Worrying Rate Prediction - How You Are Imperilled By The Issue September 2, 2008
Posted by janey in : consolidation loans , comments closedThere is an unprecedented crisis brewing in the financial system. The Federal Reserve is lowering prime interest rates, yet mortgage interest rate predictions are still shooting up - what’s going on? And what might it mean for home owners today?
The most important thing home owners need to understand about interest rate predictions is how the interest rates set by the Fed and the interest rates charged by mortgage lenders are related.
Interest rates determined by the Fed affect the cost of borrowings for mortgage lenders. Financial institutions don’t own all the money they lend out as mortgages - they actually borrow 90% of what they lend out to home owners on the wholesale market.
Banks make their profits from the difference between what they pay when they borrow money, and what they charge when they lend it out.
When the Federal Reserve lowers interest rates, it lowers the borrowing costs for financial institutions, so you would think that mortgage interest rate predictions would fall. However, banks and other lenders may choose not to pass on the reductions to home owners.
The reason for this is not greed - there is adequate competition in the mortgage lending market to ensure that no bank or other lender can profit unfairly. The reason is that being a mortgage lender just became a whole lot more risky, and risk raises interest rates.
Mortgage lenders are charging everyone more interest to offset their losses on the few who will fail to pay their mortgages. Until the US housing market settles down, default risk will stay high, and mortgage rates predictions will keep going up.
There is a limit to how much the Fed can lower interest rates, too. The actual interest rate (called the “nominal” rate) includes an allowance for inflation. To find the “real” interest rate, you subtract inflation from the nominal interest rate.
Today, when you do that, you get a negative number! It’s a real anomaly - nominal interest rates are lower than the inflation rate.
Clearly, this is a situation that cannot continue for long. Sooner or later, probably sooner, the Fed will have to raise interest rates to at least break-even levels, matching the rate of inflation. When it comes, the interest rate rise will immediately flow through into mortgage rates.
What we are saying is that it’s really only a matter of time, and not much time, before the mortgage interest rate predictions rise again.
Consolidation Loans - How To Save Money With One September 1, 2008
Posted by janey in : consolidation loans , comments closedIf you are starting to struggle keeping up with your monthly bills, possibly because you have so many different accounts to repay, or maybe your income is now not covering all your repayment requirements, now is the time to start looking at how a debt consolidation loan can help you.
If you have a number of high interest loans or credit cards, you could benefit greatly from a debt consolidation loan. Not only will you save money from a lower interest rate, you will now only have one loan repayment to make which makes managing your finances so much easier.
Another point to bear in mind is that if you have lots of and you can only afford to pay the minimum monthly amount required, you could be paying off those cards for the a very long time indeed. In most instances, the card companies design the minimum payment to repay all of the interest owed, but to pay very little off the actual capital balance. Another article I wrote demonstrated how it would take 97 years to pay off a credit card debt of £5,000 if you just repay the minimum monthly requirement.
So, you have decided that a debt consolidation loan is the way to go. What you need to do now is to sit down and write down all of your debts on a piece of paper. Add the name of the creditor, the total balance owed, what you currently pay each month, what the minimum payment is, and how much interest you pay.
Having done all that and you know how much you need to consolidate all your debts, you need to apply for the loan.
If you are looking for less than £15,000 and have a good credit history, you should be able to apply to your bank. However. if you have already missed payments, then you will probably need to look for a company that specialises in debt consoliadation loans. As they also specialise in bad credit loans so are usually able to provide loans for people with less than perfect credit records.
When you are offered a loan you may not be offered enough to clear all your debts. At this point, you will need to weigh up which loans would be best to consolidate, and that the consolidation loan is will actually benefit you. If it is a high interest rate, you may possibly not be helping yourself out financially. You need to weigh up what the new loan will cost compared to what you are currently paying.
Once you have consolidated all of your debts, avoid racking up more debt on credit cards and loans before you have paid off your loan. Many people who get a debt consolidation loan later fall into the trap of using their credit cards again, long before the debt consolidation loan has been paid off.
If you do need another loan, try to research the available loans as best you can in order to get the loan with cheapest rate available.
