The Borrowers: A Guide to Using Loans for Leverage
Nobody actively enjoys borrowing money, but it’s probably fair to say that not all debt is bad debt. Sure, those who max out all their credit cards and live a reckless life in the red will suffer at some point, but loans can be used as leverage towards a better future. This is why most people don’t consider their mortgage as real debt – because once they pay the mortgage off, they will be left with a very valuable asset that will probably have increased significantly in value from when they initially purchased it.
The same can be said for student loans. In an ideal world, students would emerge from university with their qualification in hand and not a penny of debt to their name, but it’s a simple fact of life that education costs money and most young people will have far greater earning prowess as a result of spending four years in higher education.
This same principal can be applied in many facets of society, whereby the benefits of borrowing money far outweigh any downsides.
Take a homeowner, for example, who wants to increase the value of their assets, but doesn’t necessarily want to invest in additional property. A good compromise here would be to build a new patio, garage or even fit a new kitchen. The money won’t appear out of thin air, so they will need some form of capital to help them increase the value of their home. Special homeowner loans are widely available, with the funding normally being secured against the value of the property.
However, a personal loan can be used for just about anything. For those who have managed to secure a new job that requires a commute, then a loan can be used to buy a new car to facilitate travelling to the new place of employment. Again, another example of how credit can be used constructively.
Similarly, some people may still be paying the price of a misspent youth, with countless credit cards, store cards, car loans and a myriad of other debts hanging over their heads. With different interest rates and payment terms it can be easy to lose track of where exactly their money is going. A bank loan can be used to consolidate all these debts into one loan, with only one payment to worry about each month.
So, not all debt is bad debt. Borrowing money can be used to invest in the future, whether it’s through education, home renovations or even buying a new car.
Adam Singleton writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.
Question by Jaide112: Getting a bank loan for final expenses?
My mother is in the final stage of life, and I was thinking of getting a bank loan to cover the cost of her funeral. Should I tell the bank what the loan will be used for or tell them something else? Will using the money for a funeral hurt my chances of being approved for the loan? Thanks in advance.
Best answer:
Answer by Jerry K This is a very common loan for a bank to do, so they will work with you. If they don’t, keep going to the next bank on your list. Always be truthful, it will serve you well in all facets of life and not just finances.
Burying a family member is tough, doing it while trying to borrow money and figure out how to pay for something so important and dear to your heart is too much. You should be spending your time rejoicing or grieving that your loved one is moving on. So, I have to ask, are you properly covered by life insurance that would cover your final expenses?
If not, please take the time to learn about the only life insurance anyone would ever need….level term life policies…all others are a rip off to anyone but the one selling them.
I do wish you well and will pray for you during your time of mourning.
1% Mortgage Refinance loans, you’ve probably seen 100 different advertisements, but how is it possible? There is really only one big secret to 1% mortgages: 1% minimum payments are below the interest payable on the loan. Once we’ve addressed this feature, most of the other facets of 1% mortgages are relatively logical. 1% mortgages, which now come in dozens of varieties with start rates from below 1% (some even starting at 0% for a few months after refinance) up to 4% or more, offer astonishingly low payments. Some of them offer fixed rates for 30 or even 40 years, some of them are adjustable from the day you take them out, all of these are basically “1% mortgages” and are extremely popular amongst homeowners today. 1% mortgages and their offspring are being used for debt consolidation, cash flow management, investments, and for tax purposes, and they are being used a lot.
A full 40% of home loans originated in 2005 and 2006 are estimated to be from the 1% mortgage family, with multiple payment options. By its proponents, the success of the 1% mortgage has been hailed as a new era of affordability and flexibility, of an extremely sharp financial tool once available only to the very rich now available to every family in the country. Its opponents tend to think that the 1% mortgage is a bit too sharp for the average homeowner to handle, they fear “Average Joes” could conceivably cut themselves. Despite their division, one thing is certain, the popularity of the 1% mortgage is driven by the relentless pursuit of the American dream. There are more homeowners in the United States today than in any other period in history, and many of those who own homes have only been able to accomplish home ownership, which was once a lifelong achievement, in their early 20′s and 30′s, largely because of the extended availability of these 1% mortgages to normal borrowers.
How much less expensive is a 1% mortgage payment option versus the comparable 30 Year Fixed traditional principal and interest payment?
It’s easy to see why the 1% mortgage refinance is so heavily marketed as a way to cut your mortgage payment in half. In the above example, the 1% mortgage minimum payment option is 60% less than a typical, traditional principal & interest loan payment. 1% mortgage minimum payments are usually 50% lower than even the highly lauded Interest Only payment mortgages, and most loans in the 1% mortgage family include the ability to pay more than just 1% if need be.
So How Does it Work?
In fact, 1% mortgages are more than just the 1% start rate. They have a fully indexed rate as well, which is the true amount of interest due each month. When making a 1% mortgage minimum payment, the borrower is not paying all of the interest due, which is seen by some as a good thing and some as a bad thing. Let’s examine some of the commonly perceived benefits and caveats of 1% mortgages:
Commonly Perceived Benefits of the 1% Mortgage Family:
1. Extremely Low Monthly Minimum Payment: As we’ve seen in our example, the minimum payment option is less than half of the typical traditional mortgage payment.
2. Flexibility to Control Your Own Money: Unlike a traditional mortgage, which requires a payment to principal each month, 1% mortgages allow borrowers to take the power into their own hands to make principal payments when they want to, e.g after a bonus or a particularly good year.
3. Separate Cash Flow from Equity: While many personal finance pundits laud the benefits of building home equity, the reality is that investing home equity yields a 0% return on investment on a month to month basis. In the above example, paying the traditional principal and interest payment forces the borrower to invest 00 more each month in their home, money which is locked up entirely in the equity of the home. Home Equity is illiquid, meaning all this money locked in equity cannot be accessed unless the home is sold or refinanced. The bank won’t cut a check each month for the borrower’s home equity in a traditional loan. With a 1% mortgage minimum payment, that 00 difference in payments is money in the borrower’s pocket, to invest or spend at their discretion. By deferring interest using a 1% mortgage, the borrower has full access to money that normally would be locked up until they sold the property. That 00 per month adds up to over 0,000.00 in cash over 5 years on a 1% mortgage, and it’s available every time your paycheck does not get used up paying a huge traditional mortgage payment each month.
4. Maximize Debt Consolidation: Using a 1% mortgage refinance to pay off all of your other creditors, such as credit card companies and high interest rate lenders, means that you can save even more money than with a 1% mortgage refinance alone. Since you aren’t throwing high interest money at your creditors each month, the cash which you save by making the 1% mortgage payment actually goes into your pocket, your savings, your investments, or wherever you need it most. That’s ultimate control. Let’s say that in our 0,000 1% mortgage example above, we rolled in ,000 of credit card and other high interest debt that have a monthly minimum payment requirement of ,000. By using a 1% mortgage refinance to pay off those debts, total monthly savings using the earlier example would be over 00 per month, 00 from the debt consolidation plus 00 from the difference between the traditional loan payment at 6% and the 1% mortgage minimum payment.
5. Turn Equity into a Tax Deduction: First, the 1% mortgage payment is 100% interest and therefore should be 100% tax deductible in most cases. Secondly, One of the most attractive benefits of 1% mortgages is the additional tax deduction available on deferred interest. What this means is that borrowers can realize a tax deduction on interest they did not have to lay out the cash for, and choose the time at which this deduction is realized, which can be a huge savings upon liquidity or refinance. For real estate investors, this is a huge advantage as it can often wash out the capital gains consequences of selling a property. Disclaimer: We do not dispense tax advice, and you should consider consulting a CPA.
6. Easy Qualification: Normally, to qualify for low payment mortgages, borrowers are required to have exceptional credit. However, 1% mortgage refinance loans are routinely available to borrowers with credit scores as low as 620, and if they are borrowing less than 80% of the value of their home, scores can even be in the 500s provided there are no late mortgage payments reported on their credit file. The borrower’s income can be stated, and sometimes no income or employment documentation is required at all.
7. Enhanced Protection from Foreclosure: Because the minimum payment option is so low, the cash savings each month so high, and the loan is so flexible, the 1% mortgage family offers homeowners a low minimum payment option which they have a much higher likelihood of paying should they suffer an interruption of income or become disabled.
8. Biweekly Payments: A popular way to maximize the benefits of the 1% mortgage refinance is to elect to make biweekly payments (which are available on select 1% mortgages). This optimizes the loan to coincide with most borrower’s payment cycles and reduces any possible negative effects of deferring interest.
Commonly Perceived Caveats of the 1% Mortgage Family:
1. Artificially Low Payments: Because the minimum payments are so low compared to traditional mortgages, many pundits fear that people who would normally not qualify for home ownership can now own a home. The fear is that new or “low income” homeowners could “get in over their heads” by buying more house than they can truly afford. Ultimately, it is up to the borrower to decide how much they can afford.
2. Deferred Interest: Often referred to as negative amortization, this concern is commonly cited by journalists as a “negative” because the loan balance may increase over time if the minimum payment is always selected. However, this perspective does ignore the advantages of dramatically increased cash flow in the borrower’s pocket each month and the tax benefits of deferring interest. Of course, the borrower can choose for themselves whether they want to spend their money paying interest to the bank or if they would rather put the difference into their own pockets.
3. Depreciation: If the value of the borrower’s home falls dramatically, and other factors force the borrower to sell the home while the value is low, the borrower may wind up owing more than the home is worth. This is a valid risk over short periods of time for all types of mortgages, not just 1% mortgages. Even a traditional principal and interest mortgage does not pay off enough principal over the first 5 years of its life to offset a dramatic short term decline in home values. The risk of property values declining is a real risk of owning property, period. However, history tells us that residential real estate appreciates consistently over any given ten year period in the past 50 years.
4. Too Easy To Qualify: This may not seem to be a disadvantage to most borrowers looking to purchase or refinance a home, but there are those who believe that borrowers should be forced to document significantly more income and assets to qualify for these types of loans. A lot of this sentiment is an outgrowth of antiquated conceptions of 1% mortgages as a “Rich Man’s Mortgage”, which used to require significant net worth to obtain, and some of it is attributable to equally antiquated “one size fits all” notions about mortgages. Your perspective will likely depend on whether or not you are in a position to provide extensive documentation of your income and assets in support of your loan application.
Many of the criticisms of 1% mortgages revolve around the adjustable rate variety of these mortgages, which like all adjustable rate mortgages go up and down with the rest of the market. However, in most 1% mortgages, the minimum payment stays fixed and can go up or down only 7.5% per year. So if your payment in Year 1 is 00.00 , in Year 2 it can go no higher than 75.00. Because the rate on the loan can change more or less than the minimum payment, which is extremely low, the loan can result in the deferral of interest if only the minimum payment is made. Many of the amortization issues which are seen by critics of 1% Mortgages as their key detractor have been recently resolved by the introduction of fixed rate minimum payment loans to the 1% mortgage family.
Fixed rate 1% mortgage variations, the latest additions to the 1% mortgage family, have fixed interest rates from 3 to 30 years or more. The minimum payment option is generally available for the first 5, 10, 15 or in some cases 20 years of the mortgage, at which point the 1% mortgage payment recasts or readjusts to the interest only payment or the full principal & interest payment. During the fixed period, the loan payment and interest rates of fixed 1% mortgages are utterly predictable and can be defined down to the penny. Many borrowers who would prefer a fixed rate can benefit significantly from the 30 year fixed 1% mortgage, which actually carries a minimum payment of 1.95% and a fixed rates in the 6% to 7% range for 30 years.
While there are those in the journalism community who believe that 1% mortgages have too much power for your average homeowner, ultimately the decision is in the homeowner’s hands. Make a high payment to the bank each month, or put the money in their pockets. And homeowners seem evenly divided, as refinances into loans from the 1% mortgage category are projected to represent over 50% of all refinances in 2007. Traditional mortgages are not a one size fits all solution, and neither are 1% mortgages, but with low minimum payment options, excellent debt consolidation capabilities, significant cash flow and tax advantages made possible by deferring interest, and flexibility to control your finances or insulate yourself from interruptions in income or disability, 1% mortgages continue to post significant growth across the country. Whether or not a 1% mortgage refinance is right for you should be determined by performing a detailed analysis of your personal financial situation with a home loan professional who has extensive experience with 1% mortgage products. As always, we welcome your calls and emails.
In 2006 Peter Schiff tells over 1000 mortgage brokers they are about to be out of jobs. Watch how he completely nails the coming real estate/mortgage debacle before anyone else even realized it was coming. Video Rating: 4 / 5
The forex economy is one of the most lucrative financial markets in the world today. It is amazing how it has boomed to how it is now from its beginnings in the 1970s. Some forex traders suffer become thriving in their activities in the forex market, while some lost quite a lot. A lot of it, though, does not depend on luck alone. It largely depends on the forex trading skills and techniques the present one is making use of in form to win big or, better yet, to win constantly. Forex Blogs
To be successful in the forex world, you should be able to develop your own technique and be able to learn all details about it. One of the cheapest and most effective methods in learning different techniques in dealing with the forex market is through reading different types of forex trading blogs. This is now made possible through the power of the internet wherein you will be able to gain access to a lot of insider information about forex trading and learning its different facets and the countless quirks when doing it. Not only are reading most of the blogs free, they are also exhibiting a first-hand experience in forex trading.
A forex blog can equip you with the basic foundation of the forex market and trading in it. Without the basic foundation, you will not be able to get anywhere and you will end up almost always on the losing end unless you really are lucky. Forex blogs can also teach you how to read forex signals that are essential to be able to direct you in your calls when trading. This is because experienced forex bloggers are able to point you to the right direction and also, they present scenario that are similar to your experiences or what you will be going through when you do forex trading. Their insights will be able to give you a clearer perspective, hence, increasing your chances of being able to have gains instead of losses in forex trading. Forex Blogs
Forex trading deals with a lot of probabilities and possibilities, but they will not always be to your advantage unless you absorb all the knowledge that you can get. Forex blogs are a great source of these things. But of course, you need to be able to determine which forex blogs to follow because you might be following something that does not really work. Forex Blogs
As long as you are able to discipline yourself in your forex trading activities, you will be able to have great gains and you will be able to avoid the losses. Develop your own technique now. Always want to have financial freedom? Check out Forex Blogs Program. It’ll change your Life Forever!
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Produced by: DailyFX.com Daily wrap-up of the US Forex market trading session with DailyFX Currency Strategist John Kicklighter. Includes coverage of economic and financial market news, as well as an outlook for the next week and trading ideas. Video Rating: 0 / 5
Vermillion, SD (Vocus) August 12, 2010
TeamFanShop announces latest partnership with University of South Dakota (USD) Coyotes to operate the USD Coyotes Official Online Store. Under the terms of the multi-year agreement, TeamFanShop will be responsible for all facets of operation including merchandising, shipping, returns, personalized/targeted email marketing, and customer service, among many other responsibilities.
“We have been focusing our efforts on improving the all around experience for Coyotes fans,” remarked David Herbster, Associate A.D. for Development for USD. “Upgrading our online store has always been a priority but we were searching for a partner that would be the right fit. We look forward to the many opportunities this partnership with TeamFanShop will bring and the upgrades we will be able to make to our Coyotes athletic program since every sale will directly benefit it.”
The new USD Coyotes online store will feature the largest selection of Coyotes merchandise found anywhere, including customized items and gift certificates that can be instantly emailed to recipients. Coyotes fans will find everything they need for men, women, and kids and enjoy 3-business day, flat rate shipping for only .99.
“We are excited to welcome USD Coyotes to the TeamFanShop family and extend our business model and partner relation support strategies to help increase brand awareness,” said Brian Swallow, Vice President of Sales and Marketing for TeamFanShop. “We will carry merchandise for every sport all backed by industry leading shipping, returns and customer service policies to guarantee Coyotes fans can find everything they need in one place.”
About TeamFanShop:
Founded in 1995, TeamFanShop is a leading provider of private label e-commerce solutions for Division I colleges and professional sports teams. Their dedicated solutions power the official e-commerce sites for some of the biggest names in sports and sports media. Partners include the Oklahoma Sooners, Georgia Bulldogs, Florida Gators, Jacksonville Jaguars, Tampa Bay Buccaneers, New York Giants, Philadelphia 76ers, The Southeastern Conference, The Atlantic Coast Conference and CBS College Sports, among many others. TeamFanShop combines best-of-breed, turnkey e-commerce hosting website development with highly efficient order fulfillment, secure shopping cart solutions, and customer relationship management services to help partners fully monetize their official websites.
Seeing How your Mutual Funds Investing Can be of Help
When people earn money they generally tend to spend their money on various items that they feel are needed or desired. There is another way that you can profit from your money. This is by looking at the various mutual funds and seeing how your mutual funds investing can be of help. You will need to do some research of the various companies just to get a good idea of which ones are going to be of benefit to you.
One of the best ways to begin your research into the matter of mutual funds investing is to first gain an idea of what each of the mutual funds are. This way you can decide which funds will give you great returns. There are various documents available that will help you with understanding the terminology that is used in conjunction with mutual funds.
The next step is to talk with a reputed and independent financial consultant. This individual will look at your total finances and advise you if you should investing any mutual funds. The reason for this note of caution is because the stock market is unstable. For this reason there are always risks to be found in mutual funds investing.
By knowing these many different facets of the stock exchange you can think if you are prepared for this step. When you are also preparing to invest in any of the mutual funds you will need to see what sort of expenses you will need to shoulder. Additionally you will need to understand what is meant by the terms no-load, front-end load, level loads and even deferred loads for mutual funds investing.
This knowledge will help prevent you from wandering into investment pitfalls. These pitfalls can lead you into making expensive mistakes. So we will take a brief look at what these terms are. This information may be of some help to you. To get more information however you will need to talk with an expert in the field before you begin your mutual funds investing. Now back to those terms.
Deferred loads mean that any sales fee for investments is left aside until you are leaving the fund. At this point you will be prompted to pay a very expensive fee for all of the buying and selling that you have had performed for you. Front-end loads are ones that are just as bad to your mutual funds investing as the deferred loads.
In this load you pay a significant amount of money to a broker or any other financial advisor from the mutual funds company that you are investing with. Level loads are ones that you will not like to touch either during your mutual funds investing as in this load you will be paying money to the investment company.
To get a good choice of mutual funds to invest in you should look around. This shopping for funds will yield the information you need. You will then know the best groups for mutual funds investing.
Muna wa Wanjiru is a Web Administrator and Has Been Researching and Reporting on Mutual Funds for Years. For More Information on Mutual Funds Investing, Visit His Site at Mutual Funds Investing
FXBootcamp hopes you are enjoying this 40 hour bootcamp coaching marathon leading up to the triple witching hour on Friday, we hope to see many of you during several of these sessions. We have had signs of likely further weakness in the British pound technically this week on the Daily/4hour currency charts, such as multiple Daily lower highs among other things. So going into today’s London session rising from pre-London, while profitable, kept one very attuned to the market for a reversal, or another lower high etc. Well sure enough we got just that in today’s London session as the British Pound Sterling began to dive against every other currency there is. As we had begun to reach/breach some shorter term (15m) support on GBP/USD and the other pairings, we braced ourselves for the impending Retail Sales news announcement due at that very moment. If this news were negative we would very likely be looking at a sharp decline. So in this video I focus on how we handled this news setup using Fibonacci studies after the first one minute news candle, along with price action, to wiggle ourselves into what turned out to be a nice Pound short basket across the board. Unfortunately the pullbacks we encountered were not as perfectly offered to us as we may have preferred, but with a sharp eye on price action around these levels, we were able to sneak into some of these pairs for some wonderfully quick gains. Nice session indeed, needed to be disciplined however in all facets to … Video Rating: 5 / 5
Oil falls towards after US jobs report
US nonfarm payrolls fall more than expected; equities, USD lower after jobs data. Read more on Arabian Business
Japan’s foreign reserves top trillion mark
I’m sure the BOJ and MoF would be happier if they had to sell USD/JPY rather than buy it. With reserves of this magnitude, growing by $ 13 billion a month, their appetite to buy more USD/JPY and stem the Yen rise will surely be diminished. Read more on The Forex Market
Forex: EUR/USD finds resistance at 1.3175
FXstreet.com (Córdoba) – The Euro’s recovery from 1.3130 was capped by the 1.3175 zone. Currently trades at 1.3152/57, 0.57% below today’s opening price and is posting the biggest daily decline in two weeks. Greenback gained momentum following the release of upbeat economic data. Read more on The Forex Market
Forex: EUR/USD: Rally to 1.3400 this month and 1.3700 the next – Mizuho
FXstreet.com (Barcelona) – Euro recovery from 1.1800 on early June has accelerated during the current week to levels above 1.3200, and, despite the current consolidation movement, Nicole Elliott, technical analyst at Mizuho corporate Bank favours further rally, to 1.3400 this month and 1.3700 in six weeks time. Read more on The Forex Market
This work provides analysis of the legal and regulatory facets of syndicated loans, secondary loan market practice and other related financial practices. Acknowledging the dynamic growth in the secondary loan market, Mugasha covers loan trading, credit derivatives, collateralised debt obligations, mezzanine and hybrid debt solutions–all topical issues for finance lawyers.
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