Debt Elimination Through Your Home Mortgage
_Americans are awash in a sea of debt, from credit cards to lines of credit on their homes, to credit cards, to 'holiday loans'. Unsecured debt is a dangerous habit, and one that costs the American consumer a great deal every year.
The cost of debt is accumulated through compound interest, and it gets expensive over time. The basic formula is to take your interest rate in points, and divide seventy-two by it. The result is the number of years for the accumulated compound interest to equal the amount of money taken out on the loan (which is the average balance of your monthly statements over the course of the year.
For example, if you're paying eighteen percent interest on your credit card, seventy-two divided by eighteen is four – if you maintain a positive balance on your card for four years, you will have paid as much in interest as your average balance was for those four years. No wonder the banks love credit cards and consumer credit!
Getting off the credit treadmill requires some financial discipline – most people start by doing draconic cuts in their luxuries. There's another way to do it, something called an Australian Mortgage. What you end up doing is taking out a consolidation loan on your house; your paycheck gets direct deposited to this account, and your debit card pulls from this line of credit.
On the other hand, everything you don't spend in a month goes towards paying down your mortgage. This, combined with a bit of self-restraint, can pay down your house quickly. Even better, this sort of mortgage is very appealing to many banks, because they've got a solid hedge against a foreclosure – your paycheck is direct-deposited straight into the account.
There are other techniques for getting out of debt; one of the most common is talking to a credit counselor about getting a consolidation loan. Consolidation loans are selling your existing debt to another creditor, who will let you make payments over time to get the debt paid down over time.
Many consolidation loans are drying up – and drying up fast – in the current credit climate. Hopefully, the government stimulus package will make credit a bit more free once again, but it's worth trying to comparison shop for consolidation loans.
Your measure of last resort for getting out of debt is bankruptcy protection. Bankruptcy is a court-mandated procedure, and it will torpedo your credit for a good seven to eight years. Talking about bankruptcy filing is beyond the scope of this article, and it truly is the measure of last resort.
The cost of debt is accumulated through compound interest, and it gets expensive over time. The basic formula is to take your interest rate in points, and divide seventy-two by it. The result is the number of years for the accumulated compound interest to equal the amount of money taken out on the loan (which is the average balance of your monthly statements over the course of the year.
For example, if you're paying eighteen percent interest on your credit card, seventy-two divided by eighteen is four – if you maintain a positive balance on your card for four years, you will have paid as much in interest as your average balance was for those four years. No wonder the banks love credit cards and consumer credit!
Getting off the credit treadmill requires some financial discipline – most people start by doing draconic cuts in their luxuries. There's another way to do it, something called an Australian Mortgage. What you end up doing is taking out a consolidation loan on your house; your paycheck gets direct deposited to this account, and your debit card pulls from this line of credit.
On the other hand, everything you don't spend in a month goes towards paying down your mortgage. This, combined with a bit of self-restraint, can pay down your house quickly. Even better, this sort of mortgage is very appealing to many banks, because they've got a solid hedge against a foreclosure – your paycheck is direct-deposited straight into the account.
There are other techniques for getting out of debt; one of the most common is talking to a credit counselor about getting a consolidation loan. Consolidation loans are selling your existing debt to another creditor, who will let you make payments over time to get the debt paid down over time.
Many consolidation loans are drying up – and drying up fast – in the current credit climate. Hopefully, the government stimulus package will make credit a bit more free once again, but it's worth trying to comparison shop for consolidation loans.
Your measure of last resort for getting out of debt is bankruptcy protection. Bankruptcy is a court-mandated procedure, and it will torpedo your credit for a good seven to eight years. Talking about bankruptcy filing is beyond the scope of this article, and it truly is the measure of last resort.