are not entirely clear.

So when comparing your options, you may find that some settlement companies service your state, and others do not, as there can be different interpretations of the law by different companies. And some laws were developed years ago, and do not reflect the current status of credit card debt in the United States.

Even more important than the legal status of debt settlement is the ways in which these companies treat their customers. Sadly, there are many companies that offer to settle your debt by collecting large up-front fees, and then either don’t deliver the service they promised, or don’t educate their clients as to how the process of negotiating a settlement really works.

How can consumers protect themselves from dishonest debt settlement companies?

Check with the Better Business Bureau. While the BBB is not a guarantee that a company will deliver outstanding customer service, it does allow consumers to see how they’ve treated other customers in the past. Any company with more than a few unresolved issues should probably be avoided.

Mark Brinker from Hoffman, Brinker, & Roberts feels that the BBB seal on their website “gives consumers a huge vote of confidence”. Especially when a review of Hoffman, Brinker, & Roberts BBB report reveals zero unresolved conflicts.

The bottom line is that debt settlement is a legal, honest way for consumers to avoid bankruptcy and get out from under the weight of heavy credit card debt.

A rumor that has been spread since the 1960′s is that whatever a car dealer gets for a down payment is nothing more than profit. This rumor is in part, true.

An Example

The following example applies whether you’re buying a car, truck or motorcycle with bad credit.

Let’s say that you want to purchase a used car that has a selling price of $15000.00 and the dealer is telling you that because of your bad credit history, you have to put down a 10% down payment of $1500.00. In cases like this, it is very likely that the loan company approving you will only “advance” $13,500.00 on the vehicle in question and this is generally based on loan value. Typically, the dealer will have paid somewhere around loan value for the car and if they sell it at this price, then they aren’t making any profit. So in this common example, requesting that you make a cash down payment of $1500.00 is in fact, $1500.00 of dealer profit and nothing more.

Dealers do have to make money and $1500.00 is a reasonable profit. It’s disheartening however, to fork over a couple weeks worth of income just to make that happen, though.

How to Get A Car with No Money Down

If you have bad credit and need auto financing, and you don’t want to put any money down, there is a solution. Now, hear me out on this, because this information can really benefit you and this information comes from 20 years of experience working in car dealership finance departments…

Buying a car from a private owner. This reduces the amount financed by around 7% or whatever your local tax rates are. This reduces the amount needed to buy the car and less money that has to be borrowed. There are also no dealer “doc”