May 2011

Using Your Car’s Equity to Pay off Credit Cards

While this doesn’t have anything to do with Reverse loans, I thought  at the time when this was shared with me, that it was a very creative idea to reduce unsecured debt and reduce or eliminate credit card payments each month.

I was at a local community street fair a couple of weeks about and talked with Summer O’Neil who was representing Lockheed Federal Credit Union.  She explained to me how a person can not only get very low interest rates on autos but how they can use any equity they may have in their car to pay off credit cards, which we all know have very high rates.

So could it could be  a nice solution for many people that have too much credit card debt but have equity in their car to leverage and pay off that debt.   Of course, anyone reading this who just happens to be 62 years of age or older may want to use funds from a Reverse mortgage for the same purpose, plus with a Reverse loan, the proceeds would be significantly larger and they would not have a monthly payment.

Here is what Summer explained to me:

“Our auto loan rates for new or used  are as low as 2.99% for 60-66 months .  We can pull cash out from the  equity of the vehicle to payoff other debts such as unsecured credit cards or personal loans with no rate increase. There are some guide lines on the miles on the car and Fico score. 

 The credit score  would have to be 730 or above for up to 90% Loan to value including any current balances owed on the vehicle. The other option we talked about is  share secured loan. This is a type of loan where your savings account here with Lockheed FCU would be the collateral for a loan with an interest rate of 2.25%. There is no income proof/job or credit score/history requirements because your savings is the secured collateral. 

Your savings account will earn 0.25%  so that gives you a net rate of 2.00% paid on this loan. The max term for any dollar amount is 60 months or 5 years.  The benefits are that you can save your money the way you might be doing now as well as pay the lowest loan interest with a fixed payment and rate of 2.00%  As you make payments your secured funds will be available by the amount of each payment minus the interest paid.

We have other options like this that will allow you to have a CD secured loan and make 0 payments for 18 months. Some times Investors like these types of option or people getting lump sums of money in the future.”

If you would like to speak with her for more information, here is Summer’s contact information:

818-565-2735

soneil@lfcu.com

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Deferred Payment Loans

 The Los Angeles Times recently published an article about DPL’s that is interesting but not thorough in that it doesn’t explain the parameters and the  differences between the two loan programs.  If anyone is going to consider one over the other it is important to know how they compare to one another.   Here is what is important to know when researching the details of the two mortgages.

1.  DPL’S are usually offered by states or cities.

2. But how the funds are used from the loan are restricted.   Typically they can be used to pay taxes or special assessments, home repairs or energy efficient improvements and not for cost of living expenses.

3. The amount of the money will vary from state to state or city and it will be considerably less than a person could receive from a Reverse loan.

If a senior does not need additional money for living expenses and is comfortable with the amount the money that they receive through Social Security and possibly a pension but needs money for those situations that a DPL loan could provide, then it might be a good choice.   But in the end  a Reverse mortgage is far superior, more funds, flexibility and no restrictions on how the money can be spent.
 

L.A. Times on Reverse Mortgage Alternatives
May 2nd, 2011  |  by Elizabeth Ecker Published in News, Reverse Mortgage  |  4 Comments

The L.A. Times published an article this week covering some alternatives to taking out a reverse mortgage loan. The article, titled, “Elder homeowners might want to consider reverse mortgage alternatives,” offers options it calls alternatives to reverse mortgages including deferred payment loans (DPLs), property tax deferral (PTD) loans and Supplemental Security Income (SSI) benefits, and outlines several housing options.
The article doesn’t address pros and/or cons of reverse mortgages, instead it offers additional options.
“Reverse mortgages may very well be a good choice for some seniors who need to tap into equity they have in their homes,” the article states, before outlining the alternatives. “But there are other options elder owners might also want to consider.”
For DPLs, the L.A. Times writes, generally there are no origination fees and insurance premiums and closing costs are low, as are interest rates. As for a PTD loan, the article states, “Generally, it provides annual advances that can be used only to pay your property taxes or a portion thereof.

 But no repayment is required for as long as you live in the house.” They are only available in some areas, however. For SSI benefits, the article explains, seniors may be eligible if their liquid resources total less than $3,000 for a couple or $2,000 for an individual.
For those who don’t qualify for a reverse mortgage or for whom reverse mortgages proceeds are not sufficient, the article suggests three housing alternatives: accessory apartments, ECHO cottages and sharing arrangements.
Written by Elizabeth Ecker

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