We are in an era when banks are turning away business owners due to tight credit, so the merchant cash advance style loan is gaining popularity, despite the fact that these loans usually cost a great deal more due to much higher interest charges. Business or merchant cash advance loans are a valuable resource for some business owners who find themselves in a tighter commercial credit market with shrinking or canceled lines of credit from banks – plus the intense financial challenge of an historically severe recession and credit crunch.
But in 2010 – as the market for business cash advance loans is expected to see phenomenal growth – the government is in the middle of its own effort to enforce more stringent regulations on the financial industry. So in the coming months it will be interesting to see whether the cash advance industry – which mainstream lenders and big banks often complain about because it is not very well regulated – will be given new guidelines to follow.
As a typical example based on actual loans made by cash advance companies in recent years, borrowing $30,000 might cost $10,000 in future repayments through card sales. But although that is a very steep rate of interest it is sometimes the only game in town for a business owner whose bank will not offer them a line of credit or other form of loan to help them raise the cash they need to run their operation.
For many business owners the choice to take out this kind of more costly loan comes down to a simple calculation. They can forego the business cash advance loan because it costs too much, or they lose a lot more business or even face the possibility of having to close their doors or declare bankruptcy. Sure, they would love to borrow elsewhere for a fraction of the interest paid. But if nobody else will give them a loan they have limited options and then a cash advance business loan starts to look attractive.
Using our example of a $30,000 that costs $10,000, for instance, a business owner might have to pay $10,000 but if doing so enables him or her to stay in business and make a $50,000 profit then they still come out ahead by $40,000. Or if they are having a really bad year due to the recession, they might wind up just breaking even. But they can stay afloat and when the economy turns around the expense of $10,000 to keep their business and avoid a foreclosure or bankruptcy might look like a really good bargain.
Some might call a pricey business cash advance loan the lesser of two evils – but when an entrepreneur is faced with hard choices then sometimes paying more to stay in business makes sense and can be justified in a number of different ways. You do what you have to do to survive, and if you can get past those major financial challenges then you have an opportunity to keep the business going for another season. Manage it well and with a little luck surviving can evolve into thriving, which is why many business owners who have used cash advance loans would not hesitate to do so again if the circumstances required it.
In the meantime most of the major players in the business cash advance industry are not waiting around to see what happens in Washington, but they are starting to take the matter of regulations into their own hands. Whenever an industry is threatened with tighter rules and regulations it is generally best for them to be proactive and start setting their own standards and policing themselves. That can convince regulators and legislatures to back off, and that is why this year we will see more and more changes in policy at business cash advance lending companies.
They will likely put limits on how much they charge their customers, and some are already taking steps to minimize the cut of profits or revenues that they require from certain businesses – like the grocery business – where owners typically operate on very thin profit margins. That all spells good news for the consumer, because whether the industry starts to adhere to more reasonable guidelines on its own or through official regulation, it will make the loans more affordable for business owners.
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Right now – in the wake of one of the worst financial meltdowns in history – people all over the world are skeptical of lenders and of banks in general. In 2010 we will see an even more aggressive push to pass laws that regulate the loan industry, and many legislators and consumer advocacy groups are calling for tighter rules regarding payday loans.
That’s because many consumer groups – and ordinary customers of cash advance payday loan businesses – complain that these particular loans are much too expensive. The main people who use this kind of short term loan are those who do not have much money to start with, so many watchdog groups believe that payday loans are just another means to make those who are poor even poorer and more disadvantaged.
So over the next few months there will probably be more news about the debate surrounding payday loans, and there may be attempts to limit the amount of interest and other fees that lenders are legally allowed to charge for doing this kind of loan. That’s good news for the average consumer, because under that kind of pressure payday lenders will be encouraged to keep their fees and charges lower – rather than hiking them sky high.
Interest rates this year are expected to go higher anyway, on all kinds of loans. Since payday loans are some of the most expensive types of loans out there, any rise in rates will be especially felt by the borrower who relies on cash advance paydays loans to bridge the gap from one payday to the next. So if you use this kind of loan keep an eye on rates and fees. Shop around for the lowest rates possible, because doing so can save you a tremendous amount of money in 2010.
Keep in mind that the biggest complaint is from people who get trapped in a vicious cycle of using these cash advance loans all the time. That is never a good idea for any kind of loan, so to use a payday loan wisely you should only turn to this kind of borrowing for special emergencies. If you get in the bad habit of using one of these between every single paycheck all year ‘round, you are basically just throwing away a large portion of your hard-earned wages. A better plan is to budget your money and schedule your bill paying so that you have enough to get you from one payday to the next.
You may find ways to use a cash advance payday loan to your advantage, of course, during those times when you just have no other way to get some money and you cannot avoid paying a bill or other urgent expense. Keep close track of how much you pay each time you take out a payday loan, and that will enable you to have a more clear and understandable grasp of your overall financial picture. Sometimes people borrow two or three hundred bucks to get their car fixed – and they use a payday loan to pay for it – but without having that car fixed they would be in worse shape and unable to get to work. That might be a good time to turn to a local cash advance payday lender. Or maybe you have been out sick and unable to work, so you are getting behind on bills. If you don’t pay them on time you’ll be charged extra, and a quick and easy payday loan might fill the gap and keep the creditors off your back until you get back on your feet.
Particularly in 2010 – with money already as scarce as hen’s teeth and unemployment at frightening high levels – consumer borrowing needs to be done with care, restraint, and a budget-conscious outlook and conservative attitude. Money is tighter than ever, and that can make a cash advance payday loan an attractive and tempting way to overcome challenges and deal with the continuing economic problems of the weeks and months ahead.
In the meantime government officials will hopefully be watching your back to make sure that nobody who does cash advance payday loans tries to take undue advantage of you. Stay informed, do your research and homework to learn as much as possible about loans and how they work, and then make educated decisions before you borrow. The bottom line for 2010 is that those who learn to make money and loans work for them will come out way ahead, despite the fact that these are challenging economic times.
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Shopping for loans is never as much fun as it is to take a car for a test drive, but in order to afford a gently used or pre-owned car or truck you will usually need to go looking for a pre-owned loan. But there is no reason to worry in 2010, despite the doom and gloom of recent economic news. That’s because once you are equipped with some knowledge about how to get the best loans this year – and what constitutes the main difference between a bad loan, a good loan, and a really great loan – then you should have nothing to stress-out about.
Let’s start with the nuts and bolts of what you need to do in order to qualify for the best pre-owned loans on the 2010 market. Then after that we’ll touch on what to do if you aren’t in a position to meet those requirements so that you still have choices and opportunities to get pre-owned loans.
First, here’s what you need to get the premium quality loans that offer the lowest interest rates and the easiest, most user-friendly terms and conditions.
A Great Credit Score:
In today’s tight credit environment you will want to have a score in the high 600s or the 700s to get a good pre-owned car loan. If you are between 620 and 680 you’ll get a decent loan. Less than that you’ll have to pay more or you might even be denied a loan unless you go to a bad credit loan specialty company. But to get the best deals out there you should have a FICO number that is in the upper end of the scale – or above 700. Get up in the 750 range and they should roll out the red carpet and give you special loan incentives and discounted rates.
A Substantial Down Payment:
Having a nice down payment puts lenders at ease even more, because they know that you are offering them some real collateral that is worth cold cash no matter what may happen in the future. Combine your high FICO score with at least 20 percent down – or 25-30 percent if you can scrape it together – and you’ll be in fine shape to get a super loan even during these crazy and difficult economic times.
A Really Good Idea of What Vehicle You’re Buying:
Of course before a bank or lender gives you a loan they will want to know what kind of car or truck you are buying so that they can look it up in their handy blue book of used car values and figure out what it’s really worth. So bring as much detailed info as you can to the bank, including pictures and the date, model, and make of the vehicle. They may require an informal appraisal or send an expert to go look at the car, but that is just standard operating procedure for many lenders.
A Few Important Documents:
You’ll also want to have a file with you that includes copies of your latest tax return, your recent pay stubs, and recent bank account statements. Call the lender, ask them what they need to see, and then gather the papers before you go to visit them and it will make your pre-owned car loan application process go a whole lot faster.
Now if for one reason or another you aren’t in a good position to borrow, you can take steps to improve your borrowing power – like repairing your credit, saving up for a down payment, going shopping to nail down your choice of a specific used vehicle, or getting your paperwork in order.
But if your credit is seriously damaged, order a copy of your credit report and then sit down with a credit counselor or lender and come up with a practical strategy to get started raising your credit score. While you’re doing that try to set aside some cash for a bigger down payment, too, and soon you will be in a much better position to go apply for a pre-owned loan. You can also shop for your loan with a lender that specializes in loans to people with bad credit, or see if the car dealer has any special financing for people in your situation. One way or the other you will probably be able to find a loan for you and then go through with the pre-owned car purchase you’ve been planning for the New Year.
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Between the cash for clunkers program and desperate dealer incentives to promote car sales as major vehicle manufacturers struggled to avoid bankruptcy, the automotive consumer was the only real winner in terms of the 2009 auto industry. But as we celebrate a New Year – and the start of a brand new decade – with lots of lingering economic uncertainty, many people who are in the market for a car or truck want to know the outlook for auto loans in 2010.
While nobody has the benefit of a crystal ball, consumers should have much better success this year compared to last year when it comes to auto loans and vehicle purchases. Of course there are variables that nobody can possibly predict, but according to recent news reports there are some very compelling reasons to be optimistic about car loans.
Last year, for example, the global credit markets were still reeling from the aftershocks of the unprecedented financial meltdown that rattled banks and other financial institutions at the end of 2008. The future of the entire banking system was in jeopardy, it seemed, from 2008 through the first half of 2009. Banks and other lenders were paralyzed by excessive debt, borrower defaults, and an overall lack of cash with which to make auto loans. Meanwhile the automotive industry was in the midst of its own severe crisis, and the oldest and most reputable automobile manufacturers in American were collapsing – leaving dealerships in a panic.
Those factors created a double whammy for the auto loan niche of the credit market. On the one hand there was very little credit to go around among traditional banks. Meanwhile some of the biggest players in the auto loan industry – those lenders that are and on the other hand some of the biggest auto loan institutions owned by or affiliated with big automotive companies like GMC – were completely strapped for cash. The bottom line was that it got much harder to get a loan of any kind, and that included auto loans. So despite lots of deals and perks like the cash for clunkers program, many consumers still found it hard to get approved for their auto loans in 2009.
But now the business headlines are announcing that while interest rates are still historically low, consumers are finding more loan availability. The Boston Globe newspaper for example, recently ran a story explaining that easing of credit restrictions on auto loans is finally starting to inspire a surge in buying. The well respected Ward’s Automotive Group – which tracks data about the auto industry – reported that light vehicle sales rose approximately 20 percent this past December compared to the year before. Meanwhile the most recent data available on car loans from financial institutions shows that they are approving more loans, and that is especially true for consumers who have average or above-average credit.
As car companies and banks continue to see positive economic signs on the horizon – such as improved auto sales figures and fewer defaults, foreclosures, and bankruptcies – they will both gain the confidence to increase auto finance lending. That will, in turn, encourage buyers to take out more auto loans – so that a rosy economic outlook can potentially start a chain reaction by creating a cycle of improvement that just gets better and better.
But before we can put on our party hats and toast the end of the recession – and the full fledged return of credit in the form of easier and more affordable auto loans – the unemployment picture must first improve. Employment data is still a wild card, and while there are signs of economic improvement the employment outlook remains bleak. Recent news reports show a rather unpredictable hiring forecast, and it seems that just when we get some good news regarding labor and employment another statistic makes the headlines to deflate our enthusiasm. The President has vowed to make job creation a top priority in the coming months, however, and if the national unemployment rate backs away from double digits and starts to shrink, that will be good news for auto loans.
The reason that auto loan availability is tied to employment figures and other general economic data is that when people are working and earning, they are in a better position to repay their car loans in a timely fashion. That makes auto loans easier to get, and as lenders start to compete for your business, those auto loans also become more affordable.
So while the forecast for auto loans looks good so far, based on current news, keep an eye on the business pages. If other statistics also start to fall into place it could turn out to be a banner year for auto buying.
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As the popularity of reverse mortgages increases, so too does the importance of making sure you understand both the changes that occur with reverse mortgages on a regular basis as well as how exactly reverse mortgages even work.
These lending options are very new, and as with all new financial options, they are not well understood by the public. Here are a variety of pieces of news, facts and statistics about reverse mortgages that may be useful to you as you consider these as a possible option for you.
Information on Reverse Mortgages
- You will not lose either your social security or Medicaid if you decide to go with a reverse mortgage. However, it should be noted that if you receive a lump sum of money and keep it in your savings account above the maximum threshold (currently $2000), you will have to market it as an asset, which can cause you to lose your Medicaid. If you spend it before the month is over, it will not affect your Medicaid.
- The Federal Housing Authority has increased the maximum amount of reverse mortgages to $625,000. This means that the largest loan you can receive is $625,000, even if your home is worth more in total equity.
- Reverse mortgages do not come with any prepayment penalty. At any time, should you decide you want to pay back the entirety of the loan and have the means to do so, you can pay it back without incurring any fees.
- Repayment can never exceed the value of the home. If the home sells for less than the value of the loan, no additional money is owed regardless of whether the loan has an outstanding balance. Lenders also are not allowed to expect any payments from family members outside of those that received the reverse mortgage.
- Provided the recipient of a reversed mortgage is alive and living in the home they have reverse mortgaged, the lender cannot come to collect fees under any circumstances. Only upon passing is the lender allowed to request fees.
- The older you are, the greater your reverse mortgage tenure payments will be.
- Reverse mortgages can be used to pay for any expenses. They can be used for home repair, vacations, gifts, insurance, debt relief, and even on food and groceries. Reverse mortgage loans are designed to give you cash that can be used for any legal activity or item.
- These loans are not nearly as viable an option if you expect to not be living in your home 2 to 3 years after the date of receiving the loan. The fees are such that the value of the loan goes down dramatically when it is only used in the short term. These loans are far more useful when you plan on staying in your home the rest of your life and do not plan on giving the home to your family members upon your passing.
- Reverse mortgage financial counselors are not the same as psychological counselors. There have been recent reports of judges that have been cancelling reverse mortgage loans after competency was not proven. As such, it is a good idea to apply for these loans with a family member to ensure that everyone understands these loans and options.
Also, do not forget the value of the mandatory session with the financial counselor. Their job is to answer any questions you may have about your finances, your reverse mortgage, your alternative options and the likelihood that these loans will meet your needs. Again, these counselors are mandatory, so it is within your best interests to use them for all of their knowledge and to try to find out all you can about these loans and options.
Follow the News on Reverse Mortgages
Reverse mortgages are the newest type of loans, and as such as still going through many changes. It is within your best interests to stay informed of all of these changes and make sure that you are receiving the right information to help you make a good decision. Reverse mortgages may be right for you, but make sure you know all there is to know about them before coming to that conclusion.
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