Fixed VS Variable Loan Rate

There are various types of loans that exist on the market. They are all designed for different needs of clients; banks use them for attracting more people who need money. One of the criteria that could separate different kinds of loans is the type of a loan rate. It could be fixed or variable, depending on the loan product we are talking about. In this article, we would like to familiarize you with both of these definitions.

Fixed rate

So, let’s start with the fixed rate. This type of rate is such a rate that doesn’t change the life of a loan. It means that a borrower pays the exact same amount of money for all the time. This results in the fact that you may calculate the total sum of money that you are going to spend on this loan easily, multiplying the monthly payment rate and the term of your loan. You may face fixed rates when you get your auto loan, a student loan, a mortgage, etc.

Variable rate

Opposed to the fixed rate which doesn’t change, the variable rate may fluctuate with time. That’s the reason why they are called ‘the floating rates’. They mean that you pay the interests of your loan first; then the total sum of your debt changes.

The variable rates work much more difficult than the fixed ones. The rate of this type of loan changes during its life, what means that you pay different amounts of money. However, if you are able to pay more from the very beginning of your loan life, you will pay less in total. So, the variable rate loans may be better than the fixed ones.

How to get a home loan? Tutorial for self-employed

Being a self-employed person means that you have the independent job, which can be both good and bad for your income. From one point of view, you can earn as much, as you can – without any limitations, which could exist when we talk about the ordinary 9-to-5 job. From another point of view, nobody guarantees any minimum salary for you. It means that in the case of some critical situation, you can earn nothing.

This principle of ‘any salary that could be’ is important when you want to get a home loan. This type of borrowing is quite huge; it may have any term: from 3 or 5 years to 10 or 15. That’s why a bank should have some guarantees that your salary is high enough for paying all those money. But how can you guarantee that you’ll earn enough, being a self-employed worker?

As Catherine Todd, the Australian loan broker claims, the actual difference between a hired worker and a self-employed business owner is no that big. The documents they should provide the bank with are the same: they should confirm the financial results of the business for the previous 2 (or more) years. Also, a person, who wants to get a home loan, should find some stats or analytics that show the trends of the business, its prospectives for future. This kind of information may be enough if the business is really profitable and successful. In this situation, it may be a good alternative for the fixed salary.

The types of the home equity loans

In the previous article we’ve already discussed a question, related to the home equity loans. We’ve cleared out what is home equity and how it can be used for taking new loans for your needs. In this article we’d like to tell more about the types of home equity loans and their specifications.

There are just two different types of the equity loans. The first one is called simply ‘a loan’, due to its singleness. A person, whose house’s price has increased, is able to get a single loan for his needs. Another type of the loan is called ‘a line of credit’. In general, it works similarly to the single loan, but it has the only difference – it’s not the single payment, but rather a credit line, which may be withdrawn when the borrower needs. In its core the equity credit line is similar to the credit card, when you can withdraw the money when you need, repaying it back.

The average time of the equity loans to be repaid is 15-20 years. However, there either 5-years long loans, or 30-years long equity loans. It depends on the amount of money the borrower takes. The difference is also in the cost of the home.

Comparing these two types of the home equity loans, we can say, that the credit line seems to be more convenient, than the single-payment loan. The borrower is able to repay it and take money again, if he needs. It provides financial flexibility.

Home equity loans

There are various ways to take a loan. Your home equity is another solution to borrow money, if you need them. In this article we’d like to tell you more about this.

First of all, let’s figure out, what is your home equity. It is the difference between the market cost of your house and the amount of money, you got for its purchasing. Let’s look at the simple example, in order to get it correctly.

Let’s imagine, that you’ve got $120k in mortgage for buying your new house. After you start living there, the price of the house rised a little, so that now it could be sold for $150k. The diference between these two numbers is equity ($20k). Now you can take another loan in cash, in order to spend this money, let’s say, for your house improvement.

These loans are possible because of that fact, that your house is still a collateral, so that it guarantees, that you will repay the debt. At the same time, its market price grows, which can be used by you, as its owner.

There is one important thing, which is required for taking the home equity loans. The market price of the house you bought should grow or, at least, remain the same. If it dropps, you won’t be able to get any new loan.

You should also take home equity loans if you’ve already repaid some part of your debt. It allows many borrowers to get money for the house repairing and improvements, which automatically increases its value.

Selecting the mortgage product

It’s not a secret, that the American mortgage market has thousands of offers, available for anyone. It makes you feel lost, making such a huge choice. In this article we’d like to talk more about the way you can define, which mortgage product is better for you.

It’s worth mentioning from the very beginning, that the variety of the products is really great. The interest rate itself may differ from 0% to 20%. Other conditions may vary as well. So, we’d like to give you some tips on how to make this choice and get the best solution in the end.

First of all, you should remember about the responsibility. You are, actually, a buyer of the mortgage product. And it’s up to you, whether you pay 16% or 19% rate. Or, maybe, you’ll pay 16% from the very beginning and 19% after three years. Sounds not good, right? Pay attention to the details. The sellers of this product know our weaknesses – they know, that an ordinary person doesn’t like the details. That’s where they can put some additional fees to be paid by you. So check everything twice, before you sign.

Another great advice for those, who are going to get a mortgage, is to calculate everything. It’s obvious, that mortgage is not so simple, but it allows you protecting your money. Calculate your expenses, in order to know, how they will be changed in the future. Read some reviews from the people, who have already made their choice. Hire a consultant. And pick the right mortgage after that.

How to select a mortgage company?

Taking a mortgage is, obviously, a responsible step, which will have serious consequences. You, actually, obligate yourself to get a big loan, which will be repaying by you for many years. No need saying, that you should prepare yourself for this. And one important thing, which needs to be done, is selecting a good mortgage company. In this article we’d like to pay more attention to this question.

So, there are a lot of banks of different sizes, which offer a bunch of products. You should make a choice, which may not be easy. How to choose, which company you should go to?

We offer you to look at the mortgage products and their terms, provided by these banks. And the most interesting thing for you in this situation is rates.

Mortgage rates is, actually, a price of the borrowed money for you. The higher the rates – the higher the price. So, we advise you to look at different banks’ offers, to make the best choice. Platforms, like Bankrate.com will help you with this.

They work like a seach engine for different mortgage products. You just set the filters and get the best offers. After this you get the contact informations of the banks you are interested in.

The personal meeting with a mortgage advisory follows this step. It is important too – low interest rates don’t guarantee, that your advisor will help you to get the best deal for you. Make sure, that this person is informed enough to help you and that you feel, that it’s ready to work for your interests.

Are you prepared for the mortgage?

In order to get a mortgage, you should complete a special mortgage application, filling some information about yourself. However, before doing it, we’d like to advice you to check, if you are prepared for getting a mortgage for buying any real estate. In this article we’d like to introduce you some simple steps to make sure, that you are OK with your future mortgage.

First of all, you should check your credit score. It’s a value, which shows, how good you are as a borrower. You can get your credit score after applying to the free online credit report. Pay attention to a small fee, which needs to be paid for this. In the result, you’ll get a number of your credit score. It must be equal or greater than 700. If it’s less, you can have problems with getting an approval or with a higher interest rate.

Second thing you should pay attention to is, obviously, your budget. You should demonstrate all of your incomes and expenses, in order to see the bigger picture of how much you can pay on a monthly basis. Most of the banks require the documents, showing your tax expenses for the last 3 years.

Finally, the third thing you should do, is checking, if you can afford the house you want to buy. For this some simple counting operations are needed. Determining the price of your real estate should be based on the size of your monthly payments – they should not be higher, than 25-30% of the money you earn (after taxes).

What is unsecured loans?

We are going to continue talking about the types of the loans. In the previous article we’ve already told you about the secured loans and their role. Today we’d like to talk about the second type of the loans – the unsecured ones.

It’s obvious, that this kind of loans needs no secure. The money are borrowed, actually, without any collateral. It may result in a few things.

The first one is the conditions for getting such a loan. It’s obvious, that without the guarantee for the money to be repaid, the lender won’t give you a big amount of money. So, this kind of loan has strong limitations, which you should follow.

The second important thing, concerning the unsecured loans, is the requirements for a borrower. The lender will definitely have some set of rules for the borrowers, so that far not anyone can get this money.

The third thing is, probably, the interest rate. The unsecured loan is, obviously, a more risky, than the secured one. That’s why the interest rate will be higher, as well. It leads to the higher cost of the borrowed money for the borrower.

The choice between the secured loans and the unsecured ones must be made according to the situation you deal with. If you have an opportunity to take an unsecured load with a low interest rate, you should definitely accept this offer. However, in order to lower the final cost of the loan, you’d better pay attention to the secured loan, if you have anything to become a collateral.

What is secured loans?

If you’ve already been searching for the information about loans, you should probably know that there are two main types of the loans – the secured and unsecured ones. In this article we’d like to tell more about the secured loans – why are they called so, what is their main difference from the unsecured ones and when are they used.

So, the main difference between these types of a loan is a collateral. It is present if we talk about the secured loan. It, literally, guarantees, that the borrower will repay the loan in any case. Otherwise, the collateral will be taken by a lender.

As a rule, some precious objects, like the real estate or cars may become a collateral. Sometimes, when the loan is taken for the purchase of a house or a car, this same house or car may be a collateral, which will be taken away, if the borrower fails in repaying the debt.

The secured loans may be called a more flexible tool for borrowing the money. They meet the less number of requirements from the lender, than the unsecured one, because of the guarantee, that the money will be back in any way.

If you are going to borrow some huge amounts of money, secured loans may be the only way to receive the needed sum. But before you should think well, if the estimated price of the collateral is enough for repaying the debt. As a rule, its cost must be 20-30% higher, than the size of your debt.

How to reduce the cost of personal loans?

Personal loans is a good tool to buy something, which is not affordable because of the savings abscense. However, their cost may be too high, if you don’t use it smartly. In this article we’d like to offer you some interesting ideas on how to cut down the cost of your personal loan.

1.Repaying from savings

Let’s imagine, that your loan was taken when you had no money to afford that particular purchase. However, soon you got some money and an opportunity to cover the debt. The question arises – should you pay off the loan, or maybe you should keep waiting, paying the interests?

The answer is obvious – surely, you should pay the debt off. It’s a direct way to decrease the cost of this loan, because you’ll definitely get rid of it.

2.Replace the loan with another one

One more strategy to pay less for your loan is replacing the loan with another, a cheaper one. It allows paying less, thanks to another interest rate of the second loan. This way can be also called as a refinancing, and it’s widely used by the people.

3.Consolidation

Another interesting strategy for lowering your loan debt is consolidation. You can get money to cover your previous debts, uniting them together.

4.Use interest-free credit cards

Using interest-free credit cards can be a great way to save money on getting loans. In most cases, the interest-free period lasts in the first 30-40 days of the card usage. However, it can be also available later.