Insurance World

Consider that many of these unsecured loans are also called signature loans. The only thing reassuring the lender you will pay back is your word or your signature. There is no real property of value to secure the loan. The only recourse the lender has is to take the borrower to court. If there was collateral or security, the lender could sell it to cover the loan. In light of that, here are seven points worth considering if you are looking to take an unsecured loan.

Point 1: I.O.U. Loans

Time-worn though it may be, it is still alive and well. Though the most simple of loans, it must be treated with care. Getting cash from a friend or family member involves a lot more than paying back money on time as stipulated. Missing those terms could mean bad blood and relationships on the rocks.

Point 2: Credit Cards and Cash Advances

Even though many consumers spend billions of dollars every year on credit cards, they do not see credit cards as loans, but that is what they are. The credit card issuer lends you money to give to a merchant. The consumer pays back the loan to the credit card company. Many card issuers have taken unseemly measures to penalize users for the slightest infractions. Fees are imposed and interest rates are increased to near loan shark standards. Cash advances are the most expensive items charged to credit cards.

Point 3: Traditional Lenders

Many brick and mortar financial institutions still offer signature loans. Today they call them personal lines of credit. The institutional underwriting guidelines set the credit limits and the interest rates. Credit scores and other indicators are used and the better the credit score the more favorable these loans will have.

Point 4: Sky-Rocketing Interest Rates

Many lenders like to say that since no collateral is being offered, and that the borrower often has low credit scores, the higher rates are necessary to cover the risk of the loan. Consider that these loans are often rather small. A loan of $250 could require the borrower to pay back $285 - after only two weeks. Indeed, $34 may not seem like a lot, but it is time after time in the hands of the lender.

Point 5: Bankruptcy and Unsecured Loans

Lenders do have a point when it comes to bankruptcies. Any unpaid unsecured loans usually end up at the bottom of the heap when it comes to paying out of properties seized during bankruptcy proceedings.

Point 6: Protection from Zealous Collectors

If collection agencies are hounding a consumer, they do have recourse through the Fair Debt Collection Privacy Act (FDCPA). If a consumer defaults on a loan or a credit card, this ruling disallows harassing calls, calls at work, or the threat of lawsuits when none is possible. It includes provisions for harassed consumers to sue, including the right to attorney fees.

Point 7: Credit Scores and Approvals

Most lenders will run a credit check on a consumer who requests an unsecured loan. Usually referred to as FICO (a credit industry acronym), the better one is the better the chances of approval and the lower the interest rates charged. Any consumer can get this score for themselves. Before making any loan application it should be checked for errors -- and there usually are.

Check the Borrower, And the Lender, Too

Old as the caveman, folks for generations have relied on unsecured loans. The importance of understanding the rates and terms before signing on any dotted line is incumbent on the borrower, but check the lenders, too. Whenever folks start dealing with the money of others, there is plenty of room for shysters.

Hilary Bowman is the author of this article. She works successfully as a financial advisor with years of expertise on Unsecured Loans. Hilary publishes informative articles about loans for bad credit and other financial topics at FastGuaranteedLoans.com

A good candidate for the best-known Robert Kiyosaki Quote is: "The poor work for money; the rich have money work for them." I am going to make the assumption that most readers of this are familiar with his writings, and will ask the following question, what is your ?

What's the going value for the sale of a business? Isn't it often the projected two years' profits of the business being sold? Okay, then. If you were to ask me what my personal net worth is, according to Robert Kiyosaki, I would have to take the net earnings I made last month from the business I have been building recently, and multiply it by twenty four. That simple equation would be my personal net worth, since I currently have no additional passive sources of income to add to this.

That certainly disqualifies a lot of the usual contributors, like for example the equity in my home. Let's say I own a $150,000 home with a $100,000 mortgage, thus giving me presumably $50,000 in value. I have just cut myself out of that $50K. Why in the world would I do that?

Answer: it keeps me honest. This used to be a radical concept, but those with a reading of the housing bubble ought to understand that a $150,000 home today might not be worth $150,000 tomorrow. Why would I include in my current personal value the proceeds of a home I likely have no intention of selling anytime soon? So let's not count it.

By contrast, let's pretend that I have owned my internet business for the past year which is netting me $2000 per month. In this example, the business I am building is structured in such a way that, after one year, half of my sales is generated actively (perhaps through initial enrollments in a service program of some sort), and the other half is earned passively (maybe I had the foresight to develop an auto renewal program for this business.) What does this mean for my net worth?

Clearly there would be exceptions to this rule, but if I were to sell my business, I could not presume that the buyer had yet developed the selling skills that I have developed in building my business, so we cannot use the active income as a factor. The passive income is all the buyer could count on. So, here is my

Monthly Passive Income (50% of Total Monthly Net of $2000) $1000
Times 24 months 24
Total $24,000

Doesn't that make it even more tempting to my $50,000 home equity on top of that? I would triple my net worth with a stroke of a pen! But again, were talking honesty here.

There are a couple of lessons to be learned from this:

1) The $2000 total income, or even the $1000 passive income, is a more profitable and safer investment strategy than what we are typically advised to do. If I were to take my sale proceeds and invest it in a dividend product that guaranteed a 10% annual return which I cashed out, I would earn $2400 that year, or $200 per month. Considering that $1000 was coming to me with no more effort than the dividend product would, I would have been a fool to sell this business.

2) We are woefully ignorant about money. A 10% return is considered pretty aggressive by most investment strategies. If the inflation rate is 7%, leaving us with a 3% growth difference in real purchasing power, the traditional advise of buy, hold, and diversify is going to be insufficient. A 25-year old making $50,000 per year and putting 10% away in a retirement account will have accumulated $377,006.30 today's dollars, giving that person $11,310.19 per year to live on, in today's post inflation dollars, at the age of 65. And this sample person is substantially more diligent in preparing for their retirement than the average American is! Using the 24-month rule and only calculating for passive (investment, in this case) dollars, this person would have a of $22,620.38. Pretty ugly!

I would strongly encourage you to pick up any of Robert Kiyosaki's books and give it a thorough read. Personally, I still have a long way to go in the pursuit of having money work for me, but I will master this! My future, and the future of my family, depends on it.

Busymom has been scouring the net for a viable and ethical way for a novice like her to develop passive income on the web. She now has the resources to enjoy time raising her four children. Learn more- http://busymomseasyincome.com/

Article Source:http://EzineArticles.com/?expert