September 1, 2020

3 Ways to Make Debt More Manageable

Do your mounting monthly payments leave you feeling overwhelmed, defeated, or just plain confused?

Here’s a secret: you are not committed to a rate, payment schedule, or company just because you signed on the dotted line way back when. You have options to make your debt situation more favorable – and we want to help you understand them.

Even if you feel your current payment plan is fine, you may want to consider taking advantage of a historically affordable borrowing environment and the many options available.

In this article we are going to cover three options:

  1. Consolidating existing debts
  2. Refinancing for a better rate
  3. Accessing equity in your home

You may also like: Are You Struggling Financially? Talk to Your Banker.

1. Debt consolidation

If you have multiple credit card bills with differing interest rates, due dates, and payment amounts, it doesn’t take much to become disorganized – and even forget to make payments on time.

Consolidating the debt may be a great solution. Not only does a single payment help with organization – and avoiding late payment fees – a lower interest rate can potentially save you a decent amount of money over time.

There are several things to think about when considering consolidating debts.

How much do you owe and to who?

This means everything! Oftentimes people only “count” debts they don’t have good feelings about. The reality is that every debt needs to be factored in. If you don’t acknowledge what you owe, you’ll never have an accurate picture.

What is your goal behind a possible consolidation?

Are you looking to eliminate your debt as fast as possible?

Would smaller payments simplify your life even if it takes some additional time to pay things off? And if that’s the case, what will it cost you to do that?

What are the rates and terms on your existing debt?

Understanding the rates and how much interest it is costing on a monthly basis is essential to understanding what debt you may want to eliminate. If you decide not to consolidate, two strategies to consider are either paying off the smallest loans first or the ones with the highest interest.

What are my options to do a debt consolidation loan?

We highly suggest you reach out to a Fortifi Bank lender to assist you with this. A lender can help you determine what is best for your unique situation and guide you to a healthier financial condition.

2. Refinancing for a better rate

When you bought your home (or car) five years ago, the interest rate you locked in may have been competitive for that time. Is that still the case? Or could a refinance save you thousands of dollars over the lifetime of the loan? Hint: It might!

Whether you are looking to refinance your home or car loan, the same principles apply. There is much to consider.

Is your current rate on your mortgage/car a competitive rate in the current environment?

Just because rates are slightly lower doesn’t always mean it makes sense to refinance.

How much will I save if I choose to refinance?

A lender should be able to calculate this for you quite quickly if you provide figures regarding what you owe now, your current rate, etc.

What will it cost me to refinance?

Particularly when it involves mortgage lending, there are always costs involved with the refinance process. These include items like appraisals, title costs, and processing fees. Make sure you take these into account when you are considering what you may be able to save in interest alone.

Who do I want to service my loan?

This is a more important item than most people realize, especially involving mortgage loans. While a vehicle loan is generally over within 3-5 years, you could be paying on a mortgage for 30 years – that’s a long-term relationship!

During that 30-year window, there will surely be at least a few questions that will come up regarding payments, escrows, or general items. It’s a lot easier to work through these when you know and work with the people locally. Online mortgage options are tempting, but when you need to speak to a person, they can be hard to come by when going this route.

Is it worth it?

A good lender can provide plenty of detail to determine if refinancing is the right choice for you. The good ones will tell you exactly what is (or isn’t) right for your situation.

3. Accessing equity in your home

Home equity is the current value of your house minus the balance still owed on the mortgage. In plain terms, it’s the amount of your home that you truly own.

Every month you make mortgage loan payments, you’re increasing that number, which is also known as building equity. That equity can be used to secure a loan for a major purchase, remodel, or consolidating debt to enhance your financial situation.

For many people, their home is their greatest asset. Using equity appropriately is extremely important. Here are some things to ponder when considering using the equity in your home.

How much equity do I really have in my home?

The value of your home will be established when a professional appraisal is completed. However, there are some tools that could give you an idea of the value right now. These include tax assessment values, sales in the area, and the overall age/condition of your home. Discussing your potential equity available in your home is an important thing to cover with your lender.

What is the best equity loan for my situation?

Options include pulling cash out on a new long-term fixed rate first mortgage, a second mortgage for a shorter period, or a revolving Home Equity Line of Credit (HELOC) that provides some flexibility and easy access to that equity throughout the year.

Much of this decision comes down to something noted earlier – what are your goals? A good lender will go through these options with you.

Regardless of your situation, the biggest mistake is to do nothing. Most lenders will admit their biggest regret is that they didn’t have the chance to work through their clients’ financial issues earlier. The deeper people get in debt, the harder it is to crawl out of it. But there is always a way – and we are here to help. Lean on us.

 

Ready to talk through your options?

Learn More

Comments are closed.

Live Chat

Live Chat

×