3 September 2008

Avoid Insurance Scams

There are many so-called insurance companies out there who are just waiting to get someone like you into their hands. That’s why you must be prepared for fraudulent companies and the scams they will use to get your money.Part of maintaining your budget and managing your money is to protect it from financial predators, so here's how you can be prepared before they ever get to you.

Here the steps to avoid insurance scams :
  1. Recognize the name of the company. Always read their pamphlets and research their web site in entirety to check for anything strange.
  2. Check to see if the company has detailed explanations on their insurance claims forms. Never sign blank insurance claims forms.
  3. Find out if the company is licensed. If it does not say anywhere on their documents if they are, then call the Insurance Commissioner's toll-free Consumer Hot line at 1(800) 562-6900 to find out.
  4. Meet the salespeople in person and know that they are for real. Never do business with telephone salespeople.
  5. Keep your personal information confidential. This mainly concerns your social security number. Give it out only when you are ready to make a purchase.
  6. Be alert for bogus plans. This refers to information posted on fliers and ads you may receive in your email account.
  7. Be suspicious if the insurance is too cheap. This could be a way to get you to enroll, and then they might charge you expensive fees later.
  8. Find out what the company will charge you up front and how much you will have to pay out-of-pocket. You should never be charged unless you change your plan. Contact them directly if it is inconsistent.
  9. Wait for the company to send you appropriate paperwork in the mail. Never give your credit card number to a representative over the phone.
  10. Read everything. Never sign anything with unreadable or too small print. If you can’t read it, don’t sign it.
  11. Review carefully their explanation of benefits statement. If it does not provide you with enough information, contact them.
  12. Sign up for a plan that you'll actually use. Don’t sign up for ‘extras’ to your insurance policy that you know you’ll never use. It could be the difference between a high and low cost.

1 September 2008

Refinance Your Mortgage

The benefits of mortgage refinancing for several borrowers is that it lowers payments on a monthly basis and makes cash available for spending or investment. However, it is not advisable to jump on the refinancing bandwagon.
  1. Know what will influence the rate that you will receive. Here are the elements that will determine the rate you will receive:
    • Loan size
    • Your credit score
    • Paid points
    • When is the closure of the loan?
    • Locked or floating rate
    • Debt to Income Ratio
  2. Understand that advertised rates are not reliable. Experts say that when mortgage refinancing companies publish their rates, it is most likely that only about 10% of applicants get to avail them. The displayed low rates are used to lure people. It's not wise to fall for them.
  3. Know what type of loan you want. Disclosing details to the loan officer will facilitate the process towards being given the best possible rate. State how long you would be able to pay off your loan and how much you would really need. Are you into paying points to lower the interest rate? Contemplate well before deciding to nod on any offer. If you inform your loan officer immediately regarding information that will reveal whether you meet all the requirements or not, the sooner you will know if you will be exempted from paying the other additional fees.
  4. Shop around. This is one of the best ways to go with any kind of transaction. Know the credibility of your choice lenders.
  5. Allow ample time for you to get the hang of all the mortgage terms if you're a newbie on this industry. Doing your homework will save you not just some money but also from future headaches.
  • Dropping of rates - Usually, when rates drop by 1% to 2% mortgage refinancing can be one good option.
  • The need for extra money - One choice is to resort to home equity line of credit when you are faced with the need for additional cash. With a checking account, credit account, or direct payment, this allows you to borrow against your home's equity.
  • Consolidation of debts - Through mortgage refinancing, consolidating your debts into one payment is viable if you have equity in your home. But you must still consider the rates' dropping before using refinancing in consolidating your debts.
  • Staying in your home for an extended period of time - The lower interest rate for refinancing can be best enjoyed if you are to stay in your home at least 5 years.
  • Reducing the mortgage term - Larger monthly payments will enable you to pay your loan quicker. Since shorter term programs have lower interest rates, surely, you'll be able to save more with this kind of refinancing.
  • You may want to avoid "no cost" refinancing. This is because when one says no cost, it does not translate to free. What happens is you are charged a higher interest rate for the life of the loan. In essence, the lender is paying you points which offset the closing costs. If you only plan to keep the loan a short while, this could work to your advantage since the increased amount of interest you pay during the time you keep the loan may be lower than the closing costs you would have otherwise paid. Typically, the no closing cost option is advantageous up until about the third year, however, this can vary by state and your specific situation.
  • Consider using a Mortgage Broker, they usually have hundreds of lenders to shop from so they can get you better rates than you can get on your own. You'll pay a brokerage fee (usually a percent of the loan) but they do the work for you.


Refinancing refers to the replacement of an existing debt obligation with a debt obligation bearing different terms. The most common consumer refinancing is for a home mortgage.


Refinancing may be undertaken to reduce interest rate/interest costs (by refinancing at a lower rate), to extend the repayment time, to pay off other debt(s), to reduce one's periodic payment obligations (sometimes by taking a longer-term loan), to reduce or alter risk (such as by refinancing from a variable-rate to a fixed-rate loan), and/or to raise cash for investment, consumption, or the payment of a dividend.

In essence, refinancing can alter the monthly payments owed on the loan either by changing the loan's interest rate, or by altering the term to maturity of the loan. More favourable lending conditions may reduce overall borrowing costs. Refinancing is used in most cases to improve overall cash flow.

Another use of refinancing is to reduce the risk associated with an existing loan. Interest rates on adjustable-rate loans and mortgages shift up and down based on the movements of the various indices used to calculate them. By refinancing an adjustable-rate mortgage into a fixed-rate one, the risk of interest rates increasing dramatically is removed, thus ensuring a steady interest rate over time. This flexibility comes at a price as lenders typically charge a risk premium for fixed rate loans.

In the context of personal (as opposed to corporate) finance, refinancing a loan or a series of debts can assist in paying off high-interest debt such as credit card debt, with lower-interest debt such as that of a fixed-rate home mortgage. This can allow a lender to reduce borrowing costs by more closely aligning the cost of borrowing with the general creditworthiness and collateral security available from the borrower. For home mortgages, in the United States, there may be certain tax advantages available with refinancing, particularly if one does not pay Alternative Minimum Tax.


Refinancing lenders often require an upfront payment of a certain percentage of the total loan amount as part of the process of refinancing debt. Typically, this amount is expressed in "points" (also sometimes called "premiums"), with each "point" being equivalent to 1% of the total loan amount. Therefore, if the refinance option selected involves paying three points, then the borrower will need to pay 3% of the total loan amount upfront. Most refinancing lenders offer a variety of combinations of points and interest rates. Paying more points typically allows one to get a lower interest rate than one would be capable of getting if one paid fewer or no points. Alternately, some lenders will offer to finance parts of the loan themselves, thus generating so-called "negative points" (also called discounts).

The decision of whether or not to pay points, and how many points to pay, should be taken in consideration of the fact that with points, one tends to trade a higher upfront cost in exchange for a lower monthly premium later on. Points can be paid out of the cash saved by refinancing the loan in the first place.