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Uses for Secured Loans
There are so many reasons why you might want to use a secured loan. Secured loans are loans from lending institutions that use some of your assets or equity as collateral. That means that you can offer the bank your house or your car or your stock certificates in exchange for money. Obviously, the bank doesnt use your house or your car your stock certificates -- theyre still yours -- but you basically tell the bank that if you do not pay your loan back, they can have that instead. Lending institutions like secured loans because, unlike unsecured loans, they know that there are assets they can claim to back them up if you default on the loan. And they know that you are more likely to pay back your loan than to give up your house! In many cases a secured loan will get you a lower rate of interest and perhaps a longer-term to pay it back than an unsecured loan.
So what might you use a secured loan for? There are many good reasons to use one. One excellent way to use a secured loan is for debt consolidation. That is, to pull together a number of higher interest debts and pay them off with one single lower interest loan.
Another excellent use for a secured loan is to purchase an item for which you might normally pay higher interest over a long-term, like a car for example. If you purchase a car for $20,000, over time the principal plus interest payments you make on that car will be much more than $20,000. However, if you want to take advantage of spreading your payments over time but dont want to pay the high interest associated with financing a car, you may be able to use the value of the car or the value of your house to get a secured loan to pay for the car.
Another excellent use for a secured loan is as a bridge loan in an emergency. While you could take a few days to get the money, getting some emergency cash at a lower interest rate that you can pay back over time is an excellent way for you to deal with a costly unexpected crisis.
There are three reasons why you might want to use a secure loan. Secured loans are an excellent way to get cash when you need it and to take advantage of lower interest rates and a possible longer term of payment than other forms of loans.
Commercial Loans - Cost Effective Way of Funding Business Needs
When your little idea, your dream starts taking a real shape ? you know it is time you garnered your finances to make it grow. At times your effort fall short and there you are filing for loans. Commercial loans can help business interests with uninterrupted capital supply.
Commercial loans can be used to buy business premises or commercial building for both new or establish businesses. They can be used to buy any business asset or to finance the expansion of any established business.
Different commercial loans lender have different way of processing commercial loans. You can start with pre-qualifying for commercial loans. This determines how much as a borrower you can afford as commercial loans and which commercial loans programme will suit the best.
Commercial loans are the biggest way of financing business projects. While providing you with commercial loans, the loan lender will look at general information as your income and existing debts. Your application will be reviewed by a loan officer.
Commercial loans lender will take keen interest in
? Credit history
? Reason for loan
? Collateral
? Ability to repay
? Your investment in the business
Documents to gather while applying for commercial loans are ?
Loan request ? the amount of loan requested, how the funds will be used, loan type and amount of working capital on hand. Commercial loans lender will feel more secure knowing that you have invested your own money in the commercial plan.
Business plan - If the commercial loans are used for starting a new business, the business plan is crucial. It should include cash flow projections for first 24 months. Information should be concise and clear. Its feasibility will be fundamental in getting commercial loans approved.
Personal financial statements - In case commercial loan is used for expansion of business, it will be required for you to give business profile. Personal financial statements would be required for anyone who owns 20% or more of business. Complete information about current debts balances, payment schedules, maturity, and collateral used to secure other loans. You can be required to provide more documents during the loan process.
In case you are purchasing real estate, you might be required to submit preliminary environmental reports, area maps, title reports, property appraisals, and lease summaries.
Decisions for commercial loans take usually 1-5 days. During this time, you might be required to give further information. Commercial loans broker can help you submit your loan application to several lenders for approval. Your job is to select the most attractive offer and returning the final letter of intent. After all the conditions are satisfied, the commercial loans are approved and the lender will give a final loan commitment. At the closing, the commercial loan will be transferred with a cashier?s check, draft, or electronic wire transfer.
Commercial loans are either secured or unsecured - with or without collateral. Secured commercial loans are more commonly available as commercial mortgages. Commercial mortgage are provided at better terms, interest rates and repayment options. Commercial loans are available with fixed and variable rate options. Fixed rate commercial loans will mean that your interest rate and monthly payments will be fixed at the beginning of the loan and will remain so throughout.
Businessmen apply for fixed rate commercial loans for it helps in effective financial planning because they know how much they are giving out every month. With variable rate the interest rates changes in accordance to the changes in the market. The benefit with variable rate is that they start with lower interest rate than fixed rate. But interest rate can increase during the term and therefore you will have to pay more. On the contrary fixed rate commercial loans will leave no space for change in case the interest rates drop.
Investigate before you make a commercial loan claim. Be prepared to answer some questions. Commercial loans are cost effective way of funding business needs when you need it. Commercial loans can strengthen your competitive position; increase your working capital and maximum profitability. Investigate your opportunities with commercial loans and see how your business becomes a commercial success.
How to Figure Debt to Income Ratio
Ever wonder how to figure out you debt to income ratio? Lenders use your debt to income ratio to help them evaluate your creditworthiness and debt load.
Mortgage lenders use your debt to income ratio to calculate what percentage of your income is available for your monthly mortgage payment after all of your other monthly fixed expenses are paid.
To calculate your total debt to income ratio take your total monthly fixed expenses and divide it by your gross monthly income.
Monthly fixed expenses are debts like your monthly mortgage payment, lease or car payment, credit card and any other revolving credit balances that will take more than eleven months to pay off and alimony or child support.
Your gross monthly income is what you make before taxes are taken out. This includes your wages overtime, commissions or any bonuses you get on a regular basis.
Your total monthly fixed expenses divided by your gross monthly income is your total debt to income ratio. Its what a lender calls the back end of debt ratio.
If you remove the monthly mortgage payment that is what a lender calls the front end debt ratio and that is how they calculate how much of a monthly mortgage payment you qualify for.
When you total your monthly debts, make sure you use only the minimum payment on your credit card statements. You dont have to include utility bills or any debt that will be paid off in fewer than eleven months.
Here is a sample debt to income ratio calculation:
Total Gross Monthly Household Income = $6,000
Total Monthly Fixed Expenses = $2,160
$2,160 Divided By $6,000 = 36
Total Debt To Income Ratio = 36%
A mortgage lender likes to see your front end debt ratio between 25% and 28% to qualify for a mortgage loan. A good total debt to income ratio with that monthly mortgage payment factored in should not exceed more than 45%.
These figures can go higher if you have a high credit score because that means you have better creditworthiness and will likely pass a lenders home loan guidelines easier.
Thats how to figure debt to income ratio and why it is important especially when you apply for a home loan.
Copyright ? 2005 Credit Repair Facts.com All Rights Reserved.
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