Entries Tagged 'loans' ↓
November 26th, 2008 — Debt, Personal Finance, bad debt, credit cards, loans
If you’re swimming in a sea of debt and trying to figure out how to keep your head above the water, one of the easiest ways is to consolidate. However, the actual process of consolidation can be confusing and it is all too easy to make mistakes that will end up costing you both now, and in the long term. If you are ready to reduce your bad debt, here are some great debt consolidation tips to get you started.
1. Avoid paid services.
We can’t stress enough that anyone who expects you to pay extra money to have your debts consolidated should be avoided at all costs. Many of these services are actually quite expensive and their results are quite low. There are numerous non-profit debt consolidation services out there that won’t charge you a dime to help you with your debt. These services are a much better solution and can actually be more effective at reducing your overall debt load.
2. Think before getting a consolidation loan.
It’s natural to just go to your bank and sign up for a loan in order to pay off all of your debts. However, you’ll need to carefully read the terms of the loan and do a little thinking before jumping to this conclusion. Depending on the terms, you could end up spending more on interest and it may take you even longer to get out of debt. For example, the payments on a long term debt consolidation loan may be lower, but over time, you’ll be spending thousands extra on interest payments.
3. Read card transfer deals carefully.
Another common solution for many when consolidating their debts is to simply transfer all of their high balances into one card. This is usually done during a zero percent interest offer. However, you will need to carefully read the terms on these offers before you take advantage of them. Many will have stipulations that transferred balances are not eligible for no interest, while others will increase your interest rate ten fold after six months. Always read the fine print and do some calculations to see if you really will be saving money.
When it comes to consolidating your debt, you’ve got to think long and hard about the choices you make. Yes, it is vital to pay off that bad debt and start freeing up your income so that it can work for you, but jumping to the wrong conclusion may have lasting consequences. Try to look at several avenues for debt consolidation before you jump and get the help of a trusted financial advisor to help you along the way.
If you are careful and practice smart debt consolidation techniques, chances are you’ll be able to pay off that debt in much less time and you’ll be saving money, now and in the future. Take the time to go through your options carefully and you’ll find that debt consolidation is much easier and much less expensive over the long term.
Photo Credit: 1
Related Articles
Related Stores
November 11th, 2008 — Banking, Debt, Personal Finance, economy, loans, stock market
With the fall of the stock market, the collapse of the economy became clear. The real driving force behind it, however, was the failure and dropping confidence in the largest bond market of the world. Known as structured finance, it has led to a crisis which rivals the Great Depression, as well as brought about the demise of twenty plus banks and almost $3 trillion in government spending and guarantees.
Securitization is the biggest export for the US in the 2000s. What they are is the bundling of consumer loans sub prime mortgages. The US has the largest debt, having borrowed $27 trillion since 2001. That amount is nearly twice the gross national domestic product, which is $13.8 trillion. This sort of growth owes itself to overseas banks, which wanted a piece of the action it saw in US banks. With this demand, Wall Street gladly supplied the securities, leading to nearly a trillion dollars worth of bank losses, almost half of which was outside of the US. It was in Europe where a great deal of banks got hit. The amount of securitizations grew from 78 to 453 billion euros, which is over half a trillion in US dollars. Many of these banks lost a lot of money, from one bank in Germany losing $4.1 billion to Iceland, where the Prime Minister advised his citizens to switch from finance to fishing. Even in Japan, its third largest bank saw a $6 billion dollar loss.
Securitization is considered a system which operates in the shadows, powering many consumer debt vehicles, such as credit cards, car purchases and sub prime mortgages. This system leads to cheaper loans thanks to dividing the risk of default by pooling loans. As a result, bank profits went up and a debt culture became realized across the globe. In 2005, banks decided to put more into the system in order to boost profits. Through lending more through sub prime mortgages and by relying more and more on the US money market funds, investment banks brought about fatal consequences.
Traditional lending involved the bank loaning money it had on hand, receiving regular payments on the loan and turning a profit from the amount over the principle that the borrower pays. It was loosely around 1985 that a method was devised for lending without capital. Its general mechanics involved taking anything on a payment schedule and using that money to pay off the interest for bond holders. The biggest technique used in securitization was the utilization of a sort of shadow accounting. The bank could take bonds it did not sell and shift them to an off shore account in a trust, which removed the entry from the books and allowed the bank to lend more while still recording profits. As a result, the bank could sell some of its loans to investors and put the rest in a trust, and not have to hold any capital.
It was this system that led to the banks eventually trying to use sub prime mortgages to cover money that it owed, which led to the economic crash. The failure of the economy owes itself to a pen and paper trick devised to maximize bank profits.
Photo Credit: 1
Related Articles
Related Stores
November 6th, 2008 — Money, News, Personal Finance, credit, economy, loans
The credit crunch is a hot button issue right now, raising red flags in the eyes of consumers not only all over the United States, but also elsewhere in the world. When the economy in the United States begins to have difficulties, the rest of the world is going to feel the pain as well. Lending options are becoming tighter because many large scale lending institutions are tightening their belts during this credit crunch. What do these changes in the way loans are offered mean for consumers?
Some options relating to lending are becoming more difficult and more expensive to come by because of the credit crunch. Mortgage lenders, for example, are upping the stakes when it comes to lending mortgage loans to consumers in need, meaning that consumers who do not have good credit ratings or credit reports may find it nearly impossible to get the lending that they need. On the other hand, people who have decent credit should still be able to find the lending options that they need for mortgages, auto loans, student loans and credit cards.
The government is doing what it can to provide lending options to consumers that are in need, because no one should be kept from the lending options they require for things like home mortgages, automobiles, education and so on. So while many lending options are being restricted by banking and lending institutions tightening their belts to consumers with less than perfect credit, you are still not going to be completely left out in the cold, even if your credit is poor. If you are a student in need of financial assistance for school, for example, then the credit crunch is not going to prevent you from seeking the education that you want because the government is doing what it can to make sure that these loans are still provided to the students who are in need, even when during the credit crunch their personal credit may not be enough to impress most lenders.
The truth about the credit crunch is simple: Things are going to get a little tense and a little strict for a few months or a year or so while lenders deal with the credit crunch and the mortgage loans they granted that have defaulted on in recent months. Once these issues are dealt with and the economy begins to rebuild itself, lenders will loosen their belts again and will begin to offer a much wider variety of loans. The reason why loans are so affected by the credit crunch is because lenders are in the business of making money by lending money. If they do not believe they can make money on a loan, they will not offer it. Once the credit crunch subsides a bit, lending options will be back in great numbers once again. So the trick to surviving the credit crunch is simply to be patient and do what you can to improve your credit in the meantime.
Photo Credits: 1
Related Articles
Related Stores
October 3rd, 2008 — Banking, Book Review, Budget, Mortgage, Personal Finance, loans
When it comes to a trusted source for financial news and information, it’s hard to beat the Wall Street Journal. They have introduced a line of guidebooks on many financial topics, but for this review we’ll be taking a look at their Personal Finance guidebook. While it may be a little simplistic for the financial whiz, it is certainly a must-read for those that are still struggling with their personal finance issues, or just starting out in the world.
It should be noted that there is a companion book to this title, called the The Wall Street Journal. Personal Finance Workbook
. We highly recommend purchasing both since you will be able to implement the advice of one by using the other. Both are incredibly useful, especially if you are looking for ways to get your finances on track. The guidebook is brief, coming in at right around 200 pages, but there is a lot of information packed in there.
The book starts out with the utter basics, such as managing a checkbook, but for a lot of people, this is truly necessary advice. While this is aimed at beginners, even experts might be able to spot a few common mistakes that they are guilty of making when it comes to handling checkbooks and savings accounts.
Once this section is thoroughly covered, the book goes on to help the reader start a money management plan. This is basically a budget, and again, even though the advice is simple, it is very solid and for many, very necessary. The basics of budgeting are completely explained and there is some great real world advice for those looking to get their finances and their spending under control.
How to get a good mortgage and auto loan are also some very good topics that round out the book nicely. Basically, this is a book that is designed to help the average consumer learn more about how finances work and how to implement good practices to ensure that you won’t be spending your golden years flipping burgers.
The workbook however is even better and gives you a way to create an exact plan for your future. Both contain calculation examples and tips on how to figure out whether renting is best for you, how much house you can afford, how to save money on life insurance and many other important topics. The section on investment risk, allocation and how to find out how much money you need for retirement are particularly helpful.
While these two books may be a little too basic for experts, they are absolutely vital for the rest of us. Even if you have already heard the advice before, and there is probably a good chance that you have, the author does a great job of presenting it in such a way that it seems much easier to follow and implement the advice. We highly recommend this title to anyone interested in learning more about personal finance and how to manage their money.
Related Articles
Related Stores
September 21st, 2008 — Investing, Leverage, Money, Personal Finance, Stocks, loans, roundup, saving
Welcome to this week’s edition of the SMR. Browse by category for your weekend reading material. What other categories would you like to see here? Let me know - leave a comment!
College | Home:
Investing | Stocks:
Debt | Debt Leveraging:
Save Money | Frugal Tips:
Thanks to the carnivals that hosted us!
Check out Yahoo! Savvy Networker for 10 biggest networking no-nos.
Related Articles
Related Stores
August 19th, 2008 — Debt, Long Term, Money, P2P Lending, Personal Finance, loans
There are two new trends in the banking world that may actually be very dangerous for consumers. Long term personal loans and interest only loans are gaining in popularity, especially in the wake of the housing crisis. While these may seem to be a great option at the time, there are many risks from these loans that should be avoided if at all possible. If you’re considering refinancing your home to an interest only loan, or if you are looking at getting a personal or car loan, it is very important to understand exactly what you are getting into before you agree to any loan.
An interest only home loan means that each month, you only pay the interest that you owe. At face value, this can save a lot of money and it may help you keep your home if you are refinancing. Even though interest rates are going up, when you’re not paying on the principle, your overall monthly payment will be lower. However, the part about not paying on the principle is the kicker.
At the end of your interest only loan you will not own your home. Instead, you will have to pay the principle, in full, in order to get the deed. Now, if you’re planning on selling your home after the loan is paid off, this may not be as dangerous. However, with falling property values and a down market, this can be disastrous. In addition, by only paying interest, you will end up spending a lot more at the end for your home. In most cases, homeowners with this type of loan find that they spend $25k to $50k more for their actual homes.
Another issue with interest only loans is that you will not have the benefit of gaining equity in your home, even though you are making payments every month. If you end up with an emergency on your hands and need to get money quickly, you will not be able to draw on the equity in your home. This is a big problem that many people do not consider. Would you rather have lower monthly payments, or the ability to earn equity in your home with every payment that you make?
Next up, long term loans are becoming very popular as interest rates go up. Most people prefer to keep their payments as low as possible, but right now, that is pretty tough. The solution has been to roll out new long term loans, particularly for cars. As an example, you may be paying only $300 a month for your car, but you will have to keep making those payments for the next seven to eight years. Compare this to the usual time period of three to five years.
That is a lot of extra interest and many people may not even realize just how much extra they are paying. At the end of the loan term, you will have spent thousands more than the car is worth and by then, the vehicle has depreciated to the point where you will never get that money back. Long term loans do make it easier to make payments, but at the end of the day, you’re worse for the wear.
Photo Credits: 1
Related Articles
Related Stores
August 17th, 2008 — Debt, Leverage, loans
Right now, the student loan industry is going through one of its worst periods in decades. New Federal regulations have forced many banks to stop offering student loans, and students are being forced to either find a direct loan or start paying back what they owe. Enrollment figures are being affected dramatically and right now, many students simply cannot afford to go to school.
This problem is extending to those that are already trying to pay on their student loans. It has become harder than ever to consolidate old student loans and the interest rates are not helping matters either. It is important to pay off your student loans as quickly as possible, especially if you want to save money over the long term. Here are some tips to help you accomplish this.
1. Try asking your family for help.
If your family is in the position to help you financially, this should be your first stop. No one really likes borrowing money from their parents, but if you can pay off all of your loans, it is worth it. You won’t have to worry about crazy interest rates and you’ll have a chance to make bigger payments on the loan. However, you’ll need to make sure that you can set up a payment plan and stick to it to avoid causing any family disputes.
2. Get a second job.
This is a tough one, especially if you are already working full time. However, it can mean the difference between paying on student loans for the next decade, or taking just a year to pay them off. For example, if you owe $98,000 on your student loans, and you get a part time job that pays an extra $1000 a week, you could pay off that loan in less than two years. There are many high paying second jobs, such as bartending, where you can easily work off that student loan in no time at all.
3. Leverage your debt.
If you don’t have the time to get a second job, you may want to consider a technique known as debt leveraging. This involves taking out a loan and making an investment. Whether it is in an interest bearing account, new business idea or stock is up to you. Just make sure that you can count on the returns. This will create a secondary stream of income that can be used to pay down your student loans in a lot less time.
4. Negotiate.
If all else fails, try negotiating with the loan company to get a lower interest rate. If you have been paying on your loan faithfully they will be much more likely to help you out. It never hurts to ask or to apply for a consolidation loan. The worse they can say is no, and you’ll still have a lot of different options out there. The important thing is that you don’t fall behind on your debts. It may take some hard work, but you’ll appreciate it once you’re free of the yoke of your student loans.
Photo Credits: 1
Related Articles
Related Stores
