Month: June 2018

Understanding Life Insurance Premium Financing

Life insurance premium financing is a complex concept of life insurance formed to let affluent people acquire enormous amounts of policy while settling some of the costs of the policy at the same time. Premium financing will be possible if there will be collaboration of at least two financial institutions. The policy holder must be old enough for the premium financing agreement to be fit for this sort of arrangement. This arrangement usually requires that the individual should be older than age 70 but younger than age 84. In addition, the insured should be in good health to get a life insurance and must also have a net worth of at least $5 million.

The Loan

Premium financing entails pulling out a loan to obtain life insurance. These sorts of loans can be considered as special loans with small interest rates that are merely obtainable through premium financing. They can also be a non-recourse loans that are protected by the insurance policy itself. When we say non-recourse loan, it means that the loan is secured by the death benefit of the insurance policy. Even if the policy holder fails to make payments for the loan, the bank is assured to get its money back.

The Life Insurance Policy

An insurance policy is an element of a premium financing arrangement. The insurance policy acquired is typically utilized as a component of a charitable gift but can be employed for variety of purposes. The cash values of the policy are generally not accessible on hand to the policy holder since it is secured by the premium finance loan.

Advantages

The primary advantage of engaging in premium finance arrangement is that a wealthy individual can hand down millions of dollars to its beneficiaries while reducing the cost incurred from the premiums. On the contrary, the loan payments can be obtained from the interest of the present investments. Given that payments do not depend mainly on age or health and the loan is guarded by the insurance policy, the bank is able to charge minimal interest rates to make it become more affordable than premium payments would cost.

Other Concerns
When acquiring a premium financed life insurance policy you need to consider the fact that you are getting a loan to obtain an insurance policy. Always remember that even if you are not making premium payments, you should still make loan payments. Therefore, it is necessary that you can afford to pay your loans from the bank. Moreover, banks usually offer these types of loans to people with high net worth because they have the needed assets that are required to substantiate such large amount of loans and have collateral to protect the interest of the bank.

 

Life Insurance Premium Financing

Life insurance premium financing is used by wealthy individuals to pay their life insurance premiums. By financing your premiums, it allows you to free up the funds that might have otherwise been used to pay your premium. Many wealthy people require a substantial amount of life insurance for business planning, estate planning, or for income replacement.

In order to qualify for life insurance premium financing most insurance companies require you have a minimum of $2.5 million in net worth and at least a $200,000.00 a year income. In addition, you must be bankrupt remote entity, such as a Limited Liability Corporation, or an Irrevocable Life Insurance Trust.

In a normal premium financing arrangement, you would apply for a policy at the same time you apply for a loan. The loan is usually arranged by the insurance company you are working with although there are many different companies that handle only the financing and do not deal with the actual insurance policy. While you are being medically underwritten for the life insurance policy, your loan is being processed. Assuming you pass the medical exam and qualify for the loan, the policy and financing are put into place at the same time.

The benefits of a premium financing arrangement is that it frees up business and personal money to be used more efficiently in other investment arenas. In addition, life insurance premium financing may minimize gift taxes, and can provide a greater rate of return on the death benefit paid through regular non-financed methods.

Life insurance premium financing loans may be repaid either by paying a monthly payment while you are alive, pay from the policy itself, or at the time of your death, proceeds from the policy will pay off the loan.

Interest on the life insurance premium financing loan is considered to be personal interest, and therefore, not tax deductible.

If you are considering a premium financing loan for estate planning, there are some tax issues you may want to consider. The life insurance proceeds will be included in your estate if you own the policy. If the life insurance policy is owned by an irrevocable life insurance trust, estate taxes on the death benefits may be avoided.

Before you consider financing your life insurance premiums you should be aware that the life insurance policy will have to earn returns of between 150 to 300 basis points over the interest rate of the loan.

In addition, you should ask what the loan commitment fee is, as well as knowing whether the life insurance premium financing loan is renewable, how long the term of the loan is, and if the loan extends well beyond your life expectancy.

You may want to find out if the loan requires a personal guarantee, or if the loan is guaranteed by the life insurance policy.

Also, you want to know how if the program is designed on your IRS calculated life expectancy or is it conventional. If the loan is based on your life expectancy, and you live beyond that, the loan amount will exceed the cash value and the whole program will come apart.

Before entering into a financing agreement you may want to consult a trusted attorney, your financial advisor, and/or your Certified Public Accountant.

You will also want to shop around and compare insurance companies, their individual plans, the premium amounts, and the different types and amount of life insurance available to you.

Is an FHA Loan Right For Me?

Government sponsored loan programs, such as FHA loans, have been getting a lot of press lately. But, how does an FHA loan differ from a conventional loan? What are the advantages of each?

FHA

The Federal Housing Authority (FHA) was created in 1934 to help potential homeowners gain access to money to boost homeownership rates throughout the United States. FHA loan programs require very little money down on a new purchase (usually only 3% of the purchase price) and will lend up to 95% of the value of a home on a cash out refinance. This high loan-to-value ratio is the primary appeal of an FHA transaction.

The FHA is not a lender and does not actually make or guarantee home loans. They insure the loans an online mortgage lender can assist you in obtaining.

FHA currently only offers three loan programs:

30 year fixed

15 year fixed

5 year fixed ARM

FHA Mortgage Insurance Premiums (MIP)

Every FHA loan requires Mortgage Insurance Premiums (MIP) regardless of the down payment amount or loan to value. In addition, FHA loans require Up-front Mortgage Insurance Premiums (UFMIP). The UFMIP can be financed into the loan.

Up-front Mortgage Insurance Premium (UFMIP)

UFMIP is calculated at 1.50% of the base loan amount on all loans, regardless of the down payment amount. This insurance protects the lender against losses in the event that the borrower defaults on the loan.

**The entire amount of the UFMIP can be financed into the loan amount!**

For example:

If the FHA loan amount is $100,000 (base loan amount)
The mortgage insurance premium would be $1,500 ($100,000 x 1.50%)
The mortgage amount including MIP would be $101,500 ($100,000 + $1,500)

What really happens during an FHA mortgage transaction is that the borrower owes FHA a lump sum mortgage insurance premium. The lender making the FHA loan will actually lend the money for the premium to the borrower and send the money to FHA so that the mortgage will be insured.

Monthly Mortgage Insurance Premium

In addition to the UFMIP, there may be a monthly premium due as well. The monthly premium is .50% of the base loan amount.

On a 30 year fixed loan, the monthly payment would be calculated as follows:

$100,000 x .50% = $500.00 / 12 months = $41.67 per month

Maximum Loan Amount

FHA also has maximum loan amount restrictions that differ from county to county. Go to entp.hud.gov/idapp/html/hicostlook.cfm to view the maximum loan amount in your area.

Conventional loans

There are two types of conventional loans: conforming and jumbo.

Conforming loans

A conforming loan requires a loan amount of $417,000 or less. Conforming loans offer a larger variety of loan programs than FHA with a wide array of lending options. A conforming loan generally requires a larger down payment for a purchase (usually at least 5%) and has more restrictive guidelines on getting cash out of the property for a refinance.

The big advantage of conforming loans is that they do not require Private Mortgage Insurance (PMI) if the loan amount of the new first mortgage is 80% or less of the value of the home. The elimination of PMI can offer a significant savings over the life of the loan.

Additionally, conforming loans offer interest only options. FHA currently does not allow interest only payments.

The Economic Stimulus Act of 2008 temporarily expanded the conforming loan limits through 12/31/2008 to as high as $729,750 in an attempt to shore up the slumping housing market. The new conforming loan limits are based on 125% of a city’s median home price. Go to entp.hud.gov/idapp/html/hicostlook.cfm to find the temporary conforming loan limit in your area.

Jumbo loans

A jumbo loan is any loan amount over $417,000. Jumbo loans generally have slightly tighter lending standards and may require an additional down payment of at least 10% of the purchase price. Jumbo loan programs are as diverse as conforming loan programs and also do not require PMI if the loan amount is less than 80% of the value of the home.

Summary

So, to summarize, it is really all about loan-to-value. If you plan on putting down a small down payment, than an FHA loan is most likely your best bet. But, if you are putting down a larger down payment, a conventional loan may be the way to go.

Primer on the Difference Between an FHA Loan and a Regular “Conventional” Mortgage Loan

It is in every borrower’s best interest to understand the difference between a Conventional and an FHA loan, especially if they owe more than 80% of their home’s value or are interested in purchasing a home with less than 20% down payment.

First FHA will allow a borrower who wants to refinance, or purchase a home, the opportunity to borrow up to 96.5% of their home’s value. This is also known as LTV or the “loan to value” ratio. If it is a refinance, and they want to borrow 96.5% LTV, then the borrowers are not allowed to take out any cash. The only refinance that will be accepted is one where the borrower benefits with a reduced monthly payment from a lower interest rate.

A borrower can work with a Conventional loan if they only have to borrow 95% or less LTV. It’s usually financially better to secure a Conventional loan than an FHA loan because of the 1.75% up front fee that FHA requires. This can be a significant extra fee if the loan amount is three or four hundred thousand dollars. For example, the extra fee on $300,000 is actually $5,250.

So if you have at least a 5% down payment on a purchase, or have at least 5% equity in your home when you are ready to refinance, you might qualify for a Conventional loan and forgo the 1.75% up front fee. If you can afford a 10% down payment, or have 10% in equity when you are ready to refinance, you have an even better chance of securing a Conventional loan. This is because there are several restrictions on Conventional loans between 90% and 95% LTV and many borrowers will not be strong enough financially to qualify. For example, the credit score must be exceptional (over 720 points) to get a loan over 90% LTV.

One advantage to an FHA loan is the cost of their Mortgage Insurance Program. Mortgage Insurance is an extra fee that must be paid alongside the regular monthly Mortgage Payment. Regardless if it is a Conventional or FHA loan, anytime a borrower needs a loan that is over 80%, they will be required to add a Mortgage Insurance Premium to their monthly payment.

FHA’s mortgage premium is a standard .50% of the loan amount. In other words it does not matter if you borrow 81% or 94%, if you borrow over 80%, the Mortgage Insurance Premium would be the same at .5%. A .50% Mortgage Insurance premium on $200,000 would be $200,000 x .50%, which equals $1,000. This is an annual premium and so it needs to be divided by 12. Therefore, the Mortgage Insurance Premium on an FHA $200,000 loan would cost an extra $83.33 per month ($1,000 divided by 12 = $83.33).

With a conventional loan there are different percentages associated with different LTV’s. For example a borrower who needs a loan that is over 80% but under 85% LTV will have a smaller Mortgage Insurance Premium than someone who needs to borrow 90% or 95%.

The Mortgage Insurance Premium payment under 85% LTV is about the same as the FHA premium, but the Mortgage Insurance Premium (also known as MIP) on a 90% or 95% LTV loan is much higher than FHA. So where as the FHA loan asks for a large upfront fee of 1.75% and a smaller monthly Mortgage Insurance Premium, the Conventional lender does not ask for an upfront fee, but collects a larger Mortgage Insurance Premium during the life of the loan. A good loan officer can crunch the numbers and figure out which type of loan is in your best interest.

I hope that this explanation clarifies the differences between the two loans and shows the advantages and disadvantages of each type.

My name is Allen Sayble and I have been a loan officer since 2001. I specialize in hard to find loans through FHA and USDA for borrowers with less than stellar credit, or who want to borrow over 80% of their home’s value. I also enjoy helping borrowers in a sound financial position. You have worked hard to keep your credit strong and keep your financial ship moving in the right direction. In return, I will work hard to get you the best interest rates the industry has to offer.

 

How Does a Loan Officer Get Paid and What are Points

You hear the commercials everyday on the radio. You see the billboards along the highway. ‘No Points,’ ‘No Closing Costs.’

The mortgage industry has become extremely competitive in recent years, with literally tens of thousands of licensed brokers in California alone. How did it get this way? In recent years with interest rates at record lows it was an easy way for even inexperienced people to make a ton of money with little training, and no experience. The calls to refinance came pouring in. If you could answer the phone you could make good money in the real estate lending business.

I’m not trying to slander real estate professionals. Most are very good at what they do. It is simply that in any field as over crowded as this one has become you will find those who will bend the truth, who will forget to mention certain things, prevaricate or outright lie to get your business.

Let’s set the record straight, shall we? Nobody does this for free. I myself have seven children and a beautiful wife to support. I need to get paid. For my pay I provide a quality service. Most of us in this industry work on commission; the funny thing is I get to set my own commission on each and every loan, by charging ‘points.’

You may have heard the term ‘points.’ What is a point? Simply this, a point is one percent of the loan amount. It’s called origination, or points. If I charge 3 three points on a $100,000 loan it equals $3000. I get to decide how many points I’m going to charge. The law in most states limits the number of points I can charge. To go beyond that is usury, and simply not allowed. That limit is as high as 6% in California or even higher in some states. I myself very seldom charge more than three points. I also seldom charge less than three points. The number of points being charged is disclosed along with all other closing costs on the Good Faith Estimate or GFE.

A word on GFEs, they are an estimate, and some less scrupulous lenders really make the most of that fact. When I do one I try to be as close to actual costs as possible or even a little high. Sometimes things as simple as the day the loan closes or the amount a notary will charge can affect the actual amounts. On every loan I do I build in a pad of $250. The reason is simple. I estimate everything on the high side of reasonable and put in the pad, because I’ve never had a client complain that they got $31,000 at closing instead of the $30,000 they asked for. Now imagine you needed to refinance and take $30,000 cash out, and I delivered on $28,712 instead of the $30,000 you needed.

Make sure your loan professional discloses ALL fees and not just his own. Often they will show you only the fees that broker is charging and not put in the title insurance fee, or the escrow fee, or any other third party fees. Ask, “Are these all the fees I’ll pay?” If the answer is “No,” run don’t walk to an honest loan officer.

Typically the only part the loan officer gets paid on is the origination. Of that they will usually get a split with the broker. I’ve seen splits that range from a flat $500, to anything from 25% to 85%. The broker in most places makes their money from the other fees. Application fees, processing fees, admin fees, tax service fee, underwriting fee, wire transfer fee, and more. Some are legitimate some are merely padding the price of the loan.

Points are not the only way we get paid. We also can get a rebate from the lender. Let’s say I went to a lender with your file and they quote me an interest rate of 6.5%. I turn around and tell you I can get you 7%. For this I receive a one-point rebate from the lender. While at first glance this may seem sneaky and dishonest, remember I’m getting a wholesale rate. If you went there direct you would not receive the 6.5% rate. They offer it to me with room for me to make a profit. Some lenders will limit how much I can raise the rate from what they offer me.

The base rate that they offer is called ‘par.’ Those of you who are golfers will understand the term. It means basically the base rate. Even. No adjustment up or down. That rate can go up for a rebate, or it can go down, IF you buy it down. Often when doing this you are only buying it down for a specific period so beware.

These are the biggest two ways to get paid but there are others. Let’s say you took out a ‘Pay-Option-Arm’ or ‘Pick-A-Pay’ type loan. This loan comes with the opportunity to choose one of four payment options each and every month for five years. You might choose to make a 15-year, or 30 year fully amortized payment. You could also choose interest only, or even a minimum payment based on 1% interest, with the rest of the true rate tacked onto the backside of your loan. Fully discussing this loan is a subject for another article, but suffice it to say this loan can be perfect or a disaster and you’d better understand the ups and the downs of it from the beginning.

On this type of loan all kinds of promises are made. “I can do it for Zero points! One point! 1.5 points!” Whatever.

The reason is the high backend rebate. It may not be charged to you directly but your still paying for it.

The rebates on this can be as high as 3.4 points. Selling you on a three-year prepayment penalty does that. It also means a higher fully indexed interest rate. If you’re getting into this loan for the 1% payment only, then maybe you don’t care. If your real estate market is going up faster than the loan amount is climbing, maybe you don’t care. If you are getting into this type of loan, make sure you’re asking about the rebate. If you are being charged points up front and the loan officer is getting a high backend rebate he’s ripping you off. One or the other, or a reasonable combination of both. One point up front combined with a 2.5-point rebate is reasonable. It makes the total commission 3.5 points. Two and a half up front and 1.75, for a total of 4.25 is a little high, in most cases. Sometimes the amount of work involved justifies the extra pay. As a general rule I think three points is fair to all concerned.

How do you know what your loan officer is making on the back? It is disclosed, but you need to know what you are looking at. It’s called ‘yield spread premium’ or YSP. Be careful of this though. Just because you don’t see it does not mean it’s not there. When your loan officer is selling you a loan from his own company, he does not need to disclose the YSP. The YSP is what the ‘broker’ charges over what the lender offers. If dealing direct with the lender there is no YSP. Even if the loan officer can get you that 6.5% and sells you the 7% instead, because he woks for the lender there is no YSP. Ask if he is a broker or direct lender. As with almost anything either can be sold well.

If he’s a direct lender he’ll say things like “Our money, our rules.” Or “we can control it all because we don’t have to play by the other guys rules.”

If he’s a broker he’ll say “I deal with 30, 50, 200 lenders so I’ll get you the best deal.”

Reality is that while where I work we’re approved with over 50 different lenders I’ll price a loan with no more than half a dozen and usually I know before I begin who will get the deal. Each loan is different and one of the reasons I get paid is to know who does this kind of loan. Is it ‘A’ paper or sub-prime? Is it a single-family residence, or a condo? Is it investment property of primary residence? Do we need to do a stated income loan or full doc?

I get paid for my expertise. I get paid because I not only take your loan to the guy with the best interest rate but also to the guy will get it done quickly and efficiently. If for example you were borrowing $200,000 at 7.25% your monthly payment would be $1364.35. What if you turned down the guy who told you he could get it at 7.5% even though you thought he was the more qualified? You’re chasing the rate. How much did that save you? At 7.5% that same $200,000 costs you $1398.61 per month. The difference is only $34.26 per month. Now let’s say you go with the cheaper guy. He came in cheapest because he was chasing your business. When you don’t know what you’re doing the only way to compete is to try to undercut the other guy on price.

For $34 a month you get a guy who maybe can’t even get it done. The lender has poor service so the loan doesn’t close on time and someone else buys your dream house.

For $34 a month I’ll take your loan to someone who will make it happen smoothly and quickly.

As with anything you get what you pay for. Quality service costs a little more. Beware of the guys who are either too cheap or too costly. Either is a sign to beware of.

Too cheap and they are chasing your business because they really need it. Maybe they are very good and just really want to give you, a total stranger the deal of the century. Possibly they are that good and just in a slump. It happens.

Too expensive and they are gouging you. Trying to make all their money off this one loan.

If they are in the business for the long term, they’ll want to build a relationship of trust with you. I want all my clients to come back again and again. Ideally I’ll help them into their first house. Refinance it for them so they can improve on it, and then help them buy a bigger and better house when they start growing their family. Maybe we’ll refinance it to pay off the kid’s college loans. Then when the last kid is safely on his own, I’ll help them downsize into a beautiful condo by the beach.

This kind of relationship only happens when there is trust going both ways. That trust is only built by providing quality service and sound advice.

Your home is typically the single largest investment of your life. Don’t trust it to just anyone. Make sure you understand how much you’re being charged and why. Pay for expertise. Pay for honesty and integrity. Don’t pay for inexperience or to pad a greedy loan officer’s already overstuffed pockets.

Steve and Stacie Scheunemann husband and real estate professionals with five years experience.

Stacie has been an educator, small business owner, and professional organizer.

She is a Nutritional Herbalist who keeps her family and friends healthy and eating well. Hers is the strong will and relentless drive for perfection that makes the team what it is.

Steve is a Marine veteran who served in the Gulf War and Somalia, as a helicopter crewchief. After the Marines he followed in his father and grandfather’s footsteps and became a police officer. As a police officer he received many letters of commendation from the department and the community.

He’s been a Technical Instructor in the telecom field and even worked as a cowboy on a Texas cattle ranch.

Both are active in the community, volunteering time for the Cub Scouts and fire department with their ‘Fill the Boot’ Campaign getting all seven kids into the act collecting donations outside a local mall side-by-side with the firemen.

Choices For Buying Loan Protection Insurance

It is important to realise that you do have options for buying loan protection insurance and to know about the differences. The vast majority of policies are sold alongside the loan when taking it out, however you can also choose to buy a policy at a later date after taking the loan. By choosing to shop for a protection policy yourself you can make around 80% savings on the cost of the premiums.

Loan protection insurance is a policy that is taken out to insure against the fact that you might lose your income. A loss of income can come about due to you suffering an accident or an illness which meant you were unable to work. A policy would also include you being made unemployed through reasons not of your own such as redundancy. The cover would payout an income that was tax-free which would allow you the luxury of being able to continue meeting your loan/credit card repayments using the money you insured for when taking out the policy.

If you were to lose your income and have substantial loan or credit card repayments to make then life could become an uphill struggle if you wanted to remain debt free. It is important to keep out of debt as at the very least you would see your credit rating destroyed. If this happens then for sometime in the future you could have many problems obtaining credit of any kind and a bad credit file can take a long time to repair. In the worst cases of debt the lender could take you to court and this means that you could have a County Court Judgement against you and have bailiffs come into your home to take your possession to sell to recover what you owe. For a small premium you can guard against any of this happening by keeping up with your mortgage repayments as though you were still working.

If you have the protection added into the cost of the loan then the lender could add interest on top of it and this could almost double the cost of the borrowing. Another downside to taking out protection this way is that often little information is given regarding exclusions and the other terms and conditions of the policy.

Taking out the protection with a standalone provider you will be given access to all the information on their website which would allow you to ensure a policy would be suitable. When choosing a policy there are many things that need taking onto account besides the exclusions, you need to know if cover would be backdated and when and for how long it would payout. All of these can differ with independent payment protection specialists.

Some providers offer a loan protection insurance policy with the conditions that you wait for the 30th day before claiming. With others it could be as long as the 90th day. Some will continue paying out for 12 months and with other providers payment could last for 24 months.

FICO, Credit Cards, And Home Loans What Do They Have To Do With Me?

#1. – OPEN ACCOUNTS! – I have worked with several people that either had a Bankruptcy or got in trouble with credit cards and canceled them all. They use cash only now, thinking that is the best way to go. Well that is a great way to do things. However not if your trying to get a home loan or any other type of loan. In fact sometimes people don’t even generate a FICO score because they don’t have any credit at all! Thats bad news. You need three active credit accounts, preferably for one year to help your cause. “That means I have to use credit cards again? In the past they ruined me!” Well yea thats pretty much what it means. But lets understand how credit cards and loans effect your FICO score. First of all a FICO score doesn’t look at your job or how much money you make. You could have no debt and a $100,000.00 a year job but if you dont have active accounts, your FICO score may still be low. That means higher interest rates on loans. Here is what you can expect in terms of interest rates in relation to what your FICO score is:

  • FICO score:– APR:
  • 760-850—– 5.918%
  • 700-759—– 6.140%
  • 660-699—– 6.424%
  • 620-659—– 7.234%
  • 580-619—– 8.777%
  • 500-579—– 9.670%

Many people aren’t aware that you cant really negotiate the rate much with lenders. That FICO score indicates your risk factor. You may know you can pay your loan but they don’t. When they see a 500 credit score they think there is a huge risk you will default on your loan, so they give you the interest rate that makes them the most amount of money in the shortest amount of time. Don’t think the lenders actually care about you or your circumstances they don’t, they care about money, thats it, thats the bottom line. They see your score and offer you that high risk rate loan. No matter how good a loan officer/Broker is they cant get a 6% interest rate for someone with a 550 score. It doesn’t matter how long you shop around. They can however lower their fees for you, give you great service, give you a no Yield Spread Premium loan, etc. Thats why its good to shop around for loan officers and find someone who honestly cares about you, your goals, and your money. I like to treat everyones loan who comes to me as if it were my own. Any way back to credit cards and how they help. OK so you have a credit card with a $1,000.00 limit. If you carry a balance of $850 on it you will actually hurt your credit score. You see FICO wants to see how you manage your money and bases a score on that. If it thinks you aren’t managing your money wisely then you get a lower score. If however you are carrying a balance of around 30% and making your payments on time every month that will help your credit score, looks like your managing your money well. Now it doesn’t make a difference if you have a credit limit of $300 or a Platinum $10,000 limit card it works the same way. So if you’ve had problems in the past with credit cards my suggestion is use them for small things like gas and make sure you have the money to pay them off. Remember Credit Cards are basically LOANS NOT cash! You have to pay them back and sometimes at substantial interest. Please don’t ever think of credit cards as cash. Credit cards help your FICO score by showing that you can manage your money responsibly and pay your debts on time. Your score gets higher as you continue to pay every month for years. Which will help you get a higher score a lower risk factor with the lenders and a better interest rate saving you $1,000s and $1,000.00s of dollars.

#2.- NEVER GO OVER 30 DAYS LATE ON ANYTHING! – Many people want to refinance their homes because they have gone 1,2,3 or even more months late on their mortgage. They have a 7% interest rate and suppose they can refinance at the same and take some cash out as well. If you have gone even once 30 days past due on a mortgage that is a killer to your FICO score. It causes it to just tank! So once that happens your going to end up in the High Risk score column. Your account moves to the “unsatisfactory” column on your credit report and Your refinance loan may be 9% or more and you may not even get financing. Remember the lenders just want to make money. What do you think they see when someone is 3 months past due on their current mortgage at 7% and they can only offer them a 10% loan at $300 more per month. They see default. If you think you might be short of money and before you go 30 days past due try to get refinancing then! Don’t wait till its too late because your going to be stuck with this high interest loan until you can clean up your credit report and your score goes up. That could take 1, 2, or even 3 years or more! Don’t ever go 30 days late on your credit cards! You may get charged a fee, and your interest may go sky high after you accidentally pay 10 days late, but, if you don’t go 30 days or more it wont go on your credit report. 30 DAYS LATE=TANKING FICO SCORE. Remember that.

#3.- CHECK YOUR CREDIT REPORT – Get a copy of your credit report so you can see if there are any inaccuracies on it. Most people actually have one or two inaccuracies on their report. You may have old collection accounts that should be removed. These should be looked at carefully and then disputed with the credit agencies. There are 3 credit reporting agencies. EQUIFAX, EXPERIAN (formerly trw) and TRANS UNION. You will need to order a copy from each and dispute each individually they are separate companies. You should try to do this BEFORE talking with your loan officer/Broker/Lender. Your score can go up significantly in 30 days or less by removing inaccurate information. It could be the difference in a 9.75% loan and a 6.9% loan. You cant take that chance. ORDER, REVIEW, DISPUTE!

Your Loan Repayment Can Be Protected With Loan Payment Protection

When you take on a loan no matter what happens you have to be able to carry on meeting the monthly repayments. Your lender will not let your repayments slide if you should lose your income and be unable to meet your repayments. While your lender might be willing to make an agreement with you in the short term, if you remained out of work for many months then you could be facing problems. Loan payment protection can give you an income to replace your own if you are made redundant. It can also provide for you, should you have to take time off from work due to becoming ill or if you were to have an accident.

The cheapest way to take out valuable loan payment cover is by going online and choosing to buy it independently. By searching and buying your policy this way you are able to get the information necessary to make sure cover is suitable. You will also be able to compare not only for the cheapest premiums, but also when the cover would start and for how long it would payout. These dates vary with the provider as does the premium. Loan cover can be taken with your loan from the high street lender and in some cases lenders are known to add on the cover without asking.

If protection is added on this way then you could quite possibly see your borrowing double. This is due to the protection being added onto the borrowing and then the interest is calculated on the total amount of the loan and the protection for it. You should always ensure that protection has not been added on when taking out a loan and when buying a loan online make sure that you are not being tricked into taking out protection at the same time. Sometimes when buying a loan online you have to un-tick a pre-ticked box if you do not want the protection including.

Usually providers will payout on your policy for between 12 and 24 months and during this time you receive a tax-free payment each month you remain unable to work or unemployed. There is also a period of time which you would have to wait before the cover would begin paying out and again this varies. Some providers will begin paying you after 30 days while others could ask you to wait for up to 90 before beginning payout. There are providers who would also backdate your benefit to the first date of unemployment or incapacity; again you have to check the conditions before buying.

Loan payment protection is a perfect solution to stop you worrying about how you would be able to continue meeting the repayments. It guards your credit score, as if you get behind on your repayments this would be affected and then future borrowing could be impossible. If you have large debts by way or loans or credit card the lender could take you to court. If this happens you could get a County Court Judgement against you and see bailiffs seizing your belongings to pay the lender what you owe.

Need Bad Credit Loan: Get It With These Simple Steps

If you have been knocked out of your loan application because of blemishes on your credit, it can be hard for you to deal with everyday life. Good thing, you have lots of options available to get the loan you are looking for, while, at the same time, rebuilding your credit.

Tips to follow before getting a loan

1. Consumers should be aware about the importance of checking credit history. A credit history is included in the credit report and is usually checked for inconsistencies and discrepancies before taking out a loan. The report allows the consumer to detect if something wrong has been reported, because this can affect their credit rating and the decisions of creditors giving out loans for bad credit. Keep in mind that a bad credit score limits an individual’s ability to get premium loan offers, but checking credit history will help decide what type of loan best suits him/her given that his/her current credit standing isn’t doing good.

2. Try other options available for you, like seeking assistance from family members or friends. Before applying loans at major lending institutions, ask significant others first if they can extend a loan to you. This could be very beneficial for both parties, because there’s no need for them to check your credit history. Aside from this, you could save a lot from the high interest rates of bad credit loans, as well as the time it would take to get your loan application approved. Just be responsible in paying them what you owe, or your relationship could be injured.Another option could be through P2P (or peer-to-peer lending) – usually found online. P2P is a win-win for both the borrowers and lenders. Borrowers have to pay low interest rates than regular loans, while independent lenders could earn high interest rates.

3. Check with the credit union or your personal bank first. These are two common places that best suit individuals with poor credit. Your personal bank may approve your application without too much inconvenience, because they are more than willing to work with long-time clients – like you – than with first-time strangers. Keep in mind, though, that your banks will still impose applicable interest rates on your bad credit loans, but they are more lenient in extending a loan to you, because you have money in them. Credit unions, on the other hand, are more suitable for those who have a stable paycheck. Loans from credit unions are usually offered through an employment. Clients with jobs are more agreeable option because credit unions are guaranteed to have the loan repaid properly. Usually, the loan is deducted from the employee’s salary.

4. Loan-seekers can also search online to look for companies that give out loans for bad credit. Make sure to read the terms of conditions before applying, because you might get caught up on hidden fees and charges. Finally, see to it that the company is well-established and has a good consumer rating.

5. The fastest way to obtain a bad credit loan is to look for payday loan. This loan can be applicable for someone who has emergency with no other options of obtaining cash. However, payday loan carry high interest rates and has an extremely short life. If an individual cannot repay on time, more interest is added and the life will be extended. Proceed with caution before taking this option into consideration. If necessary, opt this as your “last resort.” Don’t just go for payday loans if you aren’t sure of repaying on time, because this can cause serious problems on your credit and your finances, as well.

 

Premium Auto Loans That Won’t Leave You Running on Empty

How many times have you heard the story about somebody who spent so much on their new car they can scarcely afford the monthly repayments on the auto loan, let alone the petrol to run the darn thing?

Sadly, it’s a story that occurs all too often. You are blinded by the glare off the gleaming duco, your senses are heightened by the plush leather trim, the blast from the quad speaker system, the dashboard that looks like it was pulled straight from the cockpit of an F111, and that’s it – you’re sold.

Repayments of $2357.43 per month? Sure thing! I can do that if I give up drinking, smoking, um…eating. And if I stop taking toilet breaks, the boss might give me overtime? Yeah!

Okay, so that scenario may be a bit extreme, but car dealerships can certainly make even the most basic sedan look like a Maserati, well, maybe a Mazda, with the right lighting and a spit of polish. And who knows what can happen one year into your 5 year loan term? A change of location…a job layoff…a new baby…you just never know what’s around the corner.

So, we’ve decided to get serious and look at how you can secure the best possible auto loan for the best possible auto without going down the gurgler.

* Always do your homework before you commit yourself to any loan – particularly car loans. Ensure you are getting a premium loan package with the best possible auto loan rate. Check out all the major financial institutions first and then make a decision based on the best value for money loan.

* Don’t buy a car on impulse. Even if it’s the bargain of the century and the sales assistant tells you there are 12 people backed up behind you waiting to grab it out from under you. Chances are, he’s lying (about all the people) and if you’re meant to have it, it will still be there tomorrow. Be realistic.

* Do your sums. Don’t let the salesperson do them for you – he will have you bamboozled in no time at all. That’s his job.

Work out the total cost of the vehicle including registration, stamp duty and insurance costs and deduct your deposit – assuming you have one?

Then go online and find a car loan calculator (they are everywhere!) and input the figures to give you a rough estimate of the monthly repayments over different repayment periods, like 3 years, 5 years or 7 years.

* Look at your current family budget and factor in the loan repayment. Can you meet all basic expenses and have surplus funds to fund the repayments. Add in ‘contingencies’ of 20% over your current budget for the items you didn’t count on. Can you still meet the monthly repayments? If you can’t, scrap the idea.

* Remember: the more you borrow, the more you have to repay. And the longer the duration of the loan, the more interest you’ll be paying on the total package. In addition, the longer the loan term, the more likely it is that circumstances may change – and not always for the better.

Sure. In a worst case scenario you could sell the vehicle, but you rarely, if ever, recover the amount you originally paid; unless you bought a ’71 XY Falcon GTHO from a bloke’s back shed for $1,750 that you’ll restore and sell for $1.75million, in which case you wouldn’t need a loan and you wouldn’t be reading this article.

Now that most of the negatives have been covered, we can look at the positives.

One of the best ways to check out the best auto loan rates is to go online. Most of the major banks and lending institutions all have loan packs available with all the information you’ll need, including an application form.

Or instead, you can visit one of the quality online loan providers who use a vast panel of lenders to provide you with the best auto loans on the market, and one that is specifically tailored to suit your needs.

Once you have provided them with your personal and financial details, they will verify and confirm your financial situation and can usually get back to you within 24 hours with a response. How’s that for service?

And if you should happen to find that XY Falcon GTHO for $1,750 in the back shed, please let me know, okay?

Is Life Insurance Premium Financing a Smart Move For You?

Although people may understand the need for life insurance, sometimes it can be a burden to pay the monthly premium. This is particularly true for senior life insurance as retirees are often living on fixed incomes and have limited ability to pay their expenses.

Premium financing options are available to allow people to keep up their payments and maintain their policies.

How Life Insurance Premium Financing Works

When the insured doesn’t have the income to cover the monthly premium, the payments are borrowed from a third-party lender such as a bank or from the insurance provider itself. The amount owed the lender will increase over time. Every month the insured borrows the premium amount plus the accrued debt earns interest.

In most cases, the lender is reimbursed upon the death of the borrower by taking a portion of the life insurance value before it is passed on to the beneficiaries. Although the amount owed steadily rises, as long as it is less than the total value of the policy then the beneficiaries still receive a benefit. This is considered preferable to canceling the policy due to inability to pay, thus leaving the beneficiaries with nothing after the policy holder dies.

Who Should Consider This Option?

Life insurance premium financing is a viable option in several cases. Premium financing is a popular option among retirees. They often have their assets tied up in investments and may not wish to liquidate their assets to provide cash. Some investments can’t be sold or can be sold only at substantial discounts so borrowing is a better financial option.

Some individuals without substantial assets also consider premium financing. Even considering the cost of the loan, leaving something to their heirs is deemed more important than losing the policy completely.

In some cases the interest rate on the premium loan may be less than the return on investments, making liquidation the less preferred choice. Or the interest rate may be less than the rate of return on the life insurance, making borrowing preferable to canceling the policy. There are also situations where this arrangement carries tax benefits.

Seek Expert Advice Before Making A Decision

There is no simple formula for determining who would benefit from life insurance premium financing. As with all investment choices, the advice of an experienced financial counselor will help you determine if this is the right option for your set of circumstances.

If you decide that this is the right financing option for you, there are some details that will need to be attended to. A trust will need to be created to coordinate payments from the financing company to the insurance and from the policy to the beneficiaries after the policyholder passes away. If the trust is not set up, the payout may be held up in probate or subject to substantial estate tax.

 

How Does Premium Finance Life Insurance Work?

Premium Finance Life Insurance is not something that you hear about every day, mostly because so few people are eligible to apply for it. Those who can qualify for this type of life insurance policy funding stand to gain a great deal of money if all of the variables associated with the transaction remain in their favor. In fact as much as 15% of the face value can be seen in a return only two short years later-with no investment! With millions and millions of dollars involved in the transaction, you can calculate just how lucrative a 15% return would be.

This is how Premium Finance Life Insurance Works. You must first have an insurable net worth or asset value, called an insurable interest, of more than two million dollars. These policies have been written for up to $100 million. You apply through a premium finance broker for the life insurance policy and the financing at the same time. If the lender approves your Premium Finance Life Insurance loan, you will be given the premium money for the policy for two to five years or “life”, depending on what your requirements are. Obviously the insurance policy will be quite substantial, as there are a great deal of assets being covered. Therefore the premium payments are also going to be quite significant. This is why a low interest loan to cover the cost of these premiums is so appealing. At the end of the two year period you will then have the legal option of selling this life insurance policy into a secondary market for 3% to 15% of the face value, less the paid-to-date premiums loan and interest charged by the lender, and settlement fees.

This type of arrangement definitely sounds too good to be true, but it can be just that easy to make a huge return on no investment if you play your cards right. First you have to realize that not just anyone can apply for Premium Finance Life Insurance. You typically have to be at least 69 years old but no older than 85 to even apply. If you meet these requirements and are approved for both the loan and the policy, you must live through the two year repayment period in order to have an opportunity to sell the policy to the secondary market. If you die prior to the two year mark, your beneficiaries will receive the face value of the policy less the paid-to-date premiums and interest charged by the lender. An example : Assume a five million dollar policy with annual premiums of $350,000 and a 10% interest rate. The beneficiaries receive $4,230,000 if the senior passes at the two year mark.

Obviously, life insurance companies are aware of what Premium Financing is all about and have added that anyone looking to apply for it needs be in decent health. They may ask for a detailed estate plan. Insurance companies are also unhappy when life insurance policies are sold to secondary markets because then those policies become much less likely to lapse. Insurance companies count on the lapsing of insurance policies to keep their earnings high. This is because if the policy holder allows his or her policy to lapse, the insurance company gets to keep all of the premium money that had been paid minus any small accrual of benefits that have cash value. When all high profile life insurance policies are guaranteed eventual payment, it certainly puts a strain on insurance executives’ pockets.

It is anticipated that for these reasons insurance companies may soon find ways to make premium financing less available and attractive. Already, during the underwriting process they will ask the senior if anyone has talked to them about selling their policy in two years, and if the answer is “yes,” the company will not underwrite the policy. But for now the buzz of possible investment dollars is being heard loud and clear on Wall Street, and interest in the secondary market purchase and sale of life insurance policies is growing rapidly. Lenders like Goldman Sachs find this an attractive area, and investors like Warren Buffet see the investment of paying premium money for these life insurance policies as a very small sacrifice for a return of about 12 to14%, the industry average.