CLF loans
CLF loan menu

What To Check Out Before Getting A Subprime Loan

The latest applicant needs a new mortgage of $250,000 and needs approval quickly so that he and his wife can remove one condition on an offer they have on a home they would like to purchase. They are being offered subprime mortgages by other lenders and are wondering what to check out before getting a subprime loan?

A subprime loan is typically a loan that is offered to borrowers that have less than perfect credit ratings. The subprime loan interest rate can be from 1% to as much as 10% above the current prime lending rate, which can be a substantial difference in terms of both the amount of interest paid and the monthly payments. In the chart at the bottom of this post we have shown the total interest paid and the monthly payments for a mortgage close to prime, at 5% and also at 11% which would be indicative of interest rates for subprime loans at the time of writing this post.  The difference between a mortgage at 3% and one at 11% for a 30 year mortgage is an increase in the monthly payment by over $900 a month and over $300,000 in total interest payments over the life of the mortgage. This is a substantial amount.

The other major difference from regular loans is how often over the life of the mortgage that the interest rate can change. Clients could be looking at significant interest rate increases in the future since interest rates are at the lowest levels in years and are forecasted to increase.

This client will need to consider very carefully which type of mortgage he takes since the financial cost can be significant.


Tips For Borrowers Applying For An Unsecured Personal Loan

The latest applicant is looking for tips for borrowers applying for an unsecured loan. They live in Fresno California and would like to borrow $30000 using an unsecured loan to consolidate credit card debt and some other small debts that they have. They have a good credit rating, good jobs with decent income and their home is almost paid off. They appear to be excellent candidates for an unsecured loan.  As part of their application they have asked for some tips which we will cover in the following paragraphs. There are 9 areas in total that consumers should pay attention to when looking for unsecured loans.

Check your credit rating – know what your rating is before you apply to make sure that you are even eligible for low interest loans.

Check beyond the headline interest rated posted – if the bank is advertising an interest rate, this will be the headline rate. Many consumers will be eligible for even lower rates and they should ask if this is the best rate available.

Check the competition – shop around for the best deal. Be careful to not overdue it since each time your credit rating is checked, it will be registered and could impact your rating. Never the less you want to find the lowest rate.

Check for Alternatives to loans – would a 0% credit card work, what about your savings and can you delay the purchase until you have sufficient money saved for the purchase.

Anything but Payday Loans – payday loans are notoriously expensive in terms of fees and interest rates. Avoid payday loans and reduce your cost.

Does Loyalty Pay – always check with the bank you deal with, but do not stop there. You may be surprised that a competitor will offer a better rate to obtain your business.

What is the Term of the Loan – A longer term means you pay more interest overall and you also have a lower monthly payment. If you can, take a shorter term, pay less interest and pay off the loan more quickly.

Can you Fix Your Rate – a variable loan rate can mean increased interest costs if interest rates rise. Fix your interest rate for the term of the loan to manage your costs.

Avoid Payment Protection Insurance – or at least shop around for a lower cost PPI if you feel that you really need it.


Getting Approved For a Loan If You Don’t Have Assets For Collateral

We find that there are consumers that come from all walks of life and have a variety of problems obtaining loans and mortgages. Our current applicant has a good credit rating, a relatively secure job (as much as any job can be secure these days), and he has skills that are transferable from employer to employer. He owns his own home and car. The car is paid for, but unfortunately it is an older model and not worth too much and therefore cannot be used for collateral for a loan.

He has a mortgage on his home. He does not have sufficient equity in the home to use as collateral either and therefore is faced with interest rates that are based on unsecured loan rates.  The loan is to cover some credit card debt for the total amount of $10,000. He does not have enough equity and will need to pay slightly higher interest rates, however these rates are substantially lower than what he would pay if he were to leave the debt on his credit card. The rates are at least 10 points higher and cost a great deal more on a monthly basis.

This situation is actually pretty common with many consumers not having the equity to use as collateral for loans that they wish to be approved for. For consumers that do have collateral, this means they can obtain lower interest rates in return for placing this collateral with the lender or signing it over to the lender. What this situation really means is that if the borrower for some reason cannot repay the loan, or does not repay the loan, the lender can sell the collateral to recover the remaining balance of the loan plus the cost of processing and selling the collateral. Before you offer collateral, consumers should always be sure that they can repay the loan based on the terms of the loan without ever defaulting on the loan.

We believe that this client can meet all of the obligations of this loan and will likely be approved for a loan, however the interest rate may be higher than he would like.


Tips For Staying On A Monthly Budget

Our newest applicants are on the right track in terms of managing their money and making sure they do not get themselves into a financial bind by spending more than they have on a home. They are looking for tips on staying on a monthly budget. The first step is to arrange for a mortgage with the largest down payment they can afford and the lowest interest rate they can find. This will help to ensure that their mortgage payments are as low as possible.

They have a good credit rating and should qualify for a relatively low interest rate mortgage for as long a term as they wish. They have taken the right steps by building up a large down payment. Even though they have lived with his wife’s parents for a year, this has allowed him to build up a large down payment, which is the first step in managing a monthly budget.

We also urge these applicants to estimate their monthly taxes and the utilities that will need to be paid. Adding up all of these figures will provide an estimate of the total monthly cost for their home including principle, interest, taxes, utility costs and maintenance costs.

The big unknown is what repairs will be required once they take possession of the home. We urge then and in fact it is required in many states to have a home inspection before they finalize the purchase. This inspection is extremely important to establish what repairs will be needed on the home. Since this is a foreclosure sale, the bank will not make any repairs. The best the customer can do is to negotiate the price down further to cover any identified repairs that may be needed.

We anticipate further discussion on this file since the sale of the home is no where near being finalized at this stage.


What To Do While You Wait To Be Discharged From Personal Bankruptcy

This particular applicant is not really an applicant for a loan or mortgage. He is looking for information about what he can do while he waits to be discharged from bankruptcy. These kinds of questions are a little bit out of the scope of what we normally deal with on this web site, however we can offer some suggestions as he awaits his discharge from bankruptcy.

His wife owns a store which he operates and which is also not part of the bankruptcy proceedings since he is declaring personal bankruptcy. He went through a difficult time due to a more expensive start up of his store than he had planned for and less revenue than planned. They decided to sacrifice their personal financial situation and keep the store going. As a result the store is now doing well and he has had to declare personal bankruptcy. While we could debate  whether this was the best strategy, it is never the less the circumstances he now finds himself in that he must deal with.

Bankruptcy discharge means that you are legally released from all debt covered under your bankruptcy. There are some debts that are not allowed to be included in a bankruptcy discharge. These include – child support, alimony, debt from fraud, court fines, student loans and restitution orders. Our applicant should plan to repay these items if they apply in his situation.

There are also different rules for people who are going through bankruptcy for the fist time vs. those that have declared bankruptcy multiple times. We do not know if this applies, so he should investigate this situation depending on which applies for his situation.

In some cases a bankruptcy discharge can be opposed and you may find yourself not receiving the discharge. For example if the discharge was caused by gambling, you did not pay the agreed surplus income, there was a viable proposal that was not filed, you refused counseling or there were unusual transactions prior to declaration of bankruptcy the discharge could be opposed by creditors. This applicant should confirm that these issues do not apply to his situation.

There are several types of discharge bankruptcy’s available. Our applicant should investigate whether they will qualify for an automatic discharge, order of absolute discharge, order of conditional discharge or order of suspended bankruptcy discharge.

Once he has investigated all of these issues, he can then make some decisions regarding what to do while you wait for bankruptcy discharge.


Need Debt Relief Program That Helps More Than It Hurts?

This client is in need of a debt relief program that in his words helps more than it hurts. In other words he is looking for a lower interest rate loan with a reasonable term that allows him to consolidate his credit card debt into one low interest loan with one monthly payment. He has six credit cards and has an overall balance of $20,000 on all of his credit cards. If he does not obtain debt relief soon, he will be paying over 21% in interest on the balance of each card which totals $20,000.

This client owns his own store and according to his application is doing just fine. They openly admit that they manage the stores cash flow situation much better than they do their own personal finances. This is actually not that uncommon for many people who find themselves needing some form of debt relief from multiple credit card debt situations.

As it turns out this client would have an excellent credit rating if it were not for his multiple credit cards and outstanding debt on these cards. He has an excellent record of always paying his bills on time and has a relatively small mortgage. Owning too many credit cards can ruin many consumers credit rating simply because they are exposed to a lot of potential debt that carries a high interest rate with large monthly payments if the balances are not paid in time.

We anticipate that this client should qualify for debt relief in the form of a relatively low interest rate loan. If he does cancel several credit card accounts this will improve his credit rating as well although it will take some time for his credit rating to reflect the lower number of credit cards.


$70,000 Loan For 2010 Kenworth Truck in Bakersfield, CA

This applicant is applying for a loan of $70,000 to help him close a deal on a 2010 Kenworh truck that he wants to purchase. He will be trading in an older model and this particular truck is a low mileage vehicle at an excellent price. This will be an upgrade for him with the addition of a sleeper cab which will allow him to branch out into longer haul contracts at some point.

He has a very good credit rating with no loans other than his current mortgage which is in good standing. He has no overdue credit card bills and no other loans. He makes sufficient money to handle both his current mortgage, taxes and the new payment on the truck if it is approved.

This client has also demonstrated very good money management abilities. He has fixed his salary at a specific amount and only draws this amount each year. The remaining money is set aside for major repairs if needed, and also to cover his salary during months when the income may be a bit low. He has been doing this sort of thing for the past 10 years which provides him with an excellent cash flow and allows him to meet his ongoing obligations and living expenses. This is a really good approach to follow.

We anticipate that he will be able to purchase this truck after being approved for this loan application. The lenders may need some more information from him to help substantiate the loan, however he has an excellent chance of being approved for this loan.