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Pay Day Loans – Loan Sharking Reinvented

Feb 20

Posted by admin in Loans

We see advertisements for quick cash loans every day. These loans can be pay day loans, cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans. Typically the borrower rights out a check for the amount of the loan plus a fee. This fee can range from 10% to 40% of the loan and the borrower usually has two weeks to pay it off in full. Most can’t pay it off in time and end up owing, in some cases, more in fees than the amount of the original loan.

Some states like South Carolina have placed limits on the fee amount allowed. South Carolina law limits this fee to 15% of the amount borrowed. If you were to look at this in a yearly APR it would be 390% interest. Most states have usury laws which limit a yearly rate to 30% or under. Currently Pay Day stores slip by by stating that loans are paid off in 2 weeks so no violation has occurred and that they are providing a much needed service to people that have no where else to go.

The actuality is that most of these borrowers cannot repay on time and so they are forced to pay the interest and take out another loan to cover the principle. Currently the average borrower in South Carolina takes 10-15 loans to payoff. These statistics are similar in other states. Which means the borrower will pay $400 – $500 in loan fees on a $400 loan. This is usury and should be illegal as it is not helping anyone. It is predatory lending that just gets borrowers in deeper debt than before.

“Some will say, that little man has to have somewhere to go,” said state Rep. Eldridge Emory, “Butif he gets money this way, he’s just digging a hole deeper and deeper, and he’s not going to get out.”

Several states like North Carolina have currently banned this form of predatory lending. Others are beginning to consider legislation to further control and possibly curb pay day loans. Still more needs to be done.

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Home Equity Line Breakdown

Jan 5

Posted by admin in Finance, Loans

Home Equity Line of Credit in a Nutshell
More and more lenders are offering home equity lines of credit. By using the equity in your home, you may qualify for a sizable amount of credit, available for use when and how you please, at an interest rate that is relatively low. Furthermore, under the tax law-depending on your specific situation-you may be allowed to deduct the interest because the debt is secured by your home.

If you are in the market for credit, a home equity plan may be right for you or perhaps another form of credit would be better. Before making this decision, you should weigh carefully the costs of a home equity line against the benefits. Shop for the credit terms that best meet your borrowing needs without posing undue financial risk. And, remember, failure to repay the line could mean the loss of your home.

What Is a Home Equity Line of Credit?

A home equity line is a form of revolving credit in which your home serves as collateral. Because the home is likely to be a consumer’s largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills and not for day-to-day expenses.

With a home equity line, you will be approved for a specific amount of credit-your credit limit-meaning the maximum amount you can borrow at any one time while you have the plan.

Many lenders set the credit limit on a home equity line by taking a percentage (say, 75 percent) of the appraised value of the home and subtracting the balance owed on the existing mortgage. For example:

Appraisal of home $100,000
Percentage x75%

Percentage of appraised value
$75,000

Less mortgage debt
$40,000

Potential credit line
$35,000

In determining your actual credit line, the lender also will consider your ability to repay, by looking at your income, debts, and other financial obligations, as well as your credit history.

Home equity plans often set a fixed time during which you can borrow money, such as 10 years. When this period is up, the plan may allow you to renew the credit line. But in a plan that does not allow renewals, you will not be able to borrow additional money once the time has expired. Some plans may call for payment in full of any outstanding balance. Others may permit you to repay over a fixed time, for example 10 years.

Once approved for the home equity plan, usually you will be able to borrow up to your credit limit whenever you want. Typically, you will be able to draw on your line by using special checks.

Under some plans, borrowers can use a credit card or other means to borrow money and make purchases using the line. However, there may be limitations on how you use the line. Some plans may require you to borrow a minimum amount each time you draw on the line (for example, $300) and to keep a minimum amount outstanding. Some lenders also may require that you take an initial advance when you first set up the line.

What Should You Look for When Shopping for a Plan?

If you decide to apply for a home equity line, look for the plan that best meets your particular needs. Look carefully at the credit agreement and examine the terms and conditions of various plans, including the annual percentage rate (APR) and the costs you’ll pay to establish the plan. The disclosed APR will not reflect the closing costs and other fees and charges, so you’ll need to compare these costs, as well as the APR’s, among lenders.

Interest Rate Charges and Plan Features

Home equity plans typically involve variable interest rates rather than fixed rates. A variable rate must be based on a publicly available index (such as the prime rate published in some major daily newspapers or a U.S. Treasury bill rate); the interest rate will change, mirroring fluctuations in the index. To figure the interest rate that you will pay, most lenders add a margin, such as 2 percentage points, to the index value. Because the cost of borrowing is tied directly to the index rate, it is important to find out what index and margin each lender uses, how often the index changes, and how high it has risen in the past.

Sometimes lenders advertise a temporarily discounted rate for home equity lines-a rate that is unusually low and often lasts only for an introductory period, such as six months.

Variable rate plans secured by a dwelling must have a ceiling (or cap) on how high your interest rate can climb over the life of the plan. Some variable-rate plans limit how much your payment may increase, and also how low your interest rate may fall if interest rates drop. Some lenders may permit you to convert a variable rate to a fixed interest rate during the life of the plan, or to convert all or a portion of your line to a fixed-term installment loan. Agreements generally will permit the lender to freeze or reduce your credit line under certain circumstances. For example, some variable-rate plans may not allow you to get additional funds during any period the interest rate reaches the cap.

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Avoiding An Ominous Bankruptcy In A Failing Economy

Nov 30

Posted by admin in Bankruptcy, Debt Consolidation

The choice on whether or not to go for a bankruptcy plan is a tough one. It can make the life of a consumer much less complicated, but only in the short term. Considering the fact that bankruptcies have effects that may last up to 10 years, the decision to obtain one is not a light decision to make in any respect.

The first step in avoiding a bankruptcy is avoiding spending money. Studies show that most of those who are in bankruptcy are young, have made poor buying decisions, and have more than one credit card. The logical thing to do is to either return or sell items bought on shopping sprees to help pay debts, and then learn better budgeting practices as time wears on. In some cases, counseling may be required as shopping can be additive.
Even when few options present themselves, there are ways to bypass a bankruptcy when all seems lost. Going to see a financial adviser is one method of getting an all-around solution to a very big problem. Budgeting solutions, debt consolidation, and refinancing can all be done through advisers who have the contacts needed to change the outlook of a consumer’s debt.

Interest rates are usually the culprit in making a circle of debt that seems like it can’t be escaped. Refinancing an interest rate is always a possibility in this case. Refinancing allows a debt to update the interest rate to current market conditions, and thus, vast savings may be had if the sum of debt is large enough. This definitely helps out large debts, where a small change can mean epic changes in overall debt.

Debt consolidation is also another way to help get around debt problems. If money is owed to a lot of different credit companies and lenders, it is a hard time to figure out who to pay and who to delay. While this can usually be handled with a financial advisor, consumers themselves can haggle with credit companies to make custom payment plans. As consumers find, companies are usually fairly lenient in how they get paid as long as they do get paid.
Of course, spending money isn’t always the problem in the equation. Making money, whether employed or not, is what should be targeted after expenses are lined out. obtaining a second job if employment is had is always a good idea. Otherwise, applying for government benefits of unemployment or disability can help alleviate the blow of debts that comes each month.

Bankruptcy may seem like an easy way out, and indeed it can be, it will have long-lasting effects that should be considered. Talk to a financial aid to find out more information on your options.

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There’s more to a mortgage than a low rate

Nov 23

Posted by admin in Mortgage Refinance, Real Estate

Homeowners and buyers are in a rather enviable position these days. Interest rates are at historic lows and the cost of borrowing for a home is about as low as it can get. That’s great news. But it’s not the only thing homeowners and purchasers need to think about their mortgage.

There are a number of other features to consider before signing up for a mortgage and what is probably the largest debt that most Canadians will ever take on in their lives. “When it comes to choosing a mortgage, getting a good rate is just the tip of the iceberg,” says Mary Gronkowski, regional sales director with Mortgage Intelligence Inc., a national mortgage brokerage company. “You have to be aware of all the other features that may lie below the surface. All features of a mortgage should fit a homebuyer’s personal goals, both now and down the road.” One type of mortgage to consider is an assumable mortgage.

An assumable mortgage means it can be transferred to another borrower. It allows a purchaser to take on your mortgage’s terms and payments as part of the sale of your home. With extremely low interest rates today, that could be a big selling feature to a potential buyer in the future. Given the low rates today, many homeowners are thinking about refinancing their mortgage. Whether you should refinance your mortgage in a period of low interest rates depends on how much it will cost you to break your existing mortgage compared to how much you will save in interest payments. If you break an existing mortgage you will have to pay the greater of three month’s interest or the interest rate differential (IRD). An IRD is a penalty for early prepayment of all or part of a mortgage outside of its normal prepayment terms. Usually this is calculated as the difference between the existing rate and the rate for the term remaining, multiplied by the principal outstanding and the balance of the term.

For example, if you had a $100,000 mortgage at nine per cent interest rate with 24 months remaining and wanted to renegotiate your mortgage at 6.5 per cent for 24 months, your IRD would be $5,000 ($100,000 x 2.5% $2,500 x 2 years $5,000). It may only make sense to refinance your mortgage if the interest rate savings over the remaining life of your mortgage exceed the value of the IRD. Another strategy is to take a variable rate mortgage. If interest rates go down and you keep your mortgage payments the same, you will be paying off more of your principal with each payment and will pay down your mortgage faster. Many borrowers are taking advantage of low interest rates by accelerating payments on their mortgages. Many lenders will allow you to double up payments periodically or make lump sum payments of up to 20 per cent of the principal once a year.

You should make sure you understand the size and frequency of payments your lender will allow before you sign up. Some mortgage lenders will have an option to skip a payment without penalty, which may come in handy in today’s economy. Another option that many mortgages have is portability. This allows you to transfer your existing mortgage over to a new property, another big advantage if you have a mortgage at current low rates. Not all portability features are the same, however. Some lenders allow up to 120 days to transfer the mortgage while others allow for only a few days or a week. “Choosing the right mortgage involves considering where you are now and where you may be three to five years from now,” says Gronkowski. “Working with a professional can help you make sense of the many options available to you.” Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.

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Home Equity Mortgage Corp

Nov 12

Posted by admin in Real Estate

How would you choose a home equity mortgage corp. that fits your need?

First thing to remember is that there is not a single home equity mortgage corp. that can answer all the individual’s need for loan. And like people, home equity mortgage corp. has expertise and inclinations on giving loans. Some of them accept non-prime mortgage. Meaning, all applicants for loan can be approved regardless of the status of their credit rating. There are also some that only give approvals to those with good credit score.

The thing is: you have to know your personal credit history and score to be able to know where to apply. Be mindful that there are several advantages and disadvantages when you apply on either of the two. But ultimately, the choice would remain on the borrower if he or she will be willing to face all the negative and positive effects of choosing any of these types of home equity mortgage corp.

Then you have to choose your need. Home equity mortgage corp. would provide you the amount of loan you need in accordance to the equity or value of your home. But everything boils down to the monthly bills you will receive every month. Mortgage rate is different from state to state. The interest on the home equity rate however depends on your credit rating. The lower your credit score is, the higher your interest rate can be. The decision here is crucial since you have to pay the monthly bills carrying those amounts that the interest rate has added- not to mention of course the principal you pay.

Then you have to consider the credibility and service of the home equity mortgage corp. There is no need to hire private investigators. That is too much. Just read reviews and company profile and you can already distinguish which is good and which is not.

Of course, you must not settle for one lender. You have to shop and look for the best. Research on different home equity mortgage corp. and make comparisons. If you like boxing, then you can understand the tale of the tape. If you like basketball, then you can understand statistics. But if you don’t like any of these, just compare. They are all the same anyway.

To make your selection easier, you can consult a mortgage calculator for mortgage loan and the home equity calculator for your home equity loan. Using these calculators would give you a clear view on what’s ahead in terms of monthly bills. And since these calculators would tell you the amount you have to pay including the payment allocation (principal and interest rate), you can easily plan or give yourself time to back out and look for another lender that can give you competitive price. To use them, all you have to do is to enter the loan details such as the amount of loan, interest rate and terms. Or, if it is a home equity loan, you have to choose if it is home equity line of credit or a fixed-rate loan to precisely compute your monthly obligations.

So after you have selected the one that can give you the best loan you need with the lowest possible interest rate and the best possible service and policy in your advantage then make an arrangement. Soon enough, you have your money or your dream house at your name.

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Does It Pay To Re Finance

Nov 11

Posted by admin in Personal Finance, Real Estate

This is a question many homeowners may have when they are considering re-financing their home. Unfortunately the answer to this question is a rather complex one and the answer is not always the same. There are some standard situations where a homeowner might investigate the possibility of re-financing. These situations include when interest rates drop, when the homeowner’s credit score improves and when the homeowner has a significant change in their financial situation. While a re-finance may not necessarily be warranted in all of these situations, it is certainly worth at least investigating.

Drops in the Interest Rate
Drops in interest rates often send homeowners scrambling to re-finance. However the homeowner should carefully consider the rate drop before making the decision to re-finance. It is important to note that a homeowner pays closing costs each time they re-finance. These closings costs may include application fees, origination fees, appraisal fees and a variety of other costs and may add up quite quickly. Due to this fee, each homeowner should carefully evaluate their financial situation to determine whether or not the re-financing will be worthwhile. In general the closing fees should not exceed the overall savings and the amount of time the homeowner is required to retain the property to recoup these costs should not be longer than the homeowner plans to retain the property.

Credit Score Improvements
When the homeowner’s credit scores improve, considering re-financing is warranted. Lenders are in the business of making money and are more likely to offer favorable rates to those with good credit than they are to offer these rates to those with poor credit. As a result those with poor credit are likely to be offered terms such as high interest rates or adjustable rate mortgages. Homeowners who are dealing with these circumstances may investigate re-financing as their credit improves. The good thing about credit scores is mistakes and blemishes are eventually erased from the record. As a result, homeowners who make an honest effort to repair their credit by making payments in a timely fashion may find themselves in a position of improved credit in the future.

When credit scores are higher, lenders are willing to offer lower interest rates. For this reason homeowners should consider the option or re-financing when their credit score begins to show marked improvement. During this process the homeowner can determine whether or not re-financing under these conditions is worthwhile.

Changed Financial Situations
Homeowners should also consider re-financing when there is a considerable change in their financial situation. This may include a large raise as well as the loss of a job or a change in careers resulting in a considerable loss of pay. In either case, re-financing may be a viable solution. Homeowners who are making considerably more money might consider re-financing to pay off their debts earlier. Conversely, those who find themselves unable to fulfill their monthly financial obligations might turn to re-financing as a way of extending the debt which will lower the monthly payments. This may result in the homeowner paying more money in the long run because they are stretching their debt over a longer pay period but it might be necessary in times of need. In these cases a lower monthly payment may be worth paying more in the long run.

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Weighing The Pros And Cons Of Arm Mortgages

Nov 10

Posted by admin in Mortgage Refinance, Real Estate

When you decide to purchase a house, you will be faced with the important decision of securing a mortgage. One of the options you will be given at your financial institution is an adjustable rate mortgage, commonly known as ARM mortgages.

An ARM mortgage is just as its name implies-a term mortgage with a changing interest rate at intervals of time throughout the course of the loan. There are several advantages and disadvantages to ARM mortgages, and it is up to you whether the risk involved with an adjustable rate mortgage is worth it, or not.

In some cases, such as when interest rates are at an extremely high point, an ARM mortgage is the best solution for your mortgage needs. If the interest rate is at an extremely low point, then an ARM mortgage is not the best decision to make and you would go for a fixed rate mortgage. However, if the interest rate is floating somewhere between low and high, the decision becomes much more difficult. The risk is if the interest rate will end up higher in a few years or lower, and how it will impact the payments you are making.

Largely, your own financial situation may determine the suitability of an ARM mortgage. The biggest risk is landing a high interest rate in a few years that you will be stuck with for one or two years until the rate is reviewed again. However, if rates fall to a low when your interest rate is reviewed, you could save enough money on monthly payments to allot for a raise in later years.

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