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Archive for the ‘Finance’ Category

Introduction.

If you’ve ever felt that you’re being ripped off over credit card payments – you’re probably correct! Many credit card users are unfairly being made to pay over the odds on their credit cards because the card companies insist that any repayments you make go to pay off low interest rate debts first, leaving the higher interest rate debts to carry on accruing more and more interest – meaning that you have to keep paying more and more to the credit card payments.

A typical credit card scam.

Everyone loves a deal and being offered 0% interest on credit card balance transfers is always a tempting one. These can be great deals – providing you don’t start to spend further money on the credit card, in which case it actually becomes somewhat of a credit card scam, perpetrated by the credit card companies! Consider this simple example; you transfer a $3000 balance to a new credit card at 0% interest, knowing you can repay that within say 6 or 12 months. But, then spend a further $2000 on it at an annual 20% interest. Every time you make a repayment you’ll only be reducing the original $3000 debt, meanwhile the new debt is rising $400 the first year, $480 the second and so on.

The government to the rescue.

 The procedure above and employed by the credit card companies is known as adverse order of payment or negative order of payment. The good news for anyone with a credit card debt problem like this – is that next year legislation will come into force in the US making credit card companies change from negative OP to positive OP; ensuring that high interest rate debts get paid off before lower ones. However, if you can’t wait until then there is another way around this credit card scam. If you do use a 0% interest rate balance transfer, do not use that credit card for other purchases; look for another low interest rate credit card for your all of your other purchases.

Introduction.

This article is intended for both those people who are looking for someone to provide them with financial aid; as well as anyone fortunate enough to have spare funds and capable of providing financial aid to others. If you’re not already aware you don’t actually have to be a bank or licensed finance company to lend money from or apply to borrow money from.

Social lending.

Run an internet search for the term ‘social lending’ and you’ll see listed several what are collectively known as social lending clubs through which you can lend or borrow money according to your means. The social lending club itself is registered with the financial authorities and completely above board; of course when selecting a social lending club do satisfy yourself that it is a 100% bona fide one. Unlike a conventional bank or finance house these websites are made up of individuals, and small groups of individuals, who are prepared to invest their money as loans to other people. These financial aid websites work the same way as any other social media website by connecting together people; those with money to lend and those seeking to borrow money.

Online loans.

Whether you’re the lender or the borrower providing or getting an online loan via social lending is simple. Everyone registers with the social lending club website and agrees to have a credit score check. The reasons for this are simple; the social lending club website needs to be sure that lenders have the funds and that borrowers are not habitual loan defaulters. After that the borrowers post how much they want to borrow and why, then the lenders make an offer according to how much they can lend and the rates available. Interets rates and repayment periods can vary according to how much is required and and the borowers credit history. Don’t worry too much if as a borrower you have a poor credit score, there’ll probably still be lenders willing to work with you on a social lending website.

International social lending.

In the news again this week is how the G20 nations are yet again dragging their feet on funding the billions of dollars promised to developing nations. If you have money to invest as loans there’s no reason at all why you can’t use at least some of it to finance overseas loans. The rates of interest and repayment periods are exactly the same as those for USA loans. However, on a dollar-for-dollar basis making an international loan to help get a business venture off the ground in Africa or Asia could be both immensely rewarding and yet be virtually a philanthropic gesture from you.

Introduction.

With it all being so easy to do we’re all into online banking, applying for loans online and even arranging our mortgages online as well. Like everything in life conducting financial transactions online does carry a risk, a risk from money fraudsters that can be needlessly increased and complicated if you don’t take some basic precautions. By money fraudsters we’re not talking about someone hacking into your online money accounts, but simply tricking you into giving away details that will allow them to access your money with ease. You need to be constantly on your guard against these modern money scams as, in today’s fast moving society, it would be really easy to get tripped up by some of them at a time when you’re really busy or pressed for time.

Phising, Smishing and Vishing.

Unless you are a complete newcomer to online finance or have been living on Mars recently – you’ll already have an idea what Phishing is. Phishing is when someone sends you an email, probably pretending to be from your bank or an online finance company, asking you to confirm your access usernames and passwords under some spurious reason. A new version of this is breaking through where the perpetrators have the gall to actually contact you by phone asking you for those same details; ie voice phishing or vishing! If you’re a victim of smishing - then they simply ask for the same details via an SMS on your cell phone. Finally, don’t leave finance details lying around. Shred old statements with your bank/credit card details and if you move home make sure mail gets forwarded to you.

Job and auto frauds.

A report this week has highlighted the state of the US jobs market with more jobs being lost and unemployment at 9.5%. So, whether at home or abroad if a company asks you to send them money ahead of a job interview or offer, or even a job itself – don’t, it is almost certainly a scam. You may well feel you really need to get the pay checks rolling in again rather than taking out a loan, but how would you feel if you’d been scammed out of your much needed savings? Similarly another current scam going around is someone selling an auto and asking you to escrow money to them in advance of seeing or buying it. Again, don’t do it, as you’ll never see the car or your money again, which could be an absolute disaster if you’d taken out an auto loan for it!

Introduction.

 It’s funny to think how in one day someone can go from fat cat to alley cat, just on the sound of a judges gavel. On receiving his 150 year jail sentence Bernard Madoff, the biggest swindler in the history of Wall Street, has done just that – going from being one of the biggest of fat cats overseeing a supposed $65 billion financial empire to scratching an existence as an alley cat in a US prison, which because of the sentence will not be a minimum security ‘Club Fed’ type one.

Who really lost in the Madoff case?

Whilst Madoff might have lost his freedom and will, presumably, die in jail unless some mercy plea were to be granted, it is his thousands of victims that will be serving their own life sentences as they try to scratch out a living on their reduced circumstances.  Tales of his victims having to sell their home’s, postpone or even give up on any chances of retirement and even having to scavenge food from skips to pay for his mistakes and misdemeanors are emerging; all of which makes it understandable that his victims feel nothing but distain and fury towards him. It would have been one thing to in effect rob large corporations or the unimaginably wealthy to fund his schemes, but the fact that many of his victims were simply good, honest and hard working folk seeking to secure and save funding for future projects, makes what he did truly despicable.

Who can you trust with your money?

This case can only raise questions in people’s minds as to how safe is it to save and invest their money? The fact is that saving and investing your money is a darn sight safer that just sticking it under the mattress. If you don’t believe that read the articles about the women in Israel whose daughter threw out a mattress with $1 million stuffed in it! Also, not all financial advisers and finance companies are crooks just out to take money from you. However, the one sensible thing to do is follow the old saying and “don’t put all your eggs in the one basket”. So, have your pension plan with one company, have your health insurance with another, take out a mortgage with a third company etc. These days using the internet it is just so easy to find and compare finance offers which, even if you don’t take them up, you can use as information when discussing loans and mortgages etc with a financial advisor.

Whether you’re currently looking for a student loan, needing to refinance one or indeed pay off a student loan – everyone is always grateful for some unbiased and independent advice regarding what to do. Whilst attending college or university will, in the long run, pay for itself in higher salaries and benefits than many people without higher education qualifications – the debt you can accrue getting there can some overwhelming.

Paying off student loan debt – don’t panic!

The very last thing you’ll probably want to do from your first pay check is to start reducing your student debt – but that is the very first piece of advice. Of course it’s tempting to go out and blow that first check on a new wardrobe or that latest gadget you’ve been aching to get. However, the truth is that the longer you leave it to start paying off your student loan debt – the more the interest will rise, and the more you’ll owe on it. That doesn’t mean you have to wear a hair shirt until it’s all paid off. Just set up a regular standing order to pay off some of the debt monthly, increasing this amount as and when your salary increases.

Too much debt to cope with?

 If you feel you have too much student debt to cope with, then talk to the student loan companies you’ve dealt with. If this is a single student loan company they should be able to easily arrange for a student debt consolidation loan to be organized. This will pull together all of the small loan debt into one new loan. The advantage of this is that you then have only one payment to make each month, rather than having to make sure you always pay off several loans. If your student loans are with several companies this can make the repayments a nightmare, remembering which company needs paying what amount and on which date etc. Ask the various companies what consolidation loan they could arrange for you – and then simply select the one that is most advantageous to you.

Introduction.

Lots of people over the last two years have seen their pension funds plummet since the beginning of the credit-crunch back in September 2007. Add to that various scandals by supposed mega-stars of the financial industries, whose golden deals and gilt edged stocks actually turned out to be merely ‘fools gold’; and there are an awful lot of people with genuine concerns over their pension situations, especially if they’re approaching retirement soon. Alarmist this isn’t – fact it is, that for many workers their projected pensions have fallen by 25% since 2007. The net result of which is that if in 2007 you were expecting an annual pension of $27,500 at age 65, you can now expect a little above $20,000! So, what can you do to protect or enhance your pension?

The pension fund to annuity fund problem.

Although not everyone’s a big fan of effectively saving money into what is little more than a bank account for 30 or more years, an account that you can’t touch of course during those years, but that is how we all save our pension pots. However, come the day that you retire the vast majority of us don’t just take out that pot of money and blow it on a week-end in ‘Vegas or whatever, but have it converted into an annuity – so that it pays us an annual income on the interest earned off the capital. Simple enough – I’m sure you’ll agree. However, you might just want to check with the company you’re saving your pension pot with as to how long it takes them to convert the pot into an annuity? Regardless of how much you have saved in the pension pot its value as an annuity isn’t determined until all of the paperwork is completed and the money is transferred to the annuity fund. You should be aware that some companies are taking a month or more to complete this transaction; and with annuity rates currently falling by around 10% a year – that could seriously affect annual income you receive. Needless to say the bank or insurance company that your pension fund is with doesn’t suffer by this process. In fact it suits them to take as long as they dare to with the process as meanwhile – they’re earning interest from their investments based on your pension pot! Here’s a simple example of what this could cost you. On a $200,000 pension pot, converted to an annuity you could reasonably expect up to 7.5%, which would be $15,000 a year, that’s $1250 a month. If you lose just ¹/₂% on this your new figures are; $14,00pa and $1167 per month! Finally, just because you’ve been saving your pension fund with company X – it doesn’t mean you have to accept their annuity offer. When you receive their offer do contact specialist pension brokers and insurance companies to see if they can offer you a better annuity for your pension pot.

Should you stay in a company pension scheme?

Two big considerations in answering that question are: how secure/strong is the company and how good a deal is the company pension scheme. Now only you can decide just how strong the company you’re working for is. After all, who’d have thought 10, even 5, years ago that businesses like GM or Lehman Bros. etc would fold. Conversely, simply by looking at private pension plans online you can quickly see just how good a deal the company pension might be. The company versus private question is further complicated by how long you have to retirement, are you likely to switch jobs or indeed are you constantly switching jobs. If the company you’re with is a solid one and you’ve worked for it for years and you’re nearing your retirement; then on balance – you might be well advised to leave your pension where it is. However, if you’ve any doubts about whether or not the company will survive the current economic downturn, or you’re the sort of person that regularly changes jobs – then moving to a private pension plan may well be a better option for you. Having a lot of small pension pots with a lot of companies, especially ones that could go bust’ anytime, it will simply spread your pension too thinly and riskily. You’d be better off contacting a specialist pension fund finance company and seeking their best advice as to how you can reach your pension aspirations.

Some options if your pension is smaller than expected.

Leaving aside the idea of simply working longer or taking a lump sum and playing poker with it in the hope of improving it; there are two options that many pensioners and soon-to-be pensioners with property are looking into. First of all you can simply downsize the home you’re living in. Many people buy properties when they have a family and, when the family has grown up and left, decide the place is just too big to deal with. After all, what’s the point of being retired if you spend days on end cleaning and fixing rooms that are never used? So, ask yourself the question – are you too old to repaint or young enough to move? Of course you want the space when all the family visit – but you need to think a bit more rationally about the costs you’re incurring running a bigger than you need house-hold or apartment. The solution, sell up and move to some thing smaller, pocketing the difference between sale and purchase values. Of course to really make this worthwhile you need to make several tens of thousands of dollars on the move, and don’t forget to factor in agents fees and moving costs etc. Moving out of what was once a family home can just be too much of a wrench for some folk. So the second option is to look at home equity mortgage loans or reverse mortgages. With these you in effect take out a loan against the value of your home, which if worth say more than $150,000 would make a very tidy addition to your pension. Generally speaking, in return for the loan, you are allowed to live out your days in the property after which it will be owned by the company that arranged the loan.

The state of many people’s pensions is starting to cause alarm on several fronts. First of all with ever increasing job losses as the global economic recession continues, it is invariably older workers who find it most difficult to regain employment. This has two effects; first they can end up having to borrow money to make ends meet, meaning that as they near their retirement age their debt increases. Then, secondly, by not being in employment they are either unable to continue contributing in to their pension funds at the levels they were able to when employed; or, worse, stop contributing to their pension fund altogether. The net result of which is an increased threat of debt in retirement.

Use cash from your home to avoid debt in retirement.

One way you can make up a short-fall in your pension pot or raise cash to clear debts in your retirement is to release any cash tied up in the equity on your home. In the USA, just considering the over-65s who have no mortgage they are literally sitting on hundreds of billions of dollars worth of assets. Even if you are still paying off your mortgage, so long as the value of your home now is considerably more than the amount still owed on the mortgage – then you too could have home equity worth hundreds of thousands in cash!

Releasing home equity.

There are a few ways that you can release the equity on your home; in the USA this most commonly means you opt for a reverse mortgage or sell your home to an investment company, who then allow you to carry on living in it. Even if you don’t begin your retirement in debt a protracted illness or the need for long-term care could plunge you into debt. Again, releasing your home equity could well raise enough cash for you to comfortably pay off those bills annually.

A couple of points worth considering about releasing home equity.

If you have a family and were considering leaving your home to them, then obviously that would no longer be an option if you seek to get a home equity loan. Also, depending on the value of the property you currently have equity tied up in and the value of a smaller property you could move to – then simply down-sizing might be another option for you to consider.

If you’ve ever had the misfortune to pick up the phone just once – and hear a pre-recorded voice saying something like “Are you struggling with debt, do you need a loan …?”; then like me too you probably get so angry you want to pull the phone out of its socket. Personally – I am sick to death of these stupid recorded calls trying to tell me I need to contact them about something to do with my finances. Which is why I say – thank heavens for internet finance, because with an internet finance company – I can be in control.

Don’t answer the phone.

No doubt some of you reading this will just think – well don’t answer the phone dummy! Well, life’s not that simple. Yes I know I could get my phone company to only allow through numbers calling me that I tell them I want to receive, yes I could bar any withheld/unidentified numbers – but sometimes I need to pick up a withheld or not known number, because I am actually waiting on a call from somewhere. So, my objection is not against withheld or unknown numbers – just the stupid automated messages that these finance companies send out.

But hang-on, internet finance companies send out spam?

Yes they do – but I can easily avert that with spam filters and, best of all – I don’t have to open/read it if I don’t recognize who it’s from. With an internet finance company – I can decide if I want to read about them or not.

Why do telesales finance companies repeat call me?

It’s not just that these telesales finance companies phone me – but the number of times the same ones phone – are they really that dim? If I don’t respond to their call first time – why do they repeat call me? I’ve not got any existing loans, I’ve never had bad credit, I’m not out of work – I’m not an idiot. Yet they seem to be. Even if I pick up the phone, don’t listen to their dumb message and leave the phone for half an hour – they still don’t get it that I’m not interested and still try again later.

With an internet finance company – you’re in charge.

At least with an internet finance company you can decide whether to contact them, you can choose from the ones that come up in your search engine which one to use and, most of all, you don’t have to listen to an idiotic phone message. I like to decide who I deal with and when, so for me its internet finance companies every time – and all the telesales ones can f**k off.