Obama’s Mission to Cut Off Student Loan Interest Rates

The American President Barack Obama is taking the need for college education to the next level as he continues his campaign in convincing law makers to pass a law against the rise of student interest rates.

Obama is going from campus to campus to have his talk to students about his propaganda. The first of the list of universities he is scheduled to come to is the University of North Carolina. The president is doing this to convince the Senate to change a law from 2007 that imposes high interests for federal loans to people who are unable to finance college education on their own.

The issue of having less college graduates is due to the continuing rise in the price of education. From 3.4% the rate is to increase by half at 6.8 percent on the beginning of July if the American President fails to convince the lawmakers to prevent this.

Obama is trying desperately to convince his fellow politicians that education is important thus it must be attainable to every citizen, poor or rich. According to reports, debts from student loaning is more than the citizens’ debt in their credit cards. Thus, a further increase in the rate will discourage high school graduates to proceed to the university and get a degree.

Two years ago, an estimated amount of $25,250 was owed by students who were at their last year in college. This is more than 5% from the preceding years. This batch also included the most graduates that became unemployed.

But despite these reports, Obama has set his goals in going to colleges and enlightening students. After his visit in North Carolina, he will also go to Colorado and Iowa.

There are law makers like Mitt Romney that agree with Obama in his vision, and called on for an extension in the current rate. However, there are still others among them, Rep. John Kline that opposes this campaign. He says that it will impose a higher burden for tax payers, and the Congress must not just make laws based on one man’s good intentions because the policy might turn out doing more harm than good.

Loan Pirates Preying on Innocent Clients

Predatory loan industries have been preying on innocent clients for years now, forcing them to be buried in debt by paying their current liabilities with new loans. This cycle has been prevalent in the industry until 2010 when the state of Illinois stepped in to fix the problem.

The lenders have been charging up to 340% in interests that lasted in short intervals thus started the undying debt of clients. In a yearly basis the rate’s ratio reached 403% for a two week due of $100.  Cities and towns that have several pawnshops, clubs, and shops that sell liquors and other financial intermediaries are prey for these kinds of loan deals.

However, there are communities that have seen the problem and officials remedied the situation by limiting their loan dealers. One of these towns is Chicago which according to experts is quite interesting since they had a large population of 28,000. The community’s mayor is trying to further cut the number until only one remained- in order to do this, their local officials are just waiting for the licenses of the five loan shops to expire so that only one will exist in the city.

Illinois is trying to follow the footsteps of Chicago Heights, and take control of these loan pirates in order to regain hold of their city; however there have only been little improvements. These loan sharks are preying on frail customers, which included retired senior citizens who only had stable pensions and are unable to work.

Though these establishments are a bit better than the underground businesses such as the Mafia, because they do not hurt or kill their clients when they fail to pay, citizens pay for their decision to loan and go into deep debt because of their schemes.

Their strategy is to invite individuals who cannot get a loan from banks and credit unions. However, right now, the economy is starting to regain its balance and lend to poor and less fortunate clients with not-so-good credit records.

Credit Ratings are Not Reliable in Predicting Corporate Failure

Agencies which provide credit ratings have played very significant roles in the financial markets. In fact, some of their decisions which are not accurate had made headlines in the business news. There are industry experts and regulators who are questioning the reliability and the use of credit rating agencies according to research conducted.

According to Dr. Mungo Wilson, a Lecturer in Financial Economics at University of Oxford, the research they conducted simply proves the truth about the negative comments that the critics have been arguing for many years about the wrong information provided by credit rating agencies. The ratings made by credit agencies are a poor predictor of default probability. It is because the explanation is not very clear about the default probability. Many variations have to be considered in default probabilities and in addition to this the empirical failure rate in the business cycle must be accurately recorded.

Credit ratings are still the instrument widely used to measure the corporate credit quality. And this is being challenged by a paper from Dr. Wilson and Jens Hilscher, Assistant Professor of Finance at Brandeis University.

The paper shows that the information included in the corporate credit ratings are poor predictor of default probability. Dr. Wilson and Jens said that based on their study and research, a simple model which gathers publicly available information which is called ‘failure score’ is a better and more reliable means of predicting default risk. They used data from 1986 to 2008 and compared it with the prediction made by Standard and Poor’s corporate credit ratings and they found out that their method is twice as effective as that of Standard and Poor’s method.

The data gathered demonstrate that firms have the tendency to default in bad times and which may be referred as systematic defaults risk. The data also suggest insight to corporation owners on how they will fare during economic crisis. Dr. Wilson and Jens observed that credit rating agencies merely based their ratings through the cycle instead of considering the effect of the business cycle fluctuations on default probability. This is the reason why their ratings are not reliable and are poor predictors of default.

The researchers made a conclusion that in order to get an accurate measure of default prediction it should be separated from systematic risk. Default prediction data could quickly respond to specific news while systematic risk’s measure could be a mix of aggregate credit conditions and current credit ratings.

Get Secured Credit Cards if You Have Bad Credit – Do Not be Trapped by High Upfront Fees

The New York Times reported that the new Consumer Financial Protection Bureau did not continue to push through with its fight to stop credit companies from charging fees before opening an account with them. The Credit Card Act of 2009 was sidestepped by these “application fees.” The Credit Card Act of 2009 limited the fees which banks could charge on the first year. They could only charge up to 25 %.

First Bank defended its argument in the court that if it is prevented from charging upfront fees to the consumers, they would suffer serious damage that might even go to the extent of being irreparable. It has to charge $95 upfront fee to consumers with poor credit. This upfront fee aimed at customers with poor credit makes them suffer. In addition to the upfront fee being charged, customers with poor credit are also hit by:

* An annual fee of $75
* A monthly service fee which totals to $ 75 per year
* A high interest rate of 36%

There are however, credit cards designed for consumers with bad credit. These cards are called secured cards.

How do secured cards work?

Consumers who want to get these cards are required to make security deposits. The security deposits will determine the line of credit that will be granted by the issuers. For example, if your security deposit is $500 then the amount of credit line you will get is $500. The issuers are at less risk with the security deposits made by the consumers so that their applications to get secured cards even if they have bad credit will be likely approved. The consumers’ security deposits are refunded when their accounts are closed.

Consumers can check out the following secured credit cards issued by:

* Orchard Bank Classic Card – Orchard bank will approve all applicants with security deposits. Even if the consumer had declared bankruptcy or the credit score is very low, the bank will consider the application if the consumer can prove his identity. The minimum security deposit is $200. There is no annual fee on the first year but on the second year and thereafter, $35 will be charged. Orchard Bank is a subsidiary of HSBC Bank.

* Wells Fargo Secured Visa – It is required that the consumer must have been out of bankruptcy for one year and there are no unsettled liens before the application is accepted. The security deposit ranges from $300 to $1000 and the annual fee required is $25.

* U.S. Bank Secured Visa – The bank keeps the security deposit in a savings account which is earning interest. The annual fee required is $35.

Check all these issuers and choose the one that best suit your need.

Three New Bills to Protect Customers Against Abusive Automobile Dealers

Three new bills were passed in California just recently, all of which concerned the business of second-hand car dealers, particularly the Buy Here Pay Here automobile traders.

The first bill was drafted by Assemblyman Bob Wieckowski and passed with a 6-2 vote during the assembly of the Judiciary Committee, and the second was from Assemblyman Mike Feuer which was agreed with an 8 to 2 vote. These new laws will grant a 30 day warranty and a 1,000 mile warranty for each sold car.

Just a few hours after the passage of the two laws, the Senate Appropriations Committee also passed a third bill of their own, which was put forth by Senator Ted Lieu.

This newly approved law by the senate will sort out these Buy Here Pay Here traders by requiring them to register their business in the Department of Corporations in California. Not only that, there will be a limit of 17% to the percentage of interest they could give to customers on their deals.

According to the dealers affected by the bill, the laws should have been more intent against those automobile dealers who do not go by the regulations of law, not with those who comply. They also say that their businesses help people with poor credit and low salary by selling those cars that help them in their everyday work.

However, there are people who complain about the regulations and the performances of these Buy Here Pay Here automobile dealers. According to them, these businesses impose high interest rates, and a long distance warranty. Furthermore, they repossess their cars whenever the client is unable to pay the bill on time.

These repossessions have a huge impact on people’s credit statuses, this could make it hard for the client to get an apartment or be hired in a company for seven years. The bill by Feuer offers a 30 day or a 1,000 mile warranty to customers this is to insure that customers get value from the money they spend. Some of these Buy Here Pay Here businesses do not have warranties and once the car is considered sold; they share none of the responsibility for whatever happens to it.

The bill also further inhibits the policy of the businesses to receive money in person. This is a usual scheme to make clients miss a bill on purpose, and repossess the car. The first bill requires the sellers to give sufficient information about the condition of the cars they are selling to customers. These information should be placed on the windows of the car, furthermore the dealers can arrange the price they will give customers for the car.