Finance & Loans

The Different Types of Default

By Phineas Upham

When a person breaches the terms of their loan contract, they are said to go into default. What about when countries or corporations do it? There is also the possibility that a default is not necessarily bad if the damage is contained in a strategic manner, which is one of the potential strategies being employed in Greece.

Although default falls into two basic types, these types can be applied to several instances. A debt service default is a problem with the scheduled payment on a loan, usually because the borrower did not make a payment. A technical default occurs when a contract is violated.

If a country enters into default, the result is known as “sovereign default” and has some consequences similar to what might happen to a consumer. For example, borrowing costs increase because the country’s credit rating decreases. Although, sovereign debt is a bit different and countries that lend to one another are more apt to enter into negotiations as long as its assumed that an adjusted payment plan will repay the debt in its entirety.

Sometimes, it works out to the borrowers benefit to stop paying a loan. This was a frequent occurrence during the housing bust, when multiple households found themselves with negative equity on their properties because values had brought them upside down. In these situations, the borrower executes what is known as a “strategic default”

In some cases, the debtor may just mail keys to the bank in the event of a strategic default in order to save time.

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Phineas Upham is an investor from NYC and SF. You may contact Phin on his Phineas Upham website or Facebook page.

Dealing with debt in a divorce

Article Written by : Financial Resources 101

Marriage as well as divorce will have consequences on debt. In this article we try to explain impacts of a divorce on certain debt incurred during marriage.

Mortgage

Mortgage is one debt that many enter into immediately after marriage. Different state laws are making it complicated for many who are facing a divorce and having a mortgage obtained while married. It is more common for both parties to be responsible for the mortgage regardless of how the mortgage is obtained. But knowing your state law will help.

Credit card debt

If the debt occurred before the marriage, each party may be responsible for the debt. Once again state law may play a role. But most states consider credit obtained during the marriage as joint regardless whose name appears on the card. Therefore, both parties will be equally responsible.

Medical expenses

Once again the state law may handle medical expenses in a divorce differently. Community property law states such as Arizona and California, consider medical expenses incurred during the marriage as community debt making both parties equally responsible. In equal division property law states courts will make a decision taking variety of factors into consideration including whether parties lived together or not and impact of debt on children.

The Future of FinTech as explained by Phin Upham

By Phin Upham

Phin Upham recently spoke at the Milken Institute Global Conference about the future of financial technology, or fin tech. Banking is in dire need of help. Methodologies that have been practiced for at least the past 100 years are no longer viable in today’s financial climate.

In order to stave off irreparable damage to the middle class, the industry needs to respond to changing needs. Unfortunately, regulation has bogged down banks and made them slow to react. Financial institutions aren’t walking away from deals. They are investing in smaller startups that are better equipped to handle the stressors.

Building a Sandbox

One of the biggest failures that we’ve seen in recent memory is the over abundance of “digital wallet” style applications. Payment processors and digital wallets fail to get at the real problem of consumer debt, but there is no immediate payoff to experimenting methods on how to solve these challenges. What’s needed is a safe space built for experimentation.

A sandbox lets smaller startups build without fear. The creator is meant to and the money has already been earmarked for that purpose. With sandboxes, startups may experiment with crypto currency or personal loans with lower interest rates.

Regulation

Part of the demand for startups is the agility they possess. Big Banks must preserve cash and follow certain rules agile startups often don’t wrestle with because of size or niche. Regulation isn’t stopping banks from doing business, but it’s not creating the kind of innovation that the laws may have intended. If big banks work with smaller companies in the future, the interaction between consumers and banks will change dramatically.

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Phin Upham is an investor from NYC and SF. You may contact Phin on his Phin Upham website or Facebook page.

How much of credit to use?

 

Article Written by  : MLAVA Financial News

When lenders look at your credit, they consider credit utilization rate provided by one of three credit bureaus, namely Experian, Equifax and TransUnion. Credit utilization rate is also contributes to form your credit score. Credit utilization is the amount of credit you used out of what is allowed by the credit line to you. Generally lower utilization rates helps to get a higher FICO score.

How to get a lower utilization rate? When creditors increase your credit limit, your utilization rate could go lower. Similarly, if a lender lowers your credit limit your utilization rate go higher giving you a higher utilization rate. Paying down more than the minimum required could help you to lower the balance and lower the utilization rate.

Higher utilization rate may indicate that you are overextending your credit facility. This may result in some of the creditors lowering the limit of available credit such as credit card limit. This could result in lower FICO score and you may won’t to avoid this situation by not overextending the credit limit. Higher balances are considered higher risk for many lenders. There is no magic formula to tell how much utilization is good. But many believe keeping the utilization around 50 percent of the limit helps to get a higher FICO score.

Utilization of credit and its impact on FICO score

Article Written by : Financial Haze

The infamous FICO (Fair Isaac Corporation) score take into consideration several factors including your utilization of credit. It accounts for 30 percent of your FICO score. Debt to limit ratio is key component but not the only aspect they consider. According to three main credit bureaus, Equifax, Experian and TransUnion, who keep track of your credit and generate a FICO score, they look at six different metrics including debt to limit ratio, number of accounts with balances, amount owed on all lines of credit, and the amount of the installment you pay each month.

Having a higher credit limit can help your credit score. If you have one card with a limit of $1,000 and $500 balance you owe and another card with a limit of $2,000 and $1,000 balance, your average utilization ratio is 50 percent. Raising the credit limit of one credit card can change the average ratio of your credit utilization. If the ratio changes lower, your FICO score can generally go higher. With each monthly payment you make, your utilization ratio as well as your FICO score could change. This is why the FICO score is a fluid score. Also, based on the credit bureau you may get slightly different FICO score due to variations of their calculation methods.

Aware of your options before renegotiating a debt

Article Written by  : Invisible Insurrection

Many of us are burden by heavy debt load. There is not enough income coming in every month to pay down the debt. Extremely high interest rates are making it more difficult for many to make a dent in their unpaid credit card balance. If these situations are similar to what you are facing every day, there are ways to deal with it. One of many available options is to renegotiate with the debt issuer. Before you start to renegotiate your debt payment do your homework. Find how that particular debt affects you such as what percentage of your income requires you to pay the debt. Also, how much theoretically you can afford to pay.

You can negotiate for a principal reduction, interest rate reduction, reduction of the monthly payment, a lump sum settlement (if you can pay off debt in one payment), late fee reductions or combination of all of these. Once you contact them expect for the worse. If you can’t get at least some relief start going up the chain of command by talking to next level each time you get a refusal. Once you reach your goal get it in writing for record keeping. Honor the deal by making prompt payments.

What is Money?

By Samuel Phineas Upham

Money is more than the dollar bills one holds in one hands. The paper bills in your wallet could be easily substituted for stones, tobacco leaves, tea leaves, copper, paper, cigarettes, vegetables, fruits or anything else that can be exchanged. The thing that we call money is not a defined object in itself. If the government and society collapsed tomorrow, basic necessities would take the place of currency.

So money is not what is printed, it is what is exchanged that gives money its value.

Money can be something valuable, like gold, or it can be something akin to credit like the dollar bills in a child’s piggy bank. When you consider that the dollar is a government IOU, it’s much easier to understand.

Money, as in what is printed by the US Mint, is a universal medium of exchange. In the old days, a vendor might review your wares and make what is considered a fair trade for goods. Sometimes, these goods would be valuable like gold, but other times the goods might consist of something like spices. These goods carried value according to individual demand, somewhat like what we have today. This old system was fragmented. You would have to make several stops on your way through a region to be sure that you have traded all goods you have of value, and to get their maximum return.

Paper notes, and coins in the olden days, largely simplified the bartering process. In this way, money became little more than universally agreed upon notes that came to represent forms of payment.

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About the Author: Samuel Phineas Upham is an investor at a family office/ hedgefund, where he focuses on special situation illiquid investing. Before this position, Phin Upham was working at Morgan Stanley in the Media and Telecom group. You may contact Phin on his Samuel Phineas Upham website or LinkedIn.

Two ways you can deal with non-stop collection calls

Article Written by : Scrumpy Jack

When a debt collector starts to call you, there are many ways you can fight those threatening calls. You have immediate family needs that you need to attend and repayment of an overdue or contested debt shouldn’t be top priority over your family survival. So, prioritize all your bills and follow your heart in paying from most important to least important.

One way to deal with annoying collection calls is to find an agency or an attorney who specializes in debt relief for individuals. Once you have an attorney working on your debt, you can stop collection calls and send them to the attorney. They are more aware of all individual protections afforded to you under the law, especially the Fair Debt Collection Practices Act (FDCPA).

If you want to deal with your debt all by yourself and stop collection calls, you need to keep good records. Need to log in all calls you receive and times, names of persons you were in contact and other details. Most of all in order to stop any collection calls you need to request that in writing. Send them a certified letter asking them to stop harassment. However, if they send you proof of debt, they can start to call you again.

The Ethics of Giving

By Phineas Upham

Philanthropy is well-ingrained in American culture. It’s been around since the beginning, when colonial settlers banded together and volunteered their time and effort in building a better society. It’s not a new concept, but the ethics of giving are only recently beginning to come to light.

Aristotle said that there is no selfless act, that even our most gracious act is intrinsically self serving. This statement is quite difficult to disprove. Even when we are at our most selfless, we still take some gratification when others acknowledge our work. But giving is not itself wholly self-serving, and it has led to some excellent advances in society.

Principles and Actions

Giving What We Can is an organization with some admirable aims. The members pledge to devote 10% of their lifelong income to charities that maximize efficiency of spending. This type of pledge is an excellent example of where principles differ from action.

Most people would consider this an admirable pledge to make, but would you make it? Regardless of your financial stature, it’s not an easy choice to part with money we’ve worked for. For those on the lower income bracket, it may be a matter of survival. Higher earners may see it as a matter of preserving one’s family.

We can easily and readily believe that giving is the right thing to do, but we will almost always hesitate to do it ourselves. When we do give to organizations, especially those that support third world entities, we are putting a value on some lives over others. After all, are people not starving at home?

Giving is not as cut and dry as handing someone money. The complex motivations behind giving often drive the charitable contribution.

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Phineas Upham is an investor from NYC and SF. You may contact Phin on his Phineas Upham website or Twitter page.

Chapter 7 bankruptcy works differently from Chapter 13 bankruptcy

Article written by : MLAVA Financial Solutions

Chapter 7 bankruptcy requires the debtor to seek discharge of his or her debt in exchange for declaring all his or her assets to an examiner who is an impartial third party and works on behalf of both the debtor and the creditor. Depending on your assets and liabilities as reviewed by the impartial third party, your debt may get discharged allowing you to make a fresh start. The third party is looking for assets with equity after taking into consideration of cost of sale of each asset. However, remember not all debt including student loans can be discharged under this process.

Chapter 13 filings for bankruptcy work differently when compared to Chapter 7 filings. Chapter 13 is for individuals or married couples that have regular income and seeking help to keep their assets. This process could take longer time period, up to five years, and involve a payment plan to pay off the debt. The length of time to repay the debt depends on individual’s income and the ability to make monthly installment payments. At the end of the process debtor retains the asset. Also, it is a process for those who do not qualify to file under Chapter 7.

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