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.
Sunday, January 27, 2008
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.
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