FHA Loan Insurance

The Federal Housing Administration (FHA) is an integral part of the Department of Housing and Urban Development (HUD). The Federal Housing Administrations oversees various single-family programs of mortgage insurance such as the FHA loan insurance program. The mortgage insurance programs operate through FHA’s authorized lending institutions that submit application/s to have the submitted property appraised. Afterwards have the potential buyer’s credits be approved. Said lenders funds the loans (mortgage) that the Department then insures. Please be advised that HUD doesn’t allow direct form of loans for the purpose of helping people to buy their homes.

The 203k loan program, is the primary program of the Department. This is for the repair and rehabilitation of properties owned by single-family. This loan is basically just for home improvement/s. As such, this is a significant tool for neighborhood and community and expansion opportunities of homeownership. Given that these are the main goals of HUD, said Department truly believes that 203k loan or the FHA loan insurance is a significant program. Supporters and lenders alike are encouraged to continue on supporting this program by actual participation.

The FHA 203k or the loan insurance program together with their partners (the state and local housing agencies and other non-profit type organizations), has been successfully used by Lenders for the purpose of rehabilitating properties.

Mortgage lenders, together with the state and local government agencies, found ways to put together the FHA loan insurance and other financial resources. HUD’s HOME, HOPE; the Community Development Block Grant Programs has been created to help and assist borrowers. Some state housing financing agencies designed some programs for use together with FHA loan insurance or the 203k mortgage loan. While other lender has used local housing, agencies and other non-profit organizations expertise in helping them manage the actual rehabilitation process.

The HUD believes that the FHA 203k loan program is a great way for all lenders to be able to demonstrate their ability and full commitment to allow lending to low income communities. With the vision to help them meet their responsibilities lawfully stated under Community Reinvestment ACT of the CRA. The HUD is highly committed to increase family’s homeownership opportunities. CRA lending programs is best partnered with Section 203(k).

How to use FHA 203K Loan:

This program is intended to be used for the purpose of accomplishing rehabilitation or any improvements of a pre-existing one up to four units, homes in one of three ways;

o To buy a house and lot and rehabilitate it.

o To buy a house on another site. To move it on a new site on the said mortgaged property and then rehabilitate it.

o To use for refinancing of existing debts and to rehabilitate a house;

For you to purchase a house and lot and rehabilitate it, for refinancing existing debts and to rehabilitate a house, said mortgage and any loan proceeds (such as other rehabilitation funds) should readily available before the start of rehabilitation begins.

For you to buy a house on another site, to move it in a new site and then rehabilitate it, the mortgage should be cleared first on the said property; but loan money for the transferring of the house can’t be released not until the unit/s is then placed onto its new foundation.

Personal Loan Insurance

There are several factors which you can not control, that can cause you to be unable to make payments on a loan that is your responsibility.

You may get sick or be involved in an accident that takes you out of work for an extended period of time. It could be that your employer has had to cut down on the number of people he employs or the wages have had to be lowered; or if you are self-employed, there is a chance that your business has not earned you enough to keep up your payments.

It could be that your expenses have increased or interest rates have risen since you first received your loan and this has made it difficult for you to make your payments.

Worry about such things may be heavy on the mind of some people who are of retirement age or well beyond retirement age and also for the people who have small children.

These are some of the reasons why loan insurance, an insurance policy that protects against the possibility of one’s inability to make repayments, is offered. You will usually be offered loan insurance every time you take on credit, however, it must be understood that you are not obliged to take loan insurance and you cannot be denied credit for not taking it. When you do decide to use the loan insurance, it is wise to shop around for the best rates, as they will vary from provider to provider, and you should not go with the first insurer you contact.

If you do decide to use the personal loan insurance, you can rest a little easier knowing that if certain events not in your control occur, your loan payments will be paid on your behalf.

You must be aware of the conditions and exclusions included in the policy agreements before you agree to any type of personal loan insurance. Too many people pay for loan insurance without much prospect of ever benefiting from it and sometimes without even knowing whether or not they have it. These are some of the reasons you should thoroughly research all offers you receive for personal loan insurance before agreeing to take it.

Some people actually agree to loan insurance coverage without knowing they are receiving it, because lenders are anxious to add it to your account as a way of increasing their own revenues.

No matter how impractical it seems, sometimes these personal insurance policies will state a requirement that you take the first job you are offered after losing your present one, with no regard to the level of pay being offered.

If you were to be given time to search for a better paying job, it is entirely possible that you would be able to find a new job that is a more suitable match for your work experience and pay level.

It is always best to have direct knowledge about the insurance you are paying for, and if it is not something you want, do not buy it. If you discover that insurance has been added to your account without your express knowledge or permission, notify your lender and have it canceled with no delay. No one wants to pay for something that they don’t intend to use and especially if they did not request it be intiiated in the first place.

Lenders Often Require Mortgage Loan Insurance

Today there is typically an insurance policy available to cover purchases or transactions of most any type, and that includes one of the largest purchase transactions people make in their lifetime, which is buying a home. A mortgage loan insurance policy is designed to protect the lender in case of default on the part of the purchaser.

Twenty percent down is a safe minimum

In cases where the home buyer makes less than a twenty percent down payment on their home, an insurance policy guarantees the lenders money is safe and they will regain at least part of the money they loaned if the buyer fails to pay or defaults on the loan. This same mortgage loan insurance is beneficial to the borrower as it allows them to not be required to pay as much. Typically a down payment is required to be at least twenty percent of the total of the loan, but some instances can be as low as five percent. The lower limit will be dependent upon the borrower having excellent credit and the borrower being willing to “cover” the difference through an insurance policy.

Pay more rather than less

There is no doubt that the more a borrower can afford to put down on a home, the less they will need to repay in the form of mortgage payments. Lenders, who offer fifteen year mortgages (rather than thirty years), will benefit from having the amount they have loaned returned far more quickly and borrowers will pay far less in interest over that period of time, plus have that home free and clear in half the time. In cases where at least twenty percent is paid down and the mortgage is secured by a fifteen year loan, the mortgage loan insurance may be substantially lower.

Mortgage loan insurance can be paid two ways

Typically mortgage loan insurance is included as part of the monthly mortgage payment or it may be considered a separate loan which requires a separate payment which can be made monthly, annually, or in a lump sum. Borrowers usually prefer to incorporate it into their monthly payment although it means they must pay on that insurance policy for the lifetime of the loan. The average cost of mortgage insurance ranges from one and a half percent to around six percent of the principal of that loan, and this is considered a tax deduction for the borrower.

Mortgage loan insurance protects lenders against defaulting borrowers

When the lender has mortgage loan insurance they will not need to worry about losing their money if the borrower defaults on the loan. This insurance can be public or private and that depends upon the insurer. Also known as a mortgage indemnity guarantee, this form of insurance pays the amount agreed upon in the policy, generally around twenty five percent. The buyer has another option if they can only offer less than twenty percent down and that is to borrow additional funds, sometimes called a second mortgage or a piggy back loan.

The use of borrow paid private mortgage insurance or BPMI allows borrows to obtain a home while paying less than twenty percent down. It is all to enable home ownership and is for the benefit of all parties concerned.

Loan Insurance – All You Need to Know

Most people are required to take a loan of some sort or the other, at various points of time in their lives. Most of them are also plagued with the fear of being unable to pay their monthly loan repayments due to some financial crunch. But now they don’t have to feel scared because they can make use of the loan insurance concept that is slowly catching up all over the globe.

Loan insurance is a kind of a protection insurance that you can undertake to safeguard yourself against inability to make monthly loan repayments. It is a form of payment protection insurance that you can undertake to help cover you when you are unable to make your loan repayment due to some kind of an illness or an accident. In most cases, this insurance is taken up to cover home loans, personal loans or even car loans.

Advantages

In case of a personal problem or tragedy, you can be sure that your loan payments will be made, thanks to the insurance on loan coverage you have. People who suffer from sickness, loss of job, accident, death or any other kind of disability, leading to inability to pay the EMI’s on loans taken will benefit greatly from this kind of insurance. With your insurance taking care of your loan monthly repayment, you no longer have to be worried about the pressure being put on your family.

There is an option to undertake joint loan insurance by those who have taken up a joint loan application, giving you and your partner coverage at the same time. This scheme is very effective for partners as there is a constant reassurance that if either of the partner is taken ill or is involved in an accident or passes away, the repayments on the loan will be made on that person’s behalf.

Now the question arises on the types of loans that are covered under the loan insurance. In most cases, an insurance on loan is usually provided for borrowers of home loans. But certain banks are known to provide the insurance on auto loans as well as other personal loans.

Insurance Premium

Like any other kind of insurance, premiums are required to be paid in the case of this type of insurance as well. The amount of premium charged will differ from bank to bank. Very few banks even allow the insurance to be taken without the requirement of a premium to be paid.

The amounts of premiums that are charged on insurance for loans depend upon certain factors such as the age of the insurance holder, the amount of loan being insured, the medical record of the person taking the loan etc. The higher the person’s age, the higher will be the premium. Similarly, a higher loan amount being insured will lead to higher premiums being charged. Also, if the person’ medical records show a good status, a lower premium will be charged on the insurance. A serious ailment or a poor physical record will automatically rise up the premium amount.

The Types of Loan Insurance

If you have taken a loan and you are not sure that you will be able to repay all the installments in time then you should consider taking loan insurance because it can protect you if you fail to repay the installments. The insurance can be taken from the same bank or the lender who has approved your loan if the same bank approves it at the lowest price but there is no such compulsion. You can also consider some other bank or lender to apply for the loan insurance if this could reduce your total expense.

The types of Loan Insurance

Before applying for insurance, you should know the types of the loan insurances you could apply for. There are three types of insurances that could protect you from being a defaulter on your loan. These insurances are the death, disability and unemployment insurance. All these types of insurance are made to secure you’re the amount you have taken from the bank and protect you from being a defaulter.

Death Insurance

This type of insurance could work in the situation if the person who has taken the loan dies in an accident then a person from the same family can be the next responsible person to repay the loan. The person who will be held responsible for the repayment options will depend on the conditions of the agreement. The loan holder will have to decide at the time of taking the insurance that who will be the next person responsible for the repayment.

Disability coverage

If the loan holder gets injured or disabled in an accident or because of some other unexpected medical problems then this coverage will cover the monthly payments of the loan holder. The amount covered by this insurance would depend on the amount as agreed in the agreement.

Unemployment Coverage

If the loan holder was employed at the time of taking the loan and was also sure to repay all the installments in time but becomes unemployed due to any reason then his monthly payments will be secured by the insurance he has taken. The amount that will be secured by the insurance would depend on the amount agreed in the insurance agreement. If you have taken a loan, the repayment of which depends on your monthly income then you should also take the unemployment coverage because no one knows what will happen tomorrow.

These insurances may increase your expense but will also secure your loan and security is necessary and important to fight against all the unwanted situations such as death, disability or unemployment. If you have covered your loan by a suitable insurance scheme then you or your responsible family members will get more time to repay all the installments if the unwanted situations happen. The loan insurance would not only give you more time to manage the balance payment but will also protect your credit score and thus it will always be easier for you to apply for the next loan when needed.

The Different Types of Loans

Today, loan has become the part of the normal living. In the present circumstances, it is difficult to identify a person without even taken a singe loan. Loans are the money provided for temporary purposes, which has to be repaid in the particular repayment track. Now, most of the people have multiple loans since the economic conditions are becoming stringent. The widespread utility of the loans have motivated to introduce many different types of loan. The different types of loan have its own characteristics and attributes, which makes it different from others. The economic regulations prevailing in the country is the deciding factor behind the different types of loan.

The different types of loan are available mainly in the focus of the purpose of the loan. The most popular types of loan include home loan, personal loan, car loan, student loan, payday loan, debt consolidation loan and so on. The lenders have also introduced many subtypes of these loans, to meet the necessity of the specific group of people. The point essentially has to be noted is that these loans have different rates and repayment track. Each type of loan will be structured according to the needs of the particular loan. In case of a particular loan type such as home loan, the repayment track will be longer and the interest rates will be comparatively cheaper.

The different types of loan can be primarily categorized into two major classes, secured and unsecured. The secured loans are the particular group of loans, which is raised from the lenders by providing a collateral security of any of your valuable assets. Secured loans seem to be the most flexible loans as they are offered in lower interest rates and longer repayment tracks. The secured loans are provided in lenient terms as the lender does not have any risk in the loan amount as they can go for the foreclosure of the asset, if the borrower makes any lapse in the loan repayment. The home mortgage, equity loan, and car loan are some other types of secured loans.

Unsecured loans, on the other hand, are provided without any collateral security. The lenders have the risk of their money and most often the rates and other attributes of loan are very narrow. The borrowers cannot enjoy many privileges in the unsecured loans, but it does not relieve you from the risk of losing any of your valuable assets, if you make any defaults. The loan refinancing is a unique loan type, in which a particular collateral property is used for a second loan in an increase loan amount or better conditions and rates. The loan refinancing is opted as a beneficial plan in many options as the collateral gains more appraisal value.

Even though the requirements for each loan will be different, some conditions can be generalized as a common requirement for any type of loan. Good credit score is the basic requirement for any loan. However, now many specialized lenders are present in the market that can provide loan to bad credit people. Due to the competition in the market, most of the lenders are ready to provide many adjustments in the loan rates. Online loan lenders have made the loan processing easy. The intensive market search will help you to obtain an appropriate and affordable loan.

An Outline of Personal and Business Loan Categories and Their Uses

The number of loan products have increased over the past 20 years as economic necessity and a demanding public in need of specialization to solve financial circumstances. From personal loans, educational loans, business loans and even municipal loans. The entities that took part in the creation of the various financial products are actuaries, risk management professionals, “information and informatic engineers” and Wall Street amongst others. It was necessary to create, enhance or break down for better or for worse loan services and products to keep money fluid in a diverse marketplace that required funds to address niche demographics.

Personal Loans

Signature Loans – A signature loan is just as it sounds. One applies for a loan and gives a signature on a promissory note to repay the loan in a certain amount of time. That amount of time is called a “loan term ” and may be from six months to five years. Signature loans usually require good credit and the criteria for loan approval are mostly based on the borrower’s credit and and to a lesser degree on assets. Not all signature loans have the same parameters for qualifications. Some loans may require the borrower even with good credit to account for assets to show the lending institution for underwriting purposes. The institution may or may not place a lien on the assets but nevertheless wants to have documentation proving that there are indeed financial or physical assets owned by the borrower. Signature loans usually come with lower interest rates than other types of consumer loans like payday loans, credit card advances, title loans and some car loans. More on these topics later. Who are the lenders in signature loans? They range from large subsidiaries of auto manufacturers to banks, savings and loan institutions, finance companies and payday loan companies.

Credit Card Loans – Credit Card loans or cash advances from credit cards are another form of personal loans. These quick loans are more readily available to the general public and does not require a credit check. To obtain the initial card more than likely required a credit check or at least the process of identification for secured credit cards. Credit card loans or advances usually come with higher interest rates and also other fees for having access to the cash. Various entities allow access to the credit card cash advances from bank tellers, check cashing facilities and automated teller machines (ATMs). The fees vary based on source used to access the funds. To lower the fees for cash advances some use check cashing facilities to have the card charged and receive cash back in turn for not having to incur the fees of ATM machines as cards are assessed a fee twice; first by the ATM company and also their bank. The interest rates on credit card loans or advances are usually higher than signature loans. There are some states that have usury laws that have lower interest rates on credit cards. The loan or advance on a credit card is not a “term loan” as with most signature loans. It is more or less a line of credit the borrower has access to when they need it as long as there are funds available on the credit card. Interest on consumer loans are no longer tax deductible as in previous years. They were designed for short term borrowing needs but many have come to use their credit cards as a regular source of funds in tight economic times or between paychecks.

Wedding Loans – A relatively new form of loan to carve out a niche for the lending industry and meet the needs of the increasing costs of weddings is the Wedding Loan. Because of the expense of weddings which can range into six figures, it sometimes requires a personal loan or even a business loan of the families involved to provide a proper wedding. Wedding loans can be secured (using assets for collateral) or unsecured (signature loans) to obtain funds for the ever growing need to pay for the escalating wedding costs and all the various services and products that a successful matrimonial ceremony would need. The credit criteria and the term may vary based on the amount needed and financial status of the people involved.

Payday or Cash Advance Loans is a fast growing market because it usually requires the least of credit criteria used for loan approvals. One can have bad credit for a quick and instant loan. Just having proof of income, proof of identity and a checking account is all that is necessary to secure funds. Even today many have checking accounts without checks one can still obtain a cash advance by asking their bank to produce a one time check to give to the payday loan agency. Many payday loan companies and stores can get approval with no faxing of documents as they utilize other means for proof of income. Although payday loans come with very high annualized interest rates they sometimes are the only source of emergency cash loans for those in need.

Automotive, Motorcycle, RV (recreational vehicle) and Boat Loans – These personal consumer loans are usually not signature only loans but asset based loans. In other words a financial lien is placed against the asset to secure a loan to purchase or refinance the car, boat et al. These consumer loans may sometimes require a down payment of five to twenty-five percent to secure enjoyment and use of ownership. Because these are not funds that are already available as with credit cards they come with a “loan term” from one to six years depending on the choices of the consumer, the marketplace and the credit status. The interest rates can range from very low usually offered by manufacturers of cars, motorcycles, RV’s (recreational vehicles) and boats to very high if the borrower uses a credit card, a finance company or a “buy here – pay here” lender – or the car dealer who finances the purchase of the car by giving the borrower a term of months and years to pay the balance of the loan off.

Business Loans

SBA (Small Business Administration) Loans are loans that are given to small businesses which are not able to qualify for a loan from a financial institution for various reasons from lack of business history, lack of collateral to “secure” the loan or not having an adequate credit history. The SBA is not a direct lender but acts as an underwriter on behalf of the bank that funds the loan for the business entity. If the borrower defaults on the loan the SBA will pay the bank a percentage of the balance for taking the financial risk to loan the funds to the business. There are various types of SBA loans which will not be covered in this article but a future article will explain in more detail.

Conventional Business Loans are loans that are either unsecured meaning no asset is used to approve the loan or secured and called “asset based loans” where assets from inventory, equipment, accounts receivable or real estate are used for underwriting for loan approval. Conventional business loans are given to business entities that have great banking relationships, established business credit history with trade lines with other businesses they do business with and good standing with various credit reporting entities like Dun & Bradstreet. There are short term loans with interest only payments with the balance due at the end of the loan usually referred to as a “Balloon Loan”. There are also longer term loans that are fully amortized (principal and interest in each payment) paid over one to five years or more.

Equipment Leasing is a financial instrument which technically is not a loan. Meaning based on tax ramifications and who owns the equipment – leasing is just that – leasing an asset owned by another entity. Leases are usually from large corporations or a bank. The lease term can vary from one to five years or more and there usually are tax benefits to the business entity in leasing new or used equipment.

Equipment Sale Leaseback is a transaction to use equipment that is already owned by the business or municipal entity to secure funds for the present need for operations. The term can vary from one to five years and the amount of funds can vary based on credit history and a percentage of the fair market value of the equipment. The company then in turn leases the equipment back in usually a monthly payment. The company or the lessee normally has different choices on what they want to do with the equipment at the end of the term. They can roll the lease transaction into newer more updated equipment or software. They can buy the equipment for one dollar or ten percent of the fair market value of the equipment.More and more companies are leasing today as opposed to paying cash or using bank lines or loans.

Merchant Cash Advance is used by businesses that need fast cash and can’t qualify or don’t want to go through the process of getting bank approval for needed funds. A Merchant Cash Advance is also not a loan product but it is the selling of assets or credit card receipts at a discount. In other words the Merchant Cash Advance company buys the credit card receipts and then attaches a fee usually every time the business “batches”, settles or closes the day’s or week’s sales until the funds advanced are paid off. There is no term with merchant cash advances as it is not a loan so there is no set payment amount or period. The paying off of the advanced funds vary based on a the credit and debit card transactions of the day or week.

Factoring Accounts Receivable Invoices enables a business entity that normally has to wait 30 days or longer to be paid by other businesses or governmental entities. Again factoring is not technically a loan but a selling of invoices at a discount for cash now. In a typical transaction the company applies with a Factoring Company and the company looks primarily at the credit of the other business or governmental entity that the company is doing business with. Based on that as long as the client of the company is a solvent business or government agency the invoices are bought and funds are dispensed to the business usually within three days of due diligence on the company they are transacting business with. In other words the funds are dispensed after there is a credit check and processing of the other company. The dollar amount that is advanced can vary from fifty percent of the invoice to eighty or ninety percent depending on various factors such as the size of the invoice to the credit criteria of the other company or governmental entity whether it is a city, county, state or federal agency.

Medical Factoring is a financial transaction that benefits medical entities like hospitals, clinics and various health care professionals that have to wait to receive funds for services performed on patients. Like Factoring and Merchant Cash Advances Medical Factoring is the selling of assets in this case invoices for cash now. In many instances the health care industry receives payment from third party entities like insurance companies, Medicaid and Medicare and state entities that provide funds for those in need of medical procedures. The medical facility or professional in turns sells the invoice(s) on a on going basis or one time for cash now. Once there is an interest is selling the receivables then a Factor steps into analyze the billing so that funds can be advanced. This process can vary in length but is usually shorter in length than the process of getting bank financing.

Contract and Purchase Order Funding allows companies to bid on large projects for governmental agencies, hospitals, universities, prison systems and municipalities or also to sell to larger corporations even if the business does not have the credit or bank approval or the wherewithal to service or fulfill a large contract order. Similar to Factoring which works hand in hand with Purchase Order Funding it is not a loan but a simultaneous transaction that involves advancing funds based on the credit of the governmental agency or larger company and the size of the contract. The funds that are advanced are for the cost in completing the order of products or performing services. So the profit that will be gained is not advanced but the costs as in raw and finished material, transportation, production, labor, expertise and any other costs involved in completing the contract. Once the contract is completed or once an invoice is ready to be sent to the client a factoring company which is sometimes owned by the same company buys the invoice at a discount and the funds that would normally be advanced to the company are usually used to settle the amount advanced for the material and other services that were needed to complete the order. Contract and Purchase Order Funding usually requires large transaction amounts as opposed to factoring that can be utilized for invoices as small as one hundred dollars. With the use of Contract and Purchase Order Funding companies that were locked out of the process of bidding on large contract s may become players in multi-million dollar deals.

Commercial Real Estate Sale Leasebacks are similar to Equipment Sale Leasebacks featured in this article. Instead of utilizing owned equipment to secure cash when bank borrowing is not wanted or not available the commercial real estate is used to access funds now. This can vary from office buildings, medical buildings, retail franchises, industrial buildings and manufacturing to large utility plants. This frees up cash “locked” away in real estate. Many entities find that at the present time the business they are in whether it is retail, manufacturing or another field that the holding of commercial real estate is not in their best financial interest for now. They prefer to put to use funds for their industry. So a retailer selling retails goods decides to focus on the retail operations and to lease the space because that real estate when factored into a myriad of calculations does not fit their financial goals during the present time. Yes the ownership of commercial real estate is an asset and can be used as a security for a loan but may also be viewed as a fixed non-performing entity that does not meet the needs of the business, organization, group or individual that owns the building. Commercial Real Estate Sale Leasebacks are another form of getting access to funds and has increased over the years.

What Is the Student Loan Consolidation Rate

The student loan consolidation is the merging of several student loans, and is done to save money on interest and for the convenience of one payment instead of several. There are plenty of things you should know about student loan consolidation, and this site provides the information you need to make a decision.

Consolidation Loan – Information
It is very likely that if you went to college is likely to stay with some kind of student loan debt. Each year, borrow, this is a new and unique loan that helps pay for your tuition and living expenses. When all is said and done, however, one of the best ways to save money is through student loan consolidation. In a student loan consolidation you get a loan paid in full.

The student loan consolidation is a mystery to many college students and graduates. The truth is, however, the consolidation loan can save you much money. In addition, you can pay off your debt faster so that your college years are not chasing you in your retirement years. What a relief loan consolidation provides students.

There are many ways you can get a consolidation loan. You can get federal loans, a bank or a private lender, but no matter what you choose to do so; consolidation will have a big effect on getting out of college under their debt. The idea is that it takes only one payment per month, so you can pay your debt off faster and with lower monthly payments than you think normally.

Loan consolidation current students
It is a fact that almost half of all college students graduate with a degree of student loan debt. The average debt of $ 20,000 is focused on. That means an entire population of young people with serious debt and no education on how to deal with it. Most do not know, but the truth is that many of these students are met to consolidate loans and at school.

Despite what many believe, student loan consolidation does not have to wait until after college. In fact, there are many benefits that have been consolidating while you are still in school. Consolidating student loans while in school can lessen the debt before you even start to pay debts. That, however, is only the beginning.

Another advantage of the consolidation of student loan debt while still in school is that you can avoid any increases in interest. In July 2006, interest rates for federal student loans rose sharply. There is nothing that prevents this kind of tours that take place once again. The sooner your debt is consolidated and locked, the less likely victim of a rapid rate of rise.

As with anything, make sure that consolidating student loan debt before you graduate will work for your specific situation. In most cases, however, is a good financial base and move forward. Lightening your debt before he was even paying it is a great benefit. Indeed, it can be the difference in paying their loans off in 10 years or 30 years.

Benefit Credit
Consolidating your student loan debt can do more than just reduce your long-term debt. The fact is that consolidation could help you increase your credit score during the loan. This, in turn, will help you buy a better car, get the house you want, or end up with a lower rate credit card. But how can a debt consolidation student loan can help you increase your credit? Consider some of the measures used by credit rating agencies reporting.

First, further opening the accounts with the lowest score will be, in general. Throughout his student life, which will be held until 8 loans to pay for their education. Each of these is shown as a separate account with its own interest payments and principal. By consolidating, you close the accounts to one account. So instead of 8 open accounts, you have one. This right will not help you qualify.

Second, you will have lower payments after you have consolidated your student loans. When the number of agencies reporting your credit score, they do looking at their minimum monthly payment. Instead of having several payments per month for your student loans, you have a payment that is less than the sum of the payments of age. Again, consolidation helps your score.

As a final point, that improving your debt to credit rationing. When your score is figured, the presentation of reports have companies check your debt to available credit test versus credit used. When you have more credit available, but less used (like when you consolidate student loan debt) after the case of a higher score. So, if for no other reason, consider consolidating to help your credit score.

Beware of traps when you make loan consolidation
As we approach the end of his college career, you have undoubtedly received a number of flyers, mail and e-mail about consolidating your loans. Each company has any reason you should go to them for their consolidation. However, you should be aware that sometimes there are many catches all those promises. Knowledge of the catch can help you prepare to make a wise decision on your consolidation loan. Do not drop the first consolidation of trading that falls into your lap. Carefully consider the options that are delivered to you.

A bonus can be offered is common to all discounts. They will tell you that if you make a series of payments on time, you will receive a discount. The only problem is that to maintain the discount, you have to make timely payments for the loan after that. That may have up to 20 years. A delay in the payment in one day during that time and “discount” is gone.

Another way to get caught in a plus is when you receive the offer of an all in one building. In this loan, the company offers to take in all of its debt, including credit cards, car loans, and any other debt you have. It is tempting to have everything wrapped into one loan, but lose the ability to defer its predecessor or student loans. The loan will no longer be protected as a student loan.

As a final point, be careful with changing your email address or moving. One or two letters misdirected, or worse, the wrong orientation of emails and a lender can make you pay the price. You could lose a discount or paid excessive fees. Therefore, it is unaware of any company that offers strictly to work with you via email.

Know what you get when it comes to consolidation loans
It is important to be familiar with what they are entitled under the Higher Education Act. There are certain advantages for a federal student loan and consolidating it. Note that many lenders offer special advantages consolidation as these that are giving away. They are, in fact, offers to do. Consider some of the most common.

At the same time if you got a letter advertising the beauty is that a company is willing to offer a fixed rate? If you have, not surprisingly. In fact, everyone should offer a fixed rate under the Higher Education Act. This is not a bonus, just what you expect. Do not drop the line that are offering more than they deserve.

Another you might notice is that there will be a credit check. Again, this is not only common but also necessary. All companies that work with the student loan consolidation have to do without a credit check. Knowing what a company is obliged to offer you help in determining if the institution is actually offering a bargain or are misleading, you may believe you are getting a real bargain, more than are required to receive by law.

As a final point, you should never have prepayment penalties. No matter what the company advertises that all their loans without prepayment penalties consolidate. This is nothing special. When you are seeking privileges, then just make sure you are offering something really special.

Myths about consolidation loans
As with any financial matter, there are a lot of misinformation floating around the student loan consolidation. These little myths often keep people from consolidation when, in fact, is best for them. By taking a look at some of the most common myths, you will be able to understand what is true and what is not there.

It is absolutely certain that you will lose your eligibility deferment if consolidating your student loans. By consolidating, in fact, to keep the core deferments can be a great help pay part of the time. Deferrals can be made because in school, go to graduate school, economic hardship, unemployment and to name a few.

Consolidating your student loan is not like this refinancing the house necessarily. Some people worry that if they consolidated from over payments and interest and will end up paying more in the long run. That’s not true. On the one hand, you can pay early with no penalty. Second, get a better rate and can repay all loans under which a fee. The consolidation, if anything, reduce the term loan when it’s all said and done.

As a last point, it is easy to think that consolidation is for those who do not know what they are doing with their loans. It is unclear whether this idea comes from, but is so common that many believe it is and the avoidance of consolidation. The truth is that consolidating your student loans, in most cases, a sound financial move. You save money and reduce the loan period. It’s that simple.

Loan consolidation, as do
The process of getting your student loans consolidated is surprisingly easy. Once you have determined that you use for your consolidation application is only about a page long. Even more exciting is that there are several ways to fill the requests. Take a look at the various options available to you so you can decide which way works best for you.

One option is, of course, do so in person. You can always go to the bank or financial institution that is to consolidate your loan and take care of it. Fill, sign, and he did and in his way. The lender will review your request and contact you with your decision. Whatever, if they live nearby?

Surprisingly, you can complete your application over the phone. It is not really fill you on the phone, but the introduction of information you can go ahead and lock types for consolidation. Once you have done this, it will likely be sent by email or documents for you to finish complete, sign and send back in.

Third, at this time is not surprising that you can complete your application consolidation loan over the Internet. Many lenders have secure websites with the application there to fill. Once they do fit, you get a copy, and all the care within days.

Find your lender
Obviously, before it can consolidate, you need to find a lender with which to organize their consolidation. Fortunately, there is much competition out there, which means two things. This means that companies are easy to find and they are all willing to compete for your business.

The first place to look may be just around the corner or in your mailbox. As we approach the end of school or after the change, about every lender will send you a flyer, email, brochures, catalogs or information about the consolidation of their packages. There is nothing wrong with looking through these free brochures. Many times you will find a good package that way.

Another option, of course, is to talk to your school’s financial aid office. Someone can help you find what you need. What’s more, they have had experience in the area to know what to look for and what to avoid.

As a final point, you can watch online. There are many options available and easy to shop that way. Be sure to contact the places in person or by phone, however, before completing paperwork. That way you can be sure that everything is at maximum and more. It’s a good way to avoid online fraud and only those who seek their harvest information and move on.

As you can see, there are many options to find your company to consolidate student loans. Just make sure you always compare and ask questions. In the end, the best consolidation company is giving you what you want.

Problems with your payment?
No matter what you do with the consolidation, it is possible that your student loan debt can become too high. With only ten years to repay, could end up with fairly high payment, especially if you go to graduate school or even add more years to student work. Stop payments can really put a cramp in your financial situation. There is an answer, however. If loans and payments are too unbearable, you can always expand. You can take the loan and stretch over years in many cases.

Although the standard is 10, your consolidation loan can, in most cases, taken out much longer. You can stretch to 15, 20 or even 30 years. You will earn more interest that way, but with a lower monthly payment, you will have more capital available with which to live your life. You have to decide if you are willing to pay more in interest to make your finances more manageable.

Think of it like this. Would you rather own a home and a new car while paying a little more interest, or if you do not pay their loans off in 10 years, but years pass, in a small apartment with a bad car and not rent available? Most prefer the former over the latter. Therefore, there is no shame in extending the loan if that is what we do.

Best School Loan Consolidation Options

School loan consolidation provides you an opportunity to merge all your loans and pay only once for all of them. There are a number of options catering to almost everyone’s needs. These options are divided into the following two major categories:

Federal loan consolidation
Private loan consolidation

1. Federal:

This type of school loan consolidation provides financial help to those who are enrolled at schools that participate in federal aid programs. By school we mean a two-year or four-year degree awarding public or private college, university or trade school.

Consolidation can help reduce your student loan debt by fixing and reducing the interest rate on your loans. This loan option will also combine your separate loan debts into one package thus managing your debt paying options.

Eligibility for federal loan:

In order to qualify for federal consolidation, one should check out the following things before applying for it.

The candidate should no longer be enrolled in school (defined as being enrolled less than half-time)
You must be in the ‘grace period’ of the loan or must be actively repaying your loan.
Most consolidation companies require a minimum loan amount i.e. $10,000 is typical.

Types of Federal Loan:

Federal Family Education Loan Program: These are public-private loans aimed to deliver and administer guaranteed educational loans to parents and students. It provides the following types of loan for post-secondary education:

Stafford Loan: Stafford loan consolidation is a fixed-rate refinancing program that combines all your existing federal loans into one new loan.
PLUS Loan: PLUS loan consolidation is another form of federal school loan that allows you to pack all your PLUS loans previously taken to finance your kid’s education, into a single loan with a lower monthly payment.
Graduate Stafford Loan Consolidation: Graduate Stafford loan consolidation is a great financial tool for those who have recently graduated and are trying to pay off their graduate Stafford loans.

Federal Direct Consolidation Loans: Federal direct loan consolidation is a practical repayment tool that enables you to combine all your Federal Direct student loans into a single loan. Federal Direct loan offers the following consolidation options:

· Direct Subsidized Consolidation Loans: Thiscombines federal student loans eligible for interest subsidies, such as subsidized FFELP, Direct Loans and Federal Perkins Loans.

· Direct Unsubsidized Consolidation Loans: Thiscombines federal student loans not eligible for interest subsidies. If any one of the loans to be consolidated is unsubsidized, then you are eligible for Unsubsidized Direct Consolidation Loan.

· Direct PLUS Consolidation Loans: Thiscombines FFELP PLUS and Direct PLUS loans.

Benefits of Federal Loan:

Various benefits can be availed if you opt for federal program. Some of them are stated below:

Reduces monthly payments
Provides fixed interest rates
Requires only one payment every month
Improves credit rating
Offers flexible payment options
No pre-payment penalties

Disadvantages of Federal Loan Consolidation:

If compared to the benefits, consolidation has lesser disadvantages, which are mentioned below:

Takes long to pay back
Increases the total amount of loan
Locked interest rates i.e. if interest rates go down, your rate will not decrease/change
Lose benefits (if any) from previous loans

2. Private loan :

The purpose of private loan consolidation is more or less the same as that of federal loan consolidation but the procedure and features differ. It combines only your outstanding private education loans into one package. Private loans cover educational expenses like tuition, accommodation or any other educational expenses.

Eligibility for private loan consolidation:

As there are few eligibility rules to qualify for federal loan consolidation, similarly the private loan levies some regulations on every application that it receives for necessary approval. These criteria are mentioned below:

The candidate should be atleast half-time enrolled in a degree or technical/diploma program
Have a minimum of $10,000 in private educational loans
Is in repayment status of private education loans at the time of application
Have good credit standing
Have proof of accommodation and present income

Benefits of private loan:

Improves the payment history and credit score
Gives competitive interest rate against non-government loans
Provides a way to consolidate virtually all private and non-federal educational loans
Allows you to consolidate education-related debt as well as education-related credit card debt
Enable you to write fewer checks and may also lower down the monthly installments
Longer repayment term (up to 30 years in some cases)
Lower monthly payment

Federal loan versus Private – The Difference:

Federal loan consolidation is a tool to refinance federal education loan only while Private loan consolidation is a way to refinance private education loan only. The main difference is that a federal loan consolidation comes with a fixed interest rate while private loan consolidation comes with a market rate that may be fixed or variable.

If you consolidate both federal and private loans, you should make sure to keep them separate, i.e. refinancing a federal loan with a private loan will most likely result in a much higher interest charge, if compared to the amount you would pay by keeping them separately.

Best Commercial Loans For Business Owners

Discover the “Forgotten” SBA Program Worthy of another Look

Much has been written on these pages in the past two years about a little understood and even less used commercial real estate loan program called the 504. As our lending firm was the first and is still the only nationwide commercial lender to exclusively focus on only this loan product, I’d like to succinctly put to rest some of the more common misconceptions about this terrific loan product. Rather than waste anymore ink, let’s get right to issue at hand . . .

Who Uses It?

The 504 loan is for commercial property owner-users. It is not an investment real estate loan product per se. Borrowers of 504 loans must occupy at least a simple majority (or no less than 51%) of the commercial property within the next year in order to qualify. Two operating companies can come together to form an Eligible Passive Concern (EPC) (otherwise known as a Real Estate Holding Company, typically as an LLC or LP), however, to take title to the commercial property. In other words, a 504 loan doesn’t have to be just one small business owner purchasing his commercial property. It could be a physician and an accountant each utilizing 3,000 square feet in a 10,000 square feet office building (at 6,000 total square feet in their LLC, they would occupy 60% and be eligible) for example. Additionally, at least 51% of the total ownership of the Operating company(ies) and EPC must be comprised of U.S. citizens or resident legal aliens (those considered to be Legal Permanent Residents) to qualify.

There are no revenue restrictions or ceilings for 504 loans, but there are three financial eligibility standards unique to them: operating company(ies’) tangible business net worth cannot exceed $7 million; operating company(ies’) net income cannot average more than $2.5 million during the previous two calendar years; and the guarantors/principals’ personal, non-retirement, unencumbered liquid assets cannot exceed the proposed project size. These three criteria usually do not disqualify the typical, privately-held small to mid-sized business owner; only the absolute largest ones get tripped-up on these. Last fiscal year (October 1, 2004 to September 30, 2005), nearly 8,000 business owners used 504 loans for over $11 billion in total project costs representing a recent five-year growth rate in the program of 22% year-over-year.

Why Use It?

These loans are structured with a conventional mortgage (or first trust-deed) for 50 percent of the total project costs (inclusive of: land and existing building; hard construction/renovation costs; furniture, fixtures and equipment [FF&E]; soft costs; and closing costs) combined with a government-guaranteed bond for 40 percent. The remaining 10 percent is the borrowers’ equity and is usually a third to half as much as traditional lenders require. This lower equity requirement lowers the risk for small business owners as opposed to lowering a lender’s risk profile with more capital injected into the project like with ordinary commercial lending. It also allows the small business owner to better utilize their hard-earned capital, while still getting all of the wealth-creating benefits commercial property ownership provides.

Unlike most commercial bank deals, these loans are meant to finance total project costs as opposed to a percentage of the appraised value or purchase price, whichever is less. The first mortgage (or trust-deed) is typically a fully amortizing, 25-year term at market rates, while the second mortgage (or trust-deed) is a 20-year term, but with the interest rate fixed for the entire time at below-market rates. The second mortgage (trust-deed) on 504 loans is guaranteed by the U.S. Small Business Administration (SBA) and is, contrary to popular belief about SBA loan programs, the cheapest money available for typical small business owners. For most of the past two years, the SBA bond rate hovered near six percent fixed for 20 years, which is an incredible deal for any small to mid-sized business owner and very tough to beat. Not only do these loans provide better cash flow for borrowers (by borrowing at better rates and terms), but they also provide the highest cash-on-cash return available in the commercial-mortgage industry which is a financial metric used by most successful real estate investors. Furthermore, these loans are assumable should borrowers decide to sell their property in the future, but a better strategy for most small business owners would be to sell their operating company while keeping their EPC and cashing rent checks long into their retirement.

Why You May Not Know Much about These Loans?

Many bankers and brokers don’t like to offer 504′s because they fundamentally are smaller loan amounts for the bank (typically only 50% first mortgages or trust-deeds versus the common 80%), which means a banker has to work that much harder to bring in more assets and the smaller loan amounts also hit the typical commercial loan officer right in the pocketbook. They would rather discuss the SBA’s more notorious 7(a) loan program, which has a well-established, if not egregiously well-paying secondary market (due to Prime-based, floating rate pricing) already in place, when the issue of low down-payment commercial loans comes up. When you couple those two reasons with the fact that these 504 loans take more effort and skill only on the part of the lender, it’s no wonder this loan product has only recently started to catch fire in the marketplace.

So what are Some Common Questions about These Loans?

Isn’t There Tons of Paperwork Involved?

This was certainly the case years ago, but it is no more. With the advent of more and more specialty lenders and the recent focus on streamlining the SBA application process, 504 loans are no more involved than most ordinary commercial loans. While the documentation is specific and detailed, most small business owners are ably organized and prepared when the alternative is to pay two to three points higher in interest rates with no documentation or stated income commercial loans.

Aren’t There Extra Fees Involved?

When all closing costs are considered, 504 loans usually average about 25 to 50 basis points more in total loan fees on an average sized transaction. With stronger borrowers (i.e. better debt service coverage ratios [DSCR], higher personal liquidity, and/or better personal credit scores), these fees can usually be negotiated lower. Most small business owners utilizing 504 loans are willing to pay slightly higher fees, however, in order to receive longer-term, below-market fixed interest rates on nearly half of their deal, while receiving the highest cash-on-cash return from their property. This is exactly the reason my business partner and I chose a 504 loan when plenty of alternatives were available to us. That’s right – we actually have a 504 loan and have been in the shoes of 504 loan borrowers, so I have first-hand experience of using the loan product that we offer.

Don’t These Loans Take 3 or 4 Months to Close?

This is another old relic of the past regarding these SBA loans. Our quickest 504 loan to date took only 35 days from the first phone call to the closing table, and the commercial appraiser ate-up most of those days while we waited. We’ve done countless others in much less than the typical 60 day commercial real estate contract. If a lender claims they need nearly four months to fund a 504 loan, then perhaps you should look elsewhere. Twenty-four to forty-eight hour pre-approvals and four or five-day commitments are becoming the norm with most specialized SBA lenders.

Aren’t These Loans for Start-ups or Low DSCR Borrowers?

Plenty of 504 loans are approved with start-up borrowers and/or borrowers that don’t have DSCR’s greater than 1.25 times. While it is true that most 504 loans are for more credit-worthy (usually bankable) borrowers, this is not a necessary condition. Frequently, 504 loan borrowers with lots of experience in a given industry, but no actual ownership experience, will have an easier time securing a 504 loan than a conventional bank loan. Projections-based deals and franchised deals are often great candidates for 504 loans when the project involves commercial property. There are other SBA loan programs that may be a better fit for pure start-ups, as 504 loans do not allow for the financing of working capital, but those other SBA loans can often be used in conjunction with SBA 504 loans.

Doesn’t a Borrower have to Pledge their House as Collateral?

Only some lenders require this for 504 loans, and it is increasingly rare. Other SBA loans, on the other hand, must be “fully collateralized” in order to maintain their government-guarantee which is where this generalization comes from. Most 504 loans only secure the commercial property and/or equipment that are financed as part of the 504 loan project.

What if a Borrower has a “Checkered Past”?

Misdemeanors and/or felonies are not in and of themselves, reasons to disqualify someone from getting a 504 loan. There is an added process that often lengthens the time to closing, but the SBA usually approves borrowers with misdemeanors or borrowers with felonies that occurred in the distant past. Defaulting on previous government-guaranteed financing, however, will preclude someone from securing a 504 loan or any other SBA loan. Personal bankruptcies that occurred more than seven years ago usually will not prevent a 504 loan approval, assuming the present-day underwriting variables look promising, but more current bankruptcies are examined subjectively and frequently won’t be approved.

How do you determine who to Call for a 504 Loan?

If you visit a lender’s website to do some due diligence on them, make sure they at least list and/or mention 504 loans, as a means by which you might gauge their competency with these loans. Any lender can say they do 504 loans, but it is far better to work with those that can demonstrate their past experiences with the product, as well as detail their commitment to it on a go-forward basis. Like most things delivered better by specialists, it isn’t usually a question of if a regular lender can provide a 504 loan; it is a question of how well they can provide it. Choose wisely.