CLOSE UP: SHOPPING IN THE FINANCIAL SUPERMARKET

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As we have noted in previous blog post, the dramatic changes that have occurred in the financial marketplace offer consumers some very attractive opportunities to increase the yield on their savings and to reduce their costs for checking services, credit cards, and loans.  But consumers will fail to realize these potential advantages if they assume that all banks are more or less alike or that a bank is doing them a favor by offering them a loan.

In reality, a proliferating number of institutions are competing for a relatively fixed number of potential customers, and each of them can compete successfully only by providing services that are superior, more versatile, or less expensive than what the competition has to offer.  You have much to gain from carefully analyzing your financial needs, comparison shopping the markets to satisfy them, and continuously monitoring the market for new, better, or less expensive services.  You can also try to negotiate for better terms in any given transaction—for a better rate on a certificate of deposit, for example, or a lower rate on a loan. Seguir leyendo CLOSE UP: SHOPPING IN THE FINANCIAL SUPERMARKET…

Reverse Mortgage Companies

Many elderly people own their homes free and clear but have low cash income, even though their home, having appreciated in value in recent years, represents a substantial but non liquid asset.  Reverse mortgages, offered by a number of firms that specialize in them, can provide such homeowners with an increase in their current cash income.

The reverse mortgage is essentially a home equity loan in reverse—that is, the home serves as collateral for monthly payments that are made to the homeowner and the loan is repaid from the estate of the borrower after his or her death.  Under a typical arrangement, a couple at least 62 years old may borrow up to $700 a month for as long as they live.  Moreover, the monthly payment, because it constitutes a loan rather than income, is tax-free.  Upon death, the loan is repaid through the sale of the home, but usually no other asset of the estate can be used for repayment. Seguir leyendo Reverse Mortgage Companies…

LCD or Plasma TV?

Can’t decide between LCD and plasma? The lines are blurring, but subtle differences can tilt your decision either way.

Nowadays, buying a widescreen, flat panel television is no longer prohibitive. Sure, it’s still a relatively big-ticket item that requires considerable pleading to your significant other, but with falling prices and installment payments, flat screen TVs have become a reasonable luxury.

There are, of course, other alternatives such as rear projection TVs and front projectors, but flat screens are really the more popular choices for a modest home theater. Flat-panel televisions are lighter, thinner, and getting bigger and bigger. And here, you have just two choices: LCD (liquid crystal diode) or plasma. Seguir leyendo LCD or Plasma TV?…

Consumer Finance Companies

Advertising heavily through television commercials, consumer finance companies offer personal loans and, more recently, home equity loans and second mortgages at interest rates consistently and significantly higher than those charge by banks.  Many consumers believe that the higher rates are necessary because these companies make loans to borrowers whose credit ratings are not good enough to qualify them for a bank loan, and to source extent televisions commercials reinforce this impression.  But a recent study indicates that this is not true.  A loan application has at least as good a chance of approval by a bank as by a loan company.  The higher interest rates are due in part to the finance companies higher costs in obtaining money to lend, and perhaps also to their high expenditures or advertising.  They cannot draw on low cost depositors funds in savings and checking accounts but must obtain funds from commercial sources at money market rates.  Given their consistently higher rates, finance companies should be a last resort for any kind of loan or mortgage.

Ways to Save on Gas

It’s a good thing gas prices are going down. But don’t expect this will go on forever. World oil is notorious for drastic price changes. So develop good habits of saving on gas now.

1. Don’t be idle. A big no-no: letting the engine run, with the air conditioning on, while waiting or parked. That’s actually more wasteful than restarting the engine. So, if you have to wait more than a minute, open the car windows and turn the engine off. In the same way, make your warm-ups short. Half a minute is long enough, so drive off.

2. Don’t be fast and furious. Don’t rev up your engine, even if you think you’re Vin Diesel. And be gentle on the brake and gas pedals. Hard stops and fast starts waste fuel.

3. Gas up properly. Buy gas at cooler hours, like early morning or at night, to reduce gas evaporation. Also, avoid buying higher octane gas than necessary. And don’t overfill the tank to prevent evaporation.

4. Don’t be a drag. Take out stuff you don’t need from the backseat or trunk. Every extra 100 pounds of excess weight reduces fuel economy by 1%-2%.

5. Take care of your tires. Make sure your tires are properly inflated; otherwise it will take your engine more effort and energy to run. It’s costly too, adding six percent to fuel consumption for every pound the tire is under inflated.

6. Tune up. Get a regular tune-up as recommended by your car manufacturer. That includes changing your oil and filters regularly, to keep the engine running smoothly. Poorly tuned engines increase fuel consumption by 10%-20%. 
 

On Buying and Living in Condo

Are you in the market for a condo? Here are a few things to consider before taking the leap.

Buying a house and lot seems like the ideal scenario. But with prohibitive prices or distant locations, it’s not for everyone. And to be sure, some people would rather live in a condominium. For a growing number of Filipinos—whether by force or by choice—their condo has now become their home sweet home. 

If you’re looking for a condominium, you have to decide if you should buy a unit or just rent. Buying of course gives you a sense of ownership, as you own not just your condominium unit but your part of the common areas in the building. You’re in fact a co-owner of the condominium corporation itself.  

Your condo unit can also appreciate in value, making it an investment especially if you sell it later on. It also gives you permanency of address, compared to a renter. It also reflects well on you when you apply for loans. Plus, there are no hassles and headaches in dealing with a landlord (or landlady for that matter) since you’re not a tenant but an owner. Seguir leyendo On Buying and Living in Condo…

Brokerage Firms

Many stock brokerage firms will make personal or real state loans to customers who are willing to use the stocks and bonds they own as collateral.  Such loans are made at rates only one or two percent-age points higher than the call rate—the relatively low rate that brokers them selves pay to borrow money.  (The current call rate. Which fluctuates regularly, can be found in the financial pages of any major newspapers.)  As a result, interest on such loans may cost two to three percentage points less than a similarly secured loan obtained from a bank. Seguir leyendo Brokerage Firms…

Playing Catch Up

You’ve finally worked the numbers. And they fall short. What to do when a comfortable retirement seems beyond your reach? Here are five ways:

1. Delay your retirement date
If your savings have not caught up with your plans, you just have to bump up your retirement date. The HSBC report called “The Future of Retirement” indicated that the average retirement age is 62 for men and 57 for women. If you’re thinking of quitting work when you’re 60, push it back a few more years. If you’re employed, the mandatory retirement age is 65, but you can try to arrange a consulting gig with your employer.

2. Work at least part-time
Retirement doesn’t have to be no-work and all-play. It should be financial independence, not an end to your productive years. The HSBC study also showed that most respondents plan to work at least part-time during retirement. That’s because, according to the study, “in transitional economies, people cannot usually afford to retire when they would like to.” But it also noted that most planned to work as long as they can not just to remain self-sufficient but to keep themselves physically and mentally fit. Seguir leyendo Playing Catch Up…

LOAN ALTERNATIVES

Starting today our topic will be all about loan alternatives.

Banking alternatives are available not only for savings and checking activities but also for various kinds of loans.  But whereas the terms and conditions for savings and checking alternatives are relatively simple and straight forward—and hence readily comparable—the terms governing loan can be quite complex.  Any nonblank loan arrangement needs to be scrutinized with the greatest care.  In general, only one or two of the alternatives offer distinct advantage over a bank loan. Seguir leyendo LOAN ALTERNATIVES…

NONBANK BANKS

As we have noted, a number of investment companies and other corporations have, in recent years, began offering certain kinds of banking services to the general public.  Although these non banks are insured by the FDIC, they are not true banks because they do not offer commercial loans or accept commercial accounts.  Instead, they concentrate on serving the individual consumer and compete actively for his or her business.

The Dreyfus Corporation, for example, an investment company that manages a wide variety of mutual funds, has established the Dreyfus Consumer Bank, which offers credit cards, automobile and personal loans, and second mortgages at rates it claims are significantly lower than those charged by commercial banks.  Sears, Rebuck & Company has taken over the Greenwood Trust Company, which currently offers money market accounts and Discover credit cards without an annual fee.  In addition, charges incurred with the Discover card earn an annual rebate based on the amount charged.