Many people today are having difficulty meeting their loan commitments and as a result look to debt consolidation as a means to reduce their monthly outgoings. The normal process for debt consolidation is to wrap up your credit card debt, any personal loans, your car repayments perhaps - all into your home loan mortgage. There is no doubt that debt consolidation is attractive in that the interest rate you pay on your credit cards and personal loans is always higher than that payable under your standard mortgage because the personal debt is unsecured - you can disappear and the lender has no recourse to a property or asset to sell in order to recover the money it has lent to you.
payday cash advance loan, cash payday loans online, bad credit loans guaranteed approval,
Debt consolidation also appeals when you look at the monthly repayment you are making on your new car or used motor vehicle. Lease and hire purchase repayments on a new car or used vehicle are always high because they include a large slice of principal each month because you are required to repay most of the new car price within a maximum of 5 years. The term is short as opposed to your standard 25 - 30 year term under a home loan. When you look to debt consolidation to ease these payments and improve your cash flow you must remember that in doing so, you will pay significantly more over the loan period than you would have if you had managed your car loan repayments under a lease. If you can avoid debt consolidation and stick with your lease then
1. you will significantly reduce the amount you owe on the car within 5 years
( residual will still remain)
2. the amount by which you have reduced the lease should be such that when you come to sell the car its value should be sufficient for you to pay out the residual under the lease.
If you decide on debt consolidation then after 5 years of a standard 25 year loan you will have only made a minimal reduction to your car loan and it is unlikely that if you sold the car after 5 years you would get a price that would repay the outstanding loan
Compare $25,000 car. 5 year lease of $15,000 @10.5% with residual of $10,000
Monthly instalment $322. Total interest over 5 years $4345
At the end of 5 years you owe $10,000.
Car value likely to be around $10,000.
With $25,000 debt consolidation into 25 year mortgage
Monthly repayment $201
At end of 5 years you will owe around $22,000 on the car
Car value will not be sufficient to repay the car loan portion of the debt.
So while debt consolidation certainly reduces your cash flow and is a far better option to losing your home if you are struggling with debt repayments, because you only pay off a small amount of principal in the early years of a longer term home loan, you are not financially better off in the long term because you have paid significantly more interest and if it is a car lease you are refinancing in the debt consolidation process, because cars are depreciating in value from the moment they leave the showroom, the value of your car when you come to sell it will not be sufficient to repay the car loan portion of your home loan debt.
Need Money? Let Me Help You
Take advantage from the innovative CreditGraph lending technology today.
payday loan no faxing
Get Emergency Cash You Need! Bad Credit? No Problem! Fastest Approval. Get Cash Fast Today!
No comments:
Post a Comment