Still many of them find themselves being offered credit cards by various credit card companies.
Those who are conscious of their credit standing will find a credit card that suits their needs, sign up, keep track of their purchases, pay off credit card bills in full each month, and ignore offers from other companies.
There are others who may be dazzled by all the credit and easily end up making lots of purchases on credit which they may use or cannot afford. Usually, they pay the minimum payment on their cards.
Then one day, they may wake up with the realization of the enormity of their bills. This is when they will be needing debt consolidation loans to get out of a bad credit situation.
What Is Debt Consolidation?
Debt consolidation simply means replacing multiple loans with just one that bears lower interest rates than the original loan. That is why it is called “consolidated.”
To put it simply, debt consolidation means turning bad debts into good ones. It can be several unsecured loans converted into a secured one against an asset that serves as a collateral. Again that is why it is called secured loan.
Most commonly, that asset securing the loan is the fellow’s house. In this case, a mortgage is secured against the house.
By using the equity in your house, he can now pay off those high interest rate credit cards that would have been paid off by just paying the minimum payment. In most cases, overall monthly payment is lower after refinancing it through the mortgage.
After the debt consolidation, that person will just have one mortgage (think one creditor only).
This new loan pays all current debt, gives you cash and enables him to save money because of the reduced amortization. A word of caution, however, is emphasized.
Sometimes refinancing companies take advantage on their clients by charging very high service fees bordering on the state maximum limit on mortgage fees.
In addition, some unscrupulous refinancing companies will lurk on their preys waiting for their clients to be in a worst financial strait so if they do not refinance they may lose their houses.
At this stage, they will be willing to pay any allowable fee just to have their debts consolidated.
Although the monthly fee can be lower, the total amount repaid is always higher due to the longer period of the refinanced mortgage.
To estimate the pros and cons, it is suggested to use the financial calculator.
There are other alternatives to debt consolidation loan where unsecured loan is converted into secured ones but is eliminated through a settlement or payment plan.
Debt consolidation can be confusing. It is advised to consult a reputable company or trusted advisor.
Remember these are loans secured by mortgages with no credit check to repair bad credit.
Getting A Mortgage When The Co-Applicant Has Poor Credit
High credit card balances and cash advances can result in more than just bad credit auto financing. If one of the joint applicants for a mortgage has bad credit, both people can be affected. Lenders usually look at the lowest credit score of the two when determining the mortgage interest rate. Having a spouse with bad credit can leave both people in expensive loan territory.
Listing two borrowers on the mortgage application can help qualify for a larger loan. However, it may not be a smart move if one of the applicants has bad credit. Instead, have the higher earner with good credit serve as the only applicant. If this person has the higher income, he or she may qualify for the mortgage alone.
If more income is needed to qualify for the desired loan, a different co-signer can be used. A sibling or parent may be happy to fill this role. The good credit of this person replaces the bad credit of the spouse and increases combined income. If the co-signer earns more money, this person should be the primary borrower. For an FHA mortgage, any co-signer must be a relative.
Even if the mortgage is only in one name, the property deed can usually be in the names of the couple. Lenders have an influence on this so check with the mortgage lender before proceeding. If only one person is named on the mortgage, it is wise to draft an agreement regarding home disposition in the event of a split.
With mortgage interest rates so low, many couples are deciding to become first-time homebuyers. If one person has bad credit, all hope is not lost. The alternatives described above should help the couple qualify for a mortgage. At the same time, they can focus on paying off cash advances and other lingering debt.
