Revolving loans – Sendika12 http://sendika12.org/ Wed, 28 Sep 2022 08:50:53 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://sendika12.org/wp-content/uploads/2021/10/profile-120x120.png Revolving loans – Sendika12 http://sendika12.org/ 32 32 Strange bedfellows call on CFPB to enact broader participation rule for personal loans https://sendika12.org/strange-bedfellows-call-on-cfpb-to-enact-broader-participation-rule-for-personal-loans/ Tue, 27 Sep 2022 19:17:38 +0000 https://sendika12.org/strange-bedfellows-call-on-cfpb-to-enact-broader-participation-rule-for-personal-loans/ The Center for Responsible Lending (CRL) and the Consumer Bankers Association (CBA) have filed a joint petition with the CFPB that urges the Bureau to engage in developing rules to define the biggest players in the personal loan market. In February 2022, the CFPB established a new procedure for members of the public to submit […]]]>

The Center for Responsible Lending (CRL) and the Consumer Bankers Association (CBA) have filed a joint petition with the CFPB that urges the Bureau to engage in developing rules to define the biggest players in the personal loan market. In February 2022, the CFPB established a new procedure for members of the public to submit petitions for rulemaking (including changes to or repeals of existing rules). The petition has been registered by the CFPB. Under the new CFPB procedure, registered requests will receive a final response from the CFPB. (The ABC previously sent a letter in October 2021 to incoming director Chopra in which it urged the CFPB to adopt a broader participation rule for fintech consumer lenders.)

In their petition, CRL and CBA describe the consumer credit market as consisting of five segments: mortgages (including home equity loans and HELOCs), credit cards, auto loans, students and “other personal loans”. They describe the category of “other personal loans” as encompassing three types of loans which may be secured (other than by real estate interest) or unsecured: short-term installment loans (generally lasting from three months to year), longer-term loans and revolving lines of credit. Secured loans in this category include loans intended to finance the purchase of durable goods (such as a household appliance or mobile home) and loans backed by security over an existing asset of the borrower (such as a vehicle).

CRL and CBA note that in 2015, the Bureau announced in its regulatory agenda that it planned to develop a proposed rule to define large non-bank participants in the personal loan market, including installment loans. consumer and vehicle title loans, and reported in its Spring 2017 Regulatory Agenda report that it was working on such a rule. However, as they also note, the Bureau under former acting director Mulvaney reclassified rulemaking as inactive in its spring 2018 regulatory agenda and has not spoken on the matter since.

Reasons set out in the petition why the Bureau should resume rulemaking for larger participants include:

  • A rapidly growing personal installment loan market, particularly as a result of changes in state law that effectively ban payday loans;
  • A significant portion of consumers who use other personal loans, especially consumers who obtain such loans from non-bank institutions, tend to be economically vulnerable consumers who cannot obtain credit through credit cards or HELOCs. , have exhausted their available credit or have incurred such debt that they need to refinance a credit card or HELOC;
  • Substantial growth in fintech targeting the subprime market and offering loans that consumers are struggling to repay;
  • The current regulatory regime creates an uneven playing field with CFPB-supervised banks and a significant risk that consumer protection issues affecting vulnerable consumers will go undetected; and
  • Risk-based supervision, because of the need for firm-specific findings, is not an adequate substitute for a higher participation rule in a market with a substantial number of significant participants.

In their petition, CRL and CBA recommend that the personal loan market be defined as follows:

Creation or management of closed or open lines of credit payable in installments and provided to consumers for personal, family, or household purposes other than loans secured by real estate, loans for post-secondary education as defined in 12 CFR 1090.106 (a), or automobile purchase or refinance loans as defined in 12 CFR 1090.108(a).

Regarding their recommendation that the Bureau cover both closed installment loans and open lines of credit, CRL and CBA state that “there is an ongoing debate as to whether [buy-now-pay-later (BNPL)] the loans are fixed principal loans or variable principal lines of credit” and state that “[g]Consolidating closed and open loans in the definition of a single market for personal loans will avoid potential inconsistencies with regard to the supervision of the Office and avoid potential uncertainties with regard to the coverage of BNPL loans.

Regarding their recommendation that the market be defined to cover both the origination and servicing of personal loans, CRL and CBA point to bank/fintech partnerships. Calling “questionable” the assertion that the bank in such partnerships is the true lender, they argue that it is clear that the non-bank partner is a covered person providing a consumer financial product or service in its role as loan manager. According to CRL and CBA, defining the market to cover services and origination “will ensure that these noncustodial fintechs, if large enough to meet the higher participation threshold, are subject to Bureau oversight at least relates to its service activities, including its billing activities, collection and provision of data to consumer reporting agencies. »

In August 2022, eight national trade groups filed a petition with the CFPB that urged the Bureau to engage in developing rules to define the largest participants in the data aggregation services market.

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When to refinance a personal loan https://sendika12.org/when-to-refinance-a-personal-loan/ Fri, 23 Sep 2022 15:09:54 +0000 https://sendika12.org/when-to-refinance-a-personal-loan/ How to refinance a personal loan Let’s see how to refinance a personal loan, step by step. 1. Check your loan amount First, check the exact amount you need to borrow on a new personal loan to pay off your original loan(s). Check the total loan amount owed as well as other significant costs or […]]]>

How to refinance a personal loan

Let’s see how to refinance a personal loan, step by step.

1. Check your loan amount

First, check the exact amount you need to borrow on a new personal loan to pay off your original loan(s). Check the total loan amount owed as well as other significant costs or fees you may incur to repay your original loan and secure your new loan, such as origination fees you may have to pay with your new lender. Origination fees are those charged by a lender to process a new loan application.

2. Check your credit score and credit report

It is important to understand your credit score before refinancing because your credit score directly affects your interest rate. A credit score is a three-digit number that indicates how well you manage your debts. In order to get pre-approved for a loan, your lender may do an informal credit check.

A serious inquiry, on the other hand, occurs when you allow someone to check your credit. If you have poor credit, you may want to improve your credit score before refinancing to get the best possible interest rate on your personal loan refinance.

You can pull your credit report to check your credit history. This is a summary of how you manage credit and to check for any inaccuracies before requesting a refinance. It’s a good idea to correct mistakes before refinancing for the best results.

You are entitled to a free credit report each year from each of the three major reporting companies – Equifax®, Experian™ and TransUnion®. Report any errors to each reporting company before prequalifying for a new loan.

3. Prequalify for a new loan

After checking your credit reports for errors, you can prequalify for a new personal loan. This is considered light credit, which will not affect your credit score. You will need to provide certain information, such as your name, address, income, social security number, and date of birth. Once pre-approved, your lender will share personal loan rates, terms and amounts with you.

4. Compare lenders and loan terms

Carefully compare lenders and loan terms. Banks and other lenders may offer different rates. Check out the various fees associated with refinancing (such as origination fees) and how you might pay for them over the life of your loan.

Note that you may want to contact your current lender to renegotiate the terms of your original loan, especially if you enjoyed working with your current lender.

5. Apply for a new personal loan

Finally, you will need to apply for your new personal loan, which may require you to provide your lender with your bank account information, identification documents, pay stubs, bank statements, etc. Your lender will also ask permission to do a serious credit check, which can impact your credit score. Your new lender will then repay your old loans and you will eventually start repaying your new loan.

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Loans are cheaper than bonds for some well-rated companies https://sendika12.org/loans-are-cheaper-than-bonds-for-some-well-rated-companies/ Wed, 21 Sep 2022 21:18:00 +0000 https://sendika12.org/loans-are-cheaper-than-bonds-for-some-well-rated-companies/ Some well-rated companies are turning to term loans rather than bonds for their funding needs, taking advantage of cheaper prices as banks adjust to rising interest rates more slowly than credit markets. As the Federal Reserve on Wednesday approved a 0.75 percentage point interest rate hike, finance chiefs are doing the math as they assess […]]]>

Some well-rated companies are turning to term loans rather than bonds for their funding needs, taking advantage of cheaper prices as banks adjust to rising interest rates more slowly than credit markets.

As the Federal Reserve on Wednesday approved a 0.75 percentage point interest rate hike, finance chiefs are doing the math as they assess alternative instruments to pay maturing debt, mergers and acquisitions or other transactions. The Fed’s rate hike was its fifth of the year, and banks’ funding costs generally react slower than bond markets to these Fed actions, with a lag ranging from weeks to months. said the bankers.

“We are seeing a resurgence in interest in term loans as it is a cheaper alternative for many borrowers,” said James Shepard, head of investment grade debt capital markets at Mizuho. Americas, an investment and corporate bank. He said the difference in financing costs can be as much as half a percentage point. “These are companies that would have opted for regular bond financing when financing costs were low,” he added.

Companies, including enterprise software company Oracle Corp.

feed manufacturer Conagra Brands Inc.

and Philip Morris International Inc.,

a maker of cigarettes and vaping devices, has secured financing through term loans in recent months.

Highly rated companies raised $998.8 billion in bonds in the United States this year through Monday, compared with $177.9 billion in term loans, according to Refinitiv, a data provider. For the whole of last year, fundraising through bonds was $1.46 trillion compared to $236.7 billion for term loans for companies rated as investments .

“It’s a small portion of businesses that really need capital right now, because a lot of them have already applied for funding,” said Don McCree, vice president and head of commercial banking at Citizens. FinancialGroup. Inc.

Banks often provide additional services to business customers — for example, cash management, hedging or underwriting — and therefore may charge less for term loans, he said. “As long as there are ancillary activities, pricing in the banking market can be supported by other sources of revenue,” McCree said.

Term loans often have shorter terms than bonds, with many ranging from three to five years. Companies that agree to take out a loan don’t have to draw on it, which can make it more of an insurance than an obligation, where investors pay the company soon after the deal closes. Revolving credit facilities differ from term loans in that the borrower can draw funds up to a limit, repay and draw again. In a term loan, the borrower generally makes a single withdrawal of funds and agrees to pay a fixed amount periodically.

Term loans and revolving credit facilities often have variable rates consisting of a fixed amount plus the guaranteed overnight funding rate, which moves up or down depending on market conditions, while issuers generally agree to pay a fixed rate when they sell a bond.

Conagra, the owner of top brands like Reddi-wip cream, Slim Jim meat sticks and Birds Eye frozen food, borrowed $500 million earlier this month in a term loan that it set up in August. The Chicago-based company said it plans to use some of the unsecured loan proceeds to pay down longer-term debt maturing in its 2023 fiscal year.

Conagra has about $937 million maturing in bond debt in calendar year 2023, according to S&P Global Market Intelligence, a data provider. The company, which had different financing options, said it chose a term loan because of the “relative strength of the bank loan market”. It last mined the bond market in August 2021, according to S&P data.

While highly rated companies have agreed to an average bond yield of 4% year-to-date, that average yield has risen to 4.8% for bond sales over the past three months, said Citizens. For bank loans, including term loans, companies with a simple A credit rating have agreed to pay a spread of SOFR plus 103 basis points, or 1.03 percentage points, on average since the start of the lending. ‘year. This average lending spread has fallen to SOFR plus 92 basis points over the past three months. SOFR was trading at 2.27% on Monday, according to the Federal Reserve Bank of New York.

Austin, Texas-based Oracle, a regular issuer of bonds in previous years, has also accepted funding through investment-grade term loans in recent months, including $4.36 billion in July at a cost 160 basis points plus SOFR, according to Refinitiv. The company has borrowed about $15 billion in term loans since the start of the year and has completely ignored the bond market. Oracle sold $14.9 billion in bonds in 2021, including about $2 billion maturing in 2028 for 2.3%, and $19.9 billion in 2020, including about $3.5 billion at maturing in 2060 for 3.85%, according to Refinitiv. The company declined to comment.

Oracle has borrowed about $15 billion in term loans since the start of the year.


Photo:

David Paul Morris/Bloomberg News

Philip Morris, which in June agreed to $5.8 billion in term loans alongside a bridge facility to finance its bid for Swedish Match AB, a maker of lighters and tobacco products, also did not back down on the bond market since 2020. The highly rated company declined to comment.

Bankers also noted increased interest in term loans among unrated companies. Energy Cheniere Inc.,

a producer and exporter of liquefied natural gas, in June refinanced and increased a $4 billion term loan and a $1.5 billion working capital facility. It has not announced bonds to investors this year as it did in 2021 and 2020, when it sold $750 million and $1.8 billion, respectively, according to Refinitiv. Cheniere, who is reducing debt to get a quality credit rating, declined to comment.

“We are seeing a growing trend for businesses to increasingly use prorated term loans,” said Kristin Lesher, head of middle market banking at Wells Fargo & Co., referring to a mix of credit facilities. revolving and term loans. “For companies with impending maturities, some are choosing to use term bank loans as a way to swap debt at a lower relative cost of capital.”

But term loans can have limitations. Royal Caribbean Cruises ltd.

, a New York-listed cruise line, last month placed $1.25 billion in bonds with a coupon rate of 11.625%, alongside a second offering of $1.15 billion at 6%. The company, which is struggling to reduce its debt to pre-Covid-19 levels and has a speculative-grade credit rating, uses term loans to finance its ships, but does not rely on these loans to obtain funds to repay maturities, said chief financial officer Naftali Holtz. “The long-term strategy is to arrive at an unsecured balance sheet. Term loans tend to be collateralized,” Holtz said, pointing to the mix of bonds and term loans that make up the company’s capital structure.

Businesses that mature in early 2023 and don’t want to wait for financing can take out a term loan now or hedge to sell fixed-rate bonds.

“If credit markets revalue, they can exit term lending and tap into the bond market instead,” Mizuho’s Mr. Shepard said. “It’s cheap insurance, take out a term loan now.” Nonetheless, businesses should cover transaction fees, which can vary by bank.

Write to Nina Trentmann at Nina.Trentmann@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Student loans need to be reviewed https://sendika12.org/student-loans-need-to-be-reviewed/ Tue, 20 Sep 2022 21:00:00 +0000 https://sendika12.org/student-loans-need-to-be-reviewed/ The Student Loan Fund (SLF), supposed to help students pursue higher education, has proven to be the most counterproductive financial device in the country. The latest amendment to the law to help fix the fund is a good start, but the agency that runs the fund needs major reform. Founded in 1995 to provide loans […]]]>

The Student Loan Fund (SLF), supposed to help students pursue higher education, has proven to be the most counterproductive financial device in the country. The latest amendment to the law to help fix the fund is a good start, but the agency that runs the fund needs major reform.

Founded in 1995 to provide loans to students from low-income families so they could pursue a university education, the SLF is riddled with debt – today some 90 billion baht.

The fund has the highest non-forming loans (NPLs) in the country, 47% more than the toxic debt incurred during the 1997 “Tom Yum Kung” financial crisis, according to information from the Bank of Thailand.

Last year, the fund had more than 2.3 million defaulters out of 6.4 million borrowers.

These cases of default ended in civil lawsuits, in which the guarantors of the debt – mostly teachers and relatives – had to give up their homes or land to settle their debts, in addition to paying a hefty sum. late penalty. It is disheartening to see the fund result in acrimonious lawsuits between government and students.

But hope was born last week when the Lower House approved the amended SLF Act at its third and final reading, resulting in interest-free loans for borrowers and no fines for those who default.

The new law also provides retroactive benefits for borrowers and loan guarantors under the SLF, resulting in a statutory amnesty.

Critics warn that such a populist legal amendment will place too heavy a financial burden on the SLF, which is intended to be a revolving fund that needs to be replenished constantly when loans are taken out so that it can be easily accessed by other students.

Deputy Finance Minister Santi Promphat warned that the zero-interest loan proposal would only promote irresponsibility and lack of financial discipline among borrowers, which would eventually dangerously deplete the fund.

SLF management should heed this warning and come up with realistic payment plans to facilitate debt servicing, offering flexible payment choices instead of sticking to the same annual basis and a rigid reduction calculation debt.

Fund management can penalize late payments and defaults by forcing them to work for the government or the community. The SLF should also partner with agencies and the private sector to provide educational counseling and help borrowers find employment. One of the main causes of debt payment avoidance is that many students cannot find decent jobs.

This forces the SLF to acquire a new soul. Over the past few decades, the fund has been criticized for focusing too much on trying to get student loans paid off and prescribing unrealistic payment plans that ultimately lead to mass defaults.

The government also needs to change its attitude and give the SLF sufficient funds to keep the agency afloat. Indeed, it makes no sense that the SLF has chosen to operate as a financial fund that has to sue students and guarantors for revenue.

We must also keep in mind that education is the best development investment the government can make. The government has provided many subsidies since the financial crisis of 1997, such as subsidies for rice and agricultural products and recently subsidies for oil and gas.

Now is the time to provide a grant to help our younger generation achieve higher education.

Editorial

Bangkok Post editorial column

These editorials represent the Bangkok Post’s thoughts on current issues and situations.

Email: anchaleek@bangkokpost.co.th

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Interest-free student loans are a ‘voting ploy’ https://sendika12.org/interest-free-student-loans-are-a-voting-ploy/ Mon, 19 Sep 2022 22:00:00 +0000 https://sendika12.org/interest-free-student-loans-are-a-voting-ploy/ Relaxed rules for students in debt House Speaker Chuan Leekpai on Monday criticized a draft amendment to the Student Loan Fund (SLF) law as an effort to curry favor with voters, saying the fund should find ways to promote repayments among borrowers. His remarks followed the House passing the bill to amend the law resulting […]]]>

Relaxed rules for students in debt

House Speaker Chuan Leekpai on Monday criticized a draft amendment to the Student Loan Fund (SLF) law as an effort to curry favor with voters, saying the fund should find ways to promote repayments among borrowers.

His remarks followed the House passing the bill to amend the law resulting in interest-free loans for borrowers, no fines for those who default and no guarantor requirements.

The bill, which has drawn the attention of critics that it would cause more defaults and undermine its liquidity, is awaiting consideration in the Senate. If the Senate rejects it, a joint committee between the two chambers will be set up to examine the bill.

Chuan: Fund created when PM

This decision was intended to help defaulting ex-students avoid legal action. According to the management of the loan fund, about 2.5 million borrowers have defaulted on their loans by the due date, representing 90 billion baht in principal repayment.

Mr Chuan said the fund recently faced defaults because some educational institutions advised students not to repay.

“I knew it because a borrower thanked me for the opportunity. I asked them if he had paid off the debt. He said no because the university had advised him and it was a private university.

“If we look at the numbers, student defaults in private institutions are high. Finances are important, and so is financial responsibility,” he said.

Mr Chuan said the fund, which was set up 20 years ago with a budget of three billion baht when he was prime minister, was meant to help poor students and has succeeded in bridging the gap educational opportunities.

When it started lending, the loan fund, designed as a revolving fund, could cover about 70,000 to 80,000 students. Currently, it has lent 690 billion baht in total to 6.2 million students.

He said the interest-free loan was seen as an attempt to woo votes, but he believed paying interest had its merits in that it would promote financial discipline and commitment among borrowers. In addition, the fund also generated interest income, which is essential to maintain its liquidity.

Khunying Sudarat Keyuraphan, leader of the Thai Sang Thai party, said the amendment was a populist ploy to garner votes regardless of its consequences.

She said that instead of just focusing on interest, defaults on loans should be dealt with systematically. Although loans may be offered, interest-free measures should be in place to encourage people to continue to repay their loan and prevent defaults.

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Miami County eyes $1.3 million for labor study, development and loans https://sendika12.org/miami-county-eyes-1-3-million-for-labor-study-development-and-loans/ Sat, 17 Sep 2022 00:38:22 +0000 https://sendika12.org/miami-county-eyes-1-3-million-for-labor-study-development-and-loans/ Colley explained that funding was freed up this year through the use of American Rescue Plan Act, or ARPA, funds for expenses directly related to COVID-19. In this case, general fund money was made available using ARPA funds to reimburse the Sheriff’s Department for salary time spent directly related to COVID activities. The commission will […]]]>

Colley explained that funding was freed up this year through the use of American Rescue Plan Act, or ARPA, funds for expenses directly related to COVID-19. In this case, general fund money was made available using ARPA funds to reimburse the Sheriff’s Department for salary time spent directly related to COVID activities.

The commission will be asked to hire Management Resources of Columbus to conduct the community-wide needs assessment.

Among the goals are to provide a broader perspective on the challenges faced by county residents, the county workforce, employers, real estate developers; more detailed details of housing needs; a vision to address housing needs and gaps; and suggestions for addressing other community challenges that may be identified. The process would include focus groups, interviews, surveys and a final report with recommendations, depending on the proposed agreement.

The consultants would work with the county’s workforce committee and with members of the private sector while carrying out their work, said Rich Osgood, county director of development.

Further work is underway on the 2023 elements of the project based on the needs identified in the assessment. Work is underway to develop the format for the revolving loan program.

The focus of the revolving loan program will be to help unincorporated areas of the county, but likely not exclusively, said Michael Clarey, the county’s deputy director of development.

“We haven’t compiled a full eligibility list yet,” he said. “These policies and strategies have yet to be formulated.”

When the county initially received ARPA funding that will total more than $20 million, the discussion included consideration of a revolving loan program among the use of that funding. However, due to ARPA’s “very prescriptive” guidelines for the use of program money, a new direction for funding a revolving loan program was taken, Clarey said.

Contact this contributing writer at nancykburr@aol.com

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Buy now, pay later loans: advantages and risks, pros and cons https://sendika12.org/buy-now-pay-later-loans-advantages-and-risks-pros-and-cons/ Thu, 15 Sep 2022 21:25:59 +0000 https://sendika12.org/buy-now-pay-later-loans-advantages-and-risks-pros-and-cons/ Buy now, pay later (BNPL) loans offered by services like Affirm, Klarna and Afterpay are exploding in popularity, and it’s easy to see why. This trendy new type of loan allows consumers to pay for their online purchases in a few interest-free installments over a period of weeks or months. Approval is usually quick and […]]]>

Buy now, pay later (BNPL) loans offered by services like Affirm, Klarna and Afterpay are exploding in popularity, and it’s easy to see why.

This trendy new type of loan allows consumers to pay for their online purchases in a few interest-free installments over a period of weeks or months. Approval is usually quick and easy, as it happens seamlessly on an online retailer’s checkout page.

As online shopping has increased during the pandemic, the ubiquity of BNPL funding has also increased. A new study by the Consumer Financial Protection Bureau (CFPB) found that the number of BNPL loans issued by five major lenders increased by 970% between 2019 and 2021. Loans were worth $24.1 billion in 2021, up from $2 billion. dollars in 2019. .

BNPL products can offer serious advantages, but they also have disadvantages. Among other concerns, these loans are “designed to encourage consumers to buy more and borrow more,” CPFB said in a press release, putting borrowers at greater risk of getting into debt they cannot repay. .

This is why the CFPB has announced its intention to regulate BNPL lenders the same way it treats credit card companies.

BNPL leaders applauded the CFPB’s efforts to improve transparency and consumer protection in the industry. Affirm CEO Max Levchin called the new report a “big step forward for honest finance” on Twitter.

“Consumers deserve absolute clarity,” Levchin wrote, “and should have the flexibility to pay over time without late fees, recurring or deferred interest.”

Klarna CEO, Sebastian Siemiatkowski tweeted that he looks forward to working with the CFPB to “accelerate sound and proportionate industry regulation that will drive competition and improve outcomes for all consumers”.

Here’s everything you need to know about the pros and cons of buy now, pay later loans – the credit card alternative often touted as the next big thing in online shopping.

What are the advantages of BNPL loans?

BNPL lenders tout their products’ ease of use, smooth interfaces, and the fact that they can be cheaper than other forms of consumer credit. Not to mention their ability to extend financing to those who may not qualify for credit cards or personal loans due to poor or limited credit history.

“The financial and operational benefits [of BNPL loans] legacy credit products are real and important,” reads the CFPB report. Here is an overview of these benefits:

Of no interest

BNPL lenders generally do not charge interest on installment payments. This is a major attraction for consumers.

No late fees

Some BNPL lenders do not charge late fees, but others do. It is important to understand the terms of the loan before finalizing a transaction.

Easy repayment structure

Most BNPL loans are designed to be repaid in four installments over a few weeks. Once that loan is paid off, it’s gone — there’s no revolving line of credit like there is with a major credit card. And since many BNPL lenders allow automatic payment (and require customers to keep a debit or credit card on file), consumers are less likely to forget a payment. Unfortunately, the mandatory automatic payment can also lead to problems such as overdrafts, notes the CFPB.

Quick approval

Online buyers can be approved for a BNPL loan in seconds.

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What are the risks of BNPL loans?

The advantages cited above can all be outweighed by the disadvantages. BNPL loans can encourage overspending and excessive borrowing, and they don’t come with the built-in protections that credit cards have. Consumers should understand these risks before using a BNPL loan:

Unsustainable debt

The CFPB warns that the ease of taking out a BNPL loan can lead consumers to take out too many loans at once and accumulate more debt than they are able to repay. Regularly taking out BNPL loans for a long period could also lead to financial stress, the CFPB said.

Credit rating damage

Credit bureaus like Equifax are beginning to incorporate BNPL data into credit reports. That might be a good thing for many (an on-time payment history will boost your credit score), but it also means that a late BNPL payment could hurt your score and make it harder and more expensive to borrow on any line.

Costs

Some BNPL change service fees and late fees. According to the CFPB, BNPL’s late fees are typically around $7 per missed payment for loans of around $135, but the fee structure varies by lender.

hidden interest

If you fund a BNPL loan with a credit card that you don’t repay in full, you’ll end up paying interest on a supposedly “interest-free” transaction.

Data privacy issues

“Buy now, pay later, lenders can gather extremely detailed information about your buying behavior unlike traditional cards,” CFPB Director Rohit Chopra recently warned. Lenders can use this data to encourage users to spend and borrow more, he said.

Fewer consumer protections than credit cards

BNPL loans are a very recent innovation. The regulations surrounding these products are not as strict, and consumers have fewer protections should something go wrong. It may be more difficult to resolve disputes or return products purchased with a BNPL loan compared to products purchased with a credit card.

More money :

How “Buy Now, Pay Later” Services Can Help (or Hurt) Your Credit Score

“Buy now, pay later” apps like Affirm and Afterpay just came under federal surveillance investigation

The 6 Best Credit Cards of 2022

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Lending standards tighten as appetite for riskier loans declines https://sendika12.org/lending-standards-tighten-as-appetite-for-riskier-loans-declines/ Tue, 13 Sep 2022 15:06:17 +0000 https://sendika12.org/lending-standards-tighten-as-appetite-for-riskier-loans-declines/ Lending standards tightened in August amid a deteriorating economic outlook and signs of slowing house price growth. The Mortgage Credit Availability Index (MCAI) edged down 0.5% to 108.3 in August from the previous month, according to the Mortgage Bankers Association (MBA). A decline in the MCAI, pegged at 100 in March 2012, indicates that lending […]]]>

Lending standards tightened in August amid a deteriorating economic outlook and signs of slowing house price growth.

The Mortgage Credit Availability Index (MCAI) edged down 0.5% to 108.3 in August from the previous month, according to the Mortgage Bankers Association (MBA). A decline in the MCAI, pegged at 100 in March 2012, indicates that lending standards are tightening while an increase in the index suggests an easing in credit.

“The availability of mortgage credit declined slightly in August as investors reduced their offerings of ARM and non-QM loan programs,” said Joel Kan, associate vice president of economic and industry forecasts at MBA. Kan added that some lenders continue to streamline their operations by dropping certain loan programs to simplify their offerings, with origination volume expected to decline about 48% to $2.3 billion in 2022 from $4.4 billion. last year.

“With a deteriorating economic outlook and signs of slowing house price growth, the appetite for riskier lending programs has been reduced,” Kan said.

The conventional MCAI, which does not include government-backed loans, fell 1%, and the government MCAI, which reviews FHA, VA, and USDA loan programs, remained essentially unchanged. Among the indices that make up the conventional MCAI, the MCAI Jumbo fell 0.7% and the MCAI Compliant fell 1.2%.

The drop in the availability of mortgage credit follows the volatility of mortgage rates which ended August at 5.8%, according to Black Knightof the Optimal Blue OBMMI pricing engine before falling back in July. With the fifth interest rate hike expected this month after the Federal Free Market Committee (FOMC), the 30-year fixed rate jumped to 5.98% on September 12.


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The decrease in the availability of mortgage credit was offset by a slight increase in the new home equity line of credit (HELOC), a revolving line of credit that allows borrowers to draw money from the line of credit up to to a predefined limit. While workable equity, defined as the amount an owner can borrow against while maintaining a 20% equity stake, is expected to decline this quarter, it hit a record $11.5 trillion in the prior quarter.

“With overall home equity still at high levels, HELOCs could benefit borrowers who may want to forgo their current low mortgage rate, but want to use their home equity to support other spending plans. “, said Kan.

Amid a rapid decline in mortgage lending, non-bank lenders capitalized on rising home equity, a space that was dominated by custodian banks.

In August, rocket mortgage and his wholesale arm Rocket Pro TPO started offering home equity loans and Guaranteed rate introduces a digital HELOC. Companies considering deploying HELOC products include loanDeposit and New residential investment company.

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Cheaper long-term loans to support productive sectors https://sendika12.org/cheaper-long-term-loans-to-support-productive-sectors/ Sun, 11 Sep 2022 22:00:59 +0000 https://sendika12.org/cheaper-long-term-loans-to-support-productive-sectors/ the herald Olivier KazungaSenior Business JournalistTHE government is ready to facilitate significantly low interest rates and long durations on all the financing facilities that the Treasury will put in place to support the various productive sectors of the economy. The Minister of Finance and Economic Development, Professor Mthuli Ncube said this while answering questions from […]]]>

the herald

Olivier Kazunga
Senior Business Journalist
THE government is ready to facilitate significantly low interest rates and long durations on all the financing facilities that the Treasury will put in place to support the various productive sectors of the economy.

The Minister of Finance and Economic Development, Professor Mthuli Ncube said this while answering questions from the audience at the end of the Confederation of Zimbabwe Industries (CZI) three-day annual conference which ended on Friday at Harare.

The financing facilities include the $15 million industry support fund to be introduced by the government, which would come from the special drawing rights funds that Zimbabwe has received from the International Monetary Fund (IMF).

Last year, the IMF allocated Zimbabwe $958 million as part of a general allocation of $650 billion that was disbursed globally to member countries of the multilateral institution.

Professor Ncube recently launched a $30 million SDR-backed horticulture export revolving fund that is expected to close the financing gap for growers, boost productivity and significantly help entities with a bias towards value addition .

Through resources such as SDRs, the Treasury targets strategic sectors such as horticulture expansion and value addition.

“And you ask about support for the industry in terms of lower interest rates and longer term financing.

“I’m listening, what I’m going to do is engage the banks that are on this retooling fund and see how much they can extend the terms of the loans and also what interest rate we could peg them, which will actually be lower than the marketing rate.

“So I’m going to actually do that with all the facilities that we put in place as a government,” he said.

Professor Ncube said the SDR disbursement of $145m will be channeled to a number of priority sectors including investments in social sectors (health ($35m and education ($10m). ); support to agriculture (30 million dollars) and smallholder farmers). irrigation systems (20 million dollars), support to industry (re-equipment), development of infrastructure (housing development, 10 million dollars) and gold centers ($10 million).

One of the major challenges preventing local industry from ramping up production to optimal levels is the much needed funding for retooling and sourcing critical raw materials.

Professor Ncube said the government would also consider protecting the agricultural sector, fearing that the sector would also face undue competition from some imports flooding the local market.

“On agricultural imports, you would basically want to be protected as a local producer on some of the agricultural raw materials.

“If there is a local producer capable of producing the same product, why import this product?

“As a government, we should think carefully about protecting local industry because we are ultimately protecting jobs.

“I totally agree with that and will engage the Minister of Agriculture to see which areas we should close,” Minister Ncube said.

The agricultural sector is one of the main economic pillars contributing to gross domestic product and tax through job creation and foreign exchange generation, among other fundamentals.

On why the Reserve Bank of Zimbabwe was allocating foreign exchange when the country had so many commercial banks, Professor Ncube said: “Our banking sector is dual in nature in that we have mainly banks owned by local interests, then to foreign interests. banks, and the two groups do not trade with each other, neither for domestic monetary purposes in terms of settling their positions overnight, nor for foreign currency purposes in terms of pricing our exchange rate or the value of money.

“So because of this problem, we find that the Central Bank then has to play an interdependent role.

“For example, if one of the foreign banks is long overnight and a domestic bank is short, the Central Bank will use zero percent NCDs (negotiable certificates of deposit) to mop up that excess liquidity from the bank. and literally switch to the local bank overnight,” Prof Ncube said.

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Stanbic IBTC bank guarantees agribusiness owners loans for expansion https://sendika12.org/stanbic-ibtc-bank-guarantees-agribusiness-owners-loans-for-expansion/ Mon, 05 Sep 2022 14:17:41 +0000 https://sendika12.org/stanbic-ibtc-bank-guarantees-agribusiness-owners-loans-for-expansion/ By Aduragbemi Omiyale One of the aspirations of agribusiness owners is to expand their operations, but this has not been achieved largely due to lack of funds. However, Stanbic IBTC Bank is committed to solving this problem by providing financing solutions to agricultural enterprises tailored to their needs regarding the availability of resources for the […]]]>

By Aduragbemi Omiyale

One of the aspirations of agribusiness owners is to expand their operations, but this has not been achieved largely due to lack of funds.

However, Stanbic IBTC Bank is committed to solving this problem by providing financing solutions to agricultural enterprises tailored to their needs regarding the availability of resources for the purchase of mechanized agricultural equipment, as well as improving the flow of seasonal cash for industrial production.

The lender said it supports the sector because of its importance to the country’s economy, as it is essential for sustainable development and essential for job creation.

The Head of Agribusiness at Stanbic IBTC Bank, Mr. Wole Oshin, said Nigeria’s ambitions for accelerated and inclusive economic growth hinged on achieving a vibrant agribusiness sector capable of sustaining the enterprise development and large-scale employment.

He pointed out that Stanbic IBTC offers various credit facilities in the agricultural sector that help value chain actors to thrive.

“The loan facilities available are intended for agribusinesses to meet the short to medium term financing needs of crop and livestock producers, processors, their distribution chain and other value chain actors. The loans provide revolving working capital (to meet day-to-day operational needs and purchase inputs such as seeds, fertilizers, raw materials) and equipment financing solutions to farmers and agribusinesses,” said Mr. .Oshin.

According to him, some advantages of Stanbic IBTC agribusiness financing include the availability of surge financing for unforeseen financial needs, maintenance of cash flow, and flexibility of repayment terms depending on the type of financing. . He added that the facility was also versatile and could be used to finance resources for small and medium enterprises (SMEs), vehicles and agricultural equipment.

In addition, Mr. Oshin added that Stanbic IBTC has stepped up its efforts for the betterment of the agri-related sector by offering free capacity building sessions to SMEs in the industry, noting that most of the sessions help educate the SME owners on key business skills.

He noted that Stanbic IBTC Bank also provides financing solutions to agricultural enterprises to meet their needs regarding the availability of resources for the purchase of mechanized agricultural equipment, as well as improving seasonal cash flow for production. industrial.

“For example, Stanbic IBTC has committed £50 billion to launch a national agricultural finance scheme. The Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) and has signed a Memorandum of Understanding to boost agricultural productivity and modernization by facilitating increased bank lending to the sector,” he said.

Mr. Oshin said that Stanbic IBTC has committed these funds for the start of the program. The first phase of the program is expected to impact thousands of lives through job creation and increased incomes for farmers and agribusinesses, a testament to the financial institution’s efforts to spur a inclusive economic growth through agriculture.

He explained that Stanbic IBTC expects the program to increase production from farmland, diversify the revenue base and provide vital resources and raw materials to the manufacturing sector. He said that the idea of ​​providing financial solutions to agriculture and agribusiness as a strategy to accelerate economic growth is gradually starting to gain traction.

“Stanbic IBTC understands that financing agro-allied industries is a sure way to diversify the Nigerian economy as these industries are poised to trigger rapid business development in Nigeria,” Mr. Oshin noted.

Improving access to credit for small farmers and agribusinesses at low interest rates will have a huge impact on the micro and macro economy. The growth of the agricultural sector is essential to economic development. Stanbic IBTC recognizes this and that is why the organization intentionally develops initiatives and fosters partnerships that support industry players.

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