Saturday, 22 March 2008

Secured Loans-Maybe A Risky Last Resort

A secured loan, or a loan where the borrowers home is held as collateral, should usually be used as a last resort when all other options have been ruled out. The reason secured finance should usually be reserved as a final option is because a secured loan is a large risk for the borrower. In the case that secured finance is unable to be repaid according to schedule, the borrower will lose his or her home.

There are quite a few borrowing options that can be pursued before secured finance is considered. Instead of a secure loan, borrowers would be well advised to first seek an unsecured loan. An unsecured loan may be more difficult to receive, because a secured loan is much less risky for the lending institution. However, an unsecured loan might be an option before a secure loan if the borrowers credit is in good standing, and if the amount of money needed is not too high. Large amounts of money will normally require a secured loan.

Rather than going the route of a secured loan, another option borrowers can consider is the use of low interest or no interest credit cards. If a borrower has a good credit rating, instead of pursuing a secure loan, he or she can carry a balance on a credit card.

Another option a borrower can consider instead of using a secure loan is financing himself or herself through money that is saved in a savings account. This is not always advisable, since it is wise to keep money saved in case of emergency. However, it may be safer for some people in the long run, because it does not pose the same risks and losses that a secure loan does.

Finally, rather than pursuing a secured loan, it is always important to ask if the secured loan is absolutely necessary. If there is any way to wait for a few months and save some or all of the money needed instead of pursuing a secure loan, it would be a good option. Also, it would save a lot of money, because a secured loan would charge interest, but saving, rather than borrowing, would not include any payments of interest.

In some cases, the borrower may review these choices and decide that he or she has absolutely no other option than to pursue a secure loan. If this is the situation, it is important that the borrower find a secured loan with a good interest rate, as the secured loan will most likely be paid over a long period of time. Also, it is wise to look for a secured finance repayment plan that is very manageable. This will give the best odds of being able to repay the secured loan in a timely manner, as well as with as little interest paid as possible.

Although a secured loan should not be the first choice for most borrowers, if the secured finance is pursued in a wise manner, it can be very helpful, especially for those lacking good credit james copper

Choosing a Mortgage Types

Choosing a mortgage loan should seem like a straightforward process..yo borrow some money from the bank for a specified amount,for maybe a period time n if you already have some money you pay it back.But however getting a loan you feel comfortable with -- one that’s flexible during good times and bad -- can be a challenge.
Mortgage loans basically fall into one of two categories: government or conventional.Government loans are normally insured by the Federal Housing Administration (FHA) or the Veteran’s Administration . Some offer lower down payments and most offer favorable terms.

Conventional loans can be either conforming or non-conforming. Conforming loans follow the guidelines set forth by the Federal National Mortgage Administration (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). These types of loans can be either fixed or adjustable. Each is tied into a specific rate, term and limit which can vary from lender to lender. Non-conforming loans, on the other hand, do not adhere to any strict guidelines.

How do fixed-rate mortgage work? Fixed-rate mortgages retain the same APR throughout the life of the loan. However, the property tax and homeowner’s insurance, if built into the cost of the loan, may change over time. The most popular type of fixed loan is a 30-year term.

For those who prefer a shorter timeframe, a 15-year fixed mortgage may be a better option. While the amount of time it takes to repay is shorter, you can usually secure a better interest rate (.25-.50% lower than a 30-year fixed). Besides a 15- and 30-year term, fixed loans are also available in 40 and 50 year terms.

How do adjustable rate mortgages work? Unlike fixed-rate mortgages, adjustable rate mortgage (ARMs) are based on shorter term securities that fluctuate upward or downward based on today’s leading indexes (e.g., Constant Maturity Treasury (CMT), London Interbank Offering Rate (LIBOR) or Treasury Bill. A margin is added on top of the index rate by the lender to calculate theinterest rate.

Because ARMs are adjustable, they go up and down at pre-set intervals during the duration of the loan. Some offer a low teaser rate to qualify potential buyers which accelerates to a higher rate thereafter. ARMs can adjust once a year, every month, or three to five years, and are typically amortized over a 30 year period. Some offer a lifetime cap which sets the maximum rate that can be charged during the life of the loan with some states having their own percentage limits.

Lower your payment with an Interest-only ARM loan Another variation of the ARM is the Interest-only adjustable rate mortgage. This loan makes it affordable for borrowers to qualify for a loan by giving them the option to pay only the interest (not the principal) for the first 3-10 years of the loan. Monthly payments are usually more affordable. Afterwards, the mortgage rate adjusts to a traditional ARM at the current indexed interest rate with new principal and interest payments calculated for the remaining term of the loan.

Example A 30-year ARM loan of $250,000 at 7.50% APR has interest-only payments for 5 years. The payment during this time would be $1,522 per month. After 5 years, the payment would increase to $1,816 per month.

Sub-prime loans Borrowers who have a low FICO® score will usually fall into the sub-prime mortgage category. As a result, they’ll qualify for a loan but at a much higher rate. Lenders may apply stiffer pre-payment penalty fees in the form of interest payments to dissuade borrowers from building up any equity in their home. Some lenders may require a “balloon” payment to pay off the remaining balance of the loan after a fixed period of time. This article i read from n i post to you all i hope it's uselfull for you..

Saturday, 15 March 2008

Bad Credit Loans: Make Your Fund Raising Easy

Your credit is your asset – the asset worth with you can secure further financial support. If your credit rating is well enough to the expected, lenders do not bother offering you with the finance required. Or if you are just falling short of the anticipated, your chance of loan securing goes dim. CCJs, IVA, defaults, bad debts, arrears, bankrupts etc., come in the category of poor credit. Through the financial vagueness, bad credit loans have shown a glittering borrowing hope for individuals having bad credit.
A research is essential to finding a company that would not rip you off. Above that, it is important to use a little bit of your common sense. If at any point in your dealing with these loan companies, you feel like something is fishy, and then discontinue the transaction. These folks should be asking for a good bit of information, but there are certain things that each legitimate company needs. If they are not asking for your financial capacity, previous employment record or your current employment status, then there is a chance you might be getting scammed. So, you need to be cautious.

For all of your money provisions, you have options of secured and unsecured. Secured form of borrowing wholly depends upon your worth placing of asset. This pledging placing procedure is almost absent when you apply for unsecured form of loan accessing. You have different range of accessing opportunities. You can apply for these loans through online and offline, though processing online is preferred.
Provisioning such loans get a little costlier to other forms of borrowings. Since you have an adverse credit, finding a lender of your choice happens to be very difficult. Nevertheless, there is a great flood of lenders out there in the money market. These lenders are going in for competing one another fiercely for their lending businesses. You can access these lenders through online too. Online processing is simple and convenient. You do not have to leave cozy comfort of your home in order to get into financial zone.

by: Carmen Cortez

Monday, 3 March 2008

Home Equity Borrowing - Keep Your Powder Dry

It's trite to say, but it's true that a person's most important financial asset is usually his or her house.
Over time it has proven a formidable weapon to increase the asset of the owner since it's both used as a shelter to live-in, and as a nearly recession proof security that, like fine wine, gets better with age.

But, and there is always a but, to succeed in amassing a net worth, one needs a minimum of discipline.
Because real estate has a tendency to follow and surpass the inflation rate it is easy to fall for the siren songs of financial institutions who offer ready and sometimes needed cash in exchange for a mortgage on the property.

Why pay exorbitant credit card interest rates when one can borrow on the equity on one's house, and pay sometimes a third of the interest that the shylocks in the credit card business charge? True, but one will not increase his or hers' net worth by piling on mortgages on the property. There will always be people who will try to entice you to live better now, to live it up and tap your equity so you can pay for the doctor, for a trip or a car, and keep your credit card credit for unscheduled expenses. It's true, it can be done and it's easy but one has to realize that a mortgage should be used for long term asset building projects, not to pay the groceries.

So be careful with your lifestyle and if you decided some time ago to invest into real estate make sure that you end up building a nice nest egg that will increase your security and not an anchor that will sink you rapidly if you lose any margin of financial maneuvers.
These are trying times in the real estate world for those who have overextended themselves. Sometimes the net worth is just not there and the financial institutions have thousand of units that are so heavily mortgaged that the owners don't see any point in continuing to pay for the cost of the loan. Those poor souls simply end up giving the lenders the keys to their homes. Sad, Sad.
But it happens all the time, and years of efforts sometime go whiff into the air and there is little precious to show for the struggle to purchase and upkeep and devote oneself to making the house a home.

So be vigilant and keep your powder dry!

By Gilles Martin
How Does a Fed Cut Affect Home Mortgage Rates?

You hear quite a bit lately that "the Fed is cutting the interest rate." Maybe you've been considering a refinance, and you're waiting to move forward till the Fed takes action again. But be smart about waiting and watching. A Fed cut doesn't directly affect long term rates (for instance a 30 year fixed mortgage), but it does impact long term mortgage rates. The problem is the impact might not have the result you've been waiting for.

Who is the Fed? Well, it's really the Federal Reserve. And when the Fed cuts rates, it usually cuts the Fed Funds Rate, which is the rate banks lend each other money. However, when the Fed lowers the Fed Funds Rate, Prime Rate, the rate banks give their best customers, usually drops as well. Ok, that's great. But what does that really mean to the average person on the street? It means that anything that has an interest rate tied to Prime is directly affected by the Feds' rate cut. Typically, these are short term loans. For instance: a credit card or a Home Equity Line of Credit (HELOC). In general, these rates decline when the Fed lowers rates. On the flip side, a Fed rate cut means your savings will perhaps not yield as much interest and your CD (certificate of deposit) won't be at such a great rate. So, it's not all good.

Why aren't mortgages directly affected? Because mortgage rates are typically longer term rates and are influenced by buyers and sellers in the bond market. Daily movements in the bond market cause mortgage rates to change. That's why you might get a quote from a loan officer on Tuesday, and on Wednesday, your quoted interest rate has increased .125%. The Fed lowers rates to help stimulate the economy. Ultimately a healthy economy is good for the real estate market. Jesse Lehn, Senior Vice President for Mortgage Investors Group, believes, "...a liquid real estate market is beneficial for the mortgage market and that keeps rates competitive." So, when the Fed lowers rates, indirectly it can help mortgage rates, but there is no direct correlation.

Another misconception is that mortgage rate changes occur in direct relation to when a Fed rate cut happens. In actuality, most mortgage rate changes, positive or negative, occur regardless of whether the Fed is actually meeting. That's because the mortgage market anticipates what the Fed is going to do.

A good loan officer should have their finger on the pulse of the market, but again it's a gamble. Remember to have a target interest rate in mind if you want to lock a loan but are watching the market. Trying to lock an interest rate on the day the mortgage rates have reached their lowest point in a year is like trying to get a royal flush in poker. It happens, but it's not a realistic goal. It just means you were lucky. Just stick to your home financing goals and consider the big picture, and you'll be fine.

By Kristin Abouelata
Reasons Why Home Refinancing May Be for You

If you financed your home some time ago, you may have realized that interest rates have dropped significantly in the interim. In this case, it really does not make much financial sense in most circumstances to continue paying a high interest rate when you can refinance for a lower interest rate. This will allow you to take advantage of a lower monthly mortgage payment and pocket more money each month. Usually, the only good reason for not refinancing when interest rates have dropped considerably is when you know you will not remain in the home long enough for the cost of the home refinancing to be offset by the savings.

Another good reason to consider home refinancing is to take advantage of the opportunity to change from an adjustable rate mortgage to a fixed rate mortgage. In the event that you financed your home with an adjustable rate mortgage and then realized later that your APR had increased, a fixed rate mortgage can provide you with security and stability. This can be quite important if you value the security in knowing that your mortgage payment will remain the same from one month to another with no changes.
Many homeowners are also considering home refinancing as a way to fund a home improvement or in some cases to fund some other purchase or cost. In the event you have accumulated quite a bit of equity in your home since you purchased it, either through the home appreciating or through paying down the mortgage, you may wish to refinance and cash out some of the equity in order to pay for a home improvement project.
Another option would be to refinance and use the cash you obtain from cashing out your equity to pay for the purchase of a new vehicle or something else. This home refinancing option makes good financial sense when the interest rate you are able to obtain on the refinance is lower than what you would be able to obtain by obtaining a new loan to cover the cost of the purchase.

The same is also true of refinancing your home to pay for college education or medical costs. Many parents have recognized that it is far easier and cheaper to refinance their home and use the cash they receive from the equity to fund the cost of their children's educations rather than taking out a higher cost parent-student loan.
Regardless of why you choose to refinance your home, it is important to keep in mind that there are costs associated with home refinancing. These costs are usually quite similar to the closing costs you paid when you obtained your first mortgage and may include application fees, a title search, filing fees, etc. Today many lenders make it available to obtain what is known as a no-cost refinancing. This usually means that you can roll the cost of the refinance in with the new loan. If you are short on cash for closing costs, this can be a good option if you have decided that refinancing is for you.

By Alan Lim

Getting a Better Home Loan Rate - The General Tips

Home loan rates are currently lower than they have been in quite some time. The large inventory available in the housing market combined with these low interest rates have inspired many individuals to purchase a home; either their first home or to upgrade to a better home.

In order to save the most money possible on your home mortgage; however, you will need to make sure that you obtain the lowest home loan rate possible. Fortunately, today that is much easier than in the past when our parents and grandparents were purchasing homes. While they typically only had local financing options available to them, today we are able to go online and research home loan rates to find the best rate and terms to suit our needs.

Besides shopping around for the best home loan rate, it is also important to make sure that you have taken the time to have your credit in order before you actually begin the process of shopping for a home mortgage. This is a common mistake among many first time home buyers. Even if you are certain that you have made all of your payments on time and have not missed any payments at all, it is still a good idea to check your credit report at least six months before you plan to purchase a home to make sure that there are no mistakes reported on your credit report. Notices of late payments and delinquencies could result in a higher interest home loan rate on your mortgage. Ensure there are no mistakes ahead of time and be sure to correct anything that has been inaccurately reported before you apply for a mortgage.

If you happen to find something on your credit report that is inaccurate, write the credit reporting bureau and inform them of the mistake. Provide supporting documentation to prove your case such as canceled checks or receipts showing the debt was paid in full. Follow-up to be certain the derogatory item has been removed from your credit report.

When possible, try to make as large of a down payment as possible on your mortgage in order to obtain a lower interest rate. While it is possible to purchase a home with only a small percentage down payment, you will generally be considered a lower risk if you are able to make a larger down payment. This can translate to a lower home loan rate. Making a down payment of at least 20% will also help you to avoid private mortgage insurance, or PMI, which will also help you to save on your overall monthly mortgage payment.

Also, it is important to be sure you understand the difference between the different mortgage loan options. An adjustable rate mortgage will typically offer you a lower home loan rate than a fixed rate mortgage. An adjustable rate mortgage is subject to fluctuation over the term of your mortgage; however, so it is important to keep this in mind when choosing which mortgage option will best suit you.

By Alan Lim