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HOW TO BECOME A PRIME BORROWER FROM BEING A SUBPRIME BORROWER

Prime borrowers are considered best for lenders. They have credit history showing they are more likely to make loan payments on time and also repay the loans in full. Given all that, prime borrowers tend to get favorable interest rates and have easier time getting loans. They typically have a score greater than 620. 

If you are considered subprime by lenders, you may have some negative marks in your credit history or have too much outstanding debt. This makes you a risky borrower to the loan markets. The interest rates are normally higher, and requirements are subjected to many conditions and terms, making it hard to get approved. 

Your goal is to become a prime borrower, and there are ways to speed it up.

To move faster from being a sub-prime to a prime borrower, you should first analyze your credit report. Look for items that are not verifiable and use that to your advantage since it does not have any proof or reason to impact your score negatively. Reach out to these creditors as they are legally required to remove negative information off your report.

Secondly, ensure that you pay your current outstanding bills since in most cases current bills have much more weight than older entries. Also, if you need a long term loan at the moment, it might be worth a try to always take loans from sources that don’t necessarily show up on your credit. This will not put you in the risk of showing more debt. 

Approach your friends or family that you trust and ask them to add you to any of their existing credit accounts. This works only when the credit account has been opened for more than two years. Their positive history will help  improve your credit score. Do this only when you are sure they will always be current on their accounts. 

Take out a loan or consumer credit which you know you have the ability to pay in full very soon. Allow a few minimum payments with interest and then make a full payment to close out the account. You can get these loans online or at stores that open credit cards to purchase their items. Even credit for low amounts such as $500.00 will help. Before doing this, make sure whichever loan you take does not have a pre-payment penalty.

In a nutshell, to move from being a sub-prime borrower to a prime borrower, you will need to take some steps such as;

  •    Paying your accounts on time
  •    Minimizing the number of accounts you open
  •    Only use a portion of your available credit
  •    By all mean, avoid letting your accounts go to collection

Once doing this, over time, you will be seen by lenders as a prime borrower and receive the benefits associated with it.

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How to pay your next loan payment when you are short on funds

You have an installment loan, and your next payment is coming up, but you are short on cash to pay the payment. This can be a stressful situation. But before calling it quits and allowing the loan to default, consider these options:

Get a temporary extra income 

Lots of temporary or “do it on your own time” jobs are available with the expansion of the share economy. If you have a car, you can join Uber or Lyft and drive for several nights. If you have extra space at your place, or able to leave your place for a few days, you can rent out your place nightly through Airbnb or Flipkey. There are also small temporary jobs available on Craigslist in the “Gigs” category which you can apply for.

Borrow friend or family

It might not be the easiest request, but it is better than having bad credit. It is important that whoever will be lending you the money feels trustful that you will return the money ASAP. Perhaps offer a collateral and let the know that their money will be returned right after you make your upcoming loan payment.

Get a payday loan

If you don’t have a friend or family that will lend you money for the short period you need to pay your loan, consider a payday loan. Though payday loans have high interest rates, if you take it just for one period (not constant over a year), the fees are proportional to the payday loan and certainly less expensive than not paying your installment loan.

Refinance your loan

If you feel part of the reason you are not able to keep up with your loan payments is because the payments are too high, there is a strong possibility your current loan’s interest rate is too high. Refinancing it with a lower rate before your next payment is due will not only help save you money on the next payment, but also save you money from then on out. Make sure to clarify with your current lender if there is an early payoff penalty.

Strict budgeting 

You have daily expenses, from gas to food to anything else that arises. A way to make sure you have enough money for your upcoming loan payment is to make some sacrifices on other expenses so that you can save money to allocate for the loan. This is not an easy task, but learning to be disciplined with money and payments will allow you to increase your skills in budgeting for the future.

How real estate financing allows you to have the biggest return on your money in real estate

Making your wealth grow in real estate is not as simple as buying and flipping, even if the market your investing in is red hot. This is because there are certain strategies to go about which can help maximize the return on your investment. 

This involves creative use of real estate financing and approaching it correctly. Strategic real estate financing helps:

Boost the return of your cash

Both in appreciation and the rental yield. The less you put down on a property, the higher the return on your cash if the property value goes up and you are positive cash flow. For example, if you put only $20k down on a $200k property and the value of that property goes up $20k, your equity has increased 100%. If you rent that property, if you cash flow $2k at the end of the year, your return is a 10% annual yield. In comparison, if you invested $100k and that same property increased $20k and cash flows $5k a year, the equity increase is only 20% with a rental yield of 5%. Of course this is important that you purchase a property with an expectation that it cash flows and has a strong potential to increase in value. That is where prudent investing is involved.

Leaves extra cash for renovation

Paying a loan is predictable: there is a set monthly installment plan and the rates don’t fluctuate much, if at all. Construction, on the other, can be highly unpredictable. Expensive surprises from foundation to plumbing issues are common and involve readily available cash to take care of the problem to proceed efficiently with the project. It is better to have cash on hand for construction/renovation than to have it tied up to the real estate.  

Further investments 

The purpose of growing your real estate portfolio is to keep buying strong performing properties. Financing allows you to disperse your cash over several real estate investments and not just one. The appreciation increases by several properties than just one, as well as the diversification helps minimize the risk if one project goes south. 

Buy-and-Hold

Financing is great for having a passive approach to real estate. If you are consistent with buying properties that cash flow and in a growing area, payments for the loan become a routine and after thought. After years of collecting rent and paying the mortgage, the cash flow grows and the loan amount gets reduced. Although you might not make much in the beginning, years down the line your investment will yield higher than stocks and bonds and you still only invested the down payment in the beginning. 

Overview

Overall, financing plays an integral part of real estate investing. But you must understand that loans are still a liability, and the deals you are involved are the ones that will prove if financing helped or added headache. This is also why getting the best financing that is right for your deals is just as important as the deal itself. Reviewing various products amongst several lenders helps you decide how to best close on the financing part of the deal. 

What is the biggest reason your business needs financing?

Have you heard the old saying that you have to first spend some money to gain more money in return? Increasing your business profit requires investment. 

In running a business, the availability of finance to develop and improve is a must-have necessity. In can be tricky and often considered as too risky but in order to grow, you must also have to budget for cost of loans to allow growth. When growth exceeds the cost of the funding (interest rate), then you did the right thing.

Moreover, most business owners commonly underestimate unexpected expenses and thus, lack a finance to cover surprise costs. 

And so, this list is made for your guidelines on your way to access business loans and on why you should consider applying for one:

For business opportunities that are worth the debts

From time to time in your business journey, opportunities will knock on your door that is just too good to let go. Rethink and carefully reassess the possibilities and downfalls of the opportunity. And if the risk is worth it, then, it is time to apply for a business loan. Always weigh your cost for the loan to determine your return on investment on the given opportunity. The the investment should yield higher return than the interest rate of your loan to justify the new funding. 

For inventory

Business loans help improve the size and the quality of your inventory. The ability to sustain growth allows you to get the trust and approval of your customers. 

For expansion

Business loans can help you in gaining further rental/real estate space or conquer new geographic territories. 

For marketing and advertising

Media advertisements on television, radio or online banners on the internet can be very effective but require cost. Also, putting financing money in marketing allows to analyze best if having the loan proved worthwhile. This is because the added revenue from advertising is clearly quantifiable. 

With these in mind,  business owners are getting business loans without the worrisome that business loans are a high risk liability, but instead a vehicle of growth for years to come.

How third party banking apps allow you to get approved for a loan

Third-party service providers are financial organizations that help you to comply with your bank’s banking regulations. Some of the functions of third-party service providers are payment processing services, support on credit decisions, and retention of records.

In general, third party service providers have applications that help connect bank institutions to their consumers.

But these third party apps are becoming more and more service oriented for consumers as mobile and online banking becomes more common.

How does it work?

With the rapid increase of banking online services, lending companies seek further support from third-party service providers. Third party service providers typically have a better user friendly interface and functions that better manage your delicate and confidential information including personal identification.

New laws are changing

With ongoing technology, banking is speeding up its development to get in tune in our current time. For example in Europe, the Revised Payment Service Directive or the “PSD2” is now being implemented. This law gives stronger security requirements and enables you to manage your finances not just directly with bank, but any third party apps you choose. 

How third party service providers help you get approved for loans?

Simply put, by managing your finances through apps that provide pro-active services to help you budget, you would be able to improve your credit much easier than dealing directly with your bank. 

By improving your credit, your ability to score a loan with better terms becomes easier over time. Also, if you are looking for a loan at the very moment, third party apps use creative guidelines criteria on top of your traditional banking requirements to approve you for a loan.

The mortgage industry is shifting online

online-mortgage-pic

Unlike with the traditional mortgage process, consumers are now becoming aware to online mortgage. But before you begin to apply, learn whether this new system is right for you.

ADVANTAGES

  •    Less waste of time

Choosing online can save a lot of time during application and closing on the loan. Unlike the traditional route, where you have to write in a stack of documents, work through a bunch of emails, and make copies of everything, now, you can send info through an online mortgage lenders pre-set application online. You can just scan and upload the required papers and documents to the lender’s website.

  •    Receive lower rates and fees

Since online lenders save by not having loan officers, storefront shops, and large customer service personnel, much of the savings goes to you as the borrower. Savings such as origination points and document processing fees are all reduced or don’t exist with online mortgage lenders. 

  •    Faster Approval

Can literally take seconds after submitting the application. If your in a hurry, then the online mortgage is the best option because you can even get approval during non bank hours. 

DISADVANTAGES:

  •     Limited Customer Service

Online lenders offer mobile phone to assist their consumers, but standard communication is email and for some borrowers, the non personal attention can be stressful when they are going through a major part of their home buying journey. 

  •    Rate Switching

Even if you were offered a certain rate in your mortgage application, change of rate can happen once the lender begins the process of assessing all your information and documents. 

  •    Mortgage Scam

The potential for scams taking advantage of borrowers is higher because it is online and less regulated. Make sure to inspect the mortgager’s website thoroughly before applying to avoid financial trouble.

So which to go to?

Online mortgage is becoming popular for the convenience and savings. Meeting your lender personally can still give you the benefits of assurance especially with local banks.

But one thing is for sure. Due to a widening competition because of online mortgages, lenders are now offering a variety of offers with lower rates and fees. Rather than getting stuck with just one mortgage lender, look for a few ones who can benefit you most…both online and offline. For even a quarter differences in the interest rate can be huge savings  in the long run.

Why small commercial real estate banks can be better than the larger traditional ones

If you are shopping for a commercial real estate mortgage, you have the decision to work with a larger well known bank or a smaller lender that specializes in commercial mortgages. You will notice that approval guidelines are typically more flexible with smaller lenders. The reason is because they are able to take bigger risks. But there are other reasons why you should explore smaller commercial mortgages:

Your application stands out

Since larger mortgage banks have thousands of applications, there is less evaluating each app as a case by case basis. And if your particular situation is different than the average commercial application, there is a higher chance it will be denied.

With smaller commercial lenders, every application is evaluated with the intention of how to close the deal.

Big banks have shareholders to please

Big banks that are public are owned by stockholders, who generally would rather see their shares grow consistently with low risk. This is why banks will not take a chance on alternative or high risk borrowers, because they have more to lose than gain if they anger their shareholders.

On the other hand, smaller commercial real estate lenders are privately owned or owned by a select few shareholders who encourage higher risk lending because it helps their money be put into work.

Small mortgage banks are more responsive

When dealing with a larger bank, particular concerns can get difficult to address to higher ups. Since small lenders usually have the owner or CEO working right along with the loan officers, a borrower can get straight to whoever is needed to voice any concerns. Larger banks have different departments and hierarchies while small lenders tend to get more personal with their potential clients.

Small mortgage lenders have mastered the local market

Everything starts with the local or regional market before going to the big ones. And this is where the small commercial mortgage banks are great at. They have a complete command on the local market and can predict upcoming fluctuations and thus understand the reasoning for your loan better than national banks. 

They want your business and will flex their business to do so

If your commercial mortgage application was rejected by bigger banks, your loan application can still qualify with smaller commercial lenders. And many times for similar terms. 

The reason is because smaller lenders are looking to earn your business and will do so by being flexible with their guidelines. They are looking at term relationships by working with investors and commercial real estate borrowers. The best way is to do that for them is to meet you at the signing table.