> Tango wrote:
> She is an English teacher with payments about $650/month! We are looking for
> ways to
> reduce these payments or at least the interest rate (currently around 6.5%).
> Thoughts?
>
Unfortunately, as you said, no consolidation is possible. The
interest rate will fluctuate w/ the Fed Funds rate and therefore will
probably keep going up for a while.
There are some options, however:
1.) Stretch out the term (possibly to 20 or 30 years) - that will
lower the payment significantly.
2.) Convert it to a fixed rate (ideally a better one) via:
2.1) Home equity loan/2nd mortgage,
2.2) A balance transfer onto credit cards if they have a good
fixed rate that lasts for X yrs or until the balance is paid in full.
The pros and cons are:
2.1.a) Home equity - good fixed rate; payments are lower because
of the longer term; interest is deductible. BUT, the house is at
risk.
2.1.b) Balance transfer - possible good fixed rate. BUT, the
interest not deductible; your
credit score may fall because you're using a high % of your available credit.
Thereore the best option is likely home equity loan. If you don't
have a house then stretch out the term as long as possible. Use
either the extended or graduated option: graduated payments rise w/
income and extended are just longer-term, but you can do both.
If that's already been done or is undesirable, then pay them as fast
as possible (assuming no higher-rate debt is outstanding).
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