Online Financial Tips

Archive for February, 2010

The goal of both debt settlement and debt consolidation is to lower your debt. Debt settlement companies negotiate with your creditors to sometimes reduce the amount of your unsecured debt. There will be a fee associated with the program that equates to roughly 1% of the interest that you will pay if you continue to pay the creditors directly.

Debt settlement can reduce your debt 40% to 60%. A debt settlement program can also cut our payments by 40% in most cases making it easier to cope with your monthly budget. In most cases for a consumer in a debt settlement program they are typically debt free within 2-3 years that can be about half the time it would take in a Consumer Credit Counseling Program or a conventional debt consolidation loan.

Debt consolidation pays off your high interest debts with a low interest loan. Home equity loans provide the lowest rates, but after stretching out the loan over 20 years the 6% interest refinance winds up costing the same amount as a 21% interest credit card. A conventional bank loan will not pay off the debts but rather transfer the debt from one institution to another. This action appears to banks and mortgage companies as a last ditch effort on a consumers part to try and rectify a sinking situation. Many mortgage companies see debt consolidation loans as a sign of stress in your financial situation making it difficult for them to extend you credit in the future.

Credit Score Implication

Reducing your debts through debt settlement is a method to get out of debt in a short period of time relative to your credit history. You credit score will drop, making you ineligible for prime lending situations. You can apply for sub-prime credit after a year however the goal of a debt settlement program is to get out of debt not to create new ones.

Taking out a loan to consolidate your debt will have a major impact on your credit. Since your debt isn’t actually decreasing, you will be negatively hit on your credit for opening another account making your overall situation more overextended. Most debt consolidation loans are issued with the assumption that the problem debt will be paid off and then the accounts closed. However 98% of consumers that get a debt consolidation loan do not close the problem accounts but rather make things worse by incurring new debt on the paid off accounts. Now the consumer is faced with the debt consolidation loan in addition to the new debt on the other accounts that were previously paid off.

Financial Choices

No one financial choice will fit everyone’s needs. While debt settlement will have an affect on your credit report, additional loans may be too expensive. In extreme cases, debt settlement can help to avoid bankruptcy and costly debt consolidation loans. Many debts settlement companies report that about 50% of the debt that their clients put into the program is debt from a prior debt consolidation loan.

We encounter some competitors who give our business a bad rep. In general, most insurance brokers work very hard and do the right thing, but some do not. Most brokers earn a 10% (sometimes 15%) commission on the placement of your coverage. That commission is gross revenue for the brokerage. The brokerage then pays its overhead (rent, highly paid employees, and its broker malpractice premiums et al) and that leaves profit, which is not huge.

So if you pay $45,000 for your malpractice insurance coverage, the broker is paid $4500 by the insurance company. I write ‘paid by the insurer,’ since this commission is built into the rates. If you went directly to an insurer to buy your coverage, the insurer would not lower your premium for the broker commission; it would keep the money even if you have no broker.

The next area of compensation for a broker is fees. An insurance broker has to disclose any fee charged to the client by law as broker fees. You will see fees ranging from $350 to $1000. This is extra compensation that a broker charges to cover his/her overhead. Many brokerages cannot make a profit on premiums below $50K or even $100K depending on the type of service they provide, and the expense of the staff providing those services. The only other fees that you will see that are normal and legitimate are premium taxes and a stamping fee (effective 2/1/10 at 3.225% for CA). This money does not go to the broker, but to the state and the 3rd party company who files the tax, respectively.

We encountered a brokerage who charged 30% of the premiums in fees, and 15% in commission so its total compensation was 45%. We will call this broker ABC. It hid these fees in the insurance quote, and called them policy fees, binding fees, underwriting fees et al. This is not ethical, since all these fees should have been called broker fees since that is who these fees are paid to.

If you ever see fees other than a broker fee and premium tax on a quote for your medical malpractice insurance, ask questions. Also if you are financing your premium, make sure you read the fine print on your premium finance quote. Most brokers will arrange financing and will charge a small fee, which slightly increases the interest rate.

But the ABC broker we found, who was charging the 45% compensation was also charging big fees on the financing. So an interest rate that should have been 8% or 9% was in fact 22%, since the broker added another 5% of commission which it buried in the financing. Therefore the total compensation was 50%, unbelievable!

The other sign that you have a non-ethical broker is if he/she pushes you toward a Risk Retention Group or RRG, without offering an “A” rated AM Best insurer. AM Best Rating is an industry rating system for insurance companies, that’s not fool proof but considered good for evaluating the financial strength of medical malpractice insurers. In my opinion, RRG’s are a very legitimate option for malpractice insurance, if the financially rated insurers are unaffordable or they will not cover you for your risk. Brokers like ABC love to recommend RRG’s since they can be cheaper than a normal insurer, because RRG’s charge for reserves like insurers do.

Brokers, like ABC, offer doctors RRG quotes with big savings, and will then add big fees to that cheaper RRG insurance quote. Here are some concerns associated with an RRG, which a broker should explain prior to placing you with one:

o In the event of bankruptcy (RRG’s have a much bigger chance of becoming insolvent than an “A” rated AM Best normal insurer). A judge could order you and all the members of the RRG to pay for the run out of claims of the bankrupt RRG for as long as it takes to pay every claim. This means you may be stuck paying double insurance premiums, your new insurer who replaced the bankrupted RRG, and the bankrupt RRG who you’ve been ordered to fund till it unwinds.

o If you are in an RRG, most of the standard insurers will not take you till you change to an “A” category rated AM Best insurance company.

o Some hospitals will not credential a doctor if he is with an RRG. A broker should have you check with your hospitals prior to buying an RRG.

o If an RRG goes bankrupt, while you have an open claim, then it will not likely be able to pay your lawyer’s bills for defense, and your attorney will come to you for payment, and any judgment will be your personal liability.

If you have a good honest broker, he will tell you all of this. If you have a broker like ABC, all he/she will talk about is the savings, while he/she makes an obscene compensation while charging you outrageous fees.

What are online savings accounts?

Online Savings Accounts are becoming increasingly popular with savers looking for high interest rates and minimal fees. As a result, many financial institutions now offer competitive online savings accounts. Yet many people have no idea what they are, much less the benefits it offers.

Online savings accounts managed by the account holder exclusively online. In almost all cases, there is no branch that you can physically go into to make deposits. Instead, banks provide you with an online interface where you can easily setup and manage your account.

What are the benefits?

Without the overhead of branches, tellers and the paperwork involved with deposits and withdrawals, banks are often able to offer a higher interest rate to their customers than with traditional savings accounts. With an online savings account, you have the potential to earn significantly more money on your savings than you could in a traditional savings account.

Banking online is quick and easy. Potential customers can usually open their online savings account in a matter of minutes. Account holders can transfer money into and out of their online savings account from an Internet connection anywhere in the world with just a few clicks of the mouse. When questions arise, account holders can email or chat via IM with a bank representative with just a few more clicks.

What are the drawbacks?

While having a savings account purely online can be beneficial in many ways, there are some potential drawbacks. For one, online savings accounts don’t always offer a quick way to access your money. Some online savings accounts do offer ATM cards, but some still do not. Even with an ATM card, however, you are likely limited to a set amount, usually around $500, that you can withdraw from an ATM machine on a daily basis.

Another potential drawback for some is the lack of personal attention you receive with an online savings account. Some people like to go into branches to make their deposits, receive their withdrawals and discuss their financial options with their personal bankers. Online savings accounts do not offer branches or personal bankers, which could be a drawback for people needing that personal touch.

Having a savings account purely online isn’t for everyone. However, it is a great potential product for many people who are looking for a higher yield on their savings as well as the ease of maintaining their account without leaving ever leaving their home. In most cases, potential customers appreciate the ease of opening their new online savings account. Account holders love the higher yields they receive on their money as well as the ability to maintain their account whenever they want from wherever they want. Banks enjoy a low cost way of increasing their savings reserves as well as attracting a client base outside their normal geographic region.

Getting a auto loan can be an interesting undertaking. There are a lot of available loans out there for you and now many lenders are starting to offer zero percent financing, which can save you a lot of money over the lifetime of the loan. But you must be wary because many of these types of loan are ways of attracting new buyers and sometimes can have hidden fees and can cost you more than you will save in the end.

There are also very strict requirements to get this type of loan, usually the lender will require a credit score above 700+ and that can be a hard thing to come by for everyone that walks into the showroom. Usually an average person will have at least one negative mark on their credit history so it makes it hard to qualify for a zero percent loan.

The dealers also will offer this type of loan on certain cars only and usually they are not the most popular models available. Also they will offer vehicles which may be a great model but will be offered in strange colors or cars that have bad fuel economy. This is done so they are not stuck with slow moving cars and they can turn their inventory quickly.

Another thing that the lender will do is make the max for the loan 36 months so that the repayment is quicker but the only issue with this is that your payments will be higher and may make buying the vehicle unaffordable. it is important to do some investigation with different dealerships and make sure you know what is going on before you walk into the dealership so that you do not make any mistakes that will cost you in the long run.

Credit card application processing refers to data capturing, checking and verification. Reviewing and processing of a paper-based credit card application normally takes less than one week. But an online application is processed in less than two minutes. Once sanctioned, it normally takes a week to 10 days to obtain your credit card. It is important to note that there are application processing fees.

A credit card application processing system is tailored to meet the needs of your application processing requirements. There are manual and automated application processing systems. Many banks and financial agencies use manual solutions for handling the application, billing, payment and other functions. But the manual processing has some disadvantages such as extended application turnaround time, nonsystematic means of credit decisions, and inconsistent credit limit.

Automated systems are designed to automate the basic application processing and sanction process for the credit card business. Several software packages are available for automated processing services. Their common characteristics of automated processing include handling of paper-based or web-based applications, data capture and validation, exporting of data onto credit scoring platforms, archiving and storage of applications, safe online review and approval processes, and a mailroom facility for accepting, de-enveloping and sorting applications.

Credit card applications are available on the Internet. Many sales executives also provide them. Filling out an application is not a difficult task. You just need to complete several fields for which you already know the details such as name, address, annual income, occupation, etc. If you fill out all the required information, then there is no chance of rejecting the application by the issuer.

The credit rating is the most significant part of the application processing. A credit rating is maintained by the credit card bureaus, and it depends on the information received from various credit issuers over a period of time. A bad rating results in the rejection of the credit card application.

No down payment bad credit auto loans are the best car loans for which you can ever get approved. They are loans that do not require you to make a down payment to secure the loan. The down payment is the initial money that you place or pay down in other for you to be able to secure a loan that you have granted approval for. Whenever you are granted a loan of this type, it is always subject to the payment of the down payment. The down payment that you pay on your loan varies from one lender to the other. While most lenders charge exorbitant amounts and sums as down payment, other charges only what is necessary, accept trade in, in exchange for a down payment, or do not request for a down payment at all.

Most bad credit car loan lenders often time request or demand that you should make a down payment, in other to secure the loan provisional loan offer that you have been granted approval for. Because they believe that, you making a down payment, is an indication that you are committed and capable of shouldering the expenses and charges that may arise or emanate from the loan that you have been granted.

Poor credit car loans that requires no down payment do exist and are available online and offline. Such loans are usually difficult to get approval for because the demand for them is more than what their lenders can cope with. The internet is one of the best places that you can go whenever you are in need of bad credit auto loans. The internet is packed filled with different bad credit auto loans schemes and lenders who do not require or demand that borrowers should make down payments before they are granted bad credit auto finance loans.

No down payment bad credit auto finance loans are the most ideal auto loans that you can apply for. Most lenders who do require or demand down payment, also accept old car trade in, in exchange for a down payment.