Commercial and door-to-door representatives can make it sound so simple and even entice you to borrow more and more, either to buy homes, finance home improvements, pay medical expenses, or cover other personal needs. However, what most people do not seem to know is that paying these loans back can be a bit more demanding than expected most times. Many consumers may unknowingly become victims of unfair or “predatory” lending practices if they do not know the facts or do their homework properly, experts say.
However before taking on a large debt like a first or a second mortgage, experts advise you take time to investigate the lending market, your personal credit history and rating, and a number of lenders and programmes in the market . These simple steps, can save you lots of money and protect you from predatory practices.
Obviously with so many choices, picking the right loan product can be confusing, experts say. The law, however, is very clear. You have a right to know these five things before proceeding to take a loan: The annual percentage rate, amount financed, pay-off amount, finance charges and schedule when taking any loan.
Experts say a borrower has the right to be informed about the total cost of his loan, including the interest rate, points and other fees. A borrower has the right to know what fees are not refundable if you decide to cancel the loan agreement.
The law does not say that you necessarily need to be pointedly informed. Hence, experts’ advice is that as an intending borrower you talk with a lawyer about any terms you do not understand clearly. In future agreements, it is wise to confirm that any explanation that you ask for be put in writing. So, if there are any “surprises” after receiving your loan, you have proof that you were not merely signing documents, but you asked for thorough explanations.
A lender, either a mortgage house or a bank is not expected to invade a borrower’s privacy and should refrain from embarrassing him by divulging details of his existing contract. Physical intimidation of the borrower and violence are equally against a borrower’s rights.
Financial Experts say a bank or mortgage house is supposed to inform the borrower about his dues and give a sufficient notice period for payment. The bank is equally expected to send a notice at least seven days before it initiates recovery proceedings against the borrower.
The bank can only resort to repossession of property only as a last measure and is expected to ensure safety and security of the asset after taking custody. Upon selling the asset, if the bank is left with any excess amount after settling its dues, it must return this sum to the borrower. The borrower equally has the right to regain possession of the asset before it is sold by clearing his dues.
Experts say, if you believe your rights have been violated, you should inform the institution and make a good faith effort to resolve the problem. If this fails, you may wish to seek legal counsel. Some states have loan mediation programs certified by the government. If you initiate mediation through one of these programs, your institution is required to cooperate with requests for information and to consider debt restructuring proposals, however if this equally fails you are advised to head to a law court, experts say.
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Don’t squander your sudden windfall, invest it
It is possible for you to receive a windfall of money out of the blues. Money you did not labour to get. For instance, you may be saving money in the bank and you do not know that your bank is running a promo draw. Suddenly, you receive a phone call from your bank that you have won N1 million or more. Or you receive a sudden windfall of money from an inheritance, a settlement or just as gift of money.
In such circumstance, what do you do with such windfall of money? Miriam Caldwell, personal finance specialists explains that this extra money is an opportunity for you to improve your financial situation. Many people often squander away the money because they do not have a specific plan for it.
She said you should use the money wisely, adding that you should allow yourself a small percent to use for your enjoyment or entertainment. Generally, this should be no more than ten percent of the money.
The rest of the money according to her should be applied to your long-term financial plan. This plan should be based on your goals and should go with your investment strategy. If you still have debt payments you can use this money to pay off your debt. However, if you are not committed to staying out of debt, absolutely one hundred percent committed then you should invest the majority of the money. Otherwise you will simply run your debt back up in a few years and you will have nothing to show for the windfall. If you already have a firm financial plan the first step should be to get out of debt.
After you have gotten out of debt you should create an emergency fund of about six months of your income. This money should be put in a high yield savings account. This money should only be accessed for true emergencies such as a job loss or medical emergency. For all other expenses you should plan and save for them, Caldwell said.
She advised that after you have done this you should invest the rest of the money. The safest and easiest way to invest the money is to choose good quality mutual funds with a high annual yield. You should talk to a financial advisor about which funds to choose. You may find a financial advisor through your bank or through referrals from a friend. Mutual funds spread the risk over several stocks, but you should also diversify your investments over a few different mutual funds and mutual fund types in order to minimise your risk.
“Another option to consider is purchasing a home. If you have not already purchased a home this money may make an excellent down payment for the home or purchase it outright. You may choose to invest a large portion of the money and use some of it on a down payment. If you do purchase the home outright you should invest the amount that would be your house payment each month so that you can really begin building wealth,” she said.