Low-Interest Loans

 

Homeowners with Federal National Mortgage Association mortgages may be able to obtain considerable amounts of cash by trading in their mortgages. How it works: They receive a new mortgage worth up to 90% of the home's current market value, at a rate almost always well below prevailing rates. Those whose homes have appreciated stand to receive significant amounts. To determine eligibility: Check with the mortgage holder. Source: Credit News

Should You Take Out A Personal Loan?

If you're unsure about whether or not to take out a new personal loan, this basic calculation can be helpful. 1. Add all sources of income for a month. We also wrote Run Personal Finances Like a Business.

2. Total all monthly living expenses and your savings requirements, mortgage, debt, and insurance payments. 3. Avoid a loan that requires monthly payments that are bigger than the balance left when you subtract expenditures from monthly income. Best collateral for a bank loan: Cash value of life insurance policies, certificates of deposit, U.S. government securities (90% of value), stocks (70% of market value), mutual-fund shares (40% of market value).

Frequently Overlooked Loan Sources

Executives can borrow funds from their vested accounts in a qualified company retirement plan. Requirements:
(1) The plan must specifically provide that such loans are available to all plan participants.
(2) The loans must be genuine and bear a reasonable rate of interest.
(3) Loans may not exceed the lesser of $50,000 or the greater of $10,000 or one-half accrued benefits. (4) Loans must be repaid within 5 years (except for loans to finance a personal residence). (The $50,000 limit on plan loans is reduced by the participant's highest outstanding loan balance during the prior 12 months.)

Broker loans. Instead of selling stock, consider using it as collateral for a broker's loan. Since brokers borrow wholesale from banks, you'll probably get money closer to the prime. And there are no compensating balances.


Certificate of deposit (CD) loan. You need money, but your CD isn't due yet. Instead of cashing it in, use it as collateral for a loan. The interest charge is usually 2 percentage points above the rate paid by the certificate. These 2 points, divided by a short period of time, don't amount to much.

Before You Cosign A Loan

Three out of four cosigners of finance company loans are eventually asked to pay up. There may also be late charges due to a friend's or relative's delinquency. Sometimes even court costs and legal fees. Besides having to pay off the original loan, cosigners may damage their own credit rating in the bargain.

Advice

Never cosign a loan unless you can pay it off if necessary. Try to get the lender to hold your obligation to the principal of the loan. Never pledge your own property to secure such a loan.

Request notification in writing of any miss ed payments. That way you are aware of the borrower's delinquency and can either make the payment yourself or prod the friend or relative before the loan is called for or there are penalties.

One-to-one loans

No matter how friendly a loan, it's a good idea to draw up a note stating terms and conditions. Be businesslike. Include a provision for reasonable interest. Good reason for formalizing the loan: The IRS. With documentation, you should be able to take a deduction on any loss. Unless the loan was directly connected with your business, it will be treated as a short-term capital loss.
 
Please check this post: Family Financial Review (Best Advice).
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