System and method for paying down debt using an equity loan revolving line of credit

• US 7,254,556 B2
• Filed: 07/15/2004
• Issued: 08/07/2007
• Est. Priority Date: 07/30/2003
• Status: Active Grant

• Current Assignee: Ramsden
• Original Assignee: John D. Fry
• Inventors: Fry, John D.
• Primary Examiner(s): PATEL, JAGDISH
• Application Number:
  US10/891,962
• Publication Number:
  US 20050060257A1
• Time in Patent Office: 1,118 Days
• Field of Search: 705/39, 705/35
• US Class Current: 705/39
• CPC Class Codes: G06Q 20/10 specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof

Abstract

A loan system program comprises a loan account having a loan principal on a purchased item, and a secondary account used to pay the amortized interest on the loan principal. A user deposits, such as through automatic deposit, user payments directly into the loan account, thus paying down the loan principal. The user then uses the secondary account for personal expenses that would otherwise be met by the deposited user payments. At the end of the month or grace period, the user pays off the monthly interest on the loan account with the secondary account. The lender than raises the loan balance of the loan account to cover the secondary account balance. At least a portion of the next user deposit to the loan account covers the raise loan balance, and another portion is used to pay down the loan principal.

Claims

1. A method, implemented on a computerized mortgage system for reducing a remaining balance of a mortgage loan still requiring payment on a loan account for a specified principal amount associated with real property, wherein the loan account is configured to accrue loan interest on the remaining balance at a specified interest rate and at a specified interval, the method comprising the steps of:

the computerized mortgage system maintaining the loan account at a computer system;

the mortgage system automatically and electronically charging a pre-determined amount of living expenses per specified interval, for one or more of the specified intervals, onto a linked credit card account, the linked credit card account linked to the loan account for at least the purpose of automated electronic transfers of the linked credit card account balance to the remaining balance of the specified principal amount, the linked credit card account having a credit card account interest accrual interval, the credit card account interest accrual interval indicative of when credit card account interest is charged to the linked credit card account based on the balance of the linked credit card account, the linked credit card account also having a grace period after the interest accrual interval such that payment of the balance of the credit card account during the grace period removes accrued credit card account interest being charged to the credit card account;

accruing loan interest on the loan account at the specified rate of interest for the one or more specified intervals based on the remaining balance of the loan account;

the computerized mortgage system automatically and electronically charging the accrued loan interest to the linked credit card account to increase credit card account balance;

receiving a payment into the loan account;

applying the payment to the remaining balance of the principal amount to reduce the remaining balance of the principal amount;

the mortgage system automatically and electronically transferring the credit card account balance to the remaining balance of the principal amount before expiration of the grace period, automatically transferring the credit card account balance causing the credit card account balance to be paid off such that accrued interest charges are avoided and causing the remaining balance of the principal amount to increase by the credit card account balance;

receiving a second payment into the loan account; and

applying the second payment to the remaining balance of the principal amount that now includes the automatically and electronically transferred credit card account balance to reduce the remaining balance of the principal amount.

2. The method as recited in claim 1, wherein the linked credit card account is an unsecured credit card account.

3. The method as recited in claim 1, wherein payments- are one or more of an employment compensation, a social security payment, a trust fund payment, an individual retirement account payment, and a payment from a user savings account.

4. The method as recited in claim 1, wherein the loan account is a revolving loan account.

5. The method as recited in claim 4, wherein the loan account comprises a fixed year arm, a fixed year balloon payment, a fixed-interest rate loan, or a variable-interest rate loan.

6. The method as recited in claim 1, wherein a lender of the loan account and an issuer of the credit card account are the same financial institution.

7. The method as recited in claim 1, further comprising an act of using the credit card account to pay a credit card account service fee, such that an issuer of the credit card account receives the credit card account service fee as a payment.

8. The method as recited in claim 1, further comprising an act of charging a loan service fee to the loan account, wherein a lender for the loan account receives the loan service fee as a payment.

9. The method as recited in claim 1, wherein the loan interest is not compounded with the remaining principal.

10. The method as recited in claim 9, wherein the loan interest comprises interest that is amortized at a rate selected from among monthly, weekly, and daily.

11. The method as recited in claim 1, wherein the loan account is a home equity loan account.

12. A computer program product for use in a mortgage system, the mortgage system maintaining a loan account for a specified principal amount associated with real property, the principal amount having a remaining balance still requiring payment, the loan account configured to accrue loan interest on the remaining balance at a specified interest rate and at specified interval, the computer program product for implementing a computerized system of reducing the remaining balance such that the remaining balance can be paid off more quickly and the borrower is assisted in managing other living expenses, the computer program product comprising one or more computer-readable media having stored thereon computer-executable instructions that, when executed by a processor, cause the mortgage system to perform the following:

automatically and electronically charge a pre-determined amount of living expenses per specified interval, for one or more of the specified intervals, onto a linked credit card, the linked credit card linked to the loan account for at least the purpose of automated electronic transfers of the credit card balance to the remaining balance of the principal amount, the linked credit card having a credit card interest accrual interval, the credit card interest accrual interval indicative of when credit card interest is charged to the linked credit card based on the balance of the linked credit card, the linked credit card also having a grace period after the interest accrual interval such that payment of the balance of the credit card during the grace period removes accrued credit card interest being charged to the credit card;

accrue loan interest on the loan account at the specified rate of interest for the one or more specified intervals based on the remaining balance of the loan account;

automatically and electronically charge the accrued loan interest to the linked credit card to increase credit card balance;

receive a payment into the loan account;

apply the payment to the remaining balance of the principal amount to reduce the remaining balance of the principal amount;

automatically and electronically transfer the credit card balance to the remaining balance of the principal amount before expiration of the grace period, automatically transferring the credit card balance causing the credit card balance to be paid off such that accrued interest charges are avoided and causing the remaining balance of the principal amount to increase by the credit card balance;

receive a second payment into the loan account; and

apply the second payment to the remaining balance of the principal amount that now includes the automatically and electronically transferred credit card balance to reduce the remaining balance of the principal amount.

13. The computer program product as recited in claim 12, wherein the loan account is a revolving loan account.

14. The computer program product as recited in claim 12, wherein the loan account comprises a fixed year arm, a fixed year balloon payment, a fixed-interest rate loan, or a variable-interest rate loan.

15. A mortgage system, the mortgage system executing a computer program for reducing a remaining balance of a mortgage loan still requiring payment on a loan account for a specified principal amount associated with real property, wherein the loan account is configured to accrue loan interest on the remaining balance at a specified interest rate and at a specified interval, the mortgage system comprising:

a storage device;

a processor programmed to;

receive a request for automatically and electronically charging a pre-determined amount of living expenses per specified interval, for one or more of the specified intervals, onto a linked credit card account, the linked credit card account linked to the loan account for at least the purpose of automated electronic transfers of the linked credit card account balance to the remaining balance of the specified principal amount, the linked credit card account having a credit card account interest accrual interval, the credit card account interest accrual interval indicative of when credit card account interest is charged to the linked credit card account based on the balance of the linked credit card account, the linked credit card account also having a grace period after the interest accrual interval such that payment of the balance of the credit card account during the grace period removes accrued credit card account interest being charged to the credit card account;

accrue loan interest on the loan account at the specified rate of interest for the one or more specified intervals based on the remaining balance of the loan account;

automatically and electronically charge the accrued loan interest to the linked credit card account to increase credit card account balance;

receive data representing a payment into the loan account;

apply the data representing the payment to the remaining balance of the principal amount to reduce the remaining balance of the principal amount;

automatically and electronically transfer the credit card account balance to the remaining balance of the principal amount before expiration of the grace period, automatically transfer the credit card account balance causing the credit card account balance to be paid off such that accrued interest charges are avoided and cause the remaining balance of the principal amount to increase by the credit card account balance;

receive data representing a second payment into the loan account; and

applying the data representing the second payment to the remaining balance of the principal amount that now includes the automatically and electronically transferred credit card account balance to reduce the remaining balance of the principal amount.

16. The system as recited in claim 15, wherein the linked credit card account is an unsecured credit card account.