Tuesday, 27 March 2007

Getting The Best Loan

The general motto to get the best loan deal can be summed into one word: SHOP. No, we’re not pertaining to the retail meaning of the word. Well, maybe a bit. Anyway, what we mean is that you go about looking for the best deal the same way women look for the perfect dress shoes to match her dress – carefully and meticulously.

Look around. With the number of credit companies growing steadily, the chances of being duped also increases. There will always be companies who will try to lure you with dazzling promotions like low interest rates and get the money quick schemes in order to cash in on the trend. However, how many can truly deliver your expectations? Instead of signing up with the first creditor you speak to, look around first to check your options.

Ask. You’ve finally managed to make a short list of your prospective loan providers. You come in and ask to speak with one of the brokers, who then proceeds to discuss to you what they can offer and how. Sadly, you lost him somewhere after he said hello – what do you do? Ask. Don’t be afraid to pipe up and clarify certain items that you didn’t quite follow. For all you know he was telling you that the interest rate would increase by 10% per month! Here are more questions you should not forget to ask:

- What is the current interest rate? Is it the lowest for the said date or week?
- Is the interest rate fixed or adjustable? If it is adjustable, how will your prevailing rate and loan payment vary?
- What is the loan’s annual percentage rate (APR)?
- What is the inclusion of each fee?

Check the papers. The existing rule is that the more points you pay, the lower the interest rate. Points, by the way, are fees that are paid to the lender with each corresponding loan. Check out your local newspaper for more information about the rates and points being offered.

Negotiate. For starters, have the broker list down all the costs and fees related to the loan. After that, try asking him if he would be willing to lower down or even waive one of the fees or agree to get lesser points. Keep in mind that every penny saved means a lot. Don’t be afraid to haggle because more often than not, brokers offer different rates for the same services so that they may be able to pocket the difference as commission.

Lock it in. Once you have ironed out and settled your concerns, you should request a written lock-in from the lender. The document should include the rates agreed upon, the number of points the lender is set to receive as well as the effectivity period of the said


Thursday, 22 March 2007

Budgeting 101

Budgeting or sound financial management is not something you should only do when you start working. If you have mastered the art of budgeting in college, budgeting when you’re a professional would be a cinch.

If you think that you should only start budgeting your finances when you’ve received your first official pay check, then you can not be more mistaken. You really should start budgeting the moment you hit college. It’s the closest thing you can be to the “real world”. You live on your own (in a dorm), you have your own money (allowance from your parents / credit card, student loans, financial aid), and you have your own expenses. It’s the perfect opportunity for you to see what it is like to be an adult.

So how do you go about budgeting? First, you should put all your money in a bank. Then, determine how much money you need in a specific time frame (say, a week or a month). Try to take everything into consideration (books, school fees, food, utility bills, phone bills, and a little something extra for emergencies) and do your best to stay within that budget.

Try to refrain from using your credit card and try to limit its use to emergency purchases only. Would you believe that a large number of college students drop out of school because of credit card debt, and not because of academic failure? Don’t be one of those students so don’t start the dreadful habit of chalking up all your purchases on credit and worrying about payment when the due date arrives, or paying only a fraction of the total amount due. If you get used to this kind of lifestyle, you may find yourself still buried in debt after college, and truly dependent on plastic money.

If you still find yourself over budget, remove your vices. Do you need to buy a cup of coffee everyday before you rush off to your first class? How about that smoking habit? Not only does it harm your health, the accumulated cost of those sticks and packs will most likely burn a hole in your pocket. And what about your Friday night drinking spree with your frat buddies? Is that really necessary?

Budgeting while in college seems frightening. It seems that you need to live the life of a hermit in order to have a budget with an income larger than the outflow. It’s not that way, really. You just have to differentiate your wants from your needs, do everything in moderation and know what activities or expenses to prioritize.

If you graduate from college without any debts then you’ve got it made – well, almost. You already are familiar with the basic nuances of budgeting. The next step is to put everything you have learned from inside and outside the classroom (budgeting, among others) in to practice.

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Tuesday, 20 March 2007

Auto Financing Dilemma - Buy vs Lease

Are you best suited for a loan or a lease? A lot of it depends whether you’re the type that needs the newest everything, or if you’re more the practical consumer when it comes to purchase decisions.

There are a few basics that I can arm you with when it comes to making this decision. Outside of that dealer pressure cooker they call an office, is the best time to weigh the positives and negatives each potential financial decision has to offer you and your particular lifestyle. Car dealers often times make leasing look like a golden opportunity to you as the consumer. I mean how could you possibly go wrong with a brand new car every couple of years. Depending on what is most important to you, maybe you can’t. But if you are actually considering the possibility of purchasing that car after your lease is up, there are a few things that you will want to keep in mind.

The absolutely best aspect of a lease is the low down payment, low monthly payments, and low maintenance costs; they are damn near impossible to beat with a loan. Some people who are at the moment a little strapped for cash, but see a higher flow of income in the not so distant future; consider the lease for the initial purchase with the intent to purchase afterwards. This can be a great overall plan; however, for this plan to work, the value of your leased vehicle will need to be within the same range of your buyout price at the end of the lease. Not every car is going to hold its value enough to allow this plan to work.

Often times at the end of a lease the value of the car will be upside down to the buyout price; and you would end up paying more than the car is worth on the market. In order to properly execute this plan, you need to keep track of consumer market prices for the type of vehicle you are considering. For example, right now the consumer market is predicting that the new mustang body style introduced in 2005 will easily hold its value for the long haul, and might possibly be worth more than your buyout price at the end of your lease. That is not a solid prediction of course, but it should give you a little confidence as you’re signing those papers. If the car you really want is not predicted to hold its value, not only should you reconsider it as a smart purchase; you should probably purchase the car with the best interest loan you can get your hands on right off the bat.

If you are not planning on purchasing the car, the biggest drawback of a lease is that you will inevitably always have a car payment for as long as you continue to holdout on the buyout. Like an apartment dweller; you will never be able to build up any equity in your cars, as you are only paying for their use, rather than paying to own. This is going to be more expensive in the long run; there is no doubt about that. However if owning a new car is the most important thing here, attaining a loan for every new car you purchase every few years just does not make financial sense either, and leasing would be your better bet.

To recap; if you are buying a car that you know you will want to keep for a fair amount of years you should probably just take out a good loan; and pay it off in a few years. Then preferably keep it a few more years before trading it in on another car, and so on and so forth. If you are not the kind who can have the same car for several years before getting a new one, then leasing might just be your most simple and convenient option. Decide what kind of driver you are, and then go for it! Now wasn't that just a hell of a lot more stress relieving than making that decisions while the dealership is breathing down your neck, choking you with a pen?

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Monday, 19 March 2007

Another rant

I love to read money and finance articles. I'd read them all day if I could, but some things need to get done. The never ending assortment of new and views in personal finance is staggering. There just ins't enough time in the day to see and read a fraction of what's online. I've noticed that I used to have a long daily list of blogs, forums and sites that I used to read on a regular basis, but after some time one begins to be more selective and gets it down to a few choices. Better than thumbing through the Dumbies Guide to Investing.

Sunday, 18 March 2007

Financial freedom

I want to be financially free. I think being financially free would give stability and flexibility to life. I could save the world or stay at home to play video games, all without worrying about how I would support myself.

Being financially free is only part of my dream life. There is also good health and overall hapiness, something money can't buy either of.