U.S. FICO Score

Tags: credit rating, credit score, debt, FICO, United States

Whether they are referred to as “school loans“, “student loans” “college loans” or just “money for college“, the phrases all mean the same thing-money that is borrowed so that a person can obtain a higher education.  And, there are almost as many types of education loans as there are names for them.

Many college-bound students use the Free Application for Federal Student Aid (FAFSA) form to apply for Federal Student Aid college loans.  Examples of loans that can be applied for using a FAFSA are Pell Grants, Stafford loans, SMART (Science and Mathematics Access to Retain Talent) Grants and PLUS loans (loans that are taken out by a student’s parents) as well as others.

Some student loans are subsidized-that is, the Federal Government pays the interest for a certain amount of time, while others are unsubsidized-the student (or borrower[s]) is responsible for paying the interest that accrues on the loan.  Some student loans do not require that any repayment be started until a certain time after a student leaves school (hopefully, because the student graduated).  Others, such as the PLUS loan, offer the borrower(s) the option of beginning repayment immediately, or waiting until after the student has finished school.

It is also possible to apply for education loans through different lending institutions such as banks, credit unions, or other loan agencies.  These types of loans are referred to as “private” loans.

How much money a student needs to borrow will, of course, depend on how much it will cost to attend college.  Many colleges quote a “flat” amount per quarter, per semester, or per year, which includes books, tuition, housing, and other college expenses.  When this occurs, the student usually has a fairly good idea of exactly how much he or she will need to borrow, and can decide whether to borrow year to year, or to apply for a lump sum that will cover all of the college years.

Many students know early on which college they would like to attend.  Often, as the time gets closer, the prospective student will begin keeping track of tuition and other costs at the preferred college, and can tell if an increase seems likely.  He or she can then begin to plan accordingly, especially when it comes to knowing how much to apply for in student loans.

Other colleges break down each category, and quote a separate amount for each one.  One advantage of this is that if the student already knows that he or she will not need to worry about a specific expense (for example, he or she has already arranged for off-campus housing), he or she will then know that it is not necessary to apply for housing funds.   For this reason, the student may find that he or she can choose to look into obtaining a personal loan, rather than a Federal loan.

This may allow the student to “shop around” for the best interest rates, repayment terms, and other loan options that might not be available on other loans.  It may also allow the student to borrow more money than he or she may have thought.

No matter how education loans are obtained, the important thing is for a student to realize that there is money out there, and it is available.  It may take a few years to pay the loan back, and much of a student’s earnings the first few years after college may go to that particular debt.  However, the student will have received something that is worth every cent of the money that was borrowed-a college education, with all the benefits and rewards that come with it.

Tags: college loans, education loans, FAFSA, federal loans, Loans, money for college, PLUS loan, private student loans, school loans, Staffford loans, student loans, subsidized loans, unsubsidized loans

A loan is simply an agreement to pay back an amount of money that has been borrowed, along with any interest, and sometimes finance charges or application fees.  Loans can be as simple as someone you work with loaning you $20 and you paying them back $20 on payday, or as complicated as a bank lending you enough to start your own business, and you pay the bank back within a specified length of time.

Usually, when we see the word “loan“, we’re talking about an amount that is most likely over $100 dollars, and is obtained through a lending institution of some sort.  (Banks, credit unions, and independent loan companies are examples of lending institutions).

There are different types of loans; however, most loans fall within one of two categories: (secured and unsecured loans), and personal loans.

Unsecured personal loans are often referred to as “signature” loans.  The lending institution does not require you to “put up” some form of “collateral”, such as a bank or money market account, or some form of personal property (a car, home or other real estate, or something else of value).

Some financial institutions may ask you to have someone co-sign with you on an unsecured loan, however.  In this way, should you be unable to repay the loan, the co-signer would be responsible for the payments.

Secured loans are those that require you to provide some sort of collateral, such as that mentioned in an earlier paragraph.  The most common or familiar type of secured loan is an automobile loan, because the lending institution maintains control of the ownership papers (the title, in other words), until the loan is paid in full.  If the loan is not repaid, or payments become severely delinquent, the lending institution simply takes possession of the vehicle.

Another example of a secured loan is the very common payday loan.  You may think that this type of loan would be considered an unsecured signature loan, because, after all, you’re giving them a post-dated check, which has your signature on it.  However, when you think about it, you are actually securing this loan with funds that will be (or should be) available in your checking account on the due date.  If for some reason the money is not in your checking account when the check is presented to the bank, you will be “dinged” for the original loan amount, plus any interest, plus any insufficient fund fees that the loan company and/or your bank charges.  There are usually better options for obtaining a personal loan than a “payday” loan.

A business loan may be acquired in order to start a business, or in order to expand or support an existing business.  These are usually the most complicated types of loans. For this reason, anyone who takes out a business loan may want to have an attorney to look over the terms and conditions of the loan agreement.  This is for the borrower’s protection as well as the lender’s.

The ability to pay back a business loan is, of course, dependent on the success of the business.  The loan will still have to be repaid, even if the business fails.  This is another reason why an attorney can be an asset.  He or she can advise you on how much to borrow, and which repayment terms will be the best for your business.

Tags: automobile loans, loan, Loans, payday loans, personal loans, small business loans

The U.S. is in a recession, and this atmosphere has forced many homeowners to face an unfortunate reality: they can no longer to afford their house. And as a result, Americans are deciding to voluntarily let their homes go into foreclosure at an unprecedented rate.

But what about homeowners that are unwilling to let their homes go into foreclosure? For every household that has walked away from its debt, there are untold others that are fighting tooth and nail to continue making their house payments. And for families with fixed incomes, having a house payment jump up 10% or more can be a huge strain on every aspect of life, not just their finances. Perhaps one of the most asked questions among struggling homeowners, is “why should we keep our home and suffer, when the people that are walking away from their debt are having their slate wiped clean?”

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For homeowners not willing to go into foreclosure, but unsure of what to do with their housing situation, there are opportunities to change their existing lender-borrower arrangement. This would include pursuing a loan modification (wherein the terms of a home loan would be renegotiated) or a short-sale (an option where the bank agrees to sell the house for less than what is owed on the mortgage). The latter was created for those who can no longer make their house payments, but, for good reason, want to avoid a foreclosure.

These options exist in effort to help borrowers get out of bad loan situations. It should also be pointed out that both of these solutions are not right for everyone and there will be determining factors for each that will qualify some people for one, and another person for the other. After identifying which category you fit in (based on your financial situation) and also what you would like to do with your home, you will then be able to see if one of these options could be right for you.

Loan Modification

A loan modification, as the name suggests, is a process by which the terms of an existing loan are modified to improve the lender-borrower arrangement to improve the borrower’s ability to continue paying his mortgage. A loan modification is typically initiated by the borrower after their adjustable rate loan adjusts to a rate that is extremely difficult to sustain. These adjusting loans typically result in a monthly payment that is much higher than most borrowers anticipated, creating a legitimate difficulty to make payments.

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Loan modification involves the borrower negotiating a loan more favorable than their current one, and as a result, most lenders are hesitant to approve this arrangement. If you have decided that a loan modification is necessary for your household, the most important thing to realize is that you will have to make your current situation make sense to your lender. You will also have to get ready for what can be a very lengthy negotiation back-and-forth. For reference, think of it as trying to get your credit card company to reduce your interest rate, but for hundreds of thousands of dollars.

Another important thing to realize is that no lender will approve an applicant for a credit loan, if there is any reasonable concern that this person will then later pursue a short-sale or a let their home go into foreclosure. Getting approved for a loan modification is similar to getting approved for a home. But it is like getting approved for a 1 bedroom shack, after you’ve been approved for a 16 bedroom mansion. The key difference is that instead of trying to inflate your earnings you have to be strategic in how you present your current financial situation: it must be stressed that while your household remains solvent, that this could change at any time, due to certain hardships. Borrowers will likely want to see a good payment history, and you must communicate to them that there are factors, outside of your control, that jeopardize your ability to continue paying your mortgage at your current rate. Ultimately, the onus will be on you to convince the bank that you are not jumping on the bailout bandwagon - your situation must merit grace, but not absolution.

Credit Implications of a Loan Modification

One great aspect of a loan modification is that your credit will not be negatively affected beyond any late payments (or of course future late payments), but this can be overcome over the course of the next year and your credit can bounce back. As a corollary, there are multiple perspectives on when the best time to pursue a loan modification is: while you are still current, or after you are slightly behind. The latter, it has been argued is necessary to effectively prove to your lender that you are experiencing hardship and/or repayment difficulty. Getting approved for a loan modification will require a credit check and other applications, but the fact that a loan has been modified will not be reflected on your credit.

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Tax Implications of a Loan Modification

In December 2007, the IRS announced that loan modifications would not be categorized as a ‘prohibited transaction’ in an effort to alleviate the sub-prime mortgage crisis. This means that most loans initiated during the sub-prime mortgage heyday (January 2004 to July 2007) and adjusting during its demise (January 2009 to July 2012), would not have be liable to pay income taxes on the difference between the original loan and a later-modified loan. Therefore, a loan modification would not require the borrower to file a 1099 on what could be determined ‘income.’

Short-sale

A short-sale is a program wherein a lender and a borrower agree to sell a house that is on its way to foreclosure, at a price that is below the price of the current loan, so that both parties may minimize their loss. Short-sales came about because foreclosures are “lose-lose” situations: if a home goes into foreclosure, then the borrower’s credit is badly damaged for seven years, and the bank loses the difference between the loan amount and the home’s current market value (along with real estate agent commissions and repair costs). If a short sale is negotiated, it is still a “lose-lose,” but arguably a much lesser one. For the borrower, there will be negative credit and tax implications, as the lender trades a big loss for a relatively smaller one. Simply put, a short sale is a way for the involved parties to minimize their losses concurrently.

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If it is determined that a foreclosure is inevitable, then the borrower can use this leverage to convince its lender or “mortgagee,” that a short-sale will be the best case scenario for both parties involved. Once a lender agrees to let a house go to a short-sale, the borrower can sell the house at a price approved by the bank that is below what they owe. Upon sale, the lender would then relinquish the now former borrower from any and all financial obligation.

It should be noted that a short-sale is not likely to be approved, if the borrower shows some wherewithal to continue paying their loan at the current rate. More directly, a short-sale would be approved when the borrower’s financial situation suggests that a loan-modification is more trouble than it is worth and likely to just result in default again.

Credit Implications of a Short Sale

Compared to foreclosures, short-sales do not negatively affect credit in a uniform fashion. The very essence of a short-sale is a lender-borrower understanding that an outstanding debt cannot be repaid. This will not go unnoticed, and while it is not likely to be as serious an impact as a foreclosure, there is no credit report distinction for short sales. Short-sale notation does not exist, and every short-sale will affect their users’ differently.

There are rare instances in which your lender will not disclose the details of the termination of your loan. In this case, assuming that all preceding payments were timely, there would be only minimal negative impact on your credit score. It is suggested that anyone thinking about short-selling their house consider the amount that will be written off, and contact their lender’s loss mitigation department to discuss options and see what their company policy is on this. There may be greater implications depending on the volume of debt written off, and so forth.

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Tax Implications of a Short Sale

The tax implications could be one of the largest determining factors in choosing to go with, or against a short-sale, and much has to do with the individual’s tax/income bracket. The person having the debt forgiven is liable for the amount written off, as it is seen by the IRS as a credit towards their net assets. It is therefore taxable as income at a rate that is consistent with their tax bracket. Therefore the costs associated w/ the tax owed on a forgiven loan therefore ranges from person to person.

Factors to Consider When Deciding Which is Right for You

Deciding which is best for you may be difficult. But the underlying question is “are you looking to keep your house, or are you trying to get away from it?” The most important thing to keep in mind is that both getting approved for a short sale and or a loan modification is in effect getting yourself unqualified for your existing loan. But the determinants and ‘disqualification processes’ for each vary.

Bankruptcy / Near Bankruptcy: You will not be afforded a loan modification, because a lender could not justify the process if you are expected to soon go into foreclosure. This could help in getting a short-sale approved, however. Note, if you are trying to get a loan modification, DO NOT threaten your lendor by saying that you have considered declaring bankruptcy. All lenders require their loss-mitigation departments to note any mention of the ‘B’ word as good cause to reject an application for loan modification.

Unemployment: An unemployed borrower is a high-risk borrower. If you have recently been unemployed, wait until you find a new job before you apply for a loan modification under the premise of a hardship. If you can prove that you have become unemployed, your lender will probably approve your short sale instead of letting you go into foreclosure.

Underemployment: If you can show that your work has slowed down, but you are still making your payments relatively on-time, your lender may work out a loan modification, because of your hardship. In fact, this is probably the best time to get a loan modification because you still have an income, but your ability to pay the mortgage is doubly affected by its adjustment and your decreased earnings. You can simply admit to your lender that your employment situation is currently been disrupted. The ball would then be in their court. The same goes for a short-sale.

The Home Has Equity: The lender is less likely to work out a loan modification with a borrower if there is equity in the house. They would rather see the homeowner sell the property to get out of the deal.

The home is upside-down: The bank would prefer to work out a loan modification on a house that is worth less than the mortgage balance. If you are in this situation, then you are the ideal customer to retain, as the bank can ideally prevent a bigger loss by having to sell the home through a short-sale or foreclosing on the home.

You are current on your payments: Opinions on this vary, and the situation will differ from bank to bank. During your application process you will have to prove your hardship, and a situation such as underemployment may qualify for a loan modification. Many argue that it is best to start this process as early as possible – at the first sign of hardship – because this program takes time.

Past Due (30-60 days) on your payments: Others would argue that in order to qualify for a loan modification you must prove repayment difficulty, which is evident once a payment or two has been missed. However as was mentioned earlier, payment history is taken into consideration, and it would make sense to have a good payment history with a company that you are trying to get to help you out.

Seriously past due 90-120 days: At this point, it is likely that a short-sale is your only option. Most lenders would see a vendor at this point as being a customer who will have repayment difficulty in the future, and thus would prefer not to worry about modifying your loan.

Looking Ahead

The most important thing to keep in mind when faced with a decision to change your current mortgage situation, is that certain programs are set up to help different types of people. And in order to get the bank to work with you, they have to be convinced that they are minimizing their own losses in the long run. Think of a loan modification as a loan with qualifications that require less than income than your current mortgage required, whereas a short-sale essentially means getting disqualified for a loan.

The most important thing to realize is that while although popular, they are not necessarily right for everyone. Neither a Short Sale or a Loan Mod are options that a lender would choose to initiate for an outstanding loan, but based on each borrowers situation, a number of different types of arrangements can be made. The new arrangement has to make sense to your lender, and to your household and your future.

Tags: foreclosure, loan modifications, mortgage loan modification, mortgage loans, short sale

Bankruptcy should ONLY be considered as a final, last resort for getting out of debt only after every other resource has been exhausted.  Bankruptcy is not the “get out of debt free” (or for nominal legal fees, actually) option it once was being used for and/or has been used for in the past.

Bankruptcy laws have undergone drastic changes within the past few years.  Simply filing for bankruptcy WILL NO LONGER guarantee that you will not have to repay any outstanding debts you owe.

Student loans, taxes, and other debts, such as those which occurred through or as a result of fraud, alimony and child support that you owe (and will STILL be expected to pay), and any money that you owe as a result of criminal or civil liability which was brought, and proven, against you will not “disappear” as a result of filing bankruptcy.  You will still have to pay these debts, and you can still be held responsible if you default on any of them.

There are different types of bankruptcy.  The most common ones are Chapter 7, Chapter 11, and Chapter 13.

Chapter 7 bankruptcy is considered the “worst” (as if any form of bankruptcy were good).  True, it gets rid of the majority of debts, except those in which the creditors request payment, and of course those mentioned above which cannot be discharged through bankruptcy; however, this form of bankruptcy can cause the most damage to your credit history, and should be avoided if at all possible.

Chapter 13 bankruptcy does not make debt “go away”; rather, debts are restructured, and more time is given to pay off creditors.  In addition, one may even be given a “grace period” before having to begin repayment of the restructured debts.  Small business owners and individuals avail themselves of this form most frequently.

Chapter 11 bankruptcy is the one you frequently hear about when a large business or corporation “goes under”.  It works along the same lines at Chapter 13 bankruptcy.

A bankruptcy will go on your credit report, and will remain on there for anywhere from seven to ten years.  During this time, it will not be impossible to obtain credit; however, you will most likely not get the best interest rates, nor might you be able to borrow as much as you need, if indeed you are able to borrow at all.

Some credit card companies, for example, do offer credit cards to those who have a bankruptcy on their credit report.  Because a credit card is required for so many things besides charging purchases (holding hotel or flight reservations, for instance), you might wish to go ahead and get one of these cards.

However, remember that the card is NOT to be used except in cases of extreme emergency, or for such uses as those mentioned above.  If you do get one of these cards, do something to make it harder than it would normally be to use it.  Either keep it “off-site”, to where it will require some effort just to get it in your possession, or do something so that you will not be tempted to use it.

The best way to avoid bankruptcy is to remain aware of your current financial status.  If you see that you are starting to fall seriously behind in your payments, immediately contact your creditors and see if you can work something out with them.  If you are honest with them, and get in touch with them before you are too delinquent, you might be pleasantly surprised at how willingly they will work with you.

Tags: bankruptcy, credit cards, debt, student loans

Bad credit loans are loans given to people who for some reason or another have a poor credit rating.  A person’s credit rating is considered poor when the credit score falls below 580. People who have filed for bankruptcy are also considered poor credit risks, and may be unable to obtain a conventional loan.  The only loan they may be able to get would be a “bad credit loan”.

Bad credit loans are available; however, there will be some differences between them and “regular” loans.  You can almost certainly expect to have a higher interest rate than you would if your credit was in good shape, and you may not be able to borrow as much as you need.

Some financial institutions, such as banks, do not even offer bad credit loans.  A credit union may offer this type of loan; however, that organization may require you to have someone co-sign with you on the loan, and may also have you to put up some type of collateral (such as personal property or a car) in order to secure the loan.

If you do find a bank or credit union that will give you a bad credit loan, the difference in the interest rate on that particular loan and any other loan the financial institution makes may not be that much higher; however, it will not be the lowest interest rate offered.

Independent loan companies do offer bad credit loans.  Some advertise that you will get a loan regardless of your credit score or history; others may obtain your credit history, but will still approve the loan.  You can definitely expect to be “dinged” with a high interest rate at one of these places, however.

Some people do not realize or think of it in this sense, but a title loan is a type of bad credit loan.  When you do stop to analyze the situation, you immediately see that a title loan is truly a bad credit loan.  Think about it:  most title loan agencies do not require a credit check; they only require a “clean, clear” title to your motor vehicle.  Basically, what you are doing is “putting your car up as collateral” for a loan.

Unless your credit rating is such that you know there is no possibility of you being able to obtain a loan through any other means, a title loan should be your last resort.  The interest rates are exorbitant, and there is too much of a risk involved.  Miss or be late on one payment, and there goes your car, because you have given the business the ownership papers to the car.

If your credit rating is poor, but you find yourself needing a loan, don’t hesitate to go to another lending agency BEFORE you even consider going to a title loan company.  Most agencies are willing to work with you, and will try to accommodate if there is any possible way.

No matter where you go to get a bad credit loan, only borrow the minimum amount you need.  This is not the time to make an impulse buy or an extravagant purchase. Once you have gotten the loan, make the payments on time each month.  Depending on the repayment period, you may be able to negotiate for a lower interest rate after you have made a series of regular payments.

Tags: bad credit loans, high interest, loan, Loans, poor credit, title loans

With consumers experiencing more financial stress than ever before, the use of credit cards is rising. Those who typically wouldn’t even think about pulling out the plastic are left with no other choice during this unconfirmed recession period. While radical financial experts like Dave Ramsey claim there is no such thing as using a credit card responsibly, today’s lifestyles often require consumers to utilize credit. Thus, there may be times when using a credit card just makes sense.

Benefits of credit cards:

• Credit cards provide good opportunities for people to manage their money wisely. They are also quite safe for those who wish to make purchases without carrying around large sums of cash.
• Credit cards also provide people with the means to access money in emergency situations where they may need more than they have stashed away in the bank.
• No interest cards can help consumers make purchases and pay them off in timely manners, without penalty of interest.

While credit cards do have a purpose in life, they must be taken quite seriously. It doesn’t take long to easily max out your credit and leave yourself with nothing more than a stack of bills you’ll be responsible for paying in the near future. Thus, it’s important to remember a few things about credit cards.

Things to remember about credit cards:

• Credit cards should not be thought of as gifts. They are bona fide loans you will be required to pay back. Thus, you should never spend more than you can feasibly pay back under your terms. Reckless spending can ruin your credit, your financial future and your life!
• If someone is already buried under a great deal of debt, credit cards won’t help! They will only make the debt get larger and the overall financial situation worsen.
• High interest rate cards can be difficult to pay off in a short amount of time.

If you do decide to keep a credit card handy, it’s important to choose credit cards with low interest rates. Therefore, when you do use the cards you will be more likely to be able to pay off the balance in a timely fashion. Shopping around for the best rates is important when scouting for a new credit card!

While using cash for purchases is ideal, credit cards can be used in mature manners. Remember, stick within your budget whether you are paying with cash or credit. Focus on saving for major purchases instead of automatically reaching for your card. Be smart with your bills and be sure you never charge anything you can’t afford to pay off over time. Credit cards are not life-damaging. However, people who choose to use them in irresponsible ways can indeed ruin their financial future. Thus, it’s important to set personal goals for credit card use and not venture outside of those goals. It may be helpful to share your goals with a friend or family member, so they can help you stick with your credit card plan for the future.

Personal loans are loans that are applied for by and (hopefully) given to individuals. In other words, a person, rather than a business, corporation, or organization, wants to borrow money. Personal loans can be either secured or unsecured. Unsecured personal loans usually only require a person’s signature. The individual does not have to “secure” the loan with any type of collateral, such as a car, boat, or other personal property.

Sometimes, a financial organization may require a co-signer on an unsecured loan. In this way, if the original borrower cannot (or does not) repay the loan; the co-signer is responsible for the payments. The co-signer, however, does not have to put up any personal property either (unless that person wishes to do so).

Unsecured loans are usually fairly small. Some financial institutions will only lend up to a certain amount on an unsecured loan before they require that the loan become “secured“. While many lending agencies may offer unsecured loans, frequently, this type of loan is most often offered through a credit union or other similar organization. This does not mean that a bank, independent finance company, or other financial institution will not offer unsecured loans. One needs only to inquire at the place where he or she wishes to complete the loan application to find out if unsecured loans are offered.

An unsecured loan may very well be the first loan a young person applies for and receives. This is because the loan amount is usually fairly low, and the process itself is generally easier than that required for a secured loan. Unsecured bad credit loans will likely have a fairly low interest rate, and the monthly payment is usually very moderate. This makes an unsecured loan even more attractive, especially to a person who is just beginning to build his or her own personal financial history.

Obtaining an unsecured loan, making the payments on time, and paying the loan back within the specified time (if not a little early) are a very good way of starting a sound credit history. When and if the time comes that an individual is in need of another loan (whether unsecured or secured), creditors will have something to look at. If a lender likes what he (or she) sees, then there should be no problem when a person applies for a loan in a larger amount.

Once an unsecured loan has been repaid in full, a borrower may be able to make another unsecured loan, after a sufficient amount of time has passed. As long as each loan is paid off on time, with no late payments, the borrower can continue to obtain unsecured loans whenever it is necessary.

Personal loans are usually made with a repayment period of one to three years. The longer the repayment period, the less the monthly payments will be. A “first-timer” may wish to opt for more time in which to pay back the loan, as this will give the borrower a chance to practice and hone budgeting and payment responsibility skills.

IF a problem arises with repayment, an unsecured loan can usually be “extended”. This simply means that the remaining balance is re-financed, and the borrower is given more time to pay off the loan. If the borrower sees that this situation may be imminent, he or she should immediately contact the creditor and explain the circumstances. The lender is more apt to work with the individual if other arrangements are made before payments become delinquent.

Tags: bad credit loans, creditors, lender, loan, Loans, personal loans, secured personal loans, unsecured personal loans

With interest rates steady and fairly low, homeowners all over the country are wondering if it’s an ideal time to get a home equity loan. While there are some conditions that make a home equity loan’s timing more appropriate than others, there are some rules that should be considered no matter what the economy is doing.

Things To Consider Regardless Of The Economy

• Home equity loans are loans that should only be taken out for a “good reason”. Low interest rates are not an adequate reason alone for taking out a loan of this size. Substantial reasons for taking out a home equity loan include: a personal emergency, medical bills, college expenses, a sudden repair or debt consolidation.
• Another thing to consider is how much equity a homeowner has actually built up in their home. While equity takes time to build, the process is extremely slow overall.
• Those interested in taking out a home equity loan should be able to afford the loan’s monthly payments. If a homeowner is extremely strapped for cash it may not be feasible for them to take on another bill each month.
• One good reason for taking out a home equity loan is for a home project. Home projects are often great investments in your home. Thus, a home equity loan will help you add value to the overall property. It’s important to be certain your home project is indeed adding appropriate value in relation to what you’re spending. Thus, a realtor is the best resource to consult with before any additions or remodels are started.

The Status Of The Market Does Matter

While there are several things to consider no matter what the market looks like, the market’s status does indeed matter in the timing of a home equity loan. With interest rates moving on a daily basis, it is always good to watch the rate trends and lock in a low rate. Watching the market will help you determine when the timing is best for you to consider a home equity loan.

Alternatives

Another option to a home equity loan is a home equity line of credit. This is a great option for those people who really don’t know how much money they want or need to borrow. It’s basically an account with an overall credit limit. Borrowers only pay interest on what they use out of it, which is one benefit to this type of account. Thus, many borrowers are not tempted to use more than they actually need and will end up repaying less than if they borrowed a lump sum of money.

Conclusion

The perfect timing for a home equity loan is analyzed on an individual basis. If your credit is in good shape, the interest rates are low and you have a “good” need for the money, it may be a good time for you to borrow. Remember, to get the best deals you should shop around for the best offers and watch the market trends to ensure you’re getting a good rate.

Tags: debt consolidation, home equity loans, loan, money

The news is rife with stories about how bad things are in the US economy, and the fact that many Americans have been living beyond their means. Usually, the articles take a stance that the latter is largely responsible for the former. Americans are frequently talked about as if they are the worst consumers, or maybe it’s just that, as the world’s official scapegoat, it often seems this way. When statistics about the US economy are then presented in comparison with those of other developed (or wealthy) nations, many would be surprised by the outcome.

Data from The International Monetary Fund is widely referenced for its market research and financial analyses by leading popular and scholarly texts due to its accuracy. According to its 2007 Financial Report, the 10 wealthiest nations in the world (in terms of GDP) were:

The actual nations that make up the highest GDP list are probably not surprising, and their combined GDP is equal to roughly half of the world’s total economy. Generally speaking, the countries that produce the most are going to be ones that spend the most. This is more or less the case for individuals as well. A nation’s external debt can include any number of factors, including loans, trade deficits, budget deficits, and the sum of its citizens’ outstanding consumer debt and other factors. This is similar to how an individual’s debt can include business loans, mortgages, credit card debt or student loans.

Surprisingly, there is not a wealth of literature written about the size of these large economies after their debts have been considered. Effectively, this could be referred to as an ad hoc net worth of the above nations’ economies. This is very interesting, as the nation is in essence the sum of its parts, meaning its citizens. Someone’s debt-to-income ratio is one of the main factors in someone’s credit, and their ability to buy a house or finance a car. Why does it not play a major role in a nation’s ability to conduct business and borrow money in such a way?

According to the CIA World Factbook, the top 10 debtor nations (meaning the countries with the most external debt) are as follows:

Seven of the top ten debtor nations are included in the world’s top ten economies. Not surprising. This is largely a result of widespread availability of affordable credit, and relatively large middle classes in these countries, and consequently a large ratio of home/property owners. Most popular rhetoric on the topic would claim that wealthy countries have grown accustomed to being wealthy and they are enthralled by consumerism – it could be argued that this high level of debt could be a result of a culture that is used to and willing to buy now, and pay later…even if it means with interest.

According to our data, Japan has the highest positive income (in gross terms) at US $2,892 Billion. Similarly, the US economy is $1,594 Billion. At the other side of the spectrum, Great Britain’s income to debt ratio is a US -$7,677 Billion, and that of France is -$1,890 Billion. But what do these statistics mean on an individual level? Well, if you were to boil down what each person in this country contributed to the nation’s income vs. debt ratio, the results would be startling. We would have to take into consideration the nation’s population to better understand this. And some may be surprised to see that the US does not fare quite as bad as imagined, comparatively:

So what are some of the reasons why these nations have such high outstanding debts, even to the point where it may dwarf its GDP in comparison? Typically, in what are considered to be established capitalist economies, interest rates are kept low on purpose in order to encourage entrepreneurship and to promote the growth of businesses and spending. The idea is that those who contribute to the growth of the economy would make up for those who do not, and those who do not contribute positively to the economy would at least spend money in it. Remember Reaganomics and the “Trickle-Down” mantra?

The United Kingdom is an interesting economy in particular because its aggregate consumer debt alone ($2660 US Billion) is roughly equal to the nation’s total GDP. In this sense, the UK is just like your friend that spends exactly what they make, or even beyond their means to try and impress his/her friends. This is worse than living month to month – it’s like living a month to two months behind! And now, the UK is accumulating new debt at a faster rate than the economy. If the UK were a private citizen, it might be time for him/her to sell off what they can and move to Panama, or declare some type of bankruptcy.

So what are the causes of the high debt-to-income ratios in Europe? Expensive labor. Expensive exports. Expensive currency. Small population. High levels of taxation and large social welfare systems. On the international front, European nations are having a difficult time competing with an increasingly devalued dollar (and consequently the Chinese Yuan and The Japanese Yen), and domestically, these nations are taking care of their citizens to a point that would make any red-blooded Texas Republican cringe. And of course, the wealthy classes in these countries are so heavily taxed that money is being pumped back into the country’s extensive social programs that, perhaps counter-intuitively, can affect the economy negatively.

Conversely, in Japan, it is often pointed out that the nation has had a history of being a leader in technology and manufacturing – it is also a nation that is a net exporter, or a nation that exports more than it produces. Japan’s economy is rather large and it’s population very small. The country’s social welfare system is modestly sized, and the Yen has purposely been kept at a rate that has traditionally made Japanese exports more desirable compared to its US and European counterparts. There are also arguments that pertain to the differences in culture, and those that relate back to the fact that Japan’s position in the global economy is a relatively new phenomenon. Maybe the ‘buy now, pay later’ philosophy has not yet set in. If you were to attribute human characteristics to Japan, you’d have to conjure an image of a high-level executive who brings a sack lunch to work everyday, and drives to the office in his 1982 Toyota Pickup – because it’s paid off.

It is important to note that few economists would make any real case for some type of financial plan as a result of this data simply because most of them will never pay back any of their debt. But also, because there are not really any solutions - if the citizens of each country were taxed in a way to pay off their debt, there wouldn’t be much money (if any) left to spend domestically and put back into the economy. One of the benefits of being a wealthy nation, I guess! At the end of the day, if no one is coming to collect on these nations’ debts – what is the big deal, right? But, nations are not like people, and the rules of credit are not so applicable. The determinants of whether or not money will be lent between two countries are more likely to be a result of the two countries fraternal histories, or if they collaborate in military operations, etc.

It will be interesting to see if any of this will affect the international economy, especially with the doomsday talk about the world’s housing, stock and credit markets. In effect, most of this debt will probably be neglected, because you can’t send a country to medical collections, or into foreclosure. But what these European countries are in particular doing, is saying, “go ahead try to collect on me – I won’t pay you! And furthermore, when I decide it’s time for a new Audi, I’ll figure out a way to pay cash for it.” To take the analogy one step further, and if you are still one of the few people still in the real estate market, you would probably only be able to finance a home loan for Japan.

SOURCE

MSNBC

http://www.marketwatch.com

Tags: America, consolidation, countries, debt