Loans - Interest Only Loans

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Payday Loan - Traps to Avoid
There are a great many traps and scams that exist in the world of payday loans that will only leave you with less of your hard earned cash and a tremendous headache. Instead of having to deal with these scam artists after you find yourself in the position of being a debtor, research all your available options so you do not end up as the victim of a well placed trap. There are a fantastic array of ... Read loans article



Student and College Loans
Student and graduate loans are becoming more popular as student debt continues to rise and students seek alternative ways of dealing with it. The good news is that student or graduate loans are generally available without the need to show steady income or offer security. This is extremely helpful, as most students will not have either of these. Student and graduate loans also come at relatively go... Read loans article



Loans - Interest Only Loans
These days, as people scramble for new and more creative ways to finance buying a home, the interest only mortgage is becoming more common and well known. An interest only mortgage is one in which you have the option of paying only the interest (or just the interest and a portion of the principal) each month in the early years of the mortgage loan. Interest only periods may be applied to adjustable rate mortgages, or 30 year fixed rate mortgages, depending on the lender.

In a traditional mortgage, each month your mortgage payment is divided in two parts - one part is paid on the interest charge, the other on the principal of the loan. The main feature of an interest only mortgage loan is that during a specified initial period of time - usually three, five, seven or ten years - you may choose to make a payment of the interest portion of the loan only. The option is flexible. One month you may choose to make an interest only payment, another you may choose to make an interest-plus-part-of-the-principal mortgage payment, or a full, standard monthly mortgage payment. Needless to say, an interest-only payment will be significantly less than a traditional mortgage payment.

The flexibility of an interest-only mortgage allows you to adjust your mortgage cost on a month by month basis, giving you more control over your monthly cash flow. In any given month during the interest-only period, you have the flexibility to pay as much or as little on your mortgage as you can.

Interest only mortgages aren't right for everyone. While you have the option of paying interest only each month during the early years, the principal repayment on your mortgage loan is accumulating. At the end of your interest only period, your mortgage payment will take a dramatic jump. Financial experts recommend interest only mortgages for specific types of borrowers: those whose income is supplemented by large commissions or bonuses throughout the year, those who can reasonably expect to be making considerably more income in a few years than they are now, and those borrowers who actually WILL invest the difference between their interest-only payment and their full mortgage payment in profitable investments.

The power of an interest-only loan, according to most experts, is that you can 'afford to buy more house'. Because you'll have the choice during the early years of paying only the interest each month, you can effectively afford the monthly payments on a house that's as much as 30% more expensive than you could with an amortizing (typical) mortgage payment.

You also, however, have the choice each month of paying the interest plus as much on the principal as you wish. If you're a salesman, for instance, whose standard income is supplemented quarterly and semi-annually by large commissions or bonuses, you could pay interest-only during lean months, saving yourself up to $350 in those months. In the months that you get a large commission though, you could choose to pay down several thousand dollars on the principal.

An interest only mortgage also makes sense if you have a solid investment plan. If a typical mortgage payment would be $900 monthly, and your interest-only payment for the month is $625, then the best financial strategy according to many financial experts is to invest the remaining $275 in a solid, money-making stocks program.

Interest only loans are not for everyone, but they can be a valuable financial tool that can help you control your spending and give your investment power some added oomph. Don't rush blindly into an interest only mortgage, but do speak to a financial expert or loan officer about whether an interest only loan may be right for you.

Joseph Kenny is the webmaster of the loan information sites http://www.selectloans.co.uk/ and also http://www.ukpersonalloanstore.co.uk.

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FICO Score and Applying for a Loan

Have you wondered how loan and mortgage companies decide whether or not to lend you money when you apply for a loan? For nearly all, the decision is based on one version or another of a 'credit score' based on your credit report. The most commonly used credit scoring 'device' is the FICO - software developed by Fair Isaac and Company to evaluate credit histories.

When you make an application for a mortgage loan, the finance company or bank makes an inquiry to a credit reporting agency. The credit reporting agency takes the information given them by the finance company and compiles a report based on information in its own records and other information that's a matter of public record. That information is not only compiled, it's fed into a software program that uses a series of algorithms to estimate the likelihood that you'll pay the loan back. It makes that estimation by comparing information about you with a profile created by compiling the 'ideal borrower'. The closer your information tallies with the 'ideal' profile, the higher your credit score.

Among the things that the FICO software evaluates when coming up with a credit score are:

- the length of time you've been in your current job

- the length of time you've lived at your current address

- how long you've had credit of any kind

- how many credit cards and loans you have

- whether you've ever made any late payments (or made any in the past four years) on credit accounts

- if you've paid off any loans in full

- if you've ever had an account referred to a collection agency

- how much debt you carry

- how much credit you have available to you

Those are only a few of the factors that affect your credit score. But just how much does your credit score affect your chances of getting the mortgage you want?

According to many financial experts, while your credit score is a large factor in determining whether or not to grant a loan or mortgage to you, banks and finance companies take many factors into account. Most have their own underwriting rules and scoring systems of which the FICO is only a part. Those may include your employment history, the local job market and many other things. Based on all of those factors, a company may decide to extend a mortgage to you despite a low credit rating - or refuse you credit even if your credit rating is high.

One common belief is that a low credit score is forever. Nothing could be further from the truth. Your credit score is very fluid - it's meant to represent a picture of your current circumstances and ability to repay a loan that's extended to you. For that reason, new information added to your credit report will affect your credit score - and the further in the past that credit mistakes are, the less they matter. In some cases, it takes as little as 4-6 months of on time payments to bring your credit score up high enough to qualify you for a new loan or mortgage. A new job, a raise in salary, or paying down one or two credit cards could make the difference between a rejection and getting the mortgage that you want.

Joseph Kenny is the webmaster of the loan information sites http://www.selectloans.co.uk/ and also http://www.ukpersonalloanstore.co.uk.


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Loans - Interest Only Loans
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