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What Are The Benefits of Prepaid Credit Cards?
Prepaid credit cards have become all the rage lately as these cards provide a valuable financial transaction service that many people have long since needed. Essentially, prepaid credit cards are not credit cards at all because they do not extend credit. That service is the ability to use a debit card wherever credit cards are accepted. Instead of advancing credit charges one draws from a finite amount of deposited cash. Now, some may consider this a somewhat unnecessary service, but when one examines the benefits of prepaid credit cards it becomes obvious that these cards have a great deal to offer.
For starters, prepaid credit cards are a great way to protect oneself from fraud. While we would all like to assume that the world is made up of honest people, it is not. As such, there have been a great number of instances where people have been defrauded of their credit card funds. This happens often online as a number of less than reputable sellers operating out of seemingly unknown locations in the world rip people off for their credit card information. Considering the following common scenario: a person finds a website selling used books and makes a purchase using credit card information and when the credit card statement arrives it is discovered that the $5 book purchase led to $2,000 of purchases with the provided (and compromised) credit card information. Now, a prepaid credit card would be quite beneficial in this instance or in any instance where one is purchasing from an unknown vendor. For example, one could keep a very minimal amount on the prepaid card (say $20) so that if it is compromised the losses will be minimal and the card can simply be discarded.
Also, these prepaid credit cards are the same as using cash to pay for items without having to carry cash around. This can provide a safety net so to speak if the card is lost or stolen. For example, if you record the account number of the prepaid card and the card ends up being lost you could quickly transfer the balance of the card to another account. This way, no money is lost. Now, if a wallet full of cash was lost then…oh well…it is gone forever. As such, the ability to replace cash with an alternate means of payment is always a huge positive particularly one that also has a threshold limit of spending much lower than a credit card as a lost credit card can prove even more calamitous than lost cash.
Another aspect of prepaid credit cards that is supremely beneficial is the fact that these cards are based on a finite amount of money as opposed to advancing money on a borrowed basis. For some, there is a lack of desire to amass credit card debt, but the need for a credit card in the modern world is generally unavoidable. Additionally, there will be those individuals who would like a credit card but for a number or reasons they are turned down due to bad credit, lack of credit, etc. In regards to these problems, these prepaid credit cards come in handy as they provide a solution to such a dilemma.
As one can see, prepaid credit cards have a host of benefits that speak volumes for the value of these cards. So, if worries about lost or stolen cash or credit cards, overextending oneself on credit or simply wanted to avoid the complexities of applying for a credit card, prepaid credit cards provide a simple, safe and sane solution. What better of an endorsement could one ask for than that?
Why So Many Loan Modifications Fail and How to Seek Help
For millions of homeowners struggling to pay their mortgage, many are faced with falling home values which makes it hard to either sell or refinance. Therefore, many homeowners make the painful decision to simply walk away rather than fighting to stay afloat and keep their home. Financially speaking, it does make a lot of sense for many underwater homeowners to walk away or short sell because for some, it may take them many years to break even and start to have positive equity. However, not everyone falls in this category. The reasons are many, such as: (1) if you are planning to hold on to your house for a long time, you could break even and then start to have positive equity again; (2) perhaps you have personal goals to hold on to your house because you enjoy having your family living in it. So just because lots of people are walking away does not make it the right answer for everyone. This would be similar to doing what everyone else was doing during the bubble, which was to buy a house because everyone was.
In an effort to help some of these homeowners who wanted to save their home, loan modification programs have become one of the primary rescue effort. Loan modifications help make the mortgage payment more affordable so that people can keep their homes.
Unfortunately, these programs can be very challenging and at times fail to help the homeowners because the process to qualify for one and get approved for one is super complicated.
On one hand, banks make the process very difficult. In fact, some research shows that it was much easier for most people to obtain mortgages when they purchased their homes than it is now to apply for loan modifications. Many believe that banks do not have the proper infrastructure in place to deal with so many loan modification applications. Other believe that the banks are giving people the run-around on purpose.
On the other hand, they are lots of people who apply for loan modifications the wrong way not adequately knowing what they are getting into, or what will be expected of them. They submit their applications and wait for months hoping for the positive answer. Well, for most people, and this is a sad but true fact, if they are not financially pre-qualified they won’t get a positive response. What homeowners need to do is not only demonstrate to investors and lenders that modifying their current loan is more cost-effective than foreclosure, but that they are able to make the new modified payment.
So instead of applying unprepared, it would be better to know ahead of time whether you could qualify for a loan modification. This is vital to know because if you don’t qualify for the new terms, then the modification could be denied, anyway. And if you are not pre-qualified, perhaps fine-tuning your budget, i.e. lowering your debt, taking the train instead of owning the car, could help you get qualified. The decision whether to apply is 100% up to you, but having guidance can save you time and money, and increases your chances of approval for a loan modification. So here are some of the pre-qualification criteria that are considered crucial and this is where you need guidance with:
1. Your front-end debt-to-income ratio must be above 31% of your gross income prior to the modification.
2. Your house target payment, also known as PITIA (principal, interest, taxes, insurance, and association dues), has to be lowered to be at 31%-38% of your gross income after the modification in order to meet the HAMP guidelines. This is done in three steps. (1) Your house payment target is achieved by lowering your interest rate to no more than 2% with a 30 year loan term. (2) If the target is not reached, then your loan term is extended up to 40 years in order to try and reach the new house target payment. (3) The third step is to either provide you with a loan forbearance or a balance reduction if the target payment is not reached in steps 1 and 2. And this is the tricky part. There are relatively few loan modifications that have received a balance reduction. Additionally, as far as the forbearance option goes, this is very relative to your case; there is no size fit all, basically, the loan modification program guidelines do not give one percentage forbearance ratio for everyone.
So now you are wondering if you should become a mathematician in order to figure all the ratios and calculations involved in a loan modification. You sort of do if you are going to figure it out on your own. The alternative option is to seek out help where you can get unbiased, conflict-free analysis for your loan modification potential.
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