Category: Financing

Consolidating Debt: When Does It Make Sense?

Debt consolidation will roll several debts in one payment. It is effective if the debt is never excessive. You also require maintaining a good credit score and planning well to keep your debt in check.

Debt Management, But Not Elimination

Moving each and every outstanding balances of the loans to a single lender will aid you in managing your debts but will never reduce your owed amount. You need to clear off your loan and make payment for the interest till the loan gets repaid. Set a goal of using the debt wisely.

Make Use Of the Below Mentioned Steps:

  • Pay Debt Of Your Credit Card

You may not have borrowed out the maximum that is allowed for the credit card, but paying off your balance is one of your priorities. Always pay more than the minimum amount on the card balance. Rates of interest that are charged on most of the credit cards are much higher than those that are found on other loans. Make your credit card payment once you get your statement. It will aid you in reducing the interest that you will be charged. Reduce the usage of your credit card for some time. Stop subjecting higher balances to the interest and use cash to identify various ways of spending less.

  • Assess Alternatives Based On Real-Estate

Review the rate of interest on the existing debts. The interest rates of credit cards as well as unsecured personal loans are higher than that of other secured debts such as mortgage, home equity loan or auto loan. If you calculate that the rate of interest on a home equity line of credit is less than that on credit cards, auto loans and other personal loans, then utilizing the option of borrowing through the line of credit will save some money.

When Consolidating Debt Is A Good Idea?

It is difficult to get hold of your debts, when credit card payments or payments on consumer and student loans continue to act as a burden on your living expenses. The monthly bills make some people opt for debt consolidation as the alternative option. A useful way of streamlining your debts will aid you in managing such a huge financial stress and lower costs. But it is not for everyone. You should consider few things before you opt for debt consolidation. There lie two main reasons for considering debt consolidation. One is to save money by availing a more favorable rate of interest and another is to encourage timely payments.

  • Consolidate Debts At Lower Interest

You may have some credit cards with rate of interest in double digits. If you made timely payments for the last years and maintained a good credit then you have a chance to qualify for a loan with a much lower rate of interest. So if you consolidate the debt of your credit card with a loan of cheaper rate of interest, your interest on the loan’s life will drastically get reduced. Moreover any loan will have a term set which will act as a brake on that amount of interest that you pay. Customers are seen to pay the minimum amount when paying credit card balances. It often covers up only the interest and hardly involves the principal. So if you continue doing this for many years, whatever you will pay in interest on a purchase will end up being much more than the initial principal. In case of loan, the debt needs to be cleared off by the loan term’s end.

  • Consolidate Debts At Fixed Rates

In case of a loan with a variable rate of interest, you should consider debt consolidation to bring down a fixed rate of interest. So a fixed rate will give you an idea of the costs of your interest. It is irrespective of the movement of the market’s rate of interest that controls the rise and fall of variable rates. Thus you will not be at a risk of getting affected with an increase in the rate of interest. So if keeping a record of some credit card bills made you forget either one or two payments, then consolidating debt will help. To have a good credit score you need to make timely payments. If consolidating several debt payments into one can aid you, then do that as it will be worth considering.

  • Consolidate Student Loans

Consolidating debts in case of student loans is a complicated decision. You should on the basis of how fast you wish to clear off the loans and how much of the debt is from the federal loans. Federal loans come with some consumer protection and it would be lost if you opt for debt consolidation. Student debt consolidation can be considered only once. So make sure you are selecting the most beneficial moment before you do it.

So consolidating debt should be a part of a bigger strategy to reduce debt. Decide wisely before you opt for debt consolidation.

5 Steps For Getting An Auto Loan

Getting your new vehicle financed can be relatively easier and fast only if you are prepared. When you are planning on financing a new or used car, following a few basic steps makes the whole process go really smooth.

  • Credit Researching

It is not a secret to anyone anymore that, a credit score plays a very important role when you are applying for a loan. Whether you will be eligible for a loan or not depends a lot on the credit score and the credit standing. Not only that, the credit scores help to decide at what rate your loan interest will be charged also, because the better your score the chances of securing a lower interest rate is possible. Among the 3 major credit reporting agencies, all of them allow you to check their respective credit score at practically zero cost once a year. You can check your own scores and review the information whether they are right and perfect and if not that should immediately be addressed and reported to correct. The scores should also be checked though they tend to be slightly different from the reported one at the credit union.

  • Having Knowledge About The Budget

Having a clear idea or knowledge about your budget and how much you can spend on the car expenses is very crucial. You must be absolutely sure that the amount that is to be spent on car payments fits the allocated budget streamlining with the other financial goals. Maybe you can think about spending $400 a month behind your car but that may prove as an injustice to your monthly savings goal. Now, if you don’t have any budget, you can start planning with the monthly income after taxes and then subtracting the usual monthly expenses to see how much goes into savings every month. There are some services where you don’t get any monthly bill because of yearly subscriptions such as Xbox Live or Amazon Prime, you have to follow basic mathematics and you have to divide the yearly charge by 12 and then adding that amount to your monthly budget. You may realize that maybe you are overspending here a bit, in that cases, without panicking you just have to find ways to cartel the budget. You will also need to plan way ahead if there is any chance of buying a new car because it comes with extra expenses like vehicle registration and car insurances apart from the usual maintenance costs like lubricant changes and petty repairs. By calculating all these you can easily figure out how much you need to save for the car payment.

  • Savings Is The Key

If you are not rushing into buying a car, it is always advisable to save up as much as possible before seeking out for a loan. Having a handsome fund at hand for down payment will imply that lesser money is required to finance the loan when required. Also as mentioned earlier, it’s always good to have funds in the so called vehicle fund to meet the regular car expenses like maintenance, insurance, etc.

  • Sanctioning A Preapproved Loan

Before even you think of buying a car, always try to get a preapproved car loan. Do a detailed research on various loans to find out which one gives you the best deal in terms of length of time and interest rate. Though local banks and credit unions does provide loans still don’t be shy to expand the research to online sites as well. In an ideal situation, after securing a preapproved loan, there shouldn’t be any problems of getting a final loan though getting preapproved loan doesn’t give you an automatic pass for a final loan and several other factors comes to play to decide whether you will eventually get it or not. In the worst cases if you don’t get a loan, they you can try paying more for the down payment and reducing the loan amount or ask someone to be a cosigner along with you.

  • Shopping For The Vehicle

With a pre-approved loan amount at your disposal, you will have to chalk down how much should be required for down payment, or for any trade-in values on some existing vehicle. In both the scenarios, the spending structure will affect your affordability while buying the car. While negotiating take precautions because dealers are already equipped with the knowledge that you have got financing and they will over you a loan tenure of longer term with lower EMIs which may seem tempting but in reality that will always cost you much more over the tenure of the loan. If you are planning on buying used vehicles with a pre-approved car loan, your spending can be limited to buying cars within a stipulated mileage or age limit.

By following these aforementioned steps you will be always ahead of others while getting a car loan.

5 Reasons Why You Should Get Preapproved For A Car Loan

While buying a car, cost and time matters. While searching for a new vehicle in the market with an auto loan, trying to get a pre – approved auto loan is both time and money saver. Following are a few reasons why you should take a pre – approval process.

  • Leveraging While Dealer Negotiations

The primary benefit of a pre – approved loan is the leverage because when you already have the guarantee of a pre-approved loan, it gives you a higher ground while bargaining with the dealer. The dealer gets the fact that as a buyer, you are a serious prospect and you have the required financial power to make the purchase as the lenders are already lined up behind you to provide the money. With already the resources secured to make the purchase, with your interest and persuasion, it is more likely for the dealer to cut you a deal, that might be by reducing the cost of the car or by adding some value added extras or by reducing some paperwork charges involved in the transaction. Without a pre – approved loan, it becomes very difficult for a person to make any kind of negotiations with the dealers because there remains no guarantee of a sure shot purchase of the car.

  • Lower Rate Of Interest

Secondly, with a pre-approved loan you can not only negotiate with the dealers but also have the upper hand against the lenders. As pre – approval of loans are only given to people with low risk factors, that creates a firm image in front of the lender and you can negotiate with the lender to lower the interest rate on the loan.

  • Acquiring More Buying Power

With the security of the financial muscles for buying the product in your hand, you can step in the showroom with all the confidence of a cash buyer. With a meticulous research done beforehand, you must be absolutely sure what you want and if you stick to that, you can purchase it at the instance. While choosing the finance partner through the seller always will tempt you to go for some additional features which may burn a hole in your pocket, so knowing exactly how much you will need and how much you will spend will always safeguard you from overspending.

  • Creating A More Realistic Budget

Customer dealing with the history of a bad credit also needs to opt for pre – approved loans because it shows them a clearer picture of their finances and of their budgets whether it will be feasible for them to opt for a car or not. Upon knowing the exact interest rates that one needs to pay for the auto loan, it is much easier to figure out the total cost of the loan as well with the help of a number of calculating tolls available online. Why it’s so important if you are having a poor credit history is because a bad credit means usually a higher interest rate which will trickle down to the fact that you have to adjust your budget in a tighter fund reserve. If $10,000 was affordable with a 9% APR, with a higher APR of 20%, you may be able to afford only $8000 because of the steep monthly payments. While having bad credit, a realistic budget creation is very crucial because the last thing you will want is to default on an existing loan ending in repossession of the vehicle. So, getting a pre – approved loan and creating a logical budget on the basis of the expected APR ensures that you will be paying the monthly payments at ease.

  • Time Saver

Test Driving and negotiation may take a long amount of time even if you have pre-planned the entire process and you know which car you want to purchase. Getting a pre – approval not only helps you to save a few hundred bucks but also it ensures that you save a lot of time. Unless you try to heckle with multiple dealers for a competitive interest rate, pre – approval gets your job done without you having to run to different offices worrying about pay stubs. All you need to do is to sign in the forms and walk away with your purchase.

So, while you’re at thinking about buying a new asset, prove your smartness and get your pre – approval loan sanctioned at the earliest and save money and save time!

The Reasons Why You Should Opt For The Aid Of An Expert Debt Advisor

The number of people who are incurring debts are steadily increasing. This cannot be avoided, especially since the negative repercussions of the recession are still being felt all over the world. But then, not a lot of people have an inkling as to how they can properly manage their finances in such a way that they will not be buried under their monthly dues. In general, debt advisors who are experts in their field will say that the improper management of finances as well as the lack of awareness of what being in debt can do to a person and his or her loved ones are among the major culprits why more and more people cannot get out of the debt trap they have slowly but surely subjected themselves in.

There are a number of people who are aware of the existence of debt relief options that can eventually help them get out of debt and help them stay debt-free at all times. However, they do not really take maximum advantage of these options simply because they do not really know all the details. They fail to solicit the help of debt advisors from reputed debt management agencies who can truly get them out of the rut they are in.

If you feel that there is no way out of your sorry predicament, think again. You are not in an entirely hopeless situation. All you need to do is to have the proper mindset. First and foremost, you should realize that you need professional help. Without the realization, then you will just go on and on and on in your sorry, debt-full predicament. You should always remember that in order for you to find a workable solution, it is important to acknowledge that you have a problem and that you need help.

Your next step after realizing that you need to seek the help of an expert in debt management will be to look for a good one. He or she will be able to help you map out payment strategies and follow them to a tee. You should, then, make sure that you seek the help of someone who is well-versed in all debt’s aspects. Be wary, though, at all times since you might be conned into getting the services of an impostor.

One way to ensure that you are getting help from a real debt advisor is not to fall for ads that promise things that are too good to be true. You should be wary when seeking out debt relief websites. You have to see to it that you go to a debt management company that is already well-known as specialists in debt management. Reading reviews will help you do so or better yet, go for word of mouth advertising. If you know people who have already tried the services of a debt management company that was really able to help them solve their debt problems, there is a good chance that you can become successful if you work with that same company. It is also important to trust your gut feel while looking for a debt advisor. If your intuition doesn’t coincide with what a prospect debt advisor is telling you, do not stop up to such time that you find the one that you feel is the perfect person or company to help you. Make sure to ask for their credentials and good references.

You should always remember that even if the debt advisor you solicit the services of is good, ultimately, the decision to finally get rid of your debts and enjoy financial freedom like you never had before is yours alone. Discipline yourself. Spending your money wisely and stashing up for a rainy day is always a good thing.

It is not always a great solution to go for consolidation loans for debt negotiations. Going for debt services is way, way better.

Understanding Credit Card Rewards The Proper Way

Reward credit cards are packaged in several types, each one offering rewards programs calibrated to suit particular spending patterns. But they all have the same basic premise: the more purchases you charge to the reward credit cards the greater the rewards.

Types Of Reward Credit Cards

Frequent flyer credit cards. Points earned from a frequent flyer credit card normally go to the frequent flyer program of the airline you prefer. The points you earn is largely determined by the monthly spend made using the card. Aside from free flights, the frequent flyer credit card rewards may include free hotel stays, travel insurance, etc.

Credit Cards With General / Catalogue Rewards.

The credit card usually has partners in the program who provide the products offered for redemption under the rewards program. These items could be anything (the possibilities are endless) from gift cards, home appliances, holidays, shopping vouchers, magazine subscriptions, etc.Credit cards with Cash-back. These cards offer a very simple program: your account is credited for a certain percentage of the amount spent on particular items. As an example the card may offer a rebate from participating gas stations.

Credit Cards With Instant Rewards

These programs are more straight forward. There are no points to accumulate; you will simply receive an instant reward from participating merchants. This could take the form of an immediate discount, a buy-1-take-1 offer, or buy X items and get the Next free, etc.

Getting Value From Reward Credit Cards

Your credit card should fit your spending behaviour. If you use charge often and prefer not to carry any balances, reward credit cards that allow you to accumulate points should work best for you.

If you cannot pay off the entire amount due each month, point-based reward credit cards will be irrelevant. Rewards programs are partly funded through higher interest rates on purchases; if you pay your bills in full by the due date then you may avoid all interest charges, otherwise it could be very costly. Any balances not paid by the due date will attract the high interest rate. The cost of the high interest charges is likely to far exceed the value of any rewards earnt.

Often rewards cards have an annual fee. Their value to you therefore depends on whether the worth of benefits you receive exceeds the cost of being in the rewards program.

One quick way to measure that is to estimate how much you have to spend to get $1 of reward. One card may award you 1 point per $1 spend, whilst another gives 1.5 points per $1. In this example to redeem a reward worth 6,000 points you thus need to spend $6,000 on the first card and only $4,000 on the other.

A further method is the point currency concept developed by Cannex. Point currency gives you the spending value of your rewards points. All you need to do is divide the number of points for the reward item of your choice by the recommended retail price. The lower points needed the higher its value because you consume fewer points to get the reward.

For example, one program may require 10,000 points to win an item worth $75 in retail, but another program may need 12,000 points. The point currency in the first program is 10,000 divided by $75 or 133.3 points per $1 for the first, and then 12,000 points divided by $75 or 160 points per $1 for the other.

As far as the rewards item is concerned, the first program gives you better point currency. Note though that if you incorporate the first method and the example described above, you may need to spend $10,000 to accumulate the required points in one program (at 1 point earned per $1 spent) but only $8,000 in the other (at 1.5 points earned per $1 spent).

Your spending pattern and the offers from credit cards can change over time – try to keep tabs on whether you are still benefitting from a credit card scheme.

Why Do Banks Make So Much Money?

Banks make so much money because they can create money, effectively out of nothing, by lending. Every single pound in your bank account was created by a bank. Banks basically make money by lending money at rates higher than the cost of the money they lend. More specifically, banks collect interest on loans and interest payments from the debt securities they own.