Pros of a 30-Year Fixed Mortgage

With interest rates at a historical lows, consumers are racing to refinance their homes. In many cases consumers reach for the traditional 30-year mortgage. This loan locks in the incredibly low rates we see today for thirty years and in most cases gives the consumer a much lower payment than they had before. This sounds great because with rate where they are there is not much lower they can go and certainly over the next 30 years we should expect rates to rise perhaps even dramatically if inflation were to rear its head. It certainly sounds like the 30 year fix mortgage is a great alternative to any adjustable rate loan offer that will most likely result in higher payments and interest to consumers in the future.

Wow! Look at the Interest You Pay over 30 years

What many consumers don’t realize is just how much they pay in interest over the term of their loan. Let’s take a $100,000 loan at 4.25% interest rate (Interest rates will vary based on credit and other factors). Over the 30 year term you pay $77,098 in interest on top of the $100,000 you borrowed. That is a 77% premium to your original loan amount. If we take a bigger loan say $625,000 you end up paying a whopping $481,250 in interest which is the same 77% premium to your original loan amount.

The 15-Year Fixed Mortgage – A Simple Trick

Now if you don’t like the idea of paying your bank all that interest here’s a simple solution. Consider a 15 year fixed mortgage. There are two big advantages to a 15 year fixed mortgage. First, the term is half as long so you will pay less interest because of this time element. Second, many lenders offer lower rates on 15 year fixed mortgages so you will pay less interest because of the lower rate.  Let’s go back to our examples. The $100,000 loan for 15 years now has an interest rate of 3.4% (Again interest rates will vary based on credit and other factors but for many lenders you will see a nice difference). In this case over the 15 year term you pay $27,797 in interest, a $49,302 savings in interest. If we take the bigger $625,000 loan the interest you pay is now $173,730, a $307,520 saving in interest.

The Price you Pay to Pay off your Loan in Half the Time

The 15-Year fixed mortgage is a great way to reduce the interest you pay to banks but is still is not for everyone. There is a price you pay to reduce the interest you pay and to have your home free and clear in half the time. One of the down sides to a 15 year mortgage is that your payments will be larger on a monthly basis then the 30 year mortgage because you are paying the loan down in 15 years vs 30 years. So in our $100,000 example you pay $492 per month with the 30 year mortgage and $218 more a month or $710 with the 15 year mortgage. In our $625,000 example you pay $3,074 per month with the 30 year mortgage and $1,363 more a month or $4,437 with the 15 year mortgage.

Related articles

• Fixed mortgage rates hit new lows. Does anyone care? (csmonitor.com)
• Rate on 30-year mortgage down to record 3.91 pct. (sfgate.com)

Do you know where your debit card is? It is essential to your overall financial security that you keep your debit card in a safe place at all times. Safety, above all else, is of utmost importance. If you are careless with your debit card it is only a matter of time before it backfires on you.

What does it mean to be safe with your debit card? Well, this means different things to different people. To give you an idea of how to improve the safety of your card, follow the tips below.

1. If you lose your debit card do not wait too long to call your bank. The biggest mistake you can make is thinking that you are going to find your card in the near future – just to learn that this never happens. It is better to be safe than sorry. Call your bank, explain that your debit card is missing, and have them cancel it at once. Sure, it is an inconvenience but you will receive your new card in no time at all.

2. Do not share your debit card number and other information with anybody. There is never a good reason to give somebody else the information from your debit card.

3. Only use your debit card at reputable stores. One of the biggest mistakes you can make is using your card at stores that are unknown or do not appear to be legitimate. This holds true for both land based and online stores.

4. Speaking of online stores, make sure you proceed with caution. In today’s day and age it is simple for anybody to start their own store. At the same time, it is just as simple for somebody to steal your debit card information by doing so. Along with this, make sure all the information you transmit to an online store is kept 100 percent secure.

5. Memorize your PIN number. Did you know that some people keep their PIN number in their wallet? Worse yet, there are users that write their PIN on the back of their card. While this may sound silly, it is an all too common mistake. To avoid these types of issues, all you have to do is memorize your PIN. Don’t worry about forgetting it. If need be, you can always reset your PIN number at a local branch or even over the phone.

There is no reason to take a safety risk with your debit card. Instead, follow the five tips above. They will keep you, your finances, and your debit card safe.

Related articles

• Credit card processing and debit cards (creditcardprocessing.net)

Can I use a debit card to build my credit? This is a common question, especially among younger individuals as well as those who have had credit issues in the past. Most people are aware of the importance of an above average credit score. While this may not sound like a big deal, the higher your score the better chance you have of securing a loan in the future. Along with this, it can help in many other aspects of your life, such as when applying for a job.

The answer to this question is yes and no. There are several differences between a debit card and a credit card. The main one being that your debit card is attached to a bank account. In other words, nobody is lending you money. When you use your debit card, the funds are coming out of your account. On the other hand, with a credit card, a company (Visa, American Express, and MasterCard) is lending you money and trusting you to pay it back later. Simply put, a debit card is nothing more than an easier way to access money in your bank account.

It is important to note that debit cards do not report to credit bureaus. In turn, using one of these cannot directly help you build credit or increase your score.

That being said, it can help build your credit if you show your financial institution that you can be responsible with your money. Your bank will realize that you have been using your debit card in a responsible manner, which will work in your favor if you want to apply for a “real” credit card such as one through MasterCard, American Express, or Visa. This is not a direct way of building your credit, but over the course of many months/years it will go a long way in showing your bank that you are worthy of a credit card.

Should I use a debit card since it does not do anything to help my credit? The answer to this question is up to you. Remember, just because it does not benefit your credit doesn’t mean that everything is bad. With a debit card you have quick access to funds in your checking account, while also making it easier to manage and organize your finances.

If you are looking for a direct way to build credit you should not rely solely on the use of a debit card. Fortunately, the responsible use of a debit card can help you build your credit in the future.

Related articles

• MICHELLE SINGLETARY: Cash or Credit? Now a Real Option (kitsapsun.com)
• How Safe Is Your Debit Card? (online.wsj.com)

There are many pros and cons that go along with using a debit card. It is important to be aware of both the good and bad. Once you know the benefits and drawbacks, you can do what you can to avoid the bad and focus on the details that will better your financial situation.
Pros
1. Convenience. With a debit card you never have to use cash or check again. Instead, you can use it just like a credit card – except the money coming out of your checking account. Not only is it convenient to use a debit card at local stores, but the same holds true with online purchases.
2. Speed. Have you ever taken the time to write a check at a grocery store or retail outlet? This can take a couple minutes when you factor in the time it takes the cashier to “do their thing.” You can swipe your debit card and be on your way within a matter of minutes.
3. Easy to get cash. With a debit card you can visit any ATM and receive cash out of your checking account. Along with this, most stores can give you cash back after you make a purchase with your card.
Cons
1. Fees can sneak up on you. Just like credit cards, when you use a debit card there are fees that can come up from time to time. Some of the most common include: ATM fees, point of sale fees, and over limit fees.
2. No reward program. Although some banks are implementing these with debit card users, they are few and far between. A credit card reward program can eventually lead to everything from cash back to free plane tickets and much more. With a debit card you are simply taking money out of your checking account, with nothing coming to you in return.
3. Difficulties resolving disputed charges. When you use a debit card, as opposed to a credit card, resolving disputed charges can be a hassle. The reason for this is simple: the money spent comes out of your account almost instantly. This makes it hard to dispute the charge if the item is defective or never delivered.
With millions upon millions of people using debit cards it goes without saying that the pros outweigh the cons. As a user, you want to be 100 percent aware of the benefits of your debit card. At the same time, make sure you know the drawbacks so you can hedge against them.
With this information you should find it easier to take full advantage of your debit card, while avoiding compromising situations.

Related articles

• Credit card processing and debit cards (creditcardprocessing.net)
• Baby boomer parents and college students need to be aware of high fees for new campus debit cards (seattlepi.com)
• The Difference Between a Credit Card and Debit Card (brighthub.com)

There has been lots of press on the topic of Loan Modification. You can negotiate with your bank to modify your loan yourself or by using a third party expert negotiator or law firm. The government has also now gotten involved and set up a special program to help consumers modify their loans but not everyone qualifies for the government’s bailout as part of the government loan modification program. To see if you quality you need to do some basis calculations. Read through our Loan Modification Calculator examples to see if you qualify for a government bailout or loan modification as part of Obama’s loan modification plan. If you do this is a great way to manage your debt and get back on your feet.

Here’s the basic criteria that our loan modification calculator looks at for seeing if you qualify for a government bailout:

To qualify for the government bailout loan modification program you first need to be in a financially distressed situation.

1. You need to have a financial hardship. Take a look at our article on tip to writing a hardship letter as well as sample hardship letters.
2. You have to have little or no money in the bank available to you.
3. Your loan is under the conforming limit in your area.
4. Your loan to value of your home is near or above your current loan amount.

However ….

5.   You need to have some income coming in. It is okay if you have lost some of your income but you need to be able to pay your new mortgage pavements.

If you meet these criteria then the bank look at doing two things:

- The bank will look at reducing your interest rate. To qualify for the government bailout program the bank can lower your interest rate down to 2%. If you already have a low interest rate this may not help.
- The bank will additionally look at stretching your amortization to 40 years.

6.   After adjusting your interest rate and or your term of your loan, the bank will then look to see if you qualify for the government sponsored bailout loan modification. To qualify for the bailout loan your new payment that is calculated must be not more than 31% of your gross income after your principle, interest, taxes, insurance and association dues are considered.

Here are a few examples from our loan modification calculator:

Loan Modification Calculator – Calculation 1
Your income is: 5,000 per month
Your current interest rate is: 8%
Your current loan term is: 30 years
Your current loan amount is: $800,000
Your Tax, Insurance & Ass Fees: $9,000/yr
You have a Hardship: Yes
***** In Bailout Calculation 1: You DO NOT qualify because your loan is over the limit of a conforming loan.

Loan Modification Calculator – Calculation 2
Your income is: 3,000 per month
Your current interest rate is: 8%
Your current loan term is: 30 years
Your current loan amount is: $400,000
Your Tax, Insurance & Ass Fees: $5,000/yr
You have a Hardship: Yes
***** In Bailout Calculation 2: You DO NOT qualify because even if the bank drops your interest rate to 2% and stretches your loan to 40 yrs, your payments on your loan are $1,211. If you add to that your tax, insurance and association fees you are now at $1,628 per month. Unfortunately that is 54% of your monthly income so you do not qualify for the government bail out program.

Loan Modification Calculator – Calculation 3
Your income is: 6,000 per month
Your current interest rate is: 6%
Your current loan term is: 25 years
Your current loan amount is: $400,000
Your Tax, Insurance & Ass Fees: $5,000/yr
You have a Hardship: Yes
***** In Bailout Calculation 3: You DO Qualify because if the bank drops your interest rate to 2% and stretches your loan to 40 yrs, your payments on your loan are $1,211. If you add to that your tax, insurance and association fees you are now at $1,628 per month. This is 27% of your monthly income so YOU DO qualify for the government bail out program. Likely the bank will not drop your rate to 2% in this case since they do not need to have you qualify.

If you qualify some of the other benefits to the government’s bailout program are:

1. Once the program is in place your loan will not change rate for 5yrs and even then it can only adjust 1% per year for a maximum of 5% points above your start rate.
2. If you are on time with your payments for 5 years, you get a one time reduction in your principle of $5,000 at that time.

Other Relevant Articles:

• How to use loan modification calculators

Enrolling in a debt management plan
Signing up for a debt management plan may give you more breathing room in your monthly budget, but will it hurt your credit? Not as much as you may think. Using a debt management plan to pay off debt won’t hurt your credit score, but it may make it difficult to qualify for new credit.

Debt management plan: Protecting your credit score
When you enroll in a debt management program, you write a monthly check to a credit-counseling agency and the agency pays your creditors. A debt management plan usually lasts three or four years. A notation stating that you are paying an account through a credit-counseling agency appears on your credit report and remains until the account is paid in full. Paying an account through a credit counseling agency will not hurt your credit score.

Debt management plan: Qualifying for new credit
Participating in a debt management plan could make it difficult for you to qualify for additional credit, and some debt management plans prohibit consumers from applying for new credit anyway.

Some creditors may see that a person is in a debt management plan and decide that they have all the debt they can handle. Other creditors might view participation in a debt management plan as a positive step, a sign that a consumer has taken responsibility for and is serious about paying off debt.

The more a creditor bases a lending decision on a consumer’s credit score, the less a consumer’s participation in a debt-management plan is likely to matter. A typical creditor uses the FICO score. They don’t look at notations on the account. Paying off a big chunk of debt on your own or with the help of a debt management plan will give your credit score a boost.

Debt management plan: Late payments hurt your credit score
What will hurt your credit score? Not debt management plans. Instead, being 30 or 60 days late with any payments can adversely impact your credit rating. Those negative marks hurt your credit score and can mar your credit report for up to seven years.

Debt management plan: Choose wisely
It is very important to choose a debt management plan carefully. If the agency administering the program misses or is late with a payment, it is your credit record that gets impacted. Enrollment and monthly fees for debt management plans vary widely. Some companies may charge several hundred dollars for their services, while others charge monthly fees of $20 or less.

With a debt management plan, a consumer usually gets reduced interest rates, lower monthly payments, no more late fees and fewer calls and letters from creditors. Debt-counseling agencies get their operating money by receiving a percentage of each client’s payments back from creditors.

If you are current on your bills, you may want to try negotiating new payment amounts and lower interest rates with creditors on your own. You never know what kind of deal you may land. And you may be able to make real headway on your debt by simply tightening your belt for a few months and freeing up more cash for debt payments.

Debt management plan: Monitor your debt counselor
If your situation is more serious or you just feel plain overwhelmed, you may want to talk to a debt counselor. If you decide to sign on for a debt management plan, be sure to monitor your credit bills carefully. Is the agency paying your bills on time as promised? You need to be vigilant and look at your statements regularly.

If you discover a problem with bills paid through a debt consolidation company or credit counselor, report the company to a local consumer protection agency or state attorney general‘s office. You can also file a complaint with the Better Business Bureau. For more ideas on how to monitor these companies, see some of the suggestions by the FTC on Debt Management Plans.

Related articles

• Debt Management Plans vs Bankruptcy (Bankrate.com)

• Weighing the Options With Credit Card Debt (nytimes.com)

• Get a Handle on Your Debt (alwaysbcmom.com)

• Don’t Carry Debt To Improve Your Credit Score (bargaineering.com)

Examples of Debt Management Companies

• Money Management International
• National Foundation for Credit Counseling
• Balance Financial

OVERVIEW
Debt management or debt settlement companies can often save you time and trouble when it comes to debt consolidation. A benefit of using a debt management company is the ease of the transition from having many, smaller debts to having one larger one. That being said you need to closely review any company you plan to work with to ensure that they are doing what you agree to.

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The process of debt consolidation can be tricky and intimidating and often not something for you to try, if you are not financially savvy. Debt management or debt settlement companies can often save you time and trouble when it comes to debt consolidation. A benefit of using a debt management company is the ease of the transition from having many, smaller debts to having one larger one. A debt settlement company will take over paying all your creditors. You have to make one simple payment every month.

The idea of debt consolidation is simple. The many smaller debts you carry are covered by one large loan. These are typically unsecured loans such as credit cards, personal loans, store credit cards, and bank overdrafts. The benefits of debt consolidation are that that you can negotiate one interest rate for this loan and you can negotiate the amount of the payment. Often, during the negotiation process, you can often reduce the amount of the debt.

Pros of Debt Settlement
• Avoid bankruptcy – By using a debt management company to consolidate your debt, you will can reduce your debt burden and pay off your bills more comfortably. You can protect assets, such as your car and your home, using debt settlement.
• Make One Easy Payment – You will make one payment to consolidate your debt each month to the debt management company. They will disperse the funds to the creditors. This one payment on your consolidated debt simplifies your bill paying enormously.
• Avoid Harassment – Debt collectors are notorious for their ruthless tactics. A debt management company eliminates a debt collector’s ability to hound you for payment on your consolidated debt.
• Avoid Lawsuit – Debt settlement companies can help you get a hold of your consolidated debts and get them settled in reasonable manner. This can help eliminate the possibility of a lawsuit against you.

Cons
• Debt consolidation negatively affects your credit score.
• During debt settlement, some of your accounts will get charged off. Debt consolidation can negatively impact your credit score. Debt consolidation can be repaired through time and careful use of credit in the future.
• Fees
• Some unscrupulous debt management companies will charge exorbitant fees for their services. Often, you will be asked to pay a percentage of your monthly payment to the debt settlement company in fees.

Points to remember:
• Choose a reputable non-profit debt management agency for debt consolidation. Make sure you toughly investigate the company you decide to use. You need to make sure you choose your debt management company wisely.
• Learn the fee structure for debt consolidation up front.
• Before you agree to a debt management plan, understand the impact this will have on your credit rating.
• Stop using your credit while you’re trying to repair your debt. Create a budget and stick to it.

Related Articles:

• How to Choose a Debt Management Company (Super Pages)
• Debt Help that isn’t (Bankrate)
• Debt Management Company Watch Outs (About.com)
• Your 3 worst debt consolidation moves (MSN)
• The Perils of Debt Management Companies (Find Law)

Examples of Debt Management Companies:

• Debt Consolidation Care
• Credit Counselors
• CareOne