Home Loan

Tips for those who want to pay off Personal Loans early

Financial products are the most heavily marketed products on the planet because they have such a high profit margin. Banks borrow money at 1 to 3 percent and loan it out at anywhere from 4 to 40 percent. The interest rate includes the loan administration costs and the losses from those that default on the loan, but a large percentage of it is profit. And you’d do better in life if you paid off your loans early and started saving up for what you need instead of borrowing money for your next purchase. Here are a few tips for those who want to pay off personal loans early.

Know the Rules Before You Apply for the Loan


Can you pay off personal loans early? Most loans can be paid off early, though there may be a prepayment penalty, as stated by matchfinancial.com. For example, some mortgages are closed. They may prohibit you from paying down the principal, though most will simply limit how much you can pay against the principal and when you can do so. Others charge you a fee to offset the interest they lose if you pay extra toward the home loan. Credit cards don’t have that type of limit, though they may push you to use it by charging an annual fee if you don’t charge more than a given amount each month.

What about unsecured loans? Lenders may charge you a lower interest rate if you sign up for a loan that charges a penalty if you pay it off early. They do this for the same reason mortgages may charge a penalty proportional to the interest payments they’re losing – to guarantee their profit margin. How do you avoid these prepayment penalties on an unsecured personal loan? Research the terms and conditions of the loan before you sign up for it. If they charge you a penalty for prepaying the loan, you can choose another financial product.


Run the Numbers

What should you do if you’ve already taken out a loan that charges a prepayment penalty if you pay it off early? Run the numbers. Would you actually save money if you paid off the loan early? The answer is yes if the prepayment penalty is less than the interest you’d pay over the remainder of the loan. However, that may not mean that paying down that particular loan is the best use of your money.

For example, would you save more money over the long term if you used that money to pay down credit card debt? You might want to save the money in an emergency fund instead, too. While that account doesn’t generate anything in terms of interest, it could be worth it if the savings allow you to pay for future expenses with cash instead of borrowing money at 10 to 20 percent for the next major expenditure.

Get on a Budget

Personal finance is ninety percent personal, ten percent finance. You can’t get out of debt unless you get control of your money. And the best way to do that is to make a budget. How much money do you have coming in every month? How much money is going out every month in regular bills? This category includes rent, utilities, phone bills, car payments, childcare, and taxes. How much do you have left over after the essentials? If the answer is zero or negative, you can’t get out of debt until you make dramatic lifestyle changes. This could include anything from moving to a smaller apartment to requesting additional child support to changing childcare providers. Or you may have to stop shopping at the expensive organic grocery store and buy generic brands at the grocery store. For some, the solution is canceling the unnecessary line items coming out of the paycheck at work. Stop contributing to the retirement plan when you’re paying 30 percent interest on debt. Don’t pay for unnecessary cancer insurance through work. Don’t assume that the life insurance and auto insurance your employer offers are the best deal. And you may be better off reducing the amount of coverage you have or increasing your deductible, so you have more money to pay your bills.

Suppose you have some discretionary income. Compare all of the optional and ongoing bills you have that fall into this category. How much are you spending on eating out and evenings out? How much are you spending on apps, games, and streaming media? If these expenses exceed what you have available in discretionary income, start canceling subscriptions and finding cheaper ways to have fun. Cancel the gym membership and start running in the park.

The goal is to have at least ten percent less going out than coming in. This gives you margin to pay for a higher than average electric bill or grocery bill. The first month you have this extra money, save it, so that you can use it to pay unplanned expenses.

Use Your Extra Cash to Pay Off Debt


We’ve already addressed the need to get on a budget and use the first month’s savings to create a starter emergency fund. The next month, you should use this additional money to pay down your highest-interest debt. If the debt is too large to feel like you’re making progress, then use that money to pay off a little debt. When you wipe it off the books, it feels like an accomplishment, even if it is a little medical bill or ex-partner’s phone bill you were reluctant to pay.

Use any and all additional cash to pay off debt. This could be rebates from electronics purchases, financial gifts from relatives, a tax rebate check, or a deadbeat friend finally paying you back. Use this money to either pay off your debt early or add to your emergency fund. Only reward yourself after you’ve eliminated a debt. Then you won’t reward yourself by spending windfalls of cash as if you deserve something for receiving it.

One way to maintain momentum is to create a list of debts that you post on your refrigerator and/or track on your phone. Check it regularly and make a big deal out of striking something off your list. This may help you avoid splurges and extras when the goal is to pay off your debt early.

Top 5 Things to Consider when Choosing a Home Loan

Buying a home is a huge decision. Anyone who has been through it can tell you that. You need to assess your budget, find the home, organize everything, and start a new chapter in your life. As you can imagine, all of this is stressful and it should be done very carefully, especially if you need to take a loan to buy your dream home. You must get familiar with all the conditions for taking the loan, as well as the payment period. Every bank has different conditions for giving loans, so it is important to find the one that has the best conditions to offer. Let’s take a look at the factors that you should take into consideration! Keep reading to find out more.

1. Check the interest rate


This is usually the first thing that people will ask about and that is pretty understandable considering that the loans are taken for a period of 20 or 30 years. Even half a percent lower interest can mean thousands of dollars after you are done paying it. This is why it is necessary to find the best interest rate that will enable you to save some money along the way and still achieve your goal.

2. Find out more about the fees

Make sure you find out everything you can about the additional costs that you may encounter after you take a loan. Those may be redraw fees, valuation fees, establishment fees, annual fees, and many others. This may significantly add up to the end rate that you will need to pay, so it is truly important to have in-depth knowledge about all the expenses that you may encounter. This will help you have a piece of mind and don’t be stressed out about the possible unpredicted expenses.

According to Absolute Tiny Houses, fees are smaller when you are buying a smaller home. Not only will the total price be reduced drastically but you will also have a smaller interest rate as well. Small homes allow people to become homeowners and get out of rent and it is becoming a more popular trend.

3. Choose between a variable and fixed rate


First of all, let’s explain what both types of rates are. In case you choose a variable rate, you can expect that the interest rate may change at any point when the market changes. However, even though this is not the most stable option, the reason why people choose it is because there is a certain flexibility that comes with this type concerning switching loans or making additional repayments, which can be pretty convenient. It is important to remember that the repayments will also increase if the interest rate increases.

On the other hand, if you choose to have a fixed rate, the rate will stay the same over the set period which usually refers to the period up to five years. There are many pros and cons for taking this type of loan and we will only mention the most important ones. The repayments remain the same and the banks usually offer low interest rates, but you should be aware of the restrictions if you suddenly have the need to switch the loan while the fixed-rate period is ongoing. This is why it is necessary to talk to professionals about the right option and get informed about everything in advance. If you wish to find out more, check out kbbcredit.sg

4. Get familiar with the extra repayments


Having a family comes with numerous expenses, celebrations, and unexpected repairs. At some point, your friends may invite you to come to their wedding or any other celebration which requires paying for the wardrobe, the gift, the transportation, and numerous other things. If you take a home loan that cannot be changed, you may be in trouble. This is why it is necessary to have the option to redraw your funds and simply cover the expenses easily. Sometimes you may end up with a car issue or your pipes may break, life can be unpredictable sometimes. This is why it is necessary to always have a plan B. This is the only way you can relax and enjoy life.

Some banks allow the users to take a loan top up, which means that you will be able to take more money than it was initially planned. In addition, ask if your bank allows the clients to take a break from paying loans. Having a huge loan that has to be paid for two or three decades can be quite a big burden. This is why sometimes clients wish to have some time to take a break. This may prolong your payment period, but sometimes just stopping to relax for a bit can be a huge relief especially in the moments when life becomes hectic. Make sure you ask about everything that could make your life easier.

5. Find the right bank


As previously mentioned, every bank has a different set of rules concerning the loans. This is why it is advisable to visit at least five banks and check out their terms and conditions that you may be interested in. Ask everything you want to know because you will be bound by contract for many years when you sign it. Read the fine print, ask for help from the attorney if you are not sure what something means, seek advice and make sure you are fully aware of all the details that are written in the contract and double-check everything. Once you are fully aware of everything and you make a decision, the rest will be much easier.

These were the most important things you must pay attention too if you want to make a good and informed decision. You must also pay attention to the amount of the loan you will need. Assess the needs of your family for space. Don’t go overboard and find a villa with numerous rooms. That is significantly more expensive than having a modest home that will have just the space you and your family need. Be realistic about your needs and preferences, talk to your family about it, and discuss all the details in a timely manner. In the end, the only thing left for you to do is to buy your dream home and enjoy it with your family!

Tips for Getting a Home Loan in 2020

Getting a home loan in 2020 might be a challenge given the many mortgage options and the low affordability of homes. While finding the right home can be exciting; getting the loan to finance your dream home is equally important. If you’re considering taking the plunge and finally buying a home, make sure you’re doing it smartly and not getting yourself into a loan you’ll regret. Here are ten tips to help you acquire a home loan amid the 2020 real estate trends.

1. Save Early for Your Down Payment

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If you want to buy a home, you need to start saving for the down payment as early as possible. Down payment can be as low as 2.25% or as high as 20% of your home’s buying price, depending on the financing option you choose. With this information, you can decide how much you can comfortably save and work on a plan that allows you to put away the amount every month.

The earlier you start saving, the more money you’ll have for the down payment and other home-buying costs such as moving expenses, closing costs, and home appraisal and inspection costs. If you are on a tight budget, consider financing options with low down payments like FHA.

2. Check Your Credit Score

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Lenders use your credit score to determine your suitability for a loan. A lower credit score means you are a high-risk investment. Before you set out to buy a home, check your credit report to see what your credit profile looks like to lenders. You can then put up measures to ensure that your credit score is high enough for you to acquire the best home loan deals.

The good thing is that you can get your annual credit report from credit reporting agencies like TransUnion and Equifax. You can also get your credit score at a small fee. If your credit report has errors, you should have them corrected immediately.

When it comes to credit scoring systems that use a range of 300-850, a credit score of 700 or above is usually considered good. In the same range, a score of 800 and above is considered to be excellent. Most commonly, a credit score falls somewhere between 600 and 750. If you have a higher credit score, it means that you’re seen as more responsible to lenders. As such, they will have more confidence in you to lend you more money.

A variety of organizations use credit scores. Lenders can include banks providing mortgage loans, car dealerships, and credit card companies. All of these organizations use your score to make a choice about whether or not to offer your credit like a card or a loan, as well as what your down payment and interest should be. You may have heard of the FICO® Score, but this isn’t the only type of score there is. There are many types of credit scores, including scores by VantageScore and industry-specific scores.

3. Have All Your Financial Documents in Order

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When applying for a mortgage, you will need to provide financial documents to convince your lender that you can pay back the loan. With this in mind, ensure that all the necessary financial documents are in order. These include tax return for the last two years or your recent W-2s, your previous two paycheck stubs as well as bank and brokerage statements. With your documents in order and readily available, your home loan processing will be much easier and faster.

4. Make Use of Mortgage Calculators

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A mortgage calculator helps you establish what you can afford when buying a home. Use a mortgage calculator to figure out your mortgage installments, given different prices and interest rates. This way, you can plan your finances better and avoid going outside your financial comfort zone.

5. Compare Different Offers

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It would help if you didn’t settle for the first quote or lender you find. Have a look at various financing options and compare them before choosing a suitable alternative. Look at factors such as the interest rates, flexibility of payment, fees involved, and even mortgage premiums when comparing different financing options. A better way is to look at the Annual Percentage Rate (APR) of different lenders as it represents the overall cost of your mortgage and gives a more accurate comparison figure. There are several different types of mortgages. You can learn more about them here.

6. Track Interest Rates

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Since the cost of your mortgage will be highly dependent on the interest rate, you need to know whether they are rising, falling, or stagnating. This helps you predict what you’re likely to pay for your home loan once you secure it.

7. Get Mortgage Pre-Approval

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A mortgage pre-approval not only shows you how much you can borrow but the price range of the homes you should consider, too. It also improves your chances of homeownership as most real estate agents and sellers prefer working with pre-qualified buyers. What’s more, pre-approval shows your seriousness when placing offers on homes. To be pre-approved, you only need details of your income, savings, and investments.

8. Research Your Mortgage Options

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Mortgage options differ from one lender to another. Some offer fixed-rate payment schedules while others are adjustable. By understanding the nature of your available loan options, you will be in a better position to choose a home loan that suits your financial situation.

9. Always Communicate Promptly with Your Lender

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After applying for a loan, be sure to respond to any requests by your lender promptly. Whether your financier is looking for clarification or asking for more information to process your loan, ensure that you provide immediate feedback. Delayed responses may lengthen your loan approval process, which results in problems that may cost you your dream home.

10. Don’t Ruin Your Credit

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Lenders usually take one last look at your credit status before closing to make sure your credit score hasn’t dropped, and your debt-to-income ratio is not higher than it was. To avoid ruining your credit, pay your bills on time and avoid taking new credit or applying for new loans before your home loan is closed.

Fix Your Bad Credit Score Now: Here’s How

You might have tried applying for a new loan or credit card account, but the lender or banker will not approve it. Chances are, you have a bad credit score. Your loan history and repayment history might have affected your loan application.

You need the money, and you’re frustrated with how to get approved for that loan application. Do not lose hope. There are still ways to fix your bad solvency rate. This article will tackle how you can fix it.

Understanding Your Credit Report


Your financial report contains your financial history and your past and present payment of debts. Bureaus use your financial history to know your borrowing risk, which is your credit score.

A few late payments or a payment default might have affected your score. Debt agreements and your bankruptcy will also be listed in your file, which can then result in a low or bad solvency rate.

Scores that are between 0 and 459 are generally below average and weak solvency rates. Having a low or bad solvency rate will then send a red flag to the lender or bank if you apply for a loan. Having a bad solvency rate means that there is a high chance that your loan application will be rejected. You will also run the risk of getting a loan from loan sharks with high-interest rates.

The listings that leave you in bad financial report are the following:

  • Bankruptcy – listed in your report for two years
  • Debt agreements – listed for five years
  • Defaults – listed for five to seven years
  • Writs, court judgments, and summons – listed for five years
  • Missed and late payments – listed for two years
  • Multiple loan inquiries in a short period – listed for five years

Can you still get a loan with a bad score?


Yes, you can! Although a bad solvency rate will lessen the chances of your loan application being accepted, this does not mean that you will have no other options. You can still take out a personal loan and home loans.

It is still possible for you to take out a personal loan even if you have a bad lending capacity. Some lenders in Australia will let you borrow up to $10,000. You can also consider getting a short-term loan if you need instant cash with fast approval. However, since you have a bad lending capacity, the lender might charge you with a high-interest rate.

As for home loans, there are still lenders who will approve your home loan application even if you have a bad lending capacity. Ask help from a mortgage broker to look for lenders that suit your financial status.

How to fix your bad score?

Fixing your borrowing capacity is not easy and may take up a significant amount of your time, and require a long period of financial responsibility on your part. With that mentioned, here are ways to fix your bad lending capacity.

1. Change errors in your credit report


Get a copy of your report and check the information and financial history stipulated therein. See if there are errors in the entries in your report because some reporting agencies might have made errors in your report.

The most common mistake is that your family member’s loan or stranger’s loan might have been listed to your report because of very similar names. Your income might have typographical errors, or debt may have been entered twice.

To have this error fixed, contact your reporting agency and ask them to fix the mistakes right away. Your lending capacity will probably improve if you have these errors changed.

2. Pay bills on time

This strategy is the most obvious answer when people ask how to improve their solvency rate. Your borrowing capacity will improve if you have consistent and on-time payments on record. Staying on top of your loan repayments will surely help improve your borrowing capacity and will show that your financial discipline has grown.

Paying bills on time is also essential, especially if one of your debts is more than $150 since nonpayment or late payment in paying such debt can result in default in your financial report for 60 days.

A strategy in paying bills on time is consolidating all your loan bills so that they will be paid only on one day, and you will be sure that you will not miss a paying day. Another strategy is to set up an automatic paying system with your employer or bank account.

If you do not like the two strategies mentioned above, then if you have multiple loans, budget your income and pay these loans one by one. The best technique is to pay off the loan that has the highest interest rate. If you have leftover money, then work on paying off your other debts to lessen them.


3.  Avoid making multiple loan application

Having multiple charge card applications will indicate that you are under a financial blunder and that you might not be able to pay off one of your affinity card loans because of your financial status. But if you want to have a charge card, then do not make applications too often in a short period.

4. Completely cancel your credit card

Having a charge card might be one of the reasons why you are drowning in too much debt since you will be tempted to swipe the card whenever you make a big-ticket purchase.

Make sure to completely close down your account so that your borrowing capacity will not be affected by the account anymore.

5. Get help

Doing all these things by yourself can be torturing and exhausting. It is good to ask for help from a financial counselor. These people will also help you repair your solvency rate and keep your financial stability back on track.


Discipline yourself to fix your bad lending score. Resolve any financial problems you might have using the tips mentioned above. Look for a solver or financial counselor in your area at creditsolvers.com.au to help you in fixing your score. Maintain proper financial habits, and you will be sure that your rating will be better than what it was before.

Ready for a Home Loan? Make Sure You Understand These Fundamentals

Buying a home is often advantageous financial move, compared to renting. You’ll have more flexibility to maintain your own dwelling, and as you make payments on your mortgage, you’ll gradually establish equity—meaning a portion of your money will be contributed to your financial stake in the home. However, too many new homeowners get a loan and purchase a house before they’re fully familiar with the homebuying process. Home loans are straightforward on the surface, but there are many variables and components you need to consider if you’re going to manage your loan successfully. 


What Is a Mortgage?

Let’s start with a high-level overview of what a mortgage is. A mortgage is a specific type of loan offered by a bank or lending institution to help you purchase a house. You’ll generally offer a “down payment” on your home, a percentage of the total sale price, as a way to limit the financial risk taken by the bank and as a way to establish equity in your home. This is variable, but the minimum in many areas is 5 percent, with many experts recommending as much as 20 percent. 

You’ll borrow the rest of the money to finance the home purchase, with your home serving as collateral. You’ll be required to pay this loan back in installments meant to pay down your principal (the amount you borrowed) and your accumulating interest payments. If you ever fail to make these payments, the bank may foreclose on your home, selling it to repay what you owe. If you decide to sell your house, you’ll use the proceeds to pay off the remaining principal; you’ll be able to keep whatever remains from the transaction. 

In many cases, your mortgage will also include an escrow account, meant to cover home-related expenses like your property taxes and home insurance. You’ll pay a small amount of these annual and semiannual expenses each month, along with your principal and interest payments, to make things simpler for both you and your bank. 


Types of Home Loan Rates

One of the most important elements of your mortgage is the interest rate. The interest rate is the percentage of the principal you’ll owe as interest each year, and will vary depending on market conditions and your credit score. For example, if you borrow $100,000 to buy your home and you have a 4 percent interest rate, you’ll pay $4,000 in interest each year as you pay back the loan. 

However, according to Loans.com.au, there are different types of interest rates available to homebuyers. A fixed rate is an interest rate that’s guaranteed to remain the same for the duration of your loan; if it starts as 5 percent, it will remain 5 percent indefinitely. A variable interest rate is subject to changes; it may start at 5 percent and drop to 4 percent, or rise to 6 percent, depending on market conditions. It’s also possible to have a loan with a split interest rate, which will be fixed for a set period and variable for another set period. 

Generally, homebuyers are recommended to take the fixed rate when possible. A variable rate may be lower to start, but could increase over time. More importantly, it’s reliably consistent, so your payments won’t change much over time. 


The Role of Credit

You also need to fully understand the role of credit as it pertains to your home loan availability. Your credit score is a number that reflects your financial reliability. The higher it is, the better your chances of securing a mortgage, and the more favorable that mortgage will be. If your credit score is “good” or “excellent,” you shouldn’t have an issue getting a mortgage, assuming you can afford it. If your credit score is “fair” or “poor,” you may have a more difficult time finding a lender. You may also be forced to take a higher interest rate, or pay for private mortgage insurance (PMI). 

Lenders will also look at factors like other assets you have; if you have a robust investment account, for example, it can make you look more reliable as a lender. They will also check your income and job history to make sure you have a reliable performance as an employee, and enough money to cover the cost of the mortgage. 

Other Factors

This guide covers the basics of how home mortgages work, and the most important elements to understand. However, mortgages are complex financial instruments, and you should do more research before moving forward with a home purchase. Your loan originator, the person responsible for helping you find and set up a loan with a bank, can help you with further questions.