Is Refinancing The Best Option For You?

When you’ve accumulated a mountain of debt and are not able to pay on time, it definitely lowers your credit score. It also causes you to pay higher interest rates , and worse may affect your ability to get employment or other types of loans.

If you’re worried that you’re paying too much for your home loan or if you think you’ve fallen into mortgage repayment arrears, you might want to take a look at Refinancing. For credit crisis help, some people turn to Refinancing. Most people don’t know that it could actually help you get out of the hole and turn your financial situation around. What is Refinancing? Refinancing refers to the replacement of an existing debt obligation with another debt obligation bearning different terms. In other words, it simply means restructuring your loans to reduce interest costs as the main purpose.

With interest rates dropping to its lowest in 50 years, most of us have at least thought of Refinancing. Some are even thinking the rate could go as low as 4.5%. If you’re looking at 3% potential savings, it makes sense to consider the option of refinancing.

However, refinancing isn’t for everyone.Before you consider any Refinancing Loans, first you should ask yourself ; “Am I qualified to Refinance?” Nowadays,banks require stricter documentation not to mention a credit score of 700 and above for approval.

Do you have 2-year tax returns? or 3-year pay stubs? A late payment in the last 12 months? Is it an upside down loan? If your answer is yes, then you’re not qualified for refinancing. To get the best rates, you have to qualify and if you have blemished credits, you may want to improve your credit standing first. You could check with your bank or credit union whether refinancing will benefit you and get you pre-qualified.

Let’s say you’re qualified and you’ve shopped around for brokers, the second question would be; “Will refinancing actually save me money?” If your loan carries a large prepayment penalty (paying off your current loan early), refinancing is not a sound idea. For example, in a home loan, typically, prepayment penalties can apply in the first 3 years and can be as much as 6 months worth of interest on the original amount. So, if you’re refinancing, make sure that you would at least be in your home long enough for the savings to outweigh the costs.

In additon, high refinancing fees are unavoidable. There are closing and transaction fees that are typically associated with refinancing debt, charges for changing the name of your lender to your home or car’s title and other possible hidden charges or fees depending on which country or state you are living. Make sure that you understand all the terms and conditions when you enter into refinancing. Take time to learn and ask a lot of questions. Get the necessary facts and ensure that the refinance advice is financially manageable for you.

Calculating the upfront, ongoing and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance. If a fresh loan has more suitable terms and lower interest rates, then you will be able to handle your monthly payments regularly until you pay off the total amount and improve your credit score.

When Is A Personal Loan A Good Idea?

Not so long ago, a Personal Loan was something for which we need to approach the bank, provide the details of our income and expenditures and wait for a few days just to know if we have been approved or not. Nowadays, personal loans can be obtained online just by filling out a form and have an answer in a few minutes. People can walk in a grocery store or a supermarket and find booths where lending companies offer personal loans and all you have to do again is just to fill out a form. Personal loans are now more accessible and most people don’t use this opportunity wisely. People get themselves in trouble everyday by borrowing for non-essential items. It is absolutely a bad idea to take out a loan to buy luxury goods. I’m not saying that making a personal loan has no benefits at all. It does.

So when is it really a good idea?

A Personal Loan is a good idea if it will help you build and consolidate your bills at a lower rate and if it can elp you build your Credit Rating. Most Personal Loans are unsecured and they carry a high percentage rate usually around 12% to 13%. Sounds really high but credit cards carry a rate of 19% to 20% and when you think of it, it really makes a huge difference.

A good option is to borrow a Personal Loan to make a credit card payment. A Personal Loan can also help you consolidate your bills into one monthly payment. This is ideal as long as you make all your payments on time.

It is also a good option to take out a Personal Loan if you have an existing business which you would like to expand rather than taking out a business loan. You can use the money as an additional investment and pay this on a monthly basis. Ofcourse, I wouldn’t advise you to start a business with a personal loan. You should have a tried and tested business that generates a steady income to make good use of a personal loan.

A Student Loan is also a good example of when you should take a personal loan. It is considered a good debt because it will allow you to secure an asset that increases in value. You are investing in education which will make you valuable in your workplace.

Sometimes we have emergencies and there is simply no other option especially when you don’t have any collateral. A Personal loan can provide financing in these instances.

An unsecured loan has a much higher interst rate than secured loans and it certainly has much worse terms and conditions. The higher risk for the lender will mean the higher rates for you so keep in mind that when you do take out a loan, make sure that you do your research and understand the benefits and the risk factors involved.

A Personal Loan can be a good idea if we apply good business practice and  financial discipline. Remember that this should not become a habit . The high fees can seriously hurt your credit rating and financial condition.

Are Banks Better Than Payday Loan Companies?

Payday loans from Banks are designed to help customers who have recurring deposits on their account.It is not intended for a large line of credit but it is viewed by the banks as a relationship product.

Most banks offer this feature as long as you pass the requirements such as having a checking account with them for more than 6 months and as long as the the direct deposits are automatically made into the account. A customer may get an advance of up to 50% of the amount that is regularly deposited into their account with a limit of $500 for an interest of 10% or a maximum of $50. If a customer regularly borrows for 6 months ,then they also have to go through a “cooling period” that shuts off the customer’s borrowing. The reason for this? Banks say that they they don’t want customers to be habitual borrowers and that it is only intended for emergency use by providing short term credit quickly. It is not intended for long-term financial needs.

The question is, are banks really a better source of payday loans? Note that while banks offer these loans to be paid out in a month or a few weeks, their policy is to pay themselves back during the first direct deposit of $100 or more. If a customer borrows $100 a week before payday, the amount of $110 is deducted immediately upon direct deposit which would be quite unfair given the fact that some people borrow for emergencies and instead of getting help, theyv’e just dug a deeper hole for themselves. A fee of 10% for only a few days? Certainly sounds like the equivalent of loan sharking by mobsters..In addition, banks can raise their fees as high as they want.

Payday loan companies on the other hand, offer short term loans that charge 20% or more for a few weeks. If you borrow $100 today then you pay back $120 or maybe more on payday.Payday loans are thriving in the US now with the most popular companies such as www.DollarsDirect.com.au , www.CityFinance.com.au , www.DebtRelief.com.au . While payday loans are safer than loan sharks, they certainly won’t break your legs but they can do much damage to your credit rating.

While you would think that payday loans seem to give a higher interest rate than banks, they could end up cheaper in the sense that with banks, if you bounce a check, there is a huge penalty and you can save up to 60 or 70% and there is also a $30 or more in late fees.

In comparison, BANKS:

Has a slow processing, may take 10 to 15 days.
Has tireless procedures: no appointments
Need an explanation for the loan
Have uncertainty even if you qualify
Bad credit rating affects the processing of loan
Have strict repayment schedules.
Provides lower interest than paydayday loans.

while PAYDAY  Loans:

You get instant approval if you qualify.
Are easy to get: just fill out the online form
.                       Asks no explanation for the loan.
Even people with bad credit can get a loan.
Repayment schedule can be changed.

Ultimately, only the borrower will decide if they will go to the bank or some lending institution to get a cash advance.Either way, the thing to keep in mind is to make a loan only during emergencies and not for any luxury.

People losing their beds to Payday Loans: but who’s to blame?

In today’s economy, almost everyone is struggling with money and finances and the growing popularity of payday loans have increased unsustainable levels of personal debts. Although consumer advocates condemn the practice as a whole and while some state laws issued guidelines or even ban payday loans, it still has enormous appeal to people who are already hard-pressed to pay their debts. Sadly, these are typically low-income people with few assets and who do not understand the high interest rates that would likely trap them in cycle of credit dependency.

Payday loans are fast, no credit checks needed, can be discreet and it’s everywhere! At a local outlet, over the phone, internet and some loans can even be approved overnight. There are more information of the accessibility of payday loans more than the information about the possible harm it can cost. So some people even use payday loans just to feed their impulse to buy things that they don’t have but don’t necessarily need.

Let’s face it. We make irrational decisions when it comes to money, we overspend shopping using credit cards, but manage to stay in budget when we use cash. Day to day expenses like: $5 Starbucks coffee, $10 movie, $20 for a book or the latest fashion magazine may be small, but at the end of the month, or in a year, you would realize you’ve spent thousands of dollars for books/magazines, collecting dust in 1 corner of your house.

The key is you have to know where your money goes. Get motivated to create budget – a budget knows where your money goes and would let you create a spending plan. But no matter how many books you read about budgeting, or keeping spreadsheet to track your weekly expenses, you have to be determined to stick to your budget plan.

How? You need to consider some psychological factors. Why you feel happy and elated buying new things, or why the smell of a new leather have endorphin-like effect on you? You have to examine and ask yourself what does money mean to you.

The bottom line is attitude. What you have does not determine your self-worth. Give up the urge to splurge. You have to create a positive attitude with yourself and your money. We may have our own story to tell about our experiences, different needs in life, or we may even say that “living within your means” may be easier said than done, but it is always prudent to make your finances under control so you don’t need to take out payday loans or any other quickie credit products to meet your emergency needs.

While payday loans can be useful for emergencies, it is a short term solution. Keep in mind that the loan is not taken out for a year, but for a few weeks. The faster you can pay it back, the better. There may be credit reduction programs everywhere you can turn to, however, when you really have to opt for payday loans, borrow only as much as you can afford to pay with your next pay check and still have enough to make it to the next payday. Payday loan, tax refund loan, etc., is addictive, dangerous and predatory. And the consequence is literally punishing. Who’s to blame, is a question everybody could answer.

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