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January 12, 2019

Borrowing money when you’re retired – Knowing your options

retirement money needThere are several retirees who are of the opinion that they won’t be able to obtain a loan just because they don’t get a salary any longer. Although it is true that it can be tougher to qualify for loans during retirement, yet it is not at all impossible. You must have been saving in your retirement accounts like your Roth IRA or 401(k) accounts but something that you should avoid is borrowing from these accounts. This can have an adverse impact on your savings and also on the income that you fall back on during your retirement. There are several kinds of online loans and offline ones which can save you from a financial setback even during retirement. Read on to know more on this.

Borrowing during retirement – How do you qualify?

When you’re self-funded, lenders will typically decide the monthly income utilizing 2 different procedures which are as follows:

  • Asset depletion: In this technique, the lender will subtract the down payment from the entire and sum total of the value of your fiscal assets and then take 70% of the remainder amount and then divide by 360 months.
  • Drawdown of assets: The regular monthly amount that you withdraw from your retirement accounts in the form of income will be taken into account.

Retiree loan borrowing options

Secured loans are still easier to borrow as you can set collateral against the loan but as long as unsecured loans are concerned, they’re tough for a retiree to borrow as there is no collateral to assure timely payment and hence the interest rates will also be pretty high. Here are few loan options combining secured and unsecured.

MORTGAGE LOAN

The most common kind of secured loan is definitely a home loan which carries your home as collateral. However, the income of the retiree is a major setback, more so when most of your income comes from savings or investment earnings.

CASH-OUT REFINANCE LOAN

When you refinance your existing loan with an amount that is more than what you owe and less than the value of your home, this is called cash-out refinance loan. The extra amount that you make is the secured cash loan. This will also extend the time that it take to repay your mortgage loan.

DEBT CONSOLIDATION LOAN

As the name suggests, a debt consolidation loan is only designed to consolidate debt. It is more like refinancing your current debt. This will mean paying off the debt throughout a longer period of time with lower payments. The new interest rate that you pay may be lower than your present rate or may not be.

PAYDAY LOANS

Anyone including retirees can qualify for unsecured short term loans like payday loans. You may check out websites like www.PaydayMe.com to get short term loans during an emergency when you’re sure that money will come in again with which you can repay the existing payday loan on time.

Therefore, when you’re a retiree who is thinking of ways in which you can fund your emergencies, you can take into account the above mentioned options.

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December 11, 2018

What exactly is leasing? – A detailed information

lending carA recent article in a UK newspaper claimed 1.6 million Brits currently lease their car – but how many actually understand what they’re doing?

When I first leased a car, I had no idea how it worked. I assumed a lease was something you got on a retail building and not a car!

Don’t let the complexity scare you though. Leasing can be a practical and affordable form of car finance if you take the time to get to know how it works. In this blog, I’ll run you through what leasing is, how it works and a couple different forms of leasing finance.

What is a lease?

To understand the difference between leasing and buying, you need to have a look at what you’re actually paying for in a lease.

When you buy a car outright, your payment covers the full value that the vehicle is worth. Once you’ve paid the full price (either immediately or over time), you become the legal owner of the car.

With leasing, you essentially ‘rent’ a car for a given period of time and return it at the end of your contract. Unlike buying a car, you’re never the legal owner of the car, although you are usually its registered keeper.

Why lease? Because depreciation hurts

Leasing is an attractive option for a lot of people because it eliminates one of the major problems that comes with owning a car – the cost of depreciation (depreciation is how quickly a car loses value).

According to the AA, new cars can lose up to 10% of their value the moment you drive them off the forecourt. Worse, the worst of the bunch can lose up to 60% of their value in the first year of ownership!

With these motors, if you’re planning on selling your car after a few years, you’re in for a shock when you check what it’s worth.

Contract Hire

Contract hire (more commonly known as leasing) is an arrangement where someone ‘rents’ a new car for a set period of time from a dealer. During the contract, the individual pays just enough to pay off the car’s depreciation. (Plus a little profit for the dealer, of course.) At the end of the contract, the individual returns the car to the dealer and they both go their separate ways.

With leasing deals, you aren’t the legal owner of the car but you are the registered keeper. That means you have get the car regularly serviced and keep it in a good condition.

The best thing about leasing compared to other finance options is the monthly payments, which tend to be significantly lower. That’s because, as I already mentioned, you’re only paying off the depreciation. You can also trade your car in every few years for a brand new model!

Tom Butcher worked behind the scenes in print journalism for years until he discovered the wonders of the web. He writes for several publications, covering the finance, automotive and tech sectors. At the moment, he is helping LeaseFetcher teach the world about car leasing.

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November 18, 2018

A (blue)chip on your shoulder: Things to know about blue chip funds

fund investmentsUnderstanding the viability of bluechip funds can help you plan your investment and get a well-rounded portfolio.

It is a well-known fact that market-linked investments are subject to a certain degree of risk. However, certain equity funds offer higher growth prospects with the risk element evened out over the long term. One such fund is the Emerging blue chip fund, or blue chip funds in general.

What is a bluechip fund?

The term ‘bluechip’ comes from the game of poker, where the blue coloured chip is the most expensive or valuable of all. The same logic is applied to the bluechip fund – these are equity funds of large multinationals or companies with a long and well-established track record of high performance and market credibility. Companies offering blue chip funds are normally in the top 3 performance bracket in their sector or industry.

Given their reputation and economic standing, bluechip equity funds are those with a large market capitalisation, usually in crores of Rupees. They are normally listed on the stock exchange.

Investors earn via dividend payments from these funds. They are considered relatively ‘safe’ funds to invest in, with a higher propensity for stable and regular growth.

However…

  • These equity funds offer dividend payouts since their prices normally do not move much. The dividends can become a valuable second income for investors.
  • Having mentioned the risk factor, we would be remiss in not mentioning that the bluechip funds are amongst the highest performers among most equity funds, year on year. These funds have been seen to perform over the benchmark indexes set for them over the last decade.
  • The size and composition of the company alone does not automatically guarantee that the bluechip fund is safe. Even the best in class bluechip equity funds like the Emerging Bluechip Fund carry a moderate amount of risk. But this is easily attributable to all equity funds. The key is to remain invested for a longer time frame to reap the rewards of the fund.
  • They offer stability to your portfolio, with expert handling by the fund manager (but do partner with a reputed fund house when you buy the fund). The fund can normally recover itself in a bearish market, or when there is a downturn for some reason. This is because the fund can ride market volatility much better.
  • Investors have the option of investing in blue chip funds, blue chip ULIPs, etc. This is because the fund moves in the broader market only.
  • They are more expensive. This factor might deter new investors from seeking investment in blue chip equity funds, however, they are a viable option for their growth potential. Yet, it is not ideal to have too many bluechip funds in your portfolio, and you can diversify with a range of mid-cap and small-cap funds.
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October 3, 2018

How you can invest in an appropriate term insurance

term insurance coverageYou can get an unexpected happiness or some sudden mishaps in life can lead to never-ending grief and sadness, one can never be sure. In the unfortunate events like the untimely death of an individual who is the bread earner and head of the family, everything seems to be so scattered and hard to manage for the rest of the family. Term insurance is one of the insurance that can be availed for a certain period of time. Term insurance helps the family of the policyholder to meet the various financial needs like education of a family member, household expense and etc in absence of the policyholder. With the assistance of Term Insurance plan, a family of policyholder can maintain their lifestyle and do not need to beg other people in this world of inflation. There are many benefits of term insurance cover. The coverage of term insurance plan also differs from one plan to another, so one need to be aware of his/her various expectations and requirements from the term insurance while buying a term insurance policy.

Term Insurance Policy-

There are different types of term insurance plans like Standard Term Life insurance Plans, Term Return of premium plans, Group term insurance plan, Term insurance plan by number of years, Decreasing and Increasing term Insurance Plans, Convertible Term insurance plans, Single life and joint life term insurance plans, Offline and online term insurance plans in India. One can choose one term insurance plan as per the age, tenure, cover requirements, tenure and premium amount. Various companies offer a wide range of Term insurance policies in the market but, you should read terms and conditions and understand different types of term insurance policy before buying any.

Even to enhance the beauty of term insurance plans, there are various additional riders that can be enjoyed by the customer at a little more premium amount such as Critical Illness Rider, Total and Permanent Disability Benefit Rider, Accidental Death Benefit Rider, Hospital Cash Rider, Waiver of Premium Rider and etc. Riders can play a vital role in protecting our money if choose wisely.

Pointers to look for the best insurer-

There are various factors that one needs to check before getting a term insurance plan and some of the pointers are as follows –

1. Claim Settlement Ratio – This is the most important pointer. The number of claims settled against the total claims received by the insurer. An insurer with the highest claim ratio is more preferred than other. One can find this data in the annual report that is published by IRDAI for each life insurer.

2. Featured products – it is not necessary that all insurers offer all insurance products. One need to keep an eye on the various products featured by the insurer and filter which insurance policy is actually needed.

3. Customer service quality – Valuing a customer is the most important pointer. A number of queries resolved against the total reported complaints/ queries show the mirror to the customer handling status of any insurer.

Objective –

Right from shoes to clothes we want to give our family the best we could afford. Term insurance is the best thing that you can do for your family, as it offers Maximum cover in minimum investment. The main motive of a term insurance is to help an individual’s family to meet their regular expenses and normal lifestyle in their absence during all future needs. Ideal term insurance helps an individual to wave a web to cover all necessity of his/her family. Eventually, it is your responsibility to prepare you and your family to face any unforeseen event. Don’t wait, use an online insurance web aggregator like PolicyX.com, compare quotes on the basis of benefits, premium, cover and choose the right one accordingly.

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October 2, 2018

DIY Investing with Peer to Peer Loans

another loan optionAre you a hands-on investor who enjoys evaluating investment opportunities and finding a diamond in the rough? If so you may want to consider investing in peer to peer lending. As a peer to peer lender you have the opportunity to review individual borrower applications and select the ones that you think are going to repay their loans.

What is Peer to Peer Lending?

For those of you not familiar with peer to peer lending (also know as P2P lending), let’s take a moment for a quick introduction. In the past ten years several websites (known as platforms) like LendingClub and Prosper have sprung up offering personal loans to individuals. This is certainly not unique but what makes them different is that they are not banks or financial institutions in the traditional sense. These websites get funding for the loans they provide from individual investors in amounts as small as $2,500. In a sense, anyone can be a banker with just a small amount of money. The signup process is quick and easy, and as soon as you transfer the funds you can start investing.

How Do You Invest in Peer to Peer Loans?

The process for P2P lending investing is pretty simple. Once you have opened and funded your account you will be able to see all of the loan applications that the platform has approved. These loan applications have been evaluated based on industry standard underwriting techniques and many are rejected. The ones that are approved are rated and the highest rated borrowers get the lowest interest rates.

Lenders review the approved loan applications and decide which loans they would like to invest in based on their comfort level with risk and their desired return. Investment in a loan can be as little as $25 and most experts recommend investing the minimum amount and spreading your portfolio over as many loans as possible in order to minimize risk through diversification. This is where you get to Do-It-Yourself. The platform provides dozens of pieces of information from the loan application and the borrower’s credit history. You get to determine which factors matter, how much to weigh them and what a good borrower profile looks like. To some people this may sound boring and tedious but for many investing junkies this is the fun part. You can look at data like length of employment, debt-to-income ratio, home ownership vs. renting, late payments, outstanding debt, bankruptcies and so much more.

There are a limited number of filters available on the platforms that allow you to quickly find loans that meet certain criteria, then you can review them in the more detail individually. Or, for the really hardcore investment analysis junkies, the information for all available loans can be downloaded to a spreadsheet for study and review. There are approximately 50 to 250 loans available at any given time and there are approximately 80 pieces of information available so, as you can imagine, this can be an enormous amount of data to review. However, with some simple sorting and filtering in your spreadsheet you can pretty easily identify the loans that meet your criteria.

There is also room for intuition and past experience in the analysis process. There may be more loans that meet your criteria than you have funds to invest. Ultimately, you may have to ‘go with your gut’ in order to select the loan or loans that you think are most likely to be paid back.

For those who want passive income or do not feel they are savvy enough to select quality loans there is also an auto invest feature that will choose the loans for you based on your desired risk/return level. But for the investment analysis enthusiast the DIY approach is the way to do. All in all, this can be a fun way to achieve a great return on your investment.

Cody Smith is the founder of PeerLoanAdvisor.com which provides information and advice to peer to peer lending investors.

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