Tag Archives: borrowed
Are Payday Loans Good or Bad?
When it comes to Payday Loans there is divided opinion on whether they are a good thing or a bad thing. But why are they perceived by some as a bad way of worrying? To look at this we first need to look at exactly what are Payday Loans?
The clue is in the name. They are a short-term loan designed to paid back on the borrowers next Payday. Therefore, the loan is designed only to be borrowed over a few days or at a maximum of a few weeks.
The key with any borrowing that is taken out is that the borrower is always keen to know the APR. This is understandable and this is why Payday Loans are sometimes criticised. The APR on a Payday Loan is high very high. However, the key with a Payday Loan is remembering that you borrow the loan only over a matter of days. APR stands for Annual Percentage Rate so is therefore a percentage rate over a year. It is therefore deemed a little unfair to judge a payday loan over a year as nobody would borrow the loan over that length of time.
It is common knowledge that if you were to borrow an unsecured loan over a few years you can expect to pay back sometimes double of what you initially borrow especially if the length of time the loan is taken over is a few years. So how does this compare into the Payday Loan world?
It is hard to give a specific figure on the amount of interest you will pay on a payday loan as there are many lenders that have different rates. It would not be unfair to say that you may pay back £30 of interest for every £100 borrowed. So, a £300 loan would cost you a total of £390. This would be at an APR of 2000%+ Sounds high? Well, remember the APR is if the loan was borrowed over a year but you will only borrow it for a few days/ weeks.
On the above Payday Loan model you are paying about 1/3 of the amount borrowed in interest. How would this compare to a £5,000 unsecured loan borrowed over 7 years? A 1/3 more of the amount borrowed would be a total payback of about £6,650. This could be achieved at a monthly payment of around £98. So the APR would be similar as the Payday Loan? No. The APR on this example would be about 12.4%.
I hope the above example highlights the “APR argument” when it comes to Payday Loans. You can pay the same split of interest on a Payday Loan as an Unsecured Loan and the APR is massively different the sole reason for this is that a Payday Loan will only be paid back over a matter of days.
Do Payday Loans deserve their bad reputation? Probably not. If they are used correctly, as a short-term financial product instead of a long-term financial solution, and they are paid back on time then they are an excellent form of short-term borrowing in an emergency.
FHA Reverse Mortgage Loan-Get a Hang of It
What is an FHA reverse mortgage?
First and foremost of all, the readers should know what a reverse mortgage is. Well, it is a special type of remortgage without any obligation to make repayment till the homeowner lives in the house. Therefore, reverse mortgage is a loan that is secured against a property. The FHA reverse mortgage is a program having a strong backing of the federal government. It is often referred to as home equity conversion mortgage or HECM (abbreviated format). The prime reason why the majority of the elder persons prefer the FHA program to other available reverse mortgages is that it is fully guaranteed by the government of America.
Eligibility criteria for the FHA reverse mortgage
The homeowner who is at least 62 years of age can avail the FHA reverse mortgage facility. The home must be in a fine condition so the borrower can easily avail a myriad of facilities through such reverse mortgage program. There are certain houses that are eligible to avail this remortgage loan. From a single family dwelling to detached homes to townhouses to commercial properties — it is a prolix list of the suitable items that qualify to access the loans through the well conceptualized FHA reverse mortgage facility. There may be more than one family living in the same property. In that case, the borrowers may be more than one. But here lies an interesting kink. If the co-owner is yet to reach the age of 62, he or she must have to sign a proclamation passing the ownership to the aged co-owner. One more criterion is that the aged persons should not have more than 25% mortgage remaining on their properties.
How much can be borrowed through a FHA reverse mortgage plan?
Well, it depends on the amount of equities that are bottled up in the houses. The location of the property, the prevailing rate of interest and the age of the borrower play the vital roles in deciding the amount to be accessed. A cap is also placed indicating the maximum amount that can be borrowed through a FHA reverse mortgage plan and this amount is reviewed on yearly basis.
The advantages of the FHA reverse mortgage planning
The FHA reverse mortgage originated from the idea of improving the financial penury of many an elderly person. Improving the financial status may be the most vital reason for taking such remortgage plan but there are other convincing reasons such as meeting the health care costs or enjoying the vacation that prod a homeowner to take help of this policy. The major advantage is a borrower is allowed to live in the same property that he or she has utilized to arrange the required money. Moreover, there is no need to get worried over the repayment issue if the person is not planning to sell the house and shift your base to another place. In case of the commercial mortgage loans, a borrower has to sign the deal accepting the clause of paying the money back to the lender after a certain period of time. But the FHA reverse mortgage loan is completely a new concept. The lender can never claim the ownership title till the person lives in the property and does not pass away. Even after the death of the borrower, the immediate heirs can take the burden of repaying the loans in due course of time. It is not mandatory to sell the house to repay the loan that a person has borrowed through the FHA reverse mortgage loan. He or she can collect money from any source and pay it back to the lender.