Sunday, October 22, 2017

Dealing with Mortgages and Other Loans

Most people nowadays are having a hard time juggling and paying their debts and mortgages. In this time of an ongoing recession, most people are losing their homes and filing for bankruptcy. However, there are a lot of things one can do to cope with the current economic crunch.

Most Internet guides focus on ways to help you save – like walking, car pooling, turning off home appliances, pulling the plugs, and other similar ways. However, these are temporary solutions that may help you some, but cannot reduce your expenses for the long term. To gain a more lasting strategy to beat the recession is to understand compound interest and how it affects your finances.

There are a lot of ways to effectively avoid compound interest. A more effective, but less known, way to save money is mortgage acceleration. Mortgage acceleration is paying off your mortgages in a much shorter time, like when you pay a 30-year mortgage in just 10 or 15 years. The whole process basically saves you more than 15 to 20 years of compound interest on your mortgages.

Most of the mortgage acceleration strategies available today help you identify sources of income that you can use to pay your principal debt. The secret is to make sure that more of the money you have left at the end of the month is paid against the principal amount of your mortgage. And all these create a cycle that helps you have more money against the principal every single month.

An example would be very helpful in illustrating the benefits of mortgage acceleration. Let us say that you are required to pay $1,000 on your mortgage every month, and $800 of this goes to your principal debt ad $200 serves as interest payments. If you have an extra $100 every month, you could use that to pay against your principal debt. And because you lessen your principal amount by $100, your interest would be smaller too. Therefore, the next month, you get to apply $101 to the principal, even if you maintain the $100 additional. Month after month, you get to pay more against the principal amount of your mortgage.

This can also apply to your other loans and credits. By all means, pay up all your high interest loans as quickly as possible. You can also get credit cards that offer you balance transfer services at a low interest rate or a zero interest rate and transfer credit card debt to that credit card. Do not just pay the minimum required amount every month. If you get something extra, then by all means pay off your debts. It may be wise to save some money at the end of each month for emergency purposes, but the more money you use to pay off your debts, the better.

In short, the best way to deal with this recession is to avoid accruing interest. Interest is the cost of borrowing money and compound interest adds a time element to it. The more you dilly-dally, the more you pay. Avoiding interest helps you save money, and it is a strategy that affects your finances in the long term.