Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, which is most commonly a house (in this case a mortgage is secured against the house.) The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset in order to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending. Certainly many, if not most, debt consolidation transactions do not involve predatory lending.What is a Federal Student Consolidation Loan?A Federal Consolidation Loan is a loan that you can use to pay off all or a portion of your original eligible federal student loans. You combine (consolidate) your existing federal student loan debt into one new loan.What are the terms of a Federal Consolidation Loan?o The interest rate on a Federal Consolidation Loan is fixed, meaning it will not change over the life of the loan, even if the interest rates on other federal loans go up (or down).o The interest rate is calculated from the weighted average of the interest rates of your
existing loans, rounded up to the nearest 0.125%, with a cap of 8.25%.o There are no fees to apply for or receive a Federal Consolidation Loan.o The repayment term is up to 30 years, depending on the total amount of your student loan debt, and there is no pre-payment penalty.Why should you consider consolidation?With a Federal Consolidation Loan, you can benefit from:o Lower monthly paymentso Fixed interest rateso Only one payment for your federal loans each montho New or renewed defermentsBecause you are allowed up to 30 years to repay your loan, your monthly payment can be significantly lower with a consolidation loan, although you may pay more in total interest over the life of your loan.When should you consolidate?Only loans that are in grace, deferment, forbearance, or repayment can be consolidated into a Federal Consolidation Loan. Loans that have an in-school status cannot be consolidated.There are no deadlines. However, Federal Stafford Loans that are in the grace period (or in deferment) have the lower rate compared to loans in repayment (or forbearance). Because the current interest rate is used in the calculation to determine the weighted, fixed interest rate of your consolidation loan, you will save money over the long run if you consolidate while in your grace period or while in deferment. (If you choose to consolidate while in your grace period, keep in mind that your grace period will be cancelled when the consolidation loan is issued and you will begin repayment.)Student loan consolidationIn the United States, federal student loans are consolidated somewhat differently, as federal student loans are guaranteed by the U.S. government. In a federal student loan consolidation, existing loans are purchased and closed by a loan consolidation company or by the Department of Education (depending on what type of federal student loan the borrower holds). Interest rates for the consolidation are based on that year’s student loan rate, which is in turn based on the 91-day Treasury bill rate at the last auction in May of each calendar year.Student loan rates can fluctuate from the current low of 4.70% to a maximum of 8.25% for federal Stafford loans, 9% for PLUS loans. The current consolidation program allows students to consolidate once with a private lender, and reconsolidate again only with the Department of Education. Once the student has consolidated their loans, the loans are set to a fixed rate based on the year they consolidated; reconsolidating does not change that rate.Federal student loan consolidation is often referred to as refinancing, which is incorrect because the loan rates are not changed, merely locked in. Unlike private secton debt consolidation, student loan consolidation does not incur any fees for the borrower; private companies make money on student loan consolidation by reaping subsidies from the federal government.Student loan consolidation can be beneficial to students’ credit rating, but it’s important to note that not all federal student loan consolidation companies report their loans to all credit bureaus; SLM Corporation (formerly Sallie Mae) does not report to Experian or Transunion, which means that students will have differing credit scores at Equifax, Transunion, and Experian.For more information visit our websites
Life insurance settlement or Federal Student Loan Consolidation

Consumer Awareness Guide: Eleven Critical Questions You Need to Ask Before You Hire a Loan Modification CompanyMost people that are experiencing financial difficulty have no doubt heard of loan modifications. They are talked about on the nightly news and although once shrouded in secrecy, they are now common knowledge. Those also in the know, realize that the government solutions to the financial crisis we’re experiencing will hardly solve the problem. The first round of government intervention after TARP 1 created “Hope For Homeowners” which was the federal government’s attempt at loan modifications.Well, here are the facts on that one. Of the supposed 400,000 families that were to be shielded from foreclosure, as of this report, approximately 400 loans (that’s right 400 total) have been refinanced. Industry executives correctly called the program “useless” because of its onerous details.Here are the stats on the “Hope Now Alliance” formed in the fall of 2007. Ironically, a former sub-prime mortgage executive was put in charge- can you say “fox in the henhouse?”.Of the 2.2 million foreclosures supposedly “prevented” by Hope Now Alliance, 53% of homeowners were in default again within 6 months. Why, you ask? Because the supposed modifications led to higher, not lower payments, since lenders are tacking on missed payments, taxes, and big fees to borrower’s monthly bills.  The newest round of “foreclosure prevention” solutions from the Obama administration unfortunately will not fare much better. Lenders are currently overwhelmed with calls from borrowers since the plan was announced, and don’t have the resources or the training to deal with the inquiries.Homeowners who have tried to get their own loans modified have met with frustration, deceit, incompetence, bureaucracy, and failure due to a system which is rigged to favor the banks, not the homeowners.   I speak form personal experience. Hurricane Katrina wiped out my real estate business and I had to do my own loan modifications. I spent over 2 years trying to get insurance claims paid on damaged properties after hiring several attorneys, public adjusters, and engineers.  The irony was that lenders  only allowed a 3-6 month grace period and they wanted their money.  I scrambled not only to rebuild my business, but also to save my own home after this catastrophe. I learned a very hard lesson.   The banks are definitely not looking out for you. Having a professional on my side would have leveled the playing field.This report is therefore dedicated to help those that realize that hiring a professional loan modification firm with a track record of success, is their best solution in keeping their home.Despite what the T.V. pundits tell you when they say “…contact your lender, they want to work things out…” trying to get your loan modified yourself is akin to representing yourself in court. Nine times out of ten it’s a bad idea.   With that said, it’s easy to be overwhelmed with all the conflicting information out there. After reading this report, you will be armed with the knowledge to evaluate whether or not a loan modification company is legitimate or a scam!Before you make a decision to hire anyone to handle a loan modification it’s vitally important that you answer the following 11 questions. The answers to some of these questions are more subjective and to be taken in as part of a whole, others are absolutely critical.1.) How long has the company in question been representing clients for loan modifications?While the fact that a company is new by itself doesn’t necessarily mean that you are going to get a bad modification, you’re less likely to be scammed if the business you are dealing with has some sort of track record.If it is a brand new company, or they just started doing loan modifications, you want to use more caution. Even attorneys and law firms are no exception to this rule. Law firms are no exception to the economic turmoil we live in, and as they have seen their billable hours reduced, some scramble to find work in other areas such as loan modifications.Whether they are actually competent enough to get a successful modification done is a different matter, and they must be evaluated as stringently as any other company.2.) What is the company’s success rate in achieving successful loan modifications?Most loan modification firms will claim to have above a “90% success rate”.If the company can’t tell you their success rate, this is an immediate red flag and you should RUN, not walk the other way! Ask yourself: if you were in a service business like this, would you take the time to know how many loan modifications you had taken on, and how many had been approved?Second, you need to dig further when a company gives you their so-called “success rate”. What does that mean? That the company got a modification with a payment higher than before and the homeowner defaulted 3 months into it – is that considered a “successful modification”?The definition you should hold of a “successful loan modification” is where the borrower is able to keep their home. Any loan modification company that takes fees after they have a client’s budget and knows they can’t afford the payment, is inherently unethical.If the loan modification company can’t give you a solid idea of what their REAL success rate is in getting quality loan modifications done that allow the borrowers to stay in their homes at their current income level, then you need to look elsewhere.3.) Do you have recent examples of successful modifications you have done?The loan modification company should be able to produce SOME documentation of the work they have done. Since the loan modification documents contain personal financial information, you may see the specific new terms such as interest rate and fixed term, but not the homeowner’s personal information such as name, address etc.If the company cannot produce examples, or they reply “…well I haven’t done any yet but I’ve been a loan officer and a real estate agent for 3 years, how hard can it be?”, let someone else be their guinea pig. Saving your home is too important of a task to put in the hands of an amateur.Also, make sure that the examples are modifications performed by THAT particular company. A typical scam operation will use “generic” testimonials and loan modifications, or will say “As Seen on TV” because a show on CNBC spoke about loan modifications and made no mention of their company.If you find that the testimonials they provide are not done by them, BEWARE!4.) What criteria do you look at when deciding whether or not you can do loan modifications?Examine the answer to this one VERY carefully. Also, make sure you get it answered to some degree, before they know anything about your particular situation.This is a true test of whether they fall into the boiler room category, or a professional advisor. If the loan modification rep gives a song and dance about how they can do any modification and can save your home no matter what, you know you are dealing with a scam.A reputable loan modification firm will need to obtain a full analysis and assessment of your hardship, income, assets, liabilities, with supporting docs before they can make any promises, and will be upfront with you that they cannot help every person that contacts them.Unfortunately, not every homeowner qualifies for a loan modification. If you currently have no income, or any prospects of becoming re-employed in the near future, you may not qualify for a loan modification.If your lender is not doing loan modifications at this time, you may not qualify. Every situation is different. A competent, professional loan modification company, that does hundreds or thousands of loan modifications each month, knows what lenders are willing to do in terms of modification and these criteria are changing literally weekly, due to the current financial crisis.It is up to the professionalism of the loan modification company to NOT take your fee if they know they cannot help you, or better yet, have a results-based money back guarantee to hold themselves accountable.5.) How long does it usually take to successfully negotiate a modification for your client?Today’s lending environment is always fluctuating on a near daily basis, with new legislation being proposed, failed banks, and many other factors. Still, a good loan modification company should be able to give you some idea of how long the process is going to take.If they duck and run at this question without a clear explanation, you need to give them the finger. (That’s taking your finger and pressing the receiver!)6.) Does the company offer a money bank guarantee for their services? Do they guarantee that you will have a lower payment than before?This is a big one. Stories abound of people that were promised the world by a loan modification company, paid a fee of several thousand dollars, and ended up never hearing back from the company.If a company does not offer a guarantee, or gives an excuse such as “..no one can guarantee results”, buyer beware. If they do offer a guarantee, examine closely as to what they mean exactly. Some inexperienced loan modification companies do not have the skill to get quality loan modifications done, resulting in payments that are even higher than before!Bear in mind that loan modification companies take significant risk in offering a guarantee. They are performing a service with up front costs, so it isn’t like returning clothes that they can re-sell.On the other hand, you as the homeowner are taking a GIGANTIC risk in putting out your hard earned money to do a modification.You see, by having a strong guarantee, the loan modification company essentially provides a check and balance on whether to take your fee or not – since they know if they don’t do their job, or get a poor modification done for you, they bear a financial risk.7.) Do they offer a free approval process or is there a charge up front to take an application? If your state requires that a loan modification company be registered, are they?A good loan modification company will generally not charge an application fee, as their goal is to actually help people get their loan modified and stay in their home, not to collect as many application fees as they can. If a company wants an application fee upfront, you may want to investigate their success record a little more.Certain states such as California are regulated in how loan modification companies can take upfront payments. However, California ironically also has had more modification start ups in the past 6 months (this report was written in March 2008). Many of them are not registered, are complete scams, and playing a cat and mouse game with the Attorney General’s office.Others, like Maryland, require that an attorney review the documents. Know the laws in your state BEFORE you contact the modification company, and listen to what they say either on the phone or on written materials to test their level of competence.8.) Will I be kept informed throughout the modification process? Do I have multiple ways to stay in touch on the process – for instance, a way to track my case, phone number, fax number, etc?You need to have a consistent mechanism to keep track of your file throughout the modification process, ideally a secure website or some form of automated mechanism.9.) What other lines of business is the company in besides loan modifications? What lines of business were you in prior to loan modification?When evaluating a loan modification company, the one thing you need to realize is that the businesses are typically small (less than 100 employees). You want to know what professional credentials and experience they bring to the table.If the principals in the company just closed the doors of their subprime mortgage broker office that was shut down…it may be a red flag.Do a Google search and look for the names of individuals involved in the company.While online forums can be useful, bear in mind that with the anonymous nature of text based sites, anybody (including competitors) can pose as a disgruntled customer…and they often do. Many legitimate companies have been ruined by well-orchestrated smear campaigns on behalf of their competitors. Look at the information, but use caution when evaluating what you see on internet forums.10.) Will you modify more than one mortgage, and do you offer help with a forbearance agreement, short sale, deed in lieu of foreclosure?  Do you charge extra fees for these additional services?If a loan modification effort fails, you need to know what “Plan B” is. Even if you can’t stay in the house, walking away and doing nothing is DEFINITELY not the right option.A Deed in Lieu of foreclosure, where you give the house back to the lender, should be your last resort. There are consequences of this action, but they are far less than that of a foreclosure. It will generally leave you with less bruised credit and likelihood of a judgment against you compared to having the lender foreclose.Some loan modification companies offer alternate services, such as a Deed in Lieu of Foreclosure free of charge if the initial effort to modify the loan is not successful and the homeowner is unable to keep the house.11.) Do you have any complaints against your company with the Attorney General’s Office, Better Business Bureau, etc?This is important to know. If a company has complaints it doesn’t necessarily mean they are a bad company, depending on their volume of transactions.For instance, if a modification company has been in business several years and has processed hundreds or thousands of modifications, a few complaints over several years, is probably not a big deal. However if they started six months ago and already have 30 complaints, then that’s probably a red flag.If the business is reputable, see how they handled any customer complaints, since every business, if they’ve been around a while, will inevitably have them.Also bear in mind that the Better Business Bureau rating is VERY subjective – for instance, Best Buy has an “F” rating, and Disney Films has an “E” rating! Ratings also change, so make sure you read between the lines.Conclusion:  We’re currently experiencing an unprecedented era of economic turmoil, and it is unfortunate that many vultures have risen to swoop in and take advantage of people’s desperation.Hopefully this report has put you in a more empowered position than you were prior to reading it. By applying it to every modification company you look into, you give yourself a much better chance of finding a competent company that can solve your financial crisis.Remember, while these questions serve as a measuring stick, you also want to take a step back and look into the “big picture” and as the saying goes, “trust your gut”. Is the company run by people who are “visible” and put themselves out there publicly using new media tools like blogs and videos, or do they hide behind “template” websites?Do you get the feeling that they are competent, and that they also truly have empathy for your situation?No matter what happens, remember that a house is just that…a building and the finances attached to it. It doesn’t define who you are as a person. If you look at the most successful entrepreneurs of our time: many had bankruptcies and serious financial problems in their past.However they never lost sight of their values or their end goal, learned what they could from the situation, and moved forward to success.You can spend time asking yourself “why me?”, or you can ask yourself “how can I use this challenge to find a way to solve my problem?” – either way you will get an answer. It is up to you to choose which question to ask.I wish you success in your search for a solution to your housing crisis. ©2009 By Todd Wetzelberger