Insurance and Loans

How I made money online for free: My Second day of Adsense earnings

2006-12-18T07:05:00.000-08:00

How I made money online for free: My Second day of Adsense earnings

US interest only mortgages

2006-12-18T06:52:00.000-08:00

In the United States, a five or ten year interest-only period is typical. After this time, the principal balance is amortized for the remaining term. In other words, if a borrower had a thirty-year mortgage and the first ten years were interest only, at the end of the first ten years, the principal balance would be amortized for the remaining period of twenty years. The practical result is that the early repayments (in the interest-only period) are substantially lower than the later repayments. This enables a borrower who expects to increase their salary substantially over the course of the loan to borrow more than they would have otherwise been able to afford, or investors to generate cashflow when they might not otherwise be able to. During the interest-only years of the mortgage, one is essentially renting the house since none of the principal loan decreases. The two great disadvantages are that in many states one has to pay property tax and purchase mandatory property insurance. On the other hand, the owner is still gathering appreciation, even if they aren't paying down equity against their loan, and there are many other tax advantages to home ownership not available to renters. In cases of aggressive appreciation (e.g. "flipping" homes), a 100% mortgage-to-value interest-only loan may also be able to be converted to a conventional mortgage with a more favorable mortgage-to-value loan, resulting in an overall lower payment.

College Consolidation Loan

2006-12-18T06:51:00.001-08:00

College Consolidation Loans offer individuals with student loans the ability to consolidate multiple Stafford and PLUS loans into one loan agreement.
The fixed interest rate on the consolidated loan is based on an average of the loans that are being consolidated, but the term of repayment is set at thirty years, typically lowering the monthly payment. Since the borrower has the right to prepay student loans, the consolidation loan offers greater flexibility to the student.

Process

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The loan is typically given in cash and secured by the borrower's post-dated check that includes the original loan principal and accrued interest. The maturity date usually coincides with the borrower's next payday. On the maturity date the lender processes the check traditionally or through electronic withdrawal from the borrower's checking account if the borrower does not first repay or service the loan in person.

Payday lenders typically operate small stores or franchises, but large financial service providers also offer variations on the payday advance. Some mainstream banks offer a "direct deposit advance" for customers whose paychecks are deposited electronically. When a consumer requests the direct deposit advance they receive a predetermined, small cash advance. On the next direct deposit into the consumer's bank account that advance amount is removed by the bank plus a fee for the advance (usually around 10-20%). Income tax preparation firms including H&R Block partner with lenders to offer "refund anticipation loans" to filers.

In the United States, most states have usury laws which forbid interest rates in excess of a certain APR. Payday lenders operate in those states by funding loans through a bank chartered in a different state. Under the legal doctrine of rate exportation, established by Marquette Nat. Bank v. First of Omaha Corp. 439 U.S. 299 (1978), the loan is governed by the laws of the state the bank is chartered in. This is the same doctrine that allows credit card issuers based in South Dakota and Delaware — states that abolished their usury laws — to offer credit cards nationwide.

Payday loan

2006-12-12T22:10:00.000-08:00

A payday loan or paycheck advance is a small, short-term loan (typically up to $1,500 in the U.S.) that is intended to bridge the borrower's cashflow gap between paydays. Payday loans are also sometimes referred to as cash advances, though that term can also refer to cash provided against a prearranged line of credit such as a credit card.

How they work

2006-12-10T22:16:00.000-08:00

A user is issued a credit card after an account has been approved by the credit provider (often a general bank, but sometimes a captive bank created to issue a particular brand of credit card, such as Wells Fargo or American Express Centurion Bank), with which the user will be able to make purchases from merchants accepting that credit card up to a pre-established credit limit.
When a purchase is made, the credit card user agrees to pay the card issuer. Originally the user would indicate their consent to pay, by signing a receipt with a record of the card details and indicating the amount to be paid, but many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet.
Electronic verification systems allow merchants (using a strip of magnetized material on the card holding information in a similar manner to magnetic tape or a floppy disk) to verify that the card is valid and the credit card customer has sufficient credit to cover the purchase in a few seconds, allowing the verification to happen at time of purchase. Other variations of verification systems are used by eCommerce merchants to determine if the user's account is valid and able to accept the charge.
Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect (see Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit provider charges interest on the amount owed (typically at a much higher rate than most other forms of debt). Some financial institutions can arrange for automatic payments to be deducted from the user's accounts.
Credit card issuers usually waive interest charges if the balance is paid in full each month, but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid.
For example, if a user had a $1,000 outstanding balance and pays it in full, there would be no interest charged. If, however, even $1.00 of the total balance remained unpaid, interest would be charged on the full $1,000 from the date of purchase until the payment is received. The precise manner in which interest is charged is usually detailed in a cardholder agreement which may be summarized on the back of the monthly statement. (See The TD Gold Travel Visa Cardholder Agreement Retrieved January 3, 2006)
The credit card may simply serve as a form of revolving credit, or it may become a complicated financial instrument with multiple balance segments each at a different interest rate, possibly with a single umbrella credit limit, or with separate credit limits applicable to the various balance segments. Usually this compartmentalization is the result of special incentive offers from the issuing bank, either to incent balance transfers from cards of other issuers, or to incent more spending on the part of the customer. In the event that several interest rates apply to various balance segments, payment allocation is generally at the discretion of the issuing bank, and payments will therefore usually be allocated towards the lowest rate balances until paid in full before any money is paid towards higher rate balances. Interest rates can vary considerably from card to card, and the interest rate on a particular card may jump dramatically if the card user is late with a payment on that card or any other credit instrument. As the rates and terms vary, services have been set up allowing users to calculate savings available by switching cards, which can be considerable if there is a large outstanding balance (see external links for some on-line services).
Because of intense competition in the credit card industry, credit providers often offer incentives such as frequent flier points, gift certificates, or cash back (typically up to 1 percent based on total purchases) to try to attract customers to their program.
Low interest credit cards or even 0% interest credit cards are available. The only downside to consumers is that the period of low interest credit cards is limited to a fixed term, usually between 6 and 12 months after which a higher rate is charged. However, services are available which alert credit card holders when their low interest period is due to expire. Most such services charge a monthly or annual fee.

Credit card

2006-12-10T22:11:00.000-08:00

A credit card system is a type of retail transaction settlement and credit system, named after the small plastic card issued to users of the system. A credit card is different from a debit card in that it does not remove money from the user' s account after every transaction. In the case of credit cards, the issuer lends money to the consumer (or the user). It is also different from a charge card (though this name is sometimes used by the public to describe credit cards), which requires the balance to be paid in full each month. In contrast, a credit card allows the consumer to 'revolve' their balance, at the cost of having interest charged. Most credit cards are the same shape and size, as specified by the ISO 7810 standard.

Credit card debt

2006-12-08T08:00:00.000-08:00

Credit card debt is an example of unsecured consumer debt, accessed through ISO 7810 plastic credit cards.

Debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent.
The results of not paying this debt on time are that the company will charge a late payment penalty (generally in the US from $10 to $40) and report the late payment to credit rating agencies. Being late on a payment is sometimes referred to as being in "default". The late payment penalty itself increases the amount of debt the consumer has.

When a consumer has been late on a payment, it is possible that other creditors, even creditors the consumer was not late in paying, may increase the interest rates the consumer is paying. This practice is called universal default.

If the customer is carrying an amount of debt that is so high that it is over their credit limit, then they might be charged an over-the-limit fee of up to $39 until their balance is paid down to below their credit limit. This, too, may add to the consumer's debt.

Debt consolidation

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Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house.[1] The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.

Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.

Finance

2006-12-07T23:52:00.000-08:00

In finance, investment means buying securities or other monetary or paper (financial) assets in the money markets or capital markets, or in fairly liquid real assets, such as gold as an investment, real estate, or collectibles. Valuation is the method for assessing whether a potential investment is worth its price.
Types of financial investments include shares or other equity investment, and bonds (including bonds denominated in foreign currencies). These investments assets are then expected to provide income or positive future cash flows, but may increase or decrease in value giving the investor capital gains or losses.
Trades in contingent claims or derivative securities do not necessarily have future positive expected cash flows - so are not considered to be assets, or strictly speaking, securities or investments. Nevertheless, since their cash flows are closely related to (or derived from) those of specific securities, they are often studied as or treated as investments.
Investments are often made indirectly through intermediaries, such as banks, mutual funds, pension funds, insurance companies, collective investment schemes, or even investment clubs. Though their legal and procedural details differ, an intermediary generally makes an investment using money from many individuals, each of whom receives a claim on the intermediary

Cash Flow

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Cash flow refers to the amounts of cash being received and spent by a business during a defined period of time, sometimes tied to a specific project. It can be used

to determine problems with liquidity. Being profitable does not necessarily mean being liquid. A company can fail because of a shortage of cash, even while profitable.
to generate project rate of returns. The time of cash flows into and out of projects are inputs to models like internal rate of return and net present value.
to measure income or growth of a business when it is believed that accrual accounting rules do not represent economic realities. Alternately, the cash flow can be used to 'validate' the net income generated by accrual accounting.

Cash flows can be classified by:

1.Operational cash flows: Cash received or expended as a result of the company's core business activities.
2.Investment cash flows: Cash received or expended by making capital expenditures that will benefit the business for many years (e.g. the purchase of new machinery), investments or acquisitions.
3.Financing cash flows: Cash received or expended as a result of financial activities, such as receiving or paying loans, issuing or repurchasing stock, and paying dividends

All three together are necessary to reconcile the beginning cash balance to the ending cash balance.

Structure of Debt

2006-12-07T08:12:00.000-08:00

The Bureau of the Public Debt divides the national debt into two main categories: debt held by the public, and intragovernmental holdings. Intragovernmental debt includes money for government trust funds, such as pension plans and the debt for social security. Overall, intragovernmental holdings account for over $3.1 trillion of the total debt at this time.

The remaining $4.6 trillion or so has been purchased by the public, including foreign entities. This largely comes from the issuance of U.S. Treasury securities. Nearly half ($2.2 trillion) is composed of Treasury notes (aka T-notes), while T-bills and T-bonds (including savings bonds) cover most of the remaining public portion of the debt. Bonds sold for infrastructure projects are also part of the national debt.

It is common for individual Americans and businesses to buy bonds and other securities, though much of the debt is now held overseas. At the end of 2004, foreign holdings of Treasury debt were $1.886 trillion, which was 44% of the total debt held by the public. Foreign central banks owned 64% of the Federal debt held by foreign residents; private investors owned nearly all the rest (figures are from the Analytical Perspectives of the 2006 U.S. Budget, page 257).

The country holding by far the most debt is Japan which held $644.2 billion at the end of August 2006. In recent years the People's Republic of China has also become a holder of over $1 Trillion in total foreign reserves, of which about $339 billion are US Treasuries.

Loan Shark

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A loan shark is a person or body that offers illegal unsecured loans at high interest rates to individuals, often backed by blackmail or threats of violence. They provide credit to those who are not willing or are unable to obtain it from more respectable sources, usually because interest rates commensurate with the perceived risk are illegal.

In much of history, usury laws made loan sharks commonplace. Many moneylenders skirted between legal and extra-legal activity. In the western world in recent years, loan sharks have been a feature of the criminal underworld, but otherwise rare. Loan sharks are common in Triads in Hong Kong.

Payday loans and other aspects of consumer finance have made true loan sharks rarer, though some legitimate lenders have been accused of behaving in an exploitative manner. There are many registered and legal lenders that lend to people who cannot get loans from the most mainstream lenders, such as large banks. Terms such as sub-prime lending and "non-standard consumer credit" are used for this type of lender. They often operate in cash, whereas mainstream lenders increasingly operate only electronically, which means that they will not deal with people who do not have a bank account.

Payday loan operations have also come under fire for charging inflated "service charges" for the service of cashing a "payday advance" — effectively a short-term (no more than one or two weeks) loan for which charges may run 3-5% of the principal amount. By claiming to be charging for the 'service' of cashing a paycheck, instead of merely charging interest for a short-term loan, laws which strictly regulate moneylending costs can be effectively bypassed.

Loans

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A loan is a type of debt. All material things can be lent but this article focuses exclusively on monetary loans. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.

The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt.

Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply

Protection for You and Your Family

2006-12-07T03:24:00.000-08:00

If you're one of the many who are not insured or under-insured, then an individual and family health insurance plan may be the answer to your health insurance needs.
Individual and family health insurance is health coverage specifically tailored to those not covered by employer groups or organizations. A broad selection of individual and family health insurance plans is available. Less expensive plans may provide coverage in case of a major accident or illness, while other plans may provide comprehensive coverage for all your healthcare needs.

Assessing your Life Insurance Needs

2006-12-07T03:18:00.000-08:00

There are some basic things to consider when you are buying life insurance:

Before purchasing a life insurance policy, you should consider your financial situation and the standard of living you want to maintain for your dependents or survivors. For example, who will be responsible for your funeral costs and final medical bills? Would your family have to relocate? Will there be adequate funds for future or ongoing expenses such as day care, mortgage payments, or college?
You should reevaluate your life insurance policies annually or whenever you experience a major life event such as marriage, divorce, the birth or adoption of a child, or purchase of a major item such as a house or business.

Basics of Life Insurance

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Many of us buy life insurance, because we want to make sure our loved ones remain financially secure after we die. For those interested in estate planning, cash accumulation, wealth transfer and estate tax liquidity, life insurance can be a tool to achieve those goals, as well.

There are many choices when it comes to life insurance. Policies are underwritten by more than 2,000 life insurance companies in the United States, and sold through banks and other financial institutions, as well.

Unsecured Loans

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These may be available from financial institutions under many different guises or marketing packages:

credit card debt,
personal loans,
bank overdrafts
credit facilities or lines of credit
corporate bonds

The interest rates applicable to these different forms may vary depending on the lender, the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.

Government Dept

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Government debt (also known as public debt or national debt) is money (or credit) owed by any level of government; either central government, federal government, municipal government or local government.
As the government represents the people, government debt can be seen as an indirect debt of the taxpayers.
Government debt can be categorized as internal debt, owed to lenders within the country, and external debt, owed to foreign lenders. Governments usually borrow by issuing securities such as government bonds and bills. Less credit worthy countries sometimes borrow directly from commercial banks or supranational institutions. Some people consider all government liabilities, including future pension payments and payments for goods and services the government has contracted for but not yet paid, as government debt.
Another common division of government debt is by duration. Short term debt is generally considered to be one year or less, long term is more than ten years. Medium term debt falls in the middle.

Loan for Higher Education

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While included in the term "financial aid" Higher Education Loans differ from scholarships and grants in that they must be paid back. They come in several varieties in the United States:

Federal Student Loans made to students directly: No payments until after graduation, but amounts are quite limited
Federal Student Loans made to parents: Much higher limit, but payments start immediately
Private Student Loans made to students or parents: Higher limits and no payments until after graduation, although interest will start to accrue immediately.

A Guide to Secured Loans

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A secured loan is any loan that requires the borrower to provide the lender with some form of security. In the case of secured loans, the security will be the borrower's property, regardless of whether it is mortgaged or owned outright. Loans secured against property that is already mortgaged are known as second charges, whereas loans secured against a property owned outright with no existing mortgage in place are known as first charges. See below for a quick guide to secured loans.

Health Insurance

2006-12-05T21:24:00.000-08:00

Health insurance, which is coverage for individuals to protect them against medical costs, is a highly charged and political issue in the United States, which does not have socialized health coverage. In theory, the market for health insurance provision should function in a manner similar to other insurance coverages, but the skyrocketing cost of health coverage has disrupted markets around the globe, but perhaps most glaringly in the U.S. Please see health insurance for a discussion of this category.

Principle of Insurance

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From the point of view of the insurance company there are four general criteria for deciding whether to insure events or not.

There must be a larger number of similar objects so the financial outcome of insuring the pool of exposures is predictable. Therefore they can calculate a "fair" premium.
The losses have to be accidental and unintentional from the point of view of the insured.
The losses must be measurable, identifiable in location, time, and be definite. They also want the losses to cause economic hardship. That is, so the insured has an incentive to protect and preserve the property to minimize the probability that the losses occur.
The loss potential to the insurer must be non-catastrophic. It cannot put the insurance company in financial jeopardy.