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Archive for the ‘Loans’ Category

Introduction.

Everyone is totally used to using their plastic to pay for things these days and for most of us using plastic means using a credit card rather than a debit card. Why do we prefer to use a credit card over a debit card - simple, because we can actually get more out of a using a credit card than a debit card. Just to prove the point let’s have a look at how we can set about making credit cards pay.

Credit cards and financial protection.

A major advantage of using a credit card to pay for something is the financial protection it will give you. The logo on your credit card is as good as taking out an insurance policy on your purchase every time you buy something. This protection covers you for fraud, if you can prove someone else made a purchase on your card without your permission, the theft and/or damage of your new goods, usually within the first thirty days of purchase and can even guarantee you a refund if you pay for something over the internet that never gets delivered.

Money for nothing.

Time after time you can read articles bemoaning the interest rates that credit cards charge. For sure, we should all look for the lowest interest rates possible on our credit cards and regularly pay off our credit card debts – but you know sometimes you can get some good out of your credit card by way of reduced costs and special offers. For example, if you rent a car and pay for it with your credit card the auto rental company will in all likelihood not charge you extra for the insurances. When booking a hotel they’re more likely to hold a room for you if you use a credit card and will certainly be more willing to bill you on departure rather than wanting payment in advance. Reclaiming flight expenses in the event a flight cancellation can be so much easier if you’ve booked with a credit card rather than a debit card and, if you’re abroad, getting cash out with your credit card can quite often be better for you when it comes to foreign exchange rates and expenses.

Introduction.

You know – it’s not just taking out too many loans that can cause you to fall into debt, one of the quickest ways to fall into debt is quite simply not to manage your approach to financial matters effectively. So, what advice might help you in avoiding poor financial management so that you can either avoid debt or at least be able to quickly pay off any debts that you have accrued?

Debt – deal with it!

First off – those credit cards. If you seem to be paying a fortune every month and yet never see the capital owed reduce, then you should look online to transfer your credit card debts to cards with lower interest rates or, even better, ones offering 0% interest for 6 to 12 months. That really will let you attack the outstanding credit card debt. When it comes to personal loans, having multiple personal loans is a killer when it comes to good financial management. Look online for a debt consolidation loan that will bring all the outstanding debts into one loan, with one rate of interest, requiring you to make only one loan repayment a month. Regarding your mortgage, if you are in arrears with your mortgage payment, look online for a new mortgage deal that either extends the repayment period to reduce the monthly repayments and/or offers a lower rate of interest.

Plan ahead.

The first thing you must do is be prepared to accept that you have debt and it won’t magically go away. This is where financial planning really comes in to its own. Having begun to sort out your finances an unexpected expenditure can really throw your plans, say you need a new wash tub or tires for the car. To cover these eventualities you must start to save a little from your pay check each month, look for high interest savings accounts online. Ultimately, if you are in debt, good financial planning will also mean accepting that sometimes you just can’t afford somethings. So be prepared to accept that things like a new TV or cell phone,whilst the old one is still working, might just have to wait for a few more months.

Introduction.

To many people being asked a question like “can debt be good” would only illicit one response – a resounding no. However, strange as it may sound, there actually are occasions when being in debt could be good for you, albeit over a long period of time rather than in the short term. So, how can a long term debt be beneficial to you and what are the short term debts that you should avoid?

Short term debts to avoid.

The simplest way to avoid short term debts is to not try and live beyond what you can afford from your monthly pay check. So, having allowed for your rent, utility bills and food; plus don’t forget the amount you need to repay those long term loans that we’ll come to in a moment – you’ve then got a fixed amount you can spend on yourself. Whether that’s for buying clothes, saving for a holiday or buying the latest gadget, if you can’t afford it now don’t pay for it off your credit card or take out a personal loan or pay day loan – wait until you’ve saved for it. The main reason for this is that taking out small loans or building up credit card debt will hit your credit score badly – making it more difficult to get a good deal on a bigger loan when you need one.

Long term debts as investments.

Any long term debts that you incur which are then of advantage to you later on – can actually be seen as investments. These debts are usually for significant amounts of money and so will need repaying over several years – but if in the longer term they make you money, then they are also an investment. Probably the best example here is a college loan, taking out student loans to get you a first degree will cost tens of thousands of dollars and will take a while to pay off. But, having obtained that first degree you’ll be qualified to work in jobs paying you hundreds of thousands of dollars more over your working life, than if you’d never bothered going to college. If, for whatever reasons, you don’t go to college – why work for the man when you can work for yourself. Taking out a business loan to start up your own business leaves you in full control of what you earn and how hard you work for it. It doesn’t matter if you take a loan for a truck to start a plumbing business or to rent offices for a finance company, a business loan is a true investment. There are, of course, plenty of other examples we could cite but taking out a mortgage is one debt that we all see as a long term investment, be it for ourselves or our families in the future.

Introduction.

The next few weeks will see the main rush in Christmas shopping building up to a climax around 20^th December, with an anticipated online shopping peak in the first few days of December. With so many of us still suffering from the effects of the recession and unemployment – that inevitably will mean reaching for the credit card every time we make a purchase, be it on the High Street or online. The net result of that is that come the New Year – we’re deep in debt to a high interest rate credit card! So, is there an alternative to credit card debt at Christmas?

Take out a Christmas loan.

The simple answers is that yes, there is an alternative to having to repay credit cards at incredibly high interest rates – take out a Christmas loan. Before you decide oh no, that can’t possibly be a good idea before Christmas – think on this. Every time you use your credit card to pay for a Christmas gift you are, in effect, taking out a small personal loan. The credit card company doesn’t lend you the money for free, they add interest to it that has to be paid back in full next bill – or the interest you pay will keep on rising. So, if you can’t pay for all your Christmas gifts and shopping from your savings or your regular pay check – taking out a personal loan to pay for Christmas should cost you less than using your credit card.

Advantages of a Christmas loan over using credit cards.

There are three main advantages to using a personal loan for your Christmas shopping over using your credit cards. First – by looking online for personal loans you will find countless pre-Christmas loan offers at interest rates far below those of the credit cards. Secondly, when borrowing the money – you can decide how long you take to repay it, so you’re not having to meet the short repayment deadline set by a credit card company. Thirdly, using a personal loan for your Christmas shopping will be every bit as convenient as using a credit card. Both in High Street stores and online – all you need to do is use the bank card that the loan was paid into.

Introduction.

Sounds too good to be true that you can get easy loans? Well it’s a fact that these days, with just a little bit of research on the internet, anyone can access an easy loan for just about anything they might want to do. Where are all these easy loans to be found – through peer-to-peer lending websites, also known as social lending clubs.

How it works.

Using a social lending club to borrow money is rather like buying something on an internet auction site like eBay. The difference is that rather than advertising some goods for sale you set up an advert requesting to borrow a sum of money. The lenders in the person-to-person lending website then make you offers, which you then choose from. For example, say you wanted to borrow $25,000 – perhaps to fund a wedding, start-up or develop a business, to pay off that last bit of your expensive mortgage or even to finally have that cosmetic surgery.  One lender might offer you the money to be repaid in 2 years at 8% interest, whereas perhaps another might offer terms over 3 years at 6% – you can then decide which you offer you can best afford. That might be a short repayment period or perhaps a lower rate of interest but over a longer repayment period. When registering with a social lending website, both lenders and borrowers do have to agree to some financial and personal checks – to make sure they’re who the say they are and so as to avoid any fraud occurring. Other than that, even if your credit rating would mean that many High Street banks and lenders would not even reply to your application to borrow money, you’ll find your application quickly approved and processed.

Borrower and lender.

Too good to be true you might well think but – by using a people-to-people lending website you really can access low interest rates to fund your project. Is there a catch, well no there isn’t but it does have to be said that social lending only works because the lender is prepared to trust the borrower. Despite the checks that are made on the borrower, the lender really is dependent on the honesty of the borrower when it comes to having their loan repaid. Having said that, if you fancy the idea of making some money as a lender on one of these websites, many lenders form groups of lenders, each contributing funds towards a loan, thereby minimizing their risks and exposure.

Introduction.

If you’re in the process of selling and buying homes you won’t need telling how stressful it can be. For everyone those stresses include: finding the new place you want to buy, negotiating on the price, arranging a new mortgage and then finally organizing the move itself. As if all that isn’t stressful enough – what if you need to actually buy the new property ahead of selling your old home? You can’t afford to take out two mortgages at once – so how are you going to pay for the new home ahead of selling the one you’re in now? The solution to both those questions is – you need a bridging loan.

What is a bridging loan?

A bridging loan is simply a loan that can be arranged for you to provide you with immediate cash to complete a property transaction. Bridging loans are only intended as short-term loans, normally lasting a few weeks at most. However, they will be secured loans against the value of the property you’re currently about to sell. A bridging loan is a very formal way to borrow money and will require you to complete several forms and have a good credit rating. So, on that basis you are recommended to find a reputable online loans advisor or mortgage broker to guide you through the process. There are two types of bridging loan that you can apply for – closed and open.

Closed bridging loans.

A closed bridging loan is for home owners that need to buy their new property ahead of completely selling their existing one. To enter into a closed bridging loan agreement you will already have to have someone committed to buying your current home with a formalized sales contract between you. Closed bridge loans are the easiest type to get, especially through a recognized bridging loans broker and are usually for a specific and very short period of time.

Open bridging loans.

An open bridging loan is a higher risk one for the lender and so will often have a higher interest rate than a closed bridging loan. This is because they can be applied for ahead of there being any agreement between you and a potential buyer for your existing property. With no potential buyer in place this type of bridging loan has no specified loan period – making it an ‘open’ agreement.

Introduction.

With so many people struggling now to take out personal loans – it has been almost inevitable that some unscrupulous lenders would try to worm there way into the market. As the High Street banks become less inclined to offer loans especially to low credit score borrowers – the more people turn to online loans providers to get hold of the cash they so desperately need. For most people, most of the time, this is not a problem at all and there are many great offers out there to be had in online loans. However, if a personal loan provider wants to charge you an up-front loan fee before giving you any of the loan cash – you’re better off refusing them and seeking your loan from another online lender.

Bogus loan companies.

Even if you have the worst possible credit score imaginable, there really is no reason for a finance company to ask you to pay a fee up-front before deciding whether or not to offer you a loan. Any company that insists on you making a payment before giving you the cash should be treated as at best suspicious – if not a downright bogus loans company who have no intention at all of lending you any money. A typical scenario is for you to work through the application procedure only to find that before the company can process your application you have to pay an ‘administration fee’ of anything around $100 to well over $1000!

3 reasons not to pay an up front fee for a loan.

The simplest possible of reasons here is that there is no guarantee that having handed over your cash – that they’ll then agree to your loan request at all. The chances of you being ripped off like this are quite high from companies demanding up-front payments – it really is just a scam for them to get money from you. Second, OK so the company you’re borrowing money from wants to make a profit itself – fair enough they’re not a charity, but if they need you to pay them for a bit of administration in advance – then you really should worry as to whether they can afford to lend you the money in the first place. Third, even if a loan company says you’re a bad risk to lend money to – that’s no reason to get you to pay them for giving you a loan before you’ve seen the color of their money, they’ll soon enough recoup any expenditure they make through the interest rate they charge you anyway.

Introduction.

Following months of uncertainty regarding the economy, the general consensus of opinion now seems to be that it is finally time to start buying again. We’re not talking here about things like electrical goods for the kitchen, furniture or TVs etc – but the bigger items that we tend only to buy when we think our jobs are secure, our finances are sound and the national economy is stable. Such bigger items are things like a new car or home, things most of will need to take out a loan for like an auto loan or a mortgage.

Are you ready to start buying again?

Having gone through an economically unstable period you’re probably one of the millions of American’s that haven’t been spending money of things that were not seen as essential. Instead, and rather than banking spare cash with the interest rates having been so poor, that was the time to pay off debts like credit cards and personal loans so that now the economic climate is brighter – you’re no longer saddled with those old debts and can start applying for new loans confident that your credit score is good. However, when starting to spend money again on big items – should you protect yourself against another downturn in the economy?

Protecting your new purchases.

Let’s face it nothing could be worse than starting to pay for something like a new car only to lose your job, fall behind with the payments and end up having the auto repossessed. The solution to this is to take out redundancy cover on an auto loan or new mortgage – to make sure that if your job does fold your payments will be covered. When taking out redundancy cover do make sure the contract you sign is exactly what you need and take special care to check with your boss that your job is safe. The reason for this is that quite often redundancy cover insurance can be ruled invalid if, at the time of taking out the cover, your job was under threat. Also, be aware that mortgage redundancy cover will rarely pay off the whole mortgage if you should lose your job, but will more likely agree to pay your mortgage for a fixed period giving you breathing space to find a new job.

Introduction.

It’s a fact, but worldwide financial instability and political uncertainty is once again wreaking havoc with USA money markets, quite apart from our own ‘home-grown’ financial problems. One result of these problems has been a rise in the rate of inflation from -0.4% in 2009 to nearly +2.4% already this year, or put another way in less than a year inflation has risen 3%. The net result of this is that interest rates on loans will be rising – something that can hit anyone paying off their student debts really hard.

The cost of graduating.

This rise in inflation and interest rates means that all but the best paid graduates, with large loans to repay, will be particularly hard hit as the re-payments will rise completely out of proportion to their wages; with the risk that whereas last year they were making great in-roads into paying off their student loans – they will now find the gains they made last year wiped out and even reversed this year. As if that’s not bad enough, with many graduates having to take out personal loans on completing their courses to afford things like the clothing they’ll need for their new jobs, fitting out an apartment to live in or even just needing an auto loan to buy a car so they can get to work – having all of these loans whilst struggling to establish yourself in a new job can seem just too much.

Consolidate your debts.

If you’ve recently graduated and are struggling to repay your loans the solution is to seek a debt consolidation loan; putting all of the separate loans together – meaning that you have one repayment to make, to one company and at one interest rate. As student loans traditionally have lower interest rates than other types of unsecured loans, you will need to make sure that the actual student loan you’re repaying isn’t better left as a separate loan and then just consolidate the other ones. Either way, the fewer companies you have to deal with when clearing student debt the better.

Introduction.

I guess it was only a matter of time before Mohammed Yunus’s Nobel Peace Prize in economics, for his pioneering work in micro-loans, – started to draw attention from the big banks and finance houses. The problem is quite simple really, what started out as a system whereby one person lent a relatively small amount of money to someone else for the purpose of, say, improving their sewing business in a developing country – has blossomed into a $60 billion a year loans industry.

Micro-Loans in the beginning.

As mentioned above the idea of micro-loans was originally very straightforward and low key. Rather than leaving any spare cash you had in a bank, instead you made micro-loans to individuals or small organizations and  businesses – who when they then repaid your loan had to pay a small amount of interest; often as little as 10% and way below commercial loan interest rates but generally higher than savings interest rates too. This made the micro-loan business more akin to a charitable system than a business one. However, to the people making the loans that didn’t matter as, by and large, they were as interested in their money doing ‘good’ as they were in turning a profit.

Micro-Loans today.

Fast forward a few years and the demand for micro-loans now by far out-strips the supply. Yes there are a lot of people out there that want to ‘do good’ with their spare cash; but there is only a finite supply of it. Needless to say the big banks and finance houses are stepping in to fill the void, ever keen to turn a dollar and even if it is to a high risk venture in somewhere like Nigeria. The sad part of this is, however, the interest rates that they are choosing to charge. No longer set at the charitable 10% – some of these big banks and finance houses are charging as much as 100% interest to high risk projects – as bad as if the borrower had gone to a loan shark. Ironically, they’re saying the high interest rates are because of the high demand for micro-loans in the first place! If you have some spare cash but do need to make a small profit on it and yet are basically of an altruistic nature – then providing micro-loans is something to consider. To get involved in micro-lending, look for a social lending website that is transparent about giving loans to poorer people to help them – rather than to just simply make a profit out of them.