Debt

Alternatives to Bank Loans

18. February 2013 · 5 comments · Categories: Debt, Loans

The following is a guest post.

There are times when we all need to look at loan financing, whether for a specific event such as a wedding or as a means of consolidating our debts. Most of us will initially think of going to our banks and applying for a loan, but what are the alternatives to this form of lending? Maybe your application has been rejected by your bank, or you simply want to know about other alternatives that are available. Whichever way you choose to go, there is always more than one option.

Here are some of the alternatives you can look into depending upon your financial needs.

Peer to Peer Lending

Peer to Peer lending is simply borrowing money from REAL people, not a bank or another type of organization. There are many companies now offering this form of lending and the rules are pretty simple; lenders join and offer their own money for which they will set their own interest rates. You will join and apply for a loan, and be sent offers with varying rates of interest. This is a win-win situation for all: the lenders will collect the interest on their investment and you will get the funds you need, often at a lower rate than the banks provide.

Credit Unions

Credit Unions offer extremely flexible lending to their members, often for longer pay back periods than banks will give. Credit Unions are run by a group of people who save money within the union. If someone needs to borrow from them, the money is available. This is a highly regarded form of lending amongst students and young people, as credit unions normally offer lower interest rates than banks with some loans offered on a signature only basis. Signature loans are unsecured loans that are guaranteed only by your signature – be aware tough that the interest rates for these are higher than average.

Short term Loans

As with all forms of lending, the amount you are offered, or even if you are offered one at all, will ultimately come down to your credit score. So getting a loan with a bad or low credit score can seem like an impossible feat. There is an answer to this though, and this is short term loans. These loans are designed specifically for times of financial emergency and are not long term lending solutions. There are many forms of short term loans available, with the most common being Pay Day loans. The general consensus here is that you will borrow the money for a very limited time frame, 2-4 weeks in general, and then pay back the full amount and interest once you have your next pay check.

Before signing for a short term loan, be sure that you know the interest rates so that you can work out what the total repayable amount is.

Margin Loans

This form of loan is very popular with those of us who have stocks and shares. You will essentially be gaining a loan from the stocks you own, so if your stocks are stable then you can borrow up to half of the total amount that you own. The interest rates on a long term margin loan are very competitive and this will continue to be easily managed as long as your stocks are doing well. Be advised that as soon as they drop you will face larger repayments and you may even have to pay back the full amount straight away. A viable option only if your shares and stocks are almost consistently stable.

401K Loans

401K Loans are borrowing against your retirement plan and are a very common alternative to remortgaging your homes and for when you need large loans. Every employer is different and some offer only restricted lending or even no lending at all. But if you are able to take out a 401K then you can on average borrow up to half of your balance.

The best part about this form of lending is that all the interest you pay is effectively going straight back to you, so it is a lot more efficient for you in the long run. Like with Margin Loans, there is the issue that is you are laid off or you leave your job you will be responsible for paying back the loan in full, usually within 60 days.

Whichever form of lending you choose to use, the main thing to always remember is why you need the loan and to do your homework to find the option that will work best for you.

Ellen’s comments – great post – I learned a few things from it!

5 Tips to Stay Away From Loans of Debt

13. February 2013 · 8 comments · Categories: Debt

The following is a guest post.

This is a fact, when you are in need of money, any reflection that you can make on this matter, or suggestion coming from anyone could not be a strong argument to make you change your mind, because the only real fact is that you have to get that money no matter how. Unfortunately, the first idea that comes to everyone’s mind is a desperate situation is borrowing money, as usually taking out a loan seems to be the only option to look at.

If you are in stuck in the crossroad that leads to loan debt, unsure to find another road beyond the junction sign, the first thing that you can do is calm down and keep a cool ahead finding the right choice to resolve the financial puzzle in your hands.

Warning! Stay Away from Debt Now That You Can

All of us have heard about, even people who live abroad and is embraced in the daydream of having a quick cash loan within a few minutes with a very little or nor requisites at all. Yes, these are the outline set of the almighty payday loan supposed to resolve all your problems. However, if you live outside the United States, you cannot apply for one, nor if you are an illegal alien or simply an unemployed American citizen, all of them different situation that will keep you safe from debt.

However, if you are eligible to apply for a payday loan and get approved, you will be at risk to fall into a never-ending debt trap that you must better avoid. Payday loans are easy to take out, but hard to repay due to their high interest rates and may even lead to bankruptcy.

Standard Loans Are Not Either a Solution

Loans are made to help you cover unexpected expenses that you know it is possible to repay with the money you earn, and some other income that you could generate somehow, in example, your dividends from an investment or equity you can get as a homeowner. However if you are in urgency of money and uncertain on how you will repay your debt, no matter if you shop around for short term loans, standard loans or mortgages, because it is more likely your debt will go out of control.

Other Solutions, Other Mistakes

Yes, there are many other solutions that involve debt, including using cash advances from your credit card. Nonetheless, you must remember that any money that you borrow is money that you must be able to repay with your own income, and that you must consider the interest rates added to the total amount, that may turn twice or three times higher than the money, you are asking for.

There are many other solutions to avoid falling in an asphyxiate debt that may take longer to get you the money needed, but are absolutely safe, including getting a second part-time job, selling items online, offer your services for money, and many other including borrowing money from friends or family member that may not charge you interest rates.

Author Bio: Stevie Clapton is associated with OnlinePaydayLoans.net who provide great financial articles and also present quick online personal short term loans.

Pay down debt or top up your RRSP?

04. February 2013 · 7 comments · Categories: Debt, Investing, Retirement

Yup – it’s that time of year again – last minute RRSP contribution time! So – do pay down debt or try to put a bit more into your RRSP? Here’s some tips to help you decide:

1. What kind of debt are you carrying?

If you’ve got high interest credit card debt, that should be your priority – 10, 15, or 20 percent in interest payments can do you in financially. Mortgage debt on the other hand – not so bad.

2. How much do you owe?

Carrying a big debt load is a heavy burden both financially and emotionally. If you’re struggling to make mortgage payments or have a ton of high interest debt (read: credit cards) then you might want to make debt repayment a bigger focus.

3. How old are you?

If you’re fairly close to retirement – you should really be focused on paying off debt. Making interest payments on a fixed income is no fun – especially if rates go up and you find yourself strapped for cash.

4. How much do you make?

The more you make – the more bang for your buck you get from your RRSP. If you’re earning in the top tax bracket, every 1,000 you contribute nets you a 400 tax break!

5. What kind of RRSP do you have?

If you have a group RRSP and your employer matches your contribution, then you should be taking advantage of it! That would be money lost, otherwise. Where I work, if I buy stock in my company in an RRSP, my employer will match it up to a certain amount.

6. What does the math say?

In the end, it’s a fine balance between what you’re paying on your debt and what you could be earning in your RRSP – do the math to see where you stand. One option is to use down your refund to pay down debt – but you have to have the self discipline to actually do it!

What’s your top priority – RRSP or debt payment?

How I paid off my mortgage in less than 5 years

14. May 2012 · 7 comments · Categories: Debt · Tags: down payment, mortgage, paying off mortgage quickly

I thought it would be interesting to share the tale of how I (well, Mr. Canuck Buck helped ) paid the mortgage off for my first house in less than 5 years. There were a number of factors that helped, and hopefully these can help you buy and pay off your house faster too!

1. We bought well within our price range. I think we were approved for something like up to 400,000 dollars, but ended up with a house that cost 203,000 dollars instead. So my tip here is – buy what you can reasonably afford, not the maximum the bank will let you borrow! Sure, something bigger would have been nicer, but the plus side was we got out of hosting family dinners for years.

2. We put down a fairly generous down payment – a total of 80,000 of our own funds plus 20,000 borrowed from my parents. I pulled some out of my RRSPs, some out of my savings, and some from an inheritance I’d received from my grandmother years ago. I realize this is a lot of money, and not realistic for everyone, but the tip here is that the bigger a down payment you can scrape together, the better.

3. We went the accelerated bi-weekly payment route, and also put lump sums down at the end of each year. Paying bi-weekly ensures you put down more money per year than if you pay monthly, and the lump sums really eat away at the principal. I could have gone the route of increasing our payments instead of just saving up for lump sums, but I liked the freedom to keep the cash on hand for a while just in case we needed it. I kept it in a high interest savings account so it was at least earning something.

4. We both made it a priority. I was paying the mortgage and put down the entire down payment, but Mr. Canuck Buck gave me money every month to put towards the lump sum payments. If you want to pay your house off quickly, you have to make it a priority.

5. We watched our money in other places. We got engaged just after we bought the house, but we kept our wedding on a budget, as well as the honeymoon, in order to keep on our goal of paying off the house.

What’s your tip for helping pay off your mortgage quickly?