Debt Consolidation – If Your Credit Card Debts and Loans Are Rising Annually Take Urgent Action Now

If you are noticing that every year your level of debt with mortgages, personal loans, credit card, store cards, car loans, and school fees is rising? Take stock now and do something before it’s too late. Credit cards and personal loan creep is a credit rating destroyer. In a tight credit market you are rapidly closing off the options to getting help. Take positive and wealth creation action to eliminate debt completely. Procrastinate and the solution often will pass you by.

Do you own a home, are not behind in mortgage repayments or having defaults listed on credit reports?

Step one. Establish your current position of the equity in your home.

  • Value of home………………….$………..
  • Current mortgage…………….$………..

If the portion of the loan to the value of the house is less than 80% read on. If not contact a Mortgage Broker.

Step two – Establish your total debt

  • Total balance currently owed on all mortgages, credit cards, store cards, personal loans, car loans. $……..
  • Total monthly payments on all mortgages, credit cards, store cards, personal loans, car loans $……..

Step three A Mortgage Broker will assist you through this next process

The Broker will need all the above information that you have calculated.

  • The Mortgage Broker calculates what percentage of debt can be consolidated.
  • The Mortgage Broker will tell you what your consolidated mortgage repayment will be (the new mortgage)
  • The Mortgage Broker will calculate what lender is the most suitable for you to create wealth.
  • Together you estimate the consolidated saving of the debt consolidation.
  • i.e. Old monthly loan payments – new loan amount = consolidate debt surplus
  • Commit to paying the consolidate debt surplus into your new loan AS an additional LOAN REPAYMENT.

I am now going to demonstrate the real power of using the consolidated surplus wisely. This is an example of a person or couple who are employees and all the income is fully taxed.

  • Take your payment on the new mortgage as $1627 per month
  • Take your consolidated debt surplus as $1050 per month.
  • You make the decision to put the $1050 a month into the mortgage each month.
  • Your mortgage is $300,000
  • Interest rate is 5.09%

You now have serious financial choices.

  • Do nothing and pay off the loan in 13 years.
  • In 12 months you would have $12,336 in savings accrued in your mortgage. This is called mortgage equity. You have the right to use this as you think fit without any ones permission. You can redraw your mortgage equity at any time
  • In 24 months you would have $26,314 in redraw mortgage equity.
  • In 36 months you would have $38,973 in redraw mortgage equity.
  • In 60 months you would have $68,454 in redraw mortgage equity.

Now you have a problem. Not a bad one for a change.

You need a financial planner to see what are the best options of the use of this money. Investments, superannuation, real estate investment. You have gone from seeing no hope because of rising debts to having to seek professional advice on investments. To say nothing of your credit rating.

Think about this. What other plan do you have create this wealth?

  • You are using your mortgage repayments, which you were going to pay anyway.
  • And you are using your old debt repayments WHICH YOU WOULD HAVE HAD TO PAY ANYWAY.

The question now is what would be the attitude around the home if you had $68,454 in accessible cash and no credit cards, or loans?

Now you have the facts to plan moving forward. So don’t talk yourself out of seeing a Mortgage Broker. There is always a plan B. Sitting and doing nothing only increases the stress and anxiety, not a good option contact a Mortgage Broker today to get the process started.

Consolidate Debt Loans – Credit Card Debt Consolidation Loan

The credit card system is the most easily available form of loan, as their authorization is based only on the credit history decided by the average monthly income, type of profession, proper bill payment patterns etc. of the person availing a credit card. But since the credit card system is the most unsecured form of loan, being completely dependent on the persons’ intention and promise to repay the loan, it also carries the highest rates of interest attached with it. This easy availability of credit cards also leads to the individual acquiring too many credit cards. The possession of too many credit cards has an adverse effect on the credit scores and rating of the individual. This poor credit rating leads to lending agencies charging these individuals a higher rate of interest on other types of loans like home loans etc.

Monthly Payment Higher then Monthly Income

The debtor is thus engaged in a vicious cycle which goes on increasing his debts and financial burden. Added to this is the fact that there is easy availability of credit made available due to a number of cards possessed by the individual. This leads to a tendency of over usage of credit cards to the purchase of objects that the debtor may require or wish to acquire, but may not have the immediate availability of income or financial means to do so.

The debtor on the other hand is not so adept at financial management, hence is not aware of the concept involved in the calculation of ratio of their debts to their average monthly income. This means that due to the over usage of easily available credit cards and the necessity of other loans like house loans etc., the debtor inadvertently finds himself in a completely skewed financial situation. In such a situation where the total payable loan amounts and minimum monthly payments combined are much higher than their average monthly income.

Delinquent Credit Card Accounts

This leads to irregular payments towards the outstanding credit card amounts and the loan installments. The debtor eventually ends up with a number of past due, over limit and sometimes delinquent credit card accounts. Credit card companies then apply late fee and over limit fee, in addition to that they also hike the interest rate that is normally charged on the credit card as a form of penalty. Not only does this increase the monthly payable amounts but also adversely and at time irreparably affects the credit ratings and scores of the individual. This is especially true in the cases of the individuals who end up with delinquent credit card accounts in the process.

The rates of interests that the debtor is forced to pay in such situations is in comparison much higher in all such cases compared to the rate of interests available on debt consolidation loans. Even unsecured debt consolidation loans which have a rate of interest slightly higher in comparison to the secured loans, prove to be more economical than the exorbitant interest rates charged by credit card companies. Hence both secured and unsecured types of debt consolidation loans are equally useful as means to consolidate credit card debts.

A Personal Loan to Consolidate Credit Card Debt – Is it Recommendable?

When considering credit card debt consolidation, it might be tempting to get a personal loan rather than seeking the help or advice of a reputable consolidation company. After all, many individuals have successfully obtained personal loans for this purpose, thereby getting rid of a mountain of debt, replacing it with one monthly payment. However, for the consumer whose credit report is average to poor, or who already has a mountain of debt, finding a good interest rate can be next to impossible.

A personal loan can be used for any purpose, including the reduction or elimination of other debt. These loans do not eliminate debt all together, but transfers the debt from one lender to another. Personal loans can be unsecured or secured, but the most common loan is secured. Taking out a secured loan, which is often attached to one’s home or other property, to pay off unsecured credit card debt is not a wise decision.

On the other hand, obtaining a loan through a debt consolidation company provides a logical escape route from pressing indebtedness. These companies will pay off all of your debt, which will keep your credit rating in good standing. Then, you will be required to make one small monthly payment toward the total balance, which will include one small interest fee rather than numerous large ones.

In comparison to personal loans, credit card debt consolidation is the best option. Consolidation allows you to combine existing account balances into one single, easy to manage monthly payment. Since the goal of consolidating your debt is to help you get out of debt, the payment schedule is based on your personal financial circumstances. A personal loan, on the other hand, must be repaid based on the lender’s schedule.

Is it recommendable to get a personal loan and consolidate one’s debt? If the consumer is able to obtain an unsecured personal loan with a lower interest rate than their other debts, then it is an attractive option. However, since most debt consolidation candidates are already swimming in debt, few lenders are willing to lend large sums of money. The other option, a secured loan, turns old unsecured debt into debt that could potential rob you of your home, car, or other property. Secured personal loans, therefore, are not recommended.

Ultimately, choosing to participate in a credit card debt consolidation program or attempt to resolve one’s debt with a traditional loan is a personal decision. Consumers should be cautious about taking the first loan offer, while educating themselves about alternative financing options.