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What Is A Truly Reasonable Interest Rate When You Have Bad Credit

This client is in a tough situation. he has a successful business which apparently is doing very well except that he has been hit with two calamities  which nearly bankrupted him and took every last cent he had. He obviously did not pay all his creditors at the time and as a result has a bad credit rating.

He wants to buy a home, but the interest rates are too high for him to afford due to his bad credit rating. Someone with excellent credit and a decent down payment can obtain a mortgage around 3% interest, while someone who has bad credit may pay an interest rate of 14% or even higher. We chose 14% to illustrate how big a difference the interest rate makes in a mortgage.

At 3% the monthly payment is $565.58, while at 14% the monthly payment is twice this payment at $1132.50. Many people might find this  shocking, however interest costs can add up quickly. Since this customer is obviously a knowledgeable business person, he understands the value of money and cash flow and how important it is to obtain a truly reasonable interest rate. For more information on the calculations see below.

He will be better off continuing to rent for awhile, saving up more cash for a larger down payment and setting up a fund within his company i.e. the restaurant for emergencies. With an emergency fund, he will not be impacted by any calamities that occur with the restaurant and he can continue to repair his credit rating. Taking this approach will save him a great deal of money in the long run and ensure that he can qualify for a much more reasonable interest rate saving him literally thousands of dollars over the life of his mortgage.

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Is It Worth Damaging Your Credit Rating Further By Using A Debt Relief Program?

Our latest applicant is worried about the impact a debt relief program might have on his credit rating. It is already in bad shape with all of the credit cards that he has and the level of debt that he has compared to his income. There are several solutions to his issues, some might be worthwhile pursuing, however he is going to have some sort of impact on his credit rating. The question is how to minimize the impact.

He has a number of credit cards all max’d out to the limit. This alone is a negative impact on his rating. He really should have managed the situation better, but now the damage is done.

The best solution is to apply for and be approved for a consolidation loan at a lower interest rate which will improve his cash flow and as a result will pay less interest. By paying this loan off in full, he will also improve his rating.

Another approach is to apply for a debt relief program. The process involves negotiation with the lenders to come to agreement on a total amount that will be paid, which is less than the original total amount. Using a professional negotiator to assist you can be a benefit for some customers since they understand the process and have all of the negotiation techniques well understood.  Regardless of how you go about this it is important to always obtain all agreements in writing and have all parties sign off on the deal so there are no surprises.

In most cases there will be a negative impact on credit ratings since the lender is taking a haircut on the total amount that was originally owed to them. In addition the borrower may be required to come up with the new loan amount in one lump sum which can be difficult for many people.

If you plan to borrow money in the future, a damaged credit rating can make it difficult to obtain a loan and if you do, the interest rates may be high for a personal loan. Evaluate each of these carefully before making a decision.

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Pros and Cons Of Debt Relief Settlement In California

The applicant has admitted that he has not done a good job at managing his cash flow in a situation where his income can vary a great deal depending on what is going on in his industry. He is  a set designer in the TV and movie industry which goes through ebbs and flows much like many other industries.

He does have some savings and wants to know what the pros and cons are for debt settlement in California vs. using his savings to pay down his debt vs. refinancing his mortgage and consolidating his high interest debt. In most circumstances, finance experts would recommend that clients should refinance high interest debt, consolidate it and reduce the monthly payment to something that is much more manageable. The client would experience a better cash flow and they would pay less interest overall.

Debt settlement involves negotiating with your debt holders, in this case the credit card companies and arriving at a lower number that both parties agree to. The lender gets some money, while the borrower reduces how much they pay. The downside is that the borrower must still come up with a substantial sum of money to meet their end of the bargain and they still risk a hit to their credit rating when they take this action and if they cannot repay the amount that is finally agreed to.

In some situations using a company that specializes in debt settlement to negotiate on your behalf may also reduce the overall impact. We do not recommend that the applicant take all his savings and pay of his debts at this time, until he has found the next contract and is generating income once again. At that time he may reconsider his options in terms of refinancing and consolidating his debts based on his income at that time.

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Banks That Lend To People With Bad Credit In California

Our latest client probably has what most people would consider a dream job, managing a golf course! He wants to complete the dream and purchase a home that backs onto the same golf course that he works at and be able to walk to work. Unfortunately he was out of work a few years ago and had some debt issues which have contributed to having a bad credit rating. Now he is looking for a bank that will lend to people with bad credit in California and having some difficulty finding a bank that will approve his mortgage.

He has fully repaid all his old debt and doing the things he needs to repair his bad credit rating. Not enough time has elapsed for his bad debt rating to recover, so he is going to have a more difficult time finding a mortgage. There are lenders who are willing to consider people in this situation with bad credit and mortgage brokers can also assist him in finding a mortgage that will help him buy the home of his dreams.

The lenders will need additional information, such as the size of the down payment. He did not provide this information in the application. A large down payment can help a great deal in increasing the confidence level of the lender. Small down payments are deemed to be more risky. Once this added information is provided along with some other details his application can be considered further.

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How To Improve My Credit Rating Fast

This client has done everything right in terms of paying his bills on time and avoiding debt, but has far too many credit cards which makes him a perceived credit risk in the eyes of most lenders. He has a good job and makes sufficient money for the mortgage he has applied for; however is being turned down due to too many credit cards. He wants to know how to improve his credit rating fast so that he can be approved for a mortgage.

This situation of too many credit cards and a bad credit rating affects thousands of consumers every year. Many large department stores and companies offer credit cards with large discounts and incentives to consumers when they are making purchases. The credit cards usually carry very high interest rates on unpaid balances, although they do offer significant discounts to consumers for initial purchases. It is very easy to end up with many credit cards which can affect their credit rating.

The first thing this client should do is call each of the credit card companies and begin closing these cards. He may decide to keep one or two cards which is fine.  The problem will be that it could take six months to a year before his credit rating and report reflect closing these credit accounts. This delay will not help him in being approved for a mortgage any time soon. He should also obtain statements from each company showing that his accounts have been closed and any balance fully paid.

In the mean time we suggest that the client work with a mortgage broker to obtain a mortgage lender who will be willing to take them on as a client even with their bad credit rating.

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Peer To Peer Lending – Does It Really Work For Borrowers

This client is wondering what “peer to peer lending” is and does it really work for borrowers. They also want to know if peer to peer lending will work for them, what the process is and whether they will actually be advantageous for them compared to just borrowing money from their own local bank. We will try to address these questions, but first we will describe their situation and the loan application.

The client and his wife are both private school teachers and live in Phoenix Arizona. They have worked in this field for quite a few years and also managed their finances carefully over the years and it shows. There mortgage on their home has only another 8.5 years to run, they have no loans or credit card debt and they manage their finances in such a way that their retirement funds are also well invested. They are in an enviable position and many consumers would prefer their own finances to be in such good shape.

They have apparently decided to treat themselves to a new yard with an in ground pool, waterfall and slide along with landscaping front and back which will cost them approximately $50,000 to complete based on estimates they have received. This is the loan that they wish to take out and have applied at a number of locations. They have also been searching online for loans and came across peer to peer loans and wanted to know more about this type of loan.

Peer to peer lending is the process of lending money from one individual to another individual without going through a intermediary such as a bank or financial institution. A peer to peer loan can be arranged by an intermediary for a finders fee, however the actual loan is between the two unrelated people. In reality it is a private loan and is usually without collateral and it us usually unsecured. Interest rates can be higher as a result since they are considered to be more risky.

More discussion with the client will be needed about peer to peer loans before it can be determined if they are a good candidate for this type of loan.

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Is Online Lending A Scam Or Real

This client is applying for $175,000 mortgage and lives in the Tucson Arizona area. His wife works as a hygienist in Tucson and he works as a park ranger at one of the national local parks outside of Tucson AZ. Their concern is is whether online lending is a scam or whether it is real or not. Together they make approximately $75,000 which is sufficient to carry a mortgage of this size provided that an amortization of 30 years is used. Shorter periods would drive the monthly payments higher and might preclude them from being approved for a mortgage of this size.

There are many websites that are offering online lending, some are providing funding through regular banks and will connect you with a regular bank in the Tucson area, while others are national lenders and will provide you with more competitive financing because of the national competition for customers. Mortgage brokers have access to many lenders across the country and can often find quite competitive rates compared to offers from local banks. Anytime you can drive the interest rate lower means that you are paying less interest and lowering your monthly payment as well which makes your mortgage more affordable.

This client currently rents an apartment with his wife and would like to move into a home that he and his wife would both own. The mortgage they applied for is $175,000 and they did not indicate how much of a down payment they would be able to provide. This is additional information that will be required. In addition we also need to understand what other debts that they might have, such as car loans and credit card payments or any other personal loans.

Before this application can be considered additional information will be required and then a response can be provided quite quickly concerning whether they would be approved for a mortgage of this size and whether that there would be any additional conditions that they would need to think about. There is still sufficient time for them to provide the information we need to make an assessment and to finalize an arrangement prior to the expiration of the 10 day conditions on the offer to purchase.

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