It isn’t easy to keep up with the Jones’ nowadays. You might have managed to buy a home in the ‘it’ neighborhood, matched your car to half the neighborhood driveways and the children have every electronic gaming device possible. Do you now find your budget busting at the seams by the end of the month? Focus your attention on refinancing some of your debt in order to make your monthly expenses more affordable. Refinancing is a great way to free up income.
Refinancing will take a current loan and make it better. Reducing the monthly demand will help alleviate a stressed budget. Whether you are focusing on one loan or looking to consolidate multiple ones, reducing financial difficulty is possible.
* Take advantage of a lower interest rate. The remaining balance on the original loan will be replaced by lower interest and a more affordable monthly payment.
* Extend the term length in order to shrink the monthly cost.
* Switch loans with a variable rate to a fixed rate.
* Free up cash in the budget to be used elsewhere.
Because refinancing is technically taking out a new loan, most lenders will look for good credit, collateral or a guarantor to secure the new loan. A common sense approach to finances should come into play at this point. The last thing you want to do is put your home or a family member's credit in jeopardy.
*Good credit history will help a person qualify for low interest. The low interest will help to save money in the long-run as well as keep monthly payments affordable. If you do not qualify for low interest you can extend the term of the loan which will have the same effect. If you get both...your budget is doing the happy dance.
*Collateral loans guarantee the lender full payment. If you are looking to consolidate credit cards (which are unsecured loans) you do not want to use your home to secure the new loan. If by some chance you do not fulfill the terms of the loan, you risk losing your property. When refinancing your home’s mortgage, the property will be used as collateral. Refinancing a home mortgage to lock in a lower interest rate is a great way to lower your payments and save money in the long run.
*Asking a friend or family member to guarantee the loan puts their credit at risk. A guarantor will be responsible for the remaining loan balance if you fail to pay. Late or missed payments will hurt their credit score as well. Financial advisers do not recommend becoming a guarantor.
Most recently, loan consolidation is often connected to student loan debt. Since college debt has now toppled credit and home mortgage debt throughout American households, finding student loan relief. Federal loans should never be consolidated through private lenders. The Department of Education offers affordable repayment plans for eligible loans. Private loans will reflect options listed above.
Once your monthly budget is more manageable, take preventative measures to protect it. Work at changing your mindset. Keeping up with the Jones’ is not as important as using your budget as a tool to prepare your financial future.