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THERE has been so much written in the past few months about payment protection insurance it has all become a little confusing. Most of what has been written has been very negative, indeed dangerously negative ? witch-hunt proportions even in some quarters. A mortgage magazine even ran a campaign to have single premium accident, sickness, unemployment banned.

Amid all the chest beating and promotion, some clarity is desperately needed. Without relevant PPI being offered to customers, there is an even greater risk of one of the fundamental objectives of the FSA not being met ? and that is protecting consumer interests.

The PPI witch-hunt has also lumped together mortgage payment protection insurance and single premium ASU. These products are, of course, all very different. Most of the Office of Fair Trading?s concerns re- volved around the potential mis-selling of PPI related to consumer and revolving credit sales, not mortgages.

In November 2005, the FSA published a report detailing its findings about the sale of PPI. This was backed up with mystery shopping of various firms involved in the sale of PPI ? that goes beyond mortgages to other companies that offer revolving lines of credit, store accounts and unsecured loans. It was much broader than the mortgage industry alone and, given the mortgage industry has been regulated by the FSA for some time now, it has taken a disproportionate amount of flak.

Experience

It does strike me as odd that people who have very limited experience in the mortgage market ? and more specifically experience in the sub-prime mortgage market ? have been pontificating about the so-called evils of single premium ASU.

The mortgage industry as a whole needs to assess the risks and benefits ? yes, benefits ? of single premium ASU with calm heads, because things have moved on.

Fact one. Sub-prime clients cancel their monthly ASU policies. Some major insurers have even withdrawn the product from sale because the persistency levels are so low. That is what sub-prime clients do. It is the same reason they cancel their life policies. That does not mean we should stop writing life business because we would be leaving customers and their families exposed.

There is a fundamental issue here. Why sell a client a monthly policy when he has a demonstrated history of not being able to meet his monthly commitments?
And guess what? Fact two: sub-prime clients will cancel their monthly ASU policy at the time when they need it the most. The potential ramifications for the IFA/mortgage broker are dire should he be unable to demonstrate that he offered his client the option of either monthly or single premium ASU and it has subsequently gone pear shaped for his client.

Some brokers detail the costs and benefits of ASU in the suitability letter and document in that letter if the client has chosen not to take it up. Some go even further. For clients who cancel their policies downstream, some brokers send a disclaimer ensuring they know what they are cancelling and detail the ramifications of having no cover.

It is cheaper to do that than risk the potential of attracting a lawsuit, and worse still drawing bad press to our business and brand.
There is no doubt that single premium ASU policies have come in for some major flak because of their poor flexibility and TCF unfriendliness.

Commission

Agreed and rightly so. One of the key issues at play here is the seemingly large commission payments made for single premium ASU.

Let us look at that issue in another context. What if a motor insurer offered a three-year product and guaranteed not to change price over the term with no inflationary creep? What if you got a further discount for paying that policy upfront as a lump sum? Of course, the selling broker would be paid his share of the total premium.

Single premium ASU is not really that different; it is just that a lot of commentators have got all bent out of shape about the commission payment and not the cover itself.

This problem has been further magnified by lots of people throwing their twopence into the ring when, to be frank, objectivity is needed and recognition of what has changed. There is a place for single premium ASU, but not as we used to know it.

What if the mortgage industry had a single premium ASU product that had the following features:

- provided no quibble pro-rata refunds if it was cancelled;
– where Read more…

But as companies confront a tight credit market coupled with lower than expected results, many CFOs are viewing asset based lending as a viable option in the financing tool kit. Even successful companies with strong banking relationships can quickly fall out of favor with lenders and lose access to unsecured financing, especially if they?ve shown recent losses. A few bad quarterly results doesn?t necessarily mean that a company is in bad shape, but stringent bank underwriting parameters can cause existing loans to be called and prevent the firm from qualifying for new financing. A company facing such a scenario can use asset based lending (ABL) arrangements as bridge loans to pay off banks and provide liquidity until bank financing is achievable.

What is asset based lending?

An asset-based loan is secured by a company’s accounts receivable, inventory, equipment, and/or real estate, whereby the lender takes a first priority security interest in those assets financed. Asset-based loans are an alternative to traditional bank lending because they serve borrowers with risk characteristics typically outside a bank’s comfort level. These assets typically have an easily determined value. The financing can take the form of loans to revolving credit lines to equipment leases and can range from $100,000 to $1 billion, depending on needs and circumstances.

How can ABL be a beneficial financing option?

Acquisition

To grow a business, a company may look to acquire a strategic partner or even a competitor. Asset-based financing is often an efficient means to obtain funding for business acquisitions.

Turnaround Financing

Turnaround financing is often used by under-performing businesses that are not achieving their full potential. In some cases, it is used for businesses that are either insolvent or on their way to becoming insolvent. Asset-based lenders are accustomed to the bankruptcy process and asset-based financing is ideal for turnarounds because of its flexibility.

Capital Expenditures

Capital expenditure is the money spent to acquire and/or upgrade physical assets such as buildings and machinery. Capital expenditure is also commonly referred to as capital spending or capital expense.

Debtor-in-Possession (DIP) Financing

Debtor-in-possession (DIP) refers to a company that has filed for protection under Chapter XI of the Federal Bankruptcy Code and has been permitted by the bankruptcy court to continue its operations to effect a formal reorganization. A DIP company can still obtain loans–but only with bankruptcy court approval. DIP financing, which is new debt obtained by a firm during the Chapter XI bankruptcy process, allows the company to continue to operate during a reorganization process. Asset-based lenders also provide exit financing or confirmation financing to companies coming out of bankruptcy.

Growth

Typically, as a company grows so does its need for financing. Also, as a company’s collateral grows, its assets can strengthen its ability to borrow. An experienced and creative asset-based lender can assemble a credit facility that can scale to grow with a company.

Recapitalization

Recapitalization is the process of fundamentally revising a company’s capital structure. A company might recapitalize due to bankruptcy or replacing debt securities with equity in order to reduce the company’s ongoing interest obligation. A leveraged recapitalization typically achieves just the opposite–by taking on a material amount of debt, the company increases its ongoing interest obligation but is able to pay its shareholders a special dividend.

Refinancing/Restructuring

When a company enters or exits a growth stage, refinancing or restructured financing may be key to creating a capital structure that better meets the needs of the company. This type of financing is often used for market expansion, completing an acquisition, restructuring operations, or following a successful corporate turnaround.

Buyout

A buyout is the purchase of a controlling percentage of a company’s stock. In a leveraged buyout (LBO), the acquiring company uses the minimum amount of equity to purchase the target company. The target company’s assets are used as collateral for debt, and its cash flow is used to retire debt accrued by the buyer to acquire the company. A management buyout (MBO) is an LBO led by the existing management of Read more…

Business banking is big business and there are a lot of banks and building societies vying to sign up business owners for their latest deals. There are a number of solutions for business owners looking to manage cash flow effectively. Here are a few options to consider.

Business Debit Card

A business debit card works just like a regular debit card. You normally get one with a business current account, and the debit card is an easy way to replace a chequebook. A business debit card is used to pay for items and the money comes straight out of the business account. The only people who can use the debit card are signatories to the account. With a business debit card, a business owner can only spend the money that is in the account, unless the account also has an overdraft facility.

Business Charge Card

A business charge card gives business owners credit. Business charge cards are similar to credit cards. Business owners can use them to pay for purchases and buy good or services. However, unlike a credit card, the balance on the charge card must be paid in full at the end of the month. There is usually an annual fee for a business charge card. Business owners can issue charge cards to key employees and may even be able to limit employees’ spending on the card.

Business Credit Card

Like business charge cards, business credit cards can be issued to employees with pre-approved spending limits. Business credit cards work like personal credit cards. There is a prearranged credit limit and an interest-free period of up to 56 days. Interest rates can be high if the balance isn’t settled.

Why Have Business Credit?

Like other cards, business credit cards can be a good way of managing cash flow. The ability to issue cards to employees makes it easy for them to travel on business and pay for accommodation, flights, car hire, corporate hospitality and their own meals. Employees don’t have to worry Read more…

You’ve probably heard of a debt consolidation loan. Just what is a debt consolidation loan, and how can it help you improve your financial picture? A debt consolidation loan is basically a secured loan taken out to pay off many other financial obligations, typically unsecured debt, such as credit cards or store accounts. Credit cards and store charge cards tend to have comparatively high interest rates. In addition, many of these types of accounts have annual or monthly fees associated with them that raise the cost of your credit even further.

Because they are unsecured debt, credit cards have to charge these higher interest rates. By using a loan that is secured by a stable, high value asset, such as real estate, the loan can have a much lower interest rate. In many cases, the term of the loan can be fairly long as well, typically 5 ? 10 years or so. The combination of the lower interest rate and the long term of the loan means that your payment on your new debt consolidation loan will be fairly low. It will be much lower than the total payments of the credit cards you used the new loan to pay off.

The reduction in your monthly financial obligation can be a huge help. You now only have one low payment each month. This one payment replaces a payment for each of your credit cards you are now paying for. The multiple payments for all the credit cards add up to a much larger bill every month than the new consolidation loan’s payment. This can obviously improve your monthly cash flow picture considerably.

There’s another, huge benefit as well. Because you’re only making one payment each month, instead of many smaller payments, it is much more convenient, and takes much less of your time. Instead of going through your credit card statements and laboriously writing a bunch of checks, you can be doing something else. Probably the best thing about a single payment is that it’s almost impossible to accidentally miss a payment. The costs for accidentally missing a payment or having a late payment can be severe. You’ll be Read more…

You have the habit of keeping yourself out of risk always. Now when you are going to take a personal loan, you do not want to undertake any risk. Well, in this case you can go for an unsecured personal loan. An unsecured personal loan does not require collateral. Therefore, there is no risk involved in it.

Collateral is offered to ensure the lender that he can recover his money, though the borrower fails. Thus, the lender rises above risk and it is shifted to the borrower. In case any emergency arises and he fails to pay off, then the collateral is lost. Since there is no collateral required for an unsecured personal loan, there is no risk of losing it.

In addition to the risk free nature, unsecured personal loan has some other benefits to offer. The absence of collateral eliminates some of the time consuming paperwork. Ultimately, the process of the loan becomes rather simple and the borrower receives the cash quickly.

Unsecured personal loan is a flexible loan and can be used for diverse personal needs. Home renovation, car purchasing, holidaying, debt consolidation are some of the important personal works Read more…

Whether you need money to fix up your home or you’d like to go to college, government grants shouldn’t be overlooked.

Basically free money offered by the federal government to help citizens realize their dreams and improve the American landscape along the way, there are literally hundreds of different grants available.

The money’s there and often those who don’t realize it, qualify for grants, so not checking them out can be a big loss.

Government grants and loans are offered by a number of different departments within the federal government. They range from scholarships and fellowships to straight out, low interest loans and grants for small businesses, artistic endeavors and more.

There’s even money available for fixing up homes, historic properties and more. No matter what you need money for, it just pays to look into different grant and loan programs available through the government. It doesn’t hurt to look and it could hurt not to. Who wants to walk away from free money?

There are several basic types of government financial programs available. The include scholarships, fellowships, traineeships and loans/grants. The loans, although not outright grants, generally come with rates well below prime and generous repayment terms.

Let’s look at some of the things offered in each class:

Scholarships: The federal government knows the best way to compete in the world is to have a well-educated populace. To help make this a reality, the government offers a lot, and we do mean a lot, of different scholarship programs many don’t even look into. These range from those for minorities to grants for studying medicine, business and the arts. Just about any field of study imaginable has a federal grant program attached and not all have an income requirement for eligibility.

Fellowships: Much like the scholarship programs, these come with a financial benefit for the winning fellows along with generally some hands-on training with some of the country’s best experts in fields as broad as medicine and agriculture. Fellowships tend Read more…

In today?s ever-changing world, people need more and more flexibility when it comes to borrowing and mortgages. With this in mind, more and more lenders are offering what they term as ?flexible? mortgages. However, the term ?flexible? can mean a lot of different things. If you are unsure about which mortgages are flexible and what the benefits of a flexible mortgage are, then this article might be helpful to you.

What does flexible mean?

Although there are a lot of mortgages that claim to be flexible, there are some things that define a truly flexible mortgage. There are four main characteristics you should look for when determining if a mortgage is flexible. These are:

? Being allowed to overpay
? Being allowed to underpay
? Being able to take payment holidays
? Interest is calculated daily

Overpayments

One of the best features of flexible mortgages is the ability to overpay. With traditional fixed repayment mortgages, there is no easy way for you to pay more than your fixed repayment each month. If you have a flexible mortgage, then you will have the ability to pay as much as you can each month. This means that during the good months you can speed up the process of paying your mortgage back. If you regularly overpay then you can save yourself thousands of pounds in interest payments.

Underpayments

Underpayments are another useful feature of flexible mortgages, but they should be used sparingly. If you are unable to make the repayment in a given month, then you can just pay as much as you can, effectively underpaying on your mortgage. Although this is good as it stops you from defaulting, there are penalties involved. The more you underpay, the longer the mortgage will last or the higher your repayments afterwards will be.

Payment holidays

Payment holidays are similar to underpayments, but they let you completely halt payment for a period Read more…

If you have only been able to rent property in the last few years due to poor credit, you may feel the time is right to buy a property using an adverse credit home loan. However, buying a home can be a daunting prospect, especially if you have had credit problems in the past. This should not deter you though, because even with poor credit you can still find the house that you want. All you need to do is find and secure the right adverse credit home loan.

Before looking for a property you should find out more about securing an adverse credit home loan. It pays to know about how much you can borrow before house hunting, because otherwise you will face disappointment when you find the house of your dreams but you are unable to afford it. However, if you follow a few simple steps then finding an adverse credit home loan can be much less troublesome than you might think.

Finding a lender

The very first step on the path to finding an adverse credit home loan is to find yourself a lender who is willing to offer you a loan. This may seem like a near impossible task to you, but in fact there are a fair number of lenders who might be able to help you. Property is an attractive item for lenders because if they need to take possession then it will be relatively easy to sell. Take the time to look around to find a lender you are happy with.

One of the best ways of finding a lender is by using the Internet. This saves you the time of travelling to lenders who cannot help you, and also allows you to search specifically for those lenders who specialise in offering adverse credit home loans. As well as searching online you should visit mortgage lenders and banks in your area. The more research you do, then the more likely you are to find the first adverse credit home loan for your needs.

Getting pre-approval

Once you have found the lender you think is right for you, then you need to get Read more…

Financial traders in the City are expecting interest rates to rise by half a percent by the end of this year. These days the Bank of England prefers to make a series of small changes to interest rates rather than one large change, so watch out for the first 0.25% rise around August time

Mortgage rates are already reacting with the rates for fixed rate mortgages rising. The best rates for two year fixes are now in the 4.15% to 4.48% range and for three year fixes, 4.49% to 4.64%. The rates on credit cards and loans are usually variable, so these aren’t likely to rise until the Bank of England moves ? but you can bet your bottom dollar that when the time comes, they’ll move quickly.

Only a month ago economists were talking about further falls in interest rates, so why has everything changes?

It’s all because inflation is coming back under pressure. The governments’ target for inflation is 2% per annum but with energy prices high, and likely to soar even further, we are beginning to see the knock on effect of energy inflation across the economy. And despite fuel bills siphoning money from drivers, new car registrations are up 7% on the year to March, industrial orders rose more than 13% and business confidence improved again in April. Even America, the world’s largest consumer of oil, the economy is experiencing surprising levels of activity.

In many ways this is good news for Britain’s economy. The annual rate of exports is growing at the rate of almost 20%, a rate virtually matched by imports. And the major quarterly survey of the economy suggests that growth will remain strong.

For the man and woman in the street, economic figures are all well and good, but it’s the housing market that is perhaps their key barometer. Here the current news is good for existing homeowners, but perhaps less good for those trying to get a foot on the housing ladder.

Currently, the housing market is buoyant. In the first three months of this year the Halifax reported house prices up by 1.6% and the Nationwide reported prices up 2.3%. But these are averages. Read more…

In speaking of drawbacks of credit cards another form is the fraud of making copies of stored information upon the credit card, also known as ?Skimming?. This has become extremely popular for those who are making the business of stealing other peoples financial information and making use of it. Each time you let your credit card leave your hands, you run the risk of credit card skimming.

In general, skimming occurs in a public place such as a restaurant, shop, or retail store. Anyone who is dishonest and in the fraud business such as a cashier or waiter could swipe the credit card for payment of their services and then unbeknownst to you swipe it a second time in a device known as a ?skimmer?. A skimmer is a small device that is similar to the size of a pager that has a slot; this is purchased very easily on the internet. What it does is it will record information stored upon a credit card (magnetic strip) and it will do so extremely fast. Then the information that it records is passed to thieves who will then put the information upon a credit card that is counterfeit.

This essentially means that your money is now in the hands of the thieves. There is only one way to prevent this action and that is to make sure you always keep a sharp eye upon the credit cards. Skimming has also known to take place at various unwatched ATMS such as those within a mall. Your credit card could become stuck within the ATM or done in such a way that you Read more…