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Giving Money to Relatives Or Friends Common

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Many households give or lend money to help others out.
Many people give or lend money to help family and friends out.
Opening one’s wallet to help a family member or friend is “a hidden dimension of the financial system,” according to a study from the Pew Charitable Trust. “Transfers of money across household lines are really important for keeping families afloat.”

25% Of Households Lent to Friends Or Family.

About 25 percent of American households gave or lent a median of $1,000 to friends or family in the past year, the study showed. More than 7,800 households were included in the survey. Black households are most likely to give or receive such help, but the practice is spread among all demographics.

Burden Created.

It isn’t always easy. One in five of the respondents said the “gift money” creates a burden on the giver. Not unexpectedly, the households with the least income saw their donations as a difficulty. But even those making $85,500 per year reported that their generosity was a burden.

Single Mothers Receive And Give The Most.

Single mothers are among the most common recipients, but they also are more likely to give when necessary. Half of all the single-mother households either received or gave help, compared with 30 percent of two-parent households. Some 75 percent of the single parents said it was hard to give, but they also are the group that recognizes it may need a boost at some time. They are, in essence, investing against future need, creating a safety net that they can use to tide them over emergencies.

More Common For Parents To Help Adult Children.

The study showed that adult children in the period from 2005 to 2013 were more likely to draw on cash from their wealthy parents than was common in the 1980s. About 10 percent of those in the more recent group received help with a home purchase, Pew found. Slightly more than 30 percent were given money to help with education costs, enhancing their ability to become more wealthy in the future.

The bottom line of the Pew Study: Poor people tend to help each other out so they can get through tough times. Wealthy families benefit financially when they donate to kin.

How Wise Are Lengthy Auto Loans?

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car-loansWhen you buy a new car with terms stretching five years or even more, what are the financial consequences?

Obviously, you’ll pay more interest. But in the meantime, your earnings likely will grow and the monthly payments will be more affordable. You might be able to increase your payments, erasing the effects of the interest.

Car buyers are increasingly using this tactic to pay for vehicles, which are becoming more expensive all the time. Experian Automotive reports that 30 percent of all new vehicles purchased in the first three months of this year were financed over six to seven years. Sixteen percent of used vehicles, ditto.

Lower interest rates, more extensive manufacturer warranties and the better durability of today’s vehicles make the longer pay-off periods acceptable to many buyers. People today tend to keep a vehicle longer as well, on average about eight years, according to automotive sources.

Before diving into a long-term loan for a car, consider these factors:

Look at overall costs, not just the monthly payment. The salesman on the lot will try to focus your attention on monthly element, but consider total price, down-playing sticker total and interest. Keep in mind that the interest on an auto, unlike mortgage interest, is not tax deductible.

If you can come to the lot with a preapproved financial guarantee in hand, you can negotiate based on total cost and consider the details later. Compare the preapproved amount with the dealer’s offer and then make a decision. An Edmund’s interest rate calculator will provide an honest appraisal of how much you will pay over the term of a six or seven year loan. The calculator can be accessed at http://www.edmunds.com/calculators/simplified-pricing.html

How long do you estimate you will have the vehicle? If you expect that you will have it for some time after it is paid off, you can look forward to a period free of car payments. The trade-off may be more costs for car repairs and upkeep. The amount you can expect for trade-in value also will have declined.

Most experts in the field discourage using a long-term loan to purchase a used vehicle. Suppose your choice of a used vehicle is three years old. If you are still paying on it seven years later, it is 10 years old and for many vehicles, that is approaching the end of its usefulness.

Depreciation is a factor. In the case automobiles, it begins the moment you drive it off the dealer’s lot. If you choose to sell the car in the first few years, you are looking at a loss if depreciation has outstripped the value. And the potential for accidents may enter into the picture. If you total your vehicle when it is three years old, for instance, it’s likely you still owe more on the loan than the vehicle’s current worth. That’s known in the trade as being upside down on the loan.

A long-term loan may be the answer to your desire for a newer, safer car, but don’t leap until you are sure of all the financial facts.

Related articles across the web

    Can You Qualify For A Second Mortgage?

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    If you are thinking about getting a second mortgage, you may discover that you just don’t qualify.

    The Wells Fargo formulas for deciding whether you will be offered an increase in a home equity line of credit are making it more difficult for the average American.  Self employed business owners seem to be affected deeply.

    If you were caught up in the economic problems that started in 2008, you may have lost your job and had to look for other work or make other plans. So maybe it wasn’t the end of the world for you, but it wasn’t fun either. So you try something new and decide to go into a new type of work or something totally different than you were used to doing. You end up building your own business and it doesn’t start off with a bang, but hey, it pays the bills. Good for you.  You helped yourself cope with a difficult situation.

    So your business begins to grow and your 2009 income isn’t too bad.  In fact it’s rather decent so you want to do the best thing for your financial situation by consolidating your debt and getting rid of any credit card debt so that while you are working to pay off debts you are getting a lower interest rate and can use the interest you pay to lower your taxable income.  That would help you out.

    Well, 2010 comes along and you’re business is really doing well. The best you could have ever hoped for and it’s growing. Congratulations! Great news. Life looks better in 2010 doesn’t it?

    Not to Wells Fargo. Wells Fargo uses this procedure to decide whether they can increase your home equity loan. They require that you send in two years of tax returns. Well, remember that in 2008 with your new business just starting, you may have made over $10,000  and had $4,000 in deductions. Now Wells Fargo says that well in that year, you get credit for making $6,000.  They won’t even count the rest of 2008 because it was in a different field. They then divide that by 12, because of course that is how many months there are in a year.

    So they calculate that you are making $500 a month.  Do they consider the 2009 income at all?  Well sure they do, but because there is such a huge discrepancy, they have to go with the smaller amount of money that was made in 2008. But they will give you what they call a cap of 125%. They then multiply 125% times the $500 a month and come up with a $626.25 figure . That is the new figure of how much they think you make per month, regardless of what you made in 2009. Isn’t that smart?

    Then they look at your current minimum payments for your mortgage, association fees and revolving credit and come up with your debt to income ratio. It doesn’t take a rocket scientists to figure out that most mortgages will exceed $626.25, so right there you’ve gone over 100% debt to income ratio and they come to the brilliant decision that they shouldn’t give you a loan, because well…your debt to income ratio is too high.

    For people who have the guts to start their own business and pursue it, you are going to have to have to know that it is pretty useless to try to borrow any money until you’ve had a solid two years of income that they can wave their magic formulas on to predict what you will do in the coming years.It’s a good thing that entrepreneurs have more insight and determination to grow a business than the banks have to risk lending their money to you.

    How to Qualify for a Home Loan

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    Owning a home has been considered a logical investment, as it gives a sense of security. It is asset than can be passed on to the next generation. With the recent turn in the economy, buying a home is becoming more enticing as property prices are going down. Although this is true, purchasing a home can still be expensive. Obtaining a home loan can help in being able to purchase property.

    To apply for a home loan, banks normally check the applicant’s background, whether they have a good, steady job or some other stable source of income. Credit line is also checked, whether the applicant has been responsibly paying his/her debts well. An applicant must also have collateral as financial back up, as an assurance that the applicant will be paying back the loan in full.

    Do some research on how much you can ask from lenders.  This will give a general idea in figures of how much you can borrow, how much of your income is needed for the down payment as well as for the succeeding payments. Evaluate how much you can afford to spend for the house loan, in consideration with other existing monthly payments. It is recommended that less than a third of the applicant’s monthly income be spent on the payments for the loan and property.

    Start saving money for the purchasing of the house before attempting to apply for a home loan. Possible ways of saving for the home loan and property purchase include taking a second job or reducing unnecessary expenses. This initial investment is a good demonstration to the lender of the applicant’s good intent in purchasing a house. There are also other options to be considered in obtaining financial support when purchasing a house such as the Veteran’s Administration loan for veterans. Consult with your real estate agent regarding other financial support options.

    As a result of the recent development in the economy, banks are becoming more stringent in assessing applications. However, there are ways of improving chances when applying for a home loan. In order to prepare for qualifying for a home loan, it is recommended that the applicant obtain a copy of their credit report from a qualified agency. There are services which can send a report annually or directly contact the agencies for an immediate copy. Take note of outstanding or unpaid credit, as this is an important aspect that banks check for. Pay back all debts. If this is not completely possible, then make it as low as possible. This is important as it sends a note to the lender of the applicant’s reliability in paying back the loan.

    Banks normally ask for collateral as an assurance that the applicant will pay back his/her loan. Other properties in real estate or investments in the stock market are possible sources of collateral.

    There are no definite rules that can assure the applicant will obtain the home loan. Loans are approved on a case to case basis. However, following these tips increases the chances of getting the home loan. Do not despair if you are denied a home loan but see it as a sign that there may be areas in your application that need improving.

    Federal Reserve Rate Remains The Same So What Should Do We Do?

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    Should I Refinance My Mortgage?

    Having the advice of someone who is an economist from Quicken loans, is probably a little better than the advice I can get through my local connections.

    So Bob Walters, from Quicken loans, if you say that “Homebuyers and homeowners looking for a new mortgage need to navigate this uncertain market carefully,” I will take heed. I’m not really looking for a new mortgage but for those of you that are, well…proceed with caution. [Read more…] about Federal Reserve Rate Remains The Same So What Should Do We Do?