A cashier's check (also known as a cashier's cheque, bank check, official check, teller's check, bank draft or treasurer's check) is a check guaranteed by a bank. They are usually treated as cash since most banks clear them instantly.
Cashier's checks feature the name of the issuing bank in a prominent location, usually the upper left-hand corner or upper center of the check. In addition, they are generally produced with enhanced security features, including watermarks, security thread, color-shifting ink, and special bond paper. These are designed to decrease the vulnerability to counterfeit items. In order to be recognized as a cashier's check, words to that effect must be included in a prominent place on the front of the item.
The payee's name, the written and numeric dollar amounts, the remitter's information, and other tracking information (such as the branch of issue), are printed on the front of the check. The check is generally signed by one or two bank employees or officers; however, some banks issue cashier's checks featuring a facsimile signature of the bank's chief executive officer or other senior official.
Some banks contract out the maintenance of their cashier's check accounts and check issuing. One leading contractor is Integrated Payment Systems, which issues cashier's checks and coordinates redemption of the items for many banks, in addition to issuing money orders and other payment instruments. In theory, teller's checks are checks issued by a financial institution but drawn on another institution, as is often the case with credit unions.
Due to an increase in fraudulent activities in 2006 many banks insist upon waiting for a cashier's check to clear the originating institution. Personal checks will thus have the same utility in such transactions.
Money orders are a popular alternative to cashier's checks and are considered safer than personal bank checks. However, they are generally not recognized as "guaranteed funds" under Reg CC, and are limited to a specified maximum amount ($1,000 under U.S. law).
Because of regulatory requirements associated with the Patriot Act and the Bank Secrecy Act (concerns over Money Laundering), most insurance and brokerage firms will no longer accept Money Orders as payment for insurance premiums or as deposits into brokerage accounts.
Counterfeit Money Orders and Cashier's checks have been used in certain scams to steal from those who sell their goods online.
2007/07/10
2007/06/20
Money supply
In macroeconomics, money supply ("monetary aggregates", "money stock") is the quantity of currency and checkable deposits in the hands of the non-bank public available within the economy to purchase goods, services, and securities. The money supply affects the interest rates. The two are related inversely, such that, as money supply increases interest rates will fall. When the interest rate equates the quantity of money demanded with the quantity of money supply, the economy is working at the money market equilibrium.
The money demand market uses the same tools of analysis as to other markets: supply and demand result in an equilibrium price, where the free market (or long term) interest rate plus the quantity of real money available balances the demand for money. Short term rates are artificially manipulated by the Federal Reserve in the open market.
When thinking about the "supply" of money, it is natural to think of the total of banknotes and coins in an economy. That, however, is vastly incomplete. In the United States, coins are minted by the United States Mint, part of the Department of the Treasury, outside of the Federal Reserve. Banknotes are printed by the Bureau of Engraving & Printing on behalf of the Federal Reserve System. The Federal Reserve can also create book-keeping credits in the reserve accounts of its member banks, on the same terms as it can issue paper banknotes (by pledging collateral, usually in the form of US Treasury securities). As it always stands ready to exchange these book-keeping credits for paper banknotes, they are functionally equivalent.
In this respect, all paper banknotes in existence are systematically linked to the expansion of the electronic, credit-based money supply. Coinage can be increased or decreased outside this system by Legal Mandate or Legislative Acts. However, at present the coin base is held in check and used as a complementary system rather than a competitive system with private bank issue of electronic, credit-based money. The common practice is to include printed and minted money supply in the same metric M0.
The more accurate starting point for the concept of money supply is the total of all electronic, credit-based deposit balances in bank (and other financial) accounts (for more precise definitions, see below) plus all the minted coins and printed paper. The M1 money supply is M0, plus the total of (non-paper or coin) deposit balances without any withdrawal restrictions (restricted accounts that you can't write checks on are put in the next level of liquidity, M2).
The relationship between the M0 and M1 money supplies is the money multiplier — basically, the ratio of cash and coin in people's wallets and bank vaults and ATMs to Total balances in their financial accounts. The gap and lag between the two (M0 and M1 - M0) occurs because of the system of fractional reserve banking.
The money demand market uses the same tools of analysis as to other markets: supply and demand result in an equilibrium price, where the free market (or long term) interest rate plus the quantity of real money available balances the demand for money. Short term rates are artificially manipulated by the Federal Reserve in the open market.
When thinking about the "supply" of money, it is natural to think of the total of banknotes and coins in an economy. That, however, is vastly incomplete. In the United States, coins are minted by the United States Mint, part of the Department of the Treasury, outside of the Federal Reserve. Banknotes are printed by the Bureau of Engraving & Printing on behalf of the Federal Reserve System. The Federal Reserve can also create book-keeping credits in the reserve accounts of its member banks, on the same terms as it can issue paper banknotes (by pledging collateral, usually in the form of US Treasury securities). As it always stands ready to exchange these book-keeping credits for paper banknotes, they are functionally equivalent.
In this respect, all paper banknotes in existence are systematically linked to the expansion of the electronic, credit-based money supply. Coinage can be increased or decreased outside this system by Legal Mandate or Legislative Acts. However, at present the coin base is held in check and used as a complementary system rather than a competitive system with private bank issue of electronic, credit-based money. The common practice is to include printed and minted money supply in the same metric M0.
The more accurate starting point for the concept of money supply is the total of all electronic, credit-based deposit balances in bank (and other financial) accounts (for more precise definitions, see below) plus all the minted coins and printed paper. The M1 money supply is M0, plus the total of (non-paper or coin) deposit balances without any withdrawal restrictions (restricted accounts that you can't write checks on are put in the next level of liquidity, M2).
The relationship between the M0 and M1 money supplies is the money multiplier — basically, the ratio of cash and coin in people's wallets and bank vaults and ATMs to Total balances in their financial accounts. The gap and lag between the two (M0 and M1 - M0) occurs because of the system of fractional reserve banking.
2007/06/11
Mortgage loan
Mortgage loan is the generic term for a loan secured by a mortgage on real property; the "mortgage" refers to the legal security, but the terms are often used interchangeably to refer to the mortgage loan. Mortgage loans generally refer to a loan secured by residential property, often for the purpose of acquiring the residence. Mortgage loans may be lower priced than other forms of borrowing because the value of the property reduces risk for the lender.
Mortgage lending is the primary mechanism used in many countries to finance private ownership of residential property. For commercial mortgages see the separate article. Although the terminology and precise forms will differ from country to country, the basic components tend to be similar:
Property: the physical residence being financed. The exact form of ownership will vary from country to country, and may restrict the types of lending that are possible.
Mortgage: the security created on the property by the lender, which will usually include certain restrictions on the use or disposal of the property (such as paying any outstanding debt before selling the property).
Borrower: the person borrowing who either has or is creating an ownership interest in the property.
Lender: any lender, but usually a bank or other financial institution.
Principal: the original size of the loan, which may or may not include certain other costs; as any principal is repaid, the principal will go down in size.
Interest: a financial charge for use of the lender's money.
Foreclosure or repossession: the possibility that the lender has to foreclose, repossess or seize the property under certain circumstances is essential to a mortgage loan; without this aspect, the loan is arguably no different from any other type of loan.
Many other specific characteristics are common to many markets, but the above are the essential features. Governments usually regulate many aspects of mortgage lending, either directly (through legal requirements, for example) or indirectly (through regulation of the participants or the financial markets, such as the banking industry), and often through state intervention (direct lending by the government, by state-owned banks, or sponsorship of various entities). Other aspects that define a specific mortgage market may be regional, historical, or driven by specific characteristics of the legal or financial system.
Mortgage lending is the primary mechanism used in many countries to finance private ownership of residential property. For commercial mortgages see the separate article. Although the terminology and precise forms will differ from country to country, the basic components tend to be similar:
Property: the physical residence being financed. The exact form of ownership will vary from country to country, and may restrict the types of lending that are possible.
Mortgage: the security created on the property by the lender, which will usually include certain restrictions on the use or disposal of the property (such as paying any outstanding debt before selling the property).
Borrower: the person borrowing who either has or is creating an ownership interest in the property.
Lender: any lender, but usually a bank or other financial institution.
Principal: the original size of the loan, which may or may not include certain other costs; as any principal is repaid, the principal will go down in size.
Interest: a financial charge for use of the lender's money.
Foreclosure or repossession: the possibility that the lender has to foreclose, repossess or seize the property under certain circumstances is essential to a mortgage loan; without this aspect, the loan is arguably no different from any other type of loan.
Many other specific characteristics are common to many markets, but the above are the essential features. Governments usually regulate many aspects of mortgage lending, either directly (through legal requirements, for example) or indirectly (through regulation of the participants or the financial markets, such as the banking industry), and often through state intervention (direct lending by the government, by state-owned banks, or sponsorship of various entities). Other aspects that define a specific mortgage market may be regional, historical, or driven by specific characteristics of the legal or financial system.
2007/06/03
Refinancing
Refinancing refers to applying for a secured loan intended to replace an existing loan secured by the same assets. The most common consumer refinancing is for a home mortgage.
Refinancing may be undertaken to reduce interest costs (by refinancing at a lower rate), to pay off other debts, to reduce one's periodic payment obligations (sometimes by taking a longer-term loan), to reduce risk (such as by refinancing from a variable-rate to a fixed-rate loan), and/or to liquidate some or all of the equity that has accumulated in real property during the tenure of ownership.
In essence, refinancing a mortgage or other type of loan can lower the monthly payments owed on the loan either by changing the loan to a lower interest rate, or by extending the period of loan, so as to spread the re-payment out over a long period of time. The money saved can be used to pay down the principal of the loan, thus further reducing payments. Alternately, refinancing can be used to transform available equity in one's house into ready cash, available for other purposes or expenses.[1]
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 prime rates 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.
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. The net savings between the two interest rates can then be applied either towards further paying down the debt, or other purposes. In addition, non-tax deductable debt, such as credit card or car loan debt, can be transformed into tax-deductable debt such as home mortgage debt, potentially lowering one's taxes or shifting one into a more advantageous tax bracket. This type of arrangement is often associated with a Cash-Out Refinance. [2]
Certain types of loans contain penalty clauses triggered by an early payment of the loan, either in its entirety or a specified portion. In addition, there are also closing and transaction fees typically associated with refinancing a loan or mortgage. In some cases, these fees may outweigh any savings generated through refinancing the loan itself. Typically, one should only consider refinancing if one stands to save a substantial amount of money from doing so, either in the short or long-term, or if there is a need to extend the loan in order to pay for unexpected costs such as medical expenses.
In addition some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan, depending on the type of loan used to refinance the existing debt. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance.
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 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.
Refinancing may be undertaken to reduce interest costs (by refinancing at a lower rate), to pay off other debts, to reduce one's periodic payment obligations (sometimes by taking a longer-term loan), to reduce risk (such as by refinancing from a variable-rate to a fixed-rate loan), and/or to liquidate some or all of the equity that has accumulated in real property during the tenure of ownership.
In essence, refinancing a mortgage or other type of loan can lower the monthly payments owed on the loan either by changing the loan to a lower interest rate, or by extending the period of loan, so as to spread the re-payment out over a long period of time. The money saved can be used to pay down the principal of the loan, thus further reducing payments. Alternately, refinancing can be used to transform available equity in one's house into ready cash, available for other purposes or expenses.[1]
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 prime rates 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.
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. The net savings between the two interest rates can then be applied either towards further paying down the debt, or other purposes. In addition, non-tax deductable debt, such as credit card or car loan debt, can be transformed into tax-deductable debt such as home mortgage debt, potentially lowering one's taxes or shifting one into a more advantageous tax bracket. This type of arrangement is often associated with a Cash-Out Refinance. [2]
Certain types of loans contain penalty clauses triggered by an early payment of the loan, either in its entirety or a specified portion. In addition, there are also closing and transaction fees typically associated with refinancing a loan or mortgage. In some cases, these fees may outweigh any savings generated through refinancing the loan itself. Typically, one should only consider refinancing if one stands to save a substantial amount of money from doing so, either in the short or long-term, or if there is a need to extend the loan in order to pay for unexpected costs such as medical expenses.
In addition some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan, depending on the type of loan used to refinance the existing debt. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance.
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 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.
2007/05/20
Cash
Etymology
The English word cash is of the French caisse, itself a borrowing of the Provençal caissa. That Provençal word is a derivative of the Latin capsa (box, chest), most likely by way of an unattested Vulgar Latin form *capsea; Spanish caja and Portuguese caixa are their respective languages' reflexes.[1] [2] From the original sense of a box or a chest, the word came to refer to a sum of money such as was or might be contained in one, and eventually to specie or, with the elimination of metallic standards, banknotes.[1] In this sense, it is used in contrast to credit or other financial instruments.
The word "cash" can also be traced back to: Sanskrit karsa, a weight of gold or silver but akin to Old Persian karsha-, a weight. a unit of value equivalent to one cash coin.
Historical usage in Asia
The word was formerly used also to refer to certain low-value coins used in South and East Asia. This sense derives from the Tamil kāsu, a South Indian monetary unit. The early European representations of this Tamil word, including Portuguese caxa and English cass, merged the existing words caixa and cash, which had similar connections with money. In the pre-1818 South Indian monetary system, the cash was the basic coin, with 80 cash equalling a fanam and 42 fanams equalling a star pagoda worth roughly 7s. 8d.[3]
This assimilated Tamil word was then applied to various other coins with which European traders came into contact, including the famous holed cash coins of China, the Chinese cash. Also called wén, these coins were commonly strung on cords for use in larger transactions; 1000 equalled a tael.[3]
Bookkeeping and finance
In bookkeeping and finance, cash can also refer to checks, money orders, cashier's checks, bank drafts, or traveler's checks. In all these forms, the term indicates the most liquid form of assets, which have a fixed value and can be easily converted to currency: "ready money". For example, wages or salaries paid as "cash" (as opposed to, e.g., stock options) would in most countries normally be paid with checks or direct bank deposits, which are trivially convertible to currency.
The English word cash is of the French caisse, itself a borrowing of the Provençal caissa. That Provençal word is a derivative of the Latin capsa (box, chest), most likely by way of an unattested Vulgar Latin form *capsea; Spanish caja and Portuguese caixa are their respective languages' reflexes.[1] [2] From the original sense of a box or a chest, the word came to refer to a sum of money such as was or might be contained in one, and eventually to specie or, with the elimination of metallic standards, banknotes.[1] In this sense, it is used in contrast to credit or other financial instruments.
The word "cash" can also be traced back to: Sanskrit karsa, a weight of gold or silver but akin to Old Persian karsha-, a weight. a unit of value equivalent to one cash coin.
Historical usage in Asia
The word was formerly used also to refer to certain low-value coins used in South and East Asia. This sense derives from the Tamil kāsu, a South Indian monetary unit. The early European representations of this Tamil word, including Portuguese caxa and English cass, merged the existing words caixa and cash, which had similar connections with money. In the pre-1818 South Indian monetary system, the cash was the basic coin, with 80 cash equalling a fanam and 42 fanams equalling a star pagoda worth roughly 7s. 8d.[3]
This assimilated Tamil word was then applied to various other coins with which European traders came into contact, including the famous holed cash coins of China, the Chinese cash. Also called wén, these coins were commonly strung on cords for use in larger transactions; 1000 equalled a tael.[3]
Bookkeeping and finance
In bookkeeping and finance, cash can also refer to checks, money orders, cashier's checks, bank drafts, or traveler's checks. In all these forms, the term indicates the most liquid form of assets, which have a fixed value and can be easily converted to currency: "ready money". For example, wages or salaries paid as "cash" (as opposed to, e.g., stock options) would in most countries normally be paid with checks or direct bank deposits, which are trivially convertible to currency.
2007/04/30
Loan
A loan is a type of debt. All material things can be lent but this article focuses exclusively on monetary loans. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.
The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan.
Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply.
Types
Secured
A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security - a lien on the title to the house - until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.
Unsecured
These may be available from financial institutions under many different guises or marketing packages:
- credit card debt,
- personal loans,
- bank overdrafts
- credit facilities or lines of credit
- corporate bonds
The interest rates applicable to these different forms may vary depending on the lender, the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.
Abuses
Abuse in the granting of loans is known as predatory lending. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the moneylender is not authorised, it could be considered a loan shark.
Credit card companies in some countries have been accused by consumer organisations of lending at usurious interest rates[citation needed].
References
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Any material not supported by sources may be challenged and removed at any time. This article has been tagged since June 2006.
Please help improve this article by adding citations to reliable sources. (help, get involved!)
Any material not supported by sources may be challenged and removed at any time. This article has been tagged since June 2006.
See also
- Finance, Personal finance, Settlement (finance)
- Debt, Consumer debt, Debt consolidation, Government debt
- Bank, Fractional-reserve banking, Building society
- FAFSA
- George D. Sax and the Exchange National Bank of Chicago - Innovation of instant loans
- Annual percentage rate (a.k.a. Effective annual rate)
- Interest-only loan
- Student loan
- Payday loan
- Refund Anticipation Loan
- Federal student loan consolidation
- Federal Perkins Loan
- Stafford loan
- Title loan
- Syndicated loan
Retrieved from "http://en.wikipedia.org/wiki/Loan"
Definitions of loan on the Web.
- the temporary provision of money (usually at interest)
- lend: give temporarily; let have for a limited time; "I will lend you my car"; "loan me some money"
- loanword: a word borrowed from another language; e.g. `blitz' is a German word borrowed into modern English
http://wordnet.princeton.edu/perl/webwn
- A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the ' and the '. The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt.
http://en.wikipedia.org/wiki/Loan
- Borrowing from the insurer and securing the amount of the loan by the cash value in the life insurance policy. If the insured dies when there is an outstanding loan balance, the amount of the loan and any unpaid interest will be deducted from the proceeds.
http://www.veteranslife.com/glossary.asp
- money borrowed that is usually repaid with interest.
http://www.affiliatedmortgageservices.com/html/dictionary.html
- An amount of money a borrower will take out from a lender to pay for a purchase.
http://www.loanjargon.com/jargon.htm
- A loan is a type of financial aid that must be repaid, with interest. The federal student loan programs (Federal Family Education Loan Program and Federal Direct Student Loan Program) are a good method of financing the costs of your college education. These loans are better than most consumer loans because they have lower interest rates and do not require a credit check or collateral. The Stafford Loans and Perkins Loans also provide a variety of deferment options and extended repayment terms.
http://essc.unt.edu/finaid/glossary.htm
- That which one lends or borrows, esp. a sum of money lent at interest; as, he repaid the loan.
http://www.auto-loan-calculator-auto-loan-calculator.com/financing101/glossary-loan-terms.shtml
- A mortgage loan insured by Canadian Mortgage and Housing Corporation (CMHC).
http://www.scotiabank.com/cda/content/0,1608,CID8892_LIDen,00.html
- A sum of borrowed money (principal) that is generally repaid with interest. Loan-to-Value Ratio The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage. Lock Lender's guarantee that the mortgage rate quoted will be good for a specific number of days from day of application. M Margin The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate. ...
http://www.mymortgage4less.com/financing/glossary_terms.asp
- Transaction whereby an owner of property (lender) grants another party (borrower) to use the property for a specified length of time. The borrower promises to return the property and to pay a fee (interest) for its use. When the property is cash, the borrower signs a promissory note. A loan may be secured with collateral or unsecured.
http://www.tiaa-crefbrokerage.com/invest_glosry_LoLz.htm
- The principal, or amount of total borrowed money, that is repaid with interest.
http://www.hypo.org/Content/Default.asp
- An amount borrowed to be repaid at a later date, with interest.
http://www.hfc.com/learn/Glossary.jst
- A loan made by a life insurance company from its general funds to a policy owner on the security of the cash value of a policy.
http://www.life-insurance-options.com/life_insurance_glossary.html
- A loan which is repaid by a series of small, periodic payments until a given date, when either the balance comes due in a single, large payment or the amount of the payments rises significantly.
http://www.titlecorockies.com/dictionary_b.htm
- Type of financial aid, which must be repaid, with interest.
http://www.llu.edu/ssweb/finaid/glossary.html
- A sum of money borrowed (principal) usually for a specific reason (eg to obtain an education). The bank lending the money usually charges interest for use of the money. The amount borrowed is typically repaid with interest over a period of time.
http://www.grcc.edu/ShowPage.cfm
- An advance of funds from a lender to a borrower on the agreement that the borrower pays interest on the loan, plus pay back the initial amount of the loan at or over an agreed time.
http://www.ratebusters.com.au/glossary.htm
- When a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the borrowed money, along with interest, at a predetermined date in the future.
http://www.reidepot.com/Glossary/l.html
- A loan which is technically in default but under which the lender (mortgagee) is attempting to assist the borrower (mortgagor) in restructuring the terms of the loan or the time of repayment rather than proceeding with foreclosure.
http://www.rentv.com/index.cgi
- money lent at interest. A lender makes a "loan" with the idea that it will be paid back as agreed and that interest will be paid for the use of the money.
http://www.smallbiz.nsw.gov.au/smallbusiness/Resources/Business+Tools/Glossary+of+Business+Terms/
- Money owned by one party and used by another. It is repaid under specific terms and rates of interest.
http://www.rbcroyalbank.com/buyingacar/glossary.html
- something given temporarily, as in: Remember, this book is a loan, not a gift.
http://www.business-words.com/dictionary/L.html
- A type of financial aid that is available to students and to the parents of students. An education loan must be repaid. In many cases payments do not begin until the student finishes school.
http://www.netnet.org/students/student%20glossary.htm
- A binding pledge made by the lender to the borrower to make a loan, usually at a stated interest rate within a given period of time for a given purpose, subject to the compliance of the borrower to stated conditions.
http://www.alaskausamortgage.com/help/mtgterms.asp
- Legally binding document which obligates a specific value of funds available for disbursement. The amount of funds disbursed is to be repaid (with or without interest and late fees) in accordance with the terms of a promissory note and/or repayment schedule.
http://www.innovativefinance.org/home_tools/glossary/L.htm
- Borrowing a book. "On loan" means the book is not in the library because it has been borrowed.
http://ublib.buffalo.edu/libraries/help/glossary.html
- a sum of money transferred to another for temporary use, to be repaid with or without interest according to terms of the loan agreement written in the accompanying bond, note, mortgage or other document of indebtedness. Loan is the noun. Lend (past tense lent) is the verb.
http://www.ots.treas.gov/glossary/gloss-l.html
Hard money loan.
A hard money loan is a specific type of financing in which a borrower receives funds based on the value of a specific parcel of real estate. Hard money loans are typically issued at much higher interest rates than conventional commercial or residential property loans and are almost never issued by a commercial bank or other deposit institution. Hard money is similar to a bridge loan which usually has similar criteria for lending as well as cost to the borrowers. The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and not yet qualifying for traditional financing. Whereas hard money often refers to not only an asset-based loan with a high interest rate, but can signify a distressed financial situation such as arrears on the existing mortgage or bankruptcy and foreclosure proceedings are occurring.
Loan Structure
A hard money loan is a species of real estate loan collateralized against the quick-sale value of the property for which the loan is made. Most lenders fund in the 1st-lien position, meaning that in the event of a default, they are the first creditor to receive remuneration. Occasionally, lenders will subordinate to another 1st lien position loan; these loans are known as a mezzanine loan or second lien position loans.
Hard money lenders structure loans based on a percentage of the quick-sale value of the subject property. This is called the Loan-to-Value or LTV ratio and typically hovers between 60-70% of the value of the property. For the purposes of determining an LTV, the word "value" is defined as "today's purchase price". This is the amount a lender could reasonably expect to realize from the sale of the property in the event that the loan defaults and the property must be sold in a 1-4 months' time. This 'value' differs from an MAI appraised value.
Below is an example of how a commercial real estate purchase might be structured by a hard money lender:
65% Hard Monies (Coin-form loans)
20% Borrower equity (cash or additional collateralized real estate)
15% Seller carry back loan or other subordinated (mezzanine) loan
History
Hard Money is a term that is used almost exclusively in the United States and Canada where these types of loans are most common. In commercial real estate, hard money developed as an alternative "last resort" for property owners seeking capital against the value of their holdings. The industry began in the late 1950s when the credit industry in the US underwent drastic changes (see FDIC: Evaluating the Consumer Revolution).
The hard money industry suffered severe setbacks during the real estate crashes of the early 1980s and early 1990s due to lenders overestimating and funding properties at well over market value. Since that time, lower LTV rates have been the norm for hard money lenders seeking to protect themselves against the market's volatility. Today, high interest rates are the mark of hard money loans as a way to protect the loans and lenders from the considerable risk that they undertake.
Cross Collateralizing a Hard Money Loan
In some cases the low loan to values do not facilitate a loan sufficient to pay the existing mortgage lender off in order for the hard money lender to be in first lien position. Because securing the property is the basis of making a hard money loan, the first lien position of the lender is usually always required. As an alternative to a potential shortage of equity beneath the minimum lender Loan To Value guidelines, many hard money lender programs will allow a "Cross Lien" on another of the borrowers properties. The cross collateralization of more than one property on a hard money loan transaction, is also referred to as a "blanket mortgage". Not all homeowners have additional property to cross collateralize. Cross collateralizing or blanket loans are more frequently used with investors on Commercial Hard Money Loan programs.
Commercial Hard Money
Commercial hard money is similar to traditional hard money, but may sometimes be more expensive as the risk is higher on investment property or non-owner occupied properties. Commercial Hard Money Loans may not be subject to the same consumer loan safeguards as a residential mortgage may be in the state the mortgage is issued. Commercial hard money loans are often short term and therefore interchangeably referred to as bridge loans or bridge financing.
Commercial Hard Money Lender or Bridge Lender Programs
Commercial Hard Money Lender and Bridge Lender programs are similar to traditional hard money in terms of loan to value requirements and interest rates. A commercial hard money or bridge lender will usually be a strong financial institution that has large deposit reserves and the ability to make a discretionary decision on a non-conforming loan. These borrowers are usually not conforming to the standard Fannie Mae, Freddie Mac or other residential conforming credit guidelines. Since it is a commercial property, they usually do not conform to a standard commercial loan guideline either. The property and or borrowers may be in financial distress, or a commercial property may simply not be complete during construction, have it's building permits in place, or simply be in good or marketable conditions for any number of reasons.
Some Private Investment groups or Bridge Capital Groups will require joint venture or sale-lease back requirements to the riskiest transactions that have a high likelihood of default. Private Investment groups may temporarily offer bridge or hard money, allowing the property owner to buy back the property within only a certain time period. If the property is not bought back by purchase or sold within the time period they Commercial Hard Money Lender may keep the property at the agreed to price.
Traditional Commercial Hard Money loan programs are very high risk and have a higher than average default rate. If the property owner defaults on the commercial hard money loan, they may lose the property to foreclosure. If they have exhausted bankruptcy previously, they may not be able to gain assistance through bankruptcy protection. The property owner may have to sell the property in order to satisfy the lien from the commercial hard money lender, and to protect the remaining equity on the property.
Legal & Regulatory Issues
From inception, the hard money field has always been formally unregulated by state or federal laws, although some restrictions on interest rates (usury laws) by state governments restrict the rates of hard money such that operations in several states, including Tennessee and Arkansas are virtually untenable for lending firms.
Commercial Lending Industry
Thanks to freedom from regulation, the commercial lending industry operates with particular speed and responsiveness, making it an attractive option for those seeking quick funding. However, this has also created a highly predatory lending environment where many companies refer loans to one another (brokering), increasing the price and loan points with each referral.
There is also great concern about the practices of some lending companies in the industry who require upfront payments to investigate loans and refuse to lend on virtually all properties while keeping this fee. Borrowers are advised not to work with hard money lenders who require exorbitant upfront fees prior to funding in order to reduce this risk. If you feel you have been the victim of unfair practices, contact your state's attorney general office or the office of the state in which the lender operates.
Hard Money Rate
Hard Money Mortgage loans are generally more expensive than traditional sub-prime mortgages. However all mortgage loans are not necessarily considered to be a high cost mortgage. Generally a hard money loan carries additional risk that a borrower is aware of. Rather than selling the property a borrower will opt to keep the loan and if a lender is willing to assume some of the risk by offering a hard money loan.
Interest Rate on Hard Money
The rate is not dependent on the Bank Rate. It is instead more dependent on the real estate market and availability of hard money credit. Currently and for the past decade hard money has ranged from the mid 10% to 16% range. When a borrower defaults they may be charged a higher "Default Rate". That rate can be as high as allowed by law which may go up to or around 25%-29%.
Hard Money Points
Points on a hard money loan are traditionally 1-3 more than a traditional loan, which would amount to 3-6 points on the average hard money loan. It is very common for a commercial hard money loan to be upwards of four points and as high as 10 points. The reason a borrower would pay that rate is to avoid imminent foreclosure or a "quick sale" of the property. That could amount to as much as a 30% or more discount as is common on short sales. By taking a short term bridge or hard money loan, the borrower often saves equity and extends his time to get his affairs in order to better manage the property.
All hard money borrowers are advised to use a professional real estate attorney to assure the property is not given away by way of a late payment or other default without benefit of traditional procedures which would require a court judgement.
See also
- Asset Based Loan – A similar type of commercial loan based on real estate, indicating the loan will be based upon a percentage of the properties appraised value, as the key criteria.
- Private money – Refers to lending money to a company or individual by a private individual or organization.
- Bridge Loan – A similar type of commercial loan based on real estate.
- Non Conforming Lenders – Companies that provide loans for non-conforming projects.
- Commercial Loan – Standard, broad types of loans based on commercial property value.
References
- 'Hard money' lenders: The source for last-resort loans
- Hard Money’s Other Side
- Behind Hard Money’s 2 Primary Forms
- Hard Money Loan Submission Guidelines
Retrieved from "http://en.wikipedia.org/wiki/Hard_money_loan"
How Best To Use Debt Consolidation Loans.
Debt consolidation loans can be a great way to fix bad credit or credit that is in trouble. A debt consolidation loan is a way to get debt under control.
Many lenders offer them and are willing to even extend a debt consolidation line of credit to someone who is facing credit problems. A debt consolidation loan can really help a person get their credit back in shape.
Debt consolidation loans are loans that are used to pay off debts. The idea is to pay off debts, especially those with high interest rates, so the borrower has only one bill to pay instead of multiple bills. Additionally, if the borrower can get a good interest rate on the loan, they can save a lot of money.
When getting a debt consolidation loan it is very important to get organized first. Before a borrower applies for a debt consolidation loan they need to figure out how much they need to borrow.
To do this they should gather all information for the debts they wish to pay off. If they are paying on debts that are in collections they should contact the collection agency to get the amount they will need to pay. This could be a good chance to get a settlement for an amount smaller than whet they owe.
The borrower should also get information on interest rates for each account. This will come in handy when searching for a debt consolidation loan because it will help the borrower to know what interest rate they will want to get.
It can be helpful to make a list with each debt amount and interest rate. This makes it easier to add up the amounts and find a good average interest rate. It also gives the borrower a visual of their actual debt situation. They may find they are not as bad off as they thought and see that getting a consolidation loan is not in their best interest.
Once the borrower has the amount they need to borrower they can start looking for lenders who can offer them the interest rate they need. It is very important to avoid an interest rate that is too high because in the end the total amount paid will be higher than if the original debt was paid to the original creditor.
Another point to keep in mind about debt consolidation loans is for the borrower to make sure they will be able to afford the monthly payment. After everything is figured, the monthly payment could end up being larger than paying each debt separately.
The point is to weigh what is more important - getting debts paid off now, or just following the original payment plans and saving money.
A debt consolidation loan can be helpful, but it can also lead to more troubles. There is no point in consolidated debts if it will cost more in the end. The borrower has to look at all aspects of the debt consolidation loan to make sure they are getting the best deal.
Article Source: http://www.superfeature.com
James Copper works for Any Loans who help homeowners find the right debt consolidation loans or secured loans for their circumstances.
Adverse Credit Loans - Do Not Let Your Credit History Run You Down.
For a variety of reasons, whether it is youthful foolishness, unexpected job loss, loss of employed spouse in a one-income house or severe medical problems, people get into debt and ruin their credit history.
They then find themselves in trouble with the bills they have already accrued and things just get financially worse. For those who want to get out of debt and repair their credit there is help in the form of adverse credit loans.
These loans usually cost more than those given out to borrowers with good credit. The interest rates are higher because the lender assumes more risk. With some help or a little careful searching you can find adverse credit loans whose rates are not adverse as well.
It is easier, for example, to get a better rate on an adverse credit loan, if you have paid back or settled the bills that gave you the poor credit history in the first place.
The trick that makes the financially positive difference for the borrower is that she or he take on these adverse credit loans and then pay them back on time. In other words, the consumer must not miss or be late with even one payment.
Adverse credit loans have far stricter repayment expectations than standard loans to those with good credit scores. Miss one payment on an adverse credit loan and your rate will go up, and you may even be facing a foreclosure.
No matter how low or high that interest rate on the adverse credit loans you are considering there are a few things you should be cautious of. If you can, avoid adverse credit loans that include late payment increases.
Lenders have discovered recently that they may in fact make more money just raising adverse loan rates for late or missed payments rather than hurrying to foreclose. While the ideal is to never miss a payment, you would be wise as a consumer to avoid adverse credit loans that have this stipulation.
Avoid if you possibly can adverse credit loans - or any type of mortgage or other loan, for that matter - that has a clause allowing for a prepayment penalty. If you are trying to get yourself out of debt it makes no sense to sign on the dotted line of a plan that says if you can pay your bill early it will cost you more. That is essentially what a prepayment penalty is.
This penalty means that is you pay more than you are required to do so each month or even one time only so that your balance is paid prior to the predetermined end of the loan you will incur additional fees and charges. Besides, who wants to do business with a lender who wants to get rich off of your misfortune?
Adverse credit loans can have balloon payments built in. What this means is that you make an attractively low payment for a considerable period of the loan but then you are required to make a huge payment of the balance at the end of the loan period.
This makes no sense. If you were able to make a huge payment you would not have needed to look into adverse credit loans in the first place.
Article Source: http://www.superfeature.com
James Copper works for Any Loans who offer adverse credit loans and secured loans.
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