Consumers focused on debt consolidation

by Shelton on December 17th, 2015

filed under Debt Consolidation

Credit cards are now competing with personal loans in the debt consolidation market, according to retail financial services researcher Canstar Cannex.

The analysis is contained in the company’s star ratings covering personal loans in which it said that while car purchases used to be the most popular reason people took out a personal loan, it was a sign of the times that this purpose had been overtaken by debt consolidation.

However, it said consumers were increasingly finding credit cards a convenient vehicle for debt consolidation, largely because providers were offering balance transfers ranging from 0 per cent for six months to 4.99 per cent for the life of the outstanding balance.

The Canstar Cannex analysis warned, however, that self-discipline was the key for consumers irrespective of which option they chose.

However, it said that with respect to credit cards, unless consumers could remain disciplined with respect to credit cards, they would be better served in paying down their debt by way of a personal loan.

“It may be slow and steady but if you can’t trust yourself with a credit card, a personal loan will get you over the debt finishing line a lot sooner,” the analysis said.

The benefits of having a personal mortgage broker…

by Shelton on December 15th, 2015

filed under Debt Consolidation

When choosing a mortgage, it is imperative that you choose one with terms and an interest rate best suited to your budget and individual financial needs. Otherwise, you risk spending thousands of extra dollars unnecessarily and paying hidden costs and fees.

The Mortgage InGenuity team are professionally trained mortgage brokers who represent and design mortgages around you, not the banks. Because they work for you, they have your best interests in mind, versus a banker who works for their bank and has their bottom line in mind.

Your personal mortgage broker has the resources and expertise to get you the mortgage that is best for you, and is not limited to mortgage product offerings from only one source. They will seek out the best lender package to suit your specific situation, whereas a banker is limited to the mortgage product offerings from their employer.

The mortgage brokers at Mortgage InGenuity have access to over 50 different lenders, including various banks, insurance companies and private funds. They also offer the best rates in the current market, and can guarantee that interest rate between three to four months. A banker, on the other hand, can offer only the interest rate offered at their bank, and are not allowed to offer you a potentially better deal from another lending institution.

Having a mortgage broker means having personalized and individualized service that doesnt end after you purchase your mortgage. It is important to the Mortgage InGenuity team that their clients are always happy, satisfied and secure in their decisions, and they are always available for questions or any changes you want to make down the road.

This includes options such as help with refinancing, mortgage renewal terms, loans for home renovations or debt consolidation services. Whatever you need, your Mortgage InGenuity broker will be there for you.

If you are looking for a mortgage broker, call one of the professionals at Mortgage InGenuity today at 226-666-7301. You can also email them at contact@mortgageingenuity.ca, or contact them online with any questions or comments you may have.

How to Calculate the True Savings from Refinancing a Mortgage

by Shelton on December 14th, 2015

filed under Debt Consolidation

Let’s look at a couple of examples to demonstrate how it works:

Example #1: You have a 6.50%, 30-year mortgage with a remaining balance of $200,000. You have an opportunity to refinance the mortgage at 4.50%, with $5,000 in closing costs. The analysis looks like this:

  • Current mortgage: 6.50%, monthly payment, $1,264
  • New mortgage: 4.50%, monthly payment, $1,013
  • Monthly savings: $251
  • Closing costs: $5,000

The closing cost recapture period is calculated by dividing $5,000 in closing costs by the monthly savings of $251, which looks like this: $5,000/$251 = 19.92 months, or 20 months rounded up.

Since the closing cost recapture will occur in significantly less time than 24 to 36 months, the refinance is generally worth doing.

Example #2: You have a 5.50%, 30-year mortgage with a remaining balance of $200,000. You have an opportunity to refinance the mortgage at 4.50%, with $6,000 in closing costs. The analysis looks like this:

  • Current mortgage: 5.50%, monthly payment, $1,136
  • New mortgage: 4.50%, monthly payment, $1,013
  • Monthly savings: $123
  • Closing costs: $6,000

Calculating the closing cost recapture period by dividing $6,000 in closing costs by the monthly savings of $123 we get something that looks like this: $6,000/$123 = 48.78 months, or 49 months rounded.

Since it will take you more than 36 months to recapture your closing costs, the refinance is probably not worth doing.

Now, it could be argued that if you plan to stay in the home for substantially more than 49 months, the refinance will still be worth doing. The problem, however, is that there’s no way to know for sure what you’ll be doing 4+ years from now. Should a job transfer come up that requires you to sell your home in less than 49 months, you would lose the non-recaptured closing costs forever.

Paying discount points with a refinance. The closing cost recapture period also makes a strong argument against paying discount points to permanently lower your interest rate in conjunction with a refinance. The cost of the points, each representing one percent of the new loan amount, will make your closing costs even higher. This considerably extends the closing cost recapture period. The approximately 0.125% reduction in your interest rate gained by buying a discount point will hardly be worth the cost.

Forget-the-Math Considerations

When deciding whether or not to refinance, there are times when crunching numbers doesn’t really matter. Generally speaking, this happens when you are planning to do a refinance that will eliminate a high risk loan.

Examples include:

  • A subprime mortgage The terms on these loans are so dangerous that the only motivation should be to get out of it. They usually involve some sort of six month adjustable-rate term with the potential of the rate going to double digits. And for that reason, the math will almost always work in your favor.
  • ARM loans A lot of homeowners have benefited from having adjustable-rate loans. But, that’s only because interest rates have behaved exceptionally well in recent years, mostly going down. But should that trend reverse, an ARM will quickly turn into a negative arrangement, possibly involving increases in both the rate and monthly payment. If you have an opportunity to replace a variable-rate mortgage with a fixed rate mortgage, it’s almost always worth it especially with fixed rate loans staying as low as they are.
  • Refinancing a first and second combination More specifically, if you have a large-balance home equity line of credit (HELOC) with a variable-rate, it may be worth refinancing a new first mortgage that includes your existing first and the HELOC. This is because HELOCs function like credit cards secured by your home, and the interest rate structure they carry usually isn’t much better than credit cards. If the HELOC represents a large percentage of the current debt on your home, doing a refinance that will roll the HELOC into the new mortgage is usually a solid decision – even if the math doesn’t look terribly encouraging upfront. Once again, it’s a matter of eliminating high risk debt even if the math doesn’t seem to support it.

Three Major Mortgage Deceptions to Avoid

Should you decide to refinance, there are a few conditions that you need to be aware of. They’re deceptions that make you believe that a refinance is better than it actually is. Here are three of the most significant.

Extending the loan term. This is a common practice with refinancing. You’re five years into a 30-year loan which means you have 25 years remaining – and you refinance into a new 30-year mortgage. No matter how much you’re saving on the monthly payment, you’re adding a very large additional outlay on the back end of the loan.

If you are refinancing a $200,000 loan with 25 years remaining on it into a new 30 year mortgage at 4.5% or $1,013 per month you’re adding five years of payments, or 60 months to the back end the loan. That means that you will pay an extra $60,780 on your mortgage over its lifetime ($1,013 X 60 months). That’s almost certainly more money than you will save on your monthly payments over the life of the loan.

In order to know if a refinance is really worth doing, you must make sure that the term of the new mortgage doesn’t exceed the remaining term of your current loan. That means that if you’re three years into a 30-year mortgage, the new mortgage should be not more than 27 years.

Increasing the loan balance. Homeowners sometimes do what can be referred to as a soft cash out on a refinance. That’s where they roll both closing costs in prepaid expenses (escrows for property taxes and insurance) into the new loan. That can add thousands of dollars to the loan balance, and it is done to prevent the homeowner from having to pay those costs out-of-pocket. But cash comes back to the borrower when the escrows established on the original mortgage are returned. It could represent thousands of dollars.

If you’re adding both the closing costs and prepaid expenses to the new mortgage, you’re increasing the loan balance by thousands of dollars. Under extreme circumstances, you have to consider whether replacing a $200,000 existing mortgage with a new loan at $210,000 is really your best interests. It’s a strategy that you will want to avoid if you’re planning on selling your home in the near future or if property values in your area are either flat or declining.

Refinancing for debt consolidation. On the surface, consolidating thousands of dollars in high-cost revolving debt into a low fixed-rate mortgage makes a lot of sense. But this is another example of where math may not necessarily matter.

I spent years in the mortgage business and saw a familiar pattern: People who did debt consolidation refinances on their homes, were usually back in debt within two or three years. The pattern was too common to ignore, and I heard the same report from other people in the industry.

There’s something of a moral hazard that comes from doing debt consolidations, particularly large ones on the home. Once you consolidate your non-housing debt successfully, even one time, you assume that you can do it again. The motivation to actually reduce debt by paying it down or paying it off fades. It sets up a pattern of people doing serial refinances – refinances primarily for debt consolidation, done every 2 to 3 years. This is especially prevalent in rising real estate markets.

There are several problems with this strategy. You might recognize them from the mortgage meltdown:

  • Consolidating debt doesn’t lower the borrower’s debt levels. It just changes the type of debt that is owed.
  • Adding non-housing debt to the family homestead puts the home at risk.
  • Should property values decline, the homeowner can be trapped in the home, unable to sell or refinance.

Please consider these factors if you are refinancing your mortgage primarily to consolidate non-housing debt.

Wrapping Up

You’re probably sensing that the decision to refinance your mortgage isn’t quite as simple as it seems. And in truth, if you consider all that’s involved, it really isn’t. That’s probably as it should be. After all, a mortgage is secured by one of your most important assets, your home. Caution should always be the order of the day.

Debt Consolidation USA Talks about Holiday Shopping

by Shelton on December 11th, 2015

filed under Debt Consolidation

Debt Consolidation USA shared in a recently published article some of the ways consumers can approach holiday spending. The article, titled “Scared Of What Holiday Shopping Can Do To Your Finances? Here Are 5 Ways To Handle It,” shares how people can prepare for holiday shopping and not break the bank in the process.

Tackling huge debt, chairman keeps up Tata’s growth trajectory

by Shelton on December 11th, 2015

filed under Debt Consolidation

He is not negating old strategy, just making it work better, said Krishna Palepu, a Harvard Business School professor whos been tracking Tata for almost 25 years.

While Mistry himself is media-shy and has never given an interview, his strategy and management style have become apparent through discussions with a dozen Tata executives, fund managers, analysts and others who have dealings with the group, most of whom asked not to be identified so that they could speak freely. He declined to be interviewed for this article.

Mistry is consolidating and bringing up all group companies to profitability and strength, AS Thiyaga Rajan, Singapore-based senior managing director at Aquarius Investment Advisors, said by e-mail. As long as the companies produce healthy bottom lines, it will speak for itself.

Ratan Tata, in a written reply to questions, defended his acquisitions, saying that investing in Jaguar Land Rover during the global economic downturn paid handsome dividends when the US and European car markets revived.

Automobiles and steel, which he grew through his acquisition of Corus Group Plc in 2007, are cyclical and vulnerable to changing business cycles, he said. Corus made respectable profits for a period following our acquisition, but this changed when the European economy collapsed.

Spokesmen for Tata Motors and Tata Steel declined to comment on Mistrys actions or goals. At Tata Sons Ltd., the holding company for the groups larger listed companies, a spokeswoman who asked not to be identified by name, when asked about Mistrys asset sales, writedowns and other actions, said the group has issued statements in the past on its focus areas for growth, and added that our strategy and action plans are for long-term value creation.

Mistrys plan for that is called Vision 2025. It means propelling Tata companies into the top 25 globally by market value within 10 years and making their products and services available to a quarter of the worlds population.

Last year, he earmarked $35 billion to carry this out, in part by growing the businesses that do financial services and technology, make military drones, helicopters and missiles, and which target consumers. Those include units that run clothing shops, operate supermarkets in a tie-up with Britains Tesco Plc, and brought Starbucks stores to India.

But Tata companies are also burdened with debt of about the same amount, the bulk of it on the balance sheets of Tata Steel, Tata Motors and Tata Power Co., the countrys second-largest private electricity producer. Others, such as TCS generate huge cash flows. As a result, the total debt of listed Tata companies is 7.3 times the total profit they reported in the year to March. That compares with 15.6 times profit for the listed companies owned by billionaire Kumar Mangalam Birla, who runs the closest comparable conglomerate, the Aditya Birla Group.

Debt was one of the biggest legacy issues, and we havent seen any major changes on that front yet, said Shishir Bajpai, a director at Mumbai-based IIFL Wealth Management Ltd., which has $12 billion under management. Debt consolidation is the most important thing, whether it is reducing the interest rate burden through refinancing or selling off assets.

While four Tata companies fall below investment-grade on Bloombergs default-risk model, even the debt of the riskiest, telephone and mobile operator Tata Teleservices Maharashtra Ltd., carries an A+ rating by the Indian arm of Fitch Ratings Ltd. based on its strong link to the parent group.

Mistry has managed to grow revenue at the conglomerates listed companies by about 9 percent since taking over, while profit has risen 8.4 percent. Tata Power posted its first year of profit in the fiscal year ending in March, following three straight years of losses, and expects to add to its cash flow with the sale of its stakes in Indonesian coal producers. Tata Steel may return to profitability by March 2016 following cost cuts, improved manufacturing efficiency and a demand recovery in India and Europe, according to a Bloomberg Intelligence report in September.

Investors are voting with their wallets. Total market capitalization of 25 listed Tata companies compiled by Bloomberg has risen by 54 percent since Mistry became chairman in December 2012, to 7.45 trillion rupees ($112.8 billion), eclipsing the 33 percent rise in the broader Samp;amp;P BSE Sensex gauge. That would put it at 58th, not even half way to Mistrys goal of being within the top 25 companies globally.

Theres a long road ahead. In 2007, Tata Steel made the largest overseas acquisition ever by an Indian company, paying $12.9 billion for Corus, which included the former British Steel. Its fortunes soon went south, as Europe fell into a demand slump after the 2008 economic crisis and more recently has seen a flood of cheaper Chinese imports. The steelmaker has let go at least 3,700 workers, including 1,200 announced in October, and written down its overseas assets by $2.35 billion.

Banks not worried about defaults – yet

by Shelton on December 10th, 2015

filed under Debt Consolidation

REUTERS
The logos of three of South Africas four biggest banks – Absa, Standard Bank and First National Bank – adorn buildings in Cape Town. Picture: Mike Hutchings

Johannesburg – South African banks are not worried about the possible defaults by farmers on loan repayments as a result of the drought.

At least three of the country’s big four banks said while the effect of the drought could impact on loan repayments, their books remained healthy and were diversified enough to allow farmers to increase gearing levels slightly.

The head of information at First National Bank (FNB) business agriculture, Dawie Maree, said the bank remained hopeful that the worsening drought situation could still be averted with rain in the coming months, which would make farmers able to honour their debt obligations.

Maree said the bank would extend its credit extension to most farmers.

Our through-the-cycle credit extension policy will enable us to assist most of our farming clients despite one or two below average seasons, Maree said.

We have been involved in agriculture for longer than 175 years, have invested substantially in both the primary and secondary agriculture sectors and will continue to do so within the current regulatory credit environment.

Catastrophe

The drought, the worst in more than two decades, has forced farmers to hold back on crop production and to sell livestock in order to avoid a catastrophe.

Yesterday, KwaZulu-Natal water authorities tightened their restrictions on water usage in the province, prompting fears that sugar cane farmers, who are already reeling from the drought, could be faced with even more problems as the planting season gets into full swing in most parts of the country.

Grain SA estimates that crop farmers will suffer more than R12 billion in losses during the current financial year, while breeders also estimate that profits in the livestock sector will go down by billions of rand.

Standard Bank said it might have to deal with an increase in bad debts from farmers as crop production was expected to fall due to the drought.

Standard Bank’s head of agribusiness, Nico Groenewald, said profit margins could come under pressure‚ making it difficult for some farmers to repay loans.

Early indications in the overall agricultural sector show that the areas that farmers intend to plant has shrunk by about 4 percent because of adverse weather conditions, Groenewald said.

Unless it rained soon‚ this area would shrink further.

Loan options

Agri SA, the lobby group that represents most commercial farmers in the country, has met with the banks to discuss farmers’ loan repayment options as the drought hit their crops and livestock.

Agri SA executive director Omri van Zyl said they wanted agricultural financiers to assist farmers to survive the drought through debt consolidation.

Scenarios are increasingly pointing to a situation where significant imports of maize, as staple food crop, will become necessary, as well as the provision of fodder for breeding herds of livestock to be maintained, Van Zyl said.

Absa said it would keep lending taps open for farmers as growers could use high crop prices to offset lower output.

Absa’s head of agribusiness, Ernst Janovsky, said the bank was not concerned as yet, as the severity of the drought could be felt in months to come.

He said less than 0.2 percent of farmers had defaulted on their loan repayments and there was still enough money to survive the drought.

We haven’t closed any taps, Janovsky said. There is no real problem up to now, but if substantial rains do not fall by March next year we could have serious problems.

Maree said FNB remained optimistic about the financial well-being of its farming clients.

He said the bank was still hopeful that the drought could be broken as almost 80 percent of maize farmers in Mpumalanga had already started planting, while the North West and western parts of the Free State still had time to plant.

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Debt Consolidation USA Shares Tips To Avoid Money Problems Before Year End

by Shelton on December 7th, 2015

filed under Debt Consolidation

Debt Consolidation USA discussed in a recently published article some of the ways people can help their financial position and stay away from money problems before the year comes to a close. The article titled “Want To Steer Clear Of Money Problems Before The Year Ends? Take A Look At These 7 Tips” shares some valuable tips to achieve just that.

Philadelphia, PA (PRWEB) November 24, 2015

Debt Consolidation USA discussed in a recently published article some of the ways people can help their financial position and stay away from money problems before the year comes to a close. The article titled “Want To Steer Clear Of Money Problems Before The Year Ends? Take A Look At These 7 Tips” shares some valuable tips to achieve just that.

The article starts off by pointing out that money problems is so prevalent in the finances of most American consumers that it is already being considered as the norm. But that should be corrected as early as possible because there is nothing normal with being in debt. A lot of people might be struggling to make payments but that should not be considered normal.

One of the things that article suggests is that consumers need to review the financial goals they had set for the year. It can be a certain level of equity paid on the house or even paying off the student loans. There are long term financial goals but this should be broken down to levels which can be achieved at a certain timeframe. Consumers might want to check up on their progress even before they start a new year with new financial goals.

It is also important to look at their credit card health as the holiday approaches. The article shares that consumers would mostly rely on their cards to make holiday purchases that they should check if they have any unpaid balance on it. It might also help to check if lenders would approve a credit limit increase to be able to fit in all expenses on the card.

With that being said, the article points out that consumers needs to be on their toes when it comes to the lure of holiday spending. The holiday season seemingly justifies spending regardless of type. To read the full article, click this link: https://www.debtconsolidationusa.com/personal-finance/want-to-steer-clear-of-money-problems-before-the-year-ends-take-a-look-at-these-7-tips.html

For the original version on PRWeb visit: http://www.prweb.com/releases/avoid_money_problems/before_yearend/prweb13067594.htm

Refinancing: What It Is and Why You Would Do It

by Shelton on December 7th, 2015

filed under Debt Consolidation

We hear it in commercials and see it on the news: “Rates are at or near historical lows. Refinance now before rates push higher.”

What does it mean to refinance? Refinancing is the act of taking on a new loan with different terms. Reasons for refinancing your mortgage include lowering your payment, shortening your term or using the equity you’ve built up over time to get cash back out of your home.

Lower Your Payment

Many people could benefit every month from having a lower mortgage payment. Some could use a little financial breathing room, some want to start a savings account, and others want to use the money to pay for other expenses. No matter your goal, there are a few different ways to reach it with a refinance.

Lower Rate

This is pretty self-explanatory: The higher your interest rate, the more you’ll pay for your mortgage both now and in the future. A lower rate equals a lower payment if the length of the mortgage term remains the same. Use a mortgage calculator to find out how much a lower rate could save you on your mortgage payment.

In order to refinance, you have to have a certain amount of equity in your house. If you owe more on your home than it’s worth because of a drop in property value, you may still be able to lower your rate with a HARP or a Fannie/Freddie Streamline refinance.

Change Your Loan Type

If you have a fixed-rate loan, you might be attracted by the comparatively low rates offered by adjustable rate mortgages (ARMs). If you plan on being in the house for only a handful of years, this could make a lot of sense. Your rate is fixed for a certain amount of time at a low rate compared to a fixed-rate loan. Just have a plan in place for when your initial fixed-rate period ends.

Maybe you’ve decided you really like where you are. The neighbors are awesome and the school system is great. However, if you stay with an ARM past its fixed-rate term, you’re at the mercy of current market conditions. Your payment could go down on a yearly basis, but it could also go up.

Many people expect rates will go up in the near future if the Fed decides to raise the short-term funds rate, the rate at which banks borrow money. To put it bluntly, when the cost goes up for banks, clients will pay the price in the form of higher interest.

If you find yourself tired of riding the surf that is the market, you may find that you can lower your payment by refinancing into a fixed-rate loan.

If you need a lower payment, you could also take a look at lengthening the term of your mortgage. It’ll take longer to pay off, but you’ll have a lower monthly payment that can help you out now. You may even be able to refinance to a lower rate.

Reduce or Eliminate Mortgage Insurance

Mortgage insurance protects the lender in case the borrower defaults on the loan. It can add a couple hundred dollars to your monthly mortgage payment. While no one likes paying the premiums, mortgage insurance makes it possible for many buyers to own their home without handing over a large sum of money for a down payment. It also allows current homeowners to refinance to a lower rate or a longer term – saving them money every month – even if their loan-to-value (LTV) ratio is over 80%. LTV is the amount of money you owe on your home compared to its current value.

As you can see, mortgage insurance isn’t all bad. And here’s the best part: Paying mortgage insurance doesn’t necessarily have to be a way of life the entire time you own your home.

Conventional loans can have private mortgage insurance (PMI), which you can ask your lender to remove once you reach an LTV of 80% or lower. On FHA loans, mortgage insurance might be with you for the duration of the loan, depending on when the loan was taken out. But, there’s good news; once your LTV reaches that magical 80%, you can refinance to a new loan that doesn’t require mortgage insurance.

If you can’t avoid mortgage insurance altogether, you may be able to save some money each month with a lender-paid mortgage insurance (LPMI) programs like PMI Advantage.

Pay off Your Mortgage Faster

Instead of lowering your payment, you may wish to pay off your mortgage faster and save money on interest you would have paid over the longer term.

You can refinance to a 15-year loan or even a custom-term YOURgage. Doing so will give you a higher monthly payment, but you’ll be able to pay off the loan faster and be in a better financial situation down the road, while saving quite a bit on interest. As an added bonus, shorter-term loans often come with a lower interest rate than 30-year options.

Take Cash Out

The third type of refinance allows you to convert your home equity into cash. You can then use the cash to pay for home improvement projects that may even add value to your home. Maybe you want to use it to put your child through college or make an investment with a higher rate of return than your mortgage interest rate.

The best part about a cash-out refinance is that, unlike a home equity loan, a cash-out refinance isn’t a second mortgage. This means it’s less risky for the lender and you can get a better rate.

You might also use the equity in your home to pay off debt.

As far as I’m concerned, credit cards are among the world’s great inventions. You don’t have to deal with cash or writing a check. You just swipe the plastic and pay the bill – in full. Carrying a balance on your credit card isn’t a great idea. The average rate on a variable interest credit card is 15.72%, according to the latest numbers from Bankrate. If you fall behind on a couple of cards, all that interest can add up quickly.

This is where doing a debt consolidation refinance could be helpful. Debt consolidation involves a cash-out refinance where use the equity in your home to get money to pay off your current debts. You then roll that debt into your mortgage payment at a much lower interest rate. (Rates are currently in the low 4% range.) From then on, you just have to make your mortgage payment on time and keep your credit card balances down.

Now you know what a refinance is and we’ve gone over the types. Do you think you might benefit from refinancing? Talk to one of our Home Loan Experts today and see if it’s right for you.

Personal Loans for Good, Fair and Bad Credit

by Shelton on December 6th, 2015

filed under Debt Consolidation

*Range of rates shown includes fixed- and variable-rate loans.  Rates are not guaranteed and vary based on the credit profile of each applicant. **With AutoPay discount.  ***Other credit standards apply, generally 700+ 

A personal loan is a loan that is not backed by any collateral (like a house or car). It differs from a mortgage or car loan in that the lender cannot directly seize your assets if you fail to pay back the loan.

Pros:

  • Debt consolidation.  A personal loan can be used to consolidate high-interest credit card debt to lower interest payments and accelerate debt payoff.
  • Lower interest rates than payday lenders. Personal loan providers can offer significantly lower interest rates than payday lenders, even when borrowers have bad credit.

Cons:

  • Higher interest rates than secured loans and (some) credit cards. If you have good credit and can pay off the loan in 12 18 months, you can likely get a credit card that has 0% interest on purchases for a year or longer. Alternatively, if you are a homeowner, home equity loans often have lower interest rates.
  • Extended application process. The approval process for a loan can last a few days and may require more information than that for a credit card.

If you have good credit and an existing banking relationship, it’s worth checking out your current provider or local credit union. Be sure to consider multiple options to find a good rate. Almost all lenders will require you to be over 18 and a legal US resident, with a verifiable bank account and not in bankruptcy or foreclosure.

Check out our choices for:

  • Best credit card consolidation loans
  • Best debt consolidation loans
  • Best personal loans for good credit
  • Best bad credit loans

Additional NerdWallet articles on personal loans:

The truth and lies about those debt consolidation offers

by Shelton on December 5th, 2015

filed under Debt Consolidation

Whether its credit cards, medical bills, or financial problems after a divorce, debt is a real problem for American households. The average US household carries $16,000 in credit card debt.

Those ads from debt consolidation companies make it sound easy to eliminate your debt and get back in good financial health. But the reality is, without doing your homework, they could actually get you in even more money trouble.

Lets break down the claims with the help of Kim Sands from Greenpath. The non-profit, with offices in Moline and Davenport, counsels people on their money management, including debt.

Claim #1 : Your first call is free. There is no obligation.  They are so high pressure. I have people who say, I called them with a few questions, and now I cant get them to quit calling me.

While thats true, Sands says that is where the high-pressure sales pitch starts.

Its so easy to get confused, she said. They are so high pressure. I have people who say, I called them with a few questions, and now I cant get them to quit calling me.

Claim #2: We can cut your bills by thousands, avoid high interest foreclosure, and settle your debt for up to 60 percent of what you owe.

With Greenpaths debt management program, you will repay 100% of what you owe.

Youre making on-time, monthly payments, she said. The interest rate is in the lower single digits.

Greenpath charges a fee for its debt management service, but its much different than the fees charged by a debt settlement company.

Debt settlement companies often will charge – Lets say your payment is $500. They will keep the first three months payment as their fee, she explained. Then they take a percentage of what they pay out. So if they pay $2,000 on a $4,000 credit card, they may keep 20 percent of that too. So a lot of what youre sending them is a fee.

Claim #3: Banks and credit card companies have legal representation, and so should you.

No matter who is on their staff, an attorney for a debt consolidation company cant offer you any legal protection. The only thing that can protect you, legally, is filing bankruptcy. That may be the only choice for you, but the key is knowing your options and your long-term financial goals.

Most importantly, Sands says, you should never pay a company to do what you can do yourself. You wont get a better debt settlement just because you have hired one of these companies. Debt settlement is usually only appropriate for people who have access to a large sum of money, like a tax return or and inheritance, to make a one-time payment.