Senior Hour – July 23, 2014

Hosts: Dr. Gene Dorio and Barbara Cochran
Guest: Darbe Nokes AKA The Credit Gal and Rosemary Murphy of Beyond Harmony
Topic: The Painful Realization Of Damaged Skin amp; Credit Tips From The Credit Gal

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Every Wednesday at 11 am, tune into KHTS AM 1220 to listen in on the Senior Hour Show.  Hosts Dr. Gene Dorio and Barbara Cochran discuss senior living and issues that our seniors face here in Santa Clarita.

The Senior Hour:
First up on the latest edition of The Senior Hour was Rosemary Murphy of Beyond Harmony. Rosemary shared many of her life experiences which led her to her current place in life, and how to prepare listeners for a better and more beautiful future. For example, being President of the Beyond Harmony Medical Spa in Santa Clarita was not a flip of the switch career choice. She mentioned how she is currently paying the price of not wearing protective sunscreen in her youth, and demands listeners pay attention to what she is preaching, because it will save them an enormous headache, and possibly even expensive medical bills in their future. She also explicitly warned, sunscreen and sunblock is meant for all skin types. Just because someone is darker than a caucasian person, and does not burn – does not mean their skin is being damaged by the sun’s rays! After Rosemary Murphy, The Senior Hour hosts invited Darbe Nokes AKA The Credit Gal to talk about life, money, savings and credit tips that can lead anyone, young or old, into success.

Every Wednesday at 11 am, tune into KHTS AM 1220 to listen in on the Senior Hour Show.  Hosts Dr. Gene Dorio and Barbara Cochran discuss senior living and issues that our seniors face here in Santa Clarita.

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Senior Hour – July 23, 2014

Article: Senior Hour – July 23, 2014
Source: Santa Clarita Podcasts
Author: Peter Marquez

‘No evidence’ of subprime auto loan bubble, Equifax economist says

Credit bureau Equifax Inc. has joined other financial data crunching firms that dispute theres an alarming subprime auto loan bubble thats about to burst.

Theres no evidence for that at all, Dennis Carlson, deputy chief economist for Equifax, told Automotive News. Our position is simply that theres an easy tendency to decry subprime in general because of what happened in the past, and its not fair to do that.

On Monday, Atlanta-based Equifax issued a white paper titled Not Yesterdays Subprime Auto Loan, together with a press release headlined Evidence Does Not Suggest Bubble is Forming in Subprime Auto Market.

Ghost of mortgages past

The past to which Carlson referred is the collapse of subprime mortgages, which helped trigger 18 months of recession starting in December 2007. Last month, The New York Times published an article that compared todays growth in subprime auto loans to the growth in subprime mortgages that preceded the recession. The paper also ran sympathetic portraits of borrowers with subprime credit who found themselves in auto loans they really couldnt afford.

A big part of the subprime mortgage crisis was that lenders and brokers originated mortgages to customers who couldnt afford them. In turn, the mortgages were resold to investors in the form of asset-backed securities without sufficient warning as to how risky they were.

The Times followed up the article with an even more sharply worded editorial, suggesting that similar problems are brewing for asset-backed securities backed by subprime auto loans.

Meanwhile, the US Department of Justice added fuel to the debate this month by issuing subpoenas to two subprime auto lending specialists, GM Financial and Santander Consumer USA, asking for information related to the lenders sale of asset-backed securities.

Not in the numbers

Like some other analysts, Equifaxs Carlson said there is no data to support the notion that mass numbers of subprime auto loans are about to fail without warning. Carlson said he sympathizes with the customers depicted in the articles. However, he said, The plural of anecdotes is not data.

Rather, analysts say, data on the auto finance industry show delinquencies, losses for bad loans, and repossessions are near historical lows, although there have been some small increases for those measures, especially in the subprime sector. Besides Carlson, analysts for Moodys Analytics, Standard amp; Poors Ratings Services, and the New York Federal Reserve Bank have made similar statements.

Theres little to no evidence that theres a subprime bubble, in any way, shape or form, Carlson said. That doesnt mean there couldnt ever be; it doesnt mean theres no need to monitor the market.

You can reach Jim Henry at autonews@crain.com.

Financial worries affect sleep, workplace effectiveness

A recent camping trip reminded me of many things that can keep people awake at night, including barking dogs, snoring people, raiding raccoons and rocky ground. There’s another culprit that can cause insomnia. Seventy-nine percent of respondents in the National Foundation for Credit Counseling (NFCC) July poll say their personal finances are keeping them awake at night.

Wellness experts have long noted connections between personal finances and health. Financial worries can lead to anxiety, headaches, sleepless nights and less effective employees.

The Society for Human Resource Management (SHRM) surveyed human resources professionals asking what financial challenges they see among their employees. According to the 2014 “Financial Wellness in the Workplace” survey, 42 percent reported that medical expenses are the biggest personal financial challenge affecting employees, while 41 percent reported an overall lack of money to cover personal expenses is affecting employees the most.

Financial challenges can decrease the effectiveness of employees at work. Seventy percent of the SHRM’s HR professionals said that financial challenges have a large impact or some impact on employee’s performance. Thirty-eight percent say that workers are facing more personal financial challenges now than they were before the great recession hit in 2007.

A recent Gallup poll confirms the challenges HR professionals identified in the SHRM survey. People ages 18 to 29 worry about being able to pay medical costs, maintaining their standard of living, paying off their debt, paying their rent and paying normal monthly bills. In another Gallup poll, “Job Loss Would Quickly Lead to Hardship for Many in US” Fourteen percent of people said if they lost their job they could only last one week before experiencing significant financial hardship and 29 percent said they could last up to one month.

The SHRM survey and Gallup polls reveal the fragile state of many individual’s personal finances. When people are living paycheck to paycheck, they struggle to pay their day-to-day bills and worry about how they would pay medical bills or other unexpected expenses.

While many employees are straining to cope with day-to-day expenses, most workplace financial education programs focus on planning for retirement and financial investment planning. Although saving for retirement is a common concern, it is wise to recognize that different segments of the workplace have different needs. For example, when HR professionals were asked to identify the education topics millennials would most likely participate in, 31 percent said financial investment planning, 24 percent said general budgeting advice and 14 percent indicated retirement education.

It’s encouraging that 57 percent of the SHRM respondents provide financial education to their employees. But more workplace education could focus on general budgeting advice. Good planning can reduce financial stress, improve sleeping patterns, boost regular savings and enable people to free up cash flow so they can save for long-term goals like retirement.

– Alan Prahl is with FISC, a nonprofit program of Goodwill NCW. He can be reached at aprahl@fisc-cccs.org.

The Transatlantic Growth Gap

BRUSSELS – The global financial crisis that erupted in full force in 2008 affected Europe and the United States in a very similar way – at least at the start. On both sides of the Atlantic, economic performance tanked in 2009 and started to recover in 2010.

But, as the financial crisis mutated into the euro crisis, an economic gulf opened between the US and the eurozone. Over the last three years (2011-2013), the US economy grew by about six percentage points more. Even taking into account the increasing demographic differential, which now amounts to about half a percentage point per year, the US economy has grown by about 4.5 percentage points more over these three years on a per capita basis.

The main reason for the gap is the difference in private consumption, which grew in the US, but fell in the eurozone, especially in its periphery. A retrenchment of public consumption actually subtracted more demand in the US (0.8 percentage points) than in the European Union (0.1 points). This might appear to be somewhat surprising in light of all of the talk about Brussels imposed austerity.

In fact, public consumption in the eurozone has de facto remained fairly constant over the last three years, whereas it has declined substantially in the US. (The same is true of public investment, though this constitutes such a small proportion of GDP that transatlantic differences could not have had a large impact on growth over a three-year horizon.)

The contraction of private investment in Europe accounts for only a small part (one-third) of the growth gap. Though the financial-market tensions that accompanied the euro crisis had a strong negative impact on investment in the eurozone periphery, investment demand has also remained weak in the US, minimizing the overall difference.

The resilience of private consumption in the US, the key to the growth gap, is not surprising, given that American households have reduced their debt burden considerably from the peak of more than 90% of GDP reached just before the crisis. The lower debt burden is also a key reason why consumption is expected to continue to grow much faster in the US than in the eurozone this year and next.

But the crucial question – and one that is rarely asked – is how US households were able to reduce their debt burden during a period of high unemployment and almost no wage gains while sustaining consumption growth. The answer lies in a combination of “no recourse” mortgages and fast bankruptcy procedures.

Millions of American homes that were purchased with subprime mortgages have been foreclosed in recent years, forcing their owners, unable to service their debt, to leave. But, as a result of no-recourse mortgages in many US states, the entire mortgage debt was then extinguished, even if the value of the home was too low to cover the balance still due.

Moreover, even in those states where there is full recourse, so that the homeowner remains liable for the full amount of the mortgage loan (that is, the difference between the balance due and the value recovered by selling the home), America’s procedures for personal bankruptcy offer a relatively quick solution. Millions of Americans have filed for personal bankruptcy since 2008 , thereby extinguishing their personal debt. The same applies to hundreds of thousands of small businesses.

Of course, there has also been a surge of bankruptcies in the eurozone’s periphery. But in countries like Italy, Spain, and Greece, the length of a bankruptcy proceeding is measured in years, not months or weeks, as in the US. Moreover, in most of continental Europe a person can be discharged of his or her debt only after a lengthy period, often 5-7 years, during which almost all income must be devoted to debt service.

In the US, by contrast, the corresponding period lasts less than one year in most cases. Moreover, the terms of discharge tend to be much stricter in Europe. An extreme case is Spain, where mortgage debt is never extinguished, not even after a personal bankruptcy.

This key difference between the US and (continental) Europe explains the resilience of the US economy to the collapse of its credit boom. The excessive debt accumulated by households has been worked off much more rapidly; and, once losses have been recognized, people can start again.

The cause of the transatlantic growth gap thus should not be sought in excessive eurozone austerity or the excessive prudence of the European Central Bank. There are structural reasons for the eurozone economy’s slow recovery from the financial meltdown in its periphery. Most important, compared to the US, the excess debt created during the boom years has been much more difficult to work off.

European officials are right to promote structural reforms of EU countries’ labor and product markets. But they should also focus on overhauling and accelerating bankruptcy procedures, so that losses can be recognized more quickly and over-indebted households can start afresh, rather than being shackled for years.

College Grads — What You Don’t Know CAN Hurt You Financially

Todays college graduates are vulnerable when it comes to their financial stability after leaving the safety net of college and entering the real world. The financial decisions made in the years that immediately follow graduation tend to be some of the most crucial in a young adults life, ones that require careful consideration and can have life-long implications.

Lets take a step back and look at the realities facing these young adults. Student debt in the US crossed the $1.2 trillion mark last year. Seventy-one percent of all students graduating from a four year college have student debt, and the average debt level is nearly $30,000, according to The Project on Student Debt.

In a recent TD Bank Financial Education survey, we learned that nearly 70 percent of Millennials (ages 18-34) have never received formal financial education. Moreover, 76 percent of Millennials reported that they are seeking financial advice, from basic information about checking and savings accounts to more complicated topics, such as mortgages and starting a small business.

Recent graduates are beginning to plan for the next major phase of their lives. They might be making large investments — such as renting an apartment and buying a vehicle — or smaller ones — such as purchasing housewares and getting a professional wardrobe. Whether they are ready or not, they are starting to face the financial responsibilities of entering the workforce, and it is important they keep these three things in mind as they do.

1. Create a Plan to Pay Down Debt

One of the most important considerations for a recent graduate, particularly if they leave college with debt, is to work toward lowering their current debt without piling on more. This may be one of the easiest concepts to grasp, but the hardest on which to follow through. This is where budgeting becomes critical. There are a few purchases they may need to finance, like a car or furniture. But, for the most part, it is important to live a modest lifestyle after college to start reducing debt versus taking on more.

2. Get Into a Relationship.. With Your Bank

Early financial relationships can be an asset for young adults. As is the case with many college students, their current bank account was created by their parent(s) or another family member.

However, when entering the workforce, recent graduates should look to establish their own relationships with their current bank or with new financial institutions. This will not only help them establish their own banking footprint, it will also ensure that their specific banking needs are being met at this point in their lives — such as having a bank that has longer hours, a large network of ATMs, person to person payments, or mobile deposit.

Another reason for starting a relationship with a bank is to help establish long-term financial goals. Whether these recent graduates will be looking to gain access to capital to start a small business or plan to purchase their first home, having a relationship with a bank from the get-go will put them at an advantage to be able to obtain the financial services theyll need.

3. Understand There Will Be Miscellaneous Expenses

In life, there will always be miscellaneous expenses that cannot be accounted for by even the most budget-savvy adults. For recent graduates, some of these expenses include insurance, unexpected medical bills, repairs and last-minute travel, among many other things. Young adults should look to maintain an emergency fund, which they can build slowly every month for these expenses. This will help accommodate for any unforeseen expenses and prevent more debt from accumulating.

For larger purchases down the road, financing will be required and a buyers debt-to-income ratio will come into play. Across the country, debt-to-income ratios are posing a challenge to young adults with sizable monthly school loan payments. When it comes to buying a home or a car, even prospective buyers who make above average entry-level salaries are still being denied financing based on their existing debt. Establishing good credit by making loan repayment a priority will put prospective buyers on more solid financial ground when it comes to managing debt and securing financing in the future. Planning for larger purchases and anticipating the additional savings needed, such as closing costs for a home or ongoing maintenance for a car, is critical to ensuring you will be comfortable with the additional expenses that home and car ownership require.

These are just a few considerations for recent graduates. Above all, they should continue to educate themselves — through online research, community programs, financial institutions — on personal finance and financial planning. It is vital for recent graduates to take it upon themselves to learn and keep up-to-date on the latest issues that can affect their financial well-being. Knowledge is power, and what you dont know can hurt you, financially.

Nandita Bakhshi is the Head of Retail Distribution and Product for TD Bank. In this role, she leads product innovation and delivery through retail channels, including direct channels and online and mobile banking.

Who gets what as banks say ‘sorry’ with £1bn refund

An epidemic of errors in credit and loan agreements is the latest costly scandal to hit the banking sector, with the total bill already approaching the £1bn mark.

HSBC this week joined other banks in revealing it is setting aside hundreds of millions of pounds to refund many of its personal loan customers after uncovering errors in their paperwork. These mistakes mean that, effectively, the interest payments were legally unenforceable for a period.

Other financial institutions that have uncovered similar errors include Barclays, the Co-operative Bank and Northern Rock. There are more than a dozen others that have, so far, escaped being named.

Here we look at who is entitled to cash and what you have to do to get it.

Whats this all about? It concerns some personal loans, plus some credit and store cards and hire purchase agreements. It has nothing to do with the payment protection insurance mis-selling debacle.

It originally had all the hallmarks of an isolated and relatively minor glitch affecting just one bank: Northern Rock. But many of Britains banks and building societies have subsequently discovered that some of the annual statements and arrears notices sent to customers did not comply with the Consumer Credit Act because they did not give all the information people were entitled to by law.

Since October 2008, lenders have been required to include specific information and wording in the statements that they send to customers. However, it appears that some banks failed to update the wording of their letters to reflect these changes.

The total bill for all this stands at £850m, and is expected to rise.

What did they do (or not do)? In some cases, statements didnt include the original amount borrowed. Under the act, they have to contain the sum borrowed, plus the opening and closing balance. Other statements failed to include the necessary reminders about peoples rights when it comes to paying off the loan.

It might sound like a technicality, but under the law borrowers arent liable for interest or default charges relating to a period when a lender hasnt provided all the necessary information, even if the original documentation was fully above board. Affected customers are entitled to a refund of the interest or fees charged over the period that the errors occurred – which, in some cases, is several years.

How did this come to light? In December 2012 it emerged that 152,000 people who have, or had, a personal loan from Northern Rock would each receive a windfall averaging £1,775 because of a paperwork glitch. The taxpayer picked up the £270m bill because the error happened when Northern Rock was in public ownership.

Which other banks are involved? In September 2013 it was revealed that as many as 300,000 Barclays personal loan customers could be in line for interest refunds totalling about £100m after the bank uncovered numerical errors on some statements.

The Co-operative Bank made a similar announcement, again involving personal loans. It set aside £110m.

Then, in March this year, the Office of Fair Trading announced that 17 unnamed banks and building societies had agreed to pay refunds averaging £300 per person to a total of 497,000 customers affected by this problem.

Whats happening with HSBC? The bank is putting aside around £220m to cover interest refunds to some of its personal loan customers – and has estimated the potential bill as up to £590m.

HSBC says that, in its case, the errors mainly involve annual statements sent out to personal loan customers, which omitted the necessary wording reminding people of their right to make an additional payment/overpayment.

It has not disclosed how many loans are affected, nor the period over which errors occurred. However, customers who have applied for an HSBC personal loan within the last 12 months arent affected, says a spokesman.

How do I know if Im affected? Youll have either received a letter, or youll be getting one. It is understood Barclays issued its refunds in around November last year. Meanwhile, HSBC indicated it will be writing to affected customers very soon. Customers do not need to do anything as they will be contacted by their bank, say the institutions.

Can I have the loan written off? For years, claims companies have promoted the idea you can have your loan written off on the grounds of paperwork errors, but its dubious as to how much this is true. The current refunds are, crucially, not about suggesting that the loans are unenforceable – rather that for a period of time, the interest on the loans was unenforceable. Also, in each case, the banks have been proactive so it makes no sense to use a claims company.

How is this money being repaid? Some people have received their refund in the form of a reduction in what they owe. In the case of Northern Rock, many customers had their loan account balance reduced. Similarly, Barclays rejigged peoples loans, resulting in them owing less. They carry on making the same monthly payment, which means their loan will be repaid earlier.

It is thought that some people who had already paid off their loan or no longer had the card, have received a cheque.

Has anyone lost money? Its not clear. In the case of Northern Rock, it was said that no one had lost out financially and no one had complained. HSBC says it has found no evidence that anyone suffered financial detriment, with no difference in the numbers of people making overpayments during the period, and it adds that it is not aware of any complaints.

Has there been mis-selling? The banks insist this is not a mis-selling issue; instead, they say, these are technical breaches, and that the original sales were all appropriate.

The Top 10 Consumer Complaints of 2013

A dissatisfied customer typically is not a quiet one: Venting to friends, launching a social media assault on the offending service provider and exchanging tense words with customer service representatives are among Americans favorite ways of dealing with bad experiences. You can also reach out to agencies dedicated to resolving consumer issues, and because of those complaints, the Consumer Federation of America has a good idea of what bothers people most.

Today, with the North American Consumer Protection Investigators, the CFA released its most recent edition of the top consumer complaints. The rankings are based on 268,380 complaints received in 2013 by 40 agencies in 23 states that responded to the national organizations survey. The top issues remained the same as they were in 2012: issues with automobiles and associated services; home improvement and construction; and consumer credit and debt.

Consumers Biggest Complaints

In their report, CFA and NACPI noted mostly the same local agencies responded to this and last years survey, but some did not, and a few new ones reported 2013 complaints. As a result, the rankings are only a snapshot of top complaints to participating agencies, and shifts in rankings from previous years arent necessarily indicative of an increase or decrease in problems within certain industries.

Here are the most common complaints among the thousands included in the report:

10. Fraud
2012 ranking: not in top 10
Includes fake sweepstakes and lotteries, work-at-home schemes, grant offers, fake check scams, impostor scams

9. Health Products amp; Services
2012 ranking: not in top 10
Includes misleading claims, unlicensed practitioners and failure to deliver services

8. (tie) Home Solicitations
2012 ranking: 7
Includes do-not-call violations and misrepresentation or failure to deliver products solicited by phone, mail or door-to-door sellers

Internet Sales
2012 ranking: 9
Includes deceptive marketing, product misrepresentation and failure to deliver products

7. Landlord amp; Tenant
2012 ranking: 8
Includes rent disputes, illegal eviction tactics, failure to provide promised services and unhealthy or unsafe living conditions

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6. Utilities
2012 ranking: 4
Includes service problems and billing disputes with phone, cable, satellite, Internet, electric and gas services

5. Services
2012 ranking: 6
Includes lack of proper licensing, failure to deliver, misrepresentation and poor work

4. Retail sales
2012 ranking: 5
Includes deceptive marketing, failure to deliver products, defective merchandise and issues with coupons, rebates and gift cards

3. Credit amp; Debt
2012 ranking: 3
Includes predatory lending, deceptive marketing, billing and fee disputes, credit repair, debt relief, mortgage modification and illegal or abusive debt collection tactics

2. Home Improvement amp; Construction
2012 ranking: 2
Includes shoddy work and failure to start or complete projects

1. Auto
2012 ranking: 1
Includes deceptive marketing in sales of new and used cars, leasing and towing disputes, lemons and faulty repairs

Unleashing a flood of rage on social media platforms might get you somewhere, but working with a consumer advocate may help, too, especially with issues involving large sums of money, your health and your safety. Of the 40 reporting local agencies, 35 provided figures on issue resolution: They saved or recovered more than $139 million for consumers in 2013 through mediation and enforcement actions, the report said.

The top three complaints make sense, considering how consumer activity in those industries often involve a lot of money. Thats why theyve consistently been top complaints, CFA and NACPI concluded. Losing money to debt relief scams, useless repairs and faulty home or car products can put consumers in dire financial circumstances that may have serious consequences for their well being, as well as their credit standings.

Credit is always at the top of the list when it comes to consumer complaints and scams, said Gerri Detweiler, Credit.coms director of consumer education. Dealing with credit problems can be frustrating, and consumers dont always know their rights. But if they do take the time to look at their options they may find there are consumer protection laws and resources that can help.

Consumers seeking help with their credit or debt should regularly monitor their credit throughout the process and maintain consistent communication with any third parties helping them navigate the industry. Its a good habit to request your free annual credit reports, but its especially helpful to do if youre going through credit or debt issues. You can also learn a lot by following changes to your credit scores. You can get two free scores through Credit.com, in addition to credit tips tailored to your needs.

More Money-Saving Reads:

  • What’s a Good Credit Score?
  • What’s a Bad Credit Score?
  • How Credit Impacts Your Day-to-Day Life

Image: Yanik Chauvin

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Tupas hits use of JDF for personal loans

Even without Chief Justice Maria Lourdes Sereno, the House Committee on Justice proceeded with its hearing on the Judiciary Development Fund (JDF) on Tuesday.

Iloilo Representative Niel Tupas questioned how the funds were used, among them alleged personal loans in 2012 amounting to P10 million.

Tupas also asked why millions from the JDF were given as financial assistance to local government units.

The committee, meanwhile, agreed to hold another hearing to give the Supreme Court more time to clarify the issues.

ANC Dateline Philippines, August 5, 2014

Market Update (NYSE:MET): METLIFE FOUNDATION AND HABITAT FOR …

[at noodls] Funding supports new home builds, repairs and renovations in several countries, including the United States, Brazil, Korea, the United Kingdom, Mexico, India and Bangladesh NEW YORK, August 5, 2014 MetLife
Read more on this.

MetLife, Inc. (MET), with a current value of $58.25B, opened at $51.12.

Looking at todays trading action, the companys one day range from $50.81 to $51.73 with a one year range of $45.52 to $57.57.

MET shares are currently priced at 9.11x this years forecasted earnings, which makes them relatively inexpensive compared to the industrys 18.95x earnings multiple for the same period.

The company pays shareholders $1.40 per share in dividend income per year, for a current yield of 2.50%.

According to a consensus of 19 analysts, the earnings estimate of $1.40 per share would be $0.06 better than the year-ago quarter and a $0.02 sequential decrease. In looking at the bigger picture, the full-year EPS estimate of $5.61 would be a $0.02 worse when compared to the previous years annual results.

The quarterly earnings estimate is predicated on a consensus revenue forecast of $17.63 Billion. If reported, that would be a 4.32% increase over the year-ago quarter.

Recently, UBS downgraded MET from Buy to Neutral (Jan 6, 2014). Previously, Deutsche Bank Initiated MET at to Hold.

Investors should keep in mind is that the average price target is $62.56, which is 22.38% above where the stock opened this morning.

Summary (NYSE:MET) : MetLife, Inc., through its subsidiaries, provides insurance, annuities, and employee benefit programs in the United States, Japan, Latin America, Asia, Europe, and the Middle East. It operates in six segments: Retail; Group, Voluntary amp; Worksite Benefits; Corporate Benefit Funding; Latin America; Asia; and Europe, the Middle East and Africa. The company provides variable, universal, term, and whole life products; individual disability income products; personal lines property and casualty insurance, including private passenger automobile, homeowners, and personal excess liability insurance; and variable and fixed annuities for asset accumulation and distribution needs, as well as mutual funds and other securities products. It also offers group insurance products, such as variable, universal, and term life products; dental, group short- and long-term disability, and accidental death and dismemberment coverages; and voluntary and worksite products consisting of personal lines property and casualty insurance, as well as LTC, prepaid legal plans, and critical illness products. In addition, the company provides annuity and investment products comprising guaranteed interest products and other stable value products, income annuities, and separate account contracts for the investment management of defined benefit and defined contribution plan assets; and structured settlements and products to fund postretirement benefits and company-, bank- or trust-owned life insurance, as well as health insurance, group medical, credit insurance, endowment, retirement, and savings products. It serves individuals and corporations, as well as other institutions and their employees. The company sells its products through sales forces, third-party organizations, independent agents, and property and casualty specialists, as well as through career agency, bancassurance, direct marketing, brokerage, and e-commerce channels. MetLife, Inc. was founded in 1863 and is based in New York, New York.

Tag Helper ~ Stock Code: MET | Common Company name: MetLife | Full Company name: MetLife Inc (NYSE:MET) .

Personal Loan Against Fixed Deposit: All You Wanted to Know

Liquidity management is an important aspect of personal financial planning. Even individuals with good investment portfolios often find it difficult to manage liquidity. A sudden requirement of cash can force you into selling your assets – sometimes at a discount to fair value.

However, if smartly used, traditional bank fixed deposits can come to rescue. Lenders offer personal loans against fixed deposits, whereby one can raise short-term money without breaking a fixed deposit (FD). Another advantage the borrower enjoys is the low interest rate as compared to other personal loans.

Why go for personal loan against FD?

Most banks offer personal loans at a rate of interest ranging between 16 per cent and 24 per cent.

A personal loan taken against a fixed deposit ensures that you pay just 1 per cent more than the rate of interest payable than the fixed deposit.

For example, if a bank pays a 9 per cent rate of interest on a three-year FD, then the rate of interest payable on the personal loan raised against it would be 10 per cent.

This saves a lot of money which otherwise would have been paid as interest had it been a traditional personal loan backed by no security.

A personal loan against FD is easy to obtain and the process generally takes less than one day. The individual has to submit a duly-filled application form, fixed deposit receipts and other documents such as pledge/lien letter and overdraft agreement as notified by the bank.

There is no prepayment penalty charged by the bank on the repayment of personal loans against FD. However, banks do charge a small processing fee while giving this loan. But if you have a long standing relationship with your bank, the lender may choose to waive half the fees.

Amount/interest

Banks generally offer 90 per cent of the value of the fixed deposit. For example, if you set up an FD with your bank just a month ago, the lender would be offering you a personal loan to the extent of 90 per cent of the amount you invested.

If the fixed deposit has already run for two years, then the bank would be comfortable lending you a bit more money than the amount you invested, as some interest is accrued on it in the past two years. The amount of loan offered against a fixed deposit would be closer to 90 per cent of the value of the fixed deposit.

If the borrower fails to service the loan, the bank has the right to foreclose the fixed deposit to recover the money lent. This also means that the tenure of the personal loan given against the FD cannot exceed the residual tenure of the fixed deposit.

Banks offer overdraft facility against bank fixed deposit. This enables borrowers to have access to liquidity. The borrower can use funds for a short period of time and repay the money much before the last date. This way the borrower pays interest only for the time he/she has availed cash from the bank.

For example, let us say an individual has an FD of Rs 1 lakh. The bank has approved a credit limit of Rs 90,000 against the FD and the tenure is 15 months. Now, if the borrower draws Rs 50,000 on the first of the month and then repays the money on the 17th of that month, then he/she is supposed to pay the interest on Rs 50,000 availed for 17 days only.

Remember

Two important things to note while taking a loan against FD is that it should be free from lien or encumbrance and the deposit should not be in any minors name. If this deposit is in joint name – say husband and wife, all holders of the deposit have to execute the loan documents.

The liability to repay the loan will lie with all holders of the deposit. The deposit holder will continue to receive interest on the underlying deposit. However, they need to service the EMI on the loan against deposit.

Conclusion

Personal loan against fixed deposit can help you in times of liquidity crunch. However, you should be looking at it as a means to raise short-term money. If you go overboard with a personal loan against FD and cannot repay on time, you stand to lose your bank fixed deposit as the bank forecloses the fixed deposit to recover the money lent.

Also, it shows in your credit report, popularly known as CIBIL report. Such default can pull your CIBIL score down. So use the facility of raising personal loan against bank fixed deposit responsibly.

Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.