Archive for the 'Interest Rates' Category

Compound interest – everybody wants to know about it. The concept is quite simple really and anyone wanting to get control of their personal finances should understand it. When you compound the interest, what you do is you add back the accumulated interest to the principal. This effectively turns the earned interest into a principal because you then start earning interest from your interest. This results in compounded interest.

Illustrating the Concept

To give you a better idea of how it works, here is an example. For instance, you have $10,000 saved as a high-yield investment. Under traditional method of earning interest, if you are to earn 4% on that savings, you get $400 in one year from your $10,000. In ten years time, you’d earn $4,000 from your savings.

Now, if you apply the interest as a compound daily interest, you get to earn $8.08 daily. This figure would of course vary depending on whether you add back the interest earned to the principal or not. In ten years time, you’d earn $4,917.92. You get an additional $917 with compounded interest rate.

With compound interest, you get to earn money while you without having to put more money into the investment! If you know how to take advantage of this interest, you are likely to end up spending your earnings on your interest while your principal continues to earn money.

Harnessing the Benefits of Compounded Interest Rates

Generally, regular consumers or the public cannot take advantage of compound interest rates as it is not widely offered. Usually, it is only the large firms that benefit from this tool. The public usually can earn money from compound interest when they invest in mutual funds or stocks. Therefore, in order to benefit from this type of interest, you should make the right investment in those instruments that are offering compound interest. Your personal finance will greatly improve.

When you are applying for a loan or you are considering buying something on a loan, that thing that you will be most concerned with is the interest rate. Chances are you will look to receive the banks best rate on the loan you want. The rate you receive however is likely to be determined by many factors including your creditworthiness. You might say that the word “rate” has taken over the lives of many consumers. Your personal finance can be affected by rates in a strong way.

If you are considered a creditworthy customer then the bank may lend to you at what is call their Prime rate. This in a way is the banks more favorable lending rate. The figure varies from one bank to another; and oftentimes, banks would revise the rate every so often. This rate, however, is regarded as a benchmark for other interest rates for other loans like mortgages, variable rate loans, student loans, and home equity loans. Today, the Wall Street Journal Prime Rate controls the market. Understanding how this rate works and how it controls the system might help you understand consumer’s interest rates as well. If you are applying for a new credit card or a car loan, this rate would have effect in the interest rate that your loan would be charged with.

It might be interesting to know that the reference for consumer’s interest rates is the prime rate. You could say that it functions as a base rate. Oftentimes, it moves along with the current market interest rates and trends. So, the next time you are thinking of applying for a car loan and you are wondering what your interest rate would be, you should check out the prime rate. This would help you decide in whether your personal finance can take in the loan.

The primary concern when you are trying to apply for a mortgage loan is the interest rate. Most of the time, it is the interest that blows your principal loan into huge proportions, leaving your personal finances in shreds.

There are various rates that are imposed on mortgage loans. You can choose the kind of rate that you prefer or that you can live with. One of the rates that people usually consider getting is the Adjustable Rate Mortgage or the ARM.

Defining the ARM

Adjustable Rate Mortgage is a mortgage that has an interest rate that closely relates to the economic index. Being adjustable, ARM changes along with the index. It can go up or down depending on how the economic index is behaving. Initially, ARM loans have fixed rate that runs within a short period of time. After the lapse of that period, the ARM will change according to the economic index.

There are various types of ARM rates. There is the 3/1, 5/1, 7/1 rates. When you say 3/1 ARM, this generally means that the rate is fixed for three years and in the 4th year, the rate becomes adjustable. The same goes with both 5/1 and 7/1 ARM. The rate is fixed for 5 and 7 years respectively; and on the 6th or 8th year, the interest rate turns variable.

When you are making your decision as to the kind of interest rate that you would prefer for your loan, you should take into consideration your personal finance plans. If you are not expecting that your payments can go up, do not consider ARM. You may opt for the fixed interest rate instead.

Be aware that with an ARM you will need to have some kind of financial buffer to cushion the effects of a increased rate change when the fixed period is up. If interest rates are high you will be paying substantially more for the mortgage so you should save some money for this eventuality.

Every once in a while you will come across advertisements on “all-time” low mortgage rates. Most of the time, these type of mortgages are given to people with good credit standing and control of their personal finances. But what if your credit score is not something that you can be proud of? How do you get your mortgage?

In cases like this, people would usually resort to a subprime loan since they cannot get loans with prime rates.

What are Subprime Loans?

Subprime loans are offered to individuals who have less than attractive credit history or scores. When you cannot qualify for the prime rate financing, it is highly unlikely that you will get the kind of loan that you want. Mortgage companies have exact requirements for prime mortgage loans. Basically, approval for loan despite bad credit score is the classic feature of a sub prime.

What is the drawback to these kinds of loans? Since financing companies know that loan default rate is very high when you have bad credit score, they usually charge high interest rates for subprime loans. This often translates into a bad personal finance setup for many people. Usually, however, the interest rate varies depending on how bad your credit score is.

Selecting a Lender

You might not be able to do anything about your credit score at the moment, but you have a choice as to your lender. There are companies that primarily specialize in these types of loans. There are traditional mortgage companies that are venturing into subprime loans. Make sure that you place a quote request with various lending companies before settling with one. By doing this, you may still get a great deal despite your credit score. You may still minimize the effects to your personal finance.

One key point however is that you must pay up your monthly installments on time or risk losing your property.

With the Feds lowering interest rates, that could spell relief for some borrowers, especially if they do what most investment gurus are expecting again next month, lower the key interest rates once again.

So with low rates, what does that mean for you. It means finding the right lender who won’t put you in the poor house as some mortgage lenders have done over the past few years. You need to weed through the good and the bad to find the right loans and site like Thrifty Scot can help you out.

They can help you find a cheap loan with their loans finder. You input the amount of money you’d like borrow, the purpose, the repayment period and the all important “are you a homeowner” question and out pops several places where you can get the cheapest loan for your situation. They also list all lenders in their database on one page so you can go through and read all of the information on the different loans and find the cheapest for yourself.

Speaking of being a homeowner. Whether you’re in the UK or in the US you’re probably feeling a little bit of the mortgage crisis reaching your neighborhood. If you bought in the last 3 years, chances are you might even be feeling it yourself with a ARM loan that is set to reset in the next year or two. Thrifty Scot has over 500 homeowner loans that you can search through from tons of lenders to help you make the switch from that horrible adjustable rate mortgage loan to one that can actually keep you out of the poor house. They also have a few tips and suggestions that I think everyone should read to avoid becoming part of the next mortgage crisis.

Lastly, if you’re looking to buy something nice for yourself that isn’t a home or a car, you may need to get a personal loan (better than most credit cards and usually through your bank.) This site has a section to allow you to compare personal loans to see which one will give you the best rate. These purchases could be a diamond ring, a new TV, that pool to keep you cool in the summer, or maybe even a vacation that you can go on now and pay off later by taking out a personal loan.

No matter where you borrow money just make sure that you’ve done your research at a site such as Thrifty Scot. Use the search features and find a loan that fits your needs.

Finding a good place to put your money these days is becoming tougher and tougher. If you want to increase your wealth, and eventually finance your wealth by letting just your money build you need to find a good place to but that money. Stocks can be good for a portion of your money but you need to find a medium that gives you safe, consistent returns so you can weather a storm like the one that’s going on in the stock market right now.

That’s why when I’m told about new sites that help consumers find places to put their money I try and share them with our readers. Sites like this one offering bank reviews can be truly helpful when looking for the right bank to put your money. Obviously you want a bank that can give you the greatest return but sometimes those banks are hard to find or come with stipulations. That’s why finding a site that offers reviews on many different banks, all in one place can be very very valuable.

You can find a good savings account, that you can access easily, gives you a good return and keeps your money safe.

Also a good idea for your money is not just a regular old savings account, but instead a money market account. Although these accounts aren’t as safe as a regular account, they have shown to be nearly as safe over the entire history of their existence. (But that does come with a warning) Companies like paypal are offering to keep your money in a money market account to earn you money while it sits their waiting for the next ebay gem. This may be a good option to get a higher rate than a savings with a little more risk (but still quite low). You can check money market rates on the site as well.

Overall, you need to diversify your money and savings and money market accounts are just one way to do that. Look around and visit sites like this one to help you decide which account is the right one for you.

Most of you would have thought “the Fed cuts rates, stocks are going to jump higher and higher.” Similar to what they’ve been doing over the past week or two. The stock market has been on the rise.

But today, when the Feds announced a quarter point cut stocks plummeted. I mean dropped like a rock, loosing almost 300 point overall. This after a morning of strong movement upwards.

Stocks like Google, GOOG, went from being up $5 to dropping nearly $20. Almost everything else followed suit, on the NASDAQ and the NYSE stocks just dropped.

The reason being, is because there was a general though that Feds would drop rates a half point and they didn’t. We’ll see how things rebound tomorrow.

Sometimes finding good advice on money and savings is hard, especially on the internet. Everyone and their mother (literally) seems to have advice as to how you can get rich quick, or save a bundle and retire early. Which advice do you take?

I was recently put in touch with a website called Thrifty Scot to check it over and see what I think. All in all, a good site that provides useful knowledge and services for those of you looking to save a little money and increase your wealth.

First off, as we’ve mentioned before, you can stand to save a lot of money in the long run by purchasing a house rather than renting which means taking on a mortgage. Thrifty Scot has some useful information on mortgages that may just help you out of a jam and get the right rate and deal when buying that first home.

Another killer for some peoples wallets is how much they pay in car insurance. You need to pay attention to what the “sales people” are trying to sell you and knowing what you need and don’t need is half the battle. Let this site help you out.

Lastly, once you have your finances in order you may need to get a boost in cashflow and take on some loans. We suggest heading over and learning about a sucured loan before you do anything. It could save you a lot of money in the long run by allowing you to watch out for some of the pitfalls that so often come with taking out a loan for many things.

Most of all, just read, read, read. The more you know about saving money the better chances you have of making more of it and creating wealth for yourself.

If you are considering a loan and you are unsure as to the differences between fixed interest rates and adjustable interest rates, read on.

Fixed Rate
Installment loans typically have fixed rate interest, meaning that the interest rate and the monthly payments will remain the same for the entire length of the loan.

Advantages

• Installments are constant
• Payments are easy to budget
• Loan cost won’t increase
• No unpleasant surprises

Disadvantages

• If interest rate drops, yours remains high
• Initially more than adjustable rate

Adjustable Rate
With an adjustable rate, the interest on your loan will vary. When the interest rates change, your monthly payment changes as well. This generally happens once or twice yearly.

Advantages

• Annual increases are usually controlled
• Initial rate is lower than fixed rate
• If rates drop, your overall costs are lower

Disadvantages

• Not always an option
• Tough to budget for increase in rate
• Vulnerability to rate hikes

Credit Card debt can be a pain in the neck and with the holidays now behind us, I know I’m not the only one with a little holiday related debt. Sometimes it can be just too easy to swipe the credit cards and not worry about how you’re going to pay for that sweater for Mom or socks of the brother.

However, now that you’re in a little, or a lot, of debt doesn’t mean you have to be penalized for it. You could keep your debt on high interest credit cards or you could switch them over to a 0% APR credit card that allows you to transfer your balances free of charge. It’s a way for credit cards to get you to bring your debt to them and hopefully not pay it off, or at least use their card instead of a competitors.

So use that to your advantage. I recently happened across a website, quite randomly, at www.BalanceTransfer.cc. They’ve organized all the most current 0% APR credit card offers into a great, easily navigable page(s). They’ve even got a 0% credit card offer blog that can help explain some of the issues with gimmicks and help you save a lot of money in interest.

I’ve noticed also, and had some friends sign up for, discover card 0% intro APR deals that not only save them the pain of paying interest on high debt but also give a little back if they ever decide to manage their debt well and use the card to pay for common purchases (more on that to come).

I’ve used a chase credit card 0% intro APR card that seems to be a great deal but I’m also thinking about going with an American Express credit card because I’ve never had one before and have wanted to have an AE card on hand just in case I’m ever somewhere that I need to use one. Plus they’ve got that cool “blue” card that’s almost see through.

Anyway, the point is, you can save a lot of money if you transfer your credit card debt to a 0% APR credit card. Make sure you don’t have to pay any balance transfer fees (some will sock you $75 or more to just bring your money over), and you’ll be on your way to living debt free in no time.