Category Archive 'Personal finance'

What Makes an Unsecured Personal Loan Better Than a Payday Loan?

Personal finance

If you could use some cash to resolve some kind of pressing financial issue, you have plenty of company. Many people face this situation on any given day. That’s fine if you have excellent credit and can obtain a loan with relative ease. What about those who have credit that’s not so great? Do they have not choice but to seek out a payday loan lender? The answer is no. An unsecured personal loan will accomplish the same end and provide some benefits that a payday loan could never provide. Here are some examples.

A Lower Rate of Interest

There’s no doubt that an unsecured personal loan offers better conditions than payday loans. One of the first things you will notice is the difference in the interest rates that come with each financing option. Simply put, a personal loan will have a more competitive rate of interest than any payday loan.

What does that mean? Over the life of the loan, you’re likely to save a tidy sum in terms of interest payments. That’s especially true when you opt for a personal loan with a shorter duration. As a way to get the money you need now without creating a greater financial burden, the unsecured personal loan comes out ahead.

Longer Repayment Period

The nature of a payday loan is to repay the borrowed amount plus interest within a short period of time. Even with the most liberal payday loan terms, borrowers are typically expected to repay the obligation over the next one to two pay periods. The most likely scenario is that the debt becomes due when your next payday rolls around.

By contrast, an unsecured personal loan could allow you anywhere from a couple of months to a year or more. Instead of having to pay everything in such a short time, you can structure the loan so that you have a series of manageable monthly installment payments. Thanks to this approach, it’s easier to repay the debt without putting stress on your household budget.

Fewer Fees and Additional Charges

Payday loans are certainly convenient, but there’s a price to pay for that convenience. Along with higher interest rates, there are likely to be a number of fees and charges bundled into the mix. Some of them may be easy to understand. Others will take some research to figure out.

With personal loans, there are still some fees and charges. The difference is that they are usually fewer add-ons and it’s easier for the average consumer to understand them. If you’re the type of person who values clarity when it comes to entering into binding agreements, the personal loan is easily the better choice.

Your Timely Payments are Often Reported to Credit Bureaus

If there’s any payday loan lender that reports payment histories to the major credit bureaus, rest assured that lender will be difficult to find. The industry standard is to not report activity to any of the credit agencies. That means the money you repay to the lender will do nothing to help you improve your credit score.

With unsecured personal loans, it’s not difficult to find lenders who will report your timely payments to at least one of the major credit agencies. Some lenders will report to both of them. Along with offering you better interest rates, more manageable repayment terms, and loan contracts that are easier to understand, this type of lender will also help you boost your score by a few points.

The bottom line is that there is no real benefit to choosing a payday loan over an unsecured personal loan. If you’re in need of some financing, take a look at what personal loan lenders can offer you. If you compare their terms and conditions with those offered by the typical payday loan lender, it will be easy to see which solution is in your best interests.

How to calculate your foreign exchange fees in Excel

Excel function tutorials, Personal finance

Moving currency across borders is far more expensive than most suspect. That’s because banks and money transfer providers charge more than the wire fees you see upfront.

These businesses make money in three different ways. Their wire fees are the most visible charge. However, two other categories often fly under the radar – commissions, and the exchange rates they offer.

To calculate how much you’re paying in foreign exchange fees, you need to account for all three factors. Below, we’ll show you how to create an Excel spreadsheet that will evaluate the fees charged by money transfer providers.

The easy part: accounting for wire fees & commissions

Let’s get the basic stuff out of the way first. The first two factors – wire fees and commissions – are absolute numbers that don’t change much from day-to-day. That makes them incredibly easy to account for.

After creating the outline of your spreadsheet (as shown above), enter the institutions you’ll be comparing in column A. Then, enter your transfer amount in column B. Next, find the fees these institutions charge upfront. $30 is our default for the banks, as it’s the lowest amount many American institutions charge for international outbound transfers. Enter what you find for each service in column C.

Then, if you can track it down, enter the commission percentage in column D. Enter it as a decimal (e.g., 0.02, not 2%), so it will work in our equation. However, we’ll acknowledge that this figure is hard to find in the public sphere. For instance, Western Union pays agents a commission for the transfers they process. However, to protect itself against competitors (and from public scrutiny), it treats these figures as a trade secret.

Above, we’ve entered a figure of 0.02 for the banks. This figure is a standard rate many airport exchange desks in airports earn on every transfer they make. We use 0.06 as a conservative estimate for Western Union’s agent commission – however, some rumours state that some can earn up to 30%!

The math-intensive part: calculating the exchange rate margin

So far, putting together our spreadsheet has been an exercise in data collection. Here’s where it starts to get “mathy” (yes, we’ve just invented that word… deal with it.) You’ll need to find two exchange rates – the one your institution charges, and the interbank (aka the “wholesale”) rate.

Some banks make this data readily available, like Toronto Dominion Bank in Canada. However, many American institutions aren’t fond about making this info public. To be fair, Bank of America kind of does it, but only for inbound transactions (e.g., they’ll show you their CAD/USD rate, but not USD/CAD.) As a result, you may have to call your local branch.

Next, find the interbank rate. For decades, XE.com has been the web’s trusted source for this data, a purpose it continues to serve. Plug in the amount you want to transfer, your desired currency pairing (e.g., USD/CAD), and click the arrow button. You’ll get the interbank rate, as well as the inverse for the pairing you chose.

Now, take your bank’s rate and subtract it from the interbank rate. Repeat this for every money transfer provider you’re analyzing, and input the result in column E.

The hardest part: Calculating your total cost

Time to find out how much each money transfer provider is charging you in fees. We put the “Total Cost” column to the right of the others to add emphasis – we advise you do the same.

Begin the formula creation process by clicking the first cell in Column G, and entering the equal symbol (=). Start with the easiest component – wire fees. Click on the first cell in Column C, then enter a plus sign (+).

To calculate the commission, we’ll need to make a bracketed equation. Open a bracket, then click on the first cell in Column B (your initial transfer amount.) Then, enter the multiplication symbol (*), followed by clicking on the first cell of Column D (the commission percentage.) Remember to keep this figure in decimal form, or you’ll break the equation.

Close the bracketed equation, and enter another addition symbol. Then, start the second bracketed equation – this one will determine the exchange rate margin. After opening the bracket, click on the first cell of Column B. Follow it with a multiplication symbol, and then click on the first cell of Column E.

Close this bracketed equation, and hit enter. If done right, this should calculate how badly your bank is ripping you off. According to the spreadsheet we’ve made for this article, your equation should look like this:

=C3+(B3*D3)+(E3*B3)

Your final step: Duplicate these results for the remaining entries. Hit CTRL+C  (Command+C if you’re a Mac user). Then, highlight the remainder of the cells in Column G and hit CTRL/Command+V. This step will copy the formula to each row, giving you data on the remaining money transfer providers.

Not an Excel wizard?

If you can’t be bothered to craft your own spreadsheet from scratch, we don’t blame you. However, you shouldn’t allow money transfer providers to take liberties with your money.

Over on MoneyTransferComparison.com, they have an international money transfer fee calculator. Enter your initial transfer amount, and the amount sent. In seconds, you’ll know whether you got a killer deal, or if you got fleeced.

Are You Debating Investing in Stocks? What You Need to Know

Personal finance

Trading stocks is a sexy topic. It’s very interesting. We’ve all heard anecdotes of someone that invested $20 and became rich overnight. Everyone hears a story like that. We all want to be that success story. However, we rarely hear about both sides of the coin.

Is it possible to become rich in a matter of days off the stock market? Not really.

Do you need tons of money to make money on the stock market? Nope. You don’t have to be rich. You can get started with a few dollars.

Can anyone trade stocks? Absolutely! You just have to open an account with an online brokerage. This can take only a few minutes and you can be trading stocks in the near future.

For now, let’s look at the idea of investing stocks and what to consider if this if a financial experiment that you’re considering.

“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” — Warren Buffett

Are you debating investing in stocks? Let’s look at what you need to know.

Stock prices always change!

The price of the stock will fluctuate all day every single day. Can you handle this? When I first started trading stocks, I couldn’t fathom this thought. I would hit refresh on the page every couple of minutes. I then soon realized that this was no way to live life. You have to be able to come to terms with the fact that the stock price will constantly change. Good and bad. Sometimes it will soar through the roof, tempting you to sell. Other times, it will crash, tempting you to pull out of the stock market forever. Just a warning.

On that note…

You need to be able to handle risk.

How do you deal with risks? What happens to you in an uncertain situation? Some investors are just not meant for the stock market. Others thrive off it! I can’t tell you what to do. All I can suggest is that you understand your own investor profile so that you make moves according to what you can handle.

Most trading accounts will actually help you out with this. They’ll ask you questions to see what you’re all about. They don’t want you to get in over your heard right off the bat. Some rookie investors need to start off with bonds and more conservative investments.

Can you handle risks?

Do you understand the business of the company?

I’ve been a student of Warren Buffett for years now. He preaches the importance of understanding what the company does before you invest your money into it. This was my biggest mistake as a young investor. I would invest my money into companies that I simply did NOT understand.

Why does this matter? Because it’s impossible for you to grasp how things are going if you don’t understand the business. Just because your co-worker or a friend of a friend suggests that you invest in a company, it doesn’t make it the right thing to do. The right companies to invest in are usually the ones that you understand.

You can check out E* trade online trading to get started right now! What will be your first stock purchase?

 “Price is what you pay. Value is what you get.” — Warren Buffett

How Would You Deal With an Unexpected Expense?

Personal finance

We all know that life can throw us a curve ball at times. In mid-2011, due to a freak accident my engine got messed up. Then as soon as I fixed this, someone rear ended me and drove off. So yes, I had a rough month there. I had to fork over tons of money that I wasn’t planning on spending. I had to miss out on a trip and I really had to cut back. Thankfully, I had the money in an savings/emergency account. I definitely wasn’t too pleasant about suddenly blowing all of this money.

We’ve all had to deal with a financial emergency at some point in life. It’s not pleasant, but life doesn’t care about that.

How would you deal with an unexpected expense? This question is always on my mind because you really never know what can happen. You can always at any point in time get hit with a shock expense. If you’re living paycheck to paycheck, this will catch you off guard and ruin things for you.

Let’s look at common options for dealing with sudden, yet unexpected expenses:

Your credit card.

Most of us will usually turn to a credit card to deal with a sudden expense. It’s quick and easy. Best of all, credit cards do NOT ask questions. Everyone else does. With your plastic, you don’t have to worry about approval as long as you’re within your limit.

There’s just one difference here. Some of us have the money in a savings account to pay off this balance. Others have to wait for their next paycheck to handle this. Which side do you fall under?

Your emergency fund.

Do you have money saved away just in case? While some of my friends don’t believe in just leaving money around in savings account, I do. I see the argument for why it makes sense to invest your money. I just don’t believe that you have to invest every single penny. You can keep some money in a savings account just to cover yourself in the event that something should happen.

When dealing with an emergency, you don’t want to stress about liquidation or selling off stocks. You just want instant access to your hard earned money.

Be screwed!

Unfortunately this is an option because we either can’t always be prepared or the expense is too large. In the former situation, the onus is on you to take the time to put some money away. In the event of the latter, there’s nothing that we can do. There’s only so much money that you can save for emergencies. Some emergency situations will simply be too large too handle. Hopefully this doesn’t happen to any of you guys.

What’s your plan? I’m curious to hear about how you guys would handle a surprise expense if something were to happen tomorrow  Do you have a plan? Do you just go with the flow?

Where Are You Keeping Your Money?

Personal finance

Where have you been putting your money? Most of us want to keep our money somewhere interesting. We search the web to see where we can invest and how to invest. I’m here to give you some help by throwing out some of the most common options.

Where can you keep your hard earned savings?

Your checking account.

Some folks keep their money in their checking account or a fairly-liquid account because they refer to this as their “emergency fund.” While it’s easy to scoff at this idea, it makes sense because you always have access to your money. You don’t have to stress about ever going broke or covering for emergencies. You don’t have to use your credit card to pay for it and then worry about insane interest rates.

What if you want to take some risks?

The stock market.

This is of course one of the more riskier options because there are no guarantees. When you invest in a specific stock, you have to worry about every single move that the company makes. If there’s a public blunder, you can almost always guarantee a drop in stock price. You always have to stay on top of the moves that the company is making. This isn’t passive at all.

On the bright side, the returns can be higher. When the returns are high, you’re smiling and proud of your investment. Just please remember that there are risks involved. Don’t get too greedy. I’ve gotten far too greedy in the past. I once could have cashed out and doubled my money. Instead I waited. Why? Because I wanted more money! What happened? I lost money because I waited too long. You live, you learn.

Real estate.

Real estate is where you need to have the most money to get involved. You need dozens of thousands of dollars before you try to apply for a home mortgage. You need to tie up a serious amount of capital into a property because property isn’t cheap these days.

Since I recently invested into real estate, I’ll share my best tips on the topic:

  • Research all properties in advance.
  • Save lots of money.
  • Perform the property management all on your own.
  • Ask for many opinions.
  • Shop around for the best mortgage rate.

Safe investments.

This is where a term deposit comes into play. Term deposits are a stress-free investments with flexible options. These are ideal for those of us that don’t want to stress about our money. We work hard enough. We don’t have to risk the chance that we could lose any of our money. That’s the last thing you need.

Where are you going to keep your money? These are some of the top options, but you don’t have to limit yourself to what I covered on here. There are tons of other options.