Help your Teens Become Millionaires
Parents always want their kids to grow up and be successful. It's even better if that success includes a seven-figure savings account.
It isn't too late to turn your surly teen into a millionaire. Yes, your teen-the same kid who periodically loses an iPod in an unorganized backpack-can be taught the tenets of saving. You've taught him about integrity, courtesy, and personal responsibility; now it's time to teach him about compound interest.
The American dream is about working hard to accumulate wealth. Fortunately, in this land of free enterprise, wealth is an attainable dream. Since your kids have a lot of time, they can get rich without ever breaking a sweat. If you start teaching them about investing now, you can watch them build wealth thanks to compound interest.
A little now versus a lot later
The concept of compound interest is the process of making money on money made. As confusing as this might sound to a teenager, it's really pretty simple. Here's an example to get the message across:
Let's say you deposit $2,000 into an interest-bearing account with a 3.5 percent annual yield. After one year, the account will have earned $70, and the balance will be $2,070. If the interest rate never changes, and the earnings are taken out every year to buy, say, 70 iPod downloads, the account will indefinitely produce that $70.
But what happens if you skip the 70 downloads, and you leave the money in the account? In the second year, you'll earn interest on the $2,000 plus the $70 previous interest, for total earnings of $72.45. Let that money sit there longer, and the earning power continues to grow. By the tenth year, the account will earn more than $95 per year, and the balance will be in excess of $2,800. That's $800 earned just by waiting around.
Making a millionaire
Your teen will probably argue that $2,800 is nowhere near $1 million. He might also imply that forgoing ten years of downloads is a high price to pay. You'll then have to move to the more interesting lesson-what it takes to save up seven figures. The most important considerations in the calculation are yield, and the amount and timing of additional investments. If you can stash away $500 a month at an 8 percent average annual yield, the investment will crack the million-dollar mark after 35 years.
Your teen may then argue that 35 years is practically an eternity, and too long to wait for the million-dollar jackpot. Yes, it's a long time-but there's another factor to the equation. The $500 per month for 35 years only adds up to $210,000. That means that your teen will only contribute a couple of hundred thousand, but will end up with $1 million. That's the kind of return even a surly teenager should appreciate. What's more, by the time he becomes a millionaire and he's just turning 50, he'll have his own surly teenager to explain the miracle of compound interest to.
Wednesday, January 30, 2008
Tuesday, January 29, 2008
Refinancing Woes - Meet the Parents
Refinancing Woes? Meet the Parents!
When you're facing foreclosure and you don't qualify for a refinance, consider asking mom and dad to help you out of the jam.
Kids in TV families are always asking their parents for help. Remember when Arnold and Willis Jackson were accused of robbing their neighbor's apartment on Different Strokes? Mr. Drummond helped his kids prove their innocence, despite the presence of some damaging circumstantial evidence. If you're struggling to meet your adjustable-rate mortgage (ARM) payments, it could be time to follow Arnold Jackson's lead, and ask for a little parental redemption.
Avoiding foreclosure
Being stuck in the web of an inappropriate mortgage forces you to consider the possibility of foreclosure, particularly if you can't sell your home and your mortgage refinance applications continue to be declined. It's a high-stress situation that offers no easy answers.
If you're not ready to play victim to foreclosure just yet, your parents might be able to help you out. A parental bailout may not be the preferred course of action, but it could be the best way to survive this temporary crisis. Parents can help you in one of three ways: by giving you money, co-signing on your refinance, or buying your property.
Gifting cash
You might be able to negotiate a refinance if you had some cash available to reduce the debt balance. Your parents can give you up to $12,000 per year without tax consequences; if you're married, they can give that amount to both you and your spouse. Split up the gift in two separate tax years, and your parents can donate up to $48,000 to your cause. Lenders may want to see a signed statement from your parents stating that the funds do not need to be repaid.
The gift of a signature
Your parents can also co-sign for you on a mortgage refinance. As a co-signer, they're agreeing to pay the debt if you default. The lender may approve your refinance with this additional backing; but having a co-signer won't help you make the payments. Before asking for those parental signatures, make sure that you understand why you didn't qualify for the refinance. Then, ask yourself honestly if this mortgage is realistic for you and your household. If it isn't, find another solution. You don't need to get your parents involved if foreclosure is inevitable.
An investment gift
You could also sell your property to your parents, and use the cash to pay off the loan. Once the transaction is complete, your parents can rent the property back to you. Or you can move to a smaller rental, and your parents can rent it out to a third party.
While your parents may not be as financially well off as Diff'rent Strokes' Mr. Drummond, it's likely that they're more stable than you are. Try opening the conversation-you just might end up with a solution to your mortgage dilemma.
When you're facing foreclosure and you don't qualify for a refinance, consider asking mom and dad to help you out of the jam.
Kids in TV families are always asking their parents for help. Remember when Arnold and Willis Jackson were accused of robbing their neighbor's apartment on Different Strokes? Mr. Drummond helped his kids prove their innocence, despite the presence of some damaging circumstantial evidence. If you're struggling to meet your adjustable-rate mortgage (ARM) payments, it could be time to follow Arnold Jackson's lead, and ask for a little parental redemption.
Avoiding foreclosure
Being stuck in the web of an inappropriate mortgage forces you to consider the possibility of foreclosure, particularly if you can't sell your home and your mortgage refinance applications continue to be declined. It's a high-stress situation that offers no easy answers.
If you're not ready to play victim to foreclosure just yet, your parents might be able to help you out. A parental bailout may not be the preferred course of action, but it could be the best way to survive this temporary crisis. Parents can help you in one of three ways: by giving you money, co-signing on your refinance, or buying your property.
Gifting cash
You might be able to negotiate a refinance if you had some cash available to reduce the debt balance. Your parents can give you up to $12,000 per year without tax consequences; if you're married, they can give that amount to both you and your spouse. Split up the gift in two separate tax years, and your parents can donate up to $48,000 to your cause. Lenders may want to see a signed statement from your parents stating that the funds do not need to be repaid.
The gift of a signature
Your parents can also co-sign for you on a mortgage refinance. As a co-signer, they're agreeing to pay the debt if you default. The lender may approve your refinance with this additional backing; but having a co-signer won't help you make the payments. Before asking for those parental signatures, make sure that you understand why you didn't qualify for the refinance. Then, ask yourself honestly if this mortgage is realistic for you and your household. If it isn't, find another solution. You don't need to get your parents involved if foreclosure is inevitable.
An investment gift
You could also sell your property to your parents, and use the cash to pay off the loan. Once the transaction is complete, your parents can rent the property back to you. Or you can move to a smaller rental, and your parents can rent it out to a third party.
While your parents may not be as financially well off as Diff'rent Strokes' Mr. Drummond, it's likely that they're more stable than you are. Try opening the conversation-you just might end up with a solution to your mortgage dilemma.
Monday, January 28, 2008
Avoid Penalty Points for Missed Payments
Avoid Penalty Points for Missed Payments
The fallout from delinquent subprime mortgages continues to illustrate how inter-connected our financial system truly is. Because of a penalty known as "universal default," a late payment on a mortgage can cause the interest rate on your credit card to rise.
In the wake of the surbprime mortgage crisis, credit card companies have moved to their battle stations, carefully keeping watch over potential credit problems. After observing countless financial institutions lose millions on defaulted mortgages, they're pricing their products to reflect potential risks. People with bad credit are now paying more than ever before, and their interest rates are also being adjusted upward based on a provision called universal default.
Domino effect
Credit card companies base their interest rates on a person's credit score. The higher the score, the lower the rate. When a financial institution issues a piece of plastic, their contracts generally allow them to change the interest rate. This is the case with the universal default provision.
These companies monitor the scores of their cardholders, and they react if they observe risky financial behavior. If, for example, a cardholder makes a late payment on his mortgage, the credit bureau will report a lower score. The credit card company sees the reduced score, and assumes that the customer is stumbling financially and could be a potential risk. Despite the fact that the cardholder's late payment was on his mortgage and not the credit card, the financial institution may raise interest rates to compensate for the potential risk.
Preventive maintenance
Unless you've got a card that excludes the universal default provision, there's not much you can do to stop the credit card company from raising your rate. Ideally, you should check your contract carefully, ensuring that it doesn't contain such provision. However, if you find that your current card has it, there are two ways to avoid the penalty.
The first is to get another piece of plastic without the default charge. The other is to make sure that your credit score never dips by making timely payments on all your accounts. Set up automatic withdrawals from your bank account on big ticket items like your home or car payment, and keep up on all your other bills. Consider using online payment systems so that you don't have to worry about a check getting lost in the mail. Also, make sure that you don't take on more debt than you can handle, as that can also lower your score.
The universal default provision is yet another example of how skittish financial institutions have become in the wake of the subprime mortgage crisis. By penalizing cardholders if they make a delinquent payment on other accounts, they're pricing for a potential credit risk. It's an example of how people with bad credit are being held to a higher standard-one that can, unfortunately, involve much higher interest rates.
The fallout from delinquent subprime mortgages continues to illustrate how inter-connected our financial system truly is. Because of a penalty known as "universal default," a late payment on a mortgage can cause the interest rate on your credit card to rise.
In the wake of the surbprime mortgage crisis, credit card companies have moved to their battle stations, carefully keeping watch over potential credit problems. After observing countless financial institutions lose millions on defaulted mortgages, they're pricing their products to reflect potential risks. People with bad credit are now paying more than ever before, and their interest rates are also being adjusted upward based on a provision called universal default.
Domino effect
Credit card companies base their interest rates on a person's credit score. The higher the score, the lower the rate. When a financial institution issues a piece of plastic, their contracts generally allow them to change the interest rate. This is the case with the universal default provision.
These companies monitor the scores of their cardholders, and they react if they observe risky financial behavior. If, for example, a cardholder makes a late payment on his mortgage, the credit bureau will report a lower score. The credit card company sees the reduced score, and assumes that the customer is stumbling financially and could be a potential risk. Despite the fact that the cardholder's late payment was on his mortgage and not the credit card, the financial institution may raise interest rates to compensate for the potential risk.
Preventive maintenance
Unless you've got a card that excludes the universal default provision, there's not much you can do to stop the credit card company from raising your rate. Ideally, you should check your contract carefully, ensuring that it doesn't contain such provision. However, if you find that your current card has it, there are two ways to avoid the penalty.
The first is to get another piece of plastic without the default charge. The other is to make sure that your credit score never dips by making timely payments on all your accounts. Set up automatic withdrawals from your bank account on big ticket items like your home or car payment, and keep up on all your other bills. Consider using online payment systems so that you don't have to worry about a check getting lost in the mail. Also, make sure that you don't take on more debt than you can handle, as that can also lower your score.
The universal default provision is yet another example of how skittish financial institutions have become in the wake of the subprime mortgage crisis. By penalizing cardholders if they make a delinquent payment on other accounts, they're pricing for a potential credit risk. It's an example of how people with bad credit are being held to a higher standard-one that can, unfortunately, involve much higher interest rates.
Sunday, January 27, 2008
Life Gets Easier for Bad Credit Loan Holders
Life Gets Easier for Bad Credit Loan Holders
The bugle has sounded and the cavalry is on the way for bad credit loan holders. Following a rash of foreclosures and loan defaults, mortgage companies have now begun negotiating easier terms with subprime borrowers.
No one could have predicted the breadth and depth of the subprime mortgage crisis. From realtors to mortgage banks to home improvement contractors, everyone in the housing industry has felt its wrath. The entire economy has slowed, as well, as the crisis has rocked investors and shaken consumer confidence.
While few could have anticipated the fallout from lax lending guidelines for bad credit loan holders, the mortgage industry is starting to react.
Revisiting the ARM
The crux of the subprime crisis occurred with adjustable-rate mortgages (ARMs). These loans include a low introductory interest rate, designed to entice borrowers to take out a mortgage. The product may have been initially conceived as a way to compel borrowers with good credit to act when the interest rates on fixed-mortgages were high, but unfortunately, the low teaser rates also proved tempting for another crowd.
Subprime borrowers, desperate for cash, treated their home equity like a money tree. Because home values had experienced an unprecedented increase in appreciation, bad credit loan holders routinely took out ARMs whenever they needed a shot in the arm of extra cash. They had low monthly payments and plenty of new equity to work with, a formula that served them well for several years. Then the bottom fell out.
Crash, burn...and reborn
When home values began to plummet, subprime borrowers suddenly couldn't find enough equity to qualify for a new mortgage. As their ARMs neared the end of the teaser rate periods, the borrowers couldn't get a new loan. Defaults and foreclosures soon followed, and the housing market found itself in a tailspin.
To help subprime borrowers, the mortgage industry has begun revisiting the bad credit ARM. Terms have been modified and rates frozen-some of them for up to five years. Industry data indicates that 250,000 borrowers received new repayment plans in the third quarter of last year, and more are on the way. There's even talk of expanding the program to help borrowers with non-subprime adjustable-rate loans.
Mortgage lessons learned
Around these unprecedented actions, debate will surely rage. Who will ultimately be held accountable for the subprime crisis? Without a doubt, there's plenty of blame to go around. Lenders have been greedy in the search for more loans, and their lowered lending standards have proven disastrous. Borrowers have also ignored the fundamental laws of money management, routinely borrowing more than they could afford.
In the long run, it's difficult to determine what will be the outcome of the industry's emergency actions. But the overriding concern is focused on the short-term. The bailout is designed to help an industry that's taken on serious amounts of water, and it's in everyone's best interest that this effort keeps the mortgage market afloat.
The bugle has sounded and the cavalry is on the way for bad credit loan holders. Following a rash of foreclosures and loan defaults, mortgage companies have now begun negotiating easier terms with subprime borrowers.
No one could have predicted the breadth and depth of the subprime mortgage crisis. From realtors to mortgage banks to home improvement contractors, everyone in the housing industry has felt its wrath. The entire economy has slowed, as well, as the crisis has rocked investors and shaken consumer confidence.
While few could have anticipated the fallout from lax lending guidelines for bad credit loan holders, the mortgage industry is starting to react.
Revisiting the ARM
The crux of the subprime crisis occurred with adjustable-rate mortgages (ARMs). These loans include a low introductory interest rate, designed to entice borrowers to take out a mortgage. The product may have been initially conceived as a way to compel borrowers with good credit to act when the interest rates on fixed-mortgages were high, but unfortunately, the low teaser rates also proved tempting for another crowd.
Subprime borrowers, desperate for cash, treated their home equity like a money tree. Because home values had experienced an unprecedented increase in appreciation, bad credit loan holders routinely took out ARMs whenever they needed a shot in the arm of extra cash. They had low monthly payments and plenty of new equity to work with, a formula that served them well for several years. Then the bottom fell out.
Crash, burn...and reborn
When home values began to plummet, subprime borrowers suddenly couldn't find enough equity to qualify for a new mortgage. As their ARMs neared the end of the teaser rate periods, the borrowers couldn't get a new loan. Defaults and foreclosures soon followed, and the housing market found itself in a tailspin.
To help subprime borrowers, the mortgage industry has begun revisiting the bad credit ARM. Terms have been modified and rates frozen-some of them for up to five years. Industry data indicates that 250,000 borrowers received new repayment plans in the third quarter of last year, and more are on the way. There's even talk of expanding the program to help borrowers with non-subprime adjustable-rate loans.
Mortgage lessons learned
Around these unprecedented actions, debate will surely rage. Who will ultimately be held accountable for the subprime crisis? Without a doubt, there's plenty of blame to go around. Lenders have been greedy in the search for more loans, and their lowered lending standards have proven disastrous. Borrowers have also ignored the fundamental laws of money management, routinely borrowing more than they could afford.
In the long run, it's difficult to determine what will be the outcome of the industry's emergency actions. But the overriding concern is focused on the short-term. The bailout is designed to help an industry that's taken on serious amounts of water, and it's in everyone's best interest that this effort keeps the mortgage market afloat.
Saturday, January 26, 2008
Five Common Car Purchasing Errors
Five Common Car Purchasing Errors
When learning to drive, many people practice in empty car lots or on country roads. When you're buying a car, you don't get to practice. You only get one shot-so be aware of five common car purchasing errors.
The problem with buying a new car is that these four-wheeled babies are too much fun. Cars are sleek, stylish, and can truly be a reflection of your personality. Since the best ones cost the most money, it's easy to find yourself way in over your head on a monthly basis paying for what you love.
Avoid making the wrong decisions by steering clear of five common car purchasing mistakes:
1. Buying based on wants, not needs
It's too easy to buy the hottest-looking car on the lot. To avoid this temptation, spend a few rational moments writing down how you'll actually use the car. Consider how many miles you drive, and the weather conditions that your car needs to be equipped for. This exercise should help you determine what kind of car would be ideal for you.
2. Budget based only on monthly payment
Put together a budget to decide exactly how much you want to spend on a monthly basis. Don't stop there-it's all too easy for a finance manager to put together an auto loan package that gets you a low auto loan payment. The problem is that you'll be making payments well past the day that your sleek car isn't so sleek anymore. Instead, decide how much money you're willing to spend overall, and how soon you'd like to pay it off.
3. Start talking trade-ins right away
If you want to trade-in your car, don't tell your sales person until after you've negotiated the price of the new car. If you let them work it into the deal earlier, your final numbers could be skewed against you.
4. Not investigating car dealer
Do as much research on the car dealer as you do on the car. Find out if any of your friends or family has done business with the dealer you have in mind. Check with the Better Business Bureau, as well.
5. Sticking with one dealer's loan
If you've got the right dealer and the right car picked out, take a few extra days and make sure that you've got the right car loan. Shop around for the best rates and fees, and go with a reputable lender. It need not be the dealer selling you the car.
You can practice the process of buying cars as much as you want, although it may get costly over time. A more budget-friendly alternative is to take your time, and carefully assess each move that you make. Keep this list of common errors handy, and review them throughout the process. Take it slowly and do it right. In the end, you'll have the car you need at a price you'll love. Driving the wheels you want at the deals you want will make for smoother, happier driving.
When learning to drive, many people practice in empty car lots or on country roads. When you're buying a car, you don't get to practice. You only get one shot-so be aware of five common car purchasing errors.
The problem with buying a new car is that these four-wheeled babies are too much fun. Cars are sleek, stylish, and can truly be a reflection of your personality. Since the best ones cost the most money, it's easy to find yourself way in over your head on a monthly basis paying for what you love.
Avoid making the wrong decisions by steering clear of five common car purchasing mistakes:
1. Buying based on wants, not needs
It's too easy to buy the hottest-looking car on the lot. To avoid this temptation, spend a few rational moments writing down how you'll actually use the car. Consider how many miles you drive, and the weather conditions that your car needs to be equipped for. This exercise should help you determine what kind of car would be ideal for you.
2. Budget based only on monthly payment
Put together a budget to decide exactly how much you want to spend on a monthly basis. Don't stop there-it's all too easy for a finance manager to put together an auto loan package that gets you a low auto loan payment. The problem is that you'll be making payments well past the day that your sleek car isn't so sleek anymore. Instead, decide how much money you're willing to spend overall, and how soon you'd like to pay it off.
3. Start talking trade-ins right away
If you want to trade-in your car, don't tell your sales person until after you've negotiated the price of the new car. If you let them work it into the deal earlier, your final numbers could be skewed against you.
4. Not investigating car dealer
Do as much research on the car dealer as you do on the car. Find out if any of your friends or family has done business with the dealer you have in mind. Check with the Better Business Bureau, as well.
5. Sticking with one dealer's loan
If you've got the right dealer and the right car picked out, take a few extra days and make sure that you've got the right car loan. Shop around for the best rates and fees, and go with a reputable lender. It need not be the dealer selling you the car.
You can practice the process of buying cars as much as you want, although it may get costly over time. A more budget-friendly alternative is to take your time, and carefully assess each move that you make. Keep this list of common errors handy, and review them throughout the process. Take it slowly and do it right. In the end, you'll have the car you need at a price you'll love. Driving the wheels you want at the deals you want will make for smoother, happier driving.
Friday, January 25, 2008
Four Ideas for Student Loan Consolidation
Four Ideas for Student Loan Consolidation
To consolidate or not to consolidate? Hamlet might have asked this question if he had graduated from college with student loans. If you're considering a loan consolidation, you'd be wise to follow a few simple tips.
The great thing about graduating from college is that you don't have to worry about homework hanging over your head. On the flip side of the coin, you may have something far worse to be concerned about-a student loan payment.
Many graduates consolidate their loans to lessen the pain of repayment. But no financial transaction should be taken lightly. Not only must you carefully analyze your current situation and goals, you need to consider what types of student loans are on the market. Here are some student loan consolidation tips to keep in mind.
1. Shop until your payment drops
You don't have to stick with the same lender if you're going to consolidate your loans. Shop around and look at different opportunities. Rates may not vary, but you could find that different lenders offer different discounts (see next tip). You may also find that the lender that you're currently with has included extra charges that you don't need to pay. It's always wise to comparison shop, no matter what your purchase.
2. Go discount shopping
As you're shopping for the best consolidation package, ask about discounts. Lenders today offer them for a variety of items, including everything from making a payment on time, to using automatic withdrawals from your checking account. Lenders highly value graduates who can make their student loan payments on time, primarily because so few of them do. Discounts for on-time bill paying might include reducing your payment by one full percentage point if you can rack up a 36-month consecutive payment streak.
3. Tame the terms
By extending the repayment term of your loan, you can lower your monthly payment. For most graduates struggling in an entry-level job, that's a very enticing prospect. But don't judge a payment book by its cover-an extended loan term can be as frightening as term papers. Those lower payments don't come cheap-you're going to get whacked long-term by higher interest costs. Ask your lender to tell you the difference in long-term interest costs for loans with different repayment terms. The results will startle you.
4. Do a reality check
Most importantly, don't choose a lower loan payment just so that you can buy a really cool car. Unless you've landed an exceptionally high-paying job out of college, you'll probably have to choose more of a utilitarian vehicle until you can afford a nicer ride.
As a graduate, it's great to be free from the constraints of endless exams and required reading. Unfortunately, the financial equivalent to academic pain is waiting in the wings. Repaying a student loan will be a concern of yours for a long time to come. Make sure that the debt isn't with you one day longer than necessary by carefully shopping for the right consolidation loan.
To consolidate or not to consolidate? Hamlet might have asked this question if he had graduated from college with student loans. If you're considering a loan consolidation, you'd be wise to follow a few simple tips.
The great thing about graduating from college is that you don't have to worry about homework hanging over your head. On the flip side of the coin, you may have something far worse to be concerned about-a student loan payment.
Many graduates consolidate their loans to lessen the pain of repayment. But no financial transaction should be taken lightly. Not only must you carefully analyze your current situation and goals, you need to consider what types of student loans are on the market. Here are some student loan consolidation tips to keep in mind.
1. Shop until your payment drops
You don't have to stick with the same lender if you're going to consolidate your loans. Shop around and look at different opportunities. Rates may not vary, but you could find that different lenders offer different discounts (see next tip). You may also find that the lender that you're currently with has included extra charges that you don't need to pay. It's always wise to comparison shop, no matter what your purchase.
2. Go discount shopping
As you're shopping for the best consolidation package, ask about discounts. Lenders today offer them for a variety of items, including everything from making a payment on time, to using automatic withdrawals from your checking account. Lenders highly value graduates who can make their student loan payments on time, primarily because so few of them do. Discounts for on-time bill paying might include reducing your payment by one full percentage point if you can rack up a 36-month consecutive payment streak.
3. Tame the terms
By extending the repayment term of your loan, you can lower your monthly payment. For most graduates struggling in an entry-level job, that's a very enticing prospect. But don't judge a payment book by its cover-an extended loan term can be as frightening as term papers. Those lower payments don't come cheap-you're going to get whacked long-term by higher interest costs. Ask your lender to tell you the difference in long-term interest costs for loans with different repayment terms. The results will startle you.
4. Do a reality check
Most importantly, don't choose a lower loan payment just so that you can buy a really cool car. Unless you've landed an exceptionally high-paying job out of college, you'll probably have to choose more of a utilitarian vehicle until you can afford a nicer ride.
As a graduate, it's great to be free from the constraints of endless exams and required reading. Unfortunately, the financial equivalent to academic pain is waiting in the wings. Repaying a student loan will be a concern of yours for a long time to come. Make sure that the debt isn't with you one day longer than necessary by carefully shopping for the right consolidation loan.
Thursday, January 24, 2008
Car Loans
Car Loans
Are You the Ideal Borrower for a Car Loan?
When you are looking for someone to loan you money, no matter what the purpose, you want to be as attractive to that person as possible. So, who do lenders feel most comfortable with when writing car loans? An excellent credit score as well as a low debt-to-income ratio always makes you attractive to a car lender. In addition, many banks and traditional lenders prefer to lend money for new cars.
If your car loan will be written on a used vehicle, and it is a newer car model, less than the book value, and you have a relatively short repayment schedule, your car loan will look more attractive.
Car Loan If You Are Not the Ideal Borrower? - Bad Credit Car Loans
Bad Credit, borrowing money for an older car, or needing to finance for an extended period are all reasons that a lender may look cautiously at your loan application. If you are unable to get a car loan, you may ask what would help your case. Often a small down payment may be enough to ease the lender's mind.
If traditional financing is out of the question, the next step is to attempt to get financing through the dealership. Most dealerships offer this service, and would prefer to finance your loan as well as sell you the car. The interest rate will likely be higher than through a bank or online lender, but still reasonable. The dealership who, of course, wants to sell you a vehicle, will often act as an intermediary between you and the lender, and help work out a deal.
Other Choices in Financing Your Car - Refinance or use a HELOC
If you are unable to obtain a car loan through a traditional or online lender, or through one of the major motor company's credit department, you are left with a few options. If you own your home, you can take out a 293 to pay for your car. The interest rate is reasonable, and you can normally write-off the interest on your taxes, but, you stand to lose not your car but your house if you default.
Are You the Ideal Borrower for a Car Loan?
When you are looking for someone to loan you money, no matter what the purpose, you want to be as attractive to that person as possible. So, who do lenders feel most comfortable with when writing car loans? An excellent credit score as well as a low debt-to-income ratio always makes you attractive to a car lender. In addition, many banks and traditional lenders prefer to lend money for new cars.
If your car loan will be written on a used vehicle, and it is a newer car model, less than the book value, and you have a relatively short repayment schedule, your car loan will look more attractive.
Car Loan If You Are Not the Ideal Borrower? - Bad Credit Car Loans
Bad Credit, borrowing money for an older car, or needing to finance for an extended period are all reasons that a lender may look cautiously at your loan application. If you are unable to get a car loan, you may ask what would help your case. Often a small down payment may be enough to ease the lender's mind.
If traditional financing is out of the question, the next step is to attempt to get financing through the dealership. Most dealerships offer this service, and would prefer to finance your loan as well as sell you the car. The interest rate will likely be higher than through a bank or online lender, but still reasonable. The dealership who, of course, wants to sell you a vehicle, will often act as an intermediary between you and the lender, and help work out a deal.
Other Choices in Financing Your Car - Refinance or use a HELOC
If you are unable to obtain a car loan through a traditional or online lender, or through one of the major motor company's credit department, you are left with a few options. If you own your home, you can take out a 293 to pay for your car. The interest rate is reasonable, and you can normally write-off the interest on your taxes, but, you stand to lose not your car but your house if you default.
Wednesday, January 23, 2008
Student Loans: Outlook 2008
Student Loans: Outlook 2008
Scandal rocked the student loan industry in 2007-what's on tap for 2008?
When Jackie, the TV weather person, gives her prediction for the week, you don't expect her to mention what's happening in the student loan industry. That's a good thing, because the outlook might involve lingering thunderstorms and high-pressure systems, as colleges and lenders try to rebound from some bad business that was uncovered last year.
Student loans and scandal
In 2007, the student loan industry was marred by scandal. Some colleges and universities were found to have revenue-sharing agreements with lenders who were receiving financial kickbacks for funneling their students to only one lender. As a result, nearly 1,000 colleges and universities received letters from the Federal Student Aid office (FSA) reminding them of their responsibility to provide students with several lender options. A few months after sending the initial batch of letters, the FSA followed up with 55 colleges and 23 lenders, asking for further documentation of their student loan activity.
Stricter standards
In the aftermath of last year's scandal, colleges and student lenders can expect 2008 to be characterized by stricter interpretation of existing legislation, further scrutiny into college records and, possibly, enforcement actions to protect a student's right to choose his own lender.
The Higher Education Act of 1965 (HEA) doesn't permit colleges to receive payments from lenders in exchange for student loan applications. The exact definition of what constitutes an enforceable violation, however, is open to interpretation. Traditionally, the FSA has acted on the belief that a violation happens when the lender gives the incentive specifically in return for exclusive student referrals. But the lender has been allowed to provide schools with other types of incentives, such as those intended to further the lender's advertising, branding, or goodwill objectives.
A lender's burden
In the latter part of 2007, the FSA announced that a new interpretation of the HEA will take effect in July, 2008. Under the new interpretation, the FSA places the burden on the lender to prove that payments made to colleges were not for the purposes of obtaining student loan applications. This burden of proof may make it difficult for lenders to partner with colleges on any type of business development program.
The FSA might also start conducting more on-site reviews of a college's financial aid records, as well as their business dealings with lenders. These examinations may go as far as reviewing relationships between lenders and affiliate groups, such as alumni organizations. While the existing federal legislation doesn't prohibit arrangements made between lenders and affiliate groups, at least one lender in 2007 was forced to stop paying an alumni group for exclusive student loan referrals.
Where schools or lenders are found to be non-compliant, the FSA may initiate action to suspend or terminate that entity's participation in the Federal Family Education Loan Program (FFEL). Hopefully, such measures can be avoided, because the students will be the ones to get stuck in the downpour.
Scandal rocked the student loan industry in 2007-what's on tap for 2008?
When Jackie, the TV weather person, gives her prediction for the week, you don't expect her to mention what's happening in the student loan industry. That's a good thing, because the outlook might involve lingering thunderstorms and high-pressure systems, as colleges and lenders try to rebound from some bad business that was uncovered last year.
Student loans and scandal
In 2007, the student loan industry was marred by scandal. Some colleges and universities were found to have revenue-sharing agreements with lenders who were receiving financial kickbacks for funneling their students to only one lender. As a result, nearly 1,000 colleges and universities received letters from the Federal Student Aid office (FSA) reminding them of their responsibility to provide students with several lender options. A few months after sending the initial batch of letters, the FSA followed up with 55 colleges and 23 lenders, asking for further documentation of their student loan activity.
Stricter standards
In the aftermath of last year's scandal, colleges and student lenders can expect 2008 to be characterized by stricter interpretation of existing legislation, further scrutiny into college records and, possibly, enforcement actions to protect a student's right to choose his own lender.
The Higher Education Act of 1965 (HEA) doesn't permit colleges to receive payments from lenders in exchange for student loan applications. The exact definition of what constitutes an enforceable violation, however, is open to interpretation. Traditionally, the FSA has acted on the belief that a violation happens when the lender gives the incentive specifically in return for exclusive student referrals. But the lender has been allowed to provide schools with other types of incentives, such as those intended to further the lender's advertising, branding, or goodwill objectives.
A lender's burden
In the latter part of 2007, the FSA announced that a new interpretation of the HEA will take effect in July, 2008. Under the new interpretation, the FSA places the burden on the lender to prove that payments made to colleges were not for the purposes of obtaining student loan applications. This burden of proof may make it difficult for lenders to partner with colleges on any type of business development program.
The FSA might also start conducting more on-site reviews of a college's financial aid records, as well as their business dealings with lenders. These examinations may go as far as reviewing relationships between lenders and affiliate groups, such as alumni organizations. While the existing federal legislation doesn't prohibit arrangements made between lenders and affiliate groups, at least one lender in 2007 was forced to stop paying an alumni group for exclusive student loan referrals.
Where schools or lenders are found to be non-compliant, the FSA may initiate action to suspend or terminate that entity's participation in the Federal Family Education Loan Program (FFEL). Hopefully, such measures can be avoided, because the students will be the ones to get stuck in the downpour.
Tuesday, January 22, 2008
The Best Time for an Auto Loan Refinance
The Best Time for an Auto Loan Refinance
Refinancing an auto loan is a lot like pistons firing on an engine. Unless the timing is right, everything will break down. If you're considering a car loan refinance, remember this, and you'll save big bucks as you travel down the financial freeway.
Car enthusiasts tend to place a lot of emphasis on speed. When it comes to refinancing a car loan, however, it's not the car owner who gets to the bank first who wins the race. The person who shows up at just the right time is the one who takes the checkered flag.
An overhaul for your auto loan
The most obvious indicator that you need an auto loan refinance is a dip in interest rates. Shop around at different lenders, and let them know that you're looking for a certain rate. The good loan officers will give you a call if the rates drop to your magic number. Many online services also provide this function.
Not everyone refinances based strictly on rates alone. Some people choose to refinance their car as a method of debt consolidation. They might, for example, roll their credit card debts into their car loan. This might work if you're renting, and your credit cards are at a higher interest rate than a potential car loan. If you're a homeowner, you might want to consider a home equity loan with tax deductible interest.
You can also refinance a car loan if you're planning to keep it long after it's been paid off. Many times, automobile owners refinance simply to boost their cash flow, understanding that they're stretching out their payments a few years.
Keeping your current loan in gear
There are plenty of reasons why you shouldn't refinance your auto loan. The primary reason is that refinancing involves lengthening your repayment term. You may be choosing a refinance because you're experiencing some short-term financial pain, but a refinance could stretch your payments out for years.
If you plan to sell your car in the next year or two, you can't refinance it. That's because you'll have to finish up loan payments, and you won't be able to sell a car if you currently owe money on it.
You'll also want to take a careful look at the interest rates of car loans, especially if your original one was for a new car. Rates on new auto loans tend to be lower, so refinancing will cost you more over the long haul.
Peeling rubber and flying from 0 to 60 in seconds may be a ton of fun when you're behind the wheel, but it doesn't make much sense when it comes to auto loans. It's important to take your time-not rush to a quick decision-when you refinance. Carefully analyze the current rate environment and the age of your car, before you make a move to refinance. You don't need to drag your feet, but you should absolutely proceed with the caution of a yellow light.
Refinancing an auto loan is a lot like pistons firing on an engine. Unless the timing is right, everything will break down. If you're considering a car loan refinance, remember this, and you'll save big bucks as you travel down the financial freeway.
Car enthusiasts tend to place a lot of emphasis on speed. When it comes to refinancing a car loan, however, it's not the car owner who gets to the bank first who wins the race. The person who shows up at just the right time is the one who takes the checkered flag.
An overhaul for your auto loan
The most obvious indicator that you need an auto loan refinance is a dip in interest rates. Shop around at different lenders, and let them know that you're looking for a certain rate. The good loan officers will give you a call if the rates drop to your magic number. Many online services also provide this function.
Not everyone refinances based strictly on rates alone. Some people choose to refinance their car as a method of debt consolidation. They might, for example, roll their credit card debts into their car loan. This might work if you're renting, and your credit cards are at a higher interest rate than a potential car loan. If you're a homeowner, you might want to consider a home equity loan with tax deductible interest.
You can also refinance a car loan if you're planning to keep it long after it's been paid off. Many times, automobile owners refinance simply to boost their cash flow, understanding that they're stretching out their payments a few years.
Keeping your current loan in gear
There are plenty of reasons why you shouldn't refinance your auto loan. The primary reason is that refinancing involves lengthening your repayment term. You may be choosing a refinance because you're experiencing some short-term financial pain, but a refinance could stretch your payments out for years.
If you plan to sell your car in the next year or two, you can't refinance it. That's because you'll have to finish up loan payments, and you won't be able to sell a car if you currently owe money on it.
You'll also want to take a careful look at the interest rates of car loans, especially if your original one was for a new car. Rates on new auto loans tend to be lower, so refinancing will cost you more over the long haul.
Peeling rubber and flying from 0 to 60 in seconds may be a ton of fun when you're behind the wheel, but it doesn't make much sense when it comes to auto loans. It's important to take your time-not rush to a quick decision-when you refinance. Carefully analyze the current rate environment and the age of your car, before you make a move to refinance. You don't need to drag your feet, but you should absolutely proceed with the caution of a yellow light.
Monday, January 21, 2008
Four Questions to Ask Your Auto Loan Lender
Four Questions to Ask Your Auto Loan Lender
When you're making a big purchase like a car, take time to play 20 questions. It's important that you understand a deal from top to bottom. The following four questions cover some critical areas.
Even though the car you're considering buying might do 0 to 60 in 3.5 seconds, it makes no sense to speed through the financing part of the deal. Instead, shift into low gear, relax, and ask your lender some important questions about your proposed auto loan.
1. What's the actual rate?
Make sure that your lender talks to you about the Annual Percentage Rate (APR). This includes all the fees associated with the loan. It's the best way to make an apples-to-apples comparison between prospective lenders. This rate may vary depending upon your credit report. It's a good idea to review that data before you visit a lender, to ensure that there are no mistakes or discrepancies. If there are, it can lower your score, and force the lender to give you a higher rate. Make sure that you correct the errors before your meeting.
2. Can you provide me with all the auto loan details?
For any loan, the devil-also known as the lender's profit-is in the details. Take time to review the entire document. Find out if there are any penalties or extra charges that could occur if you refinance the loan or pay it off early. Make sure that you understand the amount of each payment, the interest rate, and the length of the term. If you're confused, put some brakes on the transaction until you can get a straight answer from someone you trust.
3. Can you guarantee that the deal is set?
A favorite tactic of many unscrupulous lenders is to tell you that the deal is all set, but then call you back a few days later and say that the financing fell through. They'll then initiate another deal, but this time, the loan will be at a higher rate. Don't give them the chance. Before you leave the showroom floor, make sure that they can meet the loan terms that you've both agreed upon. Tell them that if they can't, you won't be returning to buy the car.
4. Does the car loan include credit insurance?
Many lenders try to include credit insurance with the loan. This can have some value, so you may not want to automatically dismiss it. Instead, review it with your insurance agent, and decide if it fits into your overall protection needs. If it does, have the lender include it in the APR. If you don't need it, double-check to ensure that the cost is removed before you sign on the dotted line.
Although no one wants to stretch out a car-buying experience any longer than necessary, plan to take it easy and ask plenty of questions before you make the big purchase. Slow and steady wins this race, or at least it could save you big bucks when you cross the finish line.
When you're making a big purchase like a car, take time to play 20 questions. It's important that you understand a deal from top to bottom. The following four questions cover some critical areas.
Even though the car you're considering buying might do 0 to 60 in 3.5 seconds, it makes no sense to speed through the financing part of the deal. Instead, shift into low gear, relax, and ask your lender some important questions about your proposed auto loan.
1. What's the actual rate?
Make sure that your lender talks to you about the Annual Percentage Rate (APR). This includes all the fees associated with the loan. It's the best way to make an apples-to-apples comparison between prospective lenders. This rate may vary depending upon your credit report. It's a good idea to review that data before you visit a lender, to ensure that there are no mistakes or discrepancies. If there are, it can lower your score, and force the lender to give you a higher rate. Make sure that you correct the errors before your meeting.
2. Can you provide me with all the auto loan details?
For any loan, the devil-also known as the lender's profit-is in the details. Take time to review the entire document. Find out if there are any penalties or extra charges that could occur if you refinance the loan or pay it off early. Make sure that you understand the amount of each payment, the interest rate, and the length of the term. If you're confused, put some brakes on the transaction until you can get a straight answer from someone you trust.
3. Can you guarantee that the deal is set?
A favorite tactic of many unscrupulous lenders is to tell you that the deal is all set, but then call you back a few days later and say that the financing fell through. They'll then initiate another deal, but this time, the loan will be at a higher rate. Don't give them the chance. Before you leave the showroom floor, make sure that they can meet the loan terms that you've both agreed upon. Tell them that if they can't, you won't be returning to buy the car.
4. Does the car loan include credit insurance?
Many lenders try to include credit insurance with the loan. This can have some value, so you may not want to automatically dismiss it. Instead, review it with your insurance agent, and decide if it fits into your overall protection needs. If it does, have the lender include it in the APR. If you don't need it, double-check to ensure that the cost is removed before you sign on the dotted line.
Although no one wants to stretch out a car-buying experience any longer than necessary, plan to take it easy and ask plenty of questions before you make the big purchase. Slow and steady wins this race, or at least it could save you big bucks when you cross the finish line.
Sunday, January 20, 2008
Tips on Applying for Personal Loans
Tips on Applying for Personal Loans
It's happened to everyone: Some unexpected expense pops up, and you don't have the cash to handle it. Your first instinct might be to reach for that credit card, or call Aunt Betty to ask for a loan. However, neither of these options is ideal. The answer may lie in heading to a local lender and applying for an unsecured personal loan.
Personal loan basics
A personal loan is a monetary advance made to you usually from a bank, credit union or finance company. Most personal loans are unsecured and carry a fixed interest rate. Maturity terms can vary widely, depending on the lender-some programs are as short as six months, and others as long as 10 years. The right time period for you will depend on how much money you need to borrow, what the interest rate is, and what you can afford to pay back each month. In addition to banks and credit unions, online banks and lending websites are also great resources to use for these types of loans.
It's always important to compare apples to apples when applying for a personal loan. Request written proposals from at least three different lenders, and compare each on the following:
* Interest rate (Compare this to the cash advance rate on your credit card, too.)
* Annual fees
* Restrictions on prepayments
* Length of repayment schedule
Scam Protection
Personal loans fall under the credit practice regulations administered by the Federal Reserve Board and the Federal Trade Commission. Unfortunately, the existence of regulations banning unfair or deceptive credit practices doesn't keep everyone on the straight and narrow. Ultimately, your best protection is shopping around and comparing the terms of several different lenders.
If you need money, don't pull out your credit card. And leave dear Aunt Betty alone. A little research may prove that a personal loan will provide you the funds you need with a structured repayment schedule that you can afford.
It's happened to everyone: Some unexpected expense pops up, and you don't have the cash to handle it. Your first instinct might be to reach for that credit card, or call Aunt Betty to ask for a loan. However, neither of these options is ideal. The answer may lie in heading to a local lender and applying for an unsecured personal loan.
Personal loan basics
A personal loan is a monetary advance made to you usually from a bank, credit union or finance company. Most personal loans are unsecured and carry a fixed interest rate. Maturity terms can vary widely, depending on the lender-some programs are as short as six months, and others as long as 10 years. The right time period for you will depend on how much money you need to borrow, what the interest rate is, and what you can afford to pay back each month. In addition to banks and credit unions, online banks and lending websites are also great resources to use for these types of loans.
It's always important to compare apples to apples when applying for a personal loan. Request written proposals from at least three different lenders, and compare each on the following:
* Interest rate (Compare this to the cash advance rate on your credit card, too.)
* Annual fees
* Restrictions on prepayments
* Length of repayment schedule
Scam Protection
Personal loans fall under the credit practice regulations administered by the Federal Reserve Board and the Federal Trade Commission. Unfortunately, the existence of regulations banning unfair or deceptive credit practices doesn't keep everyone on the straight and narrow. Ultimately, your best protection is shopping around and comparing the terms of several different lenders.
If you need money, don't pull out your credit card. And leave dear Aunt Betty alone. A little research may prove that a personal loan will provide you the funds you need with a structured repayment schedule that you can afford.
Saturday, January 19, 2008
Personal Loans
Personal Loans
When you mention the word "loan," most people think of a home mortgage. They are, without a doubt, the loan of choice for most Americans, thanks to their tax advantages and relatively low rates.
However, if you need quick access to cash and aren't a homeowner, or don't want to touch the equity in your home, an unsecured, or personal, loan is a viable option. If you have good credit and need a moderate amount of money, a personal loan can be a very attractive alternative to a credit card or asking friends or family to help you out.
Good Credit, Better Personal Loan Rates
The financial world tends to smile upon people who have good credit. Unsecured loans are no different. Because a lending institution doesn't have the luxury of using your property as collateral for an unsecured loan, they must use your credit score as the criteria for their lending decisions. Thus, the better your credit, the better your interest rate and monthly payment will be. They'll also look at your income and debt, to make sure you aren't overextending yourself.
Smaller Personal Loans are Better
If you need to borrow a small amount of money, a personal loan may be a better choice than a credit card. If your credit is in good shape, you may be able to get a personal loan that beats the high rates charged by credit card companies. You may also find that borrowing from a bank or credit union can be less stressful than asking friends or relatives.
If you're shopping for a personal loan, look around for the best interest rates. Obtain a copy of your credit report and review it for accuracy. If there are any errors, immediately begin the process of correcting them.
An unsecured loan might not have all the tax benefits of a mortgage, but it could be the answer to your financial woes at a rate and repayment schedule that fits comfortably into your financial picture.
When you mention the word "loan," most people think of a home mortgage. They are, without a doubt, the loan of choice for most Americans, thanks to their tax advantages and relatively low rates.
However, if you need quick access to cash and aren't a homeowner, or don't want to touch the equity in your home, an unsecured, or personal, loan is a viable option. If you have good credit and need a moderate amount of money, a personal loan can be a very attractive alternative to a credit card or asking friends or family to help you out.
Good Credit, Better Personal Loan Rates
The financial world tends to smile upon people who have good credit. Unsecured loans are no different. Because a lending institution doesn't have the luxury of using your property as collateral for an unsecured loan, they must use your credit score as the criteria for their lending decisions. Thus, the better your credit, the better your interest rate and monthly payment will be. They'll also look at your income and debt, to make sure you aren't overextending yourself.
Smaller Personal Loans are Better
If you need to borrow a small amount of money, a personal loan may be a better choice than a credit card. If your credit is in good shape, you may be able to get a personal loan that beats the high rates charged by credit card companies. You may also find that borrowing from a bank or credit union can be less stressful than asking friends or relatives.
If you're shopping for a personal loan, look around for the best interest rates. Obtain a copy of your credit report and review it for accuracy. If there are any errors, immediately begin the process of correcting them.
An unsecured loan might not have all the tax benefits of a mortgage, but it could be the answer to your financial woes at a rate and repayment schedule that fits comfortably into your financial picture.
Friday, January 18, 2008
Perfect Timing for Refinancing
Perfect Timing for Refinancing?
Making a living as a stockbroker is hardly a walk in the park. To help their clients make successful investments, they must correctly interpret countless market variables. You face a similar challenge if you're trying to pick the perfect time to refinance your mortgage.
Timing is the key to comedy-make a joke at just the right moment, and the audience roars. Great timing is also critical to a mortgage refinance, but the stakes are considerably higher. If you try to catch mortgage rates at their lowest point and you make a mistake, it could cost you thousands of dollars--hardly a laughing matter.
Timing the perfect mortgage refinance means that you're gambling on the mortgage market. It's a guessing game, which can lead to big savings or losses. Here are some simple ways to mitigate the risk.
Pick your rate
It's easy see why people hold out for a rate drop. The savings can be significant; a drop of as little as a quarter of a percent on a 30-year fixed rate mortgage can trim thousands of dollars in long-term interest.
The problem arises when you try to guess how low rates will go. Mortgage rates are no different than the stock market. A multitude of factors can cause a rate spike or dip. Countless professionals spend their entire careers trying to predict these rates, and they generally fail more often than they succeed.
The best move a novice-and even a professional-can make, is to pick a rate that you can live with, and set that as your target. If the rate drops to that level, lock in the deal and don't look back. You can always refinance the loan if rates head significantly lower, but you'll be protected if they should spike.
Don't forget the product
When you're considering which mortgage to choose, consider your needs over the next three to five years. Are you young and starting a family? If so, opt for the lower monthly payments of a 30-year fixed mortgage. If, on the other hand, retirement is on your horizon, consider clearing up your debt and moving to a 15-year term.
The point is not to get fixated on the mortgage that has the lowest rate. You need to factor in all the components of a loan-including whether or not the rate will adjust, and how much you'll spend in long-term interest costs. Your approach should be to find the best rate and the best product for your personal financial situation.
Great timing will take you far in the world of comedy. But it's much more difficult to time a mortgage than it is to time a joke. Catching mortgage rates at their lowest point involves too many variables. Instead, target a desired rate and product before you begin shopping for a loan. It's the only way to get a mortgage that's guaranteed to put a smile on your face. Wait too long, and the joke may be on you.
Making a living as a stockbroker is hardly a walk in the park. To help their clients make successful investments, they must correctly interpret countless market variables. You face a similar challenge if you're trying to pick the perfect time to refinance your mortgage.
Timing is the key to comedy-make a joke at just the right moment, and the audience roars. Great timing is also critical to a mortgage refinance, but the stakes are considerably higher. If you try to catch mortgage rates at their lowest point and you make a mistake, it could cost you thousands of dollars--hardly a laughing matter.
Timing the perfect mortgage refinance means that you're gambling on the mortgage market. It's a guessing game, which can lead to big savings or losses. Here are some simple ways to mitigate the risk.
Pick your rate
It's easy see why people hold out for a rate drop. The savings can be significant; a drop of as little as a quarter of a percent on a 30-year fixed rate mortgage can trim thousands of dollars in long-term interest.
The problem arises when you try to guess how low rates will go. Mortgage rates are no different than the stock market. A multitude of factors can cause a rate spike or dip. Countless professionals spend their entire careers trying to predict these rates, and they generally fail more often than they succeed.
The best move a novice-and even a professional-can make, is to pick a rate that you can live with, and set that as your target. If the rate drops to that level, lock in the deal and don't look back. You can always refinance the loan if rates head significantly lower, but you'll be protected if they should spike.
Don't forget the product
When you're considering which mortgage to choose, consider your needs over the next three to five years. Are you young and starting a family? If so, opt for the lower monthly payments of a 30-year fixed mortgage. If, on the other hand, retirement is on your horizon, consider clearing up your debt and moving to a 15-year term.
The point is not to get fixated on the mortgage that has the lowest rate. You need to factor in all the components of a loan-including whether or not the rate will adjust, and how much you'll spend in long-term interest costs. Your approach should be to find the best rate and the best product for your personal financial situation.
Great timing will take you far in the world of comedy. But it's much more difficult to time a mortgage than it is to time a joke. Catching mortgage rates at their lowest point involves too many variables. Instead, target a desired rate and product before you begin shopping for a loan. It's the only way to get a mortgage that's guaranteed to put a smile on your face. Wait too long, and the joke may be on you.
Thursday, January 17, 2008
Mind Your Tax Breaks
Mind Your Tax Breaks
It's time to stop ignoring the impending tax deadline and start thinking about what you owe. But here's the good news: This year, you might qualify for some extra breaks.
Smart people love making jokes and observations about taxes. Perhaps this is because only a brilliant mind could understand enough of the tax code to find it funny. If you don't quite measure up to the likes of Albert Einstein and Alan Greenspan, you could probably benefit from a few pointers about 2007 deductions and credits.
Retirement savings means savings now
It isn't too late to make a tax-deductible IRA contribution for 2007. The deadline is April 15th, and the tax-deductible contribution limit is $4,000, or $5000 if you're over 50.
On top of the IRA contribution deduction, you may also be eligible for an IRA contribution credit. If your adjusted gross income is less than $26,000, or $52,000 for married couples filing jointly, you might qualify for a credit of up to 50 percent of your $4,000 contribution-which may reduce your tax bill by up to $2,000.
Tax breaks: A joy of parenthood
Don't evict your kids just yet; those adult children might be your ticket to another tax break. Full-time students can be claimed as dependents as long as they're under the age of 24 and living with you. You also have to be responsible for more than half of their living expenses. If they aren't in school, the same rules apply, but the age limit is 19.
Remember, too, that you can deduct higher education expenses. If you're footing the bill for college, and your modified adjusted gross income is less than $80,000 (or $160,000 if married and filing jointly), you can deduct up to $2,000 of qualified education expenses. If your modified adjusted gross income is below $65,000 ($130,000 if married and filing jointly), you can deduct up to $4,000.
Your younger children may give you access to a tax credit against your childcare expenses. If you work full-time and your income qualifies, you can take a credit of up to 35 percent of eligible expenses, assuming that you aren't already using a childcare reimbursement plan through your employer. Eligible expenses are capped at $3,000 for one child, or $6,000 for more than one.
Mortgage help
If you purchased a mortgage insurance policy on or after January 1, 2007, you can deduct the premiums on your 2007 return. And, if your lender forgave some of your mortgage debt in that same year, you don't have to pay income tax on the amount forgiven. You do have to report it though, so make sure that you have an IRS Form 982 handy.
Take advantage of every tax break you can. Then, maybe you'll be the one making amusing and quotable quips about the size of your refund.
It's time to stop ignoring the impending tax deadline and start thinking about what you owe. But here's the good news: This year, you might qualify for some extra breaks.
Smart people love making jokes and observations about taxes. Perhaps this is because only a brilliant mind could understand enough of the tax code to find it funny. If you don't quite measure up to the likes of Albert Einstein and Alan Greenspan, you could probably benefit from a few pointers about 2007 deductions and credits.
Retirement savings means savings now
It isn't too late to make a tax-deductible IRA contribution for 2007. The deadline is April 15th, and the tax-deductible contribution limit is $4,000, or $5000 if you're over 50.
On top of the IRA contribution deduction, you may also be eligible for an IRA contribution credit. If your adjusted gross income is less than $26,000, or $52,000 for married couples filing jointly, you might qualify for a credit of up to 50 percent of your $4,000 contribution-which may reduce your tax bill by up to $2,000.
Tax breaks: A joy of parenthood
Don't evict your kids just yet; those adult children might be your ticket to another tax break. Full-time students can be claimed as dependents as long as they're under the age of 24 and living with you. You also have to be responsible for more than half of their living expenses. If they aren't in school, the same rules apply, but the age limit is 19.
Remember, too, that you can deduct higher education expenses. If you're footing the bill for college, and your modified adjusted gross income is less than $80,000 (or $160,000 if married and filing jointly), you can deduct up to $2,000 of qualified education expenses. If your modified adjusted gross income is below $65,000 ($130,000 if married and filing jointly), you can deduct up to $4,000.
Your younger children may give you access to a tax credit against your childcare expenses. If you work full-time and your income qualifies, you can take a credit of up to 35 percent of eligible expenses, assuming that you aren't already using a childcare reimbursement plan through your employer. Eligible expenses are capped at $3,000 for one child, or $6,000 for more than one.
Mortgage help
If you purchased a mortgage insurance policy on or after January 1, 2007, you can deduct the premiums on your 2007 return. And, if your lender forgave some of your mortgage debt in that same year, you don't have to pay income tax on the amount forgiven. You do have to report it though, so make sure that you have an IRS Form 982 handy.
Take advantage of every tax break you can. Then, maybe you'll be the one making amusing and quotable quips about the size of your refund.
Wednesday, January 16, 2008
Experts Advise Loan
Experts Advise Loan
Within the next month many IU students and recent graduates will have the opportunity to save thousands of dollars by consolidating their federal student loans before the interest rates substantially increase July 1. By consolidating their loans now, students can lock in the lower interest rates for life and reduce their monthly payments by up to $10,000 in the repayment process.
Within the next month many IU students and recent graduates will have the opportunity to save thousands of dollars by consolidating their federal student loans before the interest rates substantially increase July 1. By consolidating their loans now, students can lock in the lower interest rates for life and reduce their monthly payments by up to $10,000 in the repayment process.
"The interest rate is currently at 4.7 percent, but after July 1 it will go up to 6.8 percent, and that's quite a change," said Bill Ehrich, associate director of the IU Office of Student Financial Assistance.
The current loan rate is the fourth lowest it has ever been in the history of the federal student loan program, but Ehrich said he believes that the rate of 6.8 percent will stick for up to three years. If students consolidate their loans now, the interest rate they pay won't ever change unless they qualify for discounts from the lender. Considering that some students pay loans off for up to 30 years after college, a low interest rate makes a tremendous difference in the amount they will pay over time.
The most common type of loan that students use is a Stafford Loan, which is put into law by Congress. The federal interest rate is raised when more people want to borrow. "Student loans are subsidized by the federal government," said Robert Jennings, IU professor of finance. "Interest rates increase with the pace of economic activity and inflation."
The process of consolidating a loan is relatively simple and can be done by submitting an online application in a matter of minutes. IU students who borrow their loans from Sallie Mae, the largest student loan consolidator in the country, are recommended to consolidate loans through them. When consolidating loans, a borrower's savings will depend not just on the current interest rate, but on the current balance of their loan as well. Students who do not want to fill out an online application can go to the IU financial office for assistance or to receive consultation about their options.
"I am definitely going to consolidate the loans I've taken out soon," said sophomore Erika Schlichter. "The low rate makes a huge difference, especially for me because I am paying out-of-state tuition." Ehrich said students looking into their loan consolidation options should beware of false advertising and disreputable organizations.
"Students should stick with large, well-funded banking organizations like Sallie Mae," Ehrich said. "Some other loan consolidation organizations make offers that are too good to be true, so students should be careful. If someone makes you an offer that's too good to be true, it is."
He added many companies that send direct mail and telemarket their services may seem like they are affiliated with the federal government, but they are actually private consolidation brokers who get paid for every loan that they consolidate.
With the deadline fast approaching, students only have a limited amount of time to weigh their options. "It is important not to wait until the last minute to fill out the application," said Pat Scherschel, vice president of loan consolidation at Sallie Mae. "Lenders need to have a completed application by June 30 to ensure that their borrowers won't incur interest at the higher rate. There's no reason to wait, students should get going on this."
Tuesday, January 15, 2008
Three Tax Rebate Tips
Three Tax Rebate Tips
The United States government has applied the jumper cables to our sagging economy, and it's hoping that the economic stimulus package will give America the spark it needs to start running again. Here are some details about you and the rebate.
Whether or not you agree with the government's economic stimulus package, it's become the law of the land. There's some validation behind the theory that the government can help boost a stumbling economy (see the New Deal), but there are also naysayers who wonder how we can continue to spend while our national debt continues to skyrocket.
Regardless of your economic views, the tax rebate has become reality. To understand how the program will affect you, consider these tax rebate tips.
1. File a return
Most people file a return, but it's not required of many lower-income taxpayers and people who receive veterans' benefits and Social Security. To qualify for the rebate checks, however, you'll need to send in a tax return. The IRS has pledged that it will work with various institutions to ensure that individuals are notified, but count on plenty of lower income folks falling through the cracks and missing out on the cash.
2. Determining your eligibility
The stimulus package stipulates that individuals with adjusted gross income (AGI) of up to $75,000 are eligible for a rebate of up to $600. Married couples filing jointly with an AGI up to $150,000 can receive up to $1,200. After those levels, the rebate will decrease by 5 percent for every dollar above the income level.
For individuals who have earned income of at least $3,000 but don't pay income taxes (such as Society Security recipients), rebates of $300 for an individual, or $600 for a couple filing jointly, are available.
3. Receiving your check
The checks won't be in the mail until early May, and the IRS hasn't released any information regarding the order in which they'll distribute the money. Rebates won't be sent out with your regular refund. And you won't just receive a check, either. The IRS will send you a notice that specifies your rebate amount, and gives you a heads-up that Uncle Sam's gift is soon on the way. Approximately seven to 10 days later, your check should arrive. If you enrolled for the direct deposit option, you can expect your statement and an electronic credit to arrive at the same time.
With the U.S. economy reeling, the federal government is looking to apply this series of rebate checks as a band-aid mechanism. To ensure that the plan works, everyone must file a return (especially lower income individuals), and spend, spend, spend. Hopefully, the cumulative spark will get the American economy up and running again. Only time will tell if this quick fix will help us over the long haul.
The United States government has applied the jumper cables to our sagging economy, and it's hoping that the economic stimulus package will give America the spark it needs to start running again. Here are some details about you and the rebate.
Whether or not you agree with the government's economic stimulus package, it's become the law of the land. There's some validation behind the theory that the government can help boost a stumbling economy (see the New Deal), but there are also naysayers who wonder how we can continue to spend while our national debt continues to skyrocket.
Regardless of your economic views, the tax rebate has become reality. To understand how the program will affect you, consider these tax rebate tips.
1. File a return
Most people file a return, but it's not required of many lower-income taxpayers and people who receive veterans' benefits and Social Security. To qualify for the rebate checks, however, you'll need to send in a tax return. The IRS has pledged that it will work with various institutions to ensure that individuals are notified, but count on plenty of lower income folks falling through the cracks and missing out on the cash.
2. Determining your eligibility
The stimulus package stipulates that individuals with adjusted gross income (AGI) of up to $75,000 are eligible for a rebate of up to $600. Married couples filing jointly with an AGI up to $150,000 can receive up to $1,200. After those levels, the rebate will decrease by 5 percent for every dollar above the income level.
For individuals who have earned income of at least $3,000 but don't pay income taxes (such as Society Security recipients), rebates of $300 for an individual, or $600 for a couple filing jointly, are available.
3. Receiving your check
The checks won't be in the mail until early May, and the IRS hasn't released any information regarding the order in which they'll distribute the money. Rebates won't be sent out with your regular refund. And you won't just receive a check, either. The IRS will send you a notice that specifies your rebate amount, and gives you a heads-up that Uncle Sam's gift is soon on the way. Approximately seven to 10 days later, your check should arrive. If you enrolled for the direct deposit option, you can expect your statement and an electronic credit to arrive at the same time.
With the U.S. economy reeling, the federal government is looking to apply this series of rebate checks as a band-aid mechanism. To ensure that the plan works, everyone must file a return (especially lower income individuals), and spend, spend, spend. Hopefully, the cumulative spark will get the American economy up and running again. Only time will tell if this quick fix will help us over the long haul.
Monday, January 14, 2008
Bad Credit - Improve your Score
Bad Credit? Improve your Score!
A person is not defined by a fall from grace, but by how they react after the fall. If you've encountered some problems with bad credit, take some specific steps to rebuild your credit score.
As the great German philosopher Friedrich Nietzsche said: "Whatever doesn't kill you makes you stronger. The sentiment also applies to the world of bad credit. Late payments on a loan, or too much debt, can wreak havoc on your credit score. To reverse this toxic effect, take these steps to improve your credit rating.
Examine your credit report
Your credit report is a financial snapshot. It reflects your payment history and the amount of debt that you're currently carrying. If you have quite a few late payments, you'll naturally find that you have a low score. However, credit bureaus sometimes make mistakes on your report. There may be an account that reported an erroneous late payment, or your credit report may list several open accounts that are actually closed. These types of errors can be detrimental to your overall score. Carefully review your report for such confusion.
Learn what makes your credit bad
Take a step back and really understand what caused your score to plummet. If late payments and excessive debt loads are the cause, you'll need to take action. Analyze your bill paying procedures. Do you have a system in place? Ensure that they're paid in a timely fashion. For your debt load, try to pay off credit cards that have hefty balances. Also, be sure to keep your balances well below your credit limit. If the bureaus see that you're maxing out on a card, they'll lower your score.
Use different accounts
If credit cards got you into a financial mess, you may have a tough time getting a new one without a sky-high rate. You may need to use alternative forms of credit to rebuild your score. Consider opening a checking and savings account, for example, but be careful to avoid overdrafts. Credit bureaus monitor your overall financial picture; so managing these accounts well could reflect positively on your score.
You can also take out a secured credit card. To acquire this piece of plastic, you simply make a deposit with the issuing company, and your credit limit will equal the size of the deposit. Taking out a secured credit card and then making your payments in a timely manner will show the credit bureaus that your money management skills have improved. Over time, a higher score will reflect your new financial responsibility.
While a bad credit crunch may feel like the world has come to an end, you can work your way out of it. By understanding your credit score, and opening alternative credit accounts, you can regain your financial footing. You'll be taking baby steps out of the gates but, with a little time and patience, your financial status will be stronger than ever.
A person is not defined by a fall from grace, but by how they react after the fall. If you've encountered some problems with bad credit, take some specific steps to rebuild your credit score.
As the great German philosopher Friedrich Nietzsche said: "Whatever doesn't kill you makes you stronger. The sentiment also applies to the world of bad credit. Late payments on a loan, or too much debt, can wreak havoc on your credit score. To reverse this toxic effect, take these steps to improve your credit rating.
Examine your credit report
Your credit report is a financial snapshot. It reflects your payment history and the amount of debt that you're currently carrying. If you have quite a few late payments, you'll naturally find that you have a low score. However, credit bureaus sometimes make mistakes on your report. There may be an account that reported an erroneous late payment, or your credit report may list several open accounts that are actually closed. These types of errors can be detrimental to your overall score. Carefully review your report for such confusion.
Learn what makes your credit bad
Take a step back and really understand what caused your score to plummet. If late payments and excessive debt loads are the cause, you'll need to take action. Analyze your bill paying procedures. Do you have a system in place? Ensure that they're paid in a timely fashion. For your debt load, try to pay off credit cards that have hefty balances. Also, be sure to keep your balances well below your credit limit. If the bureaus see that you're maxing out on a card, they'll lower your score.
Use different accounts
If credit cards got you into a financial mess, you may have a tough time getting a new one without a sky-high rate. You may need to use alternative forms of credit to rebuild your score. Consider opening a checking and savings account, for example, but be careful to avoid overdrafts. Credit bureaus monitor your overall financial picture; so managing these accounts well could reflect positively on your score.
You can also take out a secured credit card. To acquire this piece of plastic, you simply make a deposit with the issuing company, and your credit limit will equal the size of the deposit. Taking out a secured credit card and then making your payments in a timely manner will show the credit bureaus that your money management skills have improved. Over time, a higher score will reflect your new financial responsibility.
While a bad credit crunch may feel like the world has come to an end, you can work your way out of it. By understanding your credit score, and opening alternative credit accounts, you can regain your financial footing. You'll be taking baby steps out of the gates but, with a little time and patience, your financial status will be stronger than ever.
Sunday, January 13, 2008
Bad Credit Loans
Bad Credit Loans
Many mortgage companies are reluctant to finance people with bad credit or no money to put down. A bad credit mortgage lender helps people who have bad credit score, low income, etc.
A bad credit mortgage lender helps you get your loan approved much faster than programs offered by credit unions and banks. But you have to pay the price to get a bad credit loan. The loan you get will carry a higher rate of interest and will have higher closing fees.
It is advisable to check the rates with a few more bad credit lenders and compare. Even though you have to pay a higher rate, see that the one you settle at is reasonable and the most favorable. At present interest rates are low so try and get the best deal.
You can always wait a while, improve your credit score and then get a loan at a low rate of interest. Some bad credit mortgage loans carry a pre-payment penalty, so make sure your loan doesn't have one. These bad credit mortgage loans have 6 months to 2-3 years pre-payment penalty. This means you have to pay huge sums of interest for at least 6 months before you can pay off the loan. If there is a pre-payment penalty you should take the loan that has the shortest term so that you can pay off the loan quickly without paying any penalty.
To compare loan offers complete our short form above. MortgageLoan helps you find the best bad credit refinance loans, bad credit home equity loans, bad credit home purchase loans and bad credit debt consolidation loans.
Many mortgage companies are reluctant to finance people with bad credit or no money to put down. A bad credit mortgage lender helps people who have bad credit score, low income, etc.
A bad credit mortgage lender helps you get your loan approved much faster than programs offered by credit unions and banks. But you have to pay the price to get a bad credit loan. The loan you get will carry a higher rate of interest and will have higher closing fees.
It is advisable to check the rates with a few more bad credit lenders and compare. Even though you have to pay a higher rate, see that the one you settle at is reasonable and the most favorable. At present interest rates are low so try and get the best deal.
You can always wait a while, improve your credit score and then get a loan at a low rate of interest. Some bad credit mortgage loans carry a pre-payment penalty, so make sure your loan doesn't have one. These bad credit mortgage loans have 6 months to 2-3 years pre-payment penalty. This means you have to pay huge sums of interest for at least 6 months before you can pay off the loan. If there is a pre-payment penalty you should take the loan that has the shortest term so that you can pay off the loan quickly without paying any penalty.
To compare loan offers complete our short form above. MortgageLoan helps you find the best bad credit refinance loans, bad credit home equity loans, bad credit home purchase loans and bad credit debt consolidation loans.
Saturday, January 12, 2008
Ins and outs of Bad Credit Second Mortgages
Ins and outs of Bad Credit Second Mortgages
With a recession waiting in the wings to be officially acknowledged, American consumers find mortgage credit in short supply at a time when they need it most. For many, the answer to their problems may lie in procuring a "bad credit" second mortgage.
A bad credit second mortgage is just like any other second mortgage, except that it's extended to those borrowers who have less-than-stellar credit histories. The loans are specifically tailored to customers who may be unable to get credit or loan approval through conventional channels like prime-lending banks and mortgage companies. Those who specialize in making bad credit second mortgages structure their loan portfolios so that they can assume higher levels of risk than ordinary lenders, and they exist for the sole purpose of making good loans to people with bad credit.
Countrywide Mortgage victims
One of the most powerful sources of bad credit second mortgages is-or was-Countrywide Mortgage. The company famously imploded because it made too many loans to those who couldn't repay them. As a result, the market for bad credit second mortgages is now pretty thin. You won't find them as easily as you could two or three years ago, but if you're willing to pay a premium in terms of higher interest rates or closing costs, they are still out there and available.
Home equity loan solution
The monthly payments of about two million homeowners with adjustable-rate loans (ARMs) are scheduled to rise as much as 60 percent during the next 18 months. Refinancing to more manageable and affordable fixed-rate loans is the best solution, but traditional lenders are reluctant to approve refinance loans in today's volatile financial environment. Many homeowners have relied upon home equity loans to pay bills, but housing values have fallen, eliminating that source of funding. Credit card debt is also increasingly expensive-despite the recent drop in prevailing interest rates-and basic household expenses for items like gasoline and groceries are inflated beyond belief. As the crisis deepens, bad credit second mortgages are quickly emerging as one of the only remaining solutions.
Some consumers use them temporarily to regain their financial footing. Others turn to them for long-term mortgages, or for a convenient way to borrow funds for business, college tuition, or home improvement projects. Whatever the reason for needing cash or financing-particularly for those who have less than spectacular credit-bad credit second mortgages are an alternative worthy of consideration.
No free ride
Don't look to a bad credit loan to cure bad spending habits or a lack of financial responsibility. Credit is never free. Because it involves putting your home up for collateral, the use of a second mortgage can be risky. Borrowing against your home should be reserved for adding, not depleting, home equity. But if you can use a bad credit second mortgage to lower your debt, or boost the value of your home as a sustainable asset, it's a path worth pursuing.
With a recession waiting in the wings to be officially acknowledged, American consumers find mortgage credit in short supply at a time when they need it most. For many, the answer to their problems may lie in procuring a "bad credit" second mortgage.
A bad credit second mortgage is just like any other second mortgage, except that it's extended to those borrowers who have less-than-stellar credit histories. The loans are specifically tailored to customers who may be unable to get credit or loan approval through conventional channels like prime-lending banks and mortgage companies. Those who specialize in making bad credit second mortgages structure their loan portfolios so that they can assume higher levels of risk than ordinary lenders, and they exist for the sole purpose of making good loans to people with bad credit.
Countrywide Mortgage victims
One of the most powerful sources of bad credit second mortgages is-or was-Countrywide Mortgage. The company famously imploded because it made too many loans to those who couldn't repay them. As a result, the market for bad credit second mortgages is now pretty thin. You won't find them as easily as you could two or three years ago, but if you're willing to pay a premium in terms of higher interest rates or closing costs, they are still out there and available.
Home equity loan solution
The monthly payments of about two million homeowners with adjustable-rate loans (ARMs) are scheduled to rise as much as 60 percent during the next 18 months. Refinancing to more manageable and affordable fixed-rate loans is the best solution, but traditional lenders are reluctant to approve refinance loans in today's volatile financial environment. Many homeowners have relied upon home equity loans to pay bills, but housing values have fallen, eliminating that source of funding. Credit card debt is also increasingly expensive-despite the recent drop in prevailing interest rates-and basic household expenses for items like gasoline and groceries are inflated beyond belief. As the crisis deepens, bad credit second mortgages are quickly emerging as one of the only remaining solutions.
Some consumers use them temporarily to regain their financial footing. Others turn to them for long-term mortgages, or for a convenient way to borrow funds for business, college tuition, or home improvement projects. Whatever the reason for needing cash or financing-particularly for those who have less than spectacular credit-bad credit second mortgages are an alternative worthy of consideration.
No free ride
Don't look to a bad credit loan to cure bad spending habits or a lack of financial responsibility. Credit is never free. Because it involves putting your home up for collateral, the use of a second mortgage can be risky. Borrowing against your home should be reserved for adding, not depleting, home equity. But if you can use a bad credit second mortgage to lower your debt, or boost the value of your home as a sustainable asset, it's a path worth pursuing.
Friday, January 11, 2008
Mortgage Rates
Mortgage Rates
The factors driving the ebbs and flows of mortgage rates are largely unknown to the general population. You may be inclined to blame-or commend-your mortgage lender for the low or high rate she offers you; but in actuality, it's not her decision. Today, the true drivers of mortgage rates are the investors in the secondary market.
To the layman's eye, mortgage rates seem to move up and down without explanation. But just like the ocean tides that wash up and back by the pull of the moon's gravity, mortgage rates have their own driving force, even if they have a less cosmic source.
The mortgage rate basics
The mortgage lender that funds your loan is called the originator. A loan originator may be a bank, credit union, or other type of financial institution. On the date of funding, the money flows out of the originator's hands and into yours. You then turn that money over to the seller of the home.
Once the loan is funded, the originator has the option of keeping that loan in its portfolio or selling it on the secondary market. If the originator keeps the loan, it makes money by way of the interest you pay each month. If the loan is sold, the originator replenishes its funds and can make more loans to other homebuyers. Basically, the secondary market investors keep funds circulating so that loan originators don't run out of money for new mortgages.
Who are these mortgage interest rate folk?
Today's secondary market investors include government-chartered companies like Fannie Mae and Freddie Mac, plus insurance companies, pension funds, and securities dealers. Although Fannie Mae and Freddie Mac are different organizations, they participate in similar activities. Both can buy mortgages, and both can group mortgages together for resale in what's called mortgage-backed securities. These are highly liquid investments, meaning that they can be readily bought and sold.
Investor demand
Here's how the secondary market affects you as a would-be homebuyer. Investors want to earn the best return possible. That level of return is determined by the current and anticipated condition of the economy. When the economy is on an upswing, future yields are expected to be better than current yields. Investors, therefore, will hold off buying until higher yields materialize. This drives mortgage interest rates up, because lenders cannot sell their loans at lower yields.
Conversely, when the economy is in a downturn, investors buy up what's available to avoid being stuck with lower yields later. This drives mortgage rates down, as investors are clamoring to buy before yields get too low.
What it means to you
By staying on top of financial trends and planning accordingly, you can time your rate lock to compare and get the best mortgage rate possible. In other words, when the tide is low, put a call into your lender and lock in that rate. You'll enjoy waves of prosperity if you do.
The factors driving the ebbs and flows of mortgage rates are largely unknown to the general population. You may be inclined to blame-or commend-your mortgage lender for the low or high rate she offers you; but in actuality, it's not her decision. Today, the true drivers of mortgage rates are the investors in the secondary market.
To the layman's eye, mortgage rates seem to move up and down without explanation. But just like the ocean tides that wash up and back by the pull of the moon's gravity, mortgage rates have their own driving force, even if they have a less cosmic source.
The mortgage rate basics
The mortgage lender that funds your loan is called the originator. A loan originator may be a bank, credit union, or other type of financial institution. On the date of funding, the money flows out of the originator's hands and into yours. You then turn that money over to the seller of the home.
Once the loan is funded, the originator has the option of keeping that loan in its portfolio or selling it on the secondary market. If the originator keeps the loan, it makes money by way of the interest you pay each month. If the loan is sold, the originator replenishes its funds and can make more loans to other homebuyers. Basically, the secondary market investors keep funds circulating so that loan originators don't run out of money for new mortgages.
Who are these mortgage interest rate folk?
Today's secondary market investors include government-chartered companies like Fannie Mae and Freddie Mac, plus insurance companies, pension funds, and securities dealers. Although Fannie Mae and Freddie Mac are different organizations, they participate in similar activities. Both can buy mortgages, and both can group mortgages together for resale in what's called mortgage-backed securities. These are highly liquid investments, meaning that they can be readily bought and sold.
Investor demand
Here's how the secondary market affects you as a would-be homebuyer. Investors want to earn the best return possible. That level of return is determined by the current and anticipated condition of the economy. When the economy is on an upswing, future yields are expected to be better than current yields. Investors, therefore, will hold off buying until higher yields materialize. This drives mortgage interest rates up, because lenders cannot sell their loans at lower yields.
Conversely, when the economy is in a downturn, investors buy up what's available to avoid being stuck with lower yields later. This drives mortgage rates down, as investors are clamoring to buy before yields get too low.
What it means to you
By staying on top of financial trends and planning accordingly, you can time your rate lock to compare and get the best mortgage rate possible. In other words, when the tide is low, put a call into your lender and lock in that rate. You'll enjoy waves of prosperity if you do.
Thursday, January 10, 2008
Mortgage Refinancing
Mortgage Refinancing
Refinancing is when you apply for a secured loan in order to pay off another different loan secured against the same assets, property etc. If this original loan had a fixed interest rate mortgage which has now declined considerably, then you would like to avail of a new loan at a more favorable interest rate.
When is Refinancing an Option
Typically home refinancing is done when you have a mortgage on your home and apply for a second loan to pay off the first one. While taking the decision to go for the home refinancing option, it is important to first determine whether the amount you save on interests balances the amount of fees payable during refinancing.
Benefits of Home Refinancing
Imagine a scenario where you can have access to extra cash, while simultaneously lowering your monthly mortgage payment. This dream can become a reality through mortgage refinancing.
A house is the largest asset you may ever own. Likewise, your mortgage payment may be the largest expense you'll have in your monthly budget. Wouldn't it be great to use this asset to reduce your monthly payment and put extra cash in your pocket? When you refinance your mortgage, you can take advantage of the equity in your home and enable this to take place.
Lower Refinance Rate, Lower Payments
When you purchased your dream home, the financial environment dictated interest rates. While certain factors, like your credit rating and the amount of the down payment that you were able to afford, influenced your interest rate, the single most important factor was the prevailing rates at that moment. However, interest rates fluctuate. When the Federal Reserve enters a rate-cutting period, the prevailing rates may become significantly lower than when you originally purchased your home.
By refinancing your mortgage when interest rates are lower, you can exchange a higher interest rate for a lower one, which, in turn, will lower your monthly payment.
Shorten the Length of Your Mortgage when Refinancing
Another advantage of home refinancing is that you can shorten the term of your mortgage. Let's say, for example, that you originally had a 30-year mortgage and have been paying it for eight years. Thanks to mortgage refinancing, you can switch to a shorter term of either 10, 15 or 20 years. This can save you thousands of dollars of interest. Also, if the refinance rate is lower, but you maintain the same monthly payment, you will build up equity in your home more quickly, because more of your payment will be going towards principal.
Exchange an Adjustable Rate for a Fixed Refinance Rate
When interest rates are low, adjustable rate mortgages (ARMs) are the housing market's darlings. However, as interest rates increase, that adjustable rate may not look as sweet. It's also possible that you opted for an ARM because your financial future was less secure, or you weren't sure how long you'd stay in your home. If, however, you've become financially stable and know that you'll be staying in your home for several years, it may be beneficial to swap that fluctuating adjustable rate for a fixed one. You'll have more security knowing that your monthly payment will remain steady, regardless of the current market environment.
Access to Extra Cash - Cash-out refinancing
One way to put more money in your pocket is to tap into the equity you've built in your home and do a "cash-out" refinancing. In this scenario, you can refinance for an amount higher than your current principal balance and take the extra funds as cash. This can provide money for remodeling your home, paying off high-interest rate bills, or sending your kids to college.
Bye, Bye PMI
If you were unable to make a down payment of 20 percent when you purchased your home, you may have been required to purchase Private Mortgage Insurance (PMI). If your house has appreciated since then, and you've steadily paid down your mortgage, your equity may now be more than 20 percent. If you refinance, you will no longer need PMI.
In many ways, your house is like a cash cow. If you have discipline and knowledge of the benefits of refinancing, you can tap into its milk for years to come.
To find the best refinance loan offers complete our short form. You will find lenders and brokers that offer home refinance loans in California, Florida and all other states.
Refinancing is when you apply for a secured loan in order to pay off another different loan secured against the same assets, property etc. If this original loan had a fixed interest rate mortgage which has now declined considerably, then you would like to avail of a new loan at a more favorable interest rate.
When is Refinancing an Option
Typically home refinancing is done when you have a mortgage on your home and apply for a second loan to pay off the first one. While taking the decision to go for the home refinancing option, it is important to first determine whether the amount you save on interests balances the amount of fees payable during refinancing.
Benefits of Home Refinancing
Imagine a scenario where you can have access to extra cash, while simultaneously lowering your monthly mortgage payment. This dream can become a reality through mortgage refinancing.
A house is the largest asset you may ever own. Likewise, your mortgage payment may be the largest expense you'll have in your monthly budget. Wouldn't it be great to use this asset to reduce your monthly payment and put extra cash in your pocket? When you refinance your mortgage, you can take advantage of the equity in your home and enable this to take place.
Lower Refinance Rate, Lower Payments
When you purchased your dream home, the financial environment dictated interest rates. While certain factors, like your credit rating and the amount of the down payment that you were able to afford, influenced your interest rate, the single most important factor was the prevailing rates at that moment. However, interest rates fluctuate. When the Federal Reserve enters a rate-cutting period, the prevailing rates may become significantly lower than when you originally purchased your home.
By refinancing your mortgage when interest rates are lower, you can exchange a higher interest rate for a lower one, which, in turn, will lower your monthly payment.
Shorten the Length of Your Mortgage when Refinancing
Another advantage of home refinancing is that you can shorten the term of your mortgage. Let's say, for example, that you originally had a 30-year mortgage and have been paying it for eight years. Thanks to mortgage refinancing, you can switch to a shorter term of either 10, 15 or 20 years. This can save you thousands of dollars of interest. Also, if the refinance rate is lower, but you maintain the same monthly payment, you will build up equity in your home more quickly, because more of your payment will be going towards principal.
Exchange an Adjustable Rate for a Fixed Refinance Rate
When interest rates are low, adjustable rate mortgages (ARMs) are the housing market's darlings. However, as interest rates increase, that adjustable rate may not look as sweet. It's also possible that you opted for an ARM because your financial future was less secure, or you weren't sure how long you'd stay in your home. If, however, you've become financially stable and know that you'll be staying in your home for several years, it may be beneficial to swap that fluctuating adjustable rate for a fixed one. You'll have more security knowing that your monthly payment will remain steady, regardless of the current market environment.
Access to Extra Cash - Cash-out refinancing
One way to put more money in your pocket is to tap into the equity you've built in your home and do a "cash-out" refinancing. In this scenario, you can refinance for an amount higher than your current principal balance and take the extra funds as cash. This can provide money for remodeling your home, paying off high-interest rate bills, or sending your kids to college.
Bye, Bye PMI
If you were unable to make a down payment of 20 percent when you purchased your home, you may have been required to purchase Private Mortgage Insurance (PMI). If your house has appreciated since then, and you've steadily paid down your mortgage, your equity may now be more than 20 percent. If you refinance, you will no longer need PMI.
In many ways, your house is like a cash cow. If you have discipline and knowledge of the benefits of refinancing, you can tap into its milk for years to come.
To find the best refinance loan offers complete our short form. You will find lenders and brokers that offer home refinance loans in California, Florida and all other states.
Wednesday, January 9, 2008
CDs and FDIC Insurance
CDs and FDIC Insurance
Bank failures don't happen often, but they do happen. If you have your savings tied up in certificates of deposit, make sure you understand how FDIC insurance protects you and your money.
The short-lived reality show Maximum Exposure turned risky and sometimes injurious behavior into comedy. In comparison to the Max-X stunts, opening a certificate of deposit (CD) with your local bank hardly seems risky at all. Certainly you won't burst into flames or fly headfirst into the side of a building; but risk is risk, and you shouldn't take on more than you have to.
FDIC insurance limits
You may have heard it said that the FDIC insures the first $100,000 of individual deposits, and the first $250,000 of retirement deposits. While this is true, it leaves out some important information. For example, many depositors mistakenly believe that these limits apply to each account, and that keeping account balances below $100,000 results in full FDIC coverage. In fact, the FDIC's coverage limits apply to the combined balances of all accounts held in specific ownership categories. These ownership categories are: individual accounts, joint accounts, retirement accounts, and revocable trust accounts.
For individual accounts held at the same bank, the FDIC covers the first $100,000 of deposits. Separately from that, the FDIC also insures up to $100,000 per account holder for money held in joint accounts, and $250,000 per account holder for funds in certain retirement accounts. Living trust funds are insured for up to $100,000 per beneficiary. Proper structuring of your accounts, therefore, can yield much higher coverage than the individual limit of $100,000.
Structuring CDs for maximum insurance coverage
To see how this works, let's assume that you have $5,000 in a checking account, and $10,000 in a savings account with your neighborhood bank. In addition, you have an additional $200,000 that you'd like to invest in a certificate of deposit. If you open up a $200,000 CD in your name with the same bank, you won't be getting full FDIC coverage, because your combined individual balance would be $215,000.
A better idea might be to open a joint CD with your spouse. Under that scenario, your savings and checking deposits of $15,000 are covered by the individual limit. The CD would fall under the joint limit, which provides $100,000 coverage for you, and $100,000 for your spouse.
If you aren't married, take a portion of your deposit to other FDIC-insured banks. You can get full coverage by opening up one $100,000 CD at one bank, and a second $100,000 CD at another. If some of these funds are earmarked for retirement, make sure that they're held in a qualified retirement plan. That way, you'll get up to an additional $250,000 of coverage.
Minimizing risk is often a matter of preparation. To some, that means putting on a helmet before attempting a death-defying motorcycle jump. To others, it means knowing the limits and working around them. For more detailed information on FDIC coverage limits, visit www.fdic.gov.
Bank failures don't happen often, but they do happen. If you have your savings tied up in certificates of deposit, make sure you understand how FDIC insurance protects you and your money.
The short-lived reality show Maximum Exposure turned risky and sometimes injurious behavior into comedy. In comparison to the Max-X stunts, opening a certificate of deposit (CD) with your local bank hardly seems risky at all. Certainly you won't burst into flames or fly headfirst into the side of a building; but risk is risk, and you shouldn't take on more than you have to.
FDIC insurance limits
You may have heard it said that the FDIC insures the first $100,000 of individual deposits, and the first $250,000 of retirement deposits. While this is true, it leaves out some important information. For example, many depositors mistakenly believe that these limits apply to each account, and that keeping account balances below $100,000 results in full FDIC coverage. In fact, the FDIC's coverage limits apply to the combined balances of all accounts held in specific ownership categories. These ownership categories are: individual accounts, joint accounts, retirement accounts, and revocable trust accounts.
For individual accounts held at the same bank, the FDIC covers the first $100,000 of deposits. Separately from that, the FDIC also insures up to $100,000 per account holder for money held in joint accounts, and $250,000 per account holder for funds in certain retirement accounts. Living trust funds are insured for up to $100,000 per beneficiary. Proper structuring of your accounts, therefore, can yield much higher coverage than the individual limit of $100,000.
Structuring CDs for maximum insurance coverage
To see how this works, let's assume that you have $5,000 in a checking account, and $10,000 in a savings account with your neighborhood bank. In addition, you have an additional $200,000 that you'd like to invest in a certificate of deposit. If you open up a $200,000 CD in your name with the same bank, you won't be getting full FDIC coverage, because your combined individual balance would be $215,000.
A better idea might be to open a joint CD with your spouse. Under that scenario, your savings and checking deposits of $15,000 are covered by the individual limit. The CD would fall under the joint limit, which provides $100,000 coverage for you, and $100,000 for your spouse.
If you aren't married, take a portion of your deposit to other FDIC-insured banks. You can get full coverage by opening up one $100,000 CD at one bank, and a second $100,000 CD at another. If some of these funds are earmarked for retirement, make sure that they're held in a qualified retirement plan. That way, you'll get up to an additional $250,000 of coverage.
Minimizing risk is often a matter of preparation. To some, that means putting on a helmet before attempting a death-defying motorcycle jump. To others, it means knowing the limits and working around them. For more detailed information on FDIC coverage limits, visit www.fdic.gov.
Tuesday, January 8, 2008
Determining CD Rates
Determining CD Rates
Several factors determine how banks and credit unions set interest rates on CDs (certificates of deposit). Learn those factors and you can find the best rate for your savings.
To most folks, the rise and fall of interest rates on certificates of deposit (CDs) seems pretty random. You might imagine a group of bankers sitting around a table, flipping coins to decide if a new, one-year certificate of deposit should pay more or less than it did yesterday. While setting CD rates is a game of sorts, it's not one that's left entirely to chance.
Institutions that issue these financial instruments consider several factors when setting their CD rates, including:
• Length of the deposit. CD issuers maintain a rate schedule, offering different rates for longer and shorter maturities. In a normal rate environment, a longer maturity yields a higher interest rate. This encourages depositors to leave money on deposit for a longer period of time.
• Amount of the deposit. Because issuers prefer large deposits over small ones, most financial institutions will pay higher CD rates on deposits that exceed a stated amount.
• Competitive strategy and profitability. Bankers can lure in more customers by raising their interest rates just above where their competition is priced. Alternatively, some banks or credit unions may choose not to engage in competitive pricing.
Profitability for the bank or credit union is another factor influencing CD rates. Credit unions, which are not-for-profit institutions, often have lower expenses and can therefore offer higher interest rates.
• Interest rate outlook. Expected changes in interest rates might also affect CD rates. If banks and credit unions believe that market interest rates will drop, rates on longer-term certificates of deposits will move closer to those offered for short-term deposits. This is done if the issuer believes it might save money by discouraging long-term deposits. Conversely, if rates are expected to go up, long-term CDs would be priced higher to encourage depositors to lock in those funds before rates rise.
Finding the best CD rates
Finding the best rates for your savings takes a little legwork. Spend some time shopping around-visit your bank or credit union and run some searches for online banks, like ING Direct. Gather quotes and compare them based on maturity length and minimum deposit requirements. It's also a good idea to know what the investment community is saying about the outlook for interest rates, and how this might affect those being currently offered. Don't try to time the market perfectly-the experts can't even do this. Just be aware of why, for example, the short- and long-term rates might be very similar.
CD investing is a great way to take some of the risk out of your portfolio. Once you lock in your deposit, you need only sit back and wait for your interest payments, even as those bankers continue to flip their coins.
Several factors determine how banks and credit unions set interest rates on CDs (certificates of deposit). Learn those factors and you can find the best rate for your savings.
To most folks, the rise and fall of interest rates on certificates of deposit (CDs) seems pretty random. You might imagine a group of bankers sitting around a table, flipping coins to decide if a new, one-year certificate of deposit should pay more or less than it did yesterday. While setting CD rates is a game of sorts, it's not one that's left entirely to chance.
Institutions that issue these financial instruments consider several factors when setting their CD rates, including:
• Length of the deposit. CD issuers maintain a rate schedule, offering different rates for longer and shorter maturities. In a normal rate environment, a longer maturity yields a higher interest rate. This encourages depositors to leave money on deposit for a longer period of time.
• Amount of the deposit. Because issuers prefer large deposits over small ones, most financial institutions will pay higher CD rates on deposits that exceed a stated amount.
• Competitive strategy and profitability. Bankers can lure in more customers by raising their interest rates just above where their competition is priced. Alternatively, some banks or credit unions may choose not to engage in competitive pricing.
Profitability for the bank or credit union is another factor influencing CD rates. Credit unions, which are not-for-profit institutions, often have lower expenses and can therefore offer higher interest rates.
• Interest rate outlook. Expected changes in interest rates might also affect CD rates. If banks and credit unions believe that market interest rates will drop, rates on longer-term certificates of deposits will move closer to those offered for short-term deposits. This is done if the issuer believes it might save money by discouraging long-term deposits. Conversely, if rates are expected to go up, long-term CDs would be priced higher to encourage depositors to lock in those funds before rates rise.
Finding the best CD rates
Finding the best rates for your savings takes a little legwork. Spend some time shopping around-visit your bank or credit union and run some searches for online banks, like ING Direct. Gather quotes and compare them based on maturity length and minimum deposit requirements. It's also a good idea to know what the investment community is saying about the outlook for interest rates, and how this might affect those being currently offered. Don't try to time the market perfectly-the experts can't even do this. Just be aware of why, for example, the short- and long-term rates might be very similar.
CD investing is a great way to take some of the risk out of your portfolio. Once you lock in your deposit, you need only sit back and wait for your interest payments, even as those bankers continue to flip their coins.
Monday, January 7, 2008
Certificate of Deposit (CD)
Certificate of Deposit (CD)
It's nice to have money in the bank. It's even nicer to have that money earning money. A certificate of deposit (CD) offers a safe way to let your cash work more effectively for you than a savings account.
A CD pays a fixed interest rate over a specified length of time. That rate will be higher than you'll earn on a simple savings account. Your bank or credit union is willing to pay you more in interest because they're guaranteed the use of your money for an uninterrupted period of time. If you withdraw your cash before the term is up, however, you'll be hit with penalties.
CD Basics
The longer the term of a CD, and the larger the initial deposit, the higher the interest rate. Terms generally range from 6 months to 5 years. During that time, you won't have access to your money. You will, however, have the option of drawing out the interest as it's paid.
Let's say you put $1,000 in a CD for one year at an annual percentage yield, or APY, of 5 percent. At the end of the year, you'll have $1,050. Fifty dollars may not sound like a lot, but leaving it in a savings account with a 2 percent APY will earn only $20.
Another great asset of CDs: they're insured just like the money that you'd put into a savings account.
Know what you're getting
Certificate of deposits offer a variety of features. Some have "call" options that allow the bank to call it in if interest rates drop. Some CDs even have variable interest rates. Before you sign on the dotted line, ask questions, get answers and fully understand the CD that you're buying. You'll need to know:
1. When the CD matures
2. The interest rate and whether it changes
3. Whether the CD can be called, or terminated early
4. Penalties for early withdrawal
5. How and when you'll be paid
A certficate of deposit is one of the safest investments you can make. Don't let your cash grow moldy in a savings account; make better use of it with a CD.
It's nice to have money in the bank. It's even nicer to have that money earning money. A certificate of deposit (CD) offers a safe way to let your cash work more effectively for you than a savings account.
A CD pays a fixed interest rate over a specified length of time. That rate will be higher than you'll earn on a simple savings account. Your bank or credit union is willing to pay you more in interest because they're guaranteed the use of your money for an uninterrupted period of time. If you withdraw your cash before the term is up, however, you'll be hit with penalties.
CD Basics
The longer the term of a CD, and the larger the initial deposit, the higher the interest rate. Terms generally range from 6 months to 5 years. During that time, you won't have access to your money. You will, however, have the option of drawing out the interest as it's paid.
Let's say you put $1,000 in a CD for one year at an annual percentage yield, or APY, of 5 percent. At the end of the year, you'll have $1,050. Fifty dollars may not sound like a lot, but leaving it in a savings account with a 2 percent APY will earn only $20.
Another great asset of CDs: they're insured just like the money that you'd put into a savings account.
Know what you're getting
Certificate of deposits offer a variety of features. Some have "call" options that allow the bank to call it in if interest rates drop. Some CDs even have variable interest rates. Before you sign on the dotted line, ask questions, get answers and fully understand the CD that you're buying. You'll need to know:
1. When the CD matures
2. The interest rate and whether it changes
3. Whether the CD can be called, or terminated early
4. Penalties for early withdrawal
5. How and when you'll be paid
A certficate of deposit is one of the safest investments you can make. Don't let your cash grow moldy in a savings account; make better use of it with a CD.
Sunday, January 6, 2008
The Art of the Budget
The Art of the Budget
Budgeting is like art. Both require discipline and perseverance, and both can yield a beautiful end product. The difference is that you don't need talent for good budgeting; you only need determination and a few simple tips.
No one likes going on a diet, but everyone loves the finished product. The same principle holds true when you use a budget for debt management. You may have to stop indulging in items that you can't afford, but ultimately, you won't be disappointed when your bank account gets fat with savings.
To create a budget, take a pen and paper and write down your monthly income and expenditures. Then follow these budgeting tips:
Remember the fun
Paring everything back to the bare necessities is the knee-jerk reaction when you start creating your budget, but it isn't practical or realistic. Life's too short to cut out all the fun. However, if you can pare back those "fun" funds to about 5 percent of your income, you'll be in good shape.
Minimum-only is a major problem
If you have credit card debt, pay more than just the minimum balance. Put some extra dollars toward the principal-otherwise your debt will never go away. You can also take out a debt consolidation loan and combine all your credit card balances into one tax-deductible loan.
Pay yourself first
Set up an automatic savings program where you put aside savings every month. Even a little bit of savings set aside regularly can result in a large chunk of change over time.
Don't let your rainy day funds dry up
It's easy to get into serious debt when your back is up against the wall. Create a rainy day fund, generally 3 to 5 months worth of income, just in case you run into a desperate situation. If you don't, you may find yourself forced into a bad credit mortgage or borrowing from relatives.
Budgeting is like dieting: You begin enthusiastically, but your willpower wanes over time. The key to sustaining a budget-like a diet-is to make it realistic. Include money for entertainment, and save a little bit every month. Once you've adjusted to your budgeted lifestyle, you'll feel good about saving more and spending less.
Budgeting is like art. Both require discipline and perseverance, and both can yield a beautiful end product. The difference is that you don't need talent for good budgeting; you only need determination and a few simple tips.
No one likes going on a diet, but everyone loves the finished product. The same principle holds true when you use a budget for debt management. You may have to stop indulging in items that you can't afford, but ultimately, you won't be disappointed when your bank account gets fat with savings.
To create a budget, take a pen and paper and write down your monthly income and expenditures. Then follow these budgeting tips:
Remember the fun
Paring everything back to the bare necessities is the knee-jerk reaction when you start creating your budget, but it isn't practical or realistic. Life's too short to cut out all the fun. However, if you can pare back those "fun" funds to about 5 percent of your income, you'll be in good shape.
Minimum-only is a major problem
If you have credit card debt, pay more than just the minimum balance. Put some extra dollars toward the principal-otherwise your debt will never go away. You can also take out a debt consolidation loan and combine all your credit card balances into one tax-deductible loan.
Pay yourself first
Set up an automatic savings program where you put aside savings every month. Even a little bit of savings set aside regularly can result in a large chunk of change over time.
Don't let your rainy day funds dry up
It's easy to get into serious debt when your back is up against the wall. Create a rainy day fund, generally 3 to 5 months worth of income, just in case you run into a desperate situation. If you don't, you may find yourself forced into a bad credit mortgage or borrowing from relatives.
Budgeting is like dieting: You begin enthusiastically, but your willpower wanes over time. The key to sustaining a budget-like a diet-is to make it realistic. Include money for entertainment, and save a little bit every month. Once you've adjusted to your budgeted lifestyle, you'll feel good about saving more and spending less.
Saturday, January 5, 2008
Refinancing Your Auto Loan
Refinancing Your Auto Loan
Many people don't realize that when interest rates drop, they can refinance their car loan just as they could their mortgage. It's an easy process that could save them substantial money every month.
If you're like most people, you love your car…except for the loan payments. Perhaps each month, as a certain date gets closer and the money in your bank account shrinks, your upcoming car payment seems harder and harder to make. There is a way to make them easier to handle, though-just refinance your auto loan.
Is refinancing for you?
By refinancing the loan, you can save money every month. It can also enable you to pay off your car loan sooner. This could happen if you refinance to one with better repayment terms. Although it may sound a little scary, it's actually much easier than refinancing your home. Plus, the money saved each month can be substantial.
The best time to refinance is when interest rates are dropping, although it can also be a lifesaver anytime if you need to lower your monthly payments.
It's not a good idea to refinance if you already have a good interest rate on your car loan, or are close to paying it off. However, it's worth a few phone calls to see what the difference in payments might be. Even if you're able to keep the same payment amount, but shorten the term of the loan by a year, it's worth investigating.
Six steps to an auto loan refinance
If you've decided that refinancing your auto loan is the right choice for you, rest assured that the process is not difficult. However, most lenders won't refinance the car loans that they originated, so you'll have to shop around for a new lender. Here are six steps to take:
1. Check your current financing contract to determine your current APR. Also, check to see if there are any pre-payment penalties.
2. Call your lender to find out the payoff amount.
3. Examine your credit report and make sure it's as clean as possible. Higher credit scores equal lower interest rates.
4. Speak with several different lenders to see if they're offering an APR at least 1 percent lower than your current loan.
5. Ask your new potential lender if there are any additional fees. If there are, they should be minimal. If not, keep shopping. Note: Refinancing does not require a new appraisal of the car.
6. Make sure that you know the correct name on the current loan account, the loan account number, and your VIN number.
With all these things in hand, you're ready to apply. The good news is that you should have an answer back within a day or two. It's that easy.
Most people don't know that, just as you can refinance a home, you can refinance your car. It's a simple process and could cease making those monthly bills such a scary sight.
Many people don't realize that when interest rates drop, they can refinance their car loan just as they could their mortgage. It's an easy process that could save them substantial money every month.
If you're like most people, you love your car…except for the loan payments. Perhaps each month, as a certain date gets closer and the money in your bank account shrinks, your upcoming car payment seems harder and harder to make. There is a way to make them easier to handle, though-just refinance your auto loan.
Is refinancing for you?
By refinancing the loan, you can save money every month. It can also enable you to pay off your car loan sooner. This could happen if you refinance to one with better repayment terms. Although it may sound a little scary, it's actually much easier than refinancing your home. Plus, the money saved each month can be substantial.
The best time to refinance is when interest rates are dropping, although it can also be a lifesaver anytime if you need to lower your monthly payments.
It's not a good idea to refinance if you already have a good interest rate on your car loan, or are close to paying it off. However, it's worth a few phone calls to see what the difference in payments might be. Even if you're able to keep the same payment amount, but shorten the term of the loan by a year, it's worth investigating.
Six steps to an auto loan refinance
If you've decided that refinancing your auto loan is the right choice for you, rest assured that the process is not difficult. However, most lenders won't refinance the car loans that they originated, so you'll have to shop around for a new lender. Here are six steps to take:
1. Check your current financing contract to determine your current APR. Also, check to see if there are any pre-payment penalties.
2. Call your lender to find out the payoff amount.
3. Examine your credit report and make sure it's as clean as possible. Higher credit scores equal lower interest rates.
4. Speak with several different lenders to see if they're offering an APR at least 1 percent lower than your current loan.
5. Ask your new potential lender if there are any additional fees. If there are, they should be minimal. If not, keep shopping. Note: Refinancing does not require a new appraisal of the car.
6. Make sure that you know the correct name on the current loan account, the loan account number, and your VIN number.
With all these things in hand, you're ready to apply. The good news is that you should have an answer back within a day or two. It's that easy.
Most people don't know that, just as you can refinance a home, you can refinance your car. It's a simple process and could cease making those monthly bills such a scary sight.
Friday, January 4, 2008
Refinance to Safety
Refinance to Safety
Adjustable-rate mortgages (ARMs) used to be the apple of a homeowner's eye. With their low teaser rates, ARMs offered smaller monthly payments than most fixed-rate products. But today's rising rates and tightening lending standards have turned the apple rotten, and forced homeowners to look at other options, like mortgage refinancing.
It seems like only yesterday that interest rates were extremely low, and anyone, anywhere could get a mortgage. Many borrowers thought those days would last forever. But, like most things financial, they didn't.
The home market has been battered recently. Rates went up, the subprime mortgage industry went into a tailspin, and home values began to shrink. The result: tightened lending guidelines and loss of equity, which caused a mass exodus from ARMs. Borrowers who could requalify for a new loan via a refinance began focusing on fixed-rate mortgages with 15- or 30-year terms-loans that provided stability.
Borrower beware
Yesterday's mortgage mentality has become today's mortgage fiasco. Lenders over-extended ARMs to subprime borrowers, who then over-extended their personal budgets. In the meantime, rates went up. When a borrower's ARM was due to adjust, he was hit with a double-whammy: He couldn't afford the higher cost of a new mortgage refinance, and his home lost value in the declining market, shrinking his available equity. As a result, borrowers defaulted on their loans.
The subprime problem has been a reality shock for many homeowners. It's clarified the fact that variable rates are subject to market forces. It's also prompted homeowners to opt for less risky mortgage products.
The value of stability
Homeowners have turned to the stability of the 15-year or 30-year fixed-rate mortgage. The interest rate is fixed, so you can count on your mortgage payment remaining the same no matter what happens to the rest of the market. The 30-year mortgage offers a lower payment than its 15-year counterpart, which will appeal to many of those ARM users who need to refinance.
Interest-only mortgages
The rise of the fixed-rate products has taken its toll on ARMs, and their share of the overall loan market has decreased significantly. The only non-traditional mortgage that seems to have emerged unscathed is the interest-only loan. With low monthly payments-(payments during the first few years go entirely toward mortgage interest)-the loan has drawn criticism from some financial corners. But it does have its fans. For the homeowner who'll be enjoying significantly higher income in the near future, such as a medical student about to become a doctor, the interest-only loan makes dollars and sense.
As ARMs adjust out of homeowners' price ranges, fixed-rate products have emerged as the home loan du jour for refinancing. Yet, lenders will point out the mortgage market is as cyclical as its stock market counterpart. When the present-day volatility rights itself, homeowners will once again arm themselves with ARMs for low-introductory rates and even lower monthly payments. For now, though, the stable fixed-rate products offer something extremely valuable to shell-shocked ARMs holders: Peace of mind.
Adjustable-rate mortgages (ARMs) used to be the apple of a homeowner's eye. With their low teaser rates, ARMs offered smaller monthly payments than most fixed-rate products. But today's rising rates and tightening lending standards have turned the apple rotten, and forced homeowners to look at other options, like mortgage refinancing.
It seems like only yesterday that interest rates were extremely low, and anyone, anywhere could get a mortgage. Many borrowers thought those days would last forever. But, like most things financial, they didn't.
The home market has been battered recently. Rates went up, the subprime mortgage industry went into a tailspin, and home values began to shrink. The result: tightened lending guidelines and loss of equity, which caused a mass exodus from ARMs. Borrowers who could requalify for a new loan via a refinance began focusing on fixed-rate mortgages with 15- or 30-year terms-loans that provided stability.
Borrower beware
Yesterday's mortgage mentality has become today's mortgage fiasco. Lenders over-extended ARMs to subprime borrowers, who then over-extended their personal budgets. In the meantime, rates went up. When a borrower's ARM was due to adjust, he was hit with a double-whammy: He couldn't afford the higher cost of a new mortgage refinance, and his home lost value in the declining market, shrinking his available equity. As a result, borrowers defaulted on their loans.
The subprime problem has been a reality shock for many homeowners. It's clarified the fact that variable rates are subject to market forces. It's also prompted homeowners to opt for less risky mortgage products.
The value of stability
Homeowners have turned to the stability of the 15-year or 30-year fixed-rate mortgage. The interest rate is fixed, so you can count on your mortgage payment remaining the same no matter what happens to the rest of the market. The 30-year mortgage offers a lower payment than its 15-year counterpart, which will appeal to many of those ARM users who need to refinance.
Interest-only mortgages
The rise of the fixed-rate products has taken its toll on ARMs, and their share of the overall loan market has decreased significantly. The only non-traditional mortgage that seems to have emerged unscathed is the interest-only loan. With low monthly payments-(payments during the first few years go entirely toward mortgage interest)-the loan has drawn criticism from some financial corners. But it does have its fans. For the homeowner who'll be enjoying significantly higher income in the near future, such as a medical student about to become a doctor, the interest-only loan makes dollars and sense.
As ARMs adjust out of homeowners' price ranges, fixed-rate products have emerged as the home loan du jour for refinancing. Yet, lenders will point out the mortgage market is as cyclical as its stock market counterpart. When the present-day volatility rights itself, homeowners will once again arm themselves with ARMs for low-introductory rates and even lower monthly payments. For now, though, the stable fixed-rate products offer something extremely valuable to shell-shocked ARMs holders: Peace of mind.
Thursday, January 3, 2008
When Not to Consolidate Student Loan Debt
When Not to Consolidate Student Loan Debt
To a college graduate, the call to "consolidate" is almost as familiar as her school fighting song. But consolidating student loans might not be as warranted as it was in years past-especially in light of recent rate changes.
Most college students spend a great deal of time with advisors. They receive guidance on class work and their various areas of study. The smart student should also seek out guidance on financial matters- especially if she has student loans.
For the last several years, students have been told to consolidate their loans before a July 2007 rate hike took place. Now that the deadline has passed, many factors need to be considered before initiating a loan consolidation.
Rate matters
The first thing that you want to do is compare the rates of your current loan with today's market. When you consolidate your student loans, a weighted average of all the interest rates of the loans is taken and rounded up to the nearest 0.125 percent.
To find out what your new monthly payment would look like after consolidation, meet with a lending official and/or do it yourself with an online loan calculator. You may discover that the new rates don't justify a refinance. You'll also want to see if the rates on your current loans are fixed. If they are, it may not make sense to refinance everything just so that you have the convenience of one loan payment. If you're uncertain about the terms on your loan, review your portfolio with a lender. Many will be happy to help you, free of charge.
Act quickly for student debt consolidation
Consolidation works most effectively if the transaction occurs within six months of graduation. That stretch of time is considered a grace period for students-they receive a price break if they start repaying their loans during that time. When the grace period ends, the interest rate on the loan increases by nearly 1 percent.
Unfortunately, if you choose the rate discount, you'll have to start repaying the student loans almost immediately after graduation. However, there are lenders willing to hold the package until the end of the grace period. Check with your bank to see if they have the same policy.
Long-term costs vs. consolidation
Ultimately, you'll need to determine your top priority. If you need low monthly payments on your loans, you may want to consider refinancing and stretching out your loan terms. However, if you'd like to be rid of a monumental debt as quickly as possible, you can opt to keep your loans at their current rate and pay down your principal.
As any academic advisor will tell a student, there are many variables to consider when making a decision. When it comes to student loans, take a good look at your current financial situation and consider your short-term job prospects. Don't jump at the easy money that a consolidation can bring. The best advice dictates that you understand all the factors at play before you make your consolidation decision.
To a college graduate, the call to "consolidate" is almost as familiar as her school fighting song. But consolidating student loans might not be as warranted as it was in years past-especially in light of recent rate changes.
Most college students spend a great deal of time with advisors. They receive guidance on class work and their various areas of study. The smart student should also seek out guidance on financial matters- especially if she has student loans.
For the last several years, students have been told to consolidate their loans before a July 2007 rate hike took place. Now that the deadline has passed, many factors need to be considered before initiating a loan consolidation.
Rate matters
The first thing that you want to do is compare the rates of your current loan with today's market. When you consolidate your student loans, a weighted average of all the interest rates of the loans is taken and rounded up to the nearest 0.125 percent.
To find out what your new monthly payment would look like after consolidation, meet with a lending official and/or do it yourself with an online loan calculator. You may discover that the new rates don't justify a refinance. You'll also want to see if the rates on your current loans are fixed. If they are, it may not make sense to refinance everything just so that you have the convenience of one loan payment. If you're uncertain about the terms on your loan, review your portfolio with a lender. Many will be happy to help you, free of charge.
Act quickly for student debt consolidation
Consolidation works most effectively if the transaction occurs within six months of graduation. That stretch of time is considered a grace period for students-they receive a price break if they start repaying their loans during that time. When the grace period ends, the interest rate on the loan increases by nearly 1 percent.
Unfortunately, if you choose the rate discount, you'll have to start repaying the student loans almost immediately after graduation. However, there are lenders willing to hold the package until the end of the grace period. Check with your bank to see if they have the same policy.
Long-term costs vs. consolidation
Ultimately, you'll need to determine your top priority. If you need low monthly payments on your loans, you may want to consider refinancing and stretching out your loan terms. However, if you'd like to be rid of a monumental debt as quickly as possible, you can opt to keep your loans at their current rate and pay down your principal.
As any academic advisor will tell a student, there are many variables to consider when making a decision. When it comes to student loans, take a good look at your current financial situation and consider your short-term job prospects. Don't jump at the easy money that a consolidation can bring. The best advice dictates that you understand all the factors at play before you make your consolidation decision.
Wednesday, January 2, 2008
Credit Crisis will Affect Student Loans
Credit Crisis will Affect Student Loans
Many students enter school with the hopes of bettering themselves and earning more income. A recent announcement by Sallie Mae that they'll no longer make loans to subprime borrowers may throw a wrench in the goals of many students, particularly those with bad credit.
Throw a pebble into a pond, and you'll see gentle ripples expand in concentric circles. The subprime lending crisis has been the equivalent of throwing a cinder block into that pond. It's sent out a tidal wave of trouble, and student loans are the latest financial product to get hit.
Sallie Mae, the nation's number one lender for college students, recently announced it will no longer make private education loans to students who are subprime borrowers. "Subprime" is classified as a person who's a high credit risk, and either made late payments on a credit card or loan, or carries too much debt.
Private loans to feel the most impact
For-profit education institutions, such as culinary schools, design academies, and trade schools, will feel the brunt of Sallie Mae's announcement. These institutions rely heavily on subprime borrowers for their enrollment.
The impact will not be as profound at non-profit colleges and universities. These types of institutions benefit from a higher number of grants and government financial aid. Nevertheless, with private loans making up nearly a quarter of all education loans, the ripple effect will likely occur.
Adapting to a new financial order
Just like the real estate and mortgage lending industry has adapted to new market conditions, educational institutions are likely to do the same. Many have already begun exploring ways to self-fund their own private loans, a prospect that may even add revenue, provided that they don't make the same mistakes as the home lending sector.
How can private educational institutions avoid the same problems that are currently plaguing lenders like Sallie Mae? First and foremost, they should be careful to follow solid lending fundamentals. The lending institutions that have suffered losses are the ones that have extended loans to people with horrendous credit. By tightening lending guidelines, lenders can steer clear of student loan defaults.
Student adaptation
How will subprime students fare in this new financial order? Undoubtedly, it will be a struggle. Students will have to do more research to find a lender that will work with them. But with private educational institutions beginning to provide their own loans, they actually stand a better chance of getting a loan at a reasonable rate, rather than being raked over the coals by unscrupulous lenders.
Ultimately, cleaning up the student loan pool is a task that must be shared by both lenders and students. Tighter guidelines will prevent future defaults. For students, sound money management will help them raise their credit scores. Hopefully, these changes will allow students not only to qualify for better loans, but also give them access to a better life.
Many students enter school with the hopes of bettering themselves and earning more income. A recent announcement by Sallie Mae that they'll no longer make loans to subprime borrowers may throw a wrench in the goals of many students, particularly those with bad credit.
Throw a pebble into a pond, and you'll see gentle ripples expand in concentric circles. The subprime lending crisis has been the equivalent of throwing a cinder block into that pond. It's sent out a tidal wave of trouble, and student loans are the latest financial product to get hit.
Sallie Mae, the nation's number one lender for college students, recently announced it will no longer make private education loans to students who are subprime borrowers. "Subprime" is classified as a person who's a high credit risk, and either made late payments on a credit card or loan, or carries too much debt.
Private loans to feel the most impact
For-profit education institutions, such as culinary schools, design academies, and trade schools, will feel the brunt of Sallie Mae's announcement. These institutions rely heavily on subprime borrowers for their enrollment.
The impact will not be as profound at non-profit colleges and universities. These types of institutions benefit from a higher number of grants and government financial aid. Nevertheless, with private loans making up nearly a quarter of all education loans, the ripple effect will likely occur.
Adapting to a new financial order
Just like the real estate and mortgage lending industry has adapted to new market conditions, educational institutions are likely to do the same. Many have already begun exploring ways to self-fund their own private loans, a prospect that may even add revenue, provided that they don't make the same mistakes as the home lending sector.
How can private educational institutions avoid the same problems that are currently plaguing lenders like Sallie Mae? First and foremost, they should be careful to follow solid lending fundamentals. The lending institutions that have suffered losses are the ones that have extended loans to people with horrendous credit. By tightening lending guidelines, lenders can steer clear of student loan defaults.
Student adaptation
How will subprime students fare in this new financial order? Undoubtedly, it will be a struggle. Students will have to do more research to find a lender that will work with them. But with private educational institutions beginning to provide their own loans, they actually stand a better chance of getting a loan at a reasonable rate, rather than being raked over the coals by unscrupulous lenders.
Ultimately, cleaning up the student loan pool is a task that must be shared by both lenders and students. Tighter guidelines will prevent future defaults. For students, sound money management will help them raise their credit scores. Hopefully, these changes will allow students not only to qualify for better loans, but also give them access to a better life.
Tuesday, January 1, 2008
Student Loans
Student Loans
It isn't always possible to finance a college education out-of-pocket or through scholarships. There are many student loan options beyond that, and a clear order of preference among them.
Federal Student Loans
Your first line of defense is the federal student loan program. A Perkins loan is hard to beat with its fixed 5 percent interest, no repayments until 9 months after graduation, and no extra fees. You need to qualify for this program through the Free Application for Federal Student Aid (FAFSA). Funds are limited, and generally go to students in serious need of low-cost financing.
The next step is the subsidized Stafford student loan. The interest rate is higher-6.8 percent-and the post-graduation grace period is only six months. You apply through the same FAFSA form, and can use both types of loan simultaneously. Another choice-the unsubsidized Stafford student loan-accumulates interest from the day of your first disbursement rather than from the end of the grace period. It's also easier to qualify for.
The last federal student loan is called PLUS. Under this program, no FAFSA form is necessary, and your parents can borrow as much as they need to finance your education. But the interest rate is higher-8.5 percent-and your parents will need to have a decent credit rating. Repayment terms are less generous, and 4 percent of the fees are deducted from every disbursement check. In other words, PLUS has a lot of minuses.
Other Student Loan Options
If you're going to any kind of medical school, there are special Health Professional Student Loans available with rates as low as 6.5 percent, a full year's grace period, and very long repayment periods. These studentt loans are quite affordable, but available only to future healthcare professionals.
Many banks and credit unions offer private education loans, though they are often expensive. Other students get their tuition money from home equity loans or HELOCs against their parents' homes. These can be preferable to PLUS for tax reasons, but are otherwise much the same thing.
It isn't always possible to finance a college education out-of-pocket or through scholarships. There are many student loan options beyond that, and a clear order of preference among them.
Federal Student Loans
Your first line of defense is the federal student loan program. A Perkins loan is hard to beat with its fixed 5 percent interest, no repayments until 9 months after graduation, and no extra fees. You need to qualify for this program through the Free Application for Federal Student Aid (FAFSA). Funds are limited, and generally go to students in serious need of low-cost financing.
The next step is the subsidized Stafford student loan. The interest rate is higher-6.8 percent-and the post-graduation grace period is only six months. You apply through the same FAFSA form, and can use both types of loan simultaneously. Another choice-the unsubsidized Stafford student loan-accumulates interest from the day of your first disbursement rather than from the end of the grace period. It's also easier to qualify for.
The last federal student loan is called PLUS. Under this program, no FAFSA form is necessary, and your parents can borrow as much as they need to finance your education. But the interest rate is higher-8.5 percent-and your parents will need to have a decent credit rating. Repayment terms are less generous, and 4 percent of the fees are deducted from every disbursement check. In other words, PLUS has a lot of minuses.
Other Student Loan Options
If you're going to any kind of medical school, there are special Health Professional Student Loans available with rates as low as 6.5 percent, a full year's grace period, and very long repayment periods. These studentt loans are quite affordable, but available only to future healthcare professionals.
Many banks and credit unions offer private education loans, though they are often expensive. Other students get their tuition money from home equity loans or HELOCs against their parents' homes. These can be preferable to PLUS for tax reasons, but are otherwise much the same thing.
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