Essential loan application tips

It is essential to understand the loan application process. It gives the borrower a better chance of the loan or kredit being approved quicker if he/she knows what the lender wants. The borrower will also understand what is expected from him/her. The following points are essential if you apply for a loan.

Filling the application form

The lender will collect and process information during the application process. The creditor will to want to know the purpose of the loan, understand who the borrower is, the value of assets used as security, and whether the borrower is able to repay the loan. Each lender has a credit policy outlining their lending regulations. The borrower’s information will be used to complete his/her credit assessment. Generally, the borrower and the lender’s representative meet to discuss the application. Being ready for the interview makes the process a lot quicker and simpler. The application form may be electronic, physical paper, a web form, or in some instances, a questions asked from a call center. Information required by the lender includes; Borrower’s names and address, how long the borrower has lived at the current address, contact details, property details, employment details, assets and liabilities statement, etc. The lender will need to know the required payments of each liability and the estimated value of every asset. The lender usually assists the borrower in filling the form. It is vital to give the correct information.

Proof of identity and legal issues

Lending institutions are obliged to identify their applicants as an absolute legal requirement. All lending institutions have to adhere to the country’s legal system. The financial institutions still follow the 100 point verification scheme. They collect various forms of recognition, each given a point value. Documents are classified into two groups. A primary document such as a citizenship certificate, passport, and birth certificate scores seventy points. A secondary document such as a credit card, Medicare card, and driver license scores between twenty-five and forty points. Secondary documents serve as support documents. This requirement may be waivered if the borrower has an account with the lender but may still complete identity checks. The lenders are legally bounded to store personal information securely. The borrower has the right to access the information they hold and make the necessary correction.

Evidence of revenue

Lenders will want to be sure that the applicant can meet the loan repayment requirement. The lender will request bank statements, letters from employers, and payslips as evidence of income. Some may require to analyze copies of the most recent tax returns from the applicant. They will make an assessment from the payment requirement from the applicant. Though the application can succeed without evidence of revenue, its unconditional acceptance cannot be realized without it.

Pinpointing The pros and cons of payday loans

At first glance payday loans may seem like an excellent thing to engage in. It helps you get the money that you need right away so it may seem like a feasible option for many people that are in need of some quick cash. There are two sides to the payday loan concept, however, that everyone should take into consideration. To start with, let’s dig in on a decent video on it (which I found on youtube by KA):

Pros

The obvious pro to getting a payday loan is that you get the money that you need. You have the ability to pay whatever bill you need to pay without having to go to family. It can be a real hassle to go to your family and borrow money. They may not have the amount you need. You may even feel embarrassed by having to ask your family for money. When you get the payday loan you get the ability to get loan money from someone that is not family. You don’t feel embarrassed about asking for the money. You don’t feel the pressure of getting harassed about the money from a family member. These are all pros to getting payday loans. You also do not have other people that you know getting into the business while you need the loan. Some people can really dig deep and tell your secrets to others. You may not want people to know why you need the extra money. When you get a payday loan these are all things that you can avoid.

Cons

The reality of the payday loan is that the interest rate is going to be substantially higher. This is what people have to factor in when they look at getting this money up front. It is true that you get the chance to get your loan to pay off any type of debt, but you are going to be required to pay more back when you get your paycheck.

If you are a person that is living from one paycheck to the next you’re going to need to find extra money to compensate for the payday loan that you have to pay back. You also need to be able to pay this loan in full. This is not some installment loan that you get and pay in small increments. Once you get the payday loan you are going to need to definitely make arrangements to have the full amount available when it is time.

Revolving Door

The biggest downside to the payday loan is that it is ultimately an indication of your inability to manage money or your need for more money. For a lot of people this becomes a revolving door. They get one payday loan and they find themselves needing another loan as soon as they pay that one off. They get caught up in the seemingly endless revolving-door a borrowing money and paying more in interest every time they do this.

 

An Overview of Settlement Risk

Settlement risk can be defined as the possibility of a loss that arises when one party fails to honor its end of the deal. Therefore, the settlement in a transfer system will not be completed as expected. It can be as a result of defaulted payments or timing difference in a settlement. Parties to a contract ought to fulfill their promises during the settlement period. This is the period between the transaction and the settlement dates.

Types of Settlement Risk

Settlement risk is made up of credit and liquidity risks. Credit risk is whereby one party is unable to fulfill their promise on the agreed date or later because they are insolvent. Liquidity risk, on the other hand, is the risk that one party to a contract is unable to honor the promise at the agreed date but could fulfill their end of the bargain later. Therefore the main difference between credit risk and liquidity risk is that for liquidity risk the defaulting counterparty can honor their promise at a later date.

How to Mitigate Settlement Risk

Settlement risk can be mitigated in three ways

– Delivery versus payment: This is a mitigation measure where parties to the contract honor their promises simultaneously. For instance, in securities, the parties exchange documents for the transfer and the agreed payment amount simultaneously. With simultaneous delivery, the risk of one party failing to honor their promise is eliminated.

– Settlement via special purpose entities: Special purpose entities are legal entities used by companies to mitigate settlement risk. Example of special purpose entity is the CLS Group. CLS group caters for settlements in the foreign exchange market. Since the foreign exchange market does not have a central clearing platform, most traders use CLS to settle their transactions so as to mitigate risk.

– Settlement through settlement risk solution services.

Settlement Risk Example

A good example of a settlement risk is the case of Herstatt Bank that failed causing a huge financial crisis. The bank was opened in 1956 by Iwan Herstatt and Hans Gerling. The investment grew and became the 35th largest bank in Germany. The bank had a foreign exchange department that operated without the control and collaboration with other divisions.

In 1974, Herstatt Bank failed causing failures in other banks that relied on them for delivery of foreign currencies. The cause of the problem was attributed to the huge foreign exchange exposure which was eight times higher than the limit. Consequently, the bank’s license was withdrawn in June 1974 as the bank lacked assets to cover the liabilities.

Conclusion

The huge liability was as a result of flawed methods applied by the bank when speculating the dollar movement. On the day the bank’s license was withdrawn, some other banks had paid Deutsche Mark to the Herstatt with the hope of getting US dollars later in the day. However, Herstatt stopped all dollar transactions at 3.30pm, that is 10.30 am in New York, and thus counterparties did not receive their dollars. This kind of risk is today referred to as Herstatt risk. The bank’s crisis resulted in a number of regulations. For instance, the banking act was amended, and a deposit protection scheme was set up for German banks.

These Tips Will Help You Avoid Getting Into Trouble With Your Credit Card

Owing a large amount of debt on a credit card can feel like quicksand, the longer you sit still the deeper you slide into a bottomless hole. Honestly, using a credit card shouldn’t leave you feeling bogged down, but it’s important to realize that there are responsible and irresponsible ways to use a credit card. Here are four tips you should follow to keep your credit card debt free and safe.

 

Don’t charge frivolous items to credit

 

Have you ever seen an amazing pair of sunglasses at a store that you didn’t need but still wanted?

Well, you might be tempted to charge those sunglasses to your credit card, however, you shouldn’t, as charging frivolous expenditures to your credit card could leave you with unmanageable debt. Your credit card should be available when you really need it, such as paying for the tow truck after your car battery dies, or when you need to pay an outstanding electricity bill. Buying luxury items on credit could leave you with a mountain of unnecessary, interest collecting debt.

 

Pay more than the minimum each month

 

You used your credit card only for emergency expenses, but now the bill is here, and you aren’t sure how much you should pay. You might be tempted to only pay the minimum, and use the extra money to buy those sunglasses, but the reality is that paying only the minimum you owe will end up costing you more money because of the incurring interest. Aim to pay the full balance you owe every month, and you can avoid ever playing catch up with interest again.

 

Don’t miss a payment

 

You try to be responsible, and pay the full amount each month, however, if one month you can’t afford the full payment, then you might be tempted to skip the payment, and try to catch up next month, but this isn’t something you should consider doing. The consequences of skipping a payment could be a damaged credit score, a late fee on top of your monthly bill, and an increased interest rate. If you can’t make the full payment, then be sure to try to pay at least the minimum as the consequences for missing a credit card payment can be catastrophic.

 

Watch out for credit card fraud

 

Credit card fraud affects millions of people each year, and everyone is a potential victim. With people using their credit cards more often, it can be convenient to reach for the plastic and type or swipe almost anywhere, but this is something you should avoid doing flippantly. How and where you use your credit card matters, so be careful to guard yourself against credit card fraud. There are many steps you can take to prevent credit card fraud:

  • Keep your credit cards secure on you at all times.
  • Choosing a bank that also allows foreign payment, like mach, the best bank in Malaysia.
  • Only use your credit card in places you trust.
  • Destroy any documents that reveal information about your credit card.
  • Set up a push notification system on your smartphone to alert you when your credit card is being used.

Getting loan to finance real estate projects

Capital is utmost part of any business. No business can survive without sufficient capital. Even, for a successful real estate business, you need to have sufficient funds so that you can invest in the best deals. Real estate business is very risky, one need to have a detailed plan for the finances to get the business funded.

If you want to raise sufficient finances for your real estate business, then it is very important that first, you invest sufficient capital yourself. Your liquid assets should become part of the capital for your real estate business.

After your own investment, you can start looking for capital from outside. Firstly, make a project for your real estate business. This will help you to know about the specific requirements of your project. Now, you will have an idea of how much capital is needed and the estimated profit you will make with this project. Now, you can discuss your project with the outsiders to raise capital for your project.

Here are the few options by which you can get loans for your real estate project:

 

  • Loans from private investors:

You can take loans from private investors by paying them interest. They will finance your project only if they are satisfied that their money will be returned back in time. The amount of loan that you can raise depends on your relationship with the private lender and your credibility in the market.

So, make sure you always make timely payment of interest and principal amount to maintain your goodwill in the market.

They usually charge a very high rate of interest in comparison to other financial institutions.

  • Personal Loans:

You can also take a personal loan to raise capital for your real estate project at a specified rate of interest from the bank. Also, you can take a loan from the bank at a variable interest rate, from rates ranging from 12 to 22 percent.

  • Mortgage loans:

In the case of a mortgage loan, you need to mortgage the property against the loan. You need to have real property to avail this loan. So, in this case, the interest rates will be slightly less but, if you are not able to timely repay the loan, your property will be taken over and auctioned by the bank to recover the money.

  • Credit cards:

If you are having a credit card with a very high credit limit, then you can use that to fund your real estate project. For this purpose, you should make a good credit history by paying your credit card bills always on time.

For making your real estate project success, you need to do good research and planning before raising the capital for the same.