Debt Consolidation Loans as a means to Manage your Overall Debt.

Click Here ... For my previous article on “What is Debt Consolidation ?"

Everyone should have a good credit history. This is one of the most essential requirements in today’s society.

This can be achieved simply by paying all your bills and loan instalments on time. Bills include – Credit Card Bills, Bills for Utilities and other similar bills. Loans include – Personal loans, Home Loans, Student Loans, Car Loans etc.

But sadly, this ideal situation of paying all the bills and instalments on time is not achieved in most of the cases, and then, we face the label of being a bad credit risk.

We, like the majority of individuals, are often caught up in unnecessary debt and then, to avoid being labelled as bad credit risk, we have to explore various options for Debt reduction or Debt Consolidation.

The individual has to keep some factors in mind while going in for Debt Consolidation loans program.

-- The amount of debt he has incurred. This is an important factor. The person has to look at his sources of income vis-à-vis his total debt incurred. If at all it is possible, then he should prefer going in for self repayment.

-- The various sources to whom he has to pay back. Managing multiple sources to whom your debt has to be paid can sometimes be quite cumbersome, especially if you have incurred a lot of debt from different avenues at different rates of interest. In such a case, going in for a Debt Consolidation loans program can be of help to you in terms of savings in time and reduction of tension. You would then have to manage only one payment instead of managing multiple payments every month.

-- The interest rates which he was previously paying vis-a-vis the interest rates he would be paying after enrolling in the debt consolidation loans program, (which would be lower as well as fixed interest rates, thus reducing your burden).

-- Debt consolidation program can help you to reduce your monthly payments, (though the duration of  payments would be longer, but in the present, the monthly outgo can be less, owing to lower and fixed interest rates).

Above are some of the points as to how Debt Consolidation loans can help you to manage your overall debt.

I would be further continuing on this topic in my upcoming articles…

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What is Debt Consolidation ?

For my previous article on “Some Basics of Bad Credit Remortgages", Click here….

Due to the economic crisis, majority of people have been forced to face serious financial situations. Due to their incomes reducing drastically, on account of job losses or business losses, they are finding it hard to keep up with the credit card payments, home loan payments, personal loans payments etc.

Their debt continues to increase day by day as they try to manage their debts by paying off either the interest amount / taking another loan to repay the previous one. In such a scenario, where a person is faced with a lot of debts originating from various sources, one can think of the option of Debt Consolidation.

In simple words, Debt Consolidation is a process involving taking out a single loan to pay off many other loans. Most of the times, it is done for the following reasons:-

-- To have only one loan to service. This reduces the tension on the part of the borrower as he needs to focus on repaying only one loan, instead of repaying a multitude of loans which he had earlier.

-- To secure lesser rate of interest as compared to what they have been paying for other loans

-- Debt consolidation is also considered for securing a fixed rate of interest on a single loan as opposed to paying variable interest rates on different loan amounts.

Although debt consolidation can entail consolidating various unsecured loans into another unsecured loan, but most of the time, the lenders prefer to have some sort of collateral.

If a person is troubled with a lot of unmanageable loans and can offer his own house as a collateral / security, then it can make the process of debt consolidation easier, as in this case the lender has to bear lower risk as a result he is in a better position to offer lower interest rates. This eventually benefits the borrower who is going in for Debt consolidation.

I would be further continuing on this topic in my upcoming articles…… 

Till then, For more such useful information, Click Here…

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Some Basics of Bad Credit Remortgages

For my previous article on “Procedure for doing Home Loan Remortgage”, Click here….

Before we go into details of what exactly is a Bad Credit Remortgage, we need to understand - How does a person become a bad credit scorer and what options does he have after that. Then this topic of bad credit remortgages can be easily understood.

Bad Credit Score...., though it is awful, but it can happen to anyone.

-- You may miss out on your Credit Card Payments, Or worse still, there my be a discrepancy in your credit card statement and you have still not resolved it with your bank.

-- Due to financial constraints, you have to miss a pending loan instalment (Personal Loan / Home Loan/ Auto Loan etc.).

-- You have taken a loan along with a co-borrower and he is not able to do his payments on time.

The above mentioned points are some of the reasons you are put into the category of Bad Credit Risk.

If you may recall, then in one of my previous articles, I had taken a hypothetical example, where a person (Mr. Kumar) is facing a harsh financial situation in his job because of the recession. Let’s say he has not been able to meet some of his loan instalments on time and has the term Bad Credit Risk labelled for him.

Now he is in need of some extra liquidity, and since he has not been able to keep up with his monthly home loan instalments, so he is thinking of a way to get his monthly instalments amount reduced as well as spread over a longer period of time.

In this case, he has the option to explore the concept of Bad Credit Remortgages.

Bad Credit Remortgages are basically for those people who have bad credit and are not satisfied with their existing mortgage. Here, he can get a new mortgage which replaces the existing mortgage in spite of his having a bad credit score.

It is saddening, but true, that those people who have bad credit score have a lot of difficulty to avail loans. Generally the lenders reject their requests for loans, and they often have to struggle to make both ends meet.

If you are having a Bad credit score, then these kinds of Bad Credit remortgages can help you to improve your credit situation. Essentially, you are borrowing an amount against the value of your home and making monthly repayments at an agreed rate.

I would be further continuing on this topic in my upcoming articles……

Till then, For more such useful information, Click Here…

I hope you have enjoyed reading this article. As always, comments are Welcome and Encouraged. Cheers..........

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Procedure for doing Home Loan Remortgage

For my previous article on “Basics of Home Loan Remortgage”, Click here….

In our previous article, we discussed some of the basics of a home loan remortgage, Today, let us discuss the procedure of doing  a Home Loan Remortgage.

1) 

Check out the home loan rates of interest which your existing home loan lender is currently providing to you. They might offer some beneficial home loan rates for their old, preferred customers.

2)

Also, in addition to your existing lender, do also check out the home loan rates being offered by other lenders in the market. Your purpose should be to get the lowest possible home loan rates so that your monthly outgo can be reduced and thus you can save money for yourselves.

For finding out various sources and best rates, you can also check online. There are many websites from where you can get an idea of the prevailing rates in the market. This will further boost your confidence and you will present yourself as an informed individual who is looking for a better deal for a Home Loan Remortgage.

3)

Further in the process,.. Do remember to negotiate upon the home loan rates. There is no harm in discussing, and, what’s more, you might be able to save money in the process....

4)

Once you sect your lender, then the next step during home loan remortgage is that the lender will be asking you for the particulars required to fill in the loan application form,.. major points being your source of income, your place of job etc. Having a steady source of income is essential in order to convince the lenders about your repayment capacity

5)

Furthermore, a real estate expert (appraiser/valuer), will be assessing the value of your home, for sanctioning the amount of home loan, based upon the existing value of your house. The value of your home also has an impact on the home loan rates offered to you.

6)

In addition to your income security aspect, the lender would also be verifying your ownership details etc., from the property papers, so that you can be eligible for home loan remortgage against your existing home.

7)

Once, the initial paperwork is done, and the loan is sanctioned, your previous lender gets paid, and you start your home loan remortgage arrangement with your new lender.

For more such useful information, Click Here…

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Basics of Home Loan Remortgage

For my previous article on “Home Mortgage Loans - Some Important Definitions”, Click here….

A Home loan Remortgage takes place when the owner of the home pays off the existing mortgage with the proceeds of a new mortgage. (But he has used the same property as a security for taking on the new mortgage).

To understand with the help of a hypothetical example, suppose that a certain Mr. Kumar has taken a Home loan which has to be repaid over a period for 20 years.

Everything is fine for about the first two years. His job is going on pretty well. He is making enough money to pay all of his bills, and the instalments of his home loan.

Then, due to the economic crisis, he has to take a salary cut. This reduces his take home salary. Now it is getting hard for him to make ends meet, and he is also having problems in paying his monthly home loan instalment. So, what options does he have now ?.

One option (out of many available) is to consider taking a home loan remortgage. Let us explore more about Home Loan Remortgage.

Various Advantages which Mr. Kumar can have by taking a Home Loan Remortgage :-

-- It usually entails in lower monthly home loan instalments.

-- The home owner can pay off the earlier mortgage on his home

-- A home Mortgage loan can be taken if the homeowner needs additional money

-- It helps the homeowner get a better interest rate as compared to what he was paying on the existing home mortgage loan

-- A Home loan remortgage can also help him consolidate other debts

-- He can pay of some large expenses like his children’s education

-- He can pay off other higher rate debts like credit card debts, car loans etc.

Some points to consider before taking a Home Loan Remortgage :-

-- Has a very short time period has elapsed since the borrower took the Home Mortgage loan ?. In that case, it is better to stick with the existing home mortgage loan.

-- The borrower may have had a very competitive interest rate on his existing mortgage and may incur penalties for early repayment

-- Whether the home owner has a steady source of monthly income (for example , does he have a good job at a reasonable salary ?/)

-- If the home owner is self employed, then what is his current monthly income and is it a stable source of monthly income ?.

-- Is the balance on the remaining home mortgage loan sufficient to justify taking of a home loan remortgage ?.

So, considering all the above points, even if Mr. Kumar’s salary has been reduced, he can still prove to the lenders that he has a steady source of income, then they would be most happy to have an assessment of his property and existing home loan and consider him for a Home Loan Remortgage.

For more such useful information, Click Here…

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Home Mortgage Loans - Some Important Definitions

For my previous article on “Basics of Home Mortgage Loans”, Click here….

In my previous article, I had discussed some basic information about What are Home Mortgage Loans. Today, let us discuss some important definitions related to Home Mortgage Loans

Some important definitions related to Home Mortgage Loans

-- Borrower :- The person who approaches the bank for the funding and offers his own property as collateral for the loan / offers down payment for the property he wishes to purchase

-- Lender :- The bank /financial institutional / investor who is ready to give the loan to the borrower

-- Mortgage: - It is the interest of the borrower in his property. (Generally the lender restricts the borrower to sell of the property before the full settlement of the loan has been done)

-- Principal Amount :- Then initial amount of the loan which is given by the lender.

-- Rate of Interest :- The rate which is charged on the loan amount given. Basically the interest portion is the profit which the lender is going to make out of this transaction.

-- Period of Repayment :- The tenure for which the loan is taken. For home mortgage loans, the tenure varies from 20-30 years, (it can be varied as per the requirements of the borrower).

-- Foreclosure / Repayment :- In the unfortunate event of the borrower not being able to repay the loan amount ( Principal / Interest), then the lender has the option to take possession of the said property. He can then further sell the property to recover his own dues.

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Basics of Home Mortgage Loans

To add to our knowledge of Personal finances, let us consider some basic facts about Home Mortgage Loans

What exactly are Home Mortgage Loans ?.

In simple words, it is a loan taken by an individual from some bank / financial institution / investor, in lieu of the property which the individual already owns / wishes to own completely in the future.

Nowadays, with the real estate prices hitting the roof, generally people do not have the money to make the entire payment for buying the home / building the home / renovating their existing home. So, in these situations, they generally resort to taking loans from banks / financial institutions. The lender charges a specified rate of interest for the usage of finances during the tenure of the loan.

A mortgage occurs when the owner of a property pledges his interest in the said property as a collateral / security with a bank / financial institution for a loan amount.

Home Mortgage loans are the major source of financing for having ownership for residential property. People also use mortgage loans for buying commercial property.

To understand with the help of an example.

1)

Suppose a certain Mr. Kumar, wants to purchase some additional property / home , then he can approach the bank with his financial details – like the amount of down-payment he is ready to put in the property, his credit history, present and future earning capacity etc. Here, the bank releases the appropriate funds to the borrower after a fair assessment of the market value of the property, which the borrower wants to purchase.

2)

Suppose that Mr. Kumar, has a house valued at USD 3,00,000/-. He has a requirement for some additional home building loans to further construct / renovate his home. He can approach a bank with papers of his property. The bank will assess the fair market value of the particular property and then give the desired amount of loan which is required by the borrower.

So, in essence, the borrower has taken a Home mortgage loan from the bank in both of the above cases.

The above is a very simple explanation of the working principle of Home mortgage loans, In actual practice, a number of points need to be considered before the loan is actually given out. Some of these factors include:-

-- The Earning capacity and consequently the Repayment capacity of the borrower

-- The Financial History of the borrower – Has his earnings been consistent in the past. What is the occupation of the borrower ?.

-- The Creditworthiness of the borrower – Has the borrower taken any loans in the past from any sources ?. Have the loans been repaid in full, without any complications ?.

-- The Time Period required to repay the Home Mortgage loans

-- The Interest Rate charged by the lending institution.

And a host of other factors, which we would discuss in our upcoming articles.

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