by Darren Cason
Being in financial crisis is a serious mental strain, one that can easily cause you to lash out at anyone involved in your woes. Before you pick up the phone and yell at some lender’s customer support representative though, consider more professional options that can be looked into concerning your debt.
One of these options is to write a credit repair letter to your lenders. These have a number of functions that can help lessen your debt load and the stress that comes along with it.
The first facet of the credit repair letter is to lay out in writing a repayment plan with your lender. This process can lead to reduced debt, erase bad credit, and at a fraction of the cost of what you currently owe. These simple letters can be powerful tools in getting credit companies to see your situation for what it is.
Ultimately they want to recoup as much of their losses as possible and save themselves from having to write it all off as bad debt. This can save you a good deal of money and potentially avoid a devastating process like bankruptcy.
Letters can also be used to halt collection agencies and debt collectors in their tracks. There’s nothing worse than having the spectre of some collector calling you at any moment looming over you, to the point where many people will refuse to take calls from unknown sources. These companies usually buy your debt from the original source, and as such have no real connection or commitment to service on your behalf.
They simply want their money, and they want it now. It’s your right not to be harassed by these collectors though, and a well crafted letter should get them off your back for a good while.
Fraud alert letters are also vital when you suspect or know you’ve been the victim of identity theft. By placing a fraud alert on your credit reports (TransUnion, EquiFax and Experian), you put your account in a position where lending institutions must call you after each transaction to confirm the sale.
Lenders don’t like this, as it gives them additional work to do, but this is your right as a borrower when you feel your identity has been compromised. These alerts must be renewed every 90 days, with multiple personal security companies springing up that will take care of this process for you, among other things, though you can easily do it yourself.
Your credit score is a major component of how you can borrow money and what rates you’ll be charged for doing so, so it’s important to squash any falsely negative information that may be appearing on your report. Write to the credit bureau in question (the three of which are listed above), and explain to them in detail with documents to back up your statements, of any false information on your reports.
Keep a copy of any and all credit letters you send out, as a part of improving credit scores as they are all good evidence that you’re working to establish a good line of communication with lenders in an effort to repair or maintain your credit. The results of these letters may not be seen immediately, but should take effect within no more than a month’s time.
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by Barry Waxller
A red hot loan package that is getting a lot of attention these days is the reverse mortgage. Common question arise regarding the loan, so let’s take a closer look.
As the name suggest, this is a loan wherein you receive payments from a lender instead of making them. The rest of the loan, however, is much different than your run of the mill mortgage.
The reverse mortgage is based on the equity in your home. Every time the lender makes a payment to you, it gets a bit of your equity. This equity is held as debt like in a traditional mortgage and interest is charged on the amount.
A thought that may have popped into your mind is what ultimately happens when the equity in the home is used up? If there is no equity, do you still own the home? Are you expected to pay off the loan? Do you get evicted?
This is exactly what happened when these loans were first offered. This unsavory result did not stand. The federal government got involved. In most current situations, you are allowed to remain in the home, but payments to you stop.
Considering you are giving away a big chunk of your nest egg, you should get some sizeable payments, right? Well, maybe. There are a lot of factors involved. These include the dollar value of your equity, your age and so on.
While you should be concerned about how the payment is calculated, it is important to understand there is an easier way to determine it. Just ask to see examples. Multiple programs are available and they should show you the estimated payment amounts.
At some point in time, you might realize a reverse mortgage is not for you. Can you get out of it? Generally, you can so long as you pay off the mortgage debt. Make sure to read the loan documents for language on this issue.
Another issue that arises is appreciation. What happens if your home appreciates over time? Can you get at the new equity? In most cases, you can. Whether this has to occur through a refinance or a modification to the reverse mortgage is a case by case decision.
What happens when I die? The reverse mortgage is handled no different than any of your other assets. It becomes due. This means your heirs must either pay it off or sell the property. If they sell the property, the reverse mortgage balance is paid off.
The reverse mortgage is undoubtedly a new toy in the loan industry. That being said, it is very expensive. For a majority of people, it is a bad choice compared to other alternatives that are cheaper and produce more income.
by Barry Waxller
The reverse mortgage is getting a lot of play these days in the media, but what is it exactly? Let’s take a closer look at it and some of the issues that arise.
The reverse mortgage is a form of negative amortization, but with a favorable side effect. While you make payments to a lender with a traditional home loan, the lender makes payments to you with a reverse loan.
Equity. The reverse mortgage equity loan is all about equity. Every payment the lender makes to you is in exchange for a slice of the equity in your property. Unlike your traditional home loan, the balance due on the loan goes up.
The number one question regarding reverse mortgages has to do with equity. Specifically, what happens if the equity is all used up before the borrower dies or the home is sold? Do you lose the home, get foreclosed on or what?
This is exactly what happened when these loans were first offered. This unsavory result did not stand. The federal government got involved. In most current situations, you are allowed to remain in the home, but payments to you stop.
If you are going to be giving away equity, what size of payments can you expect? There is no simple answer. Factors such as the amount of the reverse mortgage, your age, costs and so on all go into the calculation of the payment amount.
While you should be concerned about how the payment is calculated, it is important to understand there is an easier way to determine it. Just ask to see examples. Multiple programs are available and they should show you the estimated payment amounts.
So, can you change your mind and go in a different direction? Yes. In doing so, however, you have to either sell your home to pay off the reverse mortgage or simply pay it off outright.
Another issue that arises is appreciation. What happens if your home appreciates over time? Can you get at the new equity? In most cases, you can. Whether this has to occur through a refinance or a modification to the reverse mortgage is a case by case decision.
So what happens when you reach the end of the line? In such a situation, the home is handled just like one with a traditional home loan. Your heirs will either sell it or come up with the money to pay off the reverse mortgage.
The reverse mortgage is often touted as a great way to pull income from real estate. In truth, it is a very expensive method for doing this and there are better options. Make sure to speak with a financial advisor before going this direction.
by Barry Waxller
What is the one thing you read over and over? Buy a home! The advice makes sense in this case as a home is a good long term investment. The question, however, is how do you get the money out when you need it?
The traditional mortgage can be described simply. The lender issues you a bulk sum of money to buy a property. In exchange, you agree to pay back the sum plus interest over a lengthy period of 15 or 30 years.
Reverse mortgages, around since the 1960’s, have been making a comeback in recent years. As the basic population of the country ages, the question of converting equity to cash that can be used is becoming more and more of an issue.
The reverse mortgage is one of the rare financial tools that allows for age bias. In fact, there is a mandatory age limit and it is legal. Simply put, you must be 62 year of age or older to apply for a mortgage.
After years of making monthly payments to the lender on your traditional mortgage, you are going to love the reverse mortgage. Why? The lender will be making payments to you!
The nature of the payments, of course, is unique. You can have the lender make monthly payments to you much like you did to your original mortage lender. Alternatively, you can ask for a lump sum payment.
The biggest selling point of the reverse mortgage is the lender payback. Simply put, you don’t pay the lender back. They recover their money when you pass away or the home is sold. Not bad, eh?
With the massive amount of advertising for reverse mortgages available out there, you might think there are no negatives to the loan. In truth, there are more than a few and you really need to take them into account. Most reverse mortgages are not good deals.
The first problem with the reverse mortgage is your heirs. If you hope to leave them with something, you need to realize the reverse mortgage lender is going to take a large chunk of the equity in your home when you sell it or pass on.
The cost of the reverse mortgage is another big issue. Simply put, the fees are outrageous in most cases. They often run up in the tens of thousands of dollars. The interest rate on the accruing debt is also going to be higher than normal loan rates.
At the end of the day, most financial professionals view reverse mortgages as a less than stellar option for seniors to access the equity in their homes. If you are faced with this problem, make sure to explore all options available to you with a financial consultant.