Stop Paying The Minimum
Credit cards are there to put you in debt and keep you in debt. When they do it, they have one tool at their disposal that is more effective than all the others. It’s called the minimum payment.
What’s a Minimum Payment?
Your minimum payment is the absolute minimum that you must pay off each month to avoid defaulting on the debt. If you don’t pay your minimum, they’ll come after you – but don’t make the mistake of thinking it’s just fine to only ever pay that much.
Why are Minimums Bad?
They never used to be. Minimum payments used to be set at relatively high percentages, anywhere from 5% to 10%. This meant that you paid more, but your debt would get paid back faster.
Credit card lenders realised, though, that they could set the minimum payments lower, and collect a smaller amount of money each month for a much longer period of time. This would let them tell people that debts on their cards were ‘affordable’, while they raked in the cash over the long term, thanks to the power of compound interest.
Here’s an Example.
Let’s say you owed $1000 at an interest rate of 12.7% per year (1% per month). Your minimum payment is 5% per month. Remember that your payment goes towards the interest first, and then the debt. In this example, $10 out of the $50 you paid would disappear as interest – but $40 would still go towards paying off the debt, meaning that your debt the next month would be $960.
What happens if you change the minimum payment to only 2%? Well, the difference is enormous. Sure, you’re only paying an ‘affordable’ $20 – but $10 of it is still going on interest. That means that your $20 has only paid back $10 towards the debt, and you still owe $990!
There are so many people who just look at the interest rates they’re being charged, and don’t understand the terrible difference it can make if you only ever pay the minimum payment. In our example (which is relatively typical), 50% of the payment was going on interest – meaning that paying the minimum gets you an effective 50% interest rate, even though your APR was only 12.7%. For higher interest rates, it only gets worse: there are cards out there where only making the minimum payments will actually cause you to owe more each month, not less!
So What Should You Do?
The answers aren’t fun, but they are true. Firstly, look for a card with a high minimum payment – this is a good way to discipline yourself into paying off the debt faster.
Secondly, always pay more than the minimum if you can afford to. I know it feels like money for nothing, but isn’t it better to pay it now and get it over with, instead of paying it for the rest of your life?
Car Loan Value
Buying a new car can take a hefty chunk out of your budget. Even used cars are still expensive if you all out and buy it. Chances are, you need a car loan when buying a set of wheels. This is especially true when you’re buying from a dealer or an individual.
Lenders pay attention to Car Loan Value
Most lenders you’ll find will only finance the car loan value, instead of the vehicle itself. Cars are important investments, never mind if they’re new or used. Car loan value is generally lower than the purchase price of your car. But by knowing what the car loan value of your car is and comparing it to its purchase price, you will have an idea about the payments involved when you apply for a loan.
So before you walked into a dealership, it’s important that you know what your car loan value is and its purchase price so you can roughly estimate the amount of money you would have to put down for your car.
Car Loan Value saves Time and Trouble
It’s always a good thing to conserve time. By knowing your car loan value, you save yourself from the trouble of applying for auto loans for a car that is well above your means or not within your price range. In almost the same breath, forehand knowledge about your car loan value can keep you from getting short-changed on a car that is less than what you can really afford.
Car Loan Value – The Blue Book Value
One of the most important factors in acquiring car loans is the “blue book” which contains a list of car loan values. The blue book is usually equally important in RV loans and motorcycle loans. The most trusted resource of blue book car loan values is the Kelley Blue Book.
The Factors that affect your Car Loan Value
The car loan value is based on many different factors. These factors that affect car loan value include make and model, manufacturer’s suggested retail price, mileage, transmission type, and additional features, such as airbags and audio system.
There are several classes of vehicles available in the auto market. So when you shop for cars, you need to first identify which type of cars are your buying target. You can choose an SUV, a mini-van, a pickup truck, or even economy cars. “Staple” cars – that is, cars with popular brand names – are usually more expensive compared to other cars. For this reason, the car loan value of “branded” cars is generally higher.
The number of miles in a car also greatly affects your car loan value. In general, the car loan value depreciates the minute your car leaves the garage.
Outsourcing Property Insurance
Insurance companies are quite traditional in conducting their business. In all their business transactions, they employ the same conservative attitude and tradition-bound ideas. Their conservatism and traditional outlooks affect the way they invest the premiums they get from policyholders. This fact is rather ironic when you think about the nature of their jobs.
Insurance companies are the key aspects in an industry where quantifying risks is considered part of the job. It is their function to offer as much financial security as they could to their clients. How come then that outsourcing property insurance is considered too risky?
Many insurance agencies defend themselves by saying that it is a time-honored tradition to keep business processes to themselves and outsourcing property insurance does not necessarily fall into that category. This is not to say however that outsourcing property insurance does not get a bit of share in the competitive market.
Although a relatively new concept, outsourcing property insurance is beginning to increasingly gain popularity among insurance companies. These companies who embrace the idea of outsourcing property insurance have grappled the fact that business always involves risks. So why not join the outsourcing property insurance market?
Indeed, outsourcing property insurance is not without its benefits. Industry insiders are predicting double-digit increases for 2003 due to the increasing popularity of outsourcing property insurance. With the degree of competition in today’s markets, companies are willing to squeeze in anything into their operations if it means increasing their efficiency in delivering goods. Outsourcing property insurance is the way to go if it is a question of survival.
Outsourcing Property Insurance – Transcending Traditions
Based in McHendry Illinois, Member Insurance Agency offers insurance products and services for their clients in the hardware and building material industry. Wayne Fell, president and CEO of Member Insurance, states that it had taken some time for their company to finally accept the idea of outsourcing property insurance. “Nobody can do this better than we can” is the kind of traditional thinking that keeps large companies like Member Insurance from accepting the idea of outsourcing property insurance.
Finally though, by 2000, Member Insurance transferred their customer service to an outsourcing property insurance company. According to Fell, outsourcing property insurance is a form of specialization. “Just because you’re good at underwriting and you’re good at selling, it doesn’t mean you’re good at doing the paperwork,” Fell says by way of explaining why they opted for outsourcing property insurance.
And for most insurance companies who have adopted outsourcing property insurance, the trend is natural. Outsourcing property insurance has become a by-product of the competition in the market.
The Market is now open to outsourcing property insurance
More and more insurers are looking at outsourcing property insurance with a clearer vision. A research firm in Stamford, Connecticut, Gartner, Inc. found out in October and November of 2001 the extent of outsourcing property insurance in U.S. insurance carriers. According to their research, which used 114 U.S. insurance carriers as basis, 51 per cent of life and health insurers are outsourcing property insurance. In addition, outsourcing property insurance is done in 48 per cent of property and casualty insurers.
Industry insiders believe that the driving force of outsourcing property insurance is the Internet. The number of insurance companies selling Web-based products has placed much pressure on their company’s IT departments. The solution? Outsourcing property insurance.
Citizens Property Insurance Corp
Florida homeowners, especially those in high-risk areas, experience a difficult time getting insurance coverage for damages caused by hurricanes and windstorms. Many private insurance companies are almost adamant at writing new policies that are specific to their insurance needs. For this reason, the Citizens Property Insurance Corp was created.
Citizens Property Insurance Corp was formed from the combination of two state-owned insurance entities. These insurance companies that make Citizens Property Insurance Corp are the Florida Residential Property and Casualty Joint Underwriting Association (FRPCJUA) and the Florida Windstorm Underwriting Association (FWUA). The Florida legislature passed a law in 2002 combining these two companies in order to create the Citizens Property Insurance Corp. When they formed the Citizens Property Insurance Corp, it was their aim to provide insurance coverage for Florida homeowners who are unable to get insurance coverage from the private insurance market.
The reluctance of private insurance companies to fund coverage for homeowners in high-risk Florida is not without reason. Just recently, four hurricanes hit Florida and devastated several homes. According to estimates as of July 28, 2004, Citizens Property Insurance Corp has a total of 78,257 insurance claims to evaluate.
Citizens Property Insurance Corp is a state-run insurance company. As such, Citizens Property Insurance Corp can offer coverage of up to $350,000. This amount from Citizens Property Insurance Corp covers damages and the cost of repair and rebuilding. Aside from the actual house, Citizens Property Insurance Corp also pays for the reconstruction of other structures, such as fences, swimming pools, and such. In addition, Citizens Property Insurance Corp includes coverage for replacement of lost or damaged items and liability costs.
After hurricanes Charley, Frances, Ivan, and Jeanne wreaked havoc in Florida, Citizens Property Insurance Corp faces a total net loss of $1.77 billion. According to Risk Management Solutions, a separate entity that reviews damages to be covered by insurance, there are almost 92,000 homeowners who are filing claims at Citizens Property Insurance Corp. This number, which is 13,743 more than what Citizens Property Insurance Corp earlier projected, is still expected to rise within the next few months.
In a report filed by Risk Management Solutions, Hurricane Jeanne takes $252 million in damages from Citizens Property Insurance Corp High-Risk Accounts (HRA). $53 million is the estimated number for the former Florida JUA Personal Lines Account (PLA) of Citizens Property Insurance Corp. And for the Commercial Lines Account (CLA), Citizens Property Insurance Corp will pay for $27 million.
For Hurricane Ivan, Citizens Property Insurance Corp will cover close to $232 million total from damages in all three accounts, including the wind-only, residential multi-peril, and commercial residential policies. Citizens Property Insurance Corp will suffer $225 million in wind-only policies from Hurricane Frances. In addition, Citizens Property Insurance Corp has to prepare $65 million to cover their Personal and Commercial lines accounts.
It is Hurricane Charley that will take the biggest cut from Citizens Property Insurance Corp. With an estimated $850 million cost in High-Risk Accounts, according to Risk Management Solutions, Citizens Property Insurance Corp faces a total of $925 million in all three accounts.
Citizens Property Insurance Corp has raised their premium prices on their windstorm policy so they could keep up with all these claims. The increase of Citizens Property Insurance Corp premium could reach up to 67 per cent. On the average though, Citizens Property Insurance Corp only increased their yields to 11.9 per cent in their two other policies.
