Finance Debt – Sznurki http://www.sznurki.net/ Sun, 15 May 2022 11:16:00 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://www.sznurki.net/wp-content/uploads/2021/04/sznurki-icon-150x150.png Finance Debt – Sznurki http://www.sznurki.net/ 32 32 What happened to Upstart’s $400 million stock buyback program? https://www.sznurki.net/what-happened-to-upstarts-400-million-stock-buyback-program/ Sun, 15 May 2022 11:16:00 +0000 https://www.sznurki.net/what-happened-to-upstarts-400-million-stock-buyback-program/

Earlier this year, the artificial intelligence lender Reached (UPST 16.32%) announced a $400 million share buyback program. But in the first quarter of the year, which ended March 31, Upstart did not buy back any shares. Additionally, management made no mention of the program in its recent first-quarter earnings call. So what happened to this stock buyback program? Is Upstart still planning to buy back shares? We’ll take a look.

So what’s the problem ?

Upstart officially announced the share buyback program along with its fourth quarter and full year earnings report for 2021 on February 18 this year. It’s a bit unusual for a fast-growing company like Upstart to conduct a share buyback program so soon, but CFO Sanjay Datta attributed the situation to two things: the company’s profitability and “opportunism economic” in the sense that management thought the stock was undervalued.

At that time, Upstart was trading around $130 per share. Towards the end of March, there were times when the stock traded below $100, and very briefly below $90, so there were opportunities to buy back shares.

Image source: Getty Images.

But we do know that during the quarter, Upstart also faced several other issues that kept it busy. Upstart wants to be a technology company that helps investors, banks and credit unions better assess the credit quality of borrowers so they can initiate loans and see lower loss rates. However, Upstart doesn’t really want to be a bank. He wants to see as many loans as possible created with his software because he collects a fee for each set-up.

Upstart does not intend to keep loans on its long-term balance sheet as it is not capital efficient and would slow growth. But in the first quarter, loans on its balance sheet fell from about $252 million to about $598 million. Some of this is intentional, as Upstart recently started offering auto loans, which the company previously said they were keeping on their balance sheet until further testing.

But a small portion of the personal loans that would normally have been sold to investors have also been taken to the balance sheet. As interest rates rose in the first quarter and the economic environment became more uncertain, some investors who normally purchase and fund loans had to take a step back to consider how they should assess risk, which resulted in a funding hiatus. Upstart decided to book these loans to “fill in” the gap. This was one of the main reasons why the shares sold off intensely after the earnings.

Not only does this indicate that capital markets could dry up for Upstart loans, but Upstart is also now responsible for that credit risk should something go wrong. In addition, interest rates have steadily increased since the end of the first quarter, so the situation on the financial markets may have deteriorated. Upstart can retain capital at this time in case there are loan losses or the situation escalates and Upstart has to step in again. Given the market reaction, I imagine Upstart will want to get these loans off its balance sheet as soon as possible.

Will Upstart repurchase shares in the future?

Upstart’s share buyback program is still active, so the company could, in theory, repurchase shares at any time. He could have bought back shares since the beginning of April. From a value perspective, there would be no better time to buy back shares than now, with stocks trading about as low as they have ever been.

But I would be surprised to see Upstart buy back stocks with so much market turbulence. I also never thought it was a good idea, to begin with. On the one hand, Upstart may want to invest more in its product. Although management has invested, she said part of the reason for the pause in capital markets funding is that the process of adjusting loan yield thresholds by institutional investors is still mostly manual, while that Upstart’s banking and credit union partners can adjust their performance. thresholds in a much more autonomous way. Management said it plans to further automate this and make the capital markets system similar to that of partner banks.

But the thing is, it looks like there’s a lot to invest in, so I’m not sure the company would send the right message to the market by buying back shares. I think they should focus on getting the business back on track.

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Should you buy prepaid maintenance? https://www.sznurki.net/should-you-buy-prepaid-maintenance/ Fri, 13 May 2022 21:53:49 +0000 https://www.sznurki.net/should-you-buy-prepaid-maintenance/

Prepaid maintenance plans can be big savings if your regular maintenance is expensive. This may be especially true in today’s automotive market, where larger vehicles that rely on synthetic oil can command higher prices. But should you opt for prepaid maintenance, or is it an additional service worth skipping?

How does prepaid maintenance work?

Prepaid maintenance plans are a dealer added service that includes the cost of regular trips to the service center. Programs like this and other services like GAP insurance and extended warranties are usually offered to you by the finance and insurance manager, towards the end of your loan process, before you sign the documents. final.

These programs offer regular maintenance, such as oil changes and tire rotations, on a prepaid basis. Your maintenance will then be included in the cost of your loan, and you won’t have to worry about paying for services out of pocket when you do them at the dealership you purchased from.

When prepaid maintenance services are built into the cost of your loan and you have them on a pay-as-you-go basis. For example, if your service includes an oil change every six months and you don’t go, you’re paying for a service you didn’t get. Or, if you’re not in the area of ​​your authorized service center when you need an oil change, you might have to pay someone else to do it anyway.

Of course, plans and coverage differ depending on who supports them. Plans offered by your dealer tend to be more rigid, only allowing service at a specific dealer or group of dealers. Plans offered by the manufacturer can be more versatile, allowing you to get serviced at any franchised dealership across the country.

A disadvantage of prepaid maintenance is that the cost is built into your loan, which means it increases your monthly payment amount and increases your overall loan amount. That could add up to a lot more than you bargained for in interest charges, especially if you’re a bad credit borrower who qualifies for higher interest rates.

Is prepaid maintenance a good idea?

Prepaid servicing may be a good idea for some borrowers. If you’re not one to remember what to do with your car or you’re not one to keep a good schedule, having scheduled service built into your loan could help. to remind you to have your car serviced regularly.

On the other hand, the price of prepaid plans can get steep when you factor in the extra interest charges you pay. In this case, paying out-of-pocket for your maintenance as needed makes more sense, especially if you have a high interest rate.

If you’re looking for extra peace of mind, know that a prepaid maintenance plan is not the same as an extended warranty that might fix unexpected issues. Prepaid maintenance is only for basic services such as oil changes, fluid fills and tire rotations. All things that are normally done at the same time, and don’t cover anything extra you might need.

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Down 85% from peak, 4 reasons to bet Carvana stock will fall https://www.sznurki.net/down-85-from-peak-4-reasons-to-bet-carvana-stock-will-fall/ Mon, 02 May 2022 14:27:29 +0000 https://www.sznurki.net/down-85-from-peak-4-reasons-to-bet-carvana-stock-will-fall/

Shares of Tempe, Arizona-based online used car retailer Carvana are heavily shorted. In mid-April, 20% of its shares were sold short, meaning traders borrowed shares from a broker, sold them on the open market and hoped to profit by buying back the shares at a lower price. to repay the loan.

But that short-term interest is down from the last time I reported on it here – November 2019 – when a whopping 51% of stocks were sold short. As I wrote at the time, I thought these shorts were in trouble for a simple reason – despite burning cash and a terrible credit score on its debt, Carvana had one thing investors loved – growth three digits.

After that, Carvana shares soared 365% to peak in August 2021 at around $377 per share.

Unfortunately for the bulls, Carvana’s stock quickly tumbled and it is now trading 85% below its peak.

Is it too late to take advantage of Carvana’s decline? Here are four reasons I think his stocks are sub-short:

  • Decrease of sales
  • Bespoke accounting for securitized auto loans
  • Negative cash flow
  • Lower debt rating

Decrease of sales

Although its revenue increased from the previous year, Carvana sold fewer used vehicles in the first quarter of 2022 than in the last quarter of 2021. Carvana reported a 7% drop in the number of cars sold to customers of detail in the first quarter. – 105,185 – about 7,800 less than it sold in the previous quarter, according to the the wall street journal.

To be fair, compared to the first quarter of 2021, revenue was up nearly 56% to $3.5 billion.

This represents a considerable slowdown for Carvana. As the Journal noted, since the spring of 2020, Carvana has “roughly doubled its quarterly sales volume as more consumers shopped online.” However, the Journal wrote that Carvana has “struggled backlogs in its logistics network and reconditioning centers” due to labor shortages resulting from the pandemic.

Unfortunately, its first-quarter slowdown was accompanied by a 622% increase in its net loss to $260 million and a nearly 23% drop in its gross profit per unit to $2,833. External factors — including rising interest rates, falling used-car prices, inflation-conscious consumers and a dwindling appetite for debt — are contributing to slowing growth, the Journal noted.

With shares down 85% from their peak, Carvana’s biggest challenge is convincing investors that it can meet its growth targets – which had driven its death-defying stock price.

Analysts doubt Carvana can meet its 2022 retail sales target – announced in February – of more than 550,000 cars – about 29% more than the 425,237 units sold in 2021, according to its letter to shareholders for the fourth quarter of 2021 .

It is not known if the company will achieve this goal. Carvana said, “Over the next several quarters, we expect to better align sales with expense levels through a combination of higher sales and expense efficiencies.”

It also doesn’t help investors that Carvana has stopped providing financial advice due to “rising interest rates, rising fuel prices and macroeconomic uncertainty, all of which are affecting the market for used cars,” according to the Journal.

Perhaps to seek new avenues for growth, Carvana is in the process of acquiring ADESA – America’s second-largest physical vehicle auction network – for $2.2 billion. Carvana expects the deal — funded by $3.275 billion in committed debt financing and “$1 billion in improvements at all 56 sites” — to add about two million new production units, according to the letter. to shareholders in the fourth quarter of 2021.

Something important for Carvana changed between February and April. On April 20, Carvana said it planned to sell $2 billion of common and preferred stock, in part to fund the ADESA deal – which “came as a surprise to investors because Carvana said it had received a funding committed,” the Journal noted.

Bespoke Accounting for Securitized Auto Loans

Securitization, that is, bundling loans and selling them as securities to investors, can work very well in good times. But when the tide goes out, securitization can cause problems.

A case in point is the 2008 financial crisis. Back then, lenders created subprime mortgages, bundled them together and sold them to investors – with sterling credit ratings that masked the risk. Investors – including Bear Stearns and Lehman Brothers – borrowed heavily to buy the subprime mortgage-backed securities – then crashed.

I’m not saying Carvana is going to cause a financial crisis on the order of 2008. However, Carvana is no stranger to securitization – wrapping up the car loans it makes to consumers who buy its used cars online. Dubbed other sales and revenue, Carvana generated about $1 billion from the sale of auto loans in 2021 – nearly 8% of total revenue, according to its 10K 2021

In my opinion, if a company chooses a different method of accounting than its peers, that alerts investors. This is exactly what Carvana does when it comes to accounting for car loan sales. As the Journal reported, “Carvana is making immediate gains, unlike competitors who are making gains over time.”

It would be useful for investors to know how much Carvana’s income would be reduced if he recorded his gains over time. How? The Journal suggests that Carvana’s accounting method “boosted its revenue when consumer credit — and investor demand for auto loan-backed securities — was particularly strong.”

Carvana’s accounting approach contributed significantly to its earnings and caught the attention of its auditor. In 2021, 54% of its $4,537 gross profit per vehicle came from “other profits,” compared to 36% in the second quarter.

Carvana’s method of accounting – which relies on “relatively delicate accounting to remove loans from its books” is an audit problem. According to an August 2021 report in CFO Dive, the company’s auditor, Grant Thornton, “identified initial sales as a critical audit matter, a reference to the complexity of the transaction.”

To be fair, Carvana’s accounting method is not a potential misapplication of the rules; however, it requires “a lot of moving parts to make it work”. And Carvana must buy a small portion of each bond in which the loans are sold to comply with a federal 5% “skin-in-the-game” requirement that was enacted after the 2008 financial crisis to ensure that companies do not pledge bad debts. to investors”, according to the Chief Financial Officer

CFO
Dive.

CFO Dive noted that this approach works in good times and backfires when times get tough. This is because when money is flowing, investors are willing to buy the auto loans at a premium and when the market pulls back, Carvana “could be forced to sell the loans at par or at a discount, leading to a sharp drop in revenue. “.

It seems to be happening now. As the Journal notes, “Investors are demanding higher yields for securities backed by riskier consumer loans. They are beginning to fear that rising rates and inflation will affect borrowers’ ability to make payments.

In March, Carvana issued two securitizations — one backed by prime auto loans, the other backed by subprime loans — with a combined value of about $1.49 billion. Financial data provider Finsight noted that investor demand for higher yields reduced Carvana’s profit on trades compared to the fourth quarter of 2021.

Falling profits are a broader challenge for Carvana’s management. JPMorgan Chase

JPM
analyst Rajat Gupta “estimated in March that the company’s gain-on-sale margin from loan securitizations – a measure that compares proceeds received to the total value of loans sold – declined to 4.4% in the first quarter, compared to 9.1% in the previous quarter,” the Journal noted.

Negative cash flow

FLOW2

As measured by free cash flow (FCF), Carvana is a cash incinerator. How? between 2017 and 2021, Carvana’s negative FCF grew at an average annual rate of nearly 87%, from -$278 million to -$3,374 million.

This rate of cash burn contributed to a 23% drop in Carvana shares last week. Automotive News attributed the stock decline to “increasing cash burn, resulting from soaring used vehicle prices, capital spending” as well as a drop in the value of its junk bond offering. of $3.3 billion” even after Apollo Global Management

APO
bought about half the debt.

Debt rating downgrade

Rating agencies are not fans of Carvana. On April 25, Moody’s downgraded Carvana’s corporate family rating to Caa1. Moody’s has a litany of reasons for the downgrade. These include “very weak credit metrics, a persistent lack of profitability and negative free cash flow generation.

Additionally, Moody’s cites “governance considerations” – such as Carvana’s decision to update its “external floor plan facilities” despite the expectation of significant negative free cash flow as well as its decision to finance the acquisition of ADESA partly with debt despite its very high leverage. .”

Moody’s could downgrade its ratings “if the company is unable to generate positive operating income on a sustainable basis or if liquidity were to weaken for any reason.”

One of the possible reasons for this weakening is the outlook for the automotive e-commerce industry. Namely, William Blair analyst Sharon Zackfia expects rivals such as “Vroom, Shift and CarLotz to be largely disappointed with the number of units sold in the first quarter,” according to Automotive News.

Carvana does not give up. As CEO Ernie Garcia told investors on April 20, “While this quarter may be a little harder to see than most, we remain on the path of building the biggest and most profitable automotive retailers and changing the way people buy and sell cars. . The march continues.”

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Dave Ramsey has no credit score. Here’s why it might not work for you https://www.sznurki.net/dave-ramsey-has-no-credit-score-heres-why-it-might-not-work-for-you/ Sat, 30 Apr 2022 10:00:41 +0000 https://www.sznurki.net/dave-ramsey-has-no-credit-score-heres-why-it-might-not-work-for-you/

Image source: Getty Images

There is a danger in having no credit score at all.


Key points

  • Financial expert Dave Ramsey prides himself on having no credit score.
  • While he might get away with not having one, it may not work for the average consumer.

Your credit score is not just a random number. Rather, it is an indication of your level of confidence as a borrower. A higher credit score sends the message that you can be counted on to repay a loan on time and in full, while a lower score sends a warning that a lender may want to think twice about you. lend money.

But what if you don’t have bad credit, but rather no credit? It’s not such a rare scenario. If you are a recent college graduate, for example, who has never paid your bills directly, there may not be enough financial data on you to establish a credit score.

But it’s not just young adults who don’t have credit. Some people actively choose not to build a credit history.

Financial expert Dave Ramsey is one of them. As a strong advocate of debt avoidance, Ramsey insists that going through life without credit is more than possible. But while having no credit score may work for Ramsey, it may be more difficult for you.

Why You Might Need a Credit Score

There are ways to get by in life without borrowing money. You could save a huge amount of money to buy a house instead of having to take out a mortgage. You could save to buy a car outright and avoid having to take out a car loan. And you could forgo credit cards and just pay for all your purchases in cash.

But whether you can do these things – and want to do them – is another story. It’s easy for someone like Dave Ramsey to get by without a credit score. The reason? Its borrowing needs are probably limited to non-existent.

Investopedia reports that as of 2021, Ramsey had a net worth of around $200 million. Most of us have a net worth that is nowhere near that.

Now, if you had $200 million in assets and wanted to buy a $500,000 house, you probably wouldn’t need a mortgage either. And so in this case, having no credit score would not be a problem.

But what if your net worth is closer to $20,000 than $200 million? If so, you are in good company. And that means you may need to borrow money to finance major purchases, like a house or a car. There’s nothing to feel bad about. And it also justifies establishing enough credit history to get your own score.

Good advice, but only up to a point

Ramsey thinks debt is generally bad news and he doesn’t like to see consumers get sucked into it. In that regard, he’s onto something.

If you charge a major credit card tab, you could find yourself stuck losing hundreds or thousands of dollars in interest charges. It is not a good thing.

But not all debt is created equal. Mortgage debt, for example, is a healthier type, even if it also means spending money on interest.

Should you do everything possible to minimize your debt – and your interest payments? Absolutely. But avoiding debt altogether isn’t feasible for the typical consumer, and it’s something Ramsey tends to overlook. While you may want to follow his advice and minimize your debt, you don’t necessarily want to find yourself in a position where you have no credit rating. This could limit your options and make your life more difficult than necessary.

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Is debt settlement hurting your credit? – Forbes Advisor https://www.sznurki.net/is-debt-settlement-hurting-your-credit-forbes-advisor/ Thu, 28 Apr 2022 20:51:58 +0000 https://www.sznurki.net/is-debt-settlement-hurting-your-credit-forbes-advisor/ Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.

Debt settlement allows an overburdened borrower to repay a loan in a lump sum that may be significantly less than what is owed to them. It’s a tactic that can dispel a dark cloud hanging over your finances. But beware that a new source of gloom might begin to loom, as debt settlement can be bad for your credit score.

Credit reports used to calculate your credit score will show a black mark for any debt settled for less than the full amount. So while settling a debt can provide tremendous relief, it can also create big problems when you need to borrow again, as lenders typically use credit scores to decide whether or not to extend loans.

But don’t assume that debt settlement is always a bad idea. It all depends on the circumstances. Here’s an overview of how debt settlement works and its potential impact on your access to credit, along with tips for choosing a financially sounder alternative.

What is Debt Settlement?

In debt settlement, you agree to repay part of the debt and your creditor agrees to wipe the rest of the slate clean. This can happen in several ways.

A debt settlement company might offer to negotiate with your lender to get you a good deal. But the Consumer Financial Protection Bureau warns that working with debt settlement companies can be ‘risky’, as the federal watchdog says they often charge high fees and encourage consumers to stop paying their bills in the first place. hope to have a leverage effect on lenders.

You could end up with less money and worse credit than before, and little or no debt relief.

Home debt settlement is another option. Consumers can contact their creditors themselves and ask if a partial payment would settle a debt. This works best for debts that have already been charged by creditors as uncollectible.

Sometimes creditors will take the initiative in settling the debt. They may reach out to a customer and offer to take a reduced gain as a last attempt at collection on a long overdue account.

Whether done with the help of a settlement company, through a do-it-yourself campaign, or in response to a creditor’s offer, debt settlement can yield huge savings of 25% , 50% or even more on balances due. It may be worth considering. But you also need to consider the potential impact on your credit score.

How Debt Settlement Can Hurt Your Credit

The problem with debt settlement is that when a creditor accepts less than the amount owed, the account isn’t quite marked as paid in full on the borrower’s credit report. Verbiage varies by credit bureau. TransUnion may label the payment status as “paid after being applied”, while Experian will say: “Account legally paid in full for less than full balance”.

Different credit scoring models also handle debt settlement differently.

But the effect of settling a debt with partial payment is usually negative, often significantly. Indeed, payment history is the most important factor in calculating a credit score, accounting for 35% of the result.

Debt settlement practices can reduce your credit score by 100 points or more, according to the National Foundation for Credit Counseling. And this black mark can persist for up to seven years.

It all depends on the circumstances. For example, a consumer with an already poor credit score due to a heavy history of late payments and collection actions will not be harmed by debt settlement as much as someone with a FICO score of 800 almost perfect. And sometimes debt settlement can actually help a score, at least in the medium term.

How Debt Settlement Can Help Your Credit

One of the benefits of settling an account is that it prevents the creditor from reporting updates on it to major credit bureaus. This starts the countdown to up to seven years that “derogatory information” can remain on your credit reports.

Another advantage of settling a debt is that the balance will not burden your credit utilization, which is the amount of your available credit that you use. High credit utilization lowers credit scores. Debt settlement alleviates this pressure.

The legal settlement of a debt also prevents the creditor from taking action for recovery, an undeniable advantage. When a creditor contacts a borrower with an offer of settlement, it may be a signal that the lender is moving towards seeking legal recourse. This alone is a reason to seriously consider a creditor’s settlement offer.

When you settle a debt that a creditor has assigned to a collection agency, you can negotiate to have the collection agent report the account as “paid in full” to the credit bureaus and remove derogatory information about the settled debt from your credit records.

The collector can say no to both requests, but it’s worth asking because you could score a double win: you’d avoid paying off the full amount of a debt and protect your credit score from major long-term damage.

Or, the collector could refer you to the original creditor to justify removing the black marks from your credit reports. You would need to show that you are making a serious effort to be more responsible with credit.

Debt Settlement Alternatives

If you don’t want to pursue debt settlement, you have other debt relief options that may be less detrimental to your credit score.

You could negotiate what is called a structured debt settlement with a creditor. This type of arrangement can give you more time to pay off the debt and even reduce the interest rate. The outcome can be as positive as debt settlement, but without credit history being affected.

A debt consolidation loan offers a way to restructure debt without creditor approval. Consolidation replaces your existing debt with an unsecured personal loan or home equity loan borrowed against your home.

These loans can lower the interest rate on your debt and extend your payment term, saving you money and reducing short-term cash flow pressures. But beware, if you can’t repay a home equity loan, you could lose your home.

A similar approach is to get a new credit card with an introductory rate of 0% and transfer the debts to the card. This can save you a lot of money on interest and won’t hurt your payment history.

Perhaps the smartest decision is to take your debt problem to a nonprofit consumer credit counseling agency. These experts can provide assistance with budgeting and also negotiate new terms with creditors while holding lenders accountable and managing your payments to keep accounts current and improve your credit score.

Bankruptcy is the most drastic approach to overwhelming debt. A Chapter 7 bankruptcy can erase most unsecured debt completely and permanently, usually in exchange for no payment. However, a black mark from a Chapter 7 bankruptcy remains on a credit report for 10 years.

Find out if you qualify for debt relief

Free and non-binding estimate

Conclusion

Debt settlement can help borrowers settle old debts, often for much less than the total amount owed. While it can save money and reduce your stress levels, debt settlement can be costly to your credit score and prevent you from getting new credit for years.

If you’re burdened with unsustainable debt, settlement is one potential solution worth considering, but others may be less detrimental to your credit rating.

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Dave Ramsey hates debt. Is it really possible to live without debt? https://www.sznurki.net/dave-ramsey-hates-debt-is-it-really-possible-to-live-without-debt/ Wed, 20 Apr 2022 13:00:34 +0000 https://www.sznurki.net/dave-ramsey-hates-debt-is-it-really-possible-to-live-without-debt/

Image source: Getty Images

Many consumers are regularly in debt. But can we break this cycle?


Key points

  • Financial expert Dave Ramsey has made it clear that he is not a fan of debt.
  • Although he has many tips to help consumers stay out of debt, they may not be right for everyone.

American consumers are no strangers to debt. In February alone, debt levels rose by nearly $42 billion to a total of nearly $4.5 trillion in different borrowing categories, from credit cards to auto loans.

This news is unlikely to please financial guru Dave Ramsey. Ramsey’s views on debt are pretty clear – he thinks all debt is bad and something consumers should aim to avoid at all costs.

Dave Ramsey is so against debt that he thinks consumers should avoid credit card use altogether. And he even went so far as to suggest that home buyers buy properties with cash if they can afford to do so – even though mortgages are generally considered a healthy type of debt.

Of course, Ramsey’s advice is well-meaning. Every time you rack up debt, you sign up to pay interest, and in Ramsey’s mind, that’s the same as throwing money away. But is it really possible to live a completely debt-free life? It’s more debatable.

Choose your debts carefully

Going through life debt-free is something many consumers fail to do. But that doesn’t mean we shouldn’t aim to avoid certain types of debt.

Credit card debt is considered unhealthy because it does nothing but cost you money. Credit cards are notorious for charging exorbitant interest, so much so that a $100 purchase paid off over time could easily cost double, depending on the amount of accrued interest.

Plus, credit card debt can hurt your credit score, making it harder to borrow money affordably, or buy or rent a home. And in that sense, Ramsey is right when he says credit card debt should be avoided at all costs.

But mortgage debt is another story. Having a mortgage, even a large one, won’t hurt your credit provided you can meet your monthly payments. Additionally, a mortgage can help you own an asset that can increase in value over time.

Also, buying a house with cash makes little sense financially, even for people who have this option. Houses are quite illiquid, which means turning a house into cash is not easy. And so, shelling out $400,000 to buy a house is risking a scenario where you need a financial lifeline and have to wait months for your property to sell.

In addition, mortgages are a fairly affordable means of borrowing. Even with mortgage rates rising these days compared to the past few years, you could easily generate higher returns in the stock market than the interest you pay on a mortgage. And so keeping your money out of a house and investing it might make better financial sense.

Good advice, but only up to a point

Dave Ramsey’s tips for avoiding debt are designed to help consumers avoid wasting money on interest and getting in over their heads. But do you need to commit to a totally debt-free lifestyle? Not necessarily.

There’s nothing wrong with financing a major purchase, like a house or even a car, that probably won’t increase in value over time but will keep you going. And as long as you commit to doing your best to avoid credit card debt, you’ll make Dave Ramsey proud, at least to some degree.

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Are credit cards acceptable? Here’s what Mark Cuban says https://www.sznurki.net/are-credit-cards-acceptable-heres-what-mark-cuban-says/ Sun, 17 Apr 2022 15:00:30 +0000 https://www.sznurki.net/are-credit-cards-acceptable-heres-what-mark-cuban-says/

Image source: Getty Images

Credit cards may be popular, but are they a wise choice?


Key points

  • Credit cards can be a useful financial tool.
  • As someone who struggled with credit card debt earlier in life, Mark Cuban has some great advice on using them.

You would think that someone as rich as shark tank Personality Mark Cuban reportedly has little to no experience with credit card debt. But in fact, there was a period in Cuban’s life when he dug himself into a hole.

Granted, that was when Cuba was younger and clearly didn’t have the wealth it enjoys today. But the experience has prompted Cubans to warn consumers about the dangers of credit cards.

But does that mean you have to cut up your credit cards and commit to never using them again? Not necessarily.

The right way to use your credit cards

Some financial experts, like Dave Ramsey, believe that credit cards should simply be avoided at all costs. Mark Cuban doesn’t think consumers should go to that extreme. Instead, he thinks consumers should just pay off their credit cards each month and avoid carrying a balance — or quickly pay off balances they’ve already accrued.

The problem with credit cards is that they charge very high interest rates. So even a small balance can turn into a large debt over time.

Also, even if you make your minimum credit card payments after building up a balance, you could still end up damaging your credit score by increasing your credit utilization rate. This, in turn, could make it harder to qualify for a sound type of loan, like a mortgage. It could also make it difficult to get approved to rent a house, even if you’re not asking to borrow money in this case.

Good credit card rules to follow

Credit cards, when handled well, can improve your financial situation. Specifically, they can help you build credit and increase your savings by rewarding you with cash back on your purchases.

If you’re going to use credit cards, however, it pays to follow these key rules:

  • Do your best to only charge expenses that you can pay by the time your bills come due
  • Don’t use credit cards as emergency funds
  • Always read the fine print on your credit card agreements
  • Don’t overcharge just to rack up rewards
  • Pay cash when there’s a big discount to be had (like at the gas station, where you might pay a lot less per gallon for a cash fill-up)

Ultimately, Mark Cuban doesn’t think consumers should ditch their credit cards and swear never to use them again. But if you’ve ever struggled with credit card debt and really don’t trust yourself to spend within your limits, you might want to adopt a policy of not using a credit card.

Likewise, if, despite your best efforts, you’re really bad at avoiding impulse purchases, then buying with credit cards might not be your best decision. If you only bring enough cash with you to cover your planned purchases, you’ll take impulse buys off the table.

Credit cards can be a useful financial tool. But if you’re going to charge them expenses, stick to these rules so they help your finances instead of hurting them.

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Best business credit cards for new businesses in 2022 https://www.sznurki.net/best-business-credit-cards-for-new-businesses-in-2022/ Fri, 15 Apr 2022 02:36:43 +0000 https://www.sznurki.net/best-business-credit-cards-for-new-businesses-in-2022/

There will be a lot of items on your to-do list when you start a new business, including getting a business bank account and a business credit card. Finding a card available for startups and qualifying can be confusing.

Here, we’ll explain how new entrepreneurs can get and take advantage of small business credit cards.

Benefits of Business Credit Cards for New Businesses

Business credit cards have many advantages. They can provide:

  • Access to a line of credit that can be used for start-up financing
  • Excellent record keeping for business expenses
  • Separation of professional and personal finances
  • Benefits such as cash back or travel rewards
  • Superior protection against fraudulent use

How to choose the best credit card for your new business

When choosing a credit card for your business, you should consider two key factors:

How should I plan to use the card?

If you want to use your credit card as a line of credit and pay for your purchases over time, you’ll need to look for a low-interest card. An introductory offer of 0% APR for a year or more can be helpful in providing start-up capital. Low-rate balance transfers can also be useful if you need access to a line of credit for short-term cash flow financing.

On the other hand, if you want a card for business expenses, you can look for a card with a rewards program like cash back, travel points, or other perks. Many of these cards also offer sign-up bonuses that can be especially valuable for new businesses trying to make every dollar count.

What am I eligible for?

Unlike small business loans, most credit card issuers don’t require a lot of business time. Many cards will allow you to get a card just days after starting your business. But in this case, they will check your personal credit and probably require you to have a good to excellent personal credit score.

They’ll also want to make sure you can afford to pay off the balance by asking about your income. For most cards, revenue can come from a variety of sources, not just the company. Your income can affect your credit limit.

What credit score is needed to get a business credit card?

Most business credit cards check personal credit. Although many don’t specifically reveal their minimum credit score requirements, you can expect most cards to require good credit (650-680+) or excellent credit (700+).

There are a few business credit cards that don’t check personal credit, but they often require the business to generate fairly significant revenue. These can be called company cards.

8 Best Credit Cards for New Businesses

Every business is different, so there’s no one credit card that meets all needs. The cards shown here are available to new businesses that qualify.

Capital on Tap Corporate Credit Card

This is a popular first business credit card for small businesses. it offers 1.5% unlimited cashback with no annual fee. and the annual fee is $0.

Bank of America® Business Advantage Unlimited Cash Rewards Mastercard® Credit Card

For cardholders who want to pay for startup purchases over time, this card offers a 0% Introductory APR on purchases for the first 9 billing cycles as well as a solid welcome offer: Earn $300 online credit after making at least $3,000 in net purchases within the first 90 days of opening your account.

Ink Business Preferred® Credit Card

If you want a card with a generous welcome bonus, you can’t go wrong with this card: Earn 100,000 bonus points after spending $15,000 on purchases within the first 3 months of account opening.. And if your business takes you outside of the US (or you have overseas suppliers), you’ll save money with a $0 foreign transaction fees.

Amazon Business American Express Card

If you’re planning on making business purchases on Amazon, you might want to check out this map. Enjoy 3% Money Back or 60 Days on US Purchases on Amazon.com, Amazon Business, AWS and Whole Foods Market. You’ll earn 3% back on the first $120,000 in purchases each calendar year, 1% back thereafter.

American Express® Gold Business Card

If you want a card to pay for start-up expenses, you might consider this card. Welcome Offer: Earn 70,000 Membership Rewards® points after spending $10,000 on qualifying purchases with the Business Gold Card within the first 3 months of card membership. Earn 4X the Membership Rewards® points on the 2 selected categories where your business spent the most each month. 1X is earned for further purchases.

Divvy chip credit card for business

Divvy is an expense management platform accessible with a business credit card. It’s a great way to manage business expenses. Get free employee cards with expense controls. All charges made on this payment card are due and payable when you receive your periodic statement

American Express Blue Business Cash™ card

This Amex card is a popular cash back card and with a simple rewards structure, it does not require you to follow bonus cash back spending categories. Earn 2% cash back on all eligible purchases up to $50,000 per calendar year, then 1% cash back earned is automatically credited to your statement.

Ink Business Preferred® Credit Card

This card offers a healthy welcome offer: Earn 100,000 bonus points after spending $15,000 on purchases within the first 3 months of account opening. Earn 3 points per $1 on the first $150,000 spent on combined travel purchases, shipping purchases, internet, cable and phone services, ad purchases made on social media sites and engines search each account anniversary year. Earn 1 point per $1 on all other purchases, with no limit to the amount you can earn.

FAQs

How do new businesses get credit?

Most business credit cards report to commercial credit bureaus, making them a good choice for establishing business credit. If you maintain a good payment history, the card can help you establish good credit scores for your business.

However, the decision of whether or not you will qualify will likely depend on your personal credit scores. As long as you have a good personal credit history (and meet other requirements such as income), you should be eligible for a business credit card. There are only a few business credit cards for bad credit.

Can you use an Ein to get a credit card?

You may be asked for an Employer Identification Number (EIN) when you apply. An EIN is your business identification number used for tax purposes. (This is not required for all businesses.)

Again, however, most card issuers require a Social Security Number (SSN) to verify your personal credit history. A few cards don’t require a personal credit check, but these cards are generally not available to new businesses with no income.

Similarly, only a few cards do not require a personal guarantee.

How do I get a business credit card with a new LLC?

Many of these cards are available to new LLCs, as well as sole proprietors, provided you meet other criteria such as income and the issuer’s credit requirement.

Can I get a business credit card without business income?

Yes, many of these cards are available to small business owners as long as you meet minimum income requirements, which don’t always have to come from the business. Unless the application specifies business income, you may include personal income and/or other income.

This article was originally written on April 14, 2022.

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What are secured loans and where can you get one? https://www.sznurki.net/what-are-secured-loans-and-where-can-you-get-one/ Tue, 12 Apr 2022 19:45:57 +0000 https://www.sznurki.net/what-are-secured-loans-and-where-can-you-get-one/

Our goal at Credible Operations, Inc., NMLS Number 1681276, hereafter referred to as “Credible”, is to give you the tools and confidence you need to improve your finances. Although we promote the products of our partner lenders who pay us for our services, all opinions are our own.

Unlike unsecured loans, secured loans are backed by collateral or a valuable asset that you own. (Shutterstock)

If you don’t have the best credit and want to lock in a low interest rate or borrow a large sum of money, a secured loan might be on your radar. Contrary to unsecured personal loansSecured loans require you to pledge an asset like a savings account or a car, which the lender can take if you don’t repay the loan.

Let’s take a closer look at what secured loans are, where you can get them, and some pros and cons to consider.

If you are considering an unsecured personal loan, you can visit Credible to learn more and to see your prequalified rates.

What are secured loans and how do they work?

Also known as secured personal loanA secured loan is secured by collateral or something valuable that you own. It could be a house, a car, a savings account, an investment portfolio, or even a piece of jewelry or a musical instrument. If you default on your loan, the lender may seize your collateral. You can use a collateral loan to almost any goalwhether you need to cover an unexpected expense, pay a medical bill or perform an expensive car repair.

You will come across several types of secured loans, including mortgages and car loans. If you take out a mortgage, for example, you will use your house as collateral. For an auto loan, you would use your vehicle as collateral. Other examples of secured loans include home equity loans or home equity lines of credit (HELOCs), which also use your home as collateral.

Secured loans are less risky for lenders because they have the right to sell your asset if you fail to repay your loan. This can make secured loans easier to obtain than unsecured loans, which pose a higher risk to lenders.

Where can you get a secured loan?

You can get secured loans from a number of financial institutions, such as:

  • Banks – If you already have a checking or savings account with a bank, you might want to start there for a secured loan.
  • Credit Unions – In most cases, you will need to be a member to qualify for a secured loan from a credit union.
  • Online lenders — While most online lenders only offer unsecured loans, some also offer secured loans.
  • Car dealerships — If you are looking for a new or used vehicle, you may be able to get a car loan from a car dealership.
  • Pawn shop – Pawnbrokers are secured by a personal item of value, but they usually come with very high costs.

What credit score do you need for a secured loan?

Each lender has their own requirements for secured loans. While some require good or excellent credit scores, others are more lenient and work with borrowers who have fair credit ratings. If you don’t see the credit score requirements listed on a lender’s site, you can contact the lender to find out.

Comparing rates from multiple lenders can help you find the loan that’s right for you. Credible, it’s easy to compare your prequalified personal loan rates from several lenders.

Lenders who offer secured loans

While some personal lenders only offer unsecured loans, others offer loans that you can secure with collateral. These four credible partner lenders offer secured loans:

Before

  • Loan amounts: $2,000 to $35,000
  • Minimum credit score: 550
  • Acceptable collateral: Auto

LightStream

OneMain Financial

  • Loan amounts: $1,500 to $25,000
  • Minimum credit score: Check with the lender
  • Acceptable collateral: Car, Truck, Motorcycle, Boat, RV, Motorhome

Improve

  • Loan amounts: $1,000 to $50,000 ($3,005 minimum in GA; $6,005 minimum in MA)
  • Minimum credit score: 560
  • Acceptable collateral: Auto

The following three lenders are not Credible partners, so you won’t be able to easily compare your rates with them on the Credible platform. But they are also worth considering if you are looking for a secured loan:

First Tech Federal Credit Union

  • Loan amounts: $25,000 to $1,000,000, depending on coverage
  • Minimum credit score: Varies depending on loan amount and collateral
  • Acceptable collateral: Stocks, First Tech stock certificate, First Tech savings account

Federal Naval Credit Union

  • Loan amounts: Equal to the amount of your savings or certificate of deposit
  • Minimum credit score: Check with the lender
  • Acceptable collateral: Navy Federal Savings Account, Navy Federal Certificate of Deposit

Wells Fargo

  • Loan amounts: $3,000 to $250,000, depending on coverage
  • Minimum credit score: Check with the lender
  • Acceptable collateral: Savings account, certificate of deposit, home

How to apply for a secured loan

If you decide to go ahead, you’ll typically follow these steps to apply for a secured loan:

  1. Check your credit score. Since borrowers with the best credit ratings generally qualify for the lowest rates, it’s a good idea to review your credit rating before applying for a collateral loan. This way you will know where you stand and you won’t be surprised.
  2. Pre-qualified. Find a few lenders that allow you to prequalify for a secured loan. Prequalification generally won’t affect your credit score, so you can explore potential offers without affecting your credit.
  3. Compare offers. Compare prequalification offers and review accepted collateral, interest rates, terms and fees for each option.
  4. Take a decision. Determine which offer best suits your budget, needs and preferences. Be sure to choose a lender with collateral requirements that you can meet.
  5. Gather your documents. When you apply for a collateral loan, the lender will ask you for supporting documents to confirm your financial situation. Be prepared to submit pay stubs, tax forms, bank statements, and proof that you have the security you are offering.
  6. Complete a formal application. Depending on the lender, you may be able to apply for the loan online. Check your work before submitting your application to avoid delays. Once you’ve made a formal request, the lender will usually do a credit check, which can temporarily lower your credit score by a few points.
  7. Wait for funds. The type of secured loan and the lender you choose will determine how long it will take to receive the money. Funding time can be one business day or seven or more business days.

Credible makes it easy for you compare personal loan rates from various lenders in minutes, without affecting your credit score.

Advantages and disadvantages of secured loans

Like any other financial product, secured loans have advantages and disadvantages to keep in mind.

Advantages

  • They may be easier to get if you don’t have the best credit. Since you are securing your loan with an asset, secured loans are less risky for lenders. This means you can have one with no credit or with bad credit.
  • They usually offer lower interest rates. Compared to unsecured loans, secured loans often have lower annual percentage rates, or APR. A lower rate can save you hundreds or even thousands of dollars over the life of your loan.
  • They come with higher loan amounts. Lenders have the legal right to take your property if you don’t repay a secured loan. This may make them more willing to provide higher loan amounts, which will depend on the value of your collateral.
  • They may have better conditions. If you want more time to pay off your loan, some types of secured loans come with longer repayment terms than secured loans. For example, a mortgage, which is secured by your home, may have a repayment term of 10, 15, 20 or 30 years.
  • They could help you build or improve your credit. As long as you make your monthly payments on time and in full, a secured loan can help you establish a positive credit history. Just make sure the lender you choose will report your payments to the three major credit bureaus – Equifax, Experian and TransUnion.

The inconvenients

  • The application process can be more complex. Chances are you will have to provide more documents and share more information when applying for a secured loan than you would with an unsecured loan.
  • You are putting your asset at risk. If you default on your loan, the lender can foreclose on your property. This can be risky, especially if you are hiring your car or your home.
  • You need collateral. To take out a collateral loan, you must have something of value. If you don’t have the type of security a lender is looking for, the loan won’t be an option for you.
  • Not all lenders offer secured loans. Almost all lenders offer unsecured loans. But not everyone provides secured loans, so you may need to do some extra research to find the right secured loan for you.
  • You could hurt your credit. While a secured loan can help your credit, it can also hurt it if you don’t make your payments on time or, even worse, if you let it default. Lenders will report any late or missed payments to major credit bureaus, which can stay on your credit report for up to seven years.

Is the secured loan for you?

Although a secured loan may be a good option in some situations, it may not make sense in others. If you’re having trouble qualifying for an unsecured personal loan or need to borrow a large sum of money and you have something of value that you can afford to risk, a secured loan can be a great option. Good choice. Additionally, if you have poor credit or no credit, a secured loan can help you establish or improve your credit history.

On the other hand, if you are not sure that you can repay your loan, a secured loan is risky because you could lose a valuable asset. If you have good credit and don’t want to put a valuable asset on the line, an unsecured loan is probably a better option.

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Iranian state banks name major debtors in ‘publicity stunt’ https://www.sznurki.net/iranian-state-banks-name-major-debtors-in-publicity-stunt/ Sun, 10 Apr 2022 15:59:00 +0000 https://www.sznurki.net/iranian-state-banks-name-major-debtors-in-publicity-stunt/ Iran’s president was quick to take credit for state banks publishing the names of major debtors, while critics say the list is not new and the move is a publicity stunt.

Four state-owned banks, including Bank-e Melli, Iran’s largest bank, released their major debtors list on Saturday, six months after the economy ministry ordered them to publish quarterly major debtors lists.

The Ministry of the Economy defines a “large debtor” as persons or entities who hold loans representing at least 10% of the bank’s total resources but have not paid the installments for loans estimated at around $10 billion at today’s exchange rate, but much more in US dollars when the loans were received.

“At first glance, this can be interpreted as an important and positive step in the fight against corruption and the recovery of money owed to state banks,” Eghtesad Online (Economy Online) wrote on Sundaybut he added that the lists are extremely vague and offer no details.

The listings do not contain any information other than the names of individuals and companies. It is very difficult to trace the backgrounds of these people or the ownership of the companies, which appear to be subsidiaries or front companies set up by unknown companies, some linked to state-owned enterprises with well-connected managers.

A man who defaulted on a large loan during his defense in an Iranian court.

“None of the lists include information about when loans were issued to individuals and entities that have a long history of getting loans and not repaying. It’s also not clear whether the banks either decided on their own to grant the loans or were ordered [by other entities]. The information also does not reveal what the collateral for the loans was,” Eghtesad Online wrote.

The publication also said it is equally important to know who approved the loans and to hold them to account. He also said that the release of the lists was intended to allow the government to convince people that President Ebrahim Raisi is keeping his election promises to fight corruption and establish transparency.

Officials say the move is proof that Raisi is keeping his campaign promise to fight corruption in the banking system. “Another of the president’s promises has been implemented. Melli Bank, the largest bank in the country, has published the names of its main creditors,” the government spokesman said. Ali Bahadori-Jahromi said in a tweet on Saturday.

Others like Malek Shariatia member of parliament from Tehran, says the publication of the names of major creditors is proof that the administration and parliament are committed to establishing transparency and fighting corruption.

Based on the finance bill, the government was mandated to publish all information on the main creditors to the central bank.

In 2017, an outspoken reformist lawmaker Mahmoud Sadeghi published a list of Sarmayeh Bank’s main debtors who defaulted. In some cases, he said, loan guarantees have been priced well above their true value.

Sadeghi called the widespread phenomenon in Iran “crony capitalism”, meaning that those with ties to centers of power could easily obtain loans that others find extremely difficult to obtain. Many debtors had received subsidized low-interest loans from banks.

Major bank debtors with bad credit have would have used the money to speculate in the housing, foreign exchange and gold markets rather than investing in production and thus contributed to higher inflation.

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