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Saturday, November 29, 2008
Many couples buying a home are face with the question of whether to opt for a 15 or 30 year fixed mortgage rate. Many people wait until they are older before taking on the responsibility of a mortgage so an early payment of this large debt is an important issue to think about. Decisions of this nature need careful consideration before any commitment is made. It is always a good idea to confirm that the interest rate does not alter during the term of the mortgage.
Steer clear of lenders that are offering unbelievable deals because they probably are. Loans agreed with a 15 year fixed mortgage keep the same interest rate throughout the entire life of the agreement. For those individuals that do not like hidden surprises, this is always a benefit. My wife and I looked into the loans available with 15 year fixed mortgage rates when we were searching for a home for sale.
Although paying off the mortgage was our main priority, we did not want to have monthly payments that were uncomfortably high. As well as thinking about loans of 15 years, we also considered fixed rate mortgages that lasted 30 years as well. We did not really like the prospect of having a mortgage as we approached retirement so were really hoping to get one of the loans with 15 year fixed mortgage rates. There was obviously very good reasons to finish paying the loan off early.
After careful consideration we decided to take the longer term 30 year repayment option instead of the 15 year plan. There were many things that lead us into making this choice.Probably the over-riding decider was the fact my wife was expecting a child. Her regular monthly income would become unreliable because she wanted to be at home raising our child. Unfortunately, a higher monthly payment was the downside for loans with a 15 year fixed mortgage rate. For us it just was not feasible as we would just be in over our heads. The monthly payments on a 30 year loan were quite a bit lower.
Making a few additional lump sum payments during the year helps bring down the amount owed. Those few extra payments also help reduce the number of years you have to pay the loan over. This is well worth it in the long term but it does require some discipline. Although we would have much preferred a loan with a 15 year fixed mortgage rate we had to take our needs and abilities into consideration. In retrospect, everything worked out ok for us by going down this road.
Steer clear of lenders that are offering unbelievable deals because they probably are. Loans agreed with a 15 year fixed mortgage keep the same interest rate throughout the entire life of the agreement. For those individuals that do not like hidden surprises, this is always a benefit. My wife and I looked into the loans available with 15 year fixed mortgage rates when we were searching for a home for sale.
Although paying off the mortgage was our main priority, we did not want to have monthly payments that were uncomfortably high. As well as thinking about loans of 15 years, we also considered fixed rate mortgages that lasted 30 years as well. We did not really like the prospect of having a mortgage as we approached retirement so were really hoping to get one of the loans with 15 year fixed mortgage rates. There was obviously very good reasons to finish paying the loan off early.
After careful consideration we decided to take the longer term 30 year repayment option instead of the 15 year plan. There were many things that lead us into making this choice.Probably the over-riding decider was the fact my wife was expecting a child. Her regular monthly income would become unreliable because she wanted to be at home raising our child. Unfortunately, a higher monthly payment was the downside for loans with a 15 year fixed mortgage rate. For us it just was not feasible as we would just be in over our heads. The monthly payments on a 30 year loan were quite a bit lower.
Making a few additional lump sum payments during the year helps bring down the amount owed. Those few extra payments also help reduce the number of years you have to pay the loan over. This is well worth it in the long term but it does require some discipline. Although we would have much preferred a loan with a 15 year fixed mortgage rate we had to take our needs and abilities into consideration. In retrospect, everything worked out ok for us by going down this road.
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posted by Credit Counseling at
5:39 PM
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The Bank of England may have given UK PLC an economic boost with its recent interest rate cut of 1.5%, but the credit crunch isn't just affecting big business and the banking sector. The average person in the street is feeling the squeeze too. So will the reduction of the base rate to 3% offer any short-term relief to the customers holding a total of 72 million credit cards, beleaguered by interest charges far and above the base rate?
While mortgage borrowers will have to wait and see if the trickle-down effect reduces the cost of their mortgage repayments, credit card customers have been warned not to expect repayments to fall. Consumers look set to continue to pay an average of 17% APR on credit cards, and that percentage is unlikely to change as a result of the rate cut. The common opinion is that rates are only cut to attract customers, and in the current economic climate, lenders are reluctant to encourage even more credit into the system. Even though the lenders would like to pass on these savings to their customers, in the current economic climate those savings may have to wait a while until the market is more stable.
The lenders are concerned at exposing themselves to more 'bad debt', as cardholders struggle to meet repayments in the worsening economic climate. As a result, the card companies are not passing on the rate cut to their customers, despite Government attempts to boost the economy at ground level through fiscal policies that often seem to be knee-jerk reactions to the latest headlines. As a result, the credit card market looks set to be the next target of Gordon Brown and his Chancellor, as the Government calls for a ?new, responsible approach? to lending.
Some of the worst offenders are store cards, although the average credit card APR rate has risen to 17.6% today compared to 16.8% a year ago. Store card rates have risen sharply - up 1% in just six months - with some of the most expensive store cards now charging customers an APR of 30%. This is despite the base rate almost halving in the same time frame; from 5.75% in 2007 to 3% today. Government officials have been angered by the apparent intransigence of card lenders to reduce their rates, accusing them of behaving "irresponsibly". In return, credit card lenders remain steadfast in their more pragmatic 'wait and see' attitude, claiming sweeping reductions in the card APR rates could actually make matters worse for the financial sector as a whole, and consequently for consumers as well.
The credit card lenders, concerned by the potential of exposure to 'bad debt', are tightening up on their approach to business, making sure that customers take full responsibility for their loans. It can take only a couple of missed payments for a customer to be at the receiving end of strict enforcement of payment orders, but card companies do understand that everyone is being hit by this crisis, and will do everything they can to help people out. This isn't some good-natured, altruistic approach - it's good business sense. Minimum monthly repayments barely cover interest charges and administration fees. The Citizen's Advice Bureau has said that 20% of all new debt inquiries in 2007-08 have concerned credit card, store card and charge card debts. The Consumer Credit Counselling Service agrees; they have seen a surge in 'charging orders' enforced by card firms in the same period. Card lenders in return have made changes to their customer support policies, being much more proactive in helping those who do get into difficulties tackle the problems much earlier, reducing the overall burden.
In the US, interest rates on credit cards have echoed base rate cuts, but this is unlikely to happen in the UK any time soon, despite only a 2% difference in the base rate between the two countries. Lenders point to regulations, such as the decision by the Office of Fair Trading in 2006 to cap penalty fees to 12 as responsible for their woes. They also earmark their own falling profits on payment protection insurance as a primary factor in their inability to reduce card interest rates. The card lenders are trying to maintain a critical balance at the most direct contact point that most consumers have with the financial world, and despite the nay-sayers, there are still very attractive deals to be had on credit cards, if you're prepared to do your homework.
While mortgage borrowers will have to wait and see if the trickle-down effect reduces the cost of their mortgage repayments, credit card customers have been warned not to expect repayments to fall. Consumers look set to continue to pay an average of 17% APR on credit cards, and that percentage is unlikely to change as a result of the rate cut. The common opinion is that rates are only cut to attract customers, and in the current economic climate, lenders are reluctant to encourage even more credit into the system. Even though the lenders would like to pass on these savings to their customers, in the current economic climate those savings may have to wait a while until the market is more stable.
The lenders are concerned at exposing themselves to more 'bad debt', as cardholders struggle to meet repayments in the worsening economic climate. As a result, the card companies are not passing on the rate cut to their customers, despite Government attempts to boost the economy at ground level through fiscal policies that often seem to be knee-jerk reactions to the latest headlines. As a result, the credit card market looks set to be the next target of Gordon Brown and his Chancellor, as the Government calls for a ?new, responsible approach? to lending.
Some of the worst offenders are store cards, although the average credit card APR rate has risen to 17.6% today compared to 16.8% a year ago. Store card rates have risen sharply - up 1% in just six months - with some of the most expensive store cards now charging customers an APR of 30%. This is despite the base rate almost halving in the same time frame; from 5.75% in 2007 to 3% today. Government officials have been angered by the apparent intransigence of card lenders to reduce their rates, accusing them of behaving "irresponsibly". In return, credit card lenders remain steadfast in their more pragmatic 'wait and see' attitude, claiming sweeping reductions in the card APR rates could actually make matters worse for the financial sector as a whole, and consequently for consumers as well.
The credit card lenders, concerned by the potential of exposure to 'bad debt', are tightening up on their approach to business, making sure that customers take full responsibility for their loans. It can take only a couple of missed payments for a customer to be at the receiving end of strict enforcement of payment orders, but card companies do understand that everyone is being hit by this crisis, and will do everything they can to help people out. This isn't some good-natured, altruistic approach - it's good business sense. Minimum monthly repayments barely cover interest charges and administration fees. The Citizen's Advice Bureau has said that 20% of all new debt inquiries in 2007-08 have concerned credit card, store card and charge card debts. The Consumer Credit Counselling Service agrees; they have seen a surge in 'charging orders' enforced by card firms in the same period. Card lenders in return have made changes to their customer support policies, being much more proactive in helping those who do get into difficulties tackle the problems much earlier, reducing the overall burden.
In the US, interest rates on credit cards have echoed base rate cuts, but this is unlikely to happen in the UK any time soon, despite only a 2% difference in the base rate between the two countries. Lenders point to regulations, such as the decision by the Office of Fair Trading in 2006 to cap penalty fees to 12 as responsible for their woes. They also earmark their own falling profits on payment protection insurance as a primary factor in their inability to reduce card interest rates. The card lenders are trying to maintain a critical balance at the most direct contact point that most consumers have with the financial world, and despite the nay-sayers, there are still very attractive deals to be had on credit cards, if you're prepared to do your homework.
About the Author:
Frank Armstrong specialises in financial and money related articles for websites. Get further information on low interest credit card and compare credit cards here.
posted by Credit Counseling at
11:33 AM
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Everyone needs extra cash now and then for unforeseen events, but how many people want to go through the process of arranging a loan for something that is very short term. Many people take another option, that of the 'payday loan' and it is now possible to arrange one of these without having to own a checking account at your local bank. This is now a popular method of arranging extra cash for short term use and it works like this.
Perhaps you have had some unexpected medical expenses or had repairs carried out on your car or home. The amount you need doesn't need a bank loan and you also know that your forthcoming pay check will cover it so you request a payday loan instead. The process works by a lender arranging for a small sum of money never usually over one thousand dollars, to be made available and to be reclaimed when you are paid less any interest due.
Most people with internet access now arrange their payday loans online as it is much more convenient. The online application should only take a matter of minutes and the funds can be transferred to your bank account directly. A few years ago, it was impossible to get a payday loan if you had no checking account as a checking account was the lender's way to ensure that the crediting and depositing of the money was done without any problems.
Lenders today are much easier to please and often just proof of a savings account will do while some are actually happy to lend to people with a poor credit rating. Many just accept proof that the person is actually employed and receives pay regularly. Therefore, the next time you need to take a payday loan but have no checking account, relax.
It is not too difficult to find a lender who is willing to provide a loan as long as you can provide proof you are employed. However, be careful not to get caught in a cycle of borrowing as these loans are pretty expensive and if you get into the habit of taking one frequently, you could be spending a lot of money. From time to time, we all need the extra cash but reliance on this facility is not the answer to organizing your finances better.
Perhaps you have had some unexpected medical expenses or had repairs carried out on your car or home. The amount you need doesn't need a bank loan and you also know that your forthcoming pay check will cover it so you request a payday loan instead. The process works by a lender arranging for a small sum of money never usually over one thousand dollars, to be made available and to be reclaimed when you are paid less any interest due.
Most people with internet access now arrange their payday loans online as it is much more convenient. The online application should only take a matter of minutes and the funds can be transferred to your bank account directly. A few years ago, it was impossible to get a payday loan if you had no checking account as a checking account was the lender's way to ensure that the crediting and depositing of the money was done without any problems.
Lenders today are much easier to please and often just proof of a savings account will do while some are actually happy to lend to people with a poor credit rating. Many just accept proof that the person is actually employed and receives pay regularly. Therefore, the next time you need to take a payday loan but have no checking account, relax.
It is not too difficult to find a lender who is willing to provide a loan as long as you can provide proof you are employed. However, be careful not to get caught in a cycle of borrowing as these loans are pretty expensive and if you get into the habit of taking one frequently, you could be spending a lot of money. From time to time, we all need the extra cash but reliance on this facility is not the answer to organizing your finances better.
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posted by Credit Counseling at
7:41 AM
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