Low Interest Rate Loan Not Accessible to Small Businesses

Although banks are currently offering credit loans and different support packages at low interest rates of 14 percent annually, a lot of small and medium businesses are having trouble to get bank loans in order to avoid bankruptcy.

To assist small businesses get back from the economic crisis at present, the State Bank requested banks to decrease loan interest rates from 15 percent in the previous month to 14 percent. Unfortunately, credit is not accessible to the poor.

According to Tran Quoc Manh, the general manager of Saigon Trade and Production Development Corporation and vice president of the Handicraft and Wood Industry Association located in Ho Chi Minh City, the loan with a 15 percent interest rate every year is not available to all businesses. Because banks favor big companies rather than small, struggling ones, strong businesses can simply get this low interest rate loan while those who need it more cannot.

While it’s unreasonable to only blame banks, they do have preferences and are very picky when approving loans.

Tran Phuong Binh, president of Dong A Bank, a lot of banks will experience losses in the future since the existing capital raising rate is at 11 percent per year while treasury bills are sold at a lesser rate of 4 percent per year, along with a low inter-bank lending rate.

In spite of the desire to increase credit growth, banks are very careful in approving loan applications in order to keep away from bad debts. They are competing for potential customers, which results in a situation where strong companies are given a variety of choices while small businesses still cannot get a loan and are forced to borrow money at a higher interest rate.

According to an economic guru, banks are commercial organizations as well, so they are cautious in the decisions they make and desire profits for themselves. However, the issue here is that banks have already made profits while the rest have no support at all. Thus, small companies are facing bankruptcy lately.

Low Interest Rates May be Costly in the Future

According to an article in the national media, a graduate of Harvard masters of business administration was able to pay off his student loan with a balance of $91,000 in a span of seven months.

What’s interesting in the story is the MBA graduate was surprised that after two years of payments every month on his $101,000 loan, just about half of his total payments decreased the loan balance or principal. The other half was taken up by interest charges, most of which accrued during his stay in school.

However, the more important thing is that the story shows the role that interest rates play in our lives and our economy.

For instance, throughout the recession and our lengthened weak recovery, we have not understood the actual burden of our national debt due to very low interest rates. However, it is easy to understand that low interest rates can indicate less costly borrowing. Moreover, we have to be familiar with how financial markets work to know how our increasing national debt will make a predicament for our economy in the future.

While the economy is expanding slowly, our savings surpasses the total amount of business investment opportunities. Consequently, a significant amount of cash becomes available. That existing cash was further increased by the delay in the global economy and particularly by investors in search of safety from the financial crisis in Europe.

The outcome for the U.S. has been a flow of cash seeking to be exchanged for Treasury bonds. But since bonds become a debt payable in the future, their cost decreases when the interest rate increases. On the other hand, when interest rates are at their lowest, then bond prices or values are at their highest as well.

More than $5 trillion of Treasury bonds have been sold and their values will decrease as soon as the global economy starts to recover and interest rates start to increase. People holding those bonds will most likely want to sell them right away, but the result will be even higher interest rates.

Not only economists must worry about this dilemma but it also reminds us that interest rates are vital to us and our economy.

Future Depends on Good or Bad Credit

This year, one important thing that can influence your future is having either a good credit or bad credit. Because it is vital to have a good credit score, you must look for a reliable credit expert and understand the process of borrowing and lending.

UK has verified the double-dip recession recently, and it perceives banks and money lenders making less risky actions with their money. As a result, there is a growing quantity of exposure in the media with regard to the problem of credit rating and credit scores and the significance for average consumers who are seeking assistance.

For those who are applying for loans to put up a business or promote their careers, they must know about the fact that banks are demanding more of their borrowers, in their desire to make substantial and profitable investments.

According to Conal Duffy, consumers must be familiar with their financial information and status. Duffy was once rejected for a mortgage application due to an error over a payment for his ex-wife’s telephone bill.

Moreover, a name spelled incorrectly can lead to months of bills delivered to the incorrect place and consumers might only know about this when their credit score becomes strangely low.

While the ease of access of the internet is frequently the cause of poor credit, it can also be the origin of knowledge and positive advice.

A BBC business article reminds the public that if you would like to know your credit score, you must seek the assistance of one of the three credit reporting bureaus in the UK.

One of these credit reporting bureaus is Experian, which offers Credit Expert and Ask James. In Credit Expert, consumers can get a free credit report and subscription to their credit check service. On the other hand, Ask James is a public-facing advice system that directs customers’ concerns to the company’s Head of Consumer Affairs, James Jones, and provides them a specific advice.

Credit Unions are Recovering from Recession

Credit unions provide the majority of the same consumer services as banks, however at a little lesser cost. Credit unions in Arizona and nationwide are gaining profits once again and are trying to fix the bad loans that accumulated during the recession. Moreover, they are enticing new members or costumers, as well as those that are dissatisfied with big banks.

On a national scale, profits of credit unions during the first quarter reach $2.1 billion, which is almost 25 percent more than that of last year. Moreover, 667,000 new members signed up during the months of January to March. In addition to the 1.4 million in the previous year, credit unions currently aid 92.5 million Americans.

According to Debbie Matz, chair of the National Credit Union Association (NCUA), the credit unions’ overall assets reached $1 trillion, and for the first time, the net worth of the credit industry topped $100 billion during the latter part of March.

The majority of the credit unions in Arizona are gaining profits once again after a difficult situation during 2009 and 2010. A few of the bigger institutions’ profits for the first quarter increased approximately twice or more than what they earned last year.

The NCUA added the credit unions in Arizona headed the nation during quarter one in return on average assets, which is a major profitability measure.

On the other hand, banks are also improving in terms of their finances and are still surpassing credit unions. Based on a report from Federal Deposit Insurance Corp, during the first quarter, banks nationwide earned $35.3 billion, which is an increase of more or less 23 percent. The assets of the banking industry reached $13.9 trillion.

Since credit unions are owned by its members and are not-for-profit, they can charge loans at slightly lower interest rates than that of banks. Also, credit unions do not pay income taxes, which is unfair according to bankers. However, senior vice president of Arizona State Credit Union in Phoenix, Paul Stull, believes that the increase in credit union members is caused by the drive to support local firms.

Online Low Interest Rate Auto Loans for Poor Credit Ratings

At present, it is much easier to get an auto loan with low interest rates even though with poor credit ratings. There a lot of online car finance services that asks you to fill in an online car loan application form and the rest will be processed by a local expert. Because these kinds of services have a network of specialized lenders across America, you have a higher chance of getting an auto loan even with a poor credit rating.

However, interest rates might be significantly higher. There are some factors that might help lower these interest rates.

Auto-Financed provides online professional services to lead borrowers in looking at different bad credit auto financing options and help them choose the one that suits their current financial status, without considering credit histories.

The majority of lenders that focus in offering auto loans for those with poor credit histories will require either a huge amount as deposit or require a cosigner to lower the interest rates. While lenders are aware of the risks that accompany transacting with borrowers with poor credit, there are still some lenders who might not ask for a huge deposit or a cosigner. The automotive finance service you choose will help you find the perfect lender for you.

In addition, you can also find a low interest rate auto loan with poor credit by getting free non-obligatory proposals from various lenders. Then, you need compare them using either a car loan calculator online or a comparison website. However, the process can be a bit laborious because you need to check if each proposal charges other fees.

Auto-Financed could vigorously help you to get approved right away for online auto loans with low interest rates, bad or no credit checks, with or without a deposit or cosigner. Moreover, you will more likely obtain a solution that is within your means and will suit your specific financial status.