Loan Approvals Decline, Indicate Economy Slowing Down

According to Biz2Credit Small Business Lending Index, after evaluating 1,000 applications for loans, it was discovered that loan approvals at banks declined from 10.9 percent during the month of March to 10.6 percent during April, and also a decline from an approval rate of 11.6 percent during March 2011. Moreover, small bank lending declined from 47.6 percent during March to 45.9 percent during April.

On the other hand, loan approvals by credit unions also declined to 46.6 percent when they were proposing to raise the lending limit to 27.5 percent of their assets.

One other indication that the economy is slowing down is that, in general, the demand for small business loans for the month of April declined by 5.4 percent, which is a first for 2012.

The guarantee fee of 90 percent for loan approvals established between the months of September 2010 and March 2011 were applicable for one whole year. The month of April of this year was the first month of 75 percent guarantees along with evaluation of the 1 to 3 percent fee. This is one of the major causes for the decline in the loan demand and less enthusiasm of banks to approve funding applications.

The April jobs report showed that only 115,000 jobs were produced, even though the anticipated number is more than that. This can also mean a slowing economy. Moreover, increasing oil prices, together with the worsening of the crisis in Europe, have contributed to borrowers and lenders being much more careful.

Credit unions and alternative lenders, among all small business lenders, have approved above 50 percent of loan applications. Since the month of September last year, small bank lending declined to its lowest point. In contrast, big banks do not approve nearly 9 in 10 small business loan applications.

According to the evaluation by Biz2Credit, loan application amounts vary from $25,000 to $3 million and that the average credit score was more than 680.

Smart Financial Tips for Students

Going to college does not only give you the responsibility to look after yourself, it also means taking responsibility for your own actions. When you step into the university, you have to be very wise with your financial matters; this is because unlike your previous days in middle school and high school, your parents will not be around to manage your money for you.

For those who have no clue on the matter, then it would be wise to read on, for here are tips on how to be wise a spender and vigilant in your financial status. Learn to say “no” and say “I have no money for that.”

Aside from learning how to avoid unnecessary spending, it is also wise to learn how to create a budget. Learning how to handle your money and knowing where you spend it will allow you to better control your financials and this will avoid you from being broke and penny-less.

Most college students tend to finish off their allowances in the first semester of their schooling. Swiping away your credit card or your debit card to pay for your bills may be easy, but it is difficult to keep track of your spending that way. You can create a draft or keep a booklet recording your fees, or you can check your ledger online.

Keep in mind that spending weekly fees that amount to $75 dollars may not seem so expensive, however it totals to more than $2,700 in a year. Be smart and resourceful; take advantage of free campus dormitory facilities and entertainment mediums. Learn to discipline yourself now, and it will be most beneficial to you in the future.

Always have spare cash.Do you know what a contingency fund is? It is money intended to be spent on emergencies or unforeseen calamities. Have an amount of cash that you will not spend unless you really have to. This will make well prepared and let you keep a peace of mind.

You also have to adapt to a new type of lifestyle. Parties and other habits may tend to hover like an addiction in college. You might find yourself throwing away money so quickly over useless stuff. If overspending and asking your parents for money is what you have always done in high school, then maybe you have to change and sacrifice your social life a little bit when you step into college.

Final words of wisdom for students, never lend money to your friends. Usually, these borrowings are not formal and it is very difficult to ask for your money when you desperately need it back. Also, lending money to your friend may be doing more harm for him than good.

How to Assess a Good or Bad Debt

In the past few years, the different types of financing solutions have been common to a lot of Americans already. However, many are still asking whether or not there is indeed good debt or bad debt. The following are answers to that question.

To be brief, there is such thing as good debt. This is because the majority of people do not have the money to buy expensive things without using a line of credit.

To find out if a debt is good, the first question to ask is whether or not the debt will be used to buy something that increases your importance, for instance, a higher education degree. Another question to ask is whether or not the thing you bought will increase in value. If the answer to one or both of the questions is yes, then the debt is considered as good debt.

Higher education loans may be considered either a good debt or a bad debt. It will be a good debt if you graduate and have favorable job prospects. Otherwise, it will be a bad debt.

Besides increasing your value, good debt increases your credit score as well if you always pay your debts on time.

On the other hand, a lot of financial advisors consider credit card debt as bad debt. A bad debt is incurred when a credit card is used to buy non-durable goods like clothing, vacations, and excessive gadgets. Moreover, if these items are not paid off within either one to two billing cycles, then it will be considered as bad debt.

Importantly, buying non-durable goods and services does not increase tangible value to the life of a certain person and most of the time is not needed.

Just like higher education loans, auto loans may also be considered good or bad debt depending on the car’s value and its main purpose. To determine whether an auto loan is good or bad debt, the question to ask is whether or not a car is essential to your lifestyle.

S&P Concerned About Fixing State’s Finances

Since income tax revenues are behind by $2 billion for the month of April, Standard and Poor’s is bringing up concerns. Moreover, S&P is also concerned about a ruling by a judge, which states that the lawmakers’ pay cannot be withheld by the state controller.

The budget for the month of May is billions behind because the April revenues added up to approximately $7.1 billion but the state’s estimate was $9 billion. This is according to Governor Jerry Brown while he organizes his May budget revise.

Based on income figures reported by Controller John Chiang, Brown gave a warning by last week that the revenues will be short by $1 billion or $2 billion than the estimate. Also last week, the Legislative Analyst’s Office stated that revenue is $3.5 billion behind than Brown’s fiscal year estimate.

The planned budget for the current fiscal year by Brown totaled $92.6 billion. Furthermore, he proposed that people who annually earn $250,000 or more will have higher income taxes and also add a quarter cent to the sales tax.

Standard and Poor’s is more worried about a ruling by a Sacramento judge in the previous month.

According to Judge David Brown, Chiang went beyond his authority after withholding the lawmakers’ pay because they did not pass a budget punctually. The lawmakers actually passed a budget but Brown did not permit it because it was out-of-balance.

As a result, Chiang made a decision that there had been no budget passed so he withheld the pay for the lawmakers under Proposition 25, which permits a majority vote of the Legislature to pass a budget. Moreover, it states that lawmakers would lose their pay if they do not punctually pass a budget.

The lawmakers filed a lawsuit claiming it was a problem on separation of powers and they want their pay. Judge Brown granted their claim.

Standard and Poor’s is still concerned that the lawmakers are not willing to make the restriction, increase the taxes, or both to solve the state’s finances.

The Double Cost Damage Caused by Bad Credits

Anybody should know the reason why he has a bad credit. Those who are planning to make car loan should brace themselves for higher monthly payment for subprime loans.

According to Experian, for a five–year new car loan made in April, an average of 4.54 percent was paid by a buyer with prime credit. But a subprime buyer did pay 9.55 percent which simply means an increase of $59 per month on a $25,000 loan.

Aside from an increase in monthly payment, the buyer should also prepare for a higher car insurance premium.

Even with a clean driving record, a subprime credit can incur you an additional cost ranging from $30 to $100 a month.

Liz Pulliam Weston, a finance columnist who wrote “The 10 Commandments of Money: Survive and Thrive in the New Economy” said that life becomes more expensive for people with bad credit even if they do not intend to borrow in the future. Let us look at some examples on how a poor credit history can create double damage to car buyers.

Life becomes more expensive if your credit is bad

Due to recession, American’s credit scores reduced in points. In 2011, Experian credit reporting agency said that the average credit scores of those buying new cars or trucks dropped by six points from 766 to 761. For used vehicles buyers, the average credit scores dropped by nine points from 679 to 670.

With the economy recovering, lenders are now more willing to accept loan applications from those who did not qualify a year or two years ago. It was observed that there is an increase of 13.8 percent for new car loans to customers with poor credit, according to Experian. And for used vehicles loans, there is an increase of 8 percent.

The risk scores provided FICO which is the largest provider are also the risk scores used by Insurance companies. Insurance companies use these data as a good predictor of claims. Bad credit adds to you insurance cost. There is no exact answer as to how much cost is added. But in California, Hawaii and Massachusetts, insurers are not allowed to use credit information to determine insurance rates.