Credit Reports and Debt Consolidation

Q: How will a debt consolidation program that I adopt to settle my card arrears affect my credit rating?

A: Taking up a debt consolidation program makes limited impact to your credit rating in the immediate future, but failing to adhere to the repayment schedule can make a significant dent in the rating. Normally, your overall payment history decides your credit rating.
If you cannot exercise discipline in spending, it makes sense to close your card accounts as it can make an already precarious position worse. Though this does not obliterate your credit history connected with these accounts, you at least do not get into further debt. The other disadvantage behind closing accounts is the reduction of the credit that you become eligible for and this could make credit agencies wary about your financial strength.

If you still want to take no chances and close accounts, terminate the recently opened card accounts. Keeping some of the older ones open improves your credit rating by virtue of the time you have had those accounts. Make sure that your letter advises the creditor about your intention to close the account. He should not be under the mistaken impression that the card company has closed you out.
You cannot escape some de rating to your score when you do take the assistance of a debt agency to settle for a smaller amount than your original debt. Credit rating agencies also do not take kindly to the event of your debt agency taking their own sweet time to settle your debt and that can lead to further de rating.

Can a debt consolidation program do me and my credit score any good?

A debt consolidation program helps you settle your debt by decreasing the amount you owe and by enabling lower monthly payments, since the rate of interest is much lower under such programs. They also structure card debt at constant rate of interest, instead of a floating one that existed before and reduce the payment obligation amount. You therefore get the benefit of a lower rate of interest, less debt to be paid and a longer tenure over which this amount needs to be settled.

Life certainly becomes simpler since you need to make one payment to one creditor on a certain date every month. The credit score will reflect this fact as you having settled some card accounts. You will do well to leave a couple of card accounts open to meet any exigency. The credit that you can get on those accounts will help you in times of need.

While debt consolidation does help you, it is important to remember that the accumulated debt has to be settled at some stage and it is best to not get into such a sticky situation in the first place through prudent financial management.

Construction Loan Consolidation

It is always a dream to own your house and all of us spend a better part of our life trying to conjure up the necessary funds to be able to do so. The positive aspect of this is nowadays, you have institutions willing to lend you money to build your house and fulfill that dream sooner than later. If you can zero in on a good deal for construction loan consolidation from a reputed institution, you will be able to rest easy. The trick is to find the right one for your needs from the plethora of options available. Here are a few suggestions:

You need to start off with identifying how much finance your lender will assist you with. This will give you an idea of your total expenditure for your house including the other costs for utilities and other sundry expenses associated with the finance arrangement. Having a good idea of the amount prepares you in advance of what to expect.

The next challenge is to engage professionals for the design and actual construction of your house. The architect will cater to your requirements in planning the layout and any other features you may want to incorporate, while the construction contractor will give you his take on the expenses likely for the construction. You now need to sit with these inputs and decide whether you will be able to afford the said expenditure. Obviously, if it is far more than your initial budget, you will need to reassess the plan and cut out some elements to fit into the budget. Once you finalize, you need to discuss your requirement with the lender and hand over the plans. The lender will need to give you an approval of these plans before processing your actual finance amount. This is the preapproval stage of the loan disbursement process.

It is advisable to be aware of the different construction loan consolidation options available and you should take a loan which can be converted to a permanent one. This will lead to some savings and the process in future will be an easier one due to the same lender giving you the benefit.
Home loan lenders normally insist on an upfront payment of 10% of the amount to be paid. You can avoid PMI by paying 20% initially or by taking multiple loans, wherein the first one is for 75% and the second one is for the balance 25%.
Finally, if you desire to convert your loan to a permanent one, be sure to check out the prevalent rates of interest to enable you to decide as to what would be ideal – a fixed one or a floating one. Other options allow you to have some surplus cash which you can use at your convenience.