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Equity Now In The News - 2005

Italian Tribune
March 24, 2005

Sound Advice on Paying Off Your Credit Cards

Q&A With Michael Moskowitz
President, Equity Now, New York, N.Y.

Many Americans have seen their family finances spiral out of control because of credit card debt. In a recent report, CNN noted that non-mortgage consumer debt in the U.S. has doubled in the last 10 years to a record $1.9 billion, $18,700 per household. Credit card delinquencies and personal bankruptcies hit an all-time high.

Michael Moskowitz, CPA, is president of Equity Now, a New York-based direct mortgage lender, licensed in six states. Equity Now helps homeowners use their home equity to manage high credit card debt and other important cash needs.

Q. What advice would you give a consumer with too much credit card debt?

A. I would recommend four steps. First, stabilize the situation by negotiating a reduction in your interest rate. Second, continue to make monthly payments so your credit will not suffer further. Third, bring your lifestyle under control and reduce spending. Fourth, consider some kind of debt consolidation loan that can give you a fresh start.

Q. Is a consumer wise to use home equity to pay off credit card debt?

A. A home equity loan can be a good move if you sincerely take steps once and for all to control future spending. As with any loan, you need a clear and achievable plan to pay it off. Otherwise, you will simply repeat the pattern that got you into debt in the first place.

Q. How can homeowners with large outstanding credit card balances obtain a home equity loan? Won't they get turned down because of their low credit rating?

A. Specialty lenders, such as Equity Now, consider other factors, besides credit scores, in making their decision. We look carefully at the total credit history, past ability to handle credit obligations, job history and, where possible, income. We work with borrowers, who, in our view, are good credit risks, but because of unusual circumstances, they cannot qualify for home equity loans with mainstream banks.

Q. How do I select a lender who will help me with a home equity loan to consolidate my credit card debt?

A. Get references from people you know, particularly those who have gotten help with this problem. Read ads carefully. Remember that some who claim to be lenders aren't really lenders, but mere brokers, who simply move papers between homeowners and the actual lenders who make the decisions. This can lead to "bait-and-switch" and broken promises, giving you a loan you can't afford to pay back, or preventing you from closing your loan in time to take care of your needs.

Q. What advice would you give consumers on getting a loan that will meet their needs and on avoiding the problems and pitfalls in borrowing?

A. Know all the charges you will be expected to pay and how long the process will take. Get it in writing! Know whom you're dealing with and choose your lender wisely. Also, know whether your interest rate is fixed or variable. If variable, consider the effect of a possible interest rate increase on your ability to make payments.

Q. How does getting a cash-out refinance loan work?

A. A cash-out refinance is a refinancing of your property that pays off your current loan and provides extra money for other purposes such as investment in a business, debt consolidation, home renovation or a major expense such as college tuition or medical treatment. A direct mortgage lender, who specializes in situations such as high credit card debt, will let you know the amount of the loan they can provide, the payments you will have to make, and the timing. A good lender should take five to 10 days to close.

Q. Can you give an example of someone who was helped by a cash-out refinance?

A. A computer programmer's job was outsourced overseas. Family finances were soon a disaster as credit card debt climbed to $35,000. When real estate taxes came due, he was in danger of losing the family home. His first try to salvage his finances failed, blocked by bad credit and unverifiable income. He found Equity Now through an ad. We provided him with enough cash to pay off his taxes and credit cards, and reduce his mortgage interest to a manageable monthly payment. He has a new job which is not as high paying, but he has learned to manage his finances so as not to fall into the same situation as before.

Q. What if I need the money for something else besides credit cards?

A. The proceeds of the loan are yours to use as you see fit. However, if you are carrying large credit card balances, my counsel is to pay them off first. The alternative can leave you in an even worse, perhaps ruinous, financial condition.

Getting low cost funds on one's home, as many have found, can be a satisfying process, Moskowitz says. But to achieve your desired goal, you need to deal with the right lender. Choosing the wrong one will get you into deeper trouble than when you started. The steps are not difficult but they should be followed if you are to solve your credit card debt problems.

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