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Consolidating Credit Card Debt - Interest Only Loans

April 21st 2006

Consolidating Credit Card Debt - Interest Only Loans


Rates on 30-year mortgages moved up again this week to their highest point in nearly four years.  The rising rates may cause home prices to fall.  As rates rise, so do the monthly payments to potential barrowers.  This may cause home sellers to lower their price. 

Frank Nothaft, Freddie Macís chief economist said ďAs a result of higher mortgage rates, housing market activity is beginning to slow."  Associated Press writer, Jeannine Aversa, says that mortgage rates rose as Wall Street investors fretted that inflation might pick up.  Their worries were fanned by government reports released earlier this week showing big increases in both wholesale and consumer prices for March.

But what about credit card payments? This year Credit Card Issuers were required to double their minimum payments from 2% to 4% of the loan balance.  The Credit card companies actually fought this rule, but lost.  They make more money stringing purchasers out for longer periods of time.


Some experts believe interest rates will be increasing again either later this year or next.  This may affect both mortgage interest rates and the rates credit card companies charge.  It may be a good time to consolidate credit cards in to a 30 year mortgage. 

There are many home loans to choose from. One popular type of mortgages is the interest-only (IO) loan. There are various type of IO loans as well.  Even Investors will use these loans to increase their buying power, due to the lower payments.  They are especially popular with people that donít plan on staying in a house for longer than 5 years.


Interest only loans have a specific term.  Some IO loans will include a balloon payment after 10 years where the entire principal is due at that time.  Other IO loans are converted to a fixed or adjustable rate mortgage after a specified period, where both interest and principal are made in payments for the remaining term.  For instance, a barrower may get a IO loan for 10 years, but at that point the loan converts into a traditional loan for the remaining 20 years.          

If interest rates continue to rise, this may be the year to get rid of your credit card debt.  Ask your loan consultant if an interest only loan is right for you.

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By Dan Wilson
Best Syndication

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Important:  The material on Best Syndication is for informational purposes only and is not meant to be advice. You should always seek professional advice before making financial decisions. 
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