Refinancing – Is it for You?

October 27, 2008

What does refinancing actually mean? It means: replacing your existing mortgage with another, lower interest rate loan. There are many good reasons to consider refinancing, including lowering your repayments, shortening your loan term, taking advantage of your home’s equity, debt consolidation, cash out options etc.

Mortgage refinancing can save you a lot of money if you do it right. Overpaying on your mortgage, when refinancing, is a common mistake that homeowners make, which costs them thousands of rands in interest.

Deciding if you should refinance or not depends greatly on what your financial goals are.

If you are refinancing in order to pay less interest, you would not see the savings right away. This is because financial institutions charge fees when you take out a new mortgage, and in some cases you also have to pay a penalty for canceling your old mortgage. To determine whether refinancing makes financial sense for you, consider these issues:

The Loan Term

It will not make sense to refinance your mortgage and start over with a 20-year term should your existing mortgage almost be paid off.

The Interest Rate

A percentage drop of just one half to three quarters of a percentage point can result into huge savings over the long term.
However, to get the benefits of a lower rate, you may have to pay fees associated with the mortgage.

Refinancing Costs

Refinancing is a lot like getting a new mortgage. Your lender may charge certain fees to facilitate your new loan. The benefits of refinancing add up over time, so if you do not plan owning your home for much longer, the lower payments associated with the refinancing may not cover the costs involved.

As a rule of thumb, the longer you plan to stay in your home the more sense it will make to consider refinancing. If your refinancing expenses can be recovered within the first 24 months of the new loan, mortgage refinancing is probably a good idea.

Pre payment penalties

Many mortgages carry a penalty if you pay them off early. If you do not wish to pay such a fee you will have to give your financial institution a 3 month / 90day notice period. Some however do not charge such a fee and you should go through your original loan documents to make sure.

The break-even point

If you can determine your break-even point, then you can start figuring out when you will start saving money. This involves a very simple calculation.

Start of by calculating how much you will save by lowering your monthly payment. Then add the costs associated with refinancing and divide the total by your monthly savings. This will give you an indication of the number of months it will take to reach the break-even point.
However to get a more accurate estimate, use our financial calculators on http://www.globalproperty.co.za

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The Basics of Credit Scores and Credit Approval

August 19, 2008

Credit scores are one of the most important factors that lenders consider when someone applies for a loan. An individual’s score is considered to be an indicator of his or her creditworthiness.

The higher your score, the easier it is to get approved for a loan or credit card. It is possible for individuals who don’t have great scores to obtain financing and credit cards, but they are considered to represent greater risk. The terms under which their accounts are approved are not as favorable as those of individuals who have higher credit ratings.

Factors Impacting Credit Score

Many different issues impact your score. It is possible for individuals who have little or no debt to have lower credit scores than those who carry significant amounts of debt. Factors that are used in calculating an individual’s score include: the amount of revolving credit currently available to the individual, the person’s history of making payments on current debt, and how much debt he or she is currently carrying.

Verify Credit Report Data

If you’re planning to apply for a loan or charge card account in the near future, it’s a good idea to pull a copy of your credit report to make sure that it is completely accurate. If you find errors on your credit report, you should contact both the reporting agency and the company reporting the information.

It is not uncommon for errors to show up on credit reports. However, a lender isn’t just going to trust you about reporting errors. In order to improve your score, you will have to get the errors fixed. It takes time to get erroneous information removed from your credit history, so it’s a good idea to check your credit report at least once each year.

For more eye opening reports on Debt Consolidation, Credit Card Debt etc, please visit Zulika’s site on www.globalproperty.co.za


A debt consolidation loan is the most powerful means to regain control over your growing debt.

August 7, 2008

You see, debt levels are rising and consumer credit to households is estimated at R760bn with 14 million active credit consumers and 50 million open accounts. The average % of debt to income is 73%. At the same time there are 80,000 judgments for debt per month.

Credit card debt has seen a dramatic increase of 138 percent since 2004 while lease agreements rose by 123 percent in the same period. Is it any wonder that more and more people find themselves in a cash crunch at the end of the month?

With a debt consolidation loan you combine all your outstanding debt into one loan. Instead of having multiple creditors to pay you only have to deal with one. That alone can save you time and a lot of stress.

You arrange the repayment terms to fit your monthly budget. This means that you can now manage your debt and still have some money left over each month.

When you consolidate debt, you effectively roll all your outstanding debt and loans into one loan. You arrange repayment terms that fit your monthly budget – which means you can now manage your debt and still have some money left over each month for you and your family.

Have you ever sat down and figured out how much interest you are paying on your outstanding credit card debt??

That’s money that could have gone to paying down your debt, but instead it gets paid to the credit card companies month after month without making so much as a dent in your balances.

When you consolidate debt, you finally get rid of those credit card late fees and costly interest penalties. Starting fresh with your new loan, the money that would’ve gone to interest can now go towards reducing your debt!!

Zulika van Heerden provides more powerful articles and tips on her site:  www.globalproperty.co.za


Budgeting and Debt

July 22, 2008

If an ounce of prevention is worth a pound of cure, then preventing oneself from getting into debt should be on top of the list for any responsible consumer.

But it isn’t, and the statistics are shocking: in SA alone consumer credit to households is estimated at R760bn. There are a staggering 80,000 judgments for debt per month.

 Other countries experience the same problem and US households for example have around $50,000 average overall debt and UK households slightly less.  Everywhere, an increasing number of borrowers are growing increasingly concerned about their capability to manage their debts.

Getting On Better Terms with Debt

If you happen to be one of the people saddled with debt and are looking for a way to get out of it, you need not despair. You’re not alone and there have been people in situations similar to yours (or even worse) that have been able to reduce or eliminate their debt problems.

There are several ways of dealing with your debt: depending on your case, you can renegotiate your terms with your creditors. Or you could consolidate all your debts through a debt consolidation company and reducing your monthly debt payments.

All of these methods of dealing with your debt rely on one simple premise: the debtor must be generating some excess money with which to pay back the loans.

This is where many people get into trouble, because they either don’t know how to budget their money or refuse to confront their financial situation fully.

 Companies that are in the personal loan management trade usually have some sort of budgeting service for their customers. One can even find free budget planners and worksheets online. For people struggling to pay back what they owe (and even the lucky ones who don’t need to worry about such a thing), it’s fairly simple.

Budgeting

First you have to set aside time to formulate your budgeting plan. You can work with a budgeting application on your PC, or just use pen and paper—the main thing is that you get it done.

You need to add up your monthly expenses. Rent, food, fuel, subscriptions—itemize everything as accurately as you can. Afterwards, compare the resulting amount to your net income (after taxes and whatever other deductions you incur, such as maintenance, child support, etc.).

 If you have money left over after all the expenses have been deducted from it, then you have positive cash flow and can now start to plan about applying that towards your debt reduction. If you don’t have money left over, or worse, find that your expenses are greater than your income, then your only choice is to make some changes in your life so that your income is greater than what you spend.

 This means cutting on your spending whenever and wherever you can, getting a new job, etc. The reward after all this is getting back control of your finances and your life.

Zulika van Heerden provides valuable information on her site on how to live a debt free life. To read more tips and techniques like the ones in this article go to: http://www.globalproperty.co.za


Characteristics For Consolidators

July 17, 2008

Strictly speaking, you are taking out a form of a loan when you consolidate your debts. That means that when you look for a debt consolidation program, you still look for the characteristics that you would consider in a regular loan – terms, deadlines and interest rates, for example.

 

But given the sheer number of competing companies that offer different debt consolidation programs, you now have to consider characteristics that go way beyond the basics. Knowing and looking for these characteristics can make the difference between salvation from debt and sinking into even more debt.

 

Good Enough to Be False

 

Knowing about what to look for in a debt consolidation company isn’t just about comparing for the best rates anymore. It’s now a factor in protecting yourself from getting scammed of your hard-earned money.

 

Be wary when a company promises you free debt consolidation or a debt consolidation program without any fees. Those are either scam operations or quicksand loans; they suck you right up with all their preposterous hidden charges and fees. Don’t fall for a ‘free’ pitch because they’re rarely a real road to salvation from debt, if a road at all.

 

Other red flags are packages that have high rates, a short term, high upfront fees, high late fees and penalties when you pay too early. A combination of two or more of those characteristics (though one would suffice) is a clear signal that you probably shouldn’t get that package.

 

When an offer sounds too good to be true, an old saying says that it most probably is. This rings even more true in this case where you’re dealing with your own money and trying to solve a big problem. It’s pointless to try and get yourself out of a fix by getting yourself into another one because you took a risk with one such ‘free consolidation’ company.

 

Getting the Good

 

What would make a good debt consolidation company?

 

Credibility and a good history with customers should come as one of your top qualifiers. Try looking for a debt consolidation program from well-known banks and institutions. You can ask the institution itself for references or people from whom you could ask feedback. If the company is truly credible, it should be able to provide you the names of certain people you could ask about them. Of course, if location is a problem, internet searches and calls to consumer groups would also suffice.

 

Another thing that the company should be able to give is transparency and professionalism. That means they should give you all the costs and available options from the get-go. You can easily see this when you inquire and ask for a session with a professional. If they present you with a list of all mandatory and optional, that’s a good sign for the company. The professional or the staff should also be able to answer your questions regarding possible situations, such as if you are suddenly unable to pay regular fees.

 

The secret to getting a good debt consolidation program isn’t to just look for the program but to look for the right company as well. It’s them, after all, who will be handling all matters regarding your debt consolidation plan.

 

Zulika van Heerden provides valuable information on her site on how to live a debt free life. To read more tips and techniques like the ones in this article go to: http://www.globalproperty.co.za


Are There Risks In Debt Consolidation ?

July 11, 2008

Debt consolidation seems as an easy solution to reduce a person’s debt burden, but it has its own advantages and disadvantages.

A substantial number of people nowadays get themselves into so much debt that they sometimes have to go further into debt in order to pay it. This fighting-fire-with-fire approach, if misunderstood or misused, can lead to further debt problems instead of helping to solve them.

What is Debt Consolidation?

In a nutshell, it involves taking out a single loan (secured or unsecured, depending on the package offered) to settle all his or her numerous other loans.

Instead of having to make multiple payments, you only have to manage a single payment. You do not have to run around each and every month stressing about paying your creditors on time. This will simplify your finances and your life and you will have more time to spend with family and friends

Advantages

Consolidating your debt offers several advantages. For one thing, it’s often easier to make a single payment than trying to remember what to pay off when—some people are just not that good at remembering and scheduling payments.

The convenience offered by such a loan can also offer peace of mind to a person. This will simplify your finances and your life for that matter.

 The debtor can also benefit by the advantages of paying off a lower interest rate presented by one single loan, instead of having to pay off the interest of many high interest loans.

Pitfalls

Naturally, when you consolidate your debt it has its own set of risks. One is that your credit rating initially takes a hit when you initially consolidate your debt—it is taking out another loan, after all, and essentially zeroing out any progress the person has made paying off the other debts.

Another is that consolidation loans might not offer interest rate advantages over individual loans, because people who have been paying off their loans for a long time can often renegotiate their terms with their creditor, and these might be lower than the interest rate offered by the company that’s going to consolidate your debt

Still another is that the debt refinancing plan can fail if the person doesn’t make some changes to curb his or her spending and save more money. Debt consolidation is a drastic step to take, a fact some people don’t seem to understand. Some see their credit card balance or their loan read “R0” and takes it as carte blanche to keep right on spending and spending.

In this situation, the new loan can act merely as a sticking-plaster on a serious wound—halting problems temporarily but doing nothing to remedy the underlying situation. If the person who took out the debt consolidation loan should then be unable to repay it—for example, they need the money due to a family emergency—they would find themselves in more trouble than they were at the start.

Zulika van Heerden provides valuable information on her site on how to live a debt free life. To read more tips and techniques like the ones in this article go to: http://www.globalproperty.co.za


Before You Take Out a Loan for Debt Consolidation

July 1, 2008

What is a debt consolidation loan?  First, debt consolidation refers to consolidating or combining several loans into one big loan.  A debt consolidation loan therefore refers to any loan that will let you consolidate your multiple loans.  To elaborate, a debt consolidation loan is any loan that you can use to pay off your existing loans so you can combine such loans’ balances into one.

 

Secured and Unsecured Debt Consolidation Loan

 

There are two major types of debt consolidation loans:  secured and unsecured.  Secured debt consolidation loans refer to loans that require collateral or security before approval.  Unsecured debt consolidation loans, on the other hand, do not require such collateral.  Secured debt consolidation loans are much more difficult to get than unsecured loans, obviously because it has much more requirements.

 

However, secured debt consolidation loans also generally have better interest rates and repayment terms than unsecured debt consolidation loans.  Unsecured loans’ providers carry greater risk than providers of secured loans so they have to compensate by charging a higher rate of interest.  If you fail to pay your secured debt consolidation loan as per the terms of your loan agreement, the bank will simply take your collateral, auction it off and recoup their losses.  Under an unsecured loan agreement, however, the bank has no collateral to sell to compensate for any losses, should you not pay your loan in full.

 

Secured debt consolidation loans are of various specific types.  A second mortgage and a home  loan are examples of secured loans which you can use for debt consolidation.  With a home loan, the home itself becomes the collateral; in the case of a second mortgage, the equity you have built up in your home becomes the collateral.

 

Unsecured debt consolidation loans, on the other hand, include balance transfer loans from credit card companies.  Credit card companies usually offer balance transfer cards which you can use to consolidate all kinds of loans.

 

Fixed and Variable Percentage Rate (VPR)

 

Debt consolidation loans also vary by the type of VPR they have; some debt consolidation loans have fixed rates while some have variable rates.  Fixed-rate loans are those that are offered at a fixed rate of interest for the life of the balance barring default.  In other words, if your loan agreement says standard VPR is 15%, then you will enjoy that rate for the life of your loan unless you pay late, pay below the minimum or violate your loan agreement in any other way.

 

Variable-rate loans, on the other hand, are offered at a rate of interest that varies with a certain index rate (say, prime rate); the interest rate is computed by adding a basic rate to the index rate.  Since the index rate changes regularly, then the interest rate of the loan also varies regularly.

 

For related articles go to www.globalproperty.co.za