Hi,
A conditional sales contract is the financial instrument that is used to facilitate the purchase of such items as household furnishings, electronics, musical instruments, etc., Before the evolution of the credit card, conditional sales contracts were very common. The contracts were generally set up with finance companies who carried the contract for the retailer. The basic set up for a conditional sales contract is that whatever is purchased is used as collateral for the loan and can be repossessed if payments are not made. The interest rates charged on these contracts are generally exorbitant and the default rate on the loans is usually very high. The finance companies will use conditional sales contacts as a selling tool to offer additional loans reducing the interest rate, while rolling the conditional sales contract into the new loans. Often times, the borrower is not even aware that he or she is dealing with a finance company as he or she is under the impression that the contract is being carried by the retailer that sold them the merchandise. It is sometimes necessary for people to utilize this method of financing due to their credit situation. As with all financing agreements, conditional sales contracts have their place in the market. If you are exploring a conditional sales contract, make sure that you inquire about the interest rates, and who will be handling your contract before you sign.
Next week I will talk about credit and collections. Have a good weekend!
Until then,
Alan
Showing posts with label interest rates. Show all posts
Showing posts with label interest rates. Show all posts
Friday, March 2, 2007
Monday, February 26, 2007
Conventional Mortgages
Hi,
A 30 year fixed rate mortgage is a loan in which the principal and interest is repaid in equal monthly installments through the term of the loan. Until 35 years ago, almost all mortgages were 30 year fixed rate mortgages. The primary reason for this was the peace of mind that borrowers received knowing that their house payment would not change. Another benefit of conventional mortgages was that they didn't have points, prepayment penalties and other hidden fees. People had to meet strict credit guidelines to qualify for conventional mortgages. Beginning in the late 1970's, interest rates began to rise, peaking at over 13% in 1983. When the interest rates began to rise, the number of people who qualified for mortgages decreased. In order to support the housing industry, it became necessary for financial institutions to create a multitude of other mortgage structures people could qualify for in order to purchase homes. Very often these other mortgage structures enabled borrowers to obtain a mortgage that they wouldn't be qualified for under 30 year fixed mortgage guidelines. In most instances, the majority of people would convert these other structures into 30 year fixed rate mortgages as soon as possible. One component of 30 year mortgages, which has virtually disappeared in the marketplace today, was that almost all mortgages were assumable: people who bought homes assumed the existing mortgages. Eliminating assumable mortgages has allowed lenders to make more money and reduce risks associated with loans. When shopping for a mortgage, it is important to check with a variety of institutions, due to the fluctuation of mortgage rates among lenders. Tomorrow, I'm going to talk about the remaining mortgage structures.
Until then,
Alan
A 30 year fixed rate mortgage is a loan in which the principal and interest is repaid in equal monthly installments through the term of the loan. Until 35 years ago, almost all mortgages were 30 year fixed rate mortgages. The primary reason for this was the peace of mind that borrowers received knowing that their house payment would not change. Another benefit of conventional mortgages was that they didn't have points, prepayment penalties and other hidden fees. People had to meet strict credit guidelines to qualify for conventional mortgages. Beginning in the late 1970's, interest rates began to rise, peaking at over 13% in 1983. When the interest rates began to rise, the number of people who qualified for mortgages decreased. In order to support the housing industry, it became necessary for financial institutions to create a multitude of other mortgage structures people could qualify for in order to purchase homes. Very often these other mortgage structures enabled borrowers to obtain a mortgage that they wouldn't be qualified for under 30 year fixed mortgage guidelines. In most instances, the majority of people would convert these other structures into 30 year fixed rate mortgages as soon as possible. One component of 30 year mortgages, which has virtually disappeared in the marketplace today, was that almost all mortgages were assumable: people who bought homes assumed the existing mortgages. Eliminating assumable mortgages has allowed lenders to make more money and reduce risks associated with loans. When shopping for a mortgage, it is important to check with a variety of institutions, due to the fluctuation of mortgage rates among lenders. Tomorrow, I'm going to talk about the remaining mortgage structures.
Until then,
Alan
Sunday, February 4, 2007
The Never Decreasing Balances
Hi,
Now let's look at those bills that never seem to go down. Generally these balances are comprised of unexpected expenses which occur for all of us. Because these balances are unexpected, and not part of our monthly budget, we rationalize that it's ok not to pay them off as they occur. Or, we simply might not have the financial resources to do it. Your credit card company sets up your statement to specifically take advantage of this situation with the infamous "minimum payment due" option. When people make a minimum payment, they feel that they have made their monthly credit card payment. However, in many cases, making a minimum payment means that only the interest on the balance has been paid. Many times a person will pay the minimum payment for twelve months and be surprised that their balance has not decreased at all over the year. The only way to move this situation in a positive direction is to call the credit card company to ask them to work with you in finding a solution. Depending upon your situation, the credit card company might be able to reduce your interest rate, freeze your interest rate, and in some cases, reduce your balance. Tomorrow we will talk about stretching your bill paying dollar.
Until then,
Alan
Now let's look at those bills that never seem to go down. Generally these balances are comprised of unexpected expenses which occur for all of us. Because these balances are unexpected, and not part of our monthly budget, we rationalize that it's ok not to pay them off as they occur. Or, we simply might not have the financial resources to do it. Your credit card company sets up your statement to specifically take advantage of this situation with the infamous "minimum payment due" option. When people make a minimum payment, they feel that they have made their monthly credit card payment. However, in many cases, making a minimum payment means that only the interest on the balance has been paid. Many times a person will pay the minimum payment for twelve months and be surprised that their balance has not decreased at all over the year. The only way to move this situation in a positive direction is to call the credit card company to ask them to work with you in finding a solution. Depending upon your situation, the credit card company might be able to reduce your interest rate, freeze your interest rate, and in some cases, reduce your balance. Tomorrow we will talk about stretching your bill paying dollar.
Until then,
Alan
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