Know the Facts About Debt Consolidation

If you're like many Americans, you are looking for ways to manage your debt and save money in a way that fits your lifestyle - and debt consolidation may be the answer.

Whether you're paying off credit card debt, working on home improvements or simply need some extra cash in your pocket for the ultimate vacation, there's no better time to learn all you can about debt consolidation through mortgage refinancing and home equity loans and lines of credit.

Debt Consolidation
If you're worried about being denied a loan due to less than perfect credit, debt consolidation might be the way to go. By combining multiple loans into one single loan, you not only have a limited amount to pay each month, but the repayment period is longer. Debt consolidation improves your overall credit score by rolling all your unsecured debt into one easy secured loan, eliminating those credit "blemishes" you have accrued in the past. This makes it much easier to get approved for a home equity loan or line, mortgage refinancing or cash-out refinancing.

Home Equity Loans and Lines
Home equity loans and lines are often referred to as second mortgages, but can be in either 1st or 2nd mortgage position. By tapping into your home's equity, you can get the extra cash you need. As a bonus, the interest rate on these types of loans is usually lower - and tax deductible.
When you're choosing a home equity loan or line of credit to help with debt consolidation, you should understand that standard home equity loans offer a fixed dollar amount, paid out at the beginning of the loan, while home equity lines of credit offer flexible funds you can access as needed.

The three facets of a home loan are:
1) How much money you need to borrow or the "size" of the loan

2) The percentage rate you pay on the particular loan - which is called the "interest rate"

3) How long it will take you to pay it off - known as the "term" of the loan

Still trying to understand the basics and don't know where to start? A home equity loan calculator can be very helpful in finding out how much you can afford to borrow by helping you assess your income, current debt situation and loan information. Companies like Bank of America offer online resources such calculators and dedicated staff you can talk to immediately about home equity loans.

Mortgage Refinance
Simply put, a mortgage is a loan with a fixed or adjustable interest rate which you pay back to the bank or financial institution on a monthly basis. As the need for cash or debt consolidation arises, it is it is possible to do a mortgage refinance at a lower rate. This can also reduce your monthly payments.

Use a mortgage refinance calculator to determine how much you can afford and whether you will be able to pay the lender back. At bankofamerica.com, you'll find plenty of information about getting more cash out of your home, lowering payments through mortgage refinance and how this relates to debt consolidation.

Cash-out Refinance
Similar to a home equity loan or line, cash-out refinance is an option which allows you to borrow your equity and gain extra cash - so you can pay off your bills and make just one simple payment each month. Thus, you can replace your current mortgage with a new mortgage for a higher balance, borrowing against the value of your home. The main difference between this and a home equity loan or line is that with cash-out refinancing, you only repay one loan - your new mortgage.

With the right information, tools and advice, you can take control of your debt. So pack up the bag with text books, call the interior decorator or start planning that trip to Hawaii, because you're well on your way to financial peace of mind.

About the Author
Brit Hall is a freelance writer - and Bank of America customer - who writes articles for young adults about managing expenses, eliminating debt, and other personal finance issues.

5 Steps To Take If Your Loan Is Denied

Before you hit the pathos of denied credit, know that there are steps you can take if your loan is denied. Here you will learn what these steps are and how to go about each one of them so the next time you apply for a loan, approval won't be too far away.

Step 1: Find out why you were denied.

The first step to any problem is to identify the root cause. Why were you denied in the first place? What were the things that were factored in which ultimately led to your denial of credit?
You need to find out the answers to all these questions first.

The good news is it won't be too difficult a task since lenders are required by federal law to tell you why you were denied credit.

The law, known as the Equal Credit Opportunity Act, mandates that all lenders and credit providers should tell you the reason for the denial. This should be done in writing and given within 30 days after such denial.

The law also requires two important pieces of information that must be included in this letter. The reasons why you were denied credit. Note that these reasons must be specific, not vague. Or, the letter may contain information on how you can obtain those reasons.

Step 2: If the reasons for the denial are based on correctable errors, then correct them.

There can be various reasons why your application for a mortgage or a loan got denied. It could be because you did not meet the creditor's minimum income requirement. Sometimes, you got denied credit because you are not at your job or address for the required amount of time.

Insufficient income is one of the most frequent reasons why consumers get denied when applying for loan applications. You may not be bringing in enough money to afford the house you want or you may not have enough funds for closing costs and a down payment.

If this is the case, correct the problem by applying for loan programs that specifically for low to moderate income borrowers. This way, you can take advantage of the lower down payment requirements that programs such as these frequently offer.

Two fine examples of such loans designed for low to moderate income borrowers are the FHA loans or VA loans.

Another reason why you might be denied credit is if you requested a loan amount that is larger than 95 percent of the appraised value of your property. If this is the scenario, then likely that loan would be denied.

Step 3: If the denial is due to poor credit report, get a free copy of your report from any of three major credit reporting agencies.

Sometimes, the reason for the denial has something to do with a poor credit history things you did in the past than things you are doing now. Your credit score may be low, leaving the lender no choice but to deny your application for a loan.

A low credit score means you are high risk and lenders are bound to think twice before approving you for a loan, since the status of your score suggests that you might not be the sort who makes payments on time, has very little credit available, too many debts, etc.

If the letter sent by the lender indicates poor credit report as the reason, then be mindful that you are actually entitled to get a free copy of your credit report from any of the three credit reporting agencies Experian, Equifax, and TransUnion. Also, note that this guaranty is only for 60 days so do not wait until after two months before you order your free credit report.

Once you get your credit report, read it carefully and make sure that it is accurate and complete.

If you find any errors, such as a fraudulent collections or a cancelled account, fix them.

Step 4: Get a second opinion.

Some lenders have divisions whose sole purpose is to reevaluate loan applications. After investigating errors in your credit report and correcting them, the investigating credit reporting agency will send the corrected copy to your lender.

Contact your lender and follow up the report with a few questions of your own. You may even request a second opinion from the lender's second level of review for loans.

Step 5: Apply for a new loan.

And finally, keep shopping. Just because you got turned down once does not mean that you are never going to get approved for a loan again. Ever. Do not get discouraged by one denial of credit.

Lenders have different approval standards. Banks and mortgages use different criteria for application approval based on their business objectives. So there is a big chance that another lender will find the right program match for you.

About the Author
If you want to get more informationen about personal finance advices, please visit my blog at http://my-personal-finance-advice.blogspot.com

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