So What Can a Home Buyer Do?
Obviously, many people have lower credit ratings due to job loss, divorces, health problems, failed business ventures, etc. Others simply have poor credit ratings because they have neglected their obligations to repay creditors in a timely manner.
Regardless of the reason, recognize that there are opportunities to still purchase or refinance your home, but it is just as important to view this as a second chance – a new lease on your financial life, if you will.
Take the time to carefully analyze why you ran into credit problems in the first place, and determine if you will actually be able to make your payments once the loan is granted. If you can reasonably determine that “yes,” you are in better financial shape now than when the credit issues occurred you might want to consider an Adjustable Rate Mortgage (ARM) for your financing option.
By doing so, you will gain the benefit of a somewhat lower interest rate, but it will only be for a short period (usually 2-3 years.) Additionally, most ARM loans have a prepayment penalty that equals about six months worth of interest. The thought process of taking the ARM loan is simple. If the financial problems are behind you and you can demonstrate to the new lender that you have changed your credit patterns, you will be able to refinance at a lower, fixed rate in two or three years. Similarly, you will have the benefit of a slightly lower payment than if you selected a fixed rate payment from the outset.
If, however, you continue to see financially turbulent times ahead such as job uncertainty, marital problems or health issues, you will want to consider a fixed rate payment in order to ensure a consistent amount due each month.
Who Purchase These Loans?
While most of the investors purchasing Sub-Prime loans are non-traditional lenders, recognize that Fannie Mae, a large government sponsored agency, is beginning to move into this lucrative market. As a result, many loans that used to go non-conforming can now go through traditional lenders, which may result in lower fixed rate payments for borrower. Be certain that your lender attempts to sell your loan to Fannie Mae before placing you in a private, Sub-Prime loan pool.
Is it Worth it?
YES! The benefits of owning a home far outweigh a slightly higher interest rate if your credit is less than stellar. Aside from the tax benefits, you gain equity, experience property appreciation and experience the pride that comes with owning your own home. Don’t let credit blemishes keep you out of the game!
Wednesday, January 30, 2008
ABC of Bad Credit Lending
Know your credit - Pull a credit report and find out your exact FICO score. Examine your credit report for any errors. Immediately report any discrepancies on your credit report.
Prepare your documents - Assemble a personal history file. You should have your tax returns for at least the last two years. Have pay stubs for a full calendar year or an income verification letter from your employer.
Save for a down payment - Every dollar put down makes getting a low credit score home loan easier. Down payments may also help you get a lower interest rate and a lower monthly payment.
Shop for lenders - Even borrowers with low credit scores will find numerous home loan lenders. Select several to interview. Check their backgrounds with the Better Business Bureau or obtain references from friends. Arrange to meet with your chosen loan agents. Discuss the amount of mortgage you can afford and the type of loan your credit will require. Even with a low credit score you may be able to pre-qualify for a loan. Pre-qualifying makes the actual hunt for a home much easier.
Negotiate terms - The low credit score home loan market is very competitive. Don’t be afraid to negotiate and don’t be intimidated by the lenders. Ask if better terms are available.
Unfortunately, bad credit is a gift that keeps on giving each and every time you apply for a loan. And a mortgage is no exception. However, you don’t have to be a victim of your credit history when you apply for a mortgage because of something called a subprime loan. These are mortgages made to a borrower with bad credit or little or no credit history who would otherwise be unable to obtain one.
Here’s how they work. A prime or conventional mortgage is considered a grade A risk loan. Therefore, subprime mortgage loans are generally categorized into A–, B, C and D grade risk loans. The individual lender establishes the guidelines that determine the parameters of each grade. However, the basic principle in assigning risk grades is the greater the problems are with your credit history, the higher the risk of delinquency, default and loss, the greater the chance that you will be assigned to the highest risk grades like C and D.
Despite all of this, subprime customers don’t have to settle for the first lender that will provide credit. The increased competition within the subprime market has resulted in putting borrowers more in control of lending process. This control manifests itself in the ability to shop around for the most competitive rates. In addition, technology has given lenders automated underwriting and scoring tools that help in pricing loans and predicting defaults, which increases a lender’s capacity to provide more loans with attractive rates.
By : ABC Loan Guide
Buy a House with No Money Down
Thus, many people assumed that buying a home was unattainable. This is quite the contrary. Many mortgage lenders offer a variety of home loans that do not require a down payment.
Typical Down Payment Amounts
Ideally, down payments are about 20% of the home price. However, mortgage companies are willing to accept 3% - 5%. Because the average person did not have a large cash savings, most people had to delay buying a home, in order to save enough money.
Due to rising home prices, the majority of new home buyers can no longer postpone buying a home. Besides, building a cash reserve of 3% of the home's price would take several years. Instead, mortgage companies have begun tapping into a new niche. This allows people with moderate incomes and first time buyers to purchase a home with no money down.
Buying a Home with 100% Financing
Prior to 100% financing, home mortgage companies would only finance 80% of a home's price. Thus, buyers had to either have the additional 20% on hand, or forgo buying the property. Because of 100% financing, many buyers are able to buy a home, and have the lender finance the entire price. This alleviates the need for a down payment.
Additionally, home buyers can take advantage of 103% and 107% financing. Ordinarily, the extra money is used to pay the closing costs. However, if funds are left over, the buyer can use the money for whatever purpose. This might include paying off debts or making home improvements.
Piggyback Mortgage Loans
Piggyback mortgage loans, also referred to as 80/20 home loans, are very similar to 100% financing loans. The only difference is that homebuyers choosing the 80/20 option obtain two loans. This includes a first mortgage for 80% of the home price, and a home equity loan or second mortgage for the outstanding 20%. Although piggyback loans offer 100% financing, buyers will need money for closing.
By : ABC Loan Guide
Tuesday, January 29, 2008
What is No Money Down Home Loans
Private Mortgage Insurance
One of the main disadvantages of a no-money down mortgage loan is the private mortgage insurance that many lenders require. It is not uncommon for lenders to require private mortgage insurance on any loan that does not meet the twenty percent down payment standard. However, if you do decide to purchase private mortgage insurance, it can increase the amount of home loan that you qualify for. By obtaining a private mortgage insurance policy, you are considered less of a risk to lenders. When a homeowner reaches a certain percentage of equity in the home, the lender is required to cancel the private mortgage insurance. Twenty-two percent is that standard rate of equity that must be reached before lenders cancel the policy but some lenders may agree to cancel the private mortgage insurance before it reaches that level.
Piggyback Loan
If you do not qualify for a no-money down mortgage loan without purchasing private mortgage insurance, you may want to ask your lender if they offer piggyback loans. A piggyback loan allows homebuyers to receive two separate loans to cover the cost of the mortgage. The first loan is granted for eighty-percent of the home’s value. The second loan covers the remaining twenty-percent. These are often referred to as 80/20loans for this reason.
By : ABC Loan Guide
Basics of Mortgage Information
Points
A point is amount that a borrower will pay in order to reduce the interest rate on their mortgage. One point is generally equal to 1% of the loan amount. For example, if you were taking out a 100,000 mortgage, and wanted lower interest rates, you might have to pay anywhere from 1-3 points (or $1,000-3,000 dollars) to get that rate. It’s important to note that some lenders will advertise very low interest rates, and only when you read the fine print will you learn that you will have to pay points in order to get them.
Interest Rates
When a lender makes a loan, they make money by charging interest on that loan. With a mortgage loan, all of that interest is front-loaded, which means that for the first few years, every payment that you will make will go mostly toward the interest.
When applying for a mortgage, you will have the option of “locking-in,” or “floating” your interest rate. If you choose to lock-in your rate, then you will be assured—for about 60 days—that when you close it will be at that rate. However, if it appears that interest rates will go lower, you can choose to float the interest rate, which means that you can watch the rates carefully, and then lock it in whenever it reaches an amount that you are comfortable with.
Closing Costs
When you go to close on your home at the title company, both the buyer and seller will have to pay a pre-determined amount of closing costs. These are determined by the type of loan you get, and the area where you live. Your lender is required by law to inform you of any closing costs beforehand, so be sure to ask for your truth in lending estimate.
As you can see, mortgage terms aren’t that mysterious! Do some research or read some more articles on this site to become familiar with the lending terms that you need to know.
Look for mortgage companies that will provide you offers from more than one lender. That way, you can get competitive offers.
How to Select Adjustable Rate Mortgage
Obvious advantages - An adjustable rate mortgage has two obvious advantages. One, at the beginning of the mortgage term the monthly payment will be lower. Two, the payment to income ratio will be lower therefore it may be possible to qualify for a larger loan amount.
Know ARM definitions - There are three basic terms to know when considering an adjustable rate mortgage. One, index rate – the rate that the mortgage will be tied to, such as a one, five or ten year treasury security. Two, margin – the amount the interest rate on the mortgage will fluctuate. A margin of two means the interest rate will be two points above the index rate. Three, caps – ceilings on how much the interest rate can go up each period. There also may be caps on the interest rate over the life of the loan and caps on the actual amount of the payment.
Be cautious - Depending on the situation an adjustable rate mortgage can be a wise idea. However, an ARM can also lead to an unanticipated large increase in a monthly mortgage payment. Payments may go up $200 or more at one time. If considering an ARM, discuss it in depth with your financial institution. Don’t be timid about getting a second opinion.
Analyzing FHA and VA Loans
In comparing lenders, we analyze:
- Whether or not they have competitive interest rates.
- Their popularity among other borrowers.
- Whether or not they are reputable as a company.
and other factors.
We recommend applying initially with mortgage loan companies who can provide you with multiple, competing offers. When applying for a home loan, you don't want to have your credit pulled over and over with every lender, its best to consolidate your credit inquiries with 3-4 companies who will each get you multiple offers.
By : ABC Loan Guide
How to Select Mortgage Lenders
Know your terms - Like all industries mortgage lending has its own vocabulary. Familiarize yourself with the terms. Know what a point is, what the current interest rates are. You don’t have to be an expert but you don’t want to walk into a mortgage office without any knowledge whatsoever.
Know your credit score - Find out what your credit report and credit score say about you. Understand the basic reasons behind your credit score. Research how credit can affect the types of mortgages available to you.
Prepare questions - Make a list of questions. You will want to know the types of mortgages the lender offers, the interest rates, the closing costs and the points. Ask about prepayment penalties and additional fees. Have the lenders give you their answers in writing.
Sit down and compare - Go over each proposal line by line. Make sure you are comparing the same types of mortgages. Don’t compare an adjustable rate mortgage to a fixed rate mortgage. Don’t compare the lump sums of the closing costs. Analyze the individual items you are paying for in the closing costs. Know the penalties each lender may assess if you pay your loan off early.
Think long term - A mortgage that has a lower interest rate may not always be the better mortgage. Be sure there are no escalating rates, balloon payments or exorbitant penalties on the lower interest rate mortgage.
Ask questions - If there is anything at all you don’t understand, ask. A mortgage is probably the largest and most important debt you will ever undertake.
Monday, January 28, 2008
How Does Interest Only 2nd Mortgages Work
Interest-Only Payments
For a period of time established by either you or your lender -- usually a few years -- interest-only second mortgages only require that a borrower makes monthly payments on the interest accrued on their loan. This means that the borrower is not required to pay any amount on the principal. This makes for monthly payments that are considerably lower than fully-amortized payments.
Conversion to a Traditional 2nd Mortgage
After the term of interest-only payments, the loan converts to a traditional 2nd mortgage. This means that you will be responsible for fully-amortized payments for the remainder of the mortgage’s term.
Benefits and Disadvantages
Interest-only second mortgages can be very beneficial to borrowers who are looking to borrow money in order to pay for improvements on their home before selling it. This may allow the borrower to earn all of the borrowed money back when the home sells at a higher value because of their investment. However, interest-only second mortgages may not be wise for any reason other than this. After the interest-only payment term ends, monthly payments will be considerably higher than they would on a traditional 2nd mortgage. Borrowers not looking to sell their home should choose the shortest interest-only term possible.
Borrowers should remember that second mortgages use their home as collateral. This means that, if you cannot make your payments, your lender has the right to seize your home as repayment. Borrowers should never take out a second mortgage unless they are certain that they can afford the payments on both their first and second mortgages.
Pros and Cons of Reverse Mortgage Loan
Here are the pros and cons:
PRO: You never have to worry about making payments. Instead, money from the sale of your house is used to pay off the loan. As long as you live in the house, you never have to make a payment.
CON: You must keep current with taxes and insurance. And because the equity gradually decreases, you could end up with almost nothing by the time you move out.
PRO: The eligibility criteria are relatively simple. You must be the homeowner, and it must be your principle residence. You can’t, for example, get a Reverse Mortgage on an investment or vacation property.
CON: You must be 62 or older. That's one of the reasons these types of loans appeal to retired seniors seeking supplemental income.
PRO: Your home can never be taken by the lender. With most mortgages or home equity loans, the lender can repossess your home if you fail to make payments in a timely manner. With a Reverse Mortgage, as long as you're living in your home, it belongs to you.
CON: Since the cash from your home sale pays off the Reverse Mortgage loan, you may have nothing to leave your heirs after the loan is paid off.
PRO: You can receive the cash from the loan in a variety of ways, including regular monthly payments, a line of credit, or a combination of those two.
CON: Fees tend to be high, and you don't get the same tax advantages that you receive from other types of mortgages or home equity loans.
For folks in the right circumstances, a Reverse Mortgage can help boost income and provide money for home repairs or remodeling. But before you sign on the dotted line, be sure to carefully weigh the pros and cons.
Factors to Consider in a Jumbo Loan
Even more expensive are super jumbo loans which are for mortgages above $1,000,000.00. These loans, like jumbo loans are considered much higher risk and carry higher interest rates and penalties. Super jumbo loans are not as common as jumbo loans and many borrowers seek them for the tax write off that one can get from having a mortgage.
Jumbo and super jumbo loans can not be found at most banks, borrowers often times look to the internet for lenders, because it gives them the ability to find a wider variety and more competitive rates. These loans are most prevalent in states such as California, where real estate is some of the highest in the country. Many lenders will not lend above $650,000.00 or have very stringent rules for amounts above $650,000.00.
The availability of these loans also depends on the location of the lender and the property. If a borrower lives in a place like San Diego California where the average cost of a 2200 square foot home is $627,938.00, there will be several lenders willing to give them a jumbo or super jumbo loan. However, if a borrower lives in a rural area where the average cost of 2200 square foot home is $190,000.00, there are not going to be that many lenders willing to lend such a large loan in a market that does not have that kind of demand.
When borrowers seek loans for such large amounts, it is important to shop around for the best rate. Although it was stated earlier that super jumbo loans were often sought just for the tax write offs they offer, borrowers seeking jumbo loans often have a real need. If they live in San Diego, like the above example, they are not often seeking a luxury home or a second home, they are seeking what is considered a middle class home in that area. Borrowers could easily be led into a rate that is too high for them; by taking the first rate they are offered.
By : ABC Loan Guide
What is Interest Only Mortgage
The period of time in which interest-only payments are allowed is established by the lender. During this time, the borrower does not make payments on the principal of the loan; therefore, they gain no equity in the home. Making interest-only payments is similar to renting a home.
However, after the period of interest-only payments, the loan converts to a traditional mortgage. The borrower is then responsible for fully-amortized payments for the remainder of the loan’s term. This means that you would have to pay off your principal in a shorter amount of time.
Interest-only mortgage loans can be beneficial to college students and young professionals who expect their income to rise before the end of the interest-only term. This would allow them to live in their own home for a period of time before they can afford to start earning equity in it.
Borrowers who are considering entering into an interest-only mortgage loan should keep in mind that their monthly payments will be higher after the interest-only term than it would be on a traditional mortgage. They will not earn equity in their home during the interest-only payment period. Additionally, should the value of their home decrease, they could end up owing more than their home is worth.
By : ABC Loan Guide
What All New Homebuyer Should Know
Save Your Pennies
When you are trying to buy a home you have to have money saved. There are three major financial components to buying a home: earnest money, the down payment, and closing costs. Your earnest money is to let the seller know you are serious about the purchase and usually varies from $500 to $1000. Your down payment is an amount based upon the type of loan you secure, usually 1%-10% of the total loan amount. Closing costs are the fees associated with processing your loan and they usually can run anywhere from $500 to $3000 or more due at closing time.
Look for Special Programs
If you are a single parent, have a low income home, or just have an immature credit profile there are many lending programs that cater to those situations. Most helpful are government funded loans like FHA loans which monitor the amount of down payment needed and fees that can be collected at closing. These loans also take a more lax look at your credit report offering more opportunities for diverse situations.
With all of the excitement of your home purchase make sure you understand what you agree to. Don’t be afraid to ask questions and don’t let a lender or real estate agent push you into a loan amount you aren’t comfortable with. Have fun, be discerning and you visualize yourself in your new home.
What is Good and Bad about VA Loans
Being a Veteran does not guarantee you qualify for a VA loan. As with a standard loan any ugly credit mishaps made within the past 12 months will be evaluated and will be taken into consideration for eligibility. Your debt-to-income ratio and income is looked at and if you are filing jointly your spouses’ information will be considered as well.
One of the greatest benefits of VA loans is the low interest rates. The rates aren’t dependant on your credit score which mean if you have a credit score of 550 or 800 you get a reasonable low rate. VA loans are also in many cases available for 100% financing with no mortgage insurance so all of your interest is tax deductible and you usually walk away with minimal money out of your pocket at closing.
If you qualify for a VA loan it will be hard to beat with a conventional loan. Looking at all the benefits VA loans have to give and the strong backing behind them makes them worth seeking.
Why First Time Home Buyer need FHA Loan
FHA loans are loans insured by the federal government. These loans are often sought after by first time home buyers or those that may not have a lot of money to put down on a home because only 3% is required for the down payment. The interest rates are determined by your credit rating but are often more reasonable than that of a conventional loan if your credit isn’t that good.
Qualifying for an FHA loan is just as much work as qualifying for any other loan. The difference though is that FHA guidelines for ratios, total housing costs aren’t nearly as stringent as with conventional loans. This fact makes owning a home more achievable for more people.
There are a few issues to remember when dealing with a FHA loan. You cannot own two homes using FHA loans. Meaning you can’t rent out a property which you secured using an FHA loan and then go purchase another home using an FHA loan. Your home must be owner occupied. Another drawback would be that there are limits to the total loan amount. If your home is high priced you may not be able to qualify for an FHA loan.
Everyone deserves to be a homeowner no matter what the need or situation. Thankfully with loans such as FHA loans owning a home for some is finally becoming a reality.
By : ABC Loan Guide
Option One Mortgage Loan Defination
The first payment option is a full-amortization payment. This is the amount of money that is required each month in order to pay the mortgage off by the end of the term. Full-amortization payments pay the interest accrued on the loan each month and a portion of the principal. A full amortization payment on an option one mortgage loan is the most expensive payment option.
The second payment option is an interest-only payment. This option only requires you to pay the interest accrued that month. Option one mortgage loans have variable APR’s, so this amount may differ depending on your current interest rate.
The third payment option is called a minimum payment. This is the lowest amount you would be required to pay in any given month. The minimum payment option covers a portion of your monthly principal and a portion of your interest rate. The amount of interest you are required to pay on a minimum payment is lower than your actual APR – usually between 1 and 2%.
Option one mortgage loans can be very beneficial to a person who plans to make more money by the end of the term of optional payments. This type of mortgage could allow them to own a home when they wouldn’t otherwise be able to afford it, and keep their home after they make enough to afford the fully-amortized payments of a traditional mortgage.
However, option one mortgage loans are not for everyone. For people simply looking to own a home and earn equity on it, an option one mortgage loan would not be a wise mortgage to enter into. When a borrower pays only the minimum monthly payment, the additional interest that they are not paying is added to their principal balance. They are then required to pay interest on their interest.
By : ABC Loan Guide
Get Cash Advance before Payday for Emergency
Sometimes the need for extra cash arises when you least expect it. Repairs to your home or automobile, medical or other emergencies, and simply running low on cash several days to a week or more before your next pay check are some of the reasons people need a loan till payday. Applying for and being approved for a payday advance is quick and easy thanks to the convenience of the internet. Online payday loan companies are offering cheap rates and up to 30 days to repay. By answering a few simple questions, supplying your employment and banking information, and perhaps faxing a few documents, you can be approved and have your cash as soon as the same day you apply.
Getting a loan till payday is a painless process that can help you solve your immediate financial needs. With up to 30 days to repay your loan, the terms offered by online payday loan companies have never been easier. A quick application and you are done. Your personal information is verified and you are approved for your loan. It's as simple as that. Cheap rates and easy repayment terms make getting a loan till payday an easy process. Most of the time you can be approved for a loan till payday without having to fax any documents at all.
Search and compare online payday advance companies and find the best rates and terms possible. A loan till payday can be yours in as little as 5 minutes. Approval is fast and you may have the option of extending your loan as many as 30 days if need be. Cheap online payday loans can be the answer to your immediate needs and can be repaid in convenient installments. Apply today and have from $100 to $1000 or more in your checking account tomorrow. Some payday advance companies can deposit the cash you need into your account the very same day you apply. A quick, simple application is all you need to receive a loan till your next payday.
With cash advance payday loans, there is no credit check. So, even if you have bad credit, you can still get approved. The loan is based on your employment verification.
By : ABC Loan Guide
Friday, January 18, 2008
How to Find the Best Home Equity Loan
Home equity loans generally carry the lowest interest rate of any loan that you can obtain. The reason for this is that the risk to the lender is lower because of the type of collateral that the loan is secured by. Many lenders offer home equity loans that go up to 100% of the value of your home, but the rate is going to be highest for these types of loans. In order to get the best interest rate, try to keep the amount of your loan under 80% loan to value. For example, if your home is worth $100,000, 80% of the value of your home is $80,000. If you borrow this way, you will get the best rate and avoid many other charges like PMI, or private mortgage insurance, and points.
Many homeowners prefer to only have one payment. This is possible by rolling your first mortgage into the same loan as your home equity loan. This also has rate advantages over having separate first and second mortgages, because the rate on a first mortgage will always be lower than on a second. If you put the loans together, you will get the lowest rate on the entire amount of the home equity loan because the whole loan will be considered a first lien.
Home equity loans also have the jump on nonsecured loans and credit cards because they have tax advantages. Most homeowners can deduct the interest that they pay on real estate secured loans on their taxes. Generally speaking, if you are able to deduct your first mortgage interest you will also be able to deduct the interest that you pay on your home equity loan. This can significantly lower your tax burden. Be sure that you consult your tax professional about your specific circumstances.
When you are looking for a home equity loan, it is important to find a reputable lender. Look for one that has good reviews with the Better Business Bureau. Asking friends and family for recommendations is another smart way to find a good lender. You can also find great deals online. Many online lenders offer lower interest rates because they have less overhead costs than a larger, more traditional financial institution. They are usually more willing to negotiate fees and the processing time is usually quicker. Many people find this more attractive in today's fast paced world, since the only time you have to take the time to meet with a representative is at the closing.
Overall, if you are wise about it, a home equity loan can be a great way to save money on payments and interest rates. Because the interest is tax deductible, you are borrowing money in the most advantageous way possible. Keep the total amount of the home equity loan as close as you can to 80% loan to value and be sure to look online for great deals. If you follow these words of advice, you can find the perfect home equity loan solution to meet your needs.
Manage your Payday Loans
The first step is to determine how much income you receive per month after taxes. Include all sources: your job, alimony, investment income, interest. Basically, include anything that is regular. A one time windfall can be a boost to your savings, but it isn’t much help when planning a budget.
The next step is to determine your monthly expenses. Again, include everything: rent/mortgage, food, gas, car payments, insurance, contributions to your investments, donations to charity, and any other regular expenses. Don’t include one time expenses here either. While they can have a significant impact on your finances, one time expenses should come out of your disposable income.
Now that you have monthly income and expenses, subtract your expenses from your income. If you get a negative number, you’ve got a problem. You are spending more than you make. Find ways to reduce your expenses. Cut back on trips to Starbucks. Give less to charity. Buy cheaper clothes. Do whatever it takes to get your expenses in line with your income. If you get a positive number, you’re good to go. This amount is your disposable income. However, if it’s just barely positive, you might still want to reduce your expenses a bit to give yourself a bit more of a cushion.
Let’s take an example. Suppose your income is $3000 per month, and your expenses are $2700. So you’ve got $300 per month in disposable income. Many people would be tempted to spend this money on things like going to the movies or nice dinners out. You can still do that, but you should put some of it away in a savings account if you want to avoid a payday loan. Let’s say you put half of that money ($150) away. That money will form your rainy day fund and if you never need to use it, it can go towards your retirement. After 4 months, you will have $600 in this account – more than the maximum payday loan you can get. After a year, you will have $1800. If you increase your savings as your income increases rather than increasing your expenses, this fund will grow even faster and you will be able to handle bigger emergencies without having to resort to a payday loan.
It’s not difficult to come up with a budget that will let you avoid payday loans – it only takes a little bit of arithmetic. The hard part is resolving to actually make a budget and then stick to it.
By : Payday Loan Affiliate
Laws of Payday Loans
Consider the case of Randy. Randy was hit with an unexpected car repair. He needed to fix his car, or he wouldn’t be able to get to work and provide for his family. Randy generally makes good financial decisions, but he knew that he wouldn’t have enough money to pay his bill when they came the next week. He tried to find ways to pay his bills, but he was low on options. He found a reputable payday loan company that would give him a cash advance until his next payday that he could use to pay his bills and keep his credit strong.
Two weeks later, his paycheck was automatically deducted the amount he had borrowed plus a reasonable fee and he had found a way to keep his creditors happy and keep his anxiety down. He was taken care of with a payday loan, and this cash advance let him carry on with his life without getting into a cycle of debt.
What about the alternative?
What would happen if Randy didn’t get the payday loan? The alternatives are actually quite alarming. If Randy had four credit cards, a cable bill, a phone bill and a power bill that he needed to pay, but couldn’t, what would happen? He could pay the credit cards a month late with a $26.00 fee on each card. His cable company charges $48.00 for a bounced check. The power company charges a fee of $50.00 for reconnecting the power after it has been shut off. Randy’s phone company charges $30.00 for late payment, but is he can’t pay in a week, they also charge a $25.00 reconnection fee. The total cost for Randy not paying his bills is a whopping $257.00! He would have only needed $300.00 to pay all of his bills on time!
These fees are on top of what he would have to pay. So instead of getting a payday loan and paying his bills on time, he now owes $557.00. Randy didn’t have enough money to pay his bills before, but with all the fees, he is really in debt!
Luckily, Randy got a payday loan and saved over $210.00 in late fees and reconnection charges. Another benefit of Randy’s payday loan is that his credit is still strong. His credit report would have had marks against him and made it hard for him to get a car loan or restrict him from getting a job.
The number of payday lenders has exploded in recent years. Since 1990, the number of payday loan outlets in Colorado alone has risen from about 12 to nearly 200. This growth has several causes. Many larger lending institutions no longer issue small loans because the returns are lower, while the costs of originating and servicing the loan are basically same. “The national finance companies, which were initially founded to meet precisely this credit need, have moved out of this type of small lending.” This created a vacuum in this particular market segment. There has also been a move to deregulate interest rates.
This move started after Congress passed several laws that pre-empted state laws that placed interest rate caps on certain types of mortgages. This caused many states to deregulate interest rates in an effort to keep lending businesses from moving out of state. With this vacuum in the small amount, short term credit market and a deregulation of interest rates, an explosion of payday loan lenders has resulted.
Unfortunately, with this explosion, and deregulation, has come an increase in the number of unscrupulous lenders who take unfair advantage of consumers. These lenders do not reveal the true costs of payday loans and encourage consumers to take out multiple loans, forcing them into a cycle of debt out of which most consumers cannot climb. The actions of these lenders have led to a call for reform of the laws governing payday loans.
There are three general categories of payday loan regulation in the various states.
- The first category makes payday lenders subject to the state’s small loan or usury laws. These laws set interest rate caps of up to 36% per year and also contain provisions for loan amounts length of the loan, various reporting regulations, and required and prohibited contract provisions. In effect, these laws eliminate payday lending as it is no longer profitable at these interest rates.
- The second category allows payday lenders to charge any interest rates or fees which the parties to the loan will agree to pay.
- The third category of laws specifically permits payday loan lending. These laws usually require licensing or registration and may require a bond or certain level of assets. These laws also specify minimums and maximums for the loan term and amount. Fees and interest rates are usually also capped, but at a higher rate than in the first category. For example, on a maximum loan of $300, North Carolina permits a charge of 15%, or $45.
The state of Illinois recently enacted its Payday Loan Reform Act, which will go into effect on December 8, 2005. Previously, Illinois was a category two state and this act moves the state into category three. The act contains several provisions designed to limit abuses by payday lenders. The act limits fees to $15.50 per $100 loan over the term of the loan. Payday loans now must be for a period of 13 days or more. A lender cannot make a loan to a consumer if that loan would result in the consumer being in debt to a payday lender for more than 45 consecutive days. “After a consumer pays off the balance of all payday loans he or she took out in a 45 consecutive day period, a lender must wait seven calendar days before issuing that consumer a new payday loan.” A lender is not allowed to give a loan to a consumer who already has outstanding balances on two loans. The maximum amount of a loan is limited to the lesser of $1000 or 25% of the consumer’s monthly income. There are also special provisions that only apply to members of the military.
These reforms are designed to prevent payday loans from becoming a long term burden, while still recognizing that there is a need for short term, small sum lending. This is a better proposition than simply banning payday lending. Without a legal source for this type of loan, consumers might turn to loans from less safe alternatives – loan sharks.
Payday loans are a great alternative to the costly fees of the big utilities and credit card companies. Save yourself from these fees and debt that just grows and grows. When you need money quick, get a payday loan!
By : Payday Loan Affiliate
4 Ways To Get Out of Debt for Free
Many people go through the situation you’re experiencing now almost everyone at least once in their lives. There are many unexpected circumstances that may arise and compromise your financial position. Don’t despair, it can be overcome, it requires discipline and a bit of sacrifice but you’ll get peace of mind in return and it’s worth it.
Prepare A Budget
First of all you need to prepare a budget; you need to state your income and your expenses. This is for you to know how much money you’ll be able to destine to eliminate debt, so don’t conceal anything, be honest with yourself.
Contact Your Creditors
Now without exaggeration, it’s time to be honest with your creditors, tell them you’re having trouble breaking even, and agree to a new and more flexible repayment program. They won’t have a problem with extending the repayment periods and consequently lowering the monthly payments. You could even get a cut on your debt’s principal if you are good at bargaining. Remember that if you have to face bankruptcy, you won’t be the only one loosing money. Thus, the lenders will accept any reasonable offer that you make to them. Be prepared for some bargaining on their side too.
Consolidate Your Debt
You can also get a consolidation loan, this kind of loans are specially designed for those in your situation, with the amount of money you’ll get from this loan you’ll need to cancel all your debts, this way you’ll end up with a single monthly payment with fewer interests. Consolidation loans are not so hard to get, there are many lenders willing to approve loans for people with bad credit, no credit and even bankruptcy. So whatever your financial situation is, if you want to consolidate and get a single monthly payment, you should search for a consolidation loan lender.
Search Online
Consolidation loans are the best way to reduce your debt and get a fresh start, in order to find the best terms available, search online for loan quotes. There are sites that offer access to many lenders dealing with this kind of loans and you’ll be able to compare the terms and get a great deal. When requesting loan quotes read all the information carefully and watch the fine print closely so you don’t miss any hidden fees that can turn the loan more onerous than it seems.
Christian Debt Consolidation Loans Tips
For those who urgently need cash money and have no friends or relatives they can ask from, there are many lending programs that provide quick personal funding through a fast money loan. Depending on whether the consumer is looking to receive money online or through other sources., the means of these programs can be both secured and unsecured. fast Christian loans can help someone who has a financial problem, but every person looking to getting a loan must be very careful and analyze the many strings attached to any loan. This is an absolute must before taking action!
For individuals in need of quick cash, secure funding is often a popular form of funding. One form of a secured fast money loan includes cash advance or check cashing services. For this type of funding, consumers can write a check for the amount of money they desire plus the required fees. The individual will usually have two weeks to pay the amount to the lender before the check is submitted to their account for payment. Of course, if there are insufficient funds, the consumer will find they will not only be paying bank fees, but also service fees for the check advance service.
Another form of funding is the unsecured one, which can seem like a safer option, but also comes with strings attached. The consumer will qualify for the fast money loan on the basis of their monthly earnings and by having a checking account that is active and in good standing, usually for at least 90 days. Fast Christian money loans that do not require any credit check include payday loans or other cash advance options.
The hardest choice for all of us is deciding which lender or style to choose, as there are so many options available for consumers in need of financial assistance. Since everyone has very different personal and financial situations, they will have to choose from the fast Christian money loans that will best fit their lifestyle. Seeking assistance from a financial counselor or advisor can make this decision much easier. It will also offer the individual proper advice on how to handle their income and expenses from that time on.
So, from all these numerous options, each and every one of us must choose what he or she thinks is best for the financial problems one has. You can only hope for their ending!
10 Tips of College Loan Consolidation
- Still in school, yes! Rates are low, but they're scheduled to go up. Your college loan payments will then remain as manageable as possible when you leave school. If you have graduated, or will be graduating this May or June, yes! Graduates can lock in historical low rates, and reduce their monthly payments more than half. You can lock in a rate even while still in school, and even if you have been out of school for a couple of years can get a good deal, too.
- The newest twist in the consolidation puzzle is the "in school consolidation", affecting students who are currently enrolled and will be enrolled past the July 1 consolidation. You can consolidate your existing college loans now to secure the low rates for at least part of their student loan portfolio.
- Consolidating could save thousands of dollars in interest payments on college loans. There are impending student loan rate changes and new interpretation of regulations by the Department of Education, also, Congress is considering ending the fixed-rate program. Experts are urging students to consolidate to relieve themselves of a higher debt load.
- Many students and families are looking for a simple, clear answer about whether to consolidate college loans or not. The simple answer is to take some of the bite out of the debt by loan consolidation. You could live like a miser and save as much money as possible or consolidate your federal student loans now.
- For students still in school, you have an opportunity to choose consolidation. Consolidating would put a college loan borrower into repayment status, but the student can defer payments until after graduation by making a deferment request. Consolidating today can have payments put off until graduation.
- The federal loan program allows consolidation, which is when a borrower pools his student debts together so that only one monthly payment is necessary, rather than several. It's not just the convenience of one payment that is making consolidation so compelling. The most significant aspect of the program is that it allows a person to permanently lock in a lower interest rate on loans. These loans are backed by, or granted directly by, the federal government.
- Rates for federal Stafford loans, the most prevalent type of student loan, as well as some other types of federal student loans are set annually based on the rate of 91-day U.S. Treasury bills at the end of May. The exact rate won't be known until the end of the month, but experts say it will be about 2 percentage points higher. (Private loans and federal loans cannot be consolidated together.)
- For the first time, the U.S. Department of Education will allow students still in school to consolidate federally backed loans. Federal PLUS loans can also be consolidated. PLUS loans are used to help pay the cost higher education.
- Students, regardless of enrollment, should absolutely consolidate their college loans, arranged through the student's lender. There are no fees, no credit checks, and interest rates are expected to move higher. Those are good reasons to consolidate.
- Act quickly to put lock on current federal-aid interest rates. Graduates should act now to insulate themselves from a drastic rate change. Apply early. Do not wait until the last minute to file paperwork. Those who have already graduated or left school should not wait to investigate consolidation. In the first six months after graduation, you are in a grace period. Within that six-month window, you can lock in a low rate on Stafford loans and spread the repayment over as long as 30 years.
If you're going to consolidate, now is the best time to do it
Free Student Loan Consolidation
A free student loan consolidation - doesn't that just sound too good to be true? Think about it. You have just accrued thousands of dollars in debt through student loans after 4 years of college, or possibly even more. Then, a company offers to take all of your loans off of your hands, put them into one central loan, and do it all for free! Well, while it might not be too good to be true, it all depends around your particular situation, which could make this a "free" process, or could still work out to the benefit of the consolidation company that you are working with throughout the process.
How A Student Loan Consolidation Works
Here is how the student loan consolidation works. You have used up thousands of dollars in student loans to pay your way through college, obtain housing throughout college, and pay for other odds-and-ends while attending college. A student loan consolidation then takes all these different loans, pays for each of them, at which time you then pay the student loan consolidation company for the total amount of loans taken out during college.
Example of Student Loan Consolidation
If you were to have outstanding loans of $5000 to one company, $6000 to another, and $9000 to a third, the student loan consolidation allows you to owe $20000 to one company, rather than to three. This can save you money in the long run, as these companies also may be able to offer you a competitive interest rate, which means you will be paying less overall for your student loans in a shorter amount of time and to only one company.
Potential Student Loan Consolidation Problems
Problems can occur with student loan consolidations if you catch a deal that does not work out favorably to your situation. For instance, if you choose a no-cost student loan consolidation that does not offer you a low interest rate, you could actually end up paying them more than you originally would have! It is important that you choose a company not for their "no-cost" approach, but for their willingness to get your student loans paid off with a consolidation that promotes a quick pay-off with minimal interest rates.
New Tips to Select Student Loan Consolidation Program
The federal government, in its efforts to provide accessible and affordable education for all, has set low and fixed interest rates on all federal student loans and is also offering a student loan consolidation program with flexible repayment schedule and reduced interest rates. All the advantages of loan consolidation are available to you: you make a single payment every month instead of the several payments you initially had, the amount of money you pay is lower than the sum of amounts you had on your previous loans and there is only one lender that you make the payment to.
Also, applying for a student loan consolidation program is an easy process that does not involve any credit checks and does not require you to pay any additional fees or charges.
Advantages and disadvantages of a student loan consolidation programWith the student loan consolidation program you get all the advantages that come with rolling several different loans into one. The interest rate is lower than the average of your previous interest rates, which means you can actually save money while you are repaying the loan, and it is not subject to change for the duration of your repayment schedule. The repayment plan is flexible, you can extend the period you need to pay back the loan, or you can choose to pay the entire sum earlier with no additional prepayment penalties. There is also the option of making the payments online which decreases the rate of interest by 0.25% and also keeps you constantly up to date with the details of your repayment status.
There are, however, a few disadvantages. For instance, before applying for a student loan consolidation program you need to do the math of your existing loans properly. If some of your loans have extremely low rates of interest it is not advisable to consolidate them because after they are averaged with the interest rates of your other loans the rate will increase and you will end up paying more money. In this situation it is better to pay your low interest loans separately and only consolidate your other student loans. Also, always keep in mind the repayment schedule flexibility offered by the student loan consolidation program.
You can stretch the payments to a period of 30 years, but it is advisable that you prepay the loan if such an opportunity arises. This will save you the interest added in time, therefore meaning that the amount you prepay is much lower than the overall sum you would pay in 30 years. The student loan consolidation program is an effective tool in simplifying your repayment schedules and lowering your interest rates.
2 Types of Medical Debt Consolidation
Consolidation Through Loans
The first type of medical debt consolidation is done by obtaining a loan from a bank or financial institution. This loan can be unsecured or secured. An unsecured loan again, is a loan where a bank or financial institution loans you money based on your credit score with no collateral involved (collateral would be you have a house, boat, or car). If you can obtain a secured loan (you have collateral) it is a better route to pursue because usually a secured loan has a lower interest rate then an unsecured loan. In either case, if you get the loan, your next steps would be to pay off your medical bills to get your accounts in good standing. This type of consolidation is only advisable if you need to lower your monthly payments because of an inability to pay them. Although consolidation usually lowers your monthly payments it also increases the length of the repayment period which results in you paying more interest in the long run. Moreover, this type of consolidation is usually more difficult to obtain.
Consolidation Through The Use of Debt Management Company
The second type of medical debt consolidation is done through the use of a debt management company. These companies are experts in negotiating with creditors (hospitals, 3rd party billing agencies, collection agencies etc) to either help you get a more reasonable payment plan and even sometimes negotiate your total medical debt to a lower balance amount. The drawback to this option is that sometimes your credit can be impacted negatively if your medical debts are reported to the credit bureaus as being settled instead of being paid in full. However, this option can work if make sure then when you talk to different debt management companies that they will ensure your debts are reported to the credit bureaus as paid in full. This option is usually easier to obtain.
In either case, consolidation is beneficial if it prevents you from missing payments and degrading your credit score. In the end, you want to make sure you can live comfortably but you don't want to ruin your credit score.
How to Find the Best Debt Consolidator Online
Do a simple search.
Use your favorite search engine, like Google, Yahoo or Excite, to search for basic terms like "debt consolidator," "debt consolidation," or "debt management." Chances are you'll end up with millions of hits! All you need to do is narrow it down to a few different companies for closer scrutiny and comparison. To narrow down the choices, look for...
A free debt consolidation quote.
There are, unfortunately, lots of scammers and thieves who are hoping to take your money and run. And, in many cases, they pose as legitimate debt consolidators and prey on folks who have found themselves in a financial bind. And they won't help you consolidate your debt! Instead, they take their fee and never offer you any services in return. So how do you spot a scammer? Make sure the company offers a free debt consolidation quote. Unscrupulous thieves will often try to charge you a "fee" just to review your case--before they do any work for you! Most legitimate debt consolidation companies will review your paperwork--like bills, income and credit history--and then give you a price quote so you know how much their service will cost. Once you think you've chosen the right company...
Check with The Better Business Bureau.
To make sure the debt consolidation service is legitimate, and that no complaints have been filed against them, check with the Better Business Bureau. They'll be able to tell you if consumers and customers--like yourself--have filed any formal complaints about the company's business practices, costs or services. You might also look to see if the company belongs to any national associations or organizations that regulate or monitor its services.
It's easy to find a debt consolidator online as long as you're willing to go that extra step to ensure the company is legitimate. Never work with a debt consolidation company that you feel is neglecting your case because they're only interested in collecting a fee.
How to Find Low Interest Debt Consolidation Loan
Depending on where you look for your loan and what collateral you offer, the chances might actually be quite good.The keys to finding a low interest debt consolidation loan are knowing where to look for your loan and knowing what collateral to use for security.With careful comparison of different lenders and a good value on your collateral, you stand a good chance of securing the low interest debt consolidation loan that you're looking for.
Interest and collateral
If you're just getting started on your loan search, you might not know what some of these terms mean. Interest is the amount that you're going to have to pay to the lender in addition to the amount that you borrow it's how the lender makes their money.
Ideally, you'll be able to secure a low interest debt consolidation loan, which means that you'll have less interest added onto your monthly payment and will have less to repay.
Collateral is property that you use to secure the loan, and is usually an automobile or real estate. If you don't repay your loan, then the lender can take possession of your collateral and sell it in order to get their money back.
Where to look for your loan
One of the big factors in getting a low interest debt consolidation loan is finding the right lender. Many of the lenders with big, flashy advertising are trying to draw in customers and charge high interest rates they should be considered only as a last resort.
Check with finance companies and small local banks first, especially during times when they're having any sort of customer appreciation days or a promotion of any kind. If they can't offer you a low interest debt consolidation loan, ask them if they can recommend another establishment in most cases, they'll be able to direct you to a place where you can get a pretty good deal.
The right collateral
Choosing the right collateral can be vital to securing a low interest debt consolidation loan. After all, it's your collateral that's guaranteeing the loan for the lender use it for all that it's worth. When applying for your low interest debt consolidation loan, ask for less than the total value of the collateral.
The greater the value of the collateral in relation to the asking amount, the more likely you'll be approved and charged a lower interest rate.
Shop around for quotes at several establishments before deciding on one use the same collateral and the same asking amount, and see who offers you the lowest interest and the best terms for your money.
3 Things about Home Equity Debt Consolidation Loans
It's not available to everyone.
Just because you "own" your home doesn't mean you'll be able to get a Home Equity Loan. The equity you have equals the value of your home minus the amount you still owe on it. So if you only purchased your home recently--or home values have fallen in your neighborhood--you might not have any available equity. Moreover, a lender will also assess your credit and financial situation--such as your credit score, current employment and income--before approving your loan application. Although it's a lot easier to get approved for a home equity loan than other types of loans, some borrowers may not qualify.
Your home is at risk.
With a Home Equity Loan, your house is collateral for the loan. So if you have problems making payments, the bank or lender can actually repossess your house. In general, you should only borrow from a home equity loan for debt consolidation if you're absolutely certain that you'll be able to make the monthly payments.
You may not save as much as you think.
People assume the interest they pay on a Home Equity Loan is tax deductible, and in most cases they're right. However, there are some states in which Home Equity Loan interest is not tax deductible, so check out the rules and regulations in your area before you sign up for the loan. Also, watch out for fees, charges and other extra costs that may be attached to your loan. Paying lots of points and fees could mean that you're not saving as much as you think with your Home Equity Loan.
Although a Home Equity Loan can be a smart, low-cost way to consolidate debt, make sure you carefully research your decision--and weigh the pros and cons--before signing on the dotted line.
By : Carrie Reeder
Thursday, January 17, 2008
Secured Debt Consolidation Loans using Financial Chemistry
Benefits of Unsecured Loans for Debt Consolidation
Lawyers are notorious for telling people that there is no other way but to file for bankruptcy. Likewise, any source that tells you that they can eliminate debt is leading you on. Reality is structured to keep everyone in debt. No one has the ability to get out of debt unless they die. However, there are solutions for minimizing debts so that you can remain stable.
The unsecured loans for debt consolidation are nothing more than subtracting a series of debts and adding new debts. Sure, you may pay less, but in the long run, you still owe something to someone.
To give you an idea of unsecured loans for debt consolidation, I am going to breakdown the balance of a hypothetical loan scenario.
Let's say that you owe a number of creditors $10,000: you can go to a debt consolidation organization that offers you the loan amount. Now, you have depleted your debts from the other lenders, but you incurred a debt from another lender. Let's say there are fees (which in most instances is true) and those fees equal $39 plus a 4.49% interest. On a $10,000 unsecured loan for debt consolidation, you would pay around $834 per month to repay the debt.
How to Minimize Debts
Here are five steps to help you save money and minimize your debt:
- Create a budget.By creating a budget you designate where your money is going to be spent before you actually spend it. Your budget should include necessary items such as rent or mortgage, utilities, car payments and insurance, credit card bills, food expenses, amount to be put into a savings account or retirement fund, and a miscellaneous amount for entertainment, clothing expense and any unforeseen expense that might come up in the course of month. You should stick to your budget. As for the miscellaneous amount, if you don't end up spending it, put it into your savings.
- Limit Credit Card spending.Credit card spending puts you into more debt and actually has the opposite effect of saving money because of the amount of interest you pay in the long run. You should adopt the attitude that if you are unable to pay cash, then you cannot afford it. Only in real emergencies should credit cards be used. Additionally, you should limit the number of credit cards you have.
- Keep Your Receipts.You should keep all of your receipts and look at what you are spending your money on. You might be surprised at all of the little unnecessary items you spend your money on. Just how much are you spending on those double tall lattes on a monthly basis? By identifying those items you spend your money without need and eliminating them, you can save a significant amount of money.
- Consolidate Debt.By consolidating your debt you can end up saving money on the amount of interest paid. Consolidating debt can also reduce the amount of money you have to pay out monthly and allows you to limit the number of outgoing payments each month. In the long run, consolidating debt will help you
- Get your Credit Score.Your credit score determines how much interest you will end up paying on any loan. By knowing your credit score and understanding how you can raise it and taking the steps to raise your credit score, you can effectively lower the amount of interest you will pay on loans you take out in the future.
Taking these five steps will help you save money not just today, but also in the future. You'll be amazed at how much your savings will add up over time.
Choose Best Debt Consolidation Program
Here are some ideas on how to Choose the Best Debt Consolidation Program
Wednesday, January 16, 2008
6 Reasons for Debt Consolidation
Reason #1: Interest Rates Reduction. Combining debt can be great because you often combine them into one payment with one interest rate instead of many different rates. Often this can lower than the rate you were originally paying.
Reason #2: Stress Level Reduction. Debt can be so troubling emotionally in so many ways, and this can affect you both mentally and physically. Worry over debt can begin to take control of your life and can cause some very strong negative emotions. People often get depressed, become angry, and all this may lead to health issues, arguments with your partner and problems at work with concentration.
Reason #3: Creditor Reduction. Bad credit debt consolidation will typically involve dealing with lots of different accounts, whether they are credit cards, store cards or loans of various descriptions. It's a great relief making one easy payment to cover all of the debt. Usually, various credit payments are payable to different creditors and at different times. This can make it difficult to pay the debt in a timely manner and keep track of what payments are due to which creditor.
Reason #4: Error Reduction. Many bad credit debt consolidation programs include plans that encompass budgeting, counseling and financial planning. These are great tools to use that will prevent you from getting in the same situation sometime down the road. People make mistakes and debt is not the end of the world. The best way to keep this from happening again is to learn what you can do to become debt free, remain debt free and become financially stable.
Reason #5: Bad Credit Score Reduction. Or should we say credit score increase? As you pay off your debt, your outstanding debts that are affecting your credit score will begin to diminish and your score will increase. The higher the score, the more financially sound you seem and are more likely to be approved for future credit.
Reason #6: Total Capital Reduction. This is probably the most attractive reason to opt for a structured debt management program rather than taking out another loan. You will be writing of a huge chunk of your debt at the start. The more professional debt consolidation companies are trained in negotiating with creditors, sometimes achieving as much as 70 percent off the original debt right off the bat.
No matter which reason you choose for undertaking a debt consolidation program, all are good ones. Getting control of your finances by means of a bad credit debt consolidation plan is a perfect way to improving opportunities for better rates and future credit opportunities.
