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Happy New Year! Organize Your Finances with a Secured Loan
The most popular New Year’s resolutions are to lose weight, stop smoking, and get out of debt. While we can’t address all of these in one article, we can explore how to organize your finances, the first step to getting out of debt. Counterintuitively, one way to address this issue is to consider a secured loan; however, many people do not know how to compare secured loans.
What Caused the Debt?
You cannot fix something if you don’t understand how it became broken. Therefore, the first step on the road to recovery is tracking your behaviour to discover what caused the debt in the first place.
Do you frequently make impulse purchases?
Do you hate sacrifice?
Do you reach for the credit card before considering cash?
Do you feel the need to keep up appearances?
Do you enjoy expensive toys, such as luxury automobiles?
Do you simply love new things?
You may find yourself in any of these categories, but to truly unearth the reasons behind your circumstances, you need to track your spending. You can do this by reviewing past months’ credit card bills. You can evaluate what types of loans you have taken out. You can even spend a month entering every expenditure on a spread sheet.
Whatever you do, you have to face the issues that have caused the problem and give each one a name. For example, if I buy too many clothes, I am a clothes horse. Once you give the problem a name, you can commit to change.
What Behaviours Should Cease?
First of all, you should immediately stop spending more money than you make. Here are some behaviours you can avoid that will help you meet that goal.
Stop window shopping. While you are at it, stop going into stores when you don’t need anything.
Stop eating out.
Stop carrying your credit card in your wallet.
Eliminate things that are not necessary. For example, do you really need satellite radio? Can you bring your lunch to work and avoid the cafeteria?
Immediately, throw away junk mail advertisements.
Stop driving the latest automobile.
What Behaviours Should Increase?
One of the keys to success is positive thinking. Here are some positive ways to tackle the debt issue.
Plan for expenses.
Learn how to cook great meals.
Contribute to your 401K account.
Creatively find ways to have free fun.
Get a library card.
Read personal finance blogs, books, and newspaper articles.
Scour grocery store advertisements and plan meals according to the sales.
Make more money. A part time job can help you chip away at debt.
How Can a Secured Loan Help?
Making the minimum payment on several credit cards will never get their balances to zero. Taking out a secured loan and paying off your cards is one means of eliminating the burden of debilitating interest payments.
Remember that secured loans are secured by your home, car, or other valuable possession. Therefore, you must make the monthly payment without fail. You cannot use a secured loan to organize your finances if you do not first make a clear budget and stick to it. In addition, you must immediately stop using credit cards. Otherwise, your secured loan will only exacerbate the problem.
How to Compare Secured Loans
Secured loans have many variables. You must compare the interest rates, the loan periods, and the payments. It is also a good idea to compare the reputations of different secured loan companies and choose one that is easy to work with.
Naturally, you want a low interest rate. However, almost any secured loan interest rate will be less than the ones on your credit cards. A very important consideration is the loan’s period. A 60-month loan will cost you far more in interest than a 12-month loan, for example. On the contrary, a 60-month loan will have lower payments, and that may be what your budget needs right now.
Choosing the right secured loan is very important since its security is based on your valuable property. Make sure this is one loan that you will never default on, and you will be on track to have a new year with organized finances. The future looks bright. Now, about losing weight and putting down cigarettes, perhaps you should take on those issues next year.
Increasing Demand Could Mean Easier Access to the Cheapest Secured Loans
A popular website centered on the UK economy, FinancialReproter.com, posted the results of a poll that sheds light on a phenomenon that could open doors for individuals and businesses shopping for low interest rate secured loans. The poll, which tallied the responses of over 1,000 financial advisors, showed that 70 percent of participants would be interested in a model that allowed them to create their own loan products. Such an innovation would have implications for anyone searching for the cheapest secured loans.
The Poll
The poll asked: “As the loan markets improves, if there was an ‘out of the box’ model to help you set up your own loan/debt solutions business with direct agencies and full support, would that be of interest?” Over half of the advisors answered positively, at 52 percent. A third of participants–29 percent–answered “no,” and 18 percent were unsure.
Steve Walker, director of Promise Solutions, has stated that such an out-of-the-box solution could confer serious benefits to the loan market and that he felt it was possible due to the technological systems available today. He went on to say, “The key seems to be giving brokers the systems, control and additional income they need to be effective whilst ensuring the lenders have the comfort they want.” According to Walker, Promise Solutions has begun looking into the possibility of creating such a system with its partners.
Potential Game Changer
Many mortgage companies and banks have tightened their eligibility requirements for secured loans considerably since the collapse of the housing market in 2007. Despite overall improvement in the economy, the personal loan sector is recovering relatively slowly. The result is that while demand for loans from the public is increasing, on the whole, banks continue to wait for more favorable lending conditions. Consequently, the self-employed and those with weaker applications continue to struggle to secure loans even if they have valuable collateral to put up.
This could change if a turnkey financial services solution became available to sophisticated investors. If financial advisors could start their own businesses specialising in small secured loans, banks would be forced back into the arena or else risk losing their grip on an eager customer base.
Banks have already seen losses due to the emergence of online peer-to-peer lending schemes over the last few years. These platforms allow independent investors to offer loans directly to customers, completely bypassing bank involvement. To make matters worse for financial institutions, these individual investors can often afford to offer customers lower interest rates as they have lower overhead. In fact, the peer-to-peer platform itself covers the costs of collecting payments and virtually everything else. Typically, an investor’s only cost is a one-off fee or a commission per loan. If the peer-to-peer platform is auction-based, the investor may face stiffer fees, but ultimately, this is a pittance compared to the operating costs of even a small bank.
On top of that, If a simple-to-deploy solution hits the market that would allow financial advisors to get in on the action, banks may sit up and take notice rather than fight a battle on two fronts. All of this is wonderful news for you if you’re looking for the cheapest secured loans. Intense competition between lenders means lower interest rates overall, especially if financial advisors want to offer financial services to clients directly. Such a model is untested, and these entrepreneurs will have to overcome a certain amount of market hesitation before they can expect to turn a profit.
On another front, the proposed model could provide a viable alternative to payday loans, which have received widespread criticism. Although these loans generate lots of tax revenue, there is concern that they are easily available to persons who are unable to repay them. This is primarily because payday loan companies target individuals that earn less than £25,000 a year and then tack on exorbitant interest rates. Customers can easily find themselves falling behind, with no clear path to paying their debt.
Price War
This perfect storm of financial product diversification could result in a price war between the traditional banks and the more exotic services. Peer-to-peer loan auction site ThinCats, for instance, has already loaned over £25 million to businesses across the aisles, all the while keeping that money out of the hands of hungry banks. At the end of the day, anything that gives consumers more choice will ultimately result in lower prices as competition winnows profit margins.