Identifying the Difference Between Good and Bad Loans

The media has been over-run with talk about mortgage and credit card defaults. Many homeowners have been scrambling to save their homes from foreclosure. Hearing all of this, we might begin to wonder whether there really is such a thing as a good loan.

Using credit is not always a bad thing. We just need to understand when it is appropriate. Loans make sense when they help us increase what we already have. For example, we can use a credit card for everyday purchases if we are buying things that are within our budget and if we are able to pay the entire balance off when the monthly bill arrives.

Using the credit card can do two things. First, it allows us to put our cash to work earning some interest while we borrow the credit card’s money for free. Second, many credit cards offer cash back bonuses, flyer miles, or other perks. There is nothing wrong with accumulating these perks if it doesn’t cost us in the process.

Another example of a good loan can be a mortgage or a home equity loan. We need to be careful here, though. We should only borrow when it is going to increase what we already have.

For example, we can pull cash out to purchase more property. Real estate has the potential to be a great investment. We can use the equity in our current home to buy a rental property that can essentially pay for itself. If time permits, we can also invest in fixers. These properties may just need a little work to significantly improve their market value.

Be careful

However, please be cautious. Only a very few properties make good investments. There are diamonds in the rough out there. It is not as easy as those workshops make it look. It requires research and doing a lot of homework to find the right properties that will build our wealth.

We should only borrow money against our properties if we know that we are able to put it into an investment that is earning more for us than the cost of the loan. Do not gamble with your home. Make sure the numbers are solid.

Bad loans

Any other reason for borrowing money would make it a bad loan. We should never use credit cards as a way to get things that we cannot afford. Instant gratification may feel good now, but the interest proves that it is not the best decision in the long run.

We should not use debt consolidation programs, home equity loans, or refinancing to pay off our credit cards so that we can run them up again. We also should not borrow against the home to remodel or buy new furniture. These large purchases should be planned in advance, and we should be saving toward these goals each month until we can afford them. That might mean doing one room at a time, but the cost will be significantly less than if we borrow money to do it.

Car loans and leases should also be avoided, if possible. Borrowing to purchase a depreciating asset is not a wise investment decision.

The loan that we need to be extremely careful with is the loan from a friend or family member. It is always best not to borrow from them. Misunderstandings and miscommunication about money can cause the relationship to fall apart. It can also damage relationships with other friends or family members who find themselves caught in the middle. If it does become a last resort, it is always best to put the terms of the agreement in writing just to make sure that everyone is on the same page.

The Secrets of Litigation Finance

There are secrets to litigation finance that every plaintiff should know prior to applying for lawsuit funding. Too many plaintiffs rush to litigation finance as the answer to their current cash flow problems without completely understanding the intricacies behind litigation funding. This article should shed some light on plaintiff litigation finance and the secrets that some litigation finance companies use to make money

What is litigation finance?

Litigation finance is not a “loan” but rather it is a cash advance based upon the merits of a lawsuit that provides a plaintiff with sufficient funding to reach the conclusion of the case when the plaintiff will receive his/her fair share of the settlement or verdict. Litigation finance companies invest in the lawsuit itself as opposed to advancing money to the plaintiff in the form of a loan. Litigation finance is not based on a plaintiff’s prior credit or bankruptcy status. Other terms used for this type of funding include: lawsuit loan, litigation funding, litigation loan, lawsuit funding, lawsuit finance, lawsuit cash advance, case loan, case cash advance, plaintiff cash advance, litigant funding, pre-settlement loan, pre-settlement lending, pre-settlement cash advance, etc.

How do litigation finance companies make money?

All litigation finance companies are different and charge interest and fees differently. We all agree that litigation finance companies assume a lot of risk due to their investment in the lawsuit as opposed to investing in the plaintiff. The investment is therefore only as solid as the case. We are all familiar with how quickly a good case can get thrown-out or a jury can award a large settlement for a case that we could call “frivolous.” The United States justice system never ceases to surprise us. With that in mind, the investments of litigation finance companies are risky. They must charge relatively high interest rates on the cases that are successful in order to make-up for the unsuccessful cases. Some litigation finance companies use a multiplier instead of an interest rate which is really just a different way of accomplishing the same thing.

Are there other fees associated with litigation finance?

Again, all litigation finance companies are different and charge interest and fees differently. Generally speaking, the answer to this question is “yes.” These fees usually show-up on the contract that the plaintiff’s attorney must sign and are then taken from the settlement upon a successful case. Some examples of these fees include: origination fees, application fees, documentation fee, closing costs/fees, premature payoff penalty etc. These fees are not that different from traditional loans but plaintiffs should be aware of these so they are not blind-sided when they see these fees.

Is litigation finance a different way of getting my settlement?

Litigation finance should not be a substitute for your settlement but rather a raft that helps you stay afloat while your attorney fights for you. Too many plaintiffs apply for litigation finance with the belief that litigation finance is simply a different way to get their settlement money. Assuming you win your case, the amount owed to the litigation finance company varies greatly depending upon the length of time between the date of the advance and the date when you receive the settlement/verdict money. You should exhaust other means of funding first. Some good sources of information about litigation finance are The Funding Exchange (www.TheFundingExchange.com) and Expert Law (www.expertlaw.com).

Conclusion

As a plaintiff, you should understand litigation finance and the process of securing funding before you apply. If your expectations are set appropriately and you proceed with litigation finance then you will find that it is a saving grace in the turbulent world of litigation. If you apply for litigation finance without a true understanding then you may be disappointed.

Import Financing Options To Choose From

The import and export business is still one of the lucrative types of trades you can get into. However, importing is still a risky business to get into.

If you are still interested in entering the foreign trade industry, one of the first things you have to do is to secure the best available export and import financing solutions. With these solutions, you will have access to the working capital required for your venture as well as enhanced cash flow since you can get the assurance that all pertinent matters are effectively settled with suppliers and payments are promptly received from buyers.

There are different import financing options to choose from today. Businesses can use them on their own or two or three more in conjunction. Below are three of the most popular options you can choose from:

1. Accounts receivable financing. This option pertains to the selling or pledging of your company’s account receivable, at a discount, to a bank, financial institution, or an accounts receivable financing company who may assume a risk of loss. Under this solution, you receive a portion (usually 80% to 90% of the face value of your receivables) in advance of payment from your customers in return for a fee, or interest, which will be paid to the commercial finance company. When the customer pays the commercial finance company, the appropriate fees are deducted and the remainder is rebated to you.

2. Purchase order financing. This import financing option refers to the assignment of purchase orders to a third party, a bank, financial institution, or commercial finance company, who then takes all responsibilities of billing and collecting from customers. Purchase order financing can be used to finance all present and succeeding orders to sustain and improve your company’s cash flow.

3. Inventory financing. Inventory financing pertains to a loan secured by the inventory of your business. This financial solution enables import companies to hold more stock without cash flow strain and to produce more sales. Most of the time, inventory finance is part of a purchase order and accounts receivable financing commercial finance package.

The three types of import financing solutions stated above can enable your business to increase its purchasing capabilities dramatically. With these options, you can accept larger orders and grow your business exponentially.

By choosing the right bank or financial institution, the import financial solutions you need can also be tailored to your business’ particular requirements.