Lower Your Interest Rates

Immigrants pay high interest rates for mortgage loans in the United States

Many immigrants come to the United States to achieve the American dream. Part of the American dream is to purchase a home and to increase one’s financial well-being. In the past, some immigrants may have turned to family members or close friends who were in the United States so that they could legally obtain a mortgage for them. Today more immigrants are able to obtain mortgages on their own without having to turn to family and friends. Because mortgage companies do not require buyers to have a Social Security number to purchase a home in the United States, non-citizens now have more opportunities. Immigrants wanting to buy a home need to have a special tax ID referred to as the ITIN. An ITIN, or individual tax identification number, is proof that an individual pays taxes to the IRS or Internal Revenue Service. The IRS began issuing ITINs in the mid 1990s for individuals who were not eligible to obtain a Social Security number but needed to declare their income and pay taxes. Obtaining an ITIN, a nine digit number for tax purposes, is a relatively easy process since legal residency in the Unites States is not a requirement. A large number of illegal immigrants seeking to become permanent residents obtain ITINs in order to show the USCIS in the future that they have been paying taxes while residing in the United States.

Mortgage companies typically use the Social Security numbers of applicants to run credit histories. However, many who apply with an ITIN do not have an established credit history or any credit history at all. Cash is widely used by immigrants and most of their transactions will most likely not involve credit. As a result, the approval for a mortgage loan may take longer and be more expensive. Immigrants applying for a loan must show proof of income. In addition, they have to prove that they have been consistent with bill paying. Mortgage companies tend to take higher risks with immigrants and this risk is usually leveled off with a higher mortgage interest rate. Illegal immigrants cannot obtain loans that qualify for repurchase or are insured at the federal level by corporations sponsored by the government. These types of loans tend to offer the lowest interest rates available and lower down payments.

Immigrants must also keep in mind that while they can obtain an ITIN number, they are still not eligible to obtain a SSN. As mentioned before, obtaining an ITIN may be useful in the future when applying for permanent residency in the United States. Having an ITIN shows that an individual has been paying taxes on their income earned in the United States, which is one of the criteria that is looked at by the USCIS if applying for citizenship in the future.

Lower Credit Card Interest Rates

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.

Negotiate Lower Credit Card Interest Rates

Credit cards, while undoubtedly convenient, can also serve to put people in debt. When you are constantly charging without thought to how you might pay back the balance, you might find yourself in more debt than you can handle, which is a problem people face every day. One of the reasons why credit cards are so difficult to pay back is the high interest rates that are often charged, some as high as 26%. Even if you pay the minimum payment every month, it will be years before you can pay off the balance. So here are a few tips on how to negotiate lower interest rates.

Evaluate Your Payment History

Credit card representatives will be much more likely to listen to your pleas if you have stayed current in all of your payments. They want to keep customers who carry a balance, but also who make their minimum payments on time. If you have gotten behind or if you have paid late several times, trying to negotiate lower interest rates might not work very well in your favor. However, if you have been vigilant about paying your minimum payment, then you have a good chance of succeeding.

Explain Your Situation

Have your credit card statement in front of you, and explain that you have gotten in over your head. Tell the company representative that you are more than willing to pay off your debt, but that it simply isn't possible at the current interest rate. Remind them that you always pay on time and that they have no reason to believe that you would stop paying them, and that you believe as a valuable customer that you deserve a lower interest rate.

Bring Up the Competition

Credit card companies are forever in competition with one another, which gives you a little bit of leverage. While you shouldn't threaten the company representative, you can gently remind him or her that you can take your business elsewhere. Explain that you've been offered a much lower interest rate with another company and that they don't charge interest on balance transfers. This will give you yet another bargaining chip in attempting to negotiate lower interest rates.

Throw Out a Number

Don't wait for the representative to make you an offer; instead, throw one out. For example, let's say that your current interest rate is a variable 15.9%. Explain that you want a fixed interest rate of 10%, or you can try for even lower. Currently, prime is around 8.5%, so you probably won't get any lower than that.

Don't Mention Bankruptcy

Even if you believe that bankruptcy might be your only option, don't threaten the credit card company with it. They won't take kindly to the fact that you might be stiffing them for the entirety of your balance through Chapter 13, and your bargaining chips will be wiped off the table. Instead, be polite and explain that you simply believe you deserve a lower interest rate, and that you would be happy to continue as their customer if they are willing to comply.

Shop Around

If your credit card company is unwilling to compromise, take your business elsewhere. In this brave new world of rare customer service, you don't have to work with a company that isn't willing to work with you. In fact, you don't need credit cards at all. Pay off your balance and start using your debit card, your check book and cash. It will keep you debt free and will save you the headache you're experiencing now.

Lower Your Mortgage Interest Rates

Should You Refinance When Rates Are Low?

If mortgage interest rates are low, should you take advantage of the lower rates to refinance your mortgage? Take out a home equity loan? Buy a new car? Transfer your savings into a CD? Search for a new credit card deal? What do the lower interest rates mean to you? This article discusses mortgage moves you should consider during periods of low mortgage interest rates.

Fixed Rate Mortgages

The reduction in interest rates by the Federal Reserve doesn't necessarily result in drastically lower rates for fixed-rate mortgages. This is because bond rates, not the fed rate, drive fixed mortgage rates.

You've probably heard that it only makes sense to refinance your mortgage if the new interest rate is at least two percentage points lower than your current rate. Forget this piece of advice. It worked in the days when you could only get a 30-year fixed rate mortgage. It doesn't apply in today's financial markets where there are many options for financing your home, including fixed mortgages with terms of 15, 20, or 30 years; five- and seven-year balloon loans; and a wide variety of Adjustable Rate Mortgages (ARMs).

Even if you can't lower your monthly payment by refinancing, it might make sense if you can give up the insecurity of an ARM for a fixed rate. Marshall Loeb of CBSMarketWatch.com offers guidelines for helping you decide whether to refinance, in his book "52 Weeks to Financial Fitness." You can read his chapter on Mortgages at CBSMarketWatch.com.

Adjustable Rate Mortgages (ARMs)

Adjustable mortgage rates are affected more by changes in the fed rate because these types of loans follow short-term interest rates, such as Treasury bill rates, which follow the fed rate.

When does an ARM make sense? If you're planning to stay in a home for only a few years and you can get an ARM for significantly less than a fixed rate mortgage, you may come out ahead by going for the ARM. Adjustable rate mortgages are also popular with people who may have difficulty qualifying for a loan at higher fixed interest rates. The lower ARM rate lowers their monthly payment, making it easier for them to qualify for the loan.

If, on the other hand, you already have an ARM and you plan to stay in your house for the long-term, consider locking in at today's attractive fixed mortgage rates.

Home Equity Loans

Home equity loan rates follow the prime rate, so they are directly affected by the Fed's interest rate increases and decreases, although they are always higher than regular mortgage rates.

When interest rates are low, it's an excellent time to take out a home equity loan (but not necessarily a home equity line of credit, which works differently, and only if you use it wisely).

Making the Decision to Refinance

If you decide to refinance, first contact your current lender to see if you can negotiate with them to waive some of the closing costs. If this doesn't work, you can call local lenders for rate information, but the best way to search for and compare mortgages is to do so online at one of the many web sites that offer this service, such as e-loan, quickenloans.com, or bankrate.com, to name just a few. Many online brokerages will also allow you to apply for the loan online.

If rates are low and you're in the market for a lower mortgage rate, don't hesitate to investigate whether you can save money by refinancing.

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Secured vs Unsecured Loans

Secured loans are loans that are secured by collateral. The lender will take a security interest in your property. If you do not pay the loan back the lender has the right to seize your collateral. Most lenders will require collateral to secure a small business loan and they make take a security interest in your business and/or personal assets. Lenders will not lend you more than 100% of the value of your collateral and will usually only lend you 60% to 80% of its value.

Unsecured loans, as the name implies, are loans that are not secured by any collateral. Credit cards, while not technically loans, are the most common example of unsecured debt. The lender is loaning you money based on your reputation and credit worthiness.

Reverse Mortgage

A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

1) all at once, in a single lump sum of cash;

2) as a regular monthly cash advance;

3) as a "creditline" account that lets you decide when and how much of your available cash is paid to you;

4) as a combination of these payment methods.

No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.

"Forward" Mortgages

You can see how a reverse mortgage works by comparing it to a "forward" mortgage — the kind you use to buy a home. Both types of mortgages create debt against your home. And both affect how much equity or ownership value you have in your home. But they do so in opposite ways.

"Debt" is the amount of money you owe a lender. It includes cash advances made to you or for your benefit, plus interest. "Home equity" means the value of your home (what it would sell for) minus any debt against it. For example, if your home is worth $150,000 and you still owe $30,000 on your mortgage, your home equity is $120,000.

Secured Credit Cards

A secured credit card is a type of credit card secured by a deposit account owned by the cardholder. Typically, the cardholder must deposit between 100% and 200% of the total amount of credit desired. Thus if the cardholder puts down $1000, he or she will be given credit in the range of $500–$1000. In some cases, credit card issuers will offer incentives even on their secured card portfolios. In these cases, the deposit required may be significantly less than the required credit limit, and can be as low as 10% of the desired credit limit. This deposit is held in a special savings account. Credit card issuers offer this as they have noticed that delinquencies were notably reduced when the customer perceives he has something to lose if he doesn't repay his balance.

Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available. They are often offered as a means of rebuilding one's credit. Secured credit cards are available with both Visa and MasterCard logos on them. Fees and service charges for secured credit cards often exceed those charged for ordinary non-secured credit cards, however, for people in certain situations, (for example, after charging off on other credit cards, or people with a long history of delinquency on various forms of debt), secured cards can often be less expensive in total cost than unsecured credit cards, even including the security deposit.

Home Equity Loan

An equity loan is a mortgage placed on real estate in exchange for cash to the borrower. For example, if a person owns a home worth $100,000, but does not currently have a lien on it, they may take an equity loan at 80% loan to value (LTV) or $80,000 in cash in exchange for a lien on title placed by the lender of the equity loan. Many lending institutions require the borrower to repay only an interest component of the loan each month (calculated daily, and compounded to the loan once each month). The borrower can apply any surplus funds to the outstanding loan principal at any time, reducing the amount of interest calculated from that day onwards. Some loan products also allow the possibility to redraw cash up to the original LTV, potentially perpetuating the life of the loan beyond the original loan term. The rate of interest applied to equity loans is much lower than that applied to unsecured loans, such as credit card debt.

Home Equity Line of Credit

A Home Equity Line of Credit (often called HELOC), is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house.

A HELOC differs from a conventional home equity loan in that the borrower is not advanced the entire sum up front, but uses the line of credit to borrow sums that total no more than the amount, similar to a credit card. At closing you are assigned a specified credit limit that you can borrow up to. During a "draw period" (typically 5 to 25 years), HELOC funds can be borrowed and you pay back only what you use plus interest. Depending on how much you use the HELOC, you will have a minimum monthly payment requirement (often "interest only"); beyond the minimum, it is up to you how much to pay and when to pay. At the end of the draw period, you will have to pay back the full principal amount borrowed either in a lump-sum balloon payment or according to a loan amortization schedule.

Another important difference from a conventional loan: the interest rate on a HELOC is variable based on an index such as prime rate. This means that the interest rate can - and almost certainly will - change over time. Homeowners shopping for a HELOC must be aware that not all lenders calculate the margin the same way. The margin is the difference between the prime rate and the interest rate the borrower will actually pay. Lenders do not generally offer this information and it is up to the consumer to ask for it before taking a loan.

It must always be kept in mind that the underlying collateral of a home equity line of credit (HELOC) is the home. This means that failure to repay the loan or meet loan requirements may result in foreclosure.

Lending Abuses

Predatory lending is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the moneylender is not authorized, it could be considered a loan shark.

Usury is a different form of abuse, where the lender charges excessive interest. In different time periods and cultures the acceptable interest rate has varied, from no interest at all to unlimited interest rates. Credit card companies in some countries have been accused by consumer organizations of lending at usurious interest rates and making money out of frivolous "extra charges"

Abuses can also take place in the form of the customer abusing the lender by not repaying the loan or with an intent to defraud the lender.

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