How to Stop Paying on an Interest Only Mortgage

An interest-only mortgage is a specific type of loan that allows the borrower to make only the interest payments associated with the loan for a specified period of time, known as the interest-only period or interest-only term. Eventually, the principal of the loan will come due and you'll need to make huge payments to catch up. For this reason, many borrowers look for a way to stop paying on an interest-only mortgage when the interest-only period ends.

Instructions

1

Renegotiate with your lender directly. Ask a lender representative if a loan-modification program is available. A loan-modification program does not require a refinancing. Instead, the lender amends the contract to include different payment options or a lower interest rate. You may be able to stop paying your interest-only mortgage and have it converted to a conventional fixed-rate, fully amortized loan.

2

Refinance your mortgage into a fully amortized loan with the bank that holds your mortgage. Or you can shop around. In a fixed, fully amortized loan, you make a fixed payment on the loan that covers interest as well as some of the principal. Eventually, the loan will be paid off with no balloon payments. This is a good option if your credit is strong enough to qualify for another loan. The existing loan will be paid off when the new loan is issued.

3

Sell your home to pay off the debt. It might take six months or longer to sell your home if the real estate market is soft in your area.

4

Go into foreclosure. This is the least-attractive option. You can stop making payments on the mortgage altogether and wait for the bank to start foreclosure proceedings. This option will ruin your chances of buying another home for at least seven years, so extreme caution should be used. Essentially, you are defaulting on the loan, which could force you to rent an apartment for several years while you rebuild your credit score to the point where you could get a loan to buy another home.

Read More

How Can I Eliminate Inherited Credit Card Debt?

Consumer law pertaining to credit card debt that's incurred by deceased relatives varies from state to state. Particular circumstances also affect responsibility: when the debt occurred, the relationship between you and the deceased (spousal or parental), the status of assets in the deceased's estate and other factors. In many cases, you can only determine that you have a probable responsibility or that you probably do not. In only some circumstances can you determine that you clearly do or do not have a legal responsibility for the debt.

Instructions

1

Determine the particulars of the debt. You may have an obligation to pay your deceased spouse's credit card debt if one or more of the following conditions applies: you live in a community property state, the deceased incurred these debts during your marriage or you held the card jointly. In all such cases, particularly if the deceased had substantial credit card debt, you should consult a consumer law attorney.

2

Determine the details of your relation to the credit card, whether as a joint holder or authorized user. You very probably have no obligation to pay the debt if your deceased spouse left debt on a credit card where you were only an authorized user rather than a joint card holder. However, according to Scott Crawford, CEO of debt management service DebtGoal, in such cases many credit card companies will still try to collect.

If your spouse dies leaving unpaid balances on credit cards, you probably do not have an obligation to pay them if you do not live in a community property state, or the deceased incurred these debts prior to your marriage.

3

Do not pay the issuer if a parent dies leaving credit card debt. Your parent's estate will normally pay the debt. If the estate has insufficient assets, the executor will notify the credit card issuer of the estate's insolvency.

4

Determine the timeliness of the card issuer's claims. If you have a deceased relative with credit card debt and an estate large enough to pay off those debts, the executor has an obligation to pay them before disbursing assets to beneficiaries, which could preclude your receiving an inheritance. However, the Credit Card Act of 2009 stipulates that credit card issuers must make these claims promptly.

Read More

Where Can I Take Classes to Become a Credit Repair Specialist?

The Federal Trade Commission is the governing body that oversees employment and trade practices within the credit industry. It regulates credit repair specialists indirectly by ensuring that businesses are not marketing themselves falsely or in a misleading way. The FTC provides no definition or means to become a credit repair specialist, but a person seeking to become one must have the experience and educational background to honestly market himself as such.

Private Training

Know that technically, there is no actual accreditation or educational classwork that qualifies or certifies a person as a "specialist." Nonetheless, organizations including Simple Credit Consulting provide training coursework to assist an individual in becoming a trained credit consultant. You can also take classes with Consumer Credit Counseling Services. This provides training in improving credit reports, managing debt and other specific credit issues. It also assists with your marketing abilities and developing a consumer base. Or consider coursework with Lexington Law.

Educational Background

Get the necessary educational background that focuses on finance and accounting. To truthfully establish or market yourself as a credit repair specialist, you need a college degree in accounting, finance or business and economics. It's even more beneficial if you get a master's degree in such finance-related fields. A master's degree also allows you to refine your interests, allowing you to focus your education on bankruptcy and other aspects of credit repair.

Experience and Affiliations

Gain experience in credit counseling services. Begin working at a reputable credit care institution. A reputable credit care institution is Credit Counselors, which is a member of the National Foundation for Credit Counseling. You'll learn a great deal in this environment, and your affiliation with a legitimate and reputable organization increases your qualifications. Additionally, large credit care organizations have ongoing coursework from which you can take classes to learn more about the credit repair industry. With extensive experience and the appropriate training, you can advertise yourself as a credit repair specialist without violating the legal parameters the FTC established for the credit industry.

Read More

The Effect of the Homestead Exemption, Judgment and Lien in Illinois

If you have a judgment or a lien against you in Illinois, you might find use in the homestead exemption. The homestead exemption protects you from creditors by allowing you to keep a certain amount of your property safe from seizure. The homestead exemption also applies to bankruptcy cases. Depending on the nature of the judgment or lien against you, the Illinois homestead exemption might provide some relief.

Homestead Exemption

A homestead exemption is a legal protection that prevents creditors from seizing a home with a value up to the limit of the exemption. Each state is responsible for determining how large of a homestead exemption it will grant to its residents. In Illinois, homes are protected up to a value of $15,000 from creditors. This applies to creditors who have legal cause to pursue debts via a judgment or a lien, as well as those party to an Illinois bankruptcy case.

Judgment

If you are the subject of a judgment in Illinois, it means that one of your creditors has sued you in court to collect money you owe. If the court rules in favor of your creditor, a judgment against you authorizes the creditor to collect in a number of legal means, including the garnishment of your wages and the possible seizure of your property. The Illinois homestead exemption protects your home against seizure by creditors with a judgment.

Lien

A lien is another legal action that may come out of a creditor lawsuit against you. A lien attaches to your property and prevents you from selling it without first paying off what you owe. As with judgments, however, the Illinois homestead exemption protects the first $15,000 in net equity you hold in your personal home. Only amounts above this level can be used to satisfy any liens against your home. If you are underwater on your home, or if your home has little net equity, even creditors with a lien cannot collect from you on that property.

Bankruptcy

The Illinois homestead exemption also plays a role in Illinois bankruptcy cases. In a Chapter 7 bankruptcy filed in Illinois, you can only protect up to $15,000 of home equity from liquidation by the bankruptcy trustee. If your home is worth more, the trustee will most likely require a payment from you in the amount of the excess equity or sell the property outright to pay your creditors. If your Illinois bankruptcy is a Chapter 13, the homestead exemption is irrelevant, as you can keep all of your property anyway.

Read More

About Debt Collection Agencies

When you fail to pay a bill or you have defaulted or a loan, you might well be contacted by a debt-collection agency. A debt-collection agency is an organization that will attempt to recover money owed to an individual or a business. If the debt-collection agency is able to recover the money owed, the individual or the business will pay a percentage of the debt to the collection agency.

Considerations

In some cases, the debt-collection agency is working on its own behalf because it has purchased your unpaid debt from the lender with which you initially defaulted. Lenders are willing to sell your debt to the collection agency at a deep discount, so they can rid their books of your debt. Once purchased, the debt-collection agency will begin the process of trying to collect the "original" debt amount from you (see Resources section).

Function

Once a debt-collection agency has contacted you concerning a debt, the agency also must send you a "validation notice" in writing, stating the details of your debt. The notice also must provide instructions regarding what you should do if you believe you do not owe the money (see References section).

Warning

If the debt is old, you may want to check the statute of limitations, because you may not be obligated to pay the debt--even if the debt is valid. However, if you set up a payment arrangement or submit a payment to the collection agency, you will start the statute of limitations all over again. (To check the statutes of limitation for your state, see the Resources section).

Features

The Fair Debt Collection Practices Act (FDCPA), was formed by the Federal Trade Commission to protect consumers from deceptive practices by debt-collection agencies. For example, the act prohibits collection agencies from threatening, harassing you.
If a debt-collection agency calls you at work, you have the right to stop the phone calls. You must first ask the agency, verbally and in writing, to stop contacting you at work. If the agency continues to do so, it is in violation of the Fair Debt Collection Practices Act.
(For more information on the FDCPA, see References section).

Misconceptions

Some consumers believe that a debt-collection agency cannot contact someone else concerning their debt, but this is untrue. A collection agency legally can contact someone other than you to obtain the following: a phone number, an address or a place of employment. However, the collection agency is prohibited from discussing your debt with the third party, and it may not contact the other person more than once. In addition, if you are being represented by an attorney concerning the debt in question, the collection agency must contact your attorney instead of you.

Read More

Guide to Repair Bad Credit

Even if you're not applying for a loan, bad credit can hurt. Insurance companies, employers and landlords often review credit reports to see if you look like a dependable, trustworthy individual. Bad credit isn't eternal, though; if you work at it, you can repair your credit and boost your score.

Credit Reports

You have the legal right to see your credit reports from the three main bureaus---Equifax, TransUnion and Experian---once every 12 months. Go over the reports and look for any errors: Accounts you didn't open, back debts you've paid off or inaccurately low credit limits. Contact the bureaus and ask them to correct the mistakes. You can obtain your free copies by going to the Annual Credit Report website (see Resources).

Utilization

The total amount of debt you carry counts for 30 percent of your credit score, according to the Fair Isaac Corporation, which created the FICO scoring system. The company recommends paying down your debt and keeping it down as a way to improve your score. Your utilization ratio---the ratio between your current debt and the total credit you have available---is also important. That means you're better off with a low balance on several credit cards than one card paid off and the others maxed out.

Using Credit

If your credit history is littered with bankruptcies or late payments, you need to prove things have changed. Do whatever it takes to make your payments on time. Your current payment history will count for more than last year's missed payments. If you no longer have any credit accounts open, start one. Take out a new card and pay it off every month to avoid paying interest. If your credit is really bad, look at taking out a secured bank credit card, which uses your bank account as collateral.

Time Frame

Credit bureaus look at the amount of time you've had your accounts, with long-term accounts preferred. If you pay off cards you've had for a while, don't close the account. Instead, make small, occasional purchases and pay them off promptly so the account stays current. Don't open a lot of new accounts, which will lower your score and may look suspicious to lenders, particularly if you've had problems managing credit in the past.

Read More

Legal Ways to Improve My Credit Score Quickly

If you want your credit score to be high enough to get a credit card, an auto loan or a mortgage, or even to rent an apartment, get a job, take out insurance or get utilities or a cell phone, and you have a poor rating, there are ways to improve your credit score. It takes time to improve your score; however, some measures you take will show up faster than others will.

Improve Credit Score

Get copies of your credit reports from all three of the credit reporting agencies: Equifax, Experian and TransUnion. According to Bankrate.com, 70 percent of credit reports contain errors. You may have an error or errors on your credit report that is making your score appear lower than it actually is. By sending a letter certified mail to all three credit reporting agencies that documents what the error or errors are, you can quickly raise your score, if you are correct.

Start paying your bills on time. Payment history is a huge factor in your credit score. If you are chronically late, had a bill go to collections or declared bankruptcy, your score will be lowered.

Leave plenty of available credit on your credit cards. You can have several different credit cards, but if they are all maxed out or close to it, your score will go down. Pay down outstanding balances, and do not use your card again until you do. The best strategy, if you are maxed out on several cards, is to pay off the card with the highest interest rate first by making more than the minimum payment, while making your minimum payments on the other cards. Once you paid off one card, start the process with the next card. Owing the same amount on one card is better for your credit score than owing the same amount on several different cards.

Stop applying for credit. If you recently applied for too many new accounts, this will have a negative impact on your credit rating.

Easy Fixes Explained

Easy fixes for your credit can backfire, according to MyFICO.com. For example, some people think that by opening accounts just to have available credit, that this will help their score. However, the opposite is probably true, and you will have lowered your score even more. Rapid account buildup looks bad to people granting credit.

Another scheme people try is to increase their credit limits so that it won't look as if they are maxed out anymore. However, when you call the credit card company to get the increase, it will negatively affect your credit card rating as if you applied for new credit.

Another method that you could try, which the FTC or MyFICO.com do not recommend, is to take out an installment loan. Pay off your credit card with that, and then pay off the installment loan. The installment loan may not count against you as much as the credit card balance will.

Read More