There are definitely good reasons to refinance, but should you really be rolling all your debt over into a mortgage loan with a much longer term? Are you sure you want to consolidate that car note at 10.9%, your student loan payments at 7.5%, that credit card balance at 17.9%, and your current first mortgage at 6.8%? What if you’re offered a rate of 6.25% that allows you to consolidate all this debt under the new lower rate, with lower overall monthly payments? It’s a no brainer, right?

No way!

Although there are some cases where you may decide it’s beneficial for you to consolidate debt in this manner, I can’t think of a situation where wouldn’t cost you lot more in the end with typical rates and terms. Mortgage brokers will also try to convince you that it’s a good move tax-wise because you’re taking debt from something like a car loan, which is not tax deductible, and putting that into a mortgage loan, which is tax deductible. This doesn’t always work out as well as you might think, which I’ll explain in a minute. Bottom line is that consolidating debt is fine if that’s what you want to do, but before making that decision, you need all the facts.

There are two major factors that make debt consolidation ultimately more expensive:

1. Paying interest on money for which you have already paid interest
2. Paying interest at a low rate for a lot of years can be more expensive than paying at a higher rate for only a few years

In my opinion, what matters most in determining whether things like this are a good deal is how much it costs in the end. As the character, Wimpy, used to say in the Popeye cartoons, “I’ll gladly pay you Tuesday for a hamburger today.” Only you can decide if it’s worth the extra money down the road to lower your monthly payments today.

Paying interest on money for which you have already paid interest

I hate to pay for things twice. When you have a car loan, for example, for a term of 60 months (5 years) and you’re on year 4 and you want to consolidate that remaining debt under a new mortgage, you’re going to end up paying all that interest over again. Why? Because if you look at an amortization schedule of the car loan, you’ll see that the vast majority of the interest gets paid up front. This means if that car note at 10.9% is for a 5-year term and you’re on year number 4, you’ve already paid the majority of the interest on that loan. Adding the remaining debt to a new consolidation loan or mortgage would mean that you’ll be paying the interest all over again!

In order to see an example, we need to use a loan amortization calculator. If we take the car note as an example, we’ll make the following assumptions:

- original loan amount: $25,000
- term of loan: 5 years (60 months)
- interest rate: 10.9%
- down payment: $0

If you put that information into the amortization calculator, you’ll see that on your very first payment, you’re paying $227.08 in interest and $315.23 on the principal and the amount of interest you pay each month goes down. By the time you’re on your 48th payment (end of year 4), you’re paying $60.14 in interest and $482.17 on the principal and your remaining balance is $6139.29.

What would happen if we were to consolidate this remaining balance under a new mortgage loan at 6.25%? To make sure we’re comparing apples to apples, let’s isolate the money from the car loan and see what would happen to just that money, without the new 1st mortgage and all that stuff added to it. If we used the amortization calculator again with a loan amount of $6139.39 (the amount remaining after the 4th year of the car loan), an interest rate of 6.25% (the interest rate of the new mortgage), and a term of 30 years (360 months), we would get some alarmingly different numbers.

Doesn’t that make you think a little differently about consolidating debt under a mortgage with a much longer term? It’s pretty clear that consolidating the car note under a new 30-year mortgage makes no sense whatsoever if your goal is to pay out the smallest amount of interest possible.

Paying interest at a low rate for a lot of years can be more expensive than paying at a higher rate for only a few years

I give the above example because I hate so much to pay interest twice, but in a more general sense, paying back a loan over a long period of time is expensive. But is it always? Let’s just take some easy numbers and compare payback amounts:

It’s interesting to see that a loan with a term of 5 years at 10% costs dramatically less than a loan 30 years at 5%. But if we look in the middle, there seems to be a break even point. The loan at 10 years and 5% interest is actually the best deal because you’re paying the least interest with a low payment. You get a payment of about half that amount if you go 30 years, as is the case with many mortgage loans, but you’re going to pay back more than 3 times as much in interest.

Oh, and let’s consider that tax deduction issue I mentioned earlier. I have a friend with a construction business who thinks that just because you can write off expenses, it practically makes everything free. Uh…you still have a net payout even if you are getting a significant tax deduction. Don’t make the mistake of justifying a high cost by saying that some portion of it is tax deductible. Let’s look at an example:

Say you’re comparing the 5-year loan above against the 30-year loan and the 5-year loan is not tax deductible, but the 30-year loan is. With a very rough assumption of an ordinary income rate of almost 30% and a deduction of $9324.80, you’re still going to have a net payout of $6527.36 compared to a net payout of $2748.20 with the non-tax deductible loan. Tax deductible does not mean free!

If all this stuff seems obvious to you, then give yourself a pat on the back, because you wouldn’t believe how many people think it’ll cost them less in the end to refinance with a lower interest rate under any circumstances. There are probably more elegant formulas to show these relationships, but for those of use who just need to pound it out and see the different scenarios to determine what the best deal is, this is the method:

1. Take each installment loan you have and look at the amortization schedule for the total loan. Enter the amount you originally borrowed and the original start date of that loan.

2. See where you are currently in that schedule of payments and note the remaining balance and the total interest paid to date.

3. Look at the total interest that will be paid by the end of the loan, and subtract from that the interest paid to date from Step 2. The result is the amount of interest you will pay if you stay in that loan until the end of its term.

4. Now enter the remaining balance from Step 2 into the amortization calculator, as well as the term and interest rate of your new mortgage (ex. 360 months @ 6.25%). The result is the amount of interest you will pay on this money if you consolidate under your new mortgage.

5. Repeat this process for each installment loan you have.

A great way to track this stuff is to get a copy of an inexpensive financial software, like Quicken, because when you input all of your things and then classify them, it will show you a pie chart of how you spend your money. Then when you realize that 10-15% of your income is going towards dining (and trust me, I’ve been there! Hah!) you’ll find more motivation to stop eating out.

If you have made all the lifestyle changes you can and you’re still not making it and ending up with late payment history or worse, your loan goes into default. In the case of a bad payment history, try to work out payments you are able to afford and stick to that schedule of payments. Get a second job if you have to, but stick to it. If you have defaulted, you may be able to rehab the loan. Under the loan rehabilitation program you and your loan holder agree on a reasonable and affordable payment plan for nine (9) consecutive payments. In most cases, you sign a rehabilitation agreement specifying payments and responsibilities. A loan is rehabilitated only after you have voluntarily made the agreed-upon payments on-time for 9 consecutive months. The standard payment would be at 1% or you can demand reasonable and affordable payments for rehab under the Higher Education Act, which may lower your payment.

Another possibility is consolidation where the loans are transferred to the Department of Education under The William D. Ford Direct loan program (FDLP). Defaulted borrowers can consolidate with the FDLP if they accept income-contingent repayment (ICR). Under ICR, you would pay the monthly interest until they determine your payment amount based on documents of income. But based on your income, these payments could end up being more than was is required originally. Consolidation rate is weighted average of the rates of the loans included, rounded up to nearest 1/18th of a percent, not to exceed 8.25%. Examples:

1) 2 variable-rate Stafford loans currently at 7.14% are consolidated at 7.25% fixed.

2) 1 GSL at a fixed rate of 14% (Interest rates were very high in the early 1980s and there are indeed some loans with rates like this) is consolidated at 8.25% fixed.

3) 10 Perkins loans at 5% fixed are consolidated at 5% fixed.

Rehab is definitely a good option if your loan has gone into default, but once the loan is rehabbed you’ll have to keep it out of default. No excuses this time. If you’re serious about paying back your loan, you can do it. Borrowers who rehab at a payment amount similar to the payment amount they would have on one of the plans available to them after rehab almost never default a second time. Borrowers who are allowed to pay less due to circumstances that would not entitle them to a deferment (cable, internet, happy hour pitchers, and rent far outside a normal budget based on their income) almost always default again.

Be real with yourself about your money and your expenses, and you can achieve a debt free lifestyle eventually.

That’s why we’ve chosen to recommend this latest cash advance service, which has a great reputation and their application process is very simple.

We try to consistently offer the best, most reliable options for our readers, and give you the straight scoop on what’s good and what’s bad out there. If you can use as much as $1500 wired to your bank account tomorrow, this is an excellent service and here’s all you have to do:

1. Click the button below to view our special offer page
2. Fill out the easy, no-obligation form with a few basic details
3. Click “Get Cash – Click Here”
4. Review the offer and terms
5. Get up to $1500 wired to your account tomorrow.

Easy enough, right? Let’s take a look…

1. Short term cash flow problem that could adversely affect your credit, but that you know for sure will only be temporary.
2. Medical emergency
3. An advance for money you know you’ll be getting, but that you could really use right now.

Clearly a cash advance can be very helpful when used responsibly, but an important point to realize is that a payday loan can do more harm than good if not used properly. Here are a few points to keep in mind if you’re considering applying for an emergency payday loan:

1. Pay back the loan as soon as possible. While you might not find the initial fee for a payday loan to be too much of a burden, a continuous cycle of debt can become a downward spiral. Fees on top of fees and before you know it you’re in a far worse position than where you started. If you have a long-term debt issue, seek the advice of a professional debt manager or credit counselor to find a way out. A payday loan is not right for this situation.

2. Even if you do pay off the loan quickly each time, don’t make a habit of using payday loans to get out of difficult financial situations. I often compare payday loans to hocking your stuff at a pawn shop because the payment terms are similar. When I was in college, I had a guitar amplifier I would hock at the pawn shop every month. I’d get my G.I. Bill money at the beginning of the month and get my amp out of hock, then by mid-month I’d be broke again and I’d be right back at the pawn shop. After repeating this whole process many times I realized I had spent way more money in the course of the year to get the amp back than it was even worth. If you find yourself making a habit of using cash advances, bite the bullet at some point and go make a few extra dollars to put in an emergency savings account.

3. Consider the APR before you try to convince yourself it’s not that expensive. Typical APRs on payday loans average about 400% but can be as high as 5,000%. By comparison, the average credit card APR is around 12% if you have decent credit and you can sometimes get unsecured loans from banks and credit unions for around 7%. Don’t kid yourself about what you’re really paying!

If you’ve considered these negative aspects of payday loans and still feel it’s something from which you can benefit, then by all means use it to your advantage. We have had great feedback from our readers who have used this site, where you can get up to $1,500 wired to you in an hour. There tons of great reasons to get a cash advance, but used irresponsibly, they can get you in hot water.

But first, if you know you need a payday loan and you’re simply looking for a reputable source, we have had great feedback from our readers who have used this site, where you can get up to $1,500 wired to you in an hour.

Good uses for payday loans

1. You’re going to pay a premium for getting cash in your bank account fast. That’s to be expected. But is it really that expensive compared to the expense of having negative entries on your credit report? Let’s play out a scenario to illustrate: what if you’re getting ready to refinance your adjustable rate mortgage that has a balloon payment due next year, but you don’t have enough cash to pay your Visa bill this month? A negative entry on your credit report could cost you thousands in the form of points or a higher interest rate when you go to refinance, or you may not be able to refinance at all which could lead to really big problems and potentially foreclosure. And this is happening a lot these days folks. Clearly this is a case where you need to get that Visa billed paid and buy yourself some time to figure out a long term solution to your financial shortfalls.

2. You’re sick or injured and you can’t afford medicine or medical attention. This situation sucks, but you’ve got to take care of yourself. Your health comes first - get the money now and work out the financial issues later. This is the only case where this type of thinking is acceptable!

3. You’re getting back a couple thousand dollars for your tax refund, but you’re broke and Spring Break is next week. Is this frivolous and unwise? Absolutely. I’m not suggesting that this is an example of sound financial decision making. But sometimes you’ve just gotta cut loose and have some fun. If you can use a payday loan to help pay for that unforgettable trip to Cancun without messing up your finances, I say go for it. You only live once. But make darn sure you’re going to get the money to cover it later. Don’t count your chickens before they hatch!

So there are definitely good, responsible uses for paying a premium to have cash in hand now. But there are also some very compelling reasons not to use payday loans.

Click here to read Part II of this article

We get asked all the time to present new offers to readers across our network, so we have to be selective. This week we’re featuring an excellent service that allows you to receive up to $1500 cash in less than 24 hours with no credit check!

It’s quick and easy and you’ll have cash in your bank account tomorrow. Good stuff.

Not familiar with cash advance services? Let me explain a bit: A Cash Advance Loan (or a Payday Loan) is a short term loan that is repaid with a preauthorized electronic withdrawal for your bank account on your next payday.

Cash advance loans are also known as payday loans:
* Cash advance loans are fast and easy.
* Cash advance loan is planned to overpass the borrower’s cash flow gap between paydays.
* Cash advance loan do not require a credit check.
* Cash advance loans are small loans for a short term.
* Cash advance loans are hassle free for getting right away necessary hard cash.

This easy 60-second form provides fast approval so that you can get your quick cash advance loan now. Fill it out here

In addition to online cash advance sites, there are physical locations available in the following metro areas (not all-inclusive): atlanta, austin, baltimore, boston, chicago, dallas, denver, houston, las vegas, los angeles, miami, minneapolis, new york, orange county, philadelphia, phoenix, pittsburgh, portland, raleigh, sacramento, san diego, seattle, san francisco, washington dc

And in the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming

From my humble beginnings in that Baltimore neighborhood to the point where I’m at now as a relatively successful entrepreneur, I’ve learned a few things about money. I don’t claim to be an expert financial adviser, but I am a guy who’s had to come up the hard way and I might have a thought or two from which you are able to benefit. This blog is dedicated to all those people who need to get their hands on some money fast, whether it’s from a cash advance service, a mortgage broker, or a bank credit card. Here you’ll find some good offers from reputable companies and I’ll give you some tips on avoiding pitfalls and borrowing wisely.

Best wishes for your financial future.

Jim