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If you come by some extra cash or you are frugal in your budgeting, you can pay off your mortgage faster than the lender requires and as a result you can save money in interest charges.

Focusing on paying down your mortgage debt can be beneficial, however, you need to keep a few things in mind before paying off your mortgage:

1.  First of all, if you have higher interest debt such as vehicle loans and credit cards, it makes far more sense to work towards paying down that debt first.  Generally mortgage interest rates are lower than other forms of debt, so once you have paid off more expensive debt, you can work towards paying down your mortgage.

2.  Secondly, you want to make sure that you have enough money kept liquid and accessible in the form of an emergency fund and once you have enough saved, then you can start focusing on paying off your mortgage.

3.  Third, if you are an entrepreneur at heart, you won’t want to be putting all of your excess money into your mortgage because you will probably have other plans for your money such as for funding your latest business project.
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It looks like you may have reached a turning point in the road. Whether it’s for an auto loan, a personal loan, or department store credit, you may not be able to qualify by your own merits. This is when the cosigner comes into play. The best place to look for a cosigner is within the family, or among friends. You’ll want to trust them just as much as they will want to trust you.

If this individual is backing your loan, they will be privy to the same credit checks as you would be if this were your loan all by itself. Their creditworthiness is based on income, homeownership, credit history, and job security. If you default on any payments, the cosigner will have to pick up the tag. That’s why it’s good to make sure that you have all of your ducks lined up in a row before you put the cosigner’s financial credit rating on the line.

Say what you mean and mean what you say!

To the cosigner, you are saying that you plan to honor the credit contract to the letter they have cosigned for. Don’t try to take on too much new credit at first. Take the time to really look at your spending habits. If you have had trouble in the recent past keeping up with your finances, this may not be the best time to put someone else in the cross hairs.

Building and managing credit is a huge responsibility. Just ask any one of the thousands of people that have low credit rating scores. These people started out in good faith. They had every intent of making sure their payments would be complete and on time. However, things often happen beyond anyone’s control and those things that happen are events that can often send a good credit rating south for much longer than just the winter.

Put aside a little money each month to cover the loan repayment and make it a priority. Protect the person who cosigned as if he or she were you. Remember that the reason you needed them in the first place was because you couldn’t qualify on you own merits. That doesn’t make you a bad person in the least. It just means that it may take a while before the system deems you credit worthy and until that happens, make sure you have the cosigner’s best interest at heart.

About the Author

Liz Roberts is a loan consultant with New Horizon Finance, specializing in bad credit,& has been providing consumers & business owners with financing since 1989.  Join Experian Triple Advantage at http://www.newhorizon.org & get a free credit report & credit score.

Pam Debt

This is an age-old question and after doing some research on the subject, I have discovered that there are a lot of differing opinions out there.  Some say you should pay off all your debt before contributing to an RRSP, while others suggest making RRSP contributions when you are young and then focusing on paying down your mortgage when you are older.

The answer to this question, however, really depends on you and your own personal comfort with debt.  There are a lot of people out there who absolutely despise being in debt and will do everything in their power to get out of debt, while others are okay with being in debt, at least to a certain extent.

When considering what to do, it’s a good idea to talk to a tax specialist and/or a financial planner.  Sometimes people end up doing ridiculous things in order to avoid paying tax, so it’s important to consider all aspects rather than simply focusing on reducing the amount of tax you pay.

Some specific things to consider when choosing between saving for retirement and paying off your mortgage include your age, current tax bracket, investment returns, mortgage interest rate, and whether or not you have a pension plan.

After skimming through several articles on this subject, I noticed that most people suggest doing both.  That way you will feel as if you are getting somewhere, since simply paying down debt is supposedly not as psychologically satisfying.  Another opinion I stumbled upon was that it’s better to pay off your mortgage first if your mortgage interest rate is equal to or higher than your RRSP’s rate of return.

It really all boils down to what you deem is most important for your own personal situation.  If you want to read chartered accountant David Trahair’s opinion on why you should pay off your mortgage before contributing to an RRSP, check out this link.

If you have come across some extra money due to an inheritance, etc., I would encourage you to do your own research prior to making a decision.  There are pros and cons to both sides and it may be wise to do both simultaneously.  As the saying goes, it’s not a good idea to put all your eggs in one basket.  On the other hand, sometimes it makes the most financial sense to choose one over the other.

Pam Debt

While flipping through David Bach’s book Fight For Your Money, I came across a section on payday loans.  I have always known that payday loan companies ripped people off, but after reading this section of the book, I am more convinced than ever that payday loans should be absolutely the last resort in a financial emergency.  In fact, I wouldn’t even consider a payday loan as a feasible option.

First of all, if you take out a payday loan, you will be charged outrageous loan payment fees.  In the instance referred to in the book, a woman borrowed $400 and was charged a $60 fee.

Then, because she couldn’t afford to pay the full $400 at the due date, she was forced to take out another payday loan to pay off the first loan.  This caused her to pay yet another ridiculous loan fee.  Payday loan companies do not accept installment payments, so if you don’t have the means to pay off your initial loan, they have got you exactly where they want you – you will end up in a vicious cycle by taking out one loan after another in order to pay off the previous loan.

By the time the woman had enough to finally pay off her debt with this particular loan company, she had paid $1,780 to borrow the $400! That means she paid 445% in interest charges!  Unfortunately, some payday loan customers get stuck paying as much as 1000% in fees and interest charges as it takes them longer to get out of the trap.

Payday loan companies may seem attractive, as they are willing to lend to anyone with a job, even if they have bad credit.  Before resorting to such an option, do your research and make sure you understand the full implications of taking out a payday loan.  Learn from other people’s mistakes and avoid falling in the payday loan trap.

Pam Debt

Before doing anything drastic like filing for bankruptcy, you need to assess your debt situation. It may not be as bad as you think. Below are some suggestions for managing your debt.

1. Determine how much you owe. Take into account all of your debts and consider how much, if any, is past due, how much is owed now, and how much is owed in the future.

2. Create a monthly budget that allows you to at least make the minimum payments on all of your loans. Be prepared to let go of some of the extras for now so you can get your debt under control. Think of some creative ways to make some extra money. Consider doing some private tutoring, selling some of your stuff, or developing a hobby into a small business opportunity. Whatever you do, don’t give up!

3. Focus on paying off the bills with the highest interest rates first. If you are absolutely unable to pay all of your bills, make sure to pay the most important ones such as your water and electricity bills. You don’t want your water or electricity to be shut off.
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Pam Debt