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American Debt
Foundation
http://www.americandebtfoundation.com
Your
"fixed monthly
consolidated
payment" is calculated according to the lowest payment amount
accepted by your creditors. The agency you have hired will
distribute the amount of your "fixed monthly consolidated payment"
to each creditor. Most creditors will only reduce or stop your
interest fees if their minimum payment is met, but if so, the
interest rate reduction with these programs can range from no change
to the freezing of interest depending on the creditors policy. This
can save you thousands because rates that are usually 12%-24% can
get reduced to 10%, 8%, 6% or 0%..
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- Customer Information
-(Secure
Free Credit Card Consolidation Form) |
American Debt
Foundation
http://www.americandebtfoundation.com
Credit Card Consolidation
Call Us Today For A Free
Credit Card Consolidation Quote!
1(866)411-3328-
1(866)411-DEBT
Consolidation FAQ
- The commercials on television make it sound like a debt
consolidation loan will solve all my financial problems. Are these
loans really the perfect way to solve my debt issues?
- For some people debt consolidation loans can work very well. For
others they may come with disastrous side effects.
- How can I determine if a debt consolidation loan is right for
me?
- Start by understanding what a debt consolidation loan is and how
it fits into solving your personal debt situation.
- Isn't a debt consolidation loan just a loan where you get money
to pay off your bills?
- No. In almost all cases a debt consolidation loan is structured
as a second mortgage on your primary residence.
- What difference does that make?
- Most debtors attempting to obtain a debt consolidation loan face
issues with unsecured debt, such as credit card bills. A second
mortgage represents a secured debt. This becomes of critical
importance if things go from bad to worse. With unsecured debt a
chapter 7 bankruptcy can discharge the debt, completely relieving
the individual of the obligation. In the case of secured debt, such
as a second mortgage, even in a bankruptcy situation, the creditor
has the right to seize the collateral if the loan cannot be repaid.
When speaking about a second mortgage that would mean foreclosure on
the property.
- I intend to make all my payments, why is this an issue?
- You may have taken the credit cards with the intention of paying
off the balance each month as well. Good intentions are fine, but
unexpected things happen in life. One of the most critical issues to
analyze before taking on a debt consolidation loan will be the
borrowers ability to weather a financial down turn. I recommend that
anyone taking on a debt consolidation loan be very comfortable that
should they have a health issue, loss of job or other unfortunate
financial surprise that they would remain able to make the payment
for some time on the new debt consolidation loan. To be even more
clear, a debt consolidation loan means you "bet the house" that you
can repay your credit card debt.
- My monthly payment with a debt consolidation loan will be much
more affordable, what is wrong with that?
- There is nothing wrong with lower payments as long as you
understand the mathematical reasons why the payments will be lower.
Take a hard look at your current debt including the payments and the
interest rates. How long would it take to pay off the debt in full?
Then look at the terms of the debt consolidation loan. In some cases
lower payments result from a significantly reduced interest rate, in
other cases the reduced payment can come entirely from extending the
payoff time to as long as 30 years.
- Aren't the rates of these debt consolidation loans always low?
- Absolutely not. In some cases, where the borrower has good
credit and a fair amount of equity in the home, rates can indeed be
close to rates expected for a first mortgage. In other cases,
particularly those with individuals with poor credit or in case of
125% LTV debt consolidation loans, rates can soar to over 18%.
Depending on your current debt, rates for these debt consolidation
loans can be higher than the interest rate on the pre-existing debt.
- What is 125% LTV loan all about?
- 125% LTV (Loan To Value) loans allow the individual to borrow
monies beyond the value of their home. For example if a home is
worth $100,000.00 and the mortgage debt on the house is also
$100,000.00, a 125% LTV loan would allow the debtor to borrow an
additional $25,000.00 with the result being the total debt secured
by the house after the loan would be 125% of the value of the home.
While this type of loan opens the door for some individuals who may
otherwise have no access to money it comes with a price. The
interest rates for these loans typically run much higher that other
mortgage loans and origination fees to set the loan up can be as
much as 10% of the loan balance.
- Can anyone get a 125% loan if they need it?
- No. Only those with good to excellent credit will be eligible.
- What if a debt consolidation loan would really cure all my
problems? Are there any other dangers?
- Yes. The debtor must examine how the trouble began. One of the
most common pitfalls and recipes for the worst of disasters happens
when people take on a debt consolidation loan without rectifying the
true cause of the debt. A typical situation would play out like
this: Individuals get into debt trouble because they are living
beyond their means and supporting their spending habits with credit
cards. A debt consolidation loan seems to solve things by paying off
the debts. Unfortunately, if the spending habits continue, the
individuals find in another year or two they have run their credit
cards up to the same levels or higher than they were before the debt
consolidation loan. Only this time the equity in their house has all
been used up by the debt consolidation loan. They are unable to pay
either the new bills or the debt consolidation loan and bankruptcy
and foreclosure becomes await them.
- What is the best way to avoid this scenario?
- Find out why the debt has truly accumulated. In a case of
irresponsible use of credit cards, after paying off the credit cards
with a debt consolidation loan, cut the credit cards up. If you need
to have credit cards for rental cars, business trips or on-line
purchases consider secured credit cards or debit cards. Spending on
secured credit cards cannot exceed a limit based on the value of an
accompanying savings account. Use of debit cards require you have
money in an account in order to use the card.
- Is there a way to get a debt consolidation loan that does not
require pledging your house as collateral or a way to get a debt
consolidation loan if you do not own a house?
- No. You may be able to get an unsecured personal loan, but
unsecured personal loans will always require good to excellent
credit and come with interest rates even higher than debt
consolidation loans. Some people may refer to an unsecured loan as a
debt consolidation loan, but the typical advertising you see on
television or in the newspaper for a debt consolidation loan refers
to one secured by a second mortgage.
- Is there any legal difference between a debt consolidation loan
and a home equity loan?
- Not in most cases. A debt consolidation loan in legal structure
generally does not differ in any way from what one might call a home
equity loan or a second mortgage loan.
- Ok, Mr. Doom and Gloom, are there any good points to a debt
consolidation loan?
- Yes. When debt consolidation loans carry a low enough interest
rate payments can be significantly reduced. Many people find making
one payment can be much more convenient that making five or ten
smaller payments. Even if not the best long term plan, in the short
run longer amortizations available with debt consolidation loans can
help with cash flow.
- I have very bad credit and no collateral, like a house or a car,
what kind of debt consolidation loan is available for me.
- Other than borrowing from friends or family, if you have very
bad credit and no collateral I know of no legitimate financial
entity anywhere that will make you a loan. This is an important
point to stress for two reasons. If you have very bad credit and no
collateral don't bother spending a lot of time and effort trying to
find a loan. I have been trying to find unsecured personal loans for
clients with very bad credit for 10 years, only to find none. If
anyone reading this knows of a legitimate loan I would be excited to
hear about it. Based on my knowledge of financial institutions,
their requirements and the default rate that would exists on such
loans, I don't believe that anyone who did endeavor to make such
loans would stay in business long. With that said, the second point
to keep in mind is not to expend any money to anyone telling you
they can obtain an unsecured loan for anyone with very bad credit. I
have seen ads where people are attempting to sell lists or in some
way taking an up front fee for find such a loan. In other related
cases credit cards are offered enabling a credit line even with very
bad credit, where in reality the application fees, annual fees and
other miscellaneous fees result with the borrower essentially paying
$250.00 for a $250.00 line of credit. A new trick gaining popularity
are "payday loans" or auto "title loans" avoid them like the plague.
The hidden interest rates on these loans can be 500% per year! If
you have very bad credit and need money don't make things worse by
falling prey to a scam.
- In this context what constitutes very bad credit.
- While each account and loan request may be judged on it's own
circumstances, a bankruptcy within 2 years or a number of accounts
over 120 days late would probably be viewed very negatively by
someone examining a request for an unsecured personal loan.
- Are there cases where it's not a bad idea to pledge the house as
collateral for a debt consolidation loan?
- Yes, I can envision some situations, particularly in state that
offers very little in way of homestead exemptions for homeowners in
bankruptcy. In some places the equity in ones home is significantly
at risk whether a debt consolidation loan is taken out or not. When
the writing is on the wall that a debtor will lose their home unless
they can clean up some of their financial mess, a debt consolidation
loan can be the tool to save a home.
- I heard that debt consolidation loans are tax deductible, is
this true?
- In some cases depending on the cost basis of your home the
interest portions may be tax deductible. Potential borrowers should
check with their tax advisors to explore what portion, if any, would
be tax deductible for them.
- If things get better can I pay off a debt consolidation loan
early?
- In most cases there is no prepayment penalty with these loans,
but read your documents carefully. Some loans will indeed penalize
you an extra-prepayment penalty fee if you pay the loan early.
American Debt Foundation
http://www.americandebtfoundation.com
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