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Protect Family From Debt Liability

Protect Family From Debt Liability

Home loan companies have teamed up with life insurance or general insurance players to help mitigate the financial liabilities you owe them, in your absence.

A premium will be paid by you considering your loan amount, tenure and age. You can pay it as a lump sum amount or as installments clubbed along with your EMI (stands for Equated Monthly Installment). This arrangement goes with the expectation that the insurance company will repay the outstanding loan in case of an unfortunate incident like death or permanent disability etc. This ensures that the family or dependents of the deceased are not left with the liability to repay the loan.

The home loan players will do all necessary arrangements to add a shield to your loan and hand you the insurance forms. Although the insurance company asks for a one-time payment of the premium, the home loan company gives the customer an option to pay premium along with the EMI. However, this option will be slightly more expensive as you will have to pay the home loan company, the interest on the premium as well, since they have included it in your overall loan. The premium in that case, is added as monthly installments to your EMI, taking into consideration the FOIR and LTV.

A home loan protection plan is similar to a term insurance policy, except that the insurance cover is for the period of the loan and also will be equivalent to the outstanding loan amount at any given time during the loan tenure.

To claim insurance, you have to hand over the death or medical certificate to the insurance company and they will make the payments directly to the bank. If the policy is not on a reducing balance principal, the claims will be paid to the nominee of the borrower.

Many insurers have exclusions as well, which needs to be checked at the time of application. For example, if the cause of death is suicide or within a year or 45 days of the commencement of the policy, generally insurers won’t pay. However, accidental deaths will be considered in most cases.

You will be entitled to tax deductions under Section 80 C for HLPP (stands for Home Loan Shield Protection Plan) premium payments. However, if it is clubbed with your EMI, you still get the tax benefit applying the same logic of any home loan repayment, considering the premium amount under your interest portion. So whether you pay the premium at one go or along with your home loan, you will get the tax benefits.

Be Smart With Your Debts

Be Smart With Your Debts

There are a lot of instances wherein debt is unavoidable. Of course you can always save up for it but if you want to buy a home, it will take years to completely save up for that! If you need a home now, simply get a loan so you can buy it and any rental expense that you used to make can be put aside for your monthly amortization.

But before to take on that much needed debt, there are several things that you have to consider – the most important of course, are the three factors that we mentioned at the beginning of this article.

So what are the other considerations that will allow you to take on debt the smart way?

Of course, the usual method is to check how much you can afford to add to your debt payments. But that is not only how you prepare for your debts smartly. You need to consider how you want to live your life beyond this debt. While you really have to base your loan on your current income and expenses, you have to look at your future as well. In a few years, your expenses will change as you make life changing decisions. This can affect your debt payments – or it can affect your future plans.

For instance, if you plan to marry in the next few years or switch careers, these will affect both your expense list and your income. Debt has the potential to rule how your future self will live. It can keep you from going after a career that will provide you with a more fulfilling experience because you have to prioritize the debt that you have to pay for. It will make you rethink having kids because once you do, one of you and your spouse should give up their career to care for the kids. How will you afford your debt payments then?

So if you have to take on debt, you need to make sure that it can provide you with the means to pay it off – like a business loan for instance. If the debt that you plan on getting is only to fund a vacation or a luxury car that you do not really need, then do not get it. This is how you think smartly about your debt.

And before you take on one, make sure you have a plan in place to pay it off. If you want to use your credit card for the reward points you want to accumulate, then make sure you pay off the balance on the next bill so you do not get interest and fees. If you cannot do that, then don’t incur credit card debt.

High Levels of Mortgage Debt

High Levels of Mortgage Debt

The Office of National Statistics reported last year that property debt in the UK was a staggering £847.9 billion, but further studies have revealed that most home owners are not worried by this large mortgage debt.

Less than 15 per cent of people believe that their mortgage debt is too large a burden whereas almost 50 per cent of the British population think the debt secured on their home is ‘no problem at all’. These figures are an indication that, on the whole, the amount of property debt in the UK is not of undue concern.

This can, of course, in a large part be attributed to ongoing low interest rates which make the cost of servicing a large mortgage much easier to bear. But that is not to say that there is excessive debt is a relatively small number of households. However, looking at the wider picture, less than 40 per cent of households had any outstanding debt at all on their home and 50 per cent of those with who do have debt owe less £75,000.

The largest mortgages are, not surprisingly, to be found in London and the South East where house prices are substantially higher than many other parts of the country. But the flip side of that is that London is also the most prosperous area with string economic growth and rising house prices, even during the recession. It is also worth pointing out that the UK is still a very wealthy country and that amount of debt on properties is far less than the amount of equity that home owners have on the whole. It is no uncommon for assets to be many times greater than the debt, which explains why those with a large mortgage are often not concerned about their ability to pay it off, especially those who have owned a home since well before the start of the economic slump.

With the vast majority of borrowers unconcerned by the levels their property debt, even those with large mortgages or even million pound mortgages or more, and with interest rates at rock bottom, home owners are, in fact, benefiting from some very competitive deals. Coupled with the fact that house prices have continued to rise in London and the South East it is not surprising that many people are not worried by their debts.

Inheriting Debt

Inheriting Debt

However, depending on your situation, all of the above may be true, whether you’re dealing with medical debt, mortgage payments or credit card debt. That’s because there are a lot of different scenarios that can play out depending on what arrangements a certain person has made – or didn’t make – when they were still alive.

Hypothetically speaking, say your spouse of 50 years passed away suddenly. You co-signed with your significant other on a home loan, which is paid off, and on a credit card, which has a $3,000 balance on it. Because you co-signed on the credit card, you’re responsible for paying it off. Failure to do so will be reflected in your credit history and credit report. However if you have not cosigned on the loan you are not responsible for the debt.

But say, for instance, that your 85-year-old mother passed away, leaving behind medical debt. Her estate would be responsible for settling this debt and then everything left over would go to her heirs. So, for example, the valuables your mother accrued over her lifetime – car, home, etc. – would be used to settle any outstanding debt. If there isn’t enough money to pay debt off, then her estate is declared “insolvent” and her creditors would have to eat the outstanding debt. So here’s a credit tip – if an estate is declared “insolvent,” heirs don’t have to worry about how any outstanding debt will impact them, meaning that no lengthy credit repair measures need to be enacted on anyone’s behalf – even if aggressive debt collectors still come knocking. The collectors have about 2 to 6 months to colllect from the estate.

In some cases, however, someone may pass along a home with a balance on it to a loved one in their will. If that’s the case, this loved one is the new owner and can either decide to enact a debt management strategy to finance the remainder of the home or they could sell it and pay the remaining balance off with what it is purchased for.

Debt Mentality

Debt Mentality

I remember being in junior high school hearing my father say something to the effect of “you only have as much money as you have credit.” Now whether that was what he said exactly or not, doesn’t matter because it stuck in my head that unless you had massive debt, you couldn’t have massive prosperity. Now, some 40 years down the road, I realize how flawed that reasoning was and my responsibility for allowing it in my own life.

I suspect I am not alone in those feelings. Others may get to this mentality by different life events, but it is incredible how common the debt stories are. We all get here by different routes, but FEEL the same about the result. My personal view is the way debt makes you FEEL is the whole purpose of getting in debt in the first place. If you are in debt and have bill collectors calling, and getting the envelopes that you can read PAST DUE through, and getting the ugly phone calls, you understand what I’m talking about.

One way to describe it is to use the principle of slavery, or being in prison. Tim Robbins and Morgan Freeman acted out this concept in a powerful movie titled “The Shawshank Redemption” (get it and watch it closely). Even though he was in prison, Tim Robbins character was never a “prisoner”, and even when Morgan Freemans’ character was released from prison, he was still a prisoner. How one led the other to that awareness is the point of the movie, and a powerful life lesson.

One more point. There are those who have access to hundreds of thousands of dollars, and are broke because of a debt mentality. They suffer the same feelings of someone who only has a few thousand dollars of debt, and as near as I can tell, IT IS THE SAME FEELING. I saw a coyote put in a cage one time. Completely wild animal, never caged. The panic that creature experienced caused it to die over time. A debt mentality is similar. We may not panic and die all at once, but we will do it a little at a time, and the result will be the same. No enjoyment of life, no hope beyond working to pay past due bills. And this mentality fits how someone chooses to see life. But it doesn’t have to be this way.

Debt Negotiation Facts

Debt Negotiation Facts

The first debt negotiation fact to keep in mind is that you are the keeper of all of your own information digital signature online. You must be responsible for accurately knowing the amount of debt you owe, to whom, at what rates and with what fees.

Second, keep accurate records, from this moment, of what you pay and what you borrow. This will enable you to see your own spending and paying habits are to help you discuss them with the people you are in debt to.

Third, be aware that the companies you are in debt to want your money, but they may or may not work with you. Your debt makes them more money in fees, but there will come a point when they are ready to end the arrangement digital signature as well.

Fourth, if you really want to learn how to negotiate debt settlements, you have to be prepared to ask for exactly what you want. Keep asking and keep looking for a solution that will benefit both you and your creditors.

Fifth, be willing to follow through with the debt reduction planning tools you and your creditors have negotiated. Put yourself on the line by asking questions, then represent yourself with integrity by following through on the terms of your negotiations.

Debt negotiation works and offers solutions to achieve financial freedom without bankruptcy and the fact that you were able to handle your own debt. Battling debt can be a scary time in anyone’s life, but knowing these debt negotiation facts offers you a light at the end of the tunnel.