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The Impact of Low Interest Rates on Individuals

April 15th, 2012 admin No Comments »

The Bank of England reduced its base interest rates to an all-time low of 0.5% over two years ago and it has remained at this 315-year low ever since. There is constant debate amongst economists as to the pros and cons of keeping the base interest rate so low with good points on both sides of the argument.

This article looks at the impact on individuals. Low rates are not good for savers but do help those looking to borrow.

Savers

Low interest rates are definitely not good for savers. It means they are getting very little interest on any money they have in a regular savings account and are effectively losing money once inflation is taken into consideration. Therefore, for savers to get a decent return on savings they really need to invest. It is the only way to make a good return on their money. There is a degree of risk but many see it as a better option that keeping it in a bank account. An ISA can therefore be a good option with no tax to be paid on interest or capital gains. You can get around 3% interest rates on a cash ISA (six times that of base rate) but even more with a stocks and shares ISA.

Mortgage Holders

The low interest rates are beneficial to many with a mortgage. Mortgage rates are not as low as the 0.5% base rate, but the lower the base rate is the lower mortgage rates are, with many tracking the Bank of England rate. This means they are a certain amount above base rate, so when the base rate was reduced the interest on these mortgages was reduced. Low interest rates don’t help all mortgage holders though, with interest unchanged for those with fixed mortgages. Fixed mortgages protect again increases in interest but, unfortunately, means these mortgage holders cannot benefit from lower interest rates.

Home Buyers

Better interest rates are currently available on new mortgages than they were a few years ago, although some claim banks haven’t reduced them by as much as they should. This means tracker mortgages will start out with a low interest rate and fixed mortgages are available at a lower rate than they would have been previously. To an extent, though, this is mitigated by factors that negatively impact home buyers. There is a faltering housing market with few properties on the market. Prices have not fallen by much despite the struggling housing market with many choosing to stay put until they can sell for a higher price. The overall situation is not particularly good for first time buyers. While interest rates may be relatively low, obtaining a mortgage is proving difficult to many who would have found it easier four or five years ago. A higher deposit is require, something many potential first time buyers are unable to afford.

Andrew Marshall

Unsecured Personal Loans With Bad Credit Are Within Reach, Even Without Collateral

March 11th, 2012 admin No Comments »

It would seem that unsecured loans are hard enough to get approval on, without having to worry about the influence that a low credit rating has. But, in fact, the combination is not something that is shunned by lenders completely. There are ways to get your hands on an unsecured personal loan with bad credit. It really just comes down to meeting a short list of criteria and being sensible about what is applied for.

In truth, lenders are cautious about bad credit ratings, and the reasons why an applicant might have one. So, when it comes to personal loan approval without security, their attitude is a little like being on red alert. By calming their concerns, they will feel happier about approving the application.

However, in getting unsecured loans approved with bad credit there are some compromises necessary. Interest rates may be high, terms not ideal and loan limit low, but competitive terms can be secured if the right lender is approached.

Why Unsecured Loans?

It might seem strange that unsecured personal loans with poor credit are given the green light at all. Secured loans are more likely to be approved because of the inclusion of collateral. Collateral is an item of value offered in compensation to the lender should the borrower default on the loan.

But statistically applicants are unlikely to have items of sufficient value to offer as security. That is why often it is the item that is purchased via the loan that becomes the security, like the car in an auto loan or the house in a home loan. For personal loan approval without security, however, there is no set purchase identified so the lender is taking something of a leap of faith.

The only grounds the lender can issue approval on is income, with the credit rating only an indication of their history rather than their ability now to pay. So, it is possible to get unsecured loans approved with bad credit if the math adds up.

Importance of Income

The significance of income is extremely high in the case of unsecured personal loans with poor credit. But more than just the figure of the monthly salary is used in the calculation.

For example, an applicant with an income of $5,000 might seem to be a safe bet. But if there are existing loans to repay, and the typical monthly outlay on utility bills and living expenses are high, then personal loan approval without security is unlikely.

This is because of the debt-to-income ratio, which indicates the percentage of available income. Lenders require a cushion of around 20% to allow for unforeseen expenses, and so a 40:60 ratio is the accepted limit. Unsecured loans approved with poor credit need to fit within that ratio.

Realistic Loan Applications

To get approval on unsecured personal loans with bad credit, it is important to consider what is acceptable to the lender. Looking for $100,000 with no collateral, no identifiable purpose to the loan and a low credit rating, is almost certain to end in disappointment.

A loan of perhaps around $3,000 is certainly more reasonable, so personal loan approval, without security, is possible. This is due to two reasons: firstly, the lender knows that the repayments are manageable, and secondly, the lender can see the applicant has a mature attitude.

The fact is that unsecured loans approved with poor credit is a golden opportunity to improve credit ratings, and if a lender knows the applicant sees it as this, they will be much more comfortable about giving the thumbs up.

Joycelyn Crawford

Some Basic Facts About Mortgage Interest Rate Comparison

February 12th, 2012 admin No Comments »

When scouting the market for home loans, the best thing to do first is to gather information regarding the different mortgage tools and tips available. Get a hold of everything you need to know about the mortgage that you want. Anything that can have serious effects on your decision about what the best home loan deal is should not be taken for granted. For this particular article, let’s focus our attention on one of the most important aspects of the home loan process.

Conducting a mortgage interest rate comparison is one of the many ways that allow the home buyer to carefully select the proper loans. To better facilitate the comparison, it is wise to employ the benefits of using comparison tools. These mortgage tools are designed to assist home buyers determine a home loan’s actual cost. Using the comparison tools, the borrower simply keys in the amount of the loan, the interest rates applicable to the loan as well as the fees and other charges that apply to the loan. The resulting figure would somehow be close if not exact. When you compare home loans, these figures are the ones that you actually compare. The point is to repeat the same process for every home loan product and compare the results. This gives you a better financial perspective.

According to Australian laws, lenders have the responsibility of providing borrowers with loan documentations that details comparison rates. Also included in the documentations are the marketing materials and the interest rate. Online mortgage sites are one of the best sources of mortgage rates. Plus, it is easier to access. Mortgage rates provide borrowers with a more accurate picture of the loan’s total cost.

More often than not, there are loan offers that feature attractive interest rates at the beginning of the mortgage term. As the mortgage term rolls out, the interest rates will definitely increase. In this type of loan, the initial interest payment doesn’t provide the borrower with a precise idea regarding the annual mortgage interest in the coming years.

While comparing mortgage rates is considered a good practice is a good practice for every home buyer, one must not forget the fact that other loan factors like free redraws and flexible payment options can also help borrowers save on their mortgage in the long haul. However, they are both not included in the figure obtained from the comparison.

Mortgage comparison is a very important aspect of home buying especially since there are a lot of mortgage products available on the market. And because loan rates just continue to rise, it would be worth the effort to check new loan products on the market and conduct a mortgage interest rate comparison to see if switching to a new loan can help save some money.

Corwin Smith

Family Planning – The 529 College Savings Plan Made Easy

January 11th, 2012 admin No Comments »

So you’ve heard of the 529 college savings plan and you probably wondered if it was something you should look into taking advantage of. But with the talk of tax benefits and rules of the plan you wondered if it was really worth it.

In a nutshell, the 529 plan exempts the taxes on the interest accrued from the principle invested in the plan if the funds are used for qualified college expenses. Depending upon your particular financial situation, this could mean very little to you as compared to a standard savings plan.

Here is what you need to know to take advantage of or not take advantage of what the 529 plan has to offer.

Is the 529 college savings plan going to help you pay for college? No… the 529 plan will help you to save for college if…

…You enroll at the time of birth for the child you would like to create the plan for.
…You have the discipline and the income to make investments into the plan every month without interruption until the day the funds are needed to pay for college costs.

Let’s assume you decide to create a 529 plan for junior on the day he/she’s born. You decide to invest $125 per month into this plan. Let’s assume the interest rate on the principal is at a high of.75% annually.

With this in mind, and without any interruptions in investments, you’ll have at your disposal when your child is 18 and ready to go off to college $28,917.

This amount is roughly the average cost of one year’s tuition to go to the average state university. So if you want to have enough to pay for 4 years at a state university, you’ll need to invest $500 monthly uninterrupted from the day your child is born.

Realistically speaking, the average American family will neither have the discipline nor the income to sustain this type of savings plan. Keep in mind; this is the cost of today’s tuition rate. At the current rate of increase, it’ll be almost double that when your child is ready for college after 18 years.

Is the 529 plan a good solution to paying for college? No

Should it be a part of an overall plan for financing your child’s college education including a good early strategy to winning college scholarships? Yes…if it’s right for you.

The 529 plan varies from state to state, the first thing you need to do is determine if your states rules make it worthwhile for you to enroll in one of these college savings plans. There are rules, management fees and expenses that you need to take into consideration.

Nice Note: Some states have matching funds and one-time deposits from individual trusts based on rules of the plan. These could be nice benefits as well as the tax benefits, but you need to check the rules.

John Charest

Lowest Interest Rate Credit Card – Avoid The Traps

December 12th, 2011 admin No Comments »

It wasn’t that long ago that picking out the lowest interest rate credit card was merely a matter of going through the APR rates and simply picking the one that was the lowest. However, with reduced along with 0% promotional offers in addition to cash rebate cards, locating the credit card which offers the lowest rate is not actually as simple as it once was.

To illustrate, small business credit cards that have a fixed 12 month APR of 9.95% may appear less than a bank card with 10.0%, but the more costly card may give you cash rebates on each purchase you make. Whenever this bank card is utilized carefully it very well can end up with you in reality forking out a lesser amount of interest compared to the lower interest rate card.

Matters become even more confusing if you are offered a 0 percent interest for a predefined period which can, when all things are considered, turn out to be a money saver as you can pay off some of your current credit debt faster.

It practically requires a mathematics major to comprehend exactly which of the account proposals you get through in your mailbox are in fact the lowest interest rate credit cards. One thing is etched in stone nonetheless, if you’d like to pay a low APR you must have first-rate, and probably superior credit rankings.

People that possess a scant amount of credit ratings, along with those people that currently have lousy or perhaps even average credit ratings, are going to have to pay out increased fixed rates of interest and will not even get zero percent annual percentage rate offers or cash return benefits.

To complicate matters, when financial institutions showcase that they now have the lowest interest rate credit card they might be speaking about the fixed rate or in many cases will be discussing an opening rate of interest which after a period of time will without a doubt rise to a higher rate. Thus, make sure you read through the fine print and know in advance what that low rate is.

Whilst the zero percent introduction offers as well as the cash back programs can certainly be tempting and in many cases beneficial, the best thing to do is to hold the fixed interest rate as low as possible in advance of figuring in any of the various other promotions that may or may not give you significant savings.

Keep your eye on the bottom line. The fact is in regards to discovering the lowest interest rate credit card is the interest rates you will be repaying over the long-term is in fact what really should concern you, not the promotional rate.

James McGowan

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