Posts Tagged loans
The End of Cheap Money: Interest Rates on the Rise
Posted by Top Home Loans in Economy, Investing, Mortgage Advice on April 29, 2010
Why would countries want to increase interest rates?
With low interest rates, the country can increase their output levels because of cheap capital, yet when rates increase, then productivity will drop. The reason that banks need production to drop is to be able to maintain inflation at a reasonable rate. Inflation causes the average price of goods, services, and housing to increase in price year over year. By allowing money to be lent at discount prices, this causing the money available to depreciate in value. The more money available, the less the money is worth.
With interest rates at rock bottom levels for the past year and a half, it is definitely time for the rates to return to an economically feasible level. This means that their will be a reduction in goods, services, and housing bought and sold.
Although, the Bank of Canada intends to increase rates, they will still have problems doing this because they will risk exports. This is because the Canadian Dollar is already at par with the US dollar. If Canada increases their rates, then it can be expected that the Canadian Dollar will increase in value. This would be bad idea for the export market.
The government must keep a delicate balance between interest rates and inflation. Although, emergency measures have been put in place. We are at the end of the years of cheap money. Expect to see the cost of money increasing in the short-term at least.
What did you buy while money was cheap? When do you expect these low rates again?
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Getting a Perfect Credit Score
Posted by Top Home Loans in Credit Information on October 9, 2008
A very high credit score is essential for getting essential products like loans, lines of credit, mortgages, and investment accounts. It is even an important factor in getting employment, relationships, finding housing, and other important social aspects; however, for many people getting there start in the credit world is tough because no one will approve them for a simple credit card.
You might of never had a need for credit or have had bad credit experiences in the past; however, you are not out of luck.
Going from 0 to 500
The first step to getting or rebuilding your credit is to get a few credt cards, but how will you get one if you get declined for every credit card application you make? Banks view you as very risky; however, many banks offer programs where you put $500 down on a secured credit card, that way when you shop with your credit card, you are using your own money. The fees on this card is limited; however, you have to come up with the initial $500 to start building your credit.
Once you have the secured credit cards, make sure that you are making all of your monthly payments on time, every month. Once you have been using this credit card to build your credit rating over the first year, then your credit report should be established enough to apply for unsecured credit cards.
From 500 to 800
Once you can begin getting unsecured lending products, you must follow these key rules in order to ensure that you maintain and build your credit rating:
- Pay your bills on time every month – This is extremely important, because the banks want to know that if they lend you money, then you are going to consistently make the monthly payments to pay off the loan. If you fall behind on your payments, then make sure you pay them as soon as possible. If you have anything go to collections, then this will have severe negative effects on your credit report. Do not let this happen.
- Keep revolving balances low – If you have credit cards, then try to pay off the balance at the end of each month. Many banks can setup your account so it will automatically withdrawal the funds from your bank account. High balances will negatively affect your credit report. Do not close old credit cards, the age of the account will keep your credit report strong. Old credit cards have a higher benefit to your credit report then new cards.
- Applying for Products – The credit bureau understands that people shop for loans, lines of credits, etc. to try and get the best possible rates. If credit reports are checked within days of each other, then this will not have much of a negative impact on your credit score; however, if you are completing credit checks on a monthly basis, then this will have a largely negative impact on your credit report.
- Limit Your Credit Cards – The average age of your credit products affects what your credit rating is. It is better to keep old cards and refrain from getting new credit products. It is always better to use an old product, then applying for a new credit product.
- Managing Your Credit – Do not apply for every offer that comes your way. When you get pre-approved applications in the mail, throw them away if you don’t need them. Only keep what credit you need and don’t carry too many unused credit cards; however, don’t cancel cards if you are not using them.
What’s in it for me?
When you have an extremely high credit report, there are many things that you can get that you wouldn’t be able to get with no score. The following is just a few of the examples:
- Employment – Some companies require a minimum required credit score for new employees.
- Housing – Most mortgages require a minimum credit score for you to be approved. Also, you can get better interest rates with a better score on your mortgage. Many landlords require a minimum credit score to rent a property to an individual.
- Credit Cards – Most cases you are required to have a minimum score to get approved. Higher benefits are on credit cards that require a higher credit score to be approved. Also, the rates can become lower if you have a better credit score.
- Lines of Credit/Loans – These require a higher credit score to get approved. Usually, these products have lower interest rates then credit cards.
- Mortgage – The higher your credit score, the bigger house you can get, the lower the mortgage interest rate you can get.
- Saving Money – With a better credit score, you can usually get a much lower rate on many lending products. This, in turn, will be able to save you a lot of money on interest rates over the years by keeping a good credit score.
- Relationships – When seeking a spouse, most people will not want to be with someone who cannot handle money, get approved for credit, or get a mortgage. This even applies if the person is making a six figure income because you will still require a good credit rating to get many of the better things in life.
By following these steps, you can go from a horrible credit rating to an extremely good credit rating. This will be able to open many doors in your life, and make your life that much better.
Save your Mortgage from the Bank. Simply Mortgages can Help!
700 Billion Bailout Package
Posted by Top Home Loans in Mortgage News on October 5, 2008
Last week was a huge week in the future of the world economy. The United States is going through one of the biggest credit crunches the world has ever known. This is not just defaulting firms in North America; however, it is defaulting firms across the globe.
The only cure, according to Paulson and Bernake, is to shore up the financials with 800 billion in new funds. The implications of 800 billion on the economy will be far greater than the news media outlets would lead you to believe.
The scariest thing is that the bill was voted in under martial law, meaning that the representatives that voted on the bill did not read the bill before voting on it. The updated bill had almost 500 pages to it, and may include certain legal jurisdictions to change the financial landscape as we know it forever.
The Future of the Economy
What exactly happens as a result of the government bailout is purely speculation at the moment. We are standing on the brink of the future of the economy. Will the banks begin to lend again, or will the banks hang on to whatever money they get as they fear making loans in the future. This will create one of two possible scenarios.
The federal reserve gives massive funding to the Federal Government. The government uses these funds to buy up Trillions of subprime loans at a discount; however, the government will not have a say on what they are buying, instead the purchasing of subprime debt will be directing by the federal reserve. The goal is for the government to hold onto the bad debt until it has matured enough to be resold for fiscal gain; however, there are a lot of flaws with this plan. To begin, the debt is illiquid meaning that if the banks valued it as assets, then they would not be in this position in the first place. They would be able to buy and sell these assets between eachother if needed to turn a profit, yet no investors will buy these, even if they are able to buy and hold like the government suggests.
This forshadows that the subprime problem is not going to go away in a year or in a few years even, but it might be several years until there is a conclusion to this great crisis.
To Lend or Not To Lend
With the huge selloff of many financial institutions, it is more profitable for financial institutions not to lend money. This is because if they hold the assets they can get a better return by making more guaranteed investments, then betting on the failing real estate business. They will not be able to invest in businesses and mortgages because of fear of bankruptcy if they make the wrong decisions. Mortgage insurers will not insure mortgages as easily as in the past of fear of bankruptcy as well. The diminishing amount of funds being lent will inevitably decrease the money supply in the United States; although, there was a very large influx of funds by the bill passing. This will potentially cause deflation in the monetary system.
The cost of goods will decrease heavily causing the housing market to fall even harder than previously and this will cause even more bad loans since the financial institutions will call more and more loans upon renewal, and recovery will only occur if the government is able to guarantee the lenders stability with there investments.
Inflation Strikes Back
Let’s say financial institutions regain there confidence and begin lending again. What will be the implications of that? Well, this is the ultimate goal of the bailout pakage. If the banks begin lending again, then the goal is to push house prices back up to the level where the house prices are proportional to the loans and the subprime loans go back to being profitable.
However, this will cause the return of large inflation because the dollar has been devalued due to the huge injection of funds and the marginal banking system. There is even rumours that the margin requirement of the banking system may have been removed with the passing of this new bill.
The cost of goods will soar with the rise of inflation. This will, also, cause the key lending rate to go up, and this will cause the slowing of the economy which in turn will increase interest rates. With interest rates rising, so will mortgage rates. With higher mortgage rates, the economy and the housing market will drop as well, and this will cause a longer subprime crisis as well as more subprime loans.
Future of the Market
This is only a few of the highly possible scenarios that might come out of the subprime crisis; however, the lasting effect and the exact problems that come out of this are yet to be determined; however, when we had any other bubble, whether it be tech, commodities, or anything else, we did not bailout these firms; instead, we allowed the values to return to appropriate levels without a bailout. Why did we do it this time?