February 4, 2012

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Simplify Your Debt the Smart Way with Debt Consolidation

Living in Boston can get expensive. Some people are fortunate enough to never have to take out loans for anything while visiting or living in Boston, but most people, as they accrue educational and health-related expenses, need to rely on help from the bank and other crediting institutions to get help sharing life’s financial burdens.

When debt gets overwhelming—and for many people, it does—it can be harder to get extra help. You start to get lost in bad credit, paying bills can be difficult, and trying to raise money from other sources can be difficult without strong credit or loaning references.

Take most college graduates for example. A lot of them graduate with a significant amount of debt, and most of that is spread it to a bunch of different loaning institutions. The graduate may have a few thousand in subsidized and unsubsidized government loans, another few thousand from a private loaning agencies, and then maybe ten or twenty thousand through a different bank. Some of these larger loans may actually be divided into different smaller loans,but still fall under the larger agency umbrella.

Some of these loans may have extremely high interest rates and others, such as the government loans, may be substantially lower. If you have a lot of different loans, debt consolidation may be a good idea. You would have to consult with a loan officer or counselor to figure out what would be right for you. If you consolidate, you may lose the lower interest rates on some of your loans and they may end up costing you more. However, if you can benefit from consolidation, you can often get out of debt a lot faster, with a lot less headache, and a lot more money. And then: you can start to breathe again.

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Filed Under: Discussion, General, Life Style Tagged With: , ,

Playing the Point Game

Sign of a mortgage centre in East London
Image via Wikipedia

Every penny counts and there’s no place where you’d be concerned about saving them than in a mortgage. Mortgage points, or discount points, are an option that will pop up when you shop around for the best home mortgage you can get.

Discount points are a fee that you can pay your lender to lower the interest rate on your mortgage. One point translates into one percent of the mortgage amount, so if your mortgage is for $100,000, buying one point would translate into $1,000. The points charged can vary from one bank to another, while some do not charge at all. Sometimes, paying a few points can qualify you for a further discount, i.e. paying 3 points could earn you a discount of 0.5 percent and not just 0.3 percent.

The first thing to consider while discussing discount points is whether you can actually afford to put up the amount by yourself. Compare the outcomes of different point choices and see which one is to your advantage to figure out whether the points paid are worth the expense. A simple way to find out is to compare the monthly payments with and without points. The difference between the amounts saved should be used to divide the point paid. The result will be the number of months required to break even on that payment. Translate this into years, and you can judge whether it’s worth it. It wouldn’t much sense if the break even time is ten years, and you plan to use your property for eight years at the most.

Discount points are often confused with origination fees. The latter is used to cover the costs of processing your mortgage, and usually costs the same as one point. Playing the point game can be a good idea for your mortgage, but run your numbers past a few mortgage calculators and lenders before paying up.

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Filed Under: Entertainment, Housing Tagged With: , , ,