Ratelines.com » Money Markets

Sallie Mae lowers interest rates as private lenders battle losing billions

victoria — Thu, 20 May 2010 17:52:34 +0000

Faced with the prospect of losing billions of dollars in subsidies from the federal student loan program, private lenders are looking to making their non-federal student loans more attractive which could result in lower fees and interest rates for borrowers who qualify.

The United States’ leading private student lender Sallie Mae announced that as from the 10th of May it will reduce the rates on its Smart Option Student Loan to a rate based on the London Interbank Offered Rate (known as LIBOR) to a 2.88% to 10.24% range instead of its current rate range of 4.38% to 12.88%.

Non-federal loans are commonly used by families to help pay for college costs that aren’t covered by federal student loans and financial aid. According to the College Board, $11 billion dollars were taken out by borrowers in the 2008-2009 academic year.

Due to a provision in the new health care reform law that states that subsidies for private lenders offering federally guaranteed student laws will end by the 1st of July, private lenders will suffer huge losses. Sallie Mae announced that these loses will result in the institution cutting 2,500 jobs.

The College Board claims that the credit crunch resulted in a dramatic drop in non-federal student loans in 2009. There was a drop of 50% in the volume of non-federal loans given out from 2008.

According to Patrick Kandianis, one of the founders of the website SimpleTuition, the drop in federal student loans combined with a strong economy is reigniting interest in non-federal loans. SimpleTuition helps borrowers compare student loan programs with ten major lenders offering their services on the site as compared to only two or three lenders offering their services a year ago. Kandianis foresees more companies being added to the site in the near future.

The number of credit unions enlisted in the Credit Union Student Choice has nearly doubled in the last year, reaching a membership of 126. The Credit Union Student Choice is a group that offers non-federal student loans to credit unions and according to Mike Webber the vice president of the group, new members are striving to remain in the business of offering federal student loans.

Advocates of student loans predict that rates for the majority of non-federal loans are variable and subject to surges if interest rates rise. Another risk involved in non-federal loans is that they don’t offer consumer protection as is the case in federal student loans. The president of the Institute for College Access and Success, Lauren Asher, warns of this risk which leaves borrowers in a more vulnerable position.

Post: Sallie Mae lowers interest rates as private lenders battle losing billions taken from: Ratelines.com

Jobs for College Kids in Trying Times

admin — Mon, 26 Apr 2010 19:11:30 +0000

With respect to employment, perhaps the worst hit demographic during the current recession has been teens. The department of labor reports that there is a very high unemployment rate of 20% among teenagers aged 16 to 19. This is the highest unemployment rate among workers with respect to the different age groups. Teens of this age are often still financially dependent on their parents, if not, they usually still get a lot of financial support from them. Worse yet, if kids are not in college, they no longer qualify to be in their parents insurance.

A lot of kids are in need of spare cash, especially in the summer. For teens in need of employment, here are some summer jobs of which they may not have thought:

Internships and apprenticeships
Kids often bypass internships and apprenticeships in favor or earning higher wages when they get out of college. Long term though, internships and apprenticeships can open doors to more lucrative opportunities in the future. With the employment situation being what it is, internships and apprenticeships are better than not having a job at all, they also offer big potential rewards in the future.

Tom Cath, director of Valparaiso University’s career center in Valparaiso says these particular career outlets are “solid investments” in the future of college students. However, alot of these opportunities are not advertised within schools and universities. Students need to take initiative to search and apply for these opportunities. They could become future employers whether there’s a listing or not. It may be tough to find an internship that pays well these days, but apprenticeships always pay relatively well. If you are content with just gaining experience and improving your resume, there are a lot of unpaid internships open.

Should you find yourself having to settle for an unpaid internship, Cath advises that you should at least ask for a meal, parking and or a transportation allowance. Be sure to ask your school for academic credit as well. That way you can get some financial help from your job. Cath also advises students to inquire about internships at their schools’ career centers, or financial aid offices, such jobs could also be of help financially.

Cooperative learning programs
An option that has been available for some time, but that is worth looking at these days, is a cooperative learning program. Cooperative learning programs are designed so that students can go to school, and earn at the same time. A student studies full time for one semester, then spends the next working at a job related to his or her field for the next semester.

According to the National Commission for Cooperative Education, a Boston-based advocacy group, co-op students usually bring home more money than kids with summer jobs. With a co-op learning program, a kid can earn between $200 to $1,167 per month. What’s more, 95% of kids on co-op learning programs find jobs immediately after graduation. Interested parties can go to their school’s career center or experimental learning office to ask what co-op learning programs are available.

Research grants
Research grants are really great opportunities to improve your resume and make a bit of money on the side as well. Colleges often offer these, so do a lot of private companies and government entities. A lot of college students use research grants to pay for their board and lodging while they are in school. It is best to apply for grants as early as February or March, it they are looking for grant in the fall semester, they need to start looking in the spring.

The most convenient and logical place to start looking is your school. If you can’t find anything there, you can try scholarship sites, government organizations post openings on students.gov, and even private corporations connected to your course.

Post: Jobs for College Kids in Trying Times taken from: Ratelines.com

Invest Boldly When Money Market Rates are Low

victoria — Fri, 16 Apr 2010 18:18:02 +0000

Nowadays, money market rates are historically low. It’s difficult to find strong money market rates at the bank, so investors are looking elsewhere to get great yields. Here are a few tips to help you when you are looking to invest your funds.

Commodities Offer Consistent Demand
You can always invest in commodities, which are usually in high demand. Commodities such as sugar, salt, diamonds and many others can be purchased in bulk. It’s a good idea to consult a broker or a commodities expert before you begin investing in commodities. In addition, you need to be sure that you purchase a niche market as regards commodities. For example, you may not want to invest in cane sugar in general, but you could focus your commodity investment on cane sugar bulk for European consumers.

Customize Your ETF Strategy
ETFs are another great alternative to money market accounts. ETFs are exchange traded funds, which means they are baskets of securities that are tied to major stock indexes. You can purchase traditional ETFs or new, active ETFs. Active ETFs have a bit more liquidity and flexibility, but are also riskier. You can purchase customized ETFs that are based on a certain industry, such as aerospace or manufacturing.

Diversified Stocks and Bonds
Of course, it’s also possible to build a portfolio that contains a majority of stocks or government bonds. If you’re investing in stocks and bonds, then you should mitigate your risk through diversification of investment types. Diversification is often misunderstood. Good diversification means that you purchase many different types of securities, not necessarily different levels of risk.

For example, you can have a highly-diversified portfolio that is very risky, or you can have a highly-diversified portfolio that is very conservative. Diversification refers to your ability to minimize losses and thereby slowly gain profit from your investments.

Money Market Funds: A Conservative Approach
Money market mutual funds also represent a great investment opportunity. These funds contain a variety of very conservative investments, including bonds and bank accounts. You can purchase money market mutual funds through a brokerage firm or a bank. It’s also possible to customize your money market mutual fund. One of the most popular money market mutual funds is the Vanguard Prime Money Market Fund, which consistently gives great returns to investors. However, there are many to choose from.

At this juncture, money market funds offer greater yields than money market accounts. Interest rates at banks are very low, so it’s advisable to go out and take a bit of a risk in order to secure higher returns.

Retirement Accounts and Secure Investing
You may want to save your money for retirement, and in the case, a 401k or Roth IRA will serve your interests best. These accounts are particularly attractive due to their tax benefits. The money contributed to Roth IRAs isn’t subject to taxation, although there are contribution limits for these types of accounts.

Play the Market
Now is a good time to go out and take some risks. In a difficult economy, you can’t rely on banks to offer good interest rates. You have to create your own wealth. This means you need to look at alternative forms of investing. So, if you want to earn high yields off of your investment portfolio, then specify your niche, and diversify within that niche. You will find that you are able to earn more than you anticipated if you have a well equipped portfolio.

Post: Invest Boldly When Money Market Rates are Low taken from: Ratelines.com

Invest in Foreign Markets without Relying On Standard Money Market Rates

admin — Fri, 02 Apr 2010 16:53:48 +0000

As money market rates continue to plummet, many investors are looking at unconventional investment methods. One way of circumventing bad money market rates is by investing in foreign markets. There are specific brokerage firms that specialize in these types of investments.

A Good Foreign Investment Firm: Euro Pacific Capital
Peter Schiff is famous for predicting the subprime mortgage crisis of the 2000s, among other things. He is an Austrian School adherent of economic theory, and he’s also a massively successful brokerage owner. His firm, Euro Pacific Capital, focuses on finding strong markets throughout the world. In other words, Euro Pacific Capital is not limited to one continent; rather, it specializes in offering foreign stocks and bonds in addition to U.S. stocks.

Think and Invest Globally
The philosophy behind Euro Pacific Capital is simple. They believe in finding the best investment opportunities available around the globe. Many foreign stocks are out of reach to domestic investors, but with Euro Pacific Capital, investors have access to a far greater array of investment options.

Access to Markets All Over the World
You can also find investment advice and easy online access to foreign stocks. Euro Pacific Capital offers many resources for investors who want to purchase interest in precious metals such as gold. This is as alternative as you can get, but Euro Pacific Capital is bringing great returns to investors.

If you’re looking to branch out and invest in foreign stocks, look at Euro Pacific Capital. It is a great idea to look at global markets for investments.

Post: Invest in Foreign Markets without Relying On Standard Money Market Rates taken from: Ratelines.com

Money Markets – Commercial paper

victoria — Thu, 25 Feb 2010 15:22:52 +0000

Commercial papers, a part of money markets, are financial instruments used to fund either current assets (such as inventories) or other operating expenses. They may not be used for fixed assets such as machinery and land, but they also do not have to be regulated by the SEC, provided they meet these and other qualifications, i.e. they must mature before nine months. Commercial papers are negotiable instruments and are governed by the Uniform Commercial Code. As of 2008, there are $1.78 trillion in total outstanding commercial paper. $801.3 billion are asset backed and $816.7 billion were issued by financial corporations.

Commercial paper is generally a safe investment that can be used for working capital or inventory purchases. As a low-cost alternative to bank loans, individuals can invest in these short-term unsecured promissory notes for numerous credit issuers, where the investments are somewhat secure.

There are five main advantages of investing in commercial paper. First, it allows the investor to borrow at cheaper rates compared to local banks. Second, the investor can establish national credit. Third, the investor can establish a broader market for the paper. Fourth, the investor can obtain cash and take advantage of trade creditors’ cash discounts. Finally, the investor can keep a reserve of borrowing money at local banks.

Money Markets – Issuing Paper
There are two methods – buy and hold and selling to dealer – to issue paper. First, the issuer can market securities to a buy and hold investor, which includes most money market funds. This strategy is good for the long term as most financial markets tend to give good rates of return. Here, unsophisticated buyers tend not to know when a security is worth purchasing; thus, it is safer to simply buy and hold. This strategy is an example of the efficient market hypothesis, which presumes that all securities are fairly valued and thus it does not behoove you to trade and sell unless you need the money.

However, there are arguments opposing the merits of this strategy. Day traders, for example, hold the concept that money can be made in the short term when an individual buys and sells quickly, though clearly there is considerable more volatility with this strategy. These investors have created an industry around buying and selling stocks on a very short-term basis that can range from a few minutes to a few hours but rarely overnight. While many day traders are bank or investment employees who specialize in fund management and equity investment, casual, at home traders have taken advantage of electronic trading and margin trading. Day trading, in particular for home traders, is very risky as the traders may have inadequate risk capital, have poor trading discipline, or be incompetent with money management.

Second, as stated earlier, the other method of issuing paper is by selling them to a dealer who then sells them in the market.

Defaults
When a business is established and able to build a high credit rating, commercial paper is usually cheaper than a bank line of credit; however, companies often maintain bank links of credit as backups. One of the benefits of commercial paper is the rarity of defaults. Defaults on high quality commercial paper are rare as well.

Post: Money Markets – Commercial paper taken from: Ratelines.com

Promissory Notes for Money Markets

victoria — Sat, 19 Sep 2009 16:15:50 +0000

Money markets are defined as wholesale cash markets where corporate bodies, banks, and governing agencies can fund short-term deficits and invest short-term surpluses. Participants of such markets can lend and borrow for periods of time normally not exceeding thirteen months. While capital markets trade bonds and equity due to their long-term funding nature, money markets trade with paper, which is a short-term financial instrument. Banks use repurchase agreements and commercial paper, among other instruments, to borrow and trade with one-another in money markets. In the United States, all governments use issue paper to meet their funding needs. While the US treasury uses treasury bills to fund the US public debt, states and local governments instead use municipal paper.

Money Market and Promissory Notes
Used extensively in monkey markets, commercial papers are debt instruments issued by companies to meet short-term financing needs. A commercial paper is an unsecured promissory note with fixed maturity of 1 to 270 days. A promissory note is defined as a written promise to repay debt under certain terms at a stated time through either a specified series of payments or upon demand. Promissory notes identify all parties involved, the amount of the debt, a recitation of the consideration for the obligation, the terms of the actual payment, and the interest rate, should one apply. These notes make unconditional promises to pay a sum of money, yet they differ from IOU’s as they contain specific promises to pay rather than simply acknowledging debt. Promissory notes may also include acceleration clauses that, should a payment be missed, will make the entire amount due.

Promissory notes may also include provisions regarding the borrower’s rights in case of a default. In the United States, promissory notes must meet certain conditions that they are negotiable instruments, which include checks and bank notes. While promissory notes are often used to provide capital to businesses, negotiable promissory notes are used in financing real estate transactions. Demand promissory notes do not carry a specific maturity date; instead, they are due when the lender makes a formal demand. In these cases, the lender will only give the borrower a few days notice about the payment’s due date. Writing and signing promissory notes are often key for tax and record keeping in cases of loans between individuals.

As mentioned briefly above, commercial papers are unsecured promissory notes, which means that if the borrower declares bankruptcy, the secured creditors will be paid before the owner of the debt that is secured by the note. If one lends money through an unsecured promissory note, then it is wise not to lend any more money than one is prepared to lose, because in the event of a bankruptcy, it is feasible that the lender will in fact not be compensated for his debt. In the alternative, if a loan is large, the lender should acquire some form of security for the loan such as a lien against the real estate or recognition of the loan on the titled property. This protects the lender.

Post: Promissory Notes for Money Markets taken from: Ratelines.com