Debt Consolidation

I want to talk to you, the reader, about recent mortgage rates and the possibility of refinancing your home.  As you are well aware, we are in a down economy and so the interest rates have dropped dramatically.  At the time, that I am writing this article the interest rate is 3.94%.  This is the lowest rate that the U.S. has had in years. Many of you are considering refinancing your home and consolidating your credit card debit and possibly your vehicle loan.  Before you take the plunge, you need to sit down with a financial expert and run the numbers to make sure that it is a smart financial transaction that you are entering into.

The logic of debt consolidation is that the debt is in one loan and is being charged a lower interest rate than if it were spread over a number of providers. As an example, consider a household with $50,000 remaining to be paid on their mortgage at 7%. There’s also a $10,000 car loan at 10% and a $10,000 credit card debt at 14%. With three separate loans at three separate rates, the household is paying $3,500 annual interest from the mortgage, $1,000 from the car loan, and $1,400 from the credit card, for total interest charges of $5,900 or 8.4%. But if this household can roll all $70,000 into the mortgage at 7%, the total interest charged falls to $4,900 for a saving of $1,000, or 1.4%.

By rolling the car loan and credit card debt into the mortgage, they are reclassified as secured loans. This lowers the interest rate, as secured loans have a lower default rate and higher discharge rate, and therefore the bank can charge less interest on their reduced level of risk. Also, credit cards are harder to administer, and so rolling the debt into the mortgage lowers the monthly administrative fees, as well.

Another advantage is that the mortgage is paid out over a longer period and so the repayments will be less. However, this does mean that the cumulative interest over time will be higher, as it is spread over a number of years.

There is also the advantage that there will be one payment to be made every month, rather than several. This lowers the chance of a payment being missed or late through forgetfulness.

Unemployment in the United States

     Have you ever wondered how we got to where we are with our current unemployment situation? Currently, our unemployment is at 9.1% as of the end of August 2011. Is this statistic totally correct though? I have asked myself that question, and with some research have found that it is not telling the entire true story.

    You have heard of the "ninety-niners" I hope! If you have not; they are the unemployed folks that have hit their 99th week of unemployment benefits. This means that they have maxed out their benefits and still do not have a job lined up. There is a lady that I read about that lost her job three years ago; she sent out numerous resumes and had no bites. Her story is just one of thousands that this is happening to around the United States.

    Going back to our 9.1% unemployment statistic; with the "ninety-niners" maxing their benefits they are being excluded. I have studied and read on some web sites and literature that the true unemployment is 22.7%.  This information should blow your mind to know that the Bureau of Labor is fudging these numbers to make it seem like the unemployment is not so bad. Hopefully someone is out there understanding the severity of the situation and will do something about it.  The American people need something to believe in again, and we need our government to back us up. 

We the people, do not need our government to be against us; but to be with us!