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Loan Fraud – What to Look for

I’ll never forget the first spam I received involving an African prince who would send me oodles of money. Unfortunately, these types of loans continue to proliferate the Internet and take advantage of people. The trend has only gotten worse as people are more desperate in these hard economic times. They prey on people desperate to get student loans and other types of financing. The most common type of fraud is called an advance fee loan scams. In this situation the person is told that they have been guaranteed a unsecured loan for a large sum of money. They simply need to pay the processing fee.

Here are a few of the signs that the company may not be legitimate.

  • A lender who isn’t interested in your credit history
  • Fees that are not disclosed clearly or prominently
  • A loan that is offered by phone
  • A lender who is not registered in your state

Do business with licensed companies. Ask your state banking or finance department about the licensing requirements for lenders and loan brokers, and find out if the company has complied.

If you are the victim of a fraudulant crime you can visit https://www.ftccomplaintassistant.gov/. This site helps people who have been victimized by credit card theft. It helps the government to aggregate data and ultimately apprehend those responsible for the fraudulant crimes.

Debt Consolidation – How it Works

Debt Consolidation

Debt Consolidation

Every day I hear ads for debt consolidation. I was always curious how these loans are able to take existing interest debt and turn it into a lower payment. The primary way debt consolidation programs work is by transferring unsecured debt into secured debt. Which brings up the next question, what are the difference between the two? An unsecured debt does not have an underlying asset associated with it. A good example is a credit card. Usually, there isn’t a specific asset that you own tied to the credit card. An example of a secured debt is a home mortgage. If you don’t pay back the mortgage the bank can take possession of the home (secured asset).

Lenders are usually able to offer a lower rates since the debt is now secured with an asset. There is less risk to the lender.

Additionally, programs can do things like extend the term of your loans to increase the payback period and decrease the monthly payment. This makes it easier to meet your monthly payment. Many debt consolidation experts have the ability to work with multiple lenders. This can save a great deal of time and frustration as these agents are experts and can navigate the maze of creditors while minimizing payment.

Compare Rates in Australia

One of my favorite financial sites is bankrate.com. When I was looking for a mortgage I scoured that site on a daily basis watching rates change and thinking about who I would place my mortgage with. Interestingly for me it wasn’t all about the best rate. I also wanted someone who wouldn’t sell my mortgage and who had an office close by. I was able to find it and get a decent rate easily. I am amazed at the difference between the advertised rate and the rate you end up with though.

Even though bankrate is the 800 lb gorilla in the market there are a growing list of sites specializing in financial niches as well.

Anyway, there is a new site that seeks to help Australians with their rates as well. The site is called GoodWithMoney. They compare traditional items like credit cards and cheap loans, but what I also found interesting is that you can compare rates on items like insurance and broadband services. They have most of the major items that you need for your financial being on their site specifically geared to those living in Australia. They also have a section dedicated to financial Australian news.

If you have any other interesting sites that help to compare rates for a given niche let us know in a comment.

Where to Invest Your Money during Recession: Real Estate

Real Estate InvestingWhen you heard about real estate investing in today’s recession, the majority would react by saying, “avoid at all cost.”

The sub-prime mortgages, the sky-high interest rates, and the sharp decline in value – all seem against real estate investing.

However, I encourage you to have a surfer’s mindset that I have occasionally mentioned in my previous posts.

The surfer mindset

Surfer loves challenges. In fact, challenges are what make a surfer perform.

For example, in a surfing competition, weak tides can be a huge, single, factor that will fail the surfer to win the competition. The stronger the tides, the more challenging they will become and the better the surfers showcase their surfing skills.

However, take heed – if your surfing skills are somewhat low, strong tides will swallow you; The key is utilising the right skill sets on the right opportunities.

In your personal finance, you need to increase your financial knowledge in order to ride the right waves, with the right skill sets. Playing too safe will hinder you from achieving the financial milestones you have set. Exposing yourself to risks too much will put you into financial difficulties, even personal bankruptcy.

One of the waves in today’s tide of recession: real estate investing

Real estate is one of the hardest hit sector that causes property owners and brokers alike struggling financially.

If you thought about investing in real estate during recession, it wouldn’t be the right decision to invest your money.

Or, is it?

Many real estates are losing their value – how can they be a good place to invest your money?

Robert Kiyosaki, the best seller writer of Rich Dad Poor Dad series, stated controversially that a house is not an asset, because it is not putting money in your pocket.

General public and many experts are slamming him for such controversial statement, but his statement proves true in today’s recession.

Homes are losing value, the interest rates are high, and the demand is low – the dreaded sub-prime mortgage.

However, as everything in life, there is always a good thing in every bad thing.

Today is probably the best time to invest in real estate, for one reason: Higher mortgage interest rate = Lower real estate demand = lower price tag.

As the real estate business crashes, property prices are in decline, too. Foreclosures are everywhere – this means, opportunities are everywhere, at a discounted price tag. Of course, your eyes for real estate values and prospects play an important role.

One last advice: never invest in real estate with an expectation that your property’s value will go up – it’s not always the case. Instead, invest with cash flow comes first in mind – your property as a rental property.

Image by terren in Virginia.

Jobs to go at HBOS mortgage sector

This is a guest post.

With the mortgage drought in the UK continuing since the onset of the global credit crunch last year, it is not only consumers who are suffering. Many people that work within the mortgage industry have also suffered as a result of the turmoil in the mortgage sector, and recently HBOS has announced that there are to be job losses in its mortgage loan sector. The closure of a specialist mortgage branch by HBOS is to result in the loss of 325 jobs by the end of March next year.

The Mortgage Business, which is an arm of HBOS, will be closing to new custom later this month, and the bank will also close a mortgage processing centre. The job losses have been described as a blow by union officials, who have said that the number job losses is actually larger than the bank has cared to admit. In the first six months of the year HBOS announced that pre-tax profits fell by around 72%.

The bank said that it hoped the jobs could be cut through voluntary redundancies and turnover of staff. It added that the bank had to focus on streamlining the business. Union officials have said that the closure of the processing centre will affect jobs in Livinston, Chester, and Cardiff. One union official stated: "This is a further blow for jobs in the UK financial services sector which is being brought about by the credit crunch and the changing economic climate." 

Another union official said: "We are never happy about any reduction in roles in HBOS even if we understand the commercial logic for the changes."

Negotiating and Culture

Firstly, my thanks to Million Dollar Journey and their entry Confessions of a Car Salesman which discusses negotiating techniques used by used car salesman. Reading that blog got me thinking on the topic of negotiation.

Through my travels, I have often been fascinated by cultural attitudes towards negotiation.

In a number of places in the world, prices are flexible. They can be negotiated, bartered or otherwise influenced. Some individuals are raised in a culture of negotiation. They always try to talk their way to a different price.

Many of us in North America have been raised in a culture of price tags. What we see is what it costs. We look for sales and can try to maximize our value through those, but ultimately, we pay the listed price. Now, is this bad? Not necessarily. It means that in day-to-day life, you don’t have to worry about negotiating. However, in a few remaining areas of North American life, negotiating is common and almost required. These areas include buying cars, arranging salaries and asking for raises, and buying houses. Also, in a not so coincidental way, areas such as these are ones in which many of us feel uncomfortable.

Why do we have issues with negotiating? There are a multitude of reasons. First and foremost, for many of us it comes down to issues of appearances. If we negotiate, we can feel poor or vulnerable. I have had the privilege of witnessing master negotiators at work, and they let no sense of shame interfere in their bargaining process. They will claim poverty, starvation, the need to support a family and many other items as they push the price in the direction they want. Frankly, a good negotiation between two skilled parties is a fascinating spectacle. Not all negotiations are showy and loud though, everyone has a different style of negotiating that can work for them.

We need to look past the “price tag culture” in which many of us have been raised in order to see the benefits that lie in negotiating. A fraction of a percentage point lower interest rates for a mortgage can lead to savings of thousands of dollars over time. A few well placed words can cut hundreds or even thousands of dollars off of a car. Price tags make simple things like shopping trips to the grocery store faster and more convenient. However, by accepting prices on the larger ticket items, we often might be throwing our hard-earned money away.

So, look past any insecurities you might have on the topic, and examine the benefits you might receive from negotiating. Rather than sacrificing any self-esteem, you might end up thousands of dollars ahead for putting in a little time. As a good starting point, take a look at the entry on Million Dollar Journey, it can help you see just how easily we get sold up on prices, and how we can turn those tricks to our own use. Remember, sometimes you CAN look beyond the price tag.

The Neurobiology of McMansions

How Our Brain Structures Led to the Housing Crisis

McMansions.

That is the derogatory term that arose the last few years for the large cookie-cutter suburban subdivisions that seem to have sprung up everywhere. You may have driven through these subdivisions and, much like me, wondered where so many people found so much money. I know what I make. I know I’m in the top 5% or so of income earners. So why don’t I have a top 5% McMansion?

In retrospect, it has become obvious that many of these people could not afford what they bought. This leads to the question of why they bought houses that pushed the limits of what they could pay. Blame it on their brains.

It is a sad but true statement about the human race that we don’t care about absolute wealth. We care about relative wealth – how much wealth we have compared to other people. We don’t want a higher standard of living if everyone else has it too. Some books would say it is all a result of an elaborate mating game. Women and men, in an ever more intense race to impress each other, attempt to make it look as though their income and success are much higher than they really are. But it goes deeper than that. The problem with the housing market can be blamed on the ventral striatum.

Last year, the neuroeconomics lab at Bonn released the results of a study or reward that involved scanning the brains of participants. What they found was not just that brains responded well to a reward. They found that brains responded even stronger to a reward that was better than the reward given to others. The experiment involved pairs of male volunteers competing for prizes on the same task. The BBC article about the research explains it well.

Both “players” were asked to estimate the number of dots appearing on a screen. Providing the right answer earned a real financial reward between 30 (£22) and 120 (£86) euros. Each of the participants was told how their partners had performed and how much they were paid. Using magnetic resonance tomographs, the researchers examined the volunteers’ blood circulation throughout the activities. High blood flow indicated that the nerve cells in the respective part of the brain were particularly active.

Neuroscientist Dr Bernd Weber explains: “One area in particular, the ventral striatum, is the region where part of what we call the ‘reward system’ is located. In this area, we observed an activation when the player completed his task correctly.”
A wrong answer, and no payment, resulted in a reduction in blood flow to the “reward region”. But the area “lit up” when volunteers earned money, and interestingly showed far more activity if a player received more than his partner.

This indicated that stimulation of the reward centre was not merely linked to individual success, but to the success of others.

You may have heard about “keeping up with the Joneses.” This research shows that it isn’t just something that affects a few of the more shallow among us. It is a real human need with a deeply rooted anatomical cause.

So back to the McMansions… what is a man to do… let all of his friends have the bigger, nicer, newer house? It seems that the drive of the ventral striatum outweighed the rational thought process for many people. All the while, lenders and investors, whose ventral striatums were firing like crazy as they tried to rack up larger earnings and returns, respectively, played along to satisfy that same deep seated need to be better than the next guy. The irony, or perhaps the karma, is that most of them ended up looking worse.

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