Loan

Credit News

Long-term Car Loan Is A Bad Idea #government #loans


#long term loans
#

Long-term car loan is a bad idea

Americans are taking on car loans longer than six years more than in the past, according to Experian Automotive, and that’s not the wisest financial choice for many people.

More On Cars:

“auto”

Longer-term car loans are attractive because monthly payments are smaller than on a shorter-term car loan. And, because they allow a car buyer to buy a more expensive car while still making the payment affordable, they can actually make things worse financially.

When it comes to buying a new car, the longer the car loan, the longer the owner will be ” upside-down” in the loan — where he owes more than the car is worth — unless there’s been a significant down payment. This is because a larger portion of the monthly payments early on in the loan is going toward interest. Being upside-down is dangerous, because if the car owner has a car accident where the car is considered a total loss, he could end up still having to pay off a loan on a car that he can no longer drive.

In addition, the longer an owner is upside-down in the car loan, the harder it is to have equity in the car, which means that when it is traded in, it may not count for much of a down payment on another car.

Finally, the longer the car loan, the more interest will be paid over the life of the loan, making the car cost more than a shorter car loan in the long run.

Even though depreciation is less of an issue with used cars, since a car depreciates the most in its first few years, long-term car loans on used cars aren’t a good idea, either. A used car already has a significant number of miles on it and a longer-term car loan would mean that the car will have higher mileage when it is finally paid off.

For example, assume that you buy a 3-year-old car with 36,000 miles on it, which is what the average American would drive in that length of time. If you take out a six-year loan and you drive 12,000 miles annually, the average in America, you would add 72,000 miles. This would mean your car would have 108,000 miles on it and would be approaching 10 years old by the time it’s paid off. If you choose to trade it in sooner, you may find it’s not worth much, or worse, that you have no equity at all.

While the lower monthly payment on a long-term car loan may be appealing at first, it is better for most car buyers to save up some additional cash to increase the down payment or to select a less expensive car so the monthly payment is affordable for a loan that is shorter.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter .


When Are Personal Loans a Good Idea? #department #of #education #student #loans


#online loan
#

When Are Personal Loans a Good Idea?

Financial gurus will tell you to avoid personal loans. They’re generally right, but sometimes one makes sense. First, let’s define a personal loan. Some loans are earmarked for a specific purchase. You buy a home with a mortgage loan, you purchase a car with an auto loan and you pay for college with a student loan.

But a personal loan can be used for just about anything. Some lenders want to know what you will do with the money they lend you, but as long as you’ve borrowed it for a responsible and legal reason, you can do what you want with it.

That presents a problem. With a mortgage, your home is the collateral. Similarly, with an auto loan, the car you buy is the collateral. Because a personal loan often has no collateral – it is “unsecured” – the interest rate will probably be higher. There are also secured personal loans if you want to lower your costs.

Here are five circumstances in which a personal loan might be a good idea.

1. Consolidate Credit Cards

If you have one or more credit cards that are charged to the max, you could get a personal loan to consolidate all the charges into one monthly payment. What makes this scenario even more appealing: The interest rate on the loan could be considerably lower than the annual percentage rates (APRs) on your credit cards. (See Debt Consolidation Made Easy for more details.)

2. Refinance Student Loans

Consider this type of loan carefully before deciding whether or not to move forward. Your student loan interest rate may be 6.8% or higher, depending on the type of loan you have. But you might be able to get a personal loan with a lower interest rate that allows you to pay off your loan(s) faster.

Here are the issues: Student loans come with tax advantages. Also, if lawmakers were to offer any loan forgiveness programs in the future, in addition to those in place now, your refinanced student loans would not be eligible.

If you use a personal loan to pay off all or a portion of a student loan, you will lose the ability to deduct your interest payments (when you file your income taxes) along with the benefits that come with some loans, such as forbearance and deferment. And if your balance is sizable, a personal loan probably won’t cover it anyway. For additional information, check out Student Loan Debt: Is Consolidation the Answer?

3. Finance a Purchase

If your purchase is more of a want than a need, this is another decision to weigh carefully. If you’re going to take out a loan anyway, getting a personal loan and paying the seller in cash might be a better deal than financing through the seller. Don’t ever make a decision about financing on the spot, though. Ask the seller for an offer and compare it to what you could get through a personal loan. Then you can decide which is the right choice. For one example, see Personal Loans vs. Car Loans: How They Differ .

4. Pay for a Wedding

Any large event – such as a wedding – qualifies, if you would end up putting all associated charges on your credit card without being able to pay them off within a month. A personal loan for a large expense like this might save you a considerable amount on interest charges, provided it has a lower rate than your credit card.

5. Improve Your Credit

A personal loan might help your credit score in two ways. First, if your credit report shows mostly credit card debt, a personal loan might help your “account mix.” Having different types of loans is often favorable to your score.

Second, it may lower your credit utilization ratio – the amount of total credit you’re using compared to your credit limit. The lower the amount of your total credit you use, the better your score. Having a personal loan increases the total amount you have available to use. For other advice on boosting your credit score, see 3 Easy Ways to Improve Your Credit Score .

The Bottom Line

From a purely financial perspective, relatively small loans are rarely a good idea. Most people can’t afford to pay cash for a home, making a mortgage loan a necessity. But if you can avoid a personal loan, or any other loan that is relatively small, you should. Instead, save your money and purchase that “want” later. Remember, interest adds up fast, and you may end up borrowing money for something that is worth less than the value of the loan. Pay cash whenever possible.


Financing a Business – Ideas and Resources from Idea Cafe #consolidated #loans


#business financing
#

Take a step toward living your business dream.

Idea Cafe’s Feast of Financing

40+ Pages of Tips and Tools to Help You Get the Money Your Business Needs

First

Get ready to Get Money

How much money do you need? Find out fast with. Idea Cafe’s Instant All-in-One Budget Calculator

The Real Scoop on SBA Loans

Kent Capener spills the beans on the SBA’s goals, realities and ins outs. It’s expert experience on how the SBA can work for you in getting start-up capital.

What to Do When Funding Isn’t There

Lillyvette Montalvo shares some strategies for jump-starting your biz venture — even if you have bad credit and no bank loans. Find out what to do to increase your future financing odds.

Idea Cafe Helps You Find Investors


When Are Personal Loans a Good Idea? #same #day #payday #loans


#online loan
#

When Are Personal Loans a Good Idea?

Financial gurus will tell you to avoid personal loans. They’re generally right, but sometimes one makes sense. First, let’s define a personal loan. Some loans are earmarked for a specific purchase. You buy a home with a mortgage loan, you purchase a car with an auto loan and you pay for college with a student loan.

But a personal loan can be used for just about anything. Some lenders want to know what you will do with the money they lend you, but as long as you’ve borrowed it for a responsible and legal reason, you can do what you want with it.

That presents a problem. With a mortgage, your home is the collateral. Similarly, with an auto loan, the car you buy is the collateral. Because a personal loan often has no collateral – it is “unsecured” – the interest rate will probably be higher. There are also secured personal loans if you want to lower your costs.

Here are five circumstances in which a personal loan might be a good idea.

1. Consolidate Credit Cards

If you have one or more credit cards that are charged to the max, you could get a personal loan to consolidate all the charges into one monthly payment. What makes this scenario even more appealing: The interest rate on the loan could be considerably lower than the annual percentage rates (APRs) on your credit cards. (See Debt Consolidation Made Easy for more details.)

2. Refinance Student Loans

Consider this type of loan carefully before deciding whether or not to move forward. Your student loan interest rate may be 6.8% or higher, depending on the type of loan you have. But you might be able to get a personal loan with a lower interest rate that allows you to pay off your loan(s) faster.

Here are the issues: Student loans come with tax advantages. Also, if lawmakers were to offer any loan forgiveness programs in the future, in addition to those in place now, your refinanced student loans would not be eligible.

If you use a personal loan to pay off all or a portion of a student loan, you will lose the ability to deduct your interest payments (when you file your income taxes) along with the benefits that come with some loans, such as forbearance and deferment. And if your balance is sizable, a personal loan probably won’t cover it anyway. For additional information, check out Student Loan Debt: Is Consolidation the Answer?

3. Finance a Purchase

If your purchase is more of a want than a need, this is another decision to weigh carefully. If you’re going to take out a loan anyway, getting a personal loan and paying the seller in cash might be a better deal than financing through the seller. Don’t ever make a decision about financing on the spot, though. Ask the seller for an offer and compare it to what you could get through a personal loan. Then you can decide which is the right choice. For one example, see Personal Loans vs. Car Loans: How They Differ .

4. Pay for a Wedding

Any large event – such as a wedding – qualifies, if you would end up putting all associated charges on your credit card without being able to pay them off within a month. A personal loan for a large expense like this might save you a considerable amount on interest charges, provided it has a lower rate than your credit card.

5. Improve Your Credit

A personal loan might help your credit score in two ways. First, if your credit report shows mostly credit card debt, a personal loan might help your “account mix.” Having different types of loans is often favorable to your score.

Second, it may lower your credit utilization ratio – the amount of total credit you’re using compared to your credit limit. The lower the amount of your total credit you use, the better your score. Having a personal loan increases the total amount you have available to use. For other advice on boosting your credit score, see 3 Easy Ways to Improve Your Credit Score .

The Bottom Line

From a purely financial perspective, relatively small loans are rarely a good idea. Most people can’t afford to pay cash for a home, making a mortgage loan a necessity. But if you can avoid a personal loan, or any other loan that is relatively small, you should. Instead, save your money and purchase that “want” later. Remember, interest adds up fast, and you may end up borrowing money for something that is worth less than the value of the loan. Pay cash whenever possible.


Is Buying a New Car For Zero Percent Interest Loan a Good Idea? #student #loans #without #cosigner


#new car loans
#

Is Buying a New Car For Zero Percent Interest Loan a Good Idea?

by Joe Plemon on August 2, 2012

My friend Larry recently asked me a good question that led to a challenging question: “Joe, isn’t it true that everyone needs to be putting aside money every month for a car fund?”

Joe, “Well, yes. Although some may be wealthy enough to have a nest egg generating vehicle purchase money, the vast majority of us need to be constantly saving for our next car purchase.”

Larry, “I know you are big about saving for car purchases. But I have been able to get a zero percent loan on the last couple of new cars I bought, so what is the difference in borrowing at zero percent and saving up to pay cash?” (That was the challenging question)

I admit that Larry caught me off guard. He is a sharp guy who would immediately challenge any noble idealism I might purport about debt being bad. He needed objective rationale.

So, scrambling a bit, here was my response, “Larry, I have found that when I save and pay cash, I am much more selective about what I buy. That cash is something that I have worked and scrimped to save, so I shop very carefully. On the other hand, when I borrow money to buy a car, I don’t see the money come out of my account, so it just doesn’t seem as real. I will therefore pay more, buy newer and get more options. In short, I spend more when I borrow than I would paying cash.”

“Oh. I hadn’t thought of it that way.” Larry was slowly nodding his head. “That makes sense.”

So I suppose I was able to give a decent answer, but Larry’s question made me think. Are there other reasons not to borrow money for a new car, even at zero percent interest? I think there are. Here are some thoughts:

Depreciation

New cars depreciate faster than used cars. Yes, you get a new car guarantee and a new car smell, but you are paying for it. According to SafeCarGuide.com. “New cars lose an average of 20% of their value the instant they are driven away from the dealership. When coupled to the annual yearly depreciation of 7% to 12%, your first year’s loss is anywhere from 25% to 35%. That translates to a loss of $6,000 to $8,000 loss on a $22,500 new vehicle, or a $10,000 to $15,000 loss on a $40,000 one. And that is for a vehicle that is only driven the average of 13,500 miles. If you drive more than that, your depreciation will be greater (35% to 50% for the first year)”

I think you get the point. That zero percent loan is costing you between $500 and $1,000 a month in depreciation costs for the first year alone.

Risk

The zero percent loan could spellbind you into buying too much car. If life happens (injury, job lay off, etc.) and you can’t make your payments, Mr. Tow Truck will show up and get your car. You will still owe on the negative equity even if you no longer own the car. Zero interest sounds pretty hollow once repo man shows up.

May be paying more for car

You may well be paying for that zero interest loan via higher sale price. Yes, dealers are offering deals to move new cars, but they aren’t stupid. That same car might have sold at a lower price if the financing would have included some interest payment.

The cost of dealing with a dealer

New cars, of course, must be purchased from dealers, but that is part of the problem. For sake of discussion, I compared the Kelly Blue Book retail price of a 2007 Cadillac Escalade ESV, excellent condition, with the private party price of exactly the same vehicle. The retail price of $42,440 is $3,600 more than the private party price of $38,840. My point is that you pay a premium simply for buying from a dealer. You also pay more sales taxes in many states. For example, in Illinois (where I live) the taxes for that $42,440 vehicle purchased from a dealer are $2,652.50 compared to $1,500 if purchased from an individual.

Lost opportunity cost

Larry and I started this conversation by agreeing that everyone, whether they are making payment on a loan or saving to pay cash, needs to budget a set amount for vehicle purchases. Even at zero percent interest, the new car buyer is going to pay more per month than someone (like me) who saves up and pays cash. How much is this difference and what could that money be doing if it weren’t going for cars? This number will vary greatly from person to person, but if we assume a $25,000 new car every five years compared to a $10,000 used car every five years, and factor in depreciation for each, the new car buyer will pay about $220 a month more. The lost opportunity, if invested at 8% annual growth for 40 years, is $768,000 dollars! How many of us could use that much extra cushion in our retirement portfolios?

Concluding thoughts

While a zero percent loan on a new car sounds good, there are many downsides. If the owner buys a new car just to get that zero percent loan, he is probably buying more car than he would by saving and paying cash. Even though he isn’t paying any interest, he is paying for depreciation, sometimes as much as $1,000 a month for the first year. Other downsides are risk and the higher costs of purchasing from a dealer. In addition, the lost opportunity cost can be substantial over a lifetime.

According to “The Millionaire Next Door” by Stanley and Danko, 37% of millionaires buy used cars instead of new. Hmmm. Maybe that is how they became millionaires.

How do you plan for car purchases? Do you save and pay cash or do you borrow? What have you found to work best for you?


A capital idea: Small Business Administration programs help make loans possible. #school #loans


#loans for small business
#

A capital idea: Small Business Administration programs help make loans possible.

Last Modified: Sunday, November 15, 2015 at 11:08 p.m.

Nikunj Shah purchased his first motel in August, a deal that may not have been possible without a popular federal loan program.

Shah paid $2.4 million for the 47-unit Super 8 motel in Bradenton, financed with a $2.19 million loan from Sarasota’s Insignia Bank through the U.S. Small Business Administration.

The SBA-guaranteed loan came with a lower down payment and a longer term. It also was approved for a first-time buyer that conventional commercial lenders often reject.

“With the SBA loan, you can get a loan approved with a 15 to 20 percent down payment, compared with a commercial loan with a bank you might have to put down 25 to 35 percent,” Shah said. “Commercial banks will only amortize for 10 or 15 years, where the SBA will amortize for 20 to 25 years, so the mortgage payment is much less.”

The SBA also works with first-time buyers although, like Shah, it helps to have a previous track record of business experience.

Insignia Bank CEO Charlie Brown has been making small-business loans through the SBA for decades, and his bank was the top dollar producer for loans with the SBA among lenders headquartered in Southwest Florida.

It issued $4.5 million in SBA loans in the recently completed fiscal year, ranking the community bank in the top 35 percent of all Florida banks for SBA lending.

“We continue to see opportunities in the market for SBA loans, said Brown, the bank’s chairman and chief executive. “Where other banks have become concentrated with certain types of real estate loans and are pulling back, Insignia, with the use of the SBA program and its strong capital, continues to lend.”

Brown learned SBA lending at his former job at Charlotte State Bank & Trust in Port Charlotte, which one year ranked No. 2 in Florida in SBA loans.

“We can lend more than we normally would because of the SBA guarantee,” Brown said. “We try to use it only for when collateral may be a little tighter. The rest of the transaction still has to make sense from a cash flow, character and condition in industry standpoint.”

Lenders issued $111.1 million in SBA loans in Sarasota, Manatee and Charlotte counties in fiscal year 2015, up 18 percent from the $94.2 million the previous year.

The number of loans to new and existing businesses in the region in the fiscal year ended Sept. 30 increased by 36 to a total of 180, according to SBA data for the 12-month period ended Sept. 30.

The importance of SBA loans

SBA lending programs encourage bankers to approve more small-business loans by allowing the government to shoulder some of the default risk. Owners of small businesses like the loans because they carry longer terms and lower interest rates than most other loan sources. Borrowers also are able to qualify for SBA loans if they don’t have enough collateral to qualify under a lender’s usual terms.

Plus, other sources of loans often are unavailable.

Many banks tightened the reins on commercial lending after being battered by soured business loans during the real estate downturn. Speculative loans to developers played a key role in the demise in a number of community banks in Southwest Florida and across the state.

The SBA’s 24-county South Florida district, which includes Sarasota, Manatee and Charlotte, set a record for lending in the recent year, with 2,417 loans.

“We did nearly $1.2 billion in loan guarantees for small businesses last year,” said Althea Harris, spokeswoman for the district. “That’s better than our best year, fiscal 2007, before the recession when we did just under $900 million in loan guarantees.”

Nationwide, lending in the SBA’s flagship 7(a) program also broke records, with 63,000 loans totaling $23.6 billion for the year. That was an increase of 22 percent in number of loans and 23 percent in total dollar volume.

Conventional loans a challenge

“This level of program activity demonstrates that access to capital through conventional sources remains a challenge for small businesses,” the SBA said.

In Sarasota County, the SBA reported 89 loans for $57.4 million. Last year SBA lenders completed 69 loans for $39.7 million.

Manatee produced 64 loans totaling $38.2 million, compared with 58 loans totaling $38.0 million in fiscal 2014.

Charlotte posted a small decline in dollar volume, with 27 loans for $15.5 million, compared with 17 loans for $16.5 million.

In the South Florida region, the area south of Orlando, the number of loans in the 504 program which provides finances for major fixed assets like equipment or real estate was down by nearly 7 percent. But loans in the 7a program the most popular one, which finances everything from startup businesses to long-term working capital jumped 55 percent over the year.

7a program loans grow

Harris said 504 lending in the district has trended lower because of the competition that certified development companies, known as CDCs, are getting from the traditional 7a lenders, “who are encroaching on the real estate transactions that traditionally have been left for the CDCs.” In contrast, lending in the 7a program continues to grow. CDCs are nonprofit corporations, certified and regulated by the SBA, that work with participating lenders to provide financing to small businesses.

Shah, the motel buyer, said the SBA loan process does taken longer than direct financing through a bank. His loan took about three months to complete, but he credits Insignia and the SBA for getting it done.

He says he would probably not be a motel owner today without the program.

“Anyone buying a business for the first time, the best way is the SBA route,” he said.


When Are Personal Loans a Good Idea? #unsecured #personal #loans #bad #credit


#online loan
#

When Are Personal Loans a Good Idea?

Financial gurus will tell you to avoid personal loans. They’re generally right, but sometimes one makes sense. First, let’s define a personal loan. Some loans are earmarked for a specific purchase. You buy a home with a mortgage loan, you purchase a car with an auto loan and you pay for college with a student loan.

But a personal loan can be used for just about anything. Some lenders want to know what you will do with the money they lend you, but as long as you’ve borrowed it for a responsible and legal reason, you can do what you want with it.

That presents a problem. With a mortgage, your home is the collateral. Similarly, with an auto loan, the car you buy is the collateral. Because a personal loan often has no collateral – it is “unsecured” – the interest rate will probably be higher. There are also secured personal loans if you want to lower your costs.

Here are five circumstances in which a personal loan might be a good idea.

1. Consolidate Credit Cards

If you have one or more credit cards that are charged to the max, you could get a personal loan to consolidate all the charges into one monthly payment. What makes this scenario even more appealing: The interest rate on the loan could be considerably lower than the annual percentage rates (APRs) on your credit cards. (See Debt Consolidation Made Easy for more details.)

2. Refinance Student Loans

Consider this type of loan carefully before deciding whether or not to move forward. Your student loan interest rate may be 6.8% or higher, depending on the type of loan you have. But you might be able to get a personal loan with a lower interest rate that allows you to pay off your loan(s) faster.

Here are the issues: Student loans come with tax advantages. Also, if lawmakers were to offer any loan forgiveness programs in the future, in addition to those in place now, your refinanced student loans would not be eligible.

If you use a personal loan to pay off all or a portion of a student loan, you will lose the ability to deduct your interest payments (when you file your income taxes) along with the benefits that come with some loans, such as forbearance and deferment. And if your balance is sizable, a personal loan probably won’t cover it anyway. For additional information, check out Student Loan Debt: Is Consolidation the Answer?

3. Finance a Purchase

If your purchase is more of a want than a need, this is another decision to weigh carefully. If you’re going to take out a loan anyway, getting a personal loan and paying the seller in cash might be a better deal than financing through the seller. Don’t ever make a decision about financing on the spot, though. Ask the seller for an offer and compare it to what you could get through a personal loan. Then you can decide which is the right choice. For one example, see Personal Loans vs. Car Loans: How They Differ .

4. Pay for a Wedding

Any large event – such as a wedding – qualifies, if you would end up putting all associated charges on your credit card without being able to pay them off within a month. A personal loan for a large expense like this might save you a considerable amount on interest charges, provided it has a lower rate than your credit card.

5. Improve Your Credit

A personal loan might help your credit score in two ways. First, if your credit report shows mostly credit card debt, a personal loan might help your “account mix.” Having different types of loans is often favorable to your score.

Second, it may lower your credit utilization ratio – the amount of total credit you’re using compared to your credit limit. The lower the amount of your total credit you use, the better your score. Having a personal loan increases the total amount you have available to use. For other advice on boosting your credit score, see 3 Easy Ways to Improve Your Credit Score .

The Bottom Line

From a purely financial perspective, relatively small loans are rarely a good idea. Most people can’t afford to pay cash for a home, making a mortgage loan a necessity. But if you can avoid a personal loan, or any other loan that is relatively small, you should. Instead, save your money and purchase that “want” later. Remember, interest adds up fast, and you may end up borrowing money for something that is worth less than the value of the loan. Pay cash whenever possible.


Is an FHA loan still a good idea? CBS News #grants #for #school


#what is an fha loan
#

Is an FHA loan still a good idea?

(MoneyWatch) If you’re thinking about taking out an FHA home loan, you may want to reconsider.

For nearly 80 years, the Federal Housing Administration has helped home buyers purchase their first homes by offering loans that are easier to qualify for, require smaller down payments and feature interest rates lower than they might otherwise get through a conventional loan.

For millions of buyers who have decent — but not stellar — credit scores and haven’t saved up a big down payment, the FHA has been a good deal.

That may no longer be the case.

The FHA is experiencing a cash crunch. Congress requires the agency to keep cash balance equal to at least 2 percent of all outstanding loans in its mortgage insurance funds. But due to the slew of bad loans taken on during the housing crisis, the agency isn’t meeting that goal.

So prices are going up yet again for FHA borrowers. The cost of mortgage insurance has risen and, what’s worse, homeowners can no longer cancel it — a common feature of conventional loans.

“FHA was always designed to make home buying possible for first-time buyers that couldn’t otherwise afford it,” says Sin-Yi Lambertson, a broker at real estate agency ERA Yes! in Los Angeles. “Yet the mortgage insurance really increased so much that it’s very difficult for first-time home buyers to afford.”

On top of the 1.75 percent FHA borrowers pay up front, monthly mortgage insurance costs increased again in April, the third hike in two years. In 2010, borrowers paid more than half what they’re paying now in mortgage insurance costs.

This all translates to tacking about 1.35 percent onto your interest rate, an additional cost not borne by borrowers with no mortgage insurance. And, thanks to a new rule that just kicked in this month, borrowers will pay that increased insurance rate over the entire life of the loan. Previously, the mortgage insurance premium on a loan was automatically canceled after borrowers had attained 22 percent equity.

So if the added insurance cost results in an extra $100 each month, you will pay that extra money for 30 years instead of about five. Which translates to borrowers’ paying $30,000 or more over the life of the loan. That’s not pocket change.

Even so, that doesn’t mean there’s no place for FHA loans.

When to consider an FHA loan

Simply put, the FHA option makes sense only when there is no alternative.

The FHA accepts applicants with lower credit scores, typically between 640 and 680, whom conventional lenders may turn down.

You can also get away with a higher debt-to-income ratio, meaning that when all your housing costs are compounded, from insurance to taxes to mortgage payments, the amount is under a certain percentage of your income. To qualify for an FHA loan, that number is about 47 percent, whereas with conventional loans, it might be about 38 to 40 percent, Lambertson says.

The FHA also offers loans with down payments as small as 3.5 percent, and that down payment can come from gifts from family and friends, not just your savings.

When an FHA loan is not the right choice

If you do qualify for a loan, the FHA won’t offer much of a deal.

During the housing crisis, many first-time buyers had trouble qualifying for loans as a result of really strict standards, and they turned to the FHA. That is changing, says Lambertson, and lenders now offer loans requiring lower down payments (south of even 10 percent) and have loosened their credit requirements, though you will likely pay a higher interest rate.

Though with a conventional loan you will still typically pay mortgage insurance if you don’t put 20 percent down, your insurance costs are lower and you can cancel the policy when you have enough equity.

In making your choice, ask your lender for an honest comparison of your individual costs.

2013 CBS Interactive Inc. All Rights Reserved.


Are Home Equity Loans a Bad Idea #business #loan #rates


#ideal home loans
#

Are Home Equity Loans a Bad Idea?

November 1, 2010

Many believe that a major cause of the recent financial downturn in the economy was an overheated and overextended housing market. In many parts of the country, housing prices increased significantly over the course of just a few years, only to experience a significant decrease in value even more quickly. Many homeowners were caught off-guard by these price changes.

Some homeowners were hit doubly hard by the downturn, because they had taken out large home equity loans or home equity lines of credit when the market values of their homes were at or near their peak. Some of these people lost their homes and destroyed their credit ratings when they were unable to pay back the home equity loans they took out.

Homeowners who were not directly impacted by the recent housing market turmoil (such as if they have owned their homes for many years, or own in a region of the country that did not experience the sharp run-up or drop-off in prices) may now be left wondering whether it’s ever appropriate to take out a home equity loan. Here is some advice on the wisdom of using your home as collateral for a loan.

  • First, identify how much you are looking to borrow, and what you intend to do with the loan proceeds. Borrowing a significant amount of money against the equity in your house could put your home at risk if you’re unable to repay the loan, so you need to make sure that the purpose for your loan is a good one. A loan for home repair or an improvement that will significantly increase the value of your house may be appropriate, but taking out a home loan so that you can go on a luxurious vacation may not be.
  • Second, identify how you want to access the equity in your home. There are two basic types of loans: Home Equity Loans, and Home Equity Lines of Credit (“HELOC”). A standard home equity loan is quite similar to a mortgage, while a HELOC is somewhat similar to credit card debt. A HELOC is a revolving credit that can generally be accessed through separate checks or a credit card.
  • The interest rates applicable to home equity loans and HELOCs can vary greatly. Be sure to shop around with different banks and finance companies to make sure you’re getting the best deal. HELOCs often have variable interest rates, so pay particular attention to the financing terms applicable to those types of credit lines.
  • Home equity loans and HELOCs are secured against the value of your home, with the home itself as collateral. If you are unable to pay back the money that was borrowed, then the lender may be able to foreclose on your residence. In addition, because you’ve used the house as collateral, you must repay the loan before you can sell your house.

    Home equity loans can be a great way to finance significant purchases, provided that you are comfortable with the repayment obligations.


  • A capital idea: Small Business Administration programs help make loans possible. #bad #credit #loans #online


    #loans for small business
    #

    A capital idea: Small Business Administration programs help make loans possible.

    Last Modified: Sunday, November 15, 2015 at 11:08 p.m.

    Nikunj Shah purchased his first motel in August, a deal that may not have been possible without a popular federal loan program.

    Shah paid $2.4 million for the 47-unit Super 8 motel in Bradenton, financed with a $2.19 million loan from Sarasota’s Insignia Bank through the U.S. Small Business Administration.

    The SBA-guaranteed loan came with a lower down payment and a longer term. It also was approved for a first-time buyer that conventional commercial lenders often reject.

    “With the SBA loan, you can get a loan approved with a 15 to 20 percent down payment, compared with a commercial loan with a bank you might have to put down 25 to 35 percent,” Shah said. “Commercial banks will only amortize for 10 or 15 years, where the SBA will amortize for 20 to 25 years, so the mortgage payment is much less.”

    The SBA also works with first-time buyers although, like Shah, it helps to have a previous track record of business experience.

    Insignia Bank CEO Charlie Brown has been making small-business loans through the SBA for decades, and his bank was the top dollar producer for loans with the SBA among lenders headquartered in Southwest Florida.

    It issued $4.5 million in SBA loans in the recently completed fiscal year, ranking the community bank in the top 35 percent of all Florida banks for SBA lending.

    “We continue to see opportunities in the market for SBA loans, said Brown, the bank’s chairman and chief executive. “Where other banks have become concentrated with certain types of real estate loans and are pulling back, Insignia, with the use of the SBA program and its strong capital, continues to lend.”

    Brown learned SBA lending at his former job at Charlotte State Bank & Trust in Port Charlotte, which one year ranked No. 2 in Florida in SBA loans.

    “We can lend more than we normally would because of the SBA guarantee,” Brown said. “We try to use it only for when collateral may be a little tighter. The rest of the transaction still has to make sense from a cash flow, character and condition in industry standpoint.”

    Lenders issued $111.1 million in SBA loans in Sarasota, Manatee and Charlotte counties in fiscal year 2015, up 18 percent from the $94.2 million the previous year.

    The number of loans to new and existing businesses in the region in the fiscal year ended Sept. 30 increased by 36 to a total of 180, according to SBA data for the 12-month period ended Sept. 30.

    The importance of SBA loans

    SBA lending programs encourage bankers to approve more small-business loans by allowing the government to shoulder some of the default risk. Owners of small businesses like the loans because they carry longer terms and lower interest rates than most other loan sources. Borrowers also are able to qualify for SBA loans if they don’t have enough collateral to qualify under a lender’s usual terms.

    Plus, other sources of loans often are unavailable.

    Many banks tightened the reins on commercial lending after being battered by soured business loans during the real estate downturn. Speculative loans to developers played a key role in the demise in a number of community banks in Southwest Florida and across the state.

    The SBA’s 24-county South Florida district, which includes Sarasota, Manatee and Charlotte, set a record for lending in the recent year, with 2,417 loans.

    “We did nearly $1.2 billion in loan guarantees for small businesses last year,” said Althea Harris, spokeswoman for the district. “That’s better than our best year, fiscal 2007, before the recession when we did just under $900 million in loan guarantees.”

    Nationwide, lending in the SBA’s flagship 7(a) program also broke records, with 63,000 loans totaling $23.6 billion for the year. That was an increase of 22 percent in number of loans and 23 percent in total dollar volume.

    Conventional loans a challenge

    “This level of program activity demonstrates that access to capital through conventional sources remains a challenge for small businesses,” the SBA said.

    In Sarasota County, the SBA reported 89 loans for $57.4 million. Last year SBA lenders completed 69 loans for $39.7 million.

    Manatee produced 64 loans totaling $38.2 million, compared with 58 loans totaling $38.0 million in fiscal 2014.

    Charlotte posted a small decline in dollar volume, with 27 loans for $15.5 million, compared with 17 loans for $16.5 million.

    In the South Florida region, the area south of Orlando, the number of loans in the 504 program which provides finances for major fixed assets like equipment or real estate was down by nearly 7 percent. But loans in the 7a program the most popular one, which finances everything from startup businesses to long-term working capital jumped 55 percent over the year.

    7a program loans grow

    Harris said 504 lending in the district has trended lower because of the competition that certified development companies, known as CDCs, are getting from the traditional 7a lenders, “who are encroaching on the real estate transactions that traditionally have been left for the CDCs.” In contrast, lending in the 7a program continues to grow. CDCs are nonprofit corporations, certified and regulated by the SBA, that work with participating lenders to provide financing to small businesses.

    Shah, the motel buyer, said the SBA loan process does taken longer than direct financing through a bank. His loan took about three months to complete, but he credits Insignia and the SBA for getting it done.

    He says he would probably not be a motel owner today without the program.

    “Anyone buying a business for the first time, the best way is the SBA route,” he said.