(ARA) – While the number of auto and mortgage loans issued are down, and the effort it takes to get a good loan these days might seem daunting, there are signs that consumer lending is improving with positive economic reports. And even though dollars aren’t handed out as quickly or easily as they were just a few years ago, it is possible for a person to obtain a mortgage or auto loan.

Signs that consumer lending is improving include:

1. Interest rates remain low.
2. Banks are stronger and evaluating loan requests in depth.
3. Inflation is staying low.

Consumers interested in either a mortgage or auto loan should first review their credit scores to determine whether they can afford the loan. A bad credit score could mean denial or paying a lot of extra money. Federal law requires everyone to be able to access a free credit report from each of the three credit agencies once a year. With that credit report information, you can find out if your report has errors or if you have areas where you can work to improve your score.

“Once you have determined that your credit score will assist you in acquiring a mortgage or auto loan, you need to do some research on the loans available,” says Daniel Wesley at CreditLoan.com. “In the mortgage loan area, you need to investigate whether an Adjustable Rate Mortgage works better or a Fixed Rate Mortgage. And in the auto loan area, secured and unsecured loans are available through direct and indirect financing, giving you plenty of options to research to best fit your budget.”

ARMs are good if you plan to live in your house for only a few years because your mortgage rate will be fixed for a set number of years at a lower interest rate. But they can fluctuate quickly once the time period expires, increasing your payments greatly. You may be eligible for a refinance on the mortgage at that time – make sure you research the terms of your ARM closely.

Fixed Rate Mortgages – while higher than typical initial ARMs – are at a historic low, which has made these types of mortgages very popular. They are also popular for families looking to refinance.

Auto loan interest rates for new car purchases also have fallen from a year ago according to interest.com. Some tips for getting an auto loan include:

1. Check your credit report
2. Know what you can afford in payments
3. Determine whether a low-cost option is really the best idea in the long run

Courtesy of ARAcontent

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According to industry statistics, $75 billion in ARMs are slated to adjust higher through the rest of 2007. Another $380 billion will adjust higher in 2008.

What should consumers do if their ARM is about to reset? There is no “one size fits all” answer, so it’s imperative that homeowners educate themselves and take action before their ARM resets.

To help consumers find answers, Quicken Loans, one of the nation’s largest mortgage lenders, has launched its new Home Loan U Web site at www.quickenloans.com/HomeLoanU. The site offers a wealth of free informational guides providing easy to understand information and advice on a wide range of housing topics, including refinancing.

“With so many ARMs adjusting higher in the near future, a lot of folks are confused and worried about what to do. Their first impulse may be to immediately refinance but, in some cases, that might not be the best option,” says Bob Walters, chief economist for Quicken Loans. “There are several factors to consider when an ARM resets, such as the new interest rate and how long they plan to stay in their home.”

Walters notes that the first thing someone with an ARM should do is consult an experienced mortgage lender who can review their current loan program, discuss financial goals and explore available options to determine the best course of action to meet their immediate and long-term needs.

Here are some helpful tips about refinancing:

* Determine how long you plan to stay in your home. If you plan to move before your interest rate resets, it may make financial sense to stay in your current loan. If you plan to stay put, look into refinancing into a fixed rate mortgage.

* Know when your interest rate resets and what the new rate will be.

* Calculate the current market value of your home to determine the loan to value ratio as this will impact which loans you qualify for and the rate. You can use the free calculator found online at www.QuickenLoans.com/HomeValue.

* Avoid prepayment penalties as they make it costly to refinance should rates fall or your situation change.

* Work with an experienced lender to be sure you understand all the available loan programs, including FHA programs which require less equity and offer a viable solution to many seeking to refinance out of ARMs.

For more information visit www.QuickenLoans.com.

Courtesy of ARAcontent

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. Savings Beyond the Rate – Look for a mortgage with the option to increase your regular payments and make lump sum payments throughout the year, not only on the anniversary date. Adding a few extra dollars onto some of your regular payments throughout the year can add up to big savings over the term of your mortgage.

. Flexibility – Consider a mortgage that will help you adjust to changes in your life. If you decide to sell your home, you should be able to either take your mortgage with you (port) or give your buyer the opportunity to take it over (assume) – penalty free, at your current rate, term and loan amount. And for when the unexpected happens, ensure your mortgage has the built-in flexibility that allows you to skip a payment at least once a year and pay it back when it’s convenient for you.

. Customer Service – When shopping for a mortgage, great customer service should begin from the moment you inquire about a company’s products through to the mortgage funding, and throughout its entire term. Ask friends and family which financial institutions they would recommended for outstanding service.

The next time mortgages become the topic of discussion, stand out from the crowd by knowing that the best mortgage is a combination of a great rate, great pre-payment features and great service, which ultimately allows you to save more money, and unmortgage yourself sooner.

To explore today’s great rates and the money saving features available click www.ingdirect.ca.

Credit: www.newscanada.com

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Increasingly, homebuyers are rediscovering an old option for financing their mortgage, one that sidesteps the confusion, paperwork nightmares and threats of skyrocketing variable interest rates: They’re taking out a private mortgage from the Bank of Mom and Dad.

A private mortgage is a home loan from a relative, friend or other individual that is secured by real estate. A private mortgage (also called an intra-family mortgage) can provide the structure of a bank mortgage while retaining the flexibility associated with loans between relatives and friends, resulting in a win-win transaction for both the borrower and lender.

Interpersonal loans between relatives are not unusual — more 10 million individuals in the United States are engaged in interpersonal loans at any given time. Used for home financing, private mortgages provide compelling benefits to both the borrower and lender. The borrower can realize thousands of dollars in interest savings and tax deductions, while the lender can benefit from a monthly income stream and a predictable rate of return that is potentially higher than would be obtained through savings accounts or other fixed income investments. For both, a private mortgage helps keep wealth where it belongs — in the family.

CircleLending, a financial services company that is regarded as the market pioneer for designing private mortgage services for the masses, recognizes that there is a great need for non-traditional financing in today’s market. According to Jim Smith, vice president of CircleLending, private mortgages are used in the same ways as traditional bank loans:

1) Purchase a home: Private loan capital can be used for the entire purchase of the home, the down payment or to supplement bank financing and avoid paying Private Mortgage Insurance (PMI).

2) Refinance a bank mortgage: A private loan can be used to refinance an existing mortgage, lowering the interest rate, eliminating PMI, keeping interest payments within the family or to achieve other favorable terms.

3) Formalize an existing home loan from relatives: Home loans from relatives made in the past can be formalized to take advantage of tax benefits such as interest deductibility and capital gain write-offs

4) Renovate a home: Private loan money can be used in place of a home equity or other higher-cost home improvement loans.

5) Owner-finance a home: A seller can finance the transaction by making a private loan, allowing the buyer to pay all or part of the purchase price over time.

With a private mortgage you don’t need to apply, qualify or pass a credit check. You just need to find a relative or friend willing to finance your dream. Typically, a mortgage from a relative or friend is more affordable, more accessible and more patient than most of the borrower’s traditional financing options.

CircleLending provides a full range of services for reducing the financial risks, administrative hassles and emotional pitfalls of private loans. To learn more about private loans and mortgages, visit www.circlelending.com.

Courtesy of ARAcontent

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First, what is a ‘home equity loan’? The basic idea is simple: obtain a line of credit, secured by the equity in your home. That is, if you have a certain amount of ownership in your house – say, as a result of having made a down payment or payments over a long time (as many homeowners do) – borrow against that equity.

Many homeowners will take out a HELOC (Home Equity Line of Credit), as they’re called, in order to use the money for the purpose those loans were invented: financing home improvements. That purpose gave the loan its original name. But, because of tax implications and other reasons, the HELOC evolved to serve other purposes.

Interest paid on most kinds of debt is not tax deductible, but interest paid on a home loan is. Hence, interest paid on a HELOC can actually be a form of less expensive debt.

Suppose, you have a 12% HELOC for up to $10,000. With most HELOCs you don’t actually borrow the entire amount at once. You draw on it, much as you would a credit card, as needed and desired.

So, you have multiple benefits. You can borrow only what you need – keeping the payments and the interest owed as low as possible. And, you get to reduce your taxes by a percentage of the interest paid per year.

If you had a credit card that charged 12% APR, the advantage is clear. You pay a net lower amount of money to the lender as a result of using a HELOC rather than a credit card to finance your purchases.

But, like any loan, it’s important to remember that a home equity loan is just that – a loan, or debt. If one of your major problems is the inability to exert the will to refrain from spending beyond your means, you have just found another supplier to feed your addiction. As a result, a home equity loan may actually make your more fundamental problem worse, rather than better.

But, if you have made a commitment to control your debt, and are seeking ways to reduce your overall expenses, a home equity loan can be a sensible method to employ.

One essential exercise is to actually calculate how much money you would be spending per month – and over the life of the debt – in one scenario versus the other. There are debt calculators readily available online to help you do just that.

Sometimes you will have to weigh whether you prefer to spend more money over the life of the debt as opposed to having a smaller monthly payment, but higher total amount of interest. The better calculators will help you run through both scenarios, changing amounts to help you weigh the pros and cons.

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But as a method of adjusting debt it has some drawbacks that should be considered before making that big step.

One drawback is what was just alluded to: it’s a big step. Refinancing your current mortgage loan involves most of the steps required to take out the loan in the first place. You’ll need current income statements, past tax filings and an array of other documentation. You’ll (usually) be filling out a lot of paperwork, and sometimes paying additional fees.

All that takes time and can cost you a substantial sum of money before the process is complete. You’ll want to be sure to run some realistic calculations before making a final decision. Online calculators to help you do that are readily available.

One reason some consider making the effort, though, is almost always a poor one: to pay off credit card and other high interest debt. There are many ways to offload that debt without going through the pain of refinancing your primary mortgage loan.

If you have reasonable credit and some equity, you can get a second mortgage or a homeowner’s equity line of credit (HELOC). The rate may be slightly higher, but you will find the effort is considerably less. It also protects you in case of financial reverses. Provided you continue to make the primary payments, if you slide for a while on the secondary you are unlikely to be at risk of losing your home.

The second reason is more fundamental. Rather than continuing to seek a way out of debt by borrowing yet more money, you should first make serious efforts to reduce your dependence on borrowing. Some readjustment of current debt may be a good plan – if you can achieve a lower total outstanding debt, a lower interest rate or negotiate relief from some of the payments.

But borrowing more only adds to your long term problem. This should be a last resort, not the first thing you think of as a way out of your debt problem.

Debt consolidation often leads to merely reshuffling your debt, sometimes adding more interest and making your situation worse. But, if it’s coupled with a payment plan that does in fact gradually reduce the burden, while making it possible to meet your obligations, it can be a good plan.

In the end, the only way to know for sure is to objectively examine all your outstanding obligations and research the different plans available. Some combination of debt forgiveness, lowered monthly payment(s) and reduced interest payments is the ideal you should shoot for.

Don’t surrender your home in order to deal with a short term problem that can be fixed by other methods.

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Historically, borrowers who make larger down payments are more likely to pay the loan on time and not default, whereas borrowers who make no down payment or a low down payment are more likely to not only be late in making monthly payments, but also more prone to eventual foreclosure. Lenders generally accept the idea that a borrower who is willing to make a large down payment is a borrower who is invested in a loan and will pay it back.  Not everyone, however, has the ability to whip out their checkbook and make a down payment on a home.  For this reason, there are plenty of other options available.

One of the most commonly known zero-down programs is the program offered by the Veteran’s Administration.  Anyone who was honorably discharged from military service is qualified to receive a home loan guarantee from the VA, and this makes it possible to receive a mortgage with no money down.  One thing many veterans don’t realize, though, is that the VA charges a funding fee of around 2% of the mortgage loan.  This is a fee charged by the VA and does not go towards the principal of the loan.  This fee can be rolled into the amount of the loan, and will be waived for certain disabled veterans.

Since not everyone is a veteran, there are other loan programs offered by lenders to make it possible to purchase a home with no money down.  Some lenders offer what is called an 80/20, which means that the borrower actually takes out two loans: a first mortgage for 80% of the loan and a second mortgage for 20% of the loan.  So instead of coming to the table with a 20% down payment the borrower instead is lent the money by the same financial institution granting the mortgage.  The reason that the loan is structured the way it is with an eighty percent loan and a twenty percent loan is because most lenders require private mortgage insurance when a borrower purchases a home with less than twenty percent down.  Private mortgage insurance (PMI) is basically foreclosure insurance, meaning the lender takes out insurance on the borrower and if the borrower fails to make the payments, leading to foreclosure, the lender recoups the losses through the PMI.  PMI is paid for monthly by the borrower as a portion of the loan, and the amount is not applied to the principal balance of the mortgage loan.  The 80/20 loan sidesteps the need for PMI.

Some lenders offer 100% financing, but these loans generally come with much higher interest rates and also will more than likely require PMI.  There are some lenders who will actually offer mortgage loans exceeding 100%, sometimes going up to 107% or higher.  A borrower should be extremely wary of any mortgage loan, which starts out with the borrower owing more than the property is worth.

Even if a borrower finds a loan program, which allows for no down payment it is important to remember that there are other initial costs involved in buying a home.  Earnest money is a sum of money, which is presented to the seller when submitting a bid to buy the home.  This money tells the seller that the borrower is serious.  If a seller receives two offers from two separate buyers with one offer coming with $200 in earnest money and the other offer coming with $2000, the second offer is more likely to receive the seller’s attention. 

There are also closing costs associated with purchasing a home, although in some cases a negotiation can be made for the seller to pay closing costs.  Some borrowers like to roll closing costs into the mortgage loan, but this situation results in the aforementioned negative equity situation where more money is owed on the mortgage than the home is worth.  Buyers should make every attempt at scraping together a down payment, even if it isn’t the desired 20%, as this will result in a better loan term and interest rate.

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A line of credit is very similar to a credit card or any other revolving credit account.  The borrower is given an available balance, which in the case of home equity lines of credit is comparable to or less than the available equity in the home. Equity refers to the amount of money a home is worth minus the amount owed on the home. For example, if a homeowner has $25,000 worth of equity in their home and needs to make home repairs in the amount of $12,000 they could conceivably request a line of credit in the entire amount of $25,000 and have the remaining $13,000 sitting in the line of credit, available for use.  As the borrower pays down the $12,000 they borrowed the amount of available credit goes up, and if the entire amount is paid off in many cases the whole $25,000 is again available, just like with the aforementioned credit card.  Some homeowners will open up equity lines of credit with a “just in case” mentality; they don’t have a specific need for the money but would like the have the available credit in case the need arises.

A home equity loan is similar to a home equity line of credit in the sense that the amount available for borrowing is based off the equity in the home.  This is not a revolving account, however, so as payments are made the funds do not become available again for use.  The money is paid in one lump sum instead of being readily available for whatever reason.  This is very similar to other types of loans like car loans and personal loans.  Like the equity line of credit, borrowers can generally only borrow amounts up to the equity available in their home.  Some lenders offer equity loans which exceed the available equity, but these sorts of loans are best avoided for obvious reasons; there is no guarantee that home values won’t depreciate, so borrowing more money than a home is worth can turn into a bad situation where borrowers can find themselves selling their home at a loss.

Which equity loan is best suited to what situation? It depends on what the funds will be used for. If a borrower is looking merely to have a credit line available in the event of an emergency then a credit line works well, but if a borrower has a one-time, specific monetary need with no additional anticipated need for funds then a loan is probably best.  If a borrower is going to have many home improvement projects going and isn’t sure of the total cost then a credit line works well; lenders will often issue checkbooks or credit cards on the credit line, making it easy to pay contractors without having to contact the lender each time for a withdrawal. 

Be careful when taking out a line of credit, though, especially of the amount you are loaned exceeds what you need.  As with any revolving credit, many borrowers may find the temptation too great and the money simply too accessible resulting in money being used for instances which borrowers did not originally plan on.  Credit lines are also usually variable rates whereas loans are fixed rates, so as rates go up the payments will too with a credit line. 

Home equity should be seen as more of a rainy day fund and less of a free money fund.  Use this resource only when necessary or you may find yourself with no equity in your home and a large bill due every month in addition to your mortgage.  Projects, which add to your home’s value, are good reasons to seek out an equity loan or line of credit, but a shopping spree is certainly not.

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The problems begin, however, when people view equity as free money and spend it accordingly.  One loan product, which makes this sort of mentality particularly possible, is the home equity line of credit.  In theory, this sort of loan makes sense for people who are having a lot of work done on their home and need ready access to the funds in the form of a checkbook or credit card to pay contractors.  The account is a revolving account, much like a credit card, which offers an available balance to the borrower based on the equity of the home.  As the balance owed is paid down, the available balance goes back up. 

Issues arise when homeowners get these sorts of credit lines with no particular objective in mind.  Sure, there are some responsible homeowners who will open up a line of credit on their equity as an emergency fund and never touch the money except in the case of emergencies or major home repairs, but then there are other homeowners who use their line of credit as they would use a checking account or credit card.  Equity lines of credit were certainly not designed to fund routine shopping trips or dinners out.  It is imperative to remember that this debt is against your home, and failure to pay will not result in hassles from creditors like it would with a regular credit line, but rather will result in foreclosure of your home.  Money borrowed using an equity line of credit should be used only when there is no other option.

Some experts would disagree with these ideas, stating that since interest paid on home equity loans can be tax deductible just like a first mortgage then a HELOC should be utilized for everything from bill consolidation to auto purchases.  The problem with this thinking is that since a home equity line of credit is revolving it is entirely too easy to get carries away and spend beyond your means.  What happens if the value of your home fails to appreciate, or worse yet, if it depreciates? If you have maxed out your home equity line of credit, then you will be in the highly unenviable position of owing more on your cumulative mortgages than your home is worth.  This means that if you go to sell the home, you may wind up actually taking a loss on the sale instead of coming away from the deal with a handsome profit.

Another issue with home equity lines of credit is that the payments are usually set at variable interest rates.  This means that even if the money is borrowed initially at a very attractive interest rate, the rate will probably not stay at this rate.  Most lenders base their interest rates loosely on the federal government’s prime interest rate, so if this prime rate goes up then the interest rate on the variable equity line of credit will go up too.  For some families who are already living paycheck-to-paycheck, it can be devastating when payments go up unexpectedly.

If you must tap into your home equity for some cash you should first consider a fixed rate home equity loan.  This gives you exactly the amount of cash you need and does not allow you more money that may wind up being spent frivolously.  If you do indeed decide upon a home equity line of credit you must take care to not use the available money as though it were free money; always keep in mind that you are borrowing against your home.  Yes, it can be fun to indulge in a shopping trip or take a fabulous vacation, but do you really want to still be paying for these things long after the clothes have worn out and the vacation is nothing but a distant memory? Equity in your home is certainly not free money, and should only be utilized when absolutely necessary.

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These bank sharks are predatory lenders and target those people who are too trusting and naïve or have little experience with financial dealings. These could be people buying a home for the first time, senior citizens, college students and people with poor credit who are thankful for even getting a loan.  If your banker has not taken you advantage of financially then count yourself lucky. However, you should still be wary during any financial transactions.  There are warning signs that can indicate to you whether your banker is really a shark in disguise.  You just have to know how to spot them.  Here are a few indicators that should make you think twice about your banker:

1.  A predatory banker will try to get you to sign on a loan based on your home’s equity rather than your take home pay.  This shows that they are not really thinking about your ability to pay.  Rather, they are looking at any hidden kickbacks they might receive when they get you to sign a loan that you cannot really afford.

2.  When a loan that requires a balloon payment is pushed on you, run the other way.  Legitimate bankers want you to succeed financially and maintain good credit.  If you sign on a loan with a balloon payment that you later cannot pay, you stand to lose your home or whatever collateral you used to obtain the loan.

3.  Credit insurance is a big indicator that all is not what it may seem with your banker.  If they are insistent on you including credit insurance in financing your loan, step away from the table.  This insurance could include unemployment, life and disability insurance which can add thousands of dollars in extra fees to your loan.  Many people have these types of insurance already, either through an insurance agent or through their employer.

4.  If you have questions about the loan and paperwork and your banker does not provide adequate answers, it’s time to find someone else.  Many times, you will have to trust your gut feelings on this one.  If something does not sound quite right, it probably isn’t.  Your banker should be forthright and explain the loan in terms that you can understand.  They should answer your questions instead of talking around them.

5.  Keep an eye out for the old bait and switch routine.  A predatory banker will offer one low interest rate to entice you to sign for a loan, but then switch to a higher interest rate at the last minute.  They are hoping that you would be too overwhelmed to protest or even notice the discrepancy. 

6.  If your banker asks you to sign a blank form saying that they will fill it in later when it’s more convenient, don’t do it!  They could fill anything out that they wanted on that paperwork and it would have your legitimate signature!  There would be nothing you could do about it later when you find out your loan is not what it seems.

The six tips above are just a few warning signs that your banker may be a shark in disguise.  To avoid any potential problems in the future, take a finance class for homeowners.  You can usually find a continuing education course at a local community college or church.  Being forewarned is forearmed! This is one way to protect your own interests.  Stonewall pressure tactics.  If your banker is trying to force you into something you are unsure of, get a second opinion.  Shop around different lending institutions before settling on one.  Only you can protect your own interests.  Trust yourself when a situation does not feel right.

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