Canadian Money

Pros and Cons of Piggyback Loans

A piggyback loan involves the borrower taking out a HELOC or a home equity credit line for certain percentage of the value of a property. The cash advance is used as a down payment, and the primary mortgage covers the remainder. The main advantage of this borrowing instrument is that home owners are not required to pay mortgage insurance. This is an ideal option for borrowers who have cash on hand to make the down payment.

Furthermore, when more than one financial institution is involved in a single transaction, the two loan providers take less risk. Borrowers with a small down payment have a better chance of qualifying than they would if applying for a conventional mortgage. At the same time, the combined rate on this type of loan is usually higher than on conventional mortgages. The financial institution that finances 80 percent of the loan may agree to lower the interest rate. The second lender, however, finances 20 percent or even 5 percent and doesn’t benefit much from lending a small amount of money. This is why, the second loan provider may offer a higher interest rate. In addition, piggyback loans usually go with a substantial balloon payment at the end of the repayment period. The payment can be considerably larger compared to regular mortgage payments.  

Note that this type of financing is extended in the form of a dual mortgage. Thus, if an emergency were to arise, obtaining a home equity loan or a second mortgage could be close to impossible.

Borrowers who apply for a piggyback loan should compare different programs and consider a number of factors. Among these are monthly payments, interest rate, and the type of interest rate (adjustable vs. fixed) on the second mortgage. Other important factors are the maximum loan-to-value limits and the monthly insurance premium. Consider the fees, penalties, and any qualification limitations that may apply. When doing the math, keep in mind that you will have expenses such as the closing cost for the transaction, earnest money, and others.

For more information on loans and credit visit this site or this guide.

Is Debt Consolidation Better Than Bankruptcy

Debt consolidation is a process whereby the borrower obtains a new loan to replace credit card balances and other unsecured debts. For example, if you have an unsecured loan, 3 credit cards, and a line of credit, you may qualify for a consolidation loan to pay off your outstanding obligations. You will be making 1 payment a month instead of 5 separate payments.

Debt consolidation loans are usually provided by credit unions and banks. Some borrowers use the services of consolidation companies that negotiate the terms and conditions of the new loan.
Debt consolidation offers a number of advantages, and one is that borrowers are usually allowed to repay the loan over an extended period of time. Another advantage is that borrowers who manage to repay their outstanding balance benefit from an improved credit score and perfect credit report. Thus, qualifying for such a loan is a way to simplify your monthly payments, reduce interest costs, and get better control of your finances.

One important question is whether consolidation is a better option than bankruptcy. Generally, bankruptcy is a good solution for businesses and individual borrowers who have multiple large debts and are unable to handle them. There are many downsides to declaring bankruptcy, however. First of all, not all debts are discharged. You will lose non-essential possessions and your credit cards, and you won’t have access to financing for some time. This includes loans and mortgage loans. Some types of debt are not discharged, including income taxes, past due alimony payments and child support, resulting from divorce procedures, and court fines. Debts incurred by using fraudulent means such as providing incorrect or false information and writing bad checks are also excluded. Exempt property includes household furnishings, motor vehicles, a percentage of your wages, and life insurance.

Note that if most debts are non-dischargeable, declaring bankruptcy is not a good solution. Moreover, bankruptcy is a complicated process, and the different provinces have different rules to regulate bankruptcy. You may want to use the services of a bankruptcy lawyer who knows the ins-and-outs of declaring bankruptcy.
For more information on consolidation continue reading here: http://www.canadabanks.net/default.aspx?article=Consolidate+Your+Debt

Types of Collateral for a Business Loan

Whether you are a limited liability corporation, a sole proprietorship, or a start-up, expanding your company’s potential requires financing. Financial institutions that provide secured loans will look at your balance sheet, revenues, business credit, equity contributions, and company’s history. Even if you operate a healthy and profitable business and pass a credit check, many financial establishments will require guarantees that the business loan will be paid off in full. Different types of collateral can be used to assure the financial institution that there is an alternative source of repayment. In many cases, the collateral is an owner-occupied home (real estate), but you can use equipment, inventory, deposits, and cash savings.

Generally, there are two types of collateral you can offer – assets that the company has a loan against and its own assets. Cars and homes are commonly used as collateral, but you can use pieces of equipment, motorcycles, and watercraft. Asset-based lending is one way to get financing, especially if you have a big purchase order. Bringing on raw materials, equipment, and additional staff is sometimes necessary to meet the requirements of the client. The purchase order can be used as collateral in such cases.

When applying for a secured loan, you may use deposits or cash savings as collateral. Banks accept personal savings because they are a low risk for the financial institution. This applies to financial accounts such as certificates of deposit. The main advantage of using a financial account as collateral is that banks usually offer a low interest rate. The downside is that the financial institution will take possession of your cash savings in case of default.

Businesses that apply for a secured loan should know that financial institutions are conservative when it comes to valuing assets to be used as collateral. In case of default, the bank has to expend resources to seize the asset and try to sell it. Given that banks are conservative, it pays to ask for an appraisal revue that will assess the accuracy of the appraisal. Finally, it is also possible to obtain an unsecured loan, but banks often charge very high interest rates. For more information you can read this useful article.

Get the best home equity loan rates

The home equity loan represents a type of financial instrument that allows homeowners to make use of a loaned amount by providing their home as collateral. This type of loan is beneficial when it comes to funding major expenses such as medical bills, renovation of houses, or the payment of college tuition. The collateral is the property that you pledge as a guarantee that you will pay off your debt. If the borrower, for any reason, fails to pay off the outstanding balance, then the lender has the right to take possession of the property. The equity is basically the true value of ownership the homeowner has on the property. Then, the homeowner’s equity is whatever is left after the outstanding mortgage is deduced from the market value of the property.

Variable vs. Fixed Rates

Home equity loans are in the form of fixed rate or adjustable rate mortgages. With fixed home equity loan rates, the interest rate is set for the term of the loan. In simple words, the home equity loan rate will remain the same for the full term of the mortgage. Fixed rate mortgages are more popular and close to 75 percent of all mortgages will be fixed rate ones. With adjustable rate mortgages, also referred to as ARM, the interest rate is not set but varies depending on the indexes used. The various creditors will use different indexes to determine the adjustable rate. Some of these are the treasury bills and notes and the interest rate on jumbo certificates. You can make money in real estate using home equity loans, and this article will show you how.

Home equity loan rates are typically lower compared to various forms of consumer credit. Some creditors also offer hybrid loans which are much like home equity lines during the first couple of years and are then turned into home equity loans. If the creditor wants to convert a variable rate loan to a fixed rate one, that may be to the disadvantage of the borrower in case the variable rate is lower. The borrower will want to stay with the low rate rather than see it head higher. If that is not an option, but there is a period in which to convert, there are two options. One is to convert now and lock in a lower fixed rate. The other is to postpone that and keep the low variable rate as long as possible.  It is best to review the loan documents and see how the creditor determines the fixed home equity lone rate when converting from variable one.

It is better to opt for fixed home equity loan rates if you plan to consolidate loans, especially high interest rate debt such as credit card debt. Fixed rates are also a better option if one plans to use home equity loan as down payment, be it on an investment property or for a second home. Payments on the home equity loan, if the interest rate is fixed, may be tax deductible.

Finding the best home equity loans

Finding the best home equity loan can save you a lot of money, so it is wise to shop around. Check the Borrower’s Bill of Rights to avoid unethical creditors. Look for a range of sources such as banks, brokers or credit unions, making sure your credit score is accurate.

How to chose a credit card

The choice of a credit card depends on the borrower’s requirements, credit history, income level, and other factors. Credit card companies, banks, and other financial institutions offer different types of credit cards, including student credit cards, rewards credit cards, airmiles credit cards, cashback credit cards, and other types. The applicant’s credit score is an important factor which credit card companies take into account. Persons with a limited credit history or poor credit score may want to apply for a prepaid card or a secured credit card. Those with a high or very good credit score and high income may apply for rewards credit cards, cashback credit cards, and other specialty cards, offered with many beneficial features. Among these are hotel points for upgrades and complimentary nights, shopping discounts, concierge service, and many others. Cardholders enjoy other benefits as well, including emergency cash disbursement, stolen or lost card reporting, cardholder inquiry service, etc.

Students are offered student credit cards, and these are usually available to full-time students. Student credit cards go with lower interest rates than other cards. Persons who want to save on interest charges may want to look into low interest credit cards as well.

Obviously, credit cards are not the best solution in each case. For example, persons who plan to make big-ticket purchases may apply for a personal loan. Those who seek funds to purchase a vehicle usually apply for auto loans. Persons with excessive debt, on the other hand, may have limited access to standard loans, and they resort to bad credit loans and payday loans. Those who have multiple, high-interest debts and find it difficult to keep up with repayments often apply for consolidation loans. Generally, credit cards are a good choice for borrowers who charge everyday purchases, seek to meet their short-term cash needs, and pay the balance on time. Credit cards are not intended to be used as a long-term borrowing solution.

What Is The Best Bank For Individual And Business Clients

The Canadian retail banking system is among the safest ones worldwide. Over the last three years, it has taken a top position in view of safety. Two of the largest and best-known banks in Canada are in top 15. Some 8,000 branches operate in Canada, and there is a dense network of ATMs.

Since the Canadian government banned large bank mergers, these institutions started to expand and operate on an international level

The five biggest banks in Canada are RBC, TD Bank, Bank of Montreal, Scotiabank, and CIBC. RBC has around 17 million clients and almost 100,000 staff throughout the world. Headquartered in Toronto, the bank has 1,209 branches in Canada alone. It has two subsidiaries as well. The Dominion Securities is an investment brokerage company, while the RBC Capital Markets deals with corporate clients worldwide. The retail banking segment of the RBC, however, comprises just 22.6 percent of its total revenue. Bank of Nova Scotia is another big bank, offering the full range of investment, corporate, commercial, and retail services. Bank of Nova Scotia features a variety of services and products, including electronic banking, mortgages, credit cards, and much more. With a large variety of services offered, the Bank of Nova Scotia takes pride in being one of the biggest banks on the North American continent.

Savings and checking accounts are among the most popular products when it comes to retail banking. A lot of customers also use banks and other financial institutions for services like insurance, investment products, credit cards, and more. According to a new study, many Canadians use financial institutors for insurance, investment, and banking via an affiliated entity. Some 76 percent of Top 5 bank clients have a loan at the bank where they also have a checking or savings account, 20 percent have some sort of an insurance product, and another 40 percent dispose of investment products. In terms of the middle market, around 70 percent of clients have a loan as well as a deposit. Another 27 percent of bank clients have investment products and 16 percent have insurance products. Most banks aim to develop their relationships with customers through retail banking and eventually enhance them to include further bank services, thus giving clients an incentive to move all their financial assets and holdings to the bank in question. This is a perfectly achievable goal, especially considering the level of safety the Canadian bank sector provides. Banks provide innovative services and reliable products, such as no-fee banking and electronic statements, and thus help expand client relationships with the establishment.

According to the abovementioned study, Toronto Dominion has received the highest marks when it comes to satisfaction. Several factors have been used to measure client satisfaction, including fees, products, transactions, account setup, and problem resolution. In terms of middle-size retail banks, the highest marks go to President's Choice Financial.

What does deposit insurance in Canada mean and what is a bank run? Find the answers to all these questions here.