Online Financial Tips

Archive for July, 2010

Debt consolidation payday loans have come to the rescue of many people who are in a financial mess due to non-payment of cash loans. The debt trap can be devastating and there are many people who have not been able to handle the psychological pressure. There are many ways to get rid of the debt traps, especially from payday loans debt traps.

First of all, you need to manage your resources very well. Make a note of all your assets, income details, and future obligations. Many people don’t understand the basic meaning they get trapped in a this vicious cycle.

Misconceptions About Payday loans

People need to understand that a this loan is a short-term loan and it needs to be repaid in a very short period of time. Small-time lenders are often the best for emergencies, as they have very simple terms and conditions. Taking payday loans from such lenders is also very easy. There are several companies that would give you a payday advance in the case of an emergency. If you don’t have this facility in your office, you will surely have to think about lenders in the market. Getting a loan is very easy, but repaying it can be a very difficult task. If you are not comfortable with the financial techniques, you will need the advice of a good finance professional to help you out. Financial consultants can offer you help and guide you on the best consolidation loans.

Advantages Of Hiring A Financial Consultant

Generally, the cost of hiring a financial consultant can deter you from doing so. But, you have to take the help of a good financial consultant when you are in a big financial mess. Managing your finances is very important when you have situations in which you need cash more than your income. In such instances, you should think of ways that will help increase your income. Generally, when people see that they are getting into a financial debt trap, they would switch over to another job that pays them better. Alternatively, people also think of making an extra income. Whatever be the method, you need to ensure that you repay your loans as fast as possible and lead a stress-free life. Check out some good websites that will give you ample information on debt consolidation payday loans.

The most important thing is that you need to keep yourself informed about the latest happenings in the financial domain. If you don’t have the basics right, you may interpret things wrongly and do the wrong things. Debt consolidation for payday loans is being used very much these days. If you are in a difficult financial situation, make sure to come out of it immediately.

When one thinks of auto financing, one image that comes to mind is a world of wheeler-and-dealers who are always trying to get the better of the borrowers that come to them for a car loan. One reason for this slightly negative image is that there is no guarantee that you will get approved or that you will be offered a certain rate. Rather, it is up to each lender as to just what type of deal they will offer you on a car loan.

If you were to take a look behind closed doors within an auto dealer’s financing office or that of a bank’s loan manager, you may be surprised to learn that there is a method to their madness. In other words, they are not just taking your application, putting their hand into a hat full of different loan deals, and pulling one out for you.

Rather, there is a surprisingly predictable formula to the way a loan deal is prepared and offered to you when you visit an auto financing company. Obviously, your credit score plays a very big role in it. But, so do things like your employment history, your residential history, and even the way you present yourself in person.

If you have bad credit, you may have had some unpleasant experiences in dealing with auto financing companies. Namely, your car loan application may have been rejected on one or more occasions. Or, maybe you just were not able to qualify for a good loan.

No worries. Here are 5 steps to getting funded (at a reasonable rate) the next time you look for good auto financing companies:

1. Shop for a car in a reasonable price range:

Start by shopping for and choosing a car that is in a price range that makes sense, given your credit situation. You may be tempted to choose the very best car on the lot, but that would be a mistake. Someday soon, no doubt, that super-expensive car, SUV or truck will surely be yours. But, for now, it is time to be realistic about what you can reasonably afford. A smaller loan will mean much better chances of your loan getting funded.

2. Understand how bad credit auto financing companies think:

While 98% of car financing companies focus mainly on the borrower’s credit score as the basis for their lending decisions, about 2% of the companies out there actually look to do business with bad credit individuals. They have built a nice little business on catering to the credit-challenged. These companies look past your credit score and instead consider your situation as a whole when making a decision.

3. Run a credit check on yourself:

This may sound strange, but you will benefit greatly from doing running your own report. Find out your score with all 3 of the top 3 bureaus (since it will vary from one to the next). And, be sure to protest any errors you find on any one of your reports. They are obligated by law to fix them.

4. Take the time to build a healthy list of lenders:

In this case, “healthy” list means 5-7 lenders. Sound like a pain to do that much research? Just think: spending an extra 20-30 minutes doing your homework now could save you thousands in lower interest payments over the life of your loan.

5. Follow through with applying to five or more lenders:

Now, make sure you actually apply to all of the lenders on your final shortlist; be sure you apply to five, at minimum. You never know: the fifth one you talk to may be the one that offers you a 1-2% lower interest rate. That’s money in the bank for you.

Follow these 5 steps to finding the right auto finance company and getting funded.

Online savings banks have come of age during the last decade. Banking online was once just for the very tech savy or early adopter. Now however, millions of people in the U.S. alone have begun using online savings banks.

Why the change among banking customers? Well, bank customers realized that in many cases there was no reason to pay for the overhead associated with a traditional bank. The lack of overhead allowed online banks to offer savings account interest rates that far surpassed what their traditional neighborhood or mega bank was paying them.

Many customers used automatic teller machines almost exclusively, so if they could find an online bank that gave them access to a good ATM network, that was all many people needed. Some online banks do offer small, walk-in branches with limited services and staffing, but most do not.

If you’re looking for an online savings bank, how can you determine which one will give you the best fit for your particular needs? The first thing is to look at which one pays the highest rate on their savings accounts. One thing you’ll notice is that, while most of these banks pay interest rates that are light years beyond what you could expect at a traditional bank, there’s a cost.

Not typically a monetary one, as most of these banks have very low fees. No, the problem for some customers is that to receive the best interest rates, the banks require a fairly high minimum balance be maintained in the account at all times. That’s one of the things that you need to check when evaluating online banks.

Here are the main things you’ll need to look for when checking out online banks:

1) Interest paid on savings accounts

2) Minimum balance requirements

3) Number of cash machines in network

4) ATM fees waived, eliminated, credited back (other bank’s network), or charged to the customer.

5) Other fees charged

6) Other services offered – Some online banks offer high-yield checking, investment services, credit cards, business banking, and financial analysis.

7) How large they are – This is especially important due to the recent mortgage related credit problems aced by some banks.

Do they, or have they recently offered mortgage lending services? I so, what kind of customer were they servicing? If a large percentage o the loans they originated were to sub-prime borrowers, carefully check their financial state.

If you carefully examine the online savings banks you’re considering, it should be easy to find one that suits your needs to a ‘T’, and pays much higher interest rates than you could ever get at your local bank. You’ll be able to find the best one, and your savings account balance will thank you for it.

Every financial planner will tell you that knowing your current net worth is the first fundamental step in the financial planning process. Taking stock of who you are and where you stand will help you to determine your financial goals and dreams and towards a realistic and practical financial plan.

You need to put down in paper all your current assets and liabilities to complete your net worth statement. Your current assets will include your home, bank accounts, saving accounts, real estate investments, stocks, bonds, cars, and everything else that you possessed. Your liabilities will include the mortgage on your home, real estate loans, car loans and any other debts you may have.

Why is this first step so important in financial planning? The two situations below will help to explain why carrying out this exercise is such an important aspect of the financial planning process:-

1. If your net worth shows that you are technically a bankrupt.

This probably implies that your outstanding debts on the house mortgage, real estate loans, car loans and any other debts have outstripped your assets. Hence, your first priority in seeking financial freedom is to seek ways to reduce and retire these debts through managing your budget which will include having to change and make adjustment to your lifestyle to reduce unnecessary expenses.

2. If your net worth show that is positive.

This will probably implies that you may have some spare funds for your investment planning, or in a enviable position to be able to commence generating a special fund for investment planning. This can be done through a well planned budget diligently carried out with the utmost discipline. Investment planning is one important aspect of financial planning which cannot be overlooked. Putting spare funds into fixed deposit accounts for the short may be fine but for the long term, low yielding financial instruments are not the wisest thing to do.

Hence, knowing your current financial position is the first basic step in the financial planning exercise, imperative in your journey towards achieving financial planning. Listing your net worth statement in a spreadsheet will facilitate the monthly or yearly monitoring and tracking of your net worth.

Money deposited in a savings account is only intended to stay in the bank for a relatively shorter time span. This account usually offers much lower interest rates than most bank accounts. But still, like many other accounts, it accumulates interests. The rate of which is largely dependent on the conditions provided by the bank.

Savings accounts are normally maintained by commercial banks, credit unions, loans and savings associations, and some mutual savings bank that are offering interests that can never be used as money. However, the account may be utilized by writing a check.

These accounts allow customers to use parts of their liquid assets, which may be used for any transactions. But before a savings account is used, the balances in the savings account must first be transferred to checkable deposits or transaction deposits or currency. But due to the simplicity of transferring the saving accounts, they are often termed as “money”.

Though the use of checks is often not allowed, withdrawals are still easier when done using the savings accounts. The Money Market Deposit Account or the MMDAs on the other hand may restrict you on a limited number of transference of accounts and withdrawals.

With the advent of the Internet comes the development of a new system of banking- the direct-to-consumer banking system. This particularly addresses online savings accounts. Direct-to-consumer system allows direct access to savings accounts from the traditional bank online where money naturally transfers by means of electronic bank transfer. There are two types of banking institutions that create and allow this form of transaction- online-only banks and the traditional banks.

Online-only banking is the answer of the entrepreneurs to the growing consensus of the general public of who usually make banking transactions through the internet. These banks tried to accomplish what real banks have done. They offered almost the same spectrum of products that traditional banks have but offered them on consumer-friendly deals- high interest rates and low fees.

Online savings accounts often offer significantly higher rates of interest as compared to the contemporary savings account. This deal may be attributed to the fact that lesser expenses during online processing and that online market is naturally rate-sensitive.

Sadly, the majority of the consumers are not yet prepared to this new treatment in banking. This in effect, brought down most of such banks.

But by the end of year 2000, ING launched an optimized form of online-only banking. This was rather successful and brought great increase in the online banking industry. They created a much simpler savings account transaction that pays higher rates than the traditional banking. But this does not permit the use of ATM cards, checks, and other services. It was only intended as an account for which your money may be safely guarded.

For almost three years, ING had no other rivals in this system of banking. But recently, many other banking institutions have followed suit. Some were the pioneers of the online-only banking who eventually died down during the course yet returned to beat the market share ING has. Some of these banks offer the same services with that of the ING programs. Most have the same principle of high interest rates and no unnecessary frills.

One notable new entrant is the VirtualBank. This targeted the high-end techy society yet they offer much lower rates as compared to the ING Bank. Thus they gained some consumers.

Eventually, the industry expanded sometime in 2003 until 2004. And by the year 2005, savings account virtually revolutionized banking by means of online-only banking.

As the water began to drain from New Orleans in 2005, we learned that most of the homeowners in New Orleans did not have flood insurance, since they were supposedly in “low risk” areas. The over 60% of homeowners will need to depend upon their own savings, and limited federal assistance, to rebuild New Orleans – at an uncalculated cost for homeowners and taxpayers.

Could that level of disaster, especially that level of uninsured disaster, happen in California? Less than 15% of California homeowners currently carry earthquake insurance, due to its high cost, the “can’t happen to me or my house” factor, and mortgage providers not requiring coverage. The next big quake will result in billions of uninsured damage – but is earthquake insurance really worth the high cost?

How Did We Get Here?

The state of California requires that all homeowner’s insurance providers to at least offer earthquake insurance (albeit, at a high cost). Until 1994, it was widely available – but the high damage costs of the Northridge earthquake resulted in 97% of homeowner’s insurance providers pulling out of the state the California. In response, the California Earthquake Authority was formed by the California legislator to provide earthquake insurance.

What Is the California Earthquake Authority, and How Does It Work?

The California Earthquake Authority provides two-thirds of the earthquake policies in California, sold through their member providers, like Allstate and State Farm. A homeowner purchases the policy through their regular insurance agent, but the policy is actually a CEA policy.

The CEA currently has about $7.2 billion to pay claims, which it states is enough to pay foreseeable damages (Loma Prieta in 1989 had $6 billion in total damages). If the damage claims are more than $7.2 billion, then each claim would be paid a prorated portion of their losses – unlike a regular insurance company, which promises to pay the actual damages under the insurance policy. The state of California cannot help pay the claims out of general funds.

The policies also have a high deductible – usually 15% of the value of the dwelling. In other words, your home must be damaged more than 15% of its value before the insurance starts paying. So, this insurance is not for cracks in the driveway – it is for significant structural damage to your home. The policy also pays for limited contents (starting at $5K) and loss of use (starting at $1500).

Why Is Earthquake Insurance So Expensive?

Insurance policy premiums are calculated based on probabilities – the probability that a house like yours in a neighborhood like yours will catch fire, or a driver like you will have an accident. With data from millions of homes, these probabilities can be calculated with reasonable accuracy. But, no one can reliably predict the probability that there will be an earthquake strong enough to damage your home.

And, as you can imagine, damages from an earthquake, flood, or hurricane, are widespread, over potentially thousands of square miles – instead of one or a few dozen homes, as in a fire. As such, the insurer would have to pay either zero claims, or billions of dollars of claims – too much variance to reasonably plan for or price accurately.

Are We Really At Risk Here in San Jose?

According to the USGS, there is a 62% probability that there will be an earthquake of 6.7 or greater (like the Northridge quake) in the Bay Area in the next 30 years. In my zip code (San Jose 95126), USGS calculates a 80% chance of a 6.0 earthquake and a 20% chance of a 7.0, in the next 30 years. Whether you consider that to be a high risk depends on your risk tolerance for earthquakes – I consider that a high risk of a moderate earthquake and a somewhat low risk of a terrible earthquake, over the next 30 years.

But like any issue involving real estate – it is all local. Where your home is actually located significantly affects your risk – bedrock, reclaimed land from the bay, soil type, nearby streams, actual distance from the epicenter – all can affect potential damage.

But of course, many earthquakes occur where the USGS was not even aware of a fault line – and we never know when or where it will happen, until it happens.

Should I Obtain Earthquake Insurance?

Factors to Consider:

Could you afford to pay for the rebuilding your home from your own savings & investments? Can you afford to pay the high cost of insurance, indefinitely? Could make payments on your current mortgage and on a new loan to rebuild? Can you mitigate your potential losses by bolting your roof to the walls and the walls to the foundation, for example? What is your tolerance for the risk of an earthquake? What is the risks of your current home construction (type, age, foundation)? What are the risks of your specific location (soil type, distance to known faults)?
Are the Costs Worth It?

Let’s assume that you have a home that would cost $250K to rebuild, you will own the home for the next 30 years, and your earthquake premiums are $1200 per year. Over the next 30 years, that would be a total of $36,000 in premiums (assuming your premiums do not increase, to simplify calculations).

Instead of purchasing insurance, you invest the premiums in a diversified mutual fund. With an 8% annual return, you would have $135,000 (pre-tax) in year 30.* But of course, you only have that total in year 30, not in year one – meaning that if the earthquake happens tomorrow, you don’t have the money.

The deductible is another big turn off for many homeowners. The insurance pays only for large structural damage, not broken dishes or cracked driveways – meaning that it is less likely you will use it. However, be aware that you will not need to come up with the cash for the deductible – you may either opt to not undertake those repair or rebuilding costs, or you can apply for an SBA loan to pay for the deductible (assuming a federal disaster area is declared).

Why Not Just Get Federal Aid, or “Walk Away” and Let the Bank Have the Property?

The federal government would probably provide access to SBA loans, if the area is declared a federal disaster area (no small business required). However, the $200K maximum SBA loan may not be enough to rebuild your home – and, it is a loan that you need to pay back (in addition to your current mortgage).

If you have refinanced your mortgage, you have a recourse mortgage – which means that not only can the bank foreclose on the property in case of non-payment, the bank can also come after your personal assets and future income in case of non-payment. So you cannot just walk away, especially if you have a good income and some personal assets. The bank may help out by deferring payments for a few months, but you still must pay back the loan.

Last Thoughts

We have earthquake insurance on our home. Our home was not yet built in the 1906 earthquake (so who knows if it would stand), it is 75+ years old and is not bolted to the foundation, and we have a refinanced mortgage. For my family, the insurance premiums are worth peace of mind in case of a major earthquake disaster. That’s exactly what insurance is for – the “you never know.”

*calculations ignore inflation