A Brief Look At Various Types of Loans Available

A Brief Look At Loans
"Innovative financial packaging" is how it is sometime known. Essentially what this means is that financial institutions look for more and more ways to lend to their customers - after all, charging interest on a debt is the main way that they make their money. But, with more and more loans now available, it can sometimes be difficult to know exactly which loan to apply for. The following explanations try to clear this issue up a little for you:
Personal Loan
Probably the mainstay of financial institutions is the personal loan. As the name suggests, personal loans are money borrowed from a financial institution for personal use. In nearly all cases, a personal loan is going to be unsecured, which means you'll likely be paying a premium on interest. Once the personal loan is given, you repay it by making monthly repayments to the lender. In effect, this is the multi-purpose loan.
Auto Loans
Auto loans are where you borrow money from a financial institution in order to buy a car or vehicle. In most cases auto loans are done by the car dealer, but there is no reason why you cannot make arrangements with your bank before buying the car to borrow the money from them. As with a personal loan, most auto loans need to be repaid by monthly installments. Sometimes, although not always, the financial institution will secure your loan with the vehicle, which means if you cannot repay the loan they'll repossess your car. One additional expense with an auto loan is that most lenders insist that you take out fully comprehensive insurance during the period that the auto loan is outstanding.
Home Improvement Loans
As the name suggests, home improvement loans are where you ask a lender to lend you money so you can improve your home. In most cases a home improvement loan is granted on the condition that you give the lender a second rank mortgage on your home. As such, the loan amount can rarely exceed the valuation price of your home - including the increased value after the improvements have been made. Again, home improvement loans usually need to be paid by monthly installments; however, balloon (or bullet as they're also know), one-off, payments are also sometimes accepted.
Education Loans
Education loans are where you borrow money to further your studies. One big difference between an education loan and any other type of loan is that most education loans, although given by a financial institution, are underwritten by the government. Consequently, the interest rate on education loans (also known as "student loans") is usually very low.
Holiday Loans
These days it is even possible to go to your bank and ask them to borrow money so that you can go away on holiday! As you'll be using the money to go on holiday, this type of loan is unsecured. Consequently, interest rates are high. Not really a recommended way of paying for your holiday, but nice to know it's out there if you need it!
Debt Consolidation Loans
Unfortunately debt consolidation loans are becoming more and more popular these days. A debt consolidation loan is where you have too much debt on store cards and credit cards and you need to borrow money to pay these all off and consolidate them into one big debt. The advantages of doing this are two-fold: (i) hopefully you'll lower the borrowing interest rate; and (ii) you only have to deal with one creditor.
Having decided upon the type of loan you want, all you need to do now is to ask your financial institution to approve the loan - Good Luck!

Source: Sara Dowling

An Introduction to Life Insurance

Protecting your family from financial disasters is one of the fundamental components of financial planning. Life insurance should be a core part of that planning process. This article is a basic primer on life insurance, which should introduce you to the concept and give you an idea of how life insurance works.

What is life insurance?

Most people have a basic understanding of insurance. You receive financial compensation when an insured event occurs. Consider auto insurance, for example. If your car is in an accident or stolen, your insurance company provides compensation according to the terms outlined in your insurance policy.
On the surface, life insurance is pretty straightforward. When the insured person dies, the policy pays a prearranged amount to the designated beneficiary. The following parties are generally involved in a life insurance policy:

• The Insured. The person on whose life the policy is based.
• The Beneficiary. The person who receives the payment.
• The Owner. The person responsible for payment of premiums. It is typically the insured, but it could be the beneficiary.
• The Insurer. The insurance company that issues the policy promising payment.
• Traditionally, both spouses have life insurance policies in order to protect their family in case one of them dies.

Why purchase life insurance?

The main purpose of any life insurance policy is to protect your family and loved ones against the risk of financial uncertainty. Life insurance can provide for the welfare of your family in face of your death. If you have a spouse, three kids, a mortgage, car payments, and credit card bills, what would happen to them if you were suddenly to die? Would your family have enough money to keep the house, car, pay off credit card debt, and send your children to college?

Life insurance can guard your family and loved ones from potential financial disaster.

Types of life insurance

While the idea of life insurance may be pretty basic, there are some complexities to consider. The most important point to remember is that there are several different types of life insurance products, which can make it difficult to select the right one for your family and your financial needs.

There are two basic forms of life insurance — term life and permanent life, the latter of which comes in several flavors. Here’s a quick breakdown of the basic policy types:

Term life is the simplest and (typically) cheapest form of life insurance. Term life is designed to provide coverage for a fixed period of time, such as 5, 10, or 20 years. The premium for the term policy is guaranteed for the duration of the term; if it is a renewable policy, the premium will increase with each renewal. The premiums for renewals are generally guaranteed when the original policy is issued. Because term life policy is for a specific period of time and the payout does not increase, the overall cost of term life insurance is usually very low.
The other three common types of life insurance are permanent policies &mash; they last for the entire life of the insured, not just for a fixed period of time.

Whole life policies, for example, are designed to provide you and your loved one with coverage until your death. Unlike term life, there are no fixed periods for whole life coverage. Whole life is sometimes referred to as “cash value” insurance because it builds cash value over your lifetime. Whole life coverage contains both investment and insurance components. The investment portion invests your premiums, earns interest, and accumulates a cash value. On the other hand, the policy also has a stated insurance coverage amount that is paid upon the death of the insured.
One of the most popular forms of permanent life insurance is variable life. Variable life policies allow you to invest your premiums in the stock market. While a variable policy may offer more significant returns, it’s also at the mercy of stock market performance. In a poor performing market, the overall death benefit/cash value of the policy may decline — but never below a defined level. As a result, the policy may be more expensive because you may have to pay more to keep the policy active because less money is available to cover the policy’s premiums.

Universal life is a popular option that acts like whole life. It is a renewable policy — the investment component, premiums, and death benefits can be renewed and changed based upon the policy owner’s needs. The policy owner has flexibility over the policy — money can be moved between the insurance and investment components of the policy. The premiums, unlike whole life policies, can be paid out of interest from the accumulated savings.

Life insurance: A great tool Because of its many options and overall flexibility, life insurance can be a powerful tool in your financial planning arsenal. Consider that life insurance can be used to pay for funeral costs, college tuition, mortgage payments, debts, and more. It can also serve as income replacement — providing your spouse and family with a greater sense of financial certainty.

Remember, like all insurance policies, your coverage can lapse if you do not make timely payments. If you need help to cope with the complexities of life insurance, contact an insurance professional. You should also read the fine print closely (possibly with the help of your insurance professional) to understand if there are any limitations on the policy and what it covers.

Source: Ray from FinancialHighway