LOWER YOUR INTEREST

Refinancing Your Mortgage - Changing Your Interest Rate

2008-07-08T11:37:00.000-07:00

The opportunity to change the interest rate on a loan is one of the most common reasons that people consider mortgage refinance. Interest rates are always changing, sometimes for the better, and during these times homeowners want to take advantage and pay off one loan in favor of another that has a better interest rate. This is a process that many people have been through and those people have been able to save hundreds or thousands of dollars over the course of their mortgage loan, effectively lowering their monthly payments.

Lowering Your Interest Rate

If your goal is to lower your interest rate on your loan, you might not have a difficult time doing this. Many people find after several years of owning a home that the interest rates have dropped and they could save a lot of money if they considered mortgage refinance now. You'll hear a lot of different rules of thumb as to when you should refinance, but the fact of the matter is that if you can refinance and have your savings exceed the cost of the refinance you are probably making a good move.

It's important when you are considering mortgage refinance to not get carried away by the thought of saving. Mortgage refinance is a great opportunity to lower your interest rate but when you are considering this you need to look at the math and make sure that you are actually saving. The trouble that a lot of people have is that they are willing to accept a one percent decrease in interest, and while this is better, when you figure out how much you are paying in closing costs you might not end up any better for the refinance.

When you are serious about mortgage refinance you want to shop around and get the best deal for you. There are a lot of different loan programs out there for you to take advantage of and you should compare them all to see how much you really can save. Lowering your interest rate can do wonders for your monthly payment, but only if you go about it the right way. This is when it pays to educate yourself about how refinancing works and to work with a mortgage lender that you know you can trust to help you choose the best option for you.

Doing the math is important when you are trying to lower your interest rate because there are costs associated with refinancing and sometimes the costs do exceed the savings. This is why many experts recommend only refinancing when you are making a big change in your interest rate because that is how you are going to save the most amount of money. Even if you think that you are going to save a lot, you should always do the math to be sure that the savings are what you thought that they would be. You should always defer to the numbers before you accept any deal because when you look at the numbers you might be surprised at what the actual savings are. If you find that it doesn't make sense to go through with the mortgage refinance, don't do it, wait until rates drop further or you can get a better deal.

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What Credit Card Companies Don't Want You to Know

2008-07-03T08:15:00.000-07:00

Of all the games the credit card companies play that end up costing you thousands of dollars (late fees, over-limit fees, transfer fees, and so on), it's always been the interest rate game that hurt the most -- until now.

There's a new, completely legal game they're playing, and it can literally wipe you out financially if you're not careful.

The Universal Default Clause

If you own a credit card, you know by now that if you're late with a payment the credit card company will charge you a late fee in addition to raising your interest rate. But did you know that they can raise your interest rate if you've made a late payment on any of your other cards, including those issued by other companies?

Not only that, but your interest rates can skyrocket to 30 percent or more if you make a late payment on your car loan, mortgage, or even your phone bill!

"How can that be legal?" you may ask. The answer is found in the fine print of your credit card agreement, and it's called a universal default clause. According to the Institute of Consumer Financial Education, currently almost 40 percent of credit card issuers apply this policy to their customers.

A Late Payment 'Trigger'

Generally, a universal default clause states that a creditor reserves the right to penalize you with an increased interest rate if you're late -- that is, in default -- of a payment to any other creditor. They justify this practice because, in theory, if you pay any of your creditors late, you pose a greater credit risk and are less likely to pay your debt.

Your creditors also have the right to routinely monitor your credit file. So a creditor with a universal default clause will be watching -- and waiting.

Let's say your Visa card has a universal default clause. Any late payment -- whether it's on your utility bill, home equity loan, or Macy's credit card -- acts as a "default trigger" allowing the bank that issued the Visa card to double or even triple your interest rate overnight. Your all-important credit score will be hurt as well.

According to a study by the nonprofit advocacy and education group Consumer Action, the top three default triggers that cause your interest rates to spike are a decline in credit score, paying your mortgage late, and paying your car loan late.

Other Triggers to Worry About

Under the universal default clause, your interest rates can be increased for several other reasons, including exceeding your credit limit, bouncing a check, having too much debt, having too much credit, getting a new credit card, applying for a car loan, and applying for a mortgage loan.

How does this affect your financial future? Take a look at the numbers. Let's say you're an average American household, with $8,000 of credit card debt. Assuming you make no additional purchases on your card, you have a 9 percent interest rate, and you make the minimum monthly payment, it'll take you 218 months (18 years) to pay off your debt and you'll end up paying $3,334 in interest.

Now let's assume that for whatever reason you were late one month with your car payment. This late payment triggers the universal default clause with your credit card issuer, and now your penalty rate gets increased to 24 percent (the average default rate in 2005). It'll now take you 679 months (56 years) to pay off your credit card debt, and get this -- you'll pay $30,813 in interest.

Staying Ahead of the Clause

Here are six ways to protect yourself from interest rate hike triggers:

1. Stay away from credit cards with a universal default clause.

If you're looking to open a new credit card account, be sure to choose one without a universal default clause. This means you have to truly read the fine print. If you're confused by the fine print (as many are), call the credit card company and ask what specific circumstances will affect your interest rate.

I read recently that Capital One cards don't have a universal default clause (although you should double-check before applying), and Citi has dropped its universal default policy as well. In addition, sites like CardWeb.com, Bankrate.com , and LowerMyBills.com let you compare credit card offers, so visit them before you apply.

2. Know your current obligations.

Check your current statements and credit card agreements to find out your current interest rates, and to identify which cards have a universal default clause that you weren't aware of until now. Again, if you're uncertain after reading the fine print, call your credit card company.

Consider transferring your balance from a card that has the universal default clause to one of your cards that doesn't. But don't rush to cancel the card altogether, because it could have a negative effect on your credit score.

3. Run your credit report.

Not only do you need to know exactly what your current interest rates are, you also need to know exactly what's on your credit report. Visit Freecreditreport.com or myFICO to order your credit report and credit score today.

4. Pay your bills on time.

According to the American Bankers Association, late payments for most types of consumer loans were on the rise during the third quarter of 2006. If you're having trouble with your credit card payments, at the very least strive to make your minimum payment on time.

5. Be proactive -- call your lender for relief.

If you're struggling to make monthly payments on your other bills, like utilities, car payments, or mortgage payments, call your lender to see what options they might be able to offer you. They might be able to adjust your monthly payments so that they're more manageable.

Your goal is to protect your credit report and credit score with a consistent record of on-time payments.

6. Fight back for your money -- write your local legislator.

Right now, there are amendments to the Truth in Lending Act that, if passed, would prohibit many unfair practices within the credit card industry -- including the universal default clause.

As a consumer, you can take action by letting Congress know that you want laws to protect your rights. For more information on how you can be heard, visit Consumer Action's web site.

As I write this, Congress is holding hearings to discuss the abusive and deceptive practices of the credit card industry. Read more about it here.

A Good Night's Sleep

Obviously, what you don't know really can hurt you. Check today and see if you have the universal default clause on your credit cards.

If you do, be careful to stay on top of your debt. Better yet, find a credit card that doesn't have the clause -- you'll sleep better at night.

How To Lower Your Interest Rate

2008-07-03T08:00:00.000-07:00

So, you've got that shiny new credit card, only to find out that the interest rate on the balance is more than you bargained for. Here, we'll give you some tips on paying less interest over time, as well as reducing your overall interest rate.

First of all, the easiest way to pay less in interest payments is to simply pay off the entire balance of the card every month. Most of the major credit card companies won't charge you any interest, or any fees as long as you keep the entire balance paid off on a month to month basis.

Sometimes you may run into unexpected expenses, or want to make a larger purchase on a credit card that you can't afford to pay off in the same month. Under these circumstances, you're going to have to expect to pay a little bit of interest. That doesn't mean there aren't other ways to save yourself a little bit of money though.

The first thing you can do is to make sure that you've got the best deal available to you as far as your credit card goes. Credit cards, like anything else in life, have wildly different fees and charges from one card to the next. If you do find a company willing to offer you a card with a lower interest rate, you can take them up on the offer, or call your current credit card provider and let them know you've been offered a better deal, and see if they can match the interest rate for you.

Your credit score plays a huge role in determining the interest rate that credit card companies are willing to offer you. Generally, the better your credit score, the lower the interest rate you can expect to pay. You may want to get a copy of your credit score, and see if there are any discrepancies or outstanding debts that you didn't know about. If you can fix these problems, your credit score will generally improve over time, and then you can reapply for a credit card with a lower interest rate, or call your credit card company and see if they can give you a better deal with your improved credit score.

The best way to pay less in interest, and to keep your credit score in good standing, is to try and only make purchases on your card that you will be able to pay off within the next month or so. This isn't always possible though, so it definitely helps out if you shop around and make sure that you are getting the best deal possible on your credit card.

What you don't want to do is to rack up so many charges on your credit card that you can't afford to pay it off over time. Sometimes people fall into the trap of getting themselves so far into debt that they can barely afford to make the minimum monthly payments on their card. This results in paying nothing but interest payments every month, falling behind on your payments, hurting your credit score, and ultimately paying much more in interest payments then you would normally have to pay.

If you just use a little common sense, and keep your monthly payments to a minimum, you should easily be able to keep your interest payments down to a reasonable level.

5 Easy Steps to Lower Your Credit Card Interest Rates

2008-07-02T17:24:00.000-07:00

Lowering your credit card interest rates could save you hundreds, if not thousands of dollars. The lower your interest rates, the more money you save. Call your credit card company and request a lower rate. Many consumers are intimidated by the thought of requesting a lower rate. Don't be one of those consumers. You'd be surprised at the results. Your chances are good if you have been a customer for some time, you are not at your credit limit and you have been making timely payments. Any extra money you can save by lowering your credit card interest rates may certainly be put towards the rising costs of gasoline.

(1) Review Your Credit Card Statements

Review all of your credit card statements. Note the annual percentage rate you are paying on all of your credit cards. You should also note any late, over-limit or any other extra fees. Many credit card issuers practice universal default which means they can raise your rates if you fail to pay another bill on time, even a utility bill. You may not even be aware if you have been a victim of universal default because the credit card company does not have to warn you. In this case, you really do need to negotiate a lower interest rate.

(2) Research the Competition

Do a little research to find out what other credit cards have lower interest rates. You should also look for cards which offer 0% balance transfers and no annual fee. Be sure to note what the interest rate will be after the initial period. It is not uncommon for various credit cards to have vastly different interest rates. Some banks issue several different credit cards and there can be great interest rate and fee disparities within those cards. You could be paying twice the interest as someone else for the same credit card. Rates constantly fluctuate so it's imperative you check all of your monthly statements.

(3) Contact Your Credit Card Issuer

Speak with a representative and request your credit card interest rate be lowered. Always stay calm, professional and polite. You should always mention that you have been a good customer and that you would like nothing else but to continue your relationship with them. Point out the fact you pay on time. You may also want to mention you have a zero percent or other low interest card offer that you can transfer your balance to. If they agree to lower your interest rate you don't have to stop requesting. Call again in a few months and request an even lower rate. Getting your credit card interest rate lowered is not a one time deal. As long as you are a good customer you can periodically request lower interest rates.

(4) Be Persistent

Sometimes the first person you speak with will tell you they are not authorized to lower credit card interest rates. Don't give up. Request to speak with a manager if this occurs. Someone in that company can lower your interest rate. Remember to be polite when asking to speak with upper management. At this point if you cannot negotiate a lower rate ask the reasons for the denial and inquire as to when you may call again to request a lower rate. Even if you threaten to close your account, do not close your account. Remember that length of credit history is 15% of your credit score so you do not want to close any old accounts.

Call back every few weeks if you are denied. Being persistent increases your chances of getting your rate lowered. Your persistence lets your credit card company know you are serious.

(5) Pay-Off Credit Card Debt

Another alternative to a denial of your request would be to pay off that debt. Take any extra cash and apply it to that debt. Every extra dollar you put towards your credit card balance means you pay less in interest rates over time. For example, making a minimum payment of $50.00 a month on a credit card balance of $2,500 at 19.9% interest rate will take approximately 9 years to pay the entire balance. If you double that payment to $100.00 a month on that same balance and interest rate it will take only 2.5 years to pay off that balance.

According to the Massachusetts Public Interest Research Group (MASSPIRG), more than half of consumers who called their credit card company to complain about their high annual interest rates were successful in reducing those rates by an average of one-third. Your chances of getting a lower rate are good. It never hurts to try.

For additional information on reducing debt please visit: Eliminate Debt

Lisa Phillips is a marketing consultant specializing in business expansion and development. Because many small business owners lack the personal and business credit necessary to grow and expand, she has developed a free website to aid consumers as well as entrepreneurs in rebuilding and taking control of their credit.

Lower Your Interest On Your Home Loan Without Refinancing Or Altering Your Monthly Budget

2008-07-02T12:22:00.000-07:00

Thinking about refinancing your Home Loan?

You may want to rethink that!

Does refinancing your home loan really make sense? Sometimes, but more often than not it does not, however, people are doing it everyday because they do not know any better.

Most people refinance their home loan to lower their interest rate. They accrue additional closing costs to do this and see a lower interest rate on paper but did it really lower their interest rate they are paying? The answer might surprise you!

Over the years most of us have been taught that any time you can reduce your interest rate by two points or more this is a good thing, but is it really? While in theory this may seem like a good thing to do, most of the time it simply does not make since to do so. Here's why...

All loans are set up and amortized, which means, that the financial institution you have your home loan with has established a set amount of interest you pay per day on your home loan. They then front load your loan so that you pay back all of the interest first. That means that you are paying back the highest amount of interest at the beginning of your home loan and pay less interest as time goes on.

So lets say you have been in your home loan for 5 or 6 years and you decide to refinance. You paid the highest amount of interest on those first 5 or 6 years right? So what do you suppose will happen when you refinance? You guessed it you start the process over again paying back the highest amount of interest possible on your loan. I picked 5 or 6 years because this is the average amount of time today that most people stay in their loans before they sell or refinance. Can you see why most of the time it does not make since to refinance?

Before you consider refinancing you really should know exactly how your existing home loan works. Have you ever seen your amortization schedule on your home loan? You may want to look at it.

By the way, I have a free report that I make available for my readers to better understand exactly how their home loan is really working and before you decide to refinance I recommend that you get it and read it. Click here to get yours today.

I hope this article was interesting and don't forget to get your free report.

Have a wonderful day!

John J Wolff

Financial Education Consultant

Home Loan Educators LLC