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  • Making sense of the Bank of Canada interest rate decision on July 24, 2024 – MoneySense

    Making sense of the Bank of Canada interest rate decision on July 24, 2024 – MoneySense

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    What is the Bank of Canada’s interest rate?

    This latest decrease brings the central bank’s rate—which sets the benchmark for Canada’s prime rate and variable-rate borrowing products—to 4.5%.

    Combined with last month’s decrease, the benchmark cost of borrowing in Canada is now down 0.5% and is at its lowest since May 2023.

    What does the rate cut mean? Will the interest rate cuts continue?

    In the immediate aftermath of today’s rate cut, Canada’s prime rate will decrease from 6.95% to 6.7%, with consumer lenders passing that discount onto their prime-based products, including variable mortgage rates and home equity lines of credit (HELOCs).

    While the outcome of today’s BoC announcement was expected—markets had priced in an 80% chance of a cut—the language in the central bank’s news release was surprisingly cheerful. The central bank usually keeps its cards close to its chest in terms of future cuts, but it wasn’t afraid to come across more dovish today, pointing to the progress made thus far on inflation.

    It noted its preferred Consumer Price Index (CPI) “core measures” (called the CPI trim and median) have both trended under 3% in the last few months. The BoC also suggested that inflation will settle around 2%—the target the central bank wants to see—by 2025.

    That translates to more cuts to come. The question now, though, is whether another quarter-point cut will come in September and/or December. And, of course, just how many more cuts will come in 2025. 

    Currently, analysts believe the BoC’s cutting cycle will bottom out at 3%, which would require another six quarter-point cuts. 

    Of course, the BoC maintains that future cuts will depend heavily on inflation, stating, “Monetary policy decisions will be guided by incoming information and our assessment of their implications for the inflation outlook.” That means the markets will be watching upcoming CPI reports like a hawk. 

    What does the BoC rate announcement mean to you?

    …if you’re a mortgage borrower

    Renewing or borrowing, this is good news for Canadian home owners.

    The impact on variable-rate mortgages

    If you’ve stuck it out this far with a variable mortgage rate, you’re being rewarded today. As a result of today’s rate cut, your mortgage rate and payment will lower in kind immediately, if you’re in an adjustable-rate mortgage. If you’ve got a variable mortgage rate with a fixed payment schedule, more of your payment will now go toward your principal mortgage balance, rather than servicing interest.

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    Penelope Graham

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  • How Nonprofit Debt Consolidation Works | Bankrate

    How Nonprofit Debt Consolidation Works | Bankrate

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    Key takeaways

    • Nonprofit debt consolidation can make debt payments more manageable by reducing the number of bills you need to pay.
    • Unlike traditional debt consolidation, where borrowers pay off existing debts with a new loan, nonprofit debt consolidation relies on a debt management plan that works with your existing debts.
    • You may want to try a nonprofit service before considering a for-profit company.

    If you’re one of the almost half of Americans who carry a credit card balance every month, you might struggle to juggle multiple debt payments to numerous creditors. You have to remember all the different due dates and make sure the money is available when you need to pay each bill.

    Debt consolidation can help by combining two or more debts into a single payment with a due date that works for you. Nonprofit debt consolidation may be particularly useful for borrowers who are taking care to protect or improve their credit scores.

    What is nonprofit debt consolidation?

    Unlike traditional debt consolidation, nonprofit debt consolidation does not require a new loan to pay off your other debts.

    Instead, a nonprofit debt consolidation service works with your creditors to create a debt management plan (DMP). The DMP allows you to make one payment to the nonprofit consolidation services each month. The service will distribute your payment to the individual creditors for you.

    “Nonprofit debt consolidation can be a good option for those feeling overwhelmed by multiple payments with different due dates to remember,” says Katie Ross, executive vice president for nonprofit American Consumer Credit Counseling. “With debt consolidation, you make one monthly payment on the day of the month that works best for you.”

    It’s important to note that “nonprofit” doesn’t necessarily mean the service is free for borrowers. It simply means that the service does not turn a profit for owners.

    However, much of the nonprofit debt relief services funding comes from government programs, grants and donations. As a result, these organizations can offer much lower fees for their service than a for-profit company that relies on customers to turn a profit. Sometimes, nonprofit debt relief organizations may have enough outside funding to offer their services free to borrowers.

    How nonprofit debt consolidation works

    When you hire a nonprofit debt consolidation company, a financial counselor will contact your creditors to negotiate more favorable terms on your debts.

    The counselor might be able to get late fees waived or even lower your interest rate. A lower interest rate reduces the total amount you’ll have to pay on the debt, which can mean a lower monthly payment.

    The counselor will then create a DMP based on your budget and schedule. Tell your financial counselor if you are struggling to make the current payments on your debts. They may be able to negotiate lower monthly payments either through lower interest rates or by extending the terms of the loans. Just remember that extending the loan term may mean paying more in interest expenses over the long haul.

    You should also tell your financial counselor which payment date works best for you. For example, if you get paid on the 1st, they might schedule the payment for the 4th, when you will likely have the funds in your account.

    Your counselor will then present the proposed debt management plan to your creditors for approval. Nonprofit debt consolidation only works if creditors agree with the proposed arrangement.

    Types of debt eligible for nonprofit debt consolidation

    Nonprofit debt management services typically only apply to unsecured debt.

    Credit card debt

    This is the most common type of debt in debt management plans. Americans carry a lot of credit card debt. With credit card interest rates being so high, your credit counselor may have more room to negotiate the rate down. A lower rate could reduce your monthly payment or even help you pay off the balance faster.

    Credit card companies may require you to close active accounts before they will approve a debt management plan. You would not be able to use that card for future purchases, and it may result in a temporary decrease in your credit score.

    The average age of credit and total available credit are two main factors in calculating your credit score. Closing a long-open account affects both categories.

    Medical debt

    Medical debt comes with more consumer protections than credit card debt, so a nonprofit debt management counselor may have more options for negotiating this debt, such as social service referrals. In some states, medical debt forgiveness may be an option.

    Student loans

    Student loans may or may not be eligible for nonprofit debt consolidation, often depending on if they are federal or private. However, there may be additional options to help ease the student loan burden.

    According to Ross, “These options may include loan cancellation, consolidation or income-driven repayment plans. The options will vary depending on whether the client has federal or private student loans, as federal student loans have different types of repayment plans.”

    Debts that are ineligible for nonprofit consolidation

    Debts that are secured by collateral are typically excluded from debt consolidation services.

    Home loans

    Home mortgage loans are secured by the property being mortgaged. This means the lender could foreclose on the home if the borrower fails to repay the loan. Home loans are not eligible for nonprofit debt consolidation plans as a secured debt.

    Auto loans

    Auto loans are secured by the vehicle. If a borrower fails to repay the loan, the lender could repossess the vehicle. Using the automobile as collateral disqualifies auto loans from nonprofit debt consolidation.

    Nonprofit debt consolidation vs. for-profit debt relief

    Nonprofit debt consolidation and for-profit debt consolidation have several important differences.

    The financial objectives of the companies

    Nonprofit credit counseling agencies are not focused on turning a profit. Any profits must be funneled back into activities that support the organization. No individual shareholders are looking to benefit financially from the organization’s profitability.

    By contrast, for-profit debt relief companies aim to make money from their services.

    How the organizations are funded

    Nonprofits receive financial support from other sources, such as grants, government programs and charitable donations, so their services are inexpensive or free to borrowers.

    For-profits are funded by the consumers using the service. This means for-profit companies must charge customers more than nonprofit organizations.

    When the organizations pay creditors

    Nonprofit debt consolidation services can begin making payments to creditors on your behalf as soon as the creditors approve your DMP. As long as payments are up to date on your accounts, the nonprofit debt consolidation service can take over with no interruption to your payments. This means no late fees or penalties from the creditors.

    For-profit debt relief companies, on the other hand, often require that accounts go delinquent before they begin negotiations. They want the creditor to be concerned that the borrower may default on the loan completely. That gives the debt counselor more leverage in negotiations. While this strategy can potentially result in some level of debt forgiveness, it can also severely impact your credit score and finances.

    “Not paying your creditors will result in collections, additional late fees and possibly legal action,” says Ross.

    Additionally, there is no guarantee that your creditors will accept the proposed settlement, which would mean risking your credit score for nothing.

    Ongoing support

    Nonprofit debt consolidation agencies often provide free educational resources to help with financial tasks like budgeting, credit repair or retirement planning.

    For-profit debt settlement companies may offer some free resources for ongoing support but often charge for premium versions of these tools.

    Pros and cons of nonprofit debt consolidation

    The benefits of nonprofit debt consolidation include:

    • Less impact on your credit score compared to a for-profit debt relief service
    • Lower cost than for-profit debt relief
    • More manageable payment schedules
    • No need to apply for a debt consolidation loan
    • Potentially lower interest rates
    • Potentially lower monthly payments

    There are also a few possible downsides of nonprofit debt consolidation, including:

    • A temporary dip in your credit score
    • Not available for secured loans
    • The requirement to close accounts

    How to choose a nonprofit debt consolidation service

    When selecting a nonprofit debt relief company, look for one accredited by an independent organization.

    Companies that join the National Foundation for Credit Counseling (NFCC), for example, must be accredited by the Council on Accreditation (COA), an independent organization that accredits more than 1,600 social service organizations in the United States and Canada. Financial counselors with the NFCC have been trained and certified.

    You should also check online reviews to see if customers are generally satisfied with the service. Check reputable review sites like the Better Business Bureau, TrustPilot and Consumer Affairs.

    The bottom line

    Nonprofit debt consolidation is a legitimate, affordable way to manage debt by creating a more manageable repayment structure. Working with a nonprofit debt consolidation service can lower your interest rates, reduce your monthly payments and save your credit score from taking a major hit.

    Find a reputable nonprofit debt consolidation service by searching for accredited debt counselors through the National Foundation for Credit Counseling (NFCC).

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  • Is it a good time to buy a new car? – MoneySense

    Is it a good time to buy a new car? – MoneySense

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    Sticker prices at dealerships have started to come down and affordability is improving, said Daniel Ross, senior manager of industry insights with Canadian Black Book.

    “The new car market is normalizing faster than the used car market,” he said. “You have the inventory, you have the incentives depending on where you’re shopping and if you were a new car shopper from the beginning, it’s the best situation you’ve had in a long time.”

    Inventory of new cars has built up across the country as prices for newer models climbed and consumers pulled back on big purchases amid high inflation and rising interest rates. Now, manufacturers and dealerships have launched incentives and rebates as they look to clear that supply.

    On new cars, dealerships can offer internal financing from manufacturers and control the rates independently from bank rates, said Sam Fiorani, vice-president of global vehicle forecasting at AutoForecast Solutions.

    “Instead of offering rebates, they lower interest rates which make deals better for the consumer.”

    How availability impacts car loan interest rates

    Homeowners are watching the Bank of Canada’s every move as they hope for lower borrowing rates, but a vehicle purchase works somewhat differently, said Shari Prymak, a senior consultant at non-profit Car Help Canada. When financing through a dealership, the interest rate depends on the given make or model.

    “The rates that the manufacturer sets are mainly tied to the vehicle availability,” he said.

    “If the vehicles have a very good supply, they’ll incentivize the interest rates and bring down the rates,” Prymak said. “But if the vehicle doesn’t have any supply, if it has a long waiting period, because it’s in short supply, the rates won’t be incentivized.”

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    The Canadian Press

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  • Nearly Half Of All Borrowers Have Not Restarted Student Loan Payments

    Nearly Half Of All Borrowers Have Not Restarted Student Loan Payments

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    After the three-year pause on student loan repayment programs during the pandemic ended, 19 million borrowers either let their accounts become delinquent or extended their payment pause, leaving $1.6 trillion in debt being uncollected. What do you think?

    “Not me. I couldn’t wait to be bled dry again.”

    Roger Morant, Séance Assistant

    Taylor Swift Under Fire For Leaving Idling Plane Double-Parked Outside Store

    “I’m sure my bank will think of something.”

    Janae Carlson, Score Adjuster

    “I’ll admit I have been splurging on medical bills.”

    Anthony Ulyett, Steel Reinforcer

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  • 3-year versus 5-year mortgage: How to choose your term – MoneySense

    3-year versus 5-year mortgage: How to choose your term – MoneySense

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    Whether or not a variable-rate mortgage is a good option for you depends largely on market fluctuations. Rates for this type of mortgage are typically lower than those of fixed-rate mortgages, which is a win as long as the prime rate doesn’t go up too much. And historically, they’ve tended to average out to lower payments over time. But the past few years have reminded Canadians that huge increases are possible, and home owners who signed on for a variable-rate mortgage pre-2022 have been waving goodbye to an extra several hundreds or thousands dollars every month for the past year and a half. For some, though, these increases are unmanageable and can lead to a potentially dire financial situation.

    What is a 5-year mortgage?

    A five-year fixed mortgage allows you to lock into a specified interest rate for a full five years. Just like with a three-year term, you don’t have to worry about changing markets affecting your payments for the duration of the contract. This is very appealing to home owners with less tolerance for risk—it’s a nice, long period of predictability. It also means much longer stretches between dealing with the headache of renegotiating. 

    Being locked in for longer, however, puts you in a less flexible situation. If interest rates drop, you won’t be able to take advantage of those lower rates—unless you decide to break your mortgage early, a decision that comes with hefty penalty. Or if your financial situation changes or you want to sell your property sooner than anticipated, that five-year commitment is a bit of a roadblock. 

    With a five-year variable mortgage, your payments will change according to the whims of the market. Usually, variable mortgage rates are lower, but since currently they will likely give home owners greater savings over their mortgage term, they’re higher than fixed-rate mortgages.  

    Where are interest rates headed? 

    The soaring interest rates of the past couple of years have been a significant stressor on millions of home owners and would-be home owners across Canada. While early 2024 has seen inflation cool, the prime rate, which is currently at 6.95%, has come down only slightly from its recent high of 7.2%. Economists expect June’s BoC interest rate cut will be followed by gradual decreases over the next few years. Most predictions suggest we’ll reach a full 1% drop by the end of the year with rates stabilizing at 5.2% by the end of 2027. Check out the latest rates.

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    Deciding on a mortgage term

    So, what does this mean when it comes to choosing a mortgage? If the predictions are accurate, a variable-rate mortgage is a great way to take advantage of the downward trend and save some money. Just be sure there’s enough room in your budget to cover higher payments should there be any rate hikes. Five-year variable mortgages are currently being offered at lower rates than three-year variable loans, which could make them the winning choice. 

    However, if any level of risk is the kind of thing that keeps you up at night, a three-year fixed-rate mortgage could be a better option—there’s no unpredictability when it comes to that monthly payment, and interest rates will most likely have decreased quite a bit by the time you have to renew. A five-year fixed may not be the best choice right now, as you’ll get locked into higher payments at a time when interest rates are going down. 

    Rate decreases aside, the decision largely comes down to your future plans—are you holding on to your property for the long term or do you want to keep your options open?—and your appetite for risk. Find your comfort zone and a plan that works for you.

    Read more about mortgages in Canada:


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    Ciara Rickard

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  • Mortgage broker vs. bank—which will save you more money? – MoneySense

    Mortgage broker vs. bank—which will save you more money? – MoneySense

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    For most Canadians, using a broker is the wisest choice to save money, as they have access to a wider selection of products and should have more experience in going through the application process than you do. 

    However, not all brokers are made the same. Some specialize in mainstream lenders, others are more familiar with getting you a mortgage if you have impaired credit, while others tend to source mortgages for investment properties. Again, ask around, search online. Look at reviews and get referrals if you can.

    What to do before signing a mortgage contract

    Before signing your mortgage contract it’s worth reading the fine print, to make sure everything’s above board. Are you getting the interest rate you signed up for? What about the cost of any lender fees, like an arrangement or booking fee? 

    One important aspect is your “prepayment privilege,” which means how much you’re able to overpay your mortgage every month, shortening the time it takes to pay off the loan. It’s good to know where you stand, because by paying too much you can be charged a prepayment penalty, which makes paying it off faster not worth it.

    Buyers should view a survey of the property before signing the contract, as this can reveal if there are any issues with the home they’d need to deal with, and could even justify a renegotiation on the price. Surveys reveal the boundary of the home, so you have an idea of where you’re allowed to build on. In Canada most sellers take out the survey, known as real property reports (RPRs), and they should be scrutinized before you sign on the dotted line.

    If you’re buying a condominium—often the most affordable option in cities—you’ll want to review documents on how it’s run. Generally you join a condominium corporation where you have to pay fees which are used to manage common areas of the building, so it’s a good idea to know what you’re getting into.

    In the contract you should make sure any verbal agreements are in writing. For example if the seller informally agreed to leave some furniture as part of the purchase it’s best to make this official, just in case you get a nasty surprise when you move in.

    When getting a mortgage it’s important to make sure you don’t overburden yourself and have a backup plan if something goes wrong. Like, could you afford to repair a major leak if that happened? Do you have a plan of action on how you’ll be able to repay the mortgage if you lost your job? In some cases the latter issue can be mitigated by either taking out insurance, or using a guarantor when applying for a mortgage. 

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    Ryan Bembridge

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  • Why young people keep getting caught in debt traps and how to break the cycle – MoneySense

    Why young people keep getting caught in debt traps and how to break the cycle – MoneySense

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    “They may see a slight increase in their income, and they think, ‘Oh, I just kind of hit the lottery, and now I’m going to spend like crazy,’” Schwartz said. “And it’s tough to change those behaviours after it’s been ingrained for a long period of time.”

    To prevent this from happening, track spending diligently—you can download apps for this purpose—and delay milestones such as moving out or getting a car if you can, Schwartz said. Build up an emergency fund in case you lose your income or suffer a financial setback, to avoid falling into serious debt.

    “If you have the opportunity when you’re young, when you’re not spending as much on rent, you’re not spending as much on food, if you can cut back on how much you’re socializing—that’s a great place to start to build up that reserve fund,” Schwartz said.

    Live within your monthly cash flow—using your debit card or cash—and develop a short-term austerity plan to make big strides on debt repayment, Terrio said.

    When to focus on debt repayment

    Summer months are tough for austerity because you want to socialize, he pointed out, but January through March are a good time to adhere to a severe budget. Up to 40% of your non-rent income should go to debt, Terrio said, noting short-term austerity is tolerable because it’s over quickly.

    Ultimately, the aim is to reach the tipping point when at least half of your debt payment is going to the principal—and the portion going to interest starts to slide. Never use an instalment loan, he added.

    “All these 36 to 48% interest loans that are $10,000—if you get one of those, you’re done,” Terrio said. “You’re never, ever getting out.”

    Once you’re free of debt, stay that way. Keep your credit limit low and turn down offers to increase it, Terrio said. If you move debt to a line of credit, stop using your credit card.

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    The Canadian Press

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  • RBI directs all lenders to review their lending practices

    RBI directs all lenders to review their lending practices

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    The Reserve Bank of India has directed all lenders to review their practices regarding mode of disbursal of loans, application of interest and other charges and take corrective action, including system level changes, as may be necessary, to ensure fairness and transparency while dealing with customers.

    The central bank’s directions come as it encountered instances of lenders resorting to certain unfair practices in charging interest during the onsite examination of lenders (regulated entities/REs) for the period ended March 31, 2023.

    REs include all commercial banks ((including small finance banks, local area banks and regional rural banks), excluding payments banks; co-operative banks; and all non-banking financial companies (including microfinance institutions and housing finance companies).

    The RBI highlighted a few unfair practices, including the charging of interest from the date of sanction of loan or the date of execution of the loan agreement and not from the date of actual disbursement of the funds to the customer.

    Similarly, in the case of loans being disbursed by cheque, instances were observed where interest was charged from the date of the cheque whereas the cheque was handed over to the customer several days later.

    In the case of disbursal or repayment of loans during the course of the month, some REs were charging interest for the entire month, rather than charging interest only for the period for which the loan was outstanding.

    In some cases, RBI observed that REs were collecting one or more instalments in advance but reckoning the full loan amount for charging interest.

    The central bank emphasised that these and other such non-standard practices of charging interest are not in consonance with the spirit of fairness and transparency while dealing with customers.

    “These are matters of serious concern to the Reserve Bank. Wherever such practices have come to light, the RBI through its supervisory teams has advised REs to refund such excess interest and other charges to customers.

    REs are also being encouraged to use online account transfers in lieu of cheques being issued in a few cases for loan disbursal,” per the central bank directive.

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  • Biden takes another stab at forgiving student loan debt. Here’s how to know if you qualify for his latest $7.4 billion package

    Biden takes another stab at forgiving student loan debt. Here’s how to know if you qualify for his latest $7.4 billion package

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    The White House has announced a new $7.4 billion  round of student loan cancellations, relieving nearly 277,000 borrowers of their debt. The latest attempt to chip away at the amount owed for education means President Joe Biden has now erased a grand total of $153 billion in debt, impacting 4.3 million people.

    This round of student loan forgiveness will largely help borrowers who are enrolled in federal loan forgiveness programs including the Saving on a Valuable Education (SAVE) Plan, which offers lower monthly payments based on income, and income-driven repayment plans, which are based on a percentage of a borrower’s monthly discretionary income. People who qualify for the newest loan cancellations will start receiving emails on Friday.

    Of the $7.4 billion forgiveness round, $3.6 billion will go to 207,000 borrowers enrolled in the SAVE plan and $3.5 billion is saved for 65,800 people registered in income-driven repayment plans. That leaves about $300 million for 4,600 people enrolled in the Public Service Loan Forgiveness program who will also receive debt forgiveness. 

    The SAVE plan differs from other income-based loan plans in that it typically leads to lower monthly payments and it’s meant to limit loan balance growth, which can happen under other income-based plans due to unpaid interest. Under the SAVE Plan, “any remaining accrued interest will be covered by the government, so your principal balance won’t increase,” according to the Federal Student Aid. 

    Biden has continued student loan forgiveness in rounds after the Supreme Court last summer blocked his grand plan that would have wiped out $400 billion in student loans. It would have forgiven up to $20,000 in federal student loan debt for tens of millions of borrowers. The plan was supported by high-profile Democrats in Congress, including Elizabeth Warren and Chuck Schumer— and they even pushed for more dramatic cancellation plans. But it was controversial since it was first announced in August 2022. The plan spurred several legal challenges, with two related cases making it to the nation’s highest court, arguing that Biden didn’t have the authority to forgive debt without approval from Congress. The original plan was ultimately blocked in a 6-to-3 decision in June 2023.

    But last week, Biden unveiled his backup plan to bring the total number of people with canceled debts to 30 million since the administration’s efforts began three years ago. 

    How rampant is student loan debt?

    Currently, more than 43.2 million Americans have federal student loan debt, totaling more than $1.6 trillion, according to Education Data Initiative, a higher education research group, with the average borrower owing $37,000. Income-driven replacement plans, including the SAVE Plan, have provided $49.2 billion in debt relief to more than 996,000 borrowers. 

    The issue of student loan debt is only set to get worse as the price of higher education continues to rise. The average price of tuition at a public four-year college is 23 times higher than in 1963, according to an Education Data Initiative report. 

    And as higher education costs rise, so too does Biden’s commitments to reducing borrowers’ accumulating debt. He extended a pause on student loan payments for three years between March 2020 until September 2023; in November 2021, he canceled $11 billion in student loans, and last December, he announced a $4.8 billion student debt relief package for more than 80,300 people. 

    More recently, while at a campaign stop on April 8 in Madison, Biden unveiled a new plan to help 25 million borrowers lower their debt, with an offer to send at least $5,000 in relief to 10 million borrowers. He’s also proposed making community college free so “more Americans can access the promise of higher education.” 

    The “current student loan system and repayment programs don’t reach all borrowers, and for many Americans student loans continue to be a barrier,” Biden said in an April 8 statement. 

    Subscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up for free.

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    Sunny Nagpaul

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  • President Biden To Unveil New Plan To Give Student Loan Relief To Many New Borrowers – KXL

    President Biden To Unveil New Plan To Give Student Loan Relief To Many New Borrowers – KXL

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    President Joe Biden speaks about student loan debt forgiveness in the Roosevelt Room of the White House, Wednesday, Aug. 24, 2022, in Washington. (AP Photo/Evan Vucci)

    WASHINGTON (AP) — President Joe Biden will announce a significant new plan next week to cancel federal student loan debt for new categories of borrowers.

    It comes nearly a year after the Supreme Court ended his administration’s first attempt to relieve debt for millions who attended college.

    Biden will talk about his new plan Monday in Madison, Wisconsin.

    Three people with knowledge of the plans confirmed this information.

    The new effort is making good on Biden’s promise after the Supreme Court struck down in June his initial $400 billion proposal.

    A majority of justices insisted it needed congressional approval.

    The president called that decision a “mistake” and “wrong.”

    More about:

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    Grant McHill

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  • The real costs of buying a car – MoneySense

    The real costs of buying a car – MoneySense

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    Mark Kalinowski, a credit counsellor and financial educator at the Credit Counselling Society, says you need to know what you can afford when it comes to a car loan. “If you can’t pay for it and they repossess it, well, now your credit’s ruined for a long time,” he said. You can only afford so much credit based on your income level, so if you take on a car loan, that will eat away at other borrowing capacity such as a mortgage, Kalinowski said. 

    How much is a car? Add interest, among other things

    When shopping for a car, the numbers can come fast and furious and they can add up quickly. It’s important to keep the total cost of the vehicle in mind, Kalinowski said, not just the monthly or biweekly payment you will have to make. “One of the big things you see in dealerships is they don’t sell you the price of the car, they sell you the payments,” he said. 

    Additions like an extended warranty and undercoating may only add a few dollars a month to your payment, he says, but they can pile up to add significant costs to the overall price. “They’re going to roll [it] into the financing, so now you’re gonna pay interest on it as well,” he said.

    Gone are the days of easy credit and dealership offerings of 0% financing for new cars and trucks, so it’s important to shop around to ensure you’re getting the best deal you can on your loan, said Natasha Macmillan, director of everyday banking at Ratehub.ca.

    “It can save hundreds to thousands of dollars or more for a car or anything like that,” she said. 

    Compare personalized quotes from Canada’s top car insurance providers.All in under 5 minutes with ratehub.ca. Let’s get started.*You will be leaving MoneySense. Just close the tab to return.

    Should you get a car loan from your bank or the dealership?

    Kalinowski said borrowing from your bank instead of using the dealership financing may also give you some additional bargaining power.

    Macmillan added that a better credit score typically means a better interest rate, so if you delay your purchase to give yourself time to improve your rating, it could save you money.

    The term of the loan is also key. A longer term will mean lower monthly payments, but will raise the overall cost of the vehicle because you will be paying interest on the amount you borrow for longer.

    Kalinowski said his father told him not to borrow money to buy a new car for a longer term than the vehicle’s warranty.

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    The Canadian Press

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  • A Regional Bank Crisis Might Loom Due To Unstable Loans

    A Regional Bank Crisis Might Loom Due To Unstable Loans

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    Economy

    Jonaka Flickr/Creative Commons

    Hopefully the 2008 mortgage crisis does not come again, but there are reasons to worry.

    This time, the worry isn’t so much about residential real estate, but the growing amount of empty commercial real estate.

    RELATED: GOP Rep Claudia Tenney Formally Requests AG Garland Pursue 25th Amendment Against Biden, Senator Josh Hawley Calls On Democrats To Do The ‘Patriotic’ Thing

    Investors ‘Once Again Bracing for Turmoil Among Regional Lenders’

    The New York Community Bank, as just one example, has been given its third credit downgrade in just a week.

    Commercial real estate is getting hit with a triple-edged sword.

    First, high interest rates make already-expensive units that much more costly. Second, and maybe worse, too many office buildings and commercial buildings are empty – thanks to remote work. And remote work is also on the rise in places like Oakland because it’s just simply too dangerous to go to work.

    Yahoo Finance reports, “Almost a year after the failure of three midsized U.S. banks sparked an industry crisis, investors and regulators are once again bracing for turmoil among regional lenders, this time due to rising defaults in commercial mortgages.”

    The story continues:

    NYCB was initially a benefactor of those failures, scooping up Signature Bank last year after it was shut down by regulators following a run on deposits.

    The culprit now is commercial real-estate debt, which is souring quickly as landlords face higher interest rates than they can afford and tenants, after nearly four years of half-full offices, are cutting their leases.

    And while the U.S. banking system is increasingly dominated by a handful of national giants, commercial mortgages are still the province of regional lenders.”

     

    REPORT: After Visit With Trump, RNC Chair Ronna McDaniel Will Resign: Report

    What’s Next?

    “Commercial mortgages account for, on average, 3% of the assets at the 10 biggest banks in the country. At the next 150 banks, it’s almost 20%. Local banks routinely have half of their customers’ deposits tied up in mortgages for office buildings, hotels, and malls,” Yahoo notes.

    How this plays out is anyone’s guess but analysts are right to be concerned. It wasn’t too long ago that regional banks in California collapsed completely, which sparked similar concerns.

    As if inflation isn’t bad enough, is another mortgage crisis on the horizon too?

    Now is the time to support and share the sources you trust.
    The Political Insider ranks #3 on Feedspot’s “100 Best Political Blogs and Websites.”

    is a professional writer and editor with over 15 years of experience in conservative media and Republican politics. He… More about John Hanson



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  • Couples and credit scores: How your partner’s credit can affect yours – MoneySense

    Couples and credit scores: How your partner’s credit can affect yours – MoneySense

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    Should I get a joint credit card with my partner?

    While your partner’s credit score won’t directly impact your credit score, joint accounts or adding the other as a co-applicant will. The one exception is adding your partner as an authorized user to your credit cards and banking accounts. 

    When added as an authorized user, your partner is able to use the credit card but cannot make any changes to the account. Their credit will also not be impacted in any way. However, when a partner is added as a co-applicant, they have to go through the required credit checks and both partners’ credit is impacted based on usage of the account.

    Joint accounts can be beneficial when both partners are on the same page with money. For example, a joint account can give you access to a larger borrowing limit. It also can simplify your finances and foster feelings of partnership. However, depending on your partner’s money habits, sharing a joint credit card could be a real risk to your money and your credit score.

    If either of you miss a payment on a joint account or run up a large balance, each of your credit scores can take a hit. On the other hand, if you and your partner always make your payments on time, both of you will see improvement in your credit scores as the joint account will show up on both of your credit reports. 

    Getting extra credit through a joint credit card might seem like a good idea, be sure to assess each of your financial situations before doing so as gaining new credit can influence financial behaviours. Be critical about how having more or less credit affects your ability to live within your means and pay off your debt in full each month. If you or your partner have any debt, the focus should be on paying it down. Only consider a new, joint credit card if you have paid off your individual debts first.

    How to maintain healthy credit history (and prevent debt) as a couple

    Before combining finances in any way, such as joint credit cards or loans, it is imperative that you and your partner are in agreement and have the same expectations. To maintain healthy credit and prevent debt, consider the following five things: 

    1. Make sure your partner is someone you can trust to properly budget by having open and transparent conversations about money. 
    2. Set boundaries on how the joint account or loan will be used, as well as spending limits. Some couples ensure they both agree on a purchase beforehand, whereas others may check in at the end of the month to ensure all spends are accounted for—it’s good for catching credit card fraud, too, since you never assume it was the other person.
    3. Agree on who will make payments to ensure they’re made on time.
    4. Decide the amount you each will contribute to shared expenses. Will it be 50/50 or a percentage based on your incomes?
    5. Discuss what happens if one of you can’t make a payment due to income loss or illness. What’s your backup plan?

    Money isn’t worth fighting about—but it’s worth talking about

    Discussions about finances aren’t always easy. They might cause stress, tension and arguments with your partner. But, the more you practice communicating with honesty and intention, it does become easier. 

    None of this is to say your partner having a sub-par credit score should be a deal breaker. In fact, it’s fairly simple to start rebuilding credit. As professionally certified credit counsellors with Credit Canada, we often help couples understand their credit and address debt. If you need additional support, contact us today to book a free credit-building counselling session.

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  • Grant money for school: How to get the funds to develop your skills—and advance your career – MoneySense

    Grant money for school: How to get the funds to develop your skills—and advance your career – MoneySense

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    Ontario grant programs

    Here is a sampling of grant programs in Ontario. Not living here? Check out your provincial or territorial government employment website for similar programs: British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut.

    Better Jobs Ontario

    Better Jobs Ontario, formerly known as Second Career, is focused on supporting Ontarians taking courses that last no more than a year, including microcredential courses. It’s aimed at those who have been laid off or who have been unemployed for six months or longer, but recently it was expanded to serve gig workers, youth and people on social assistance. For instance, you can also apply if you receive unemployment insurance or if you receive assistance through Ontario Works or the Ontario Disability Support Program.

    The $28,000 available through Better Jobs Ontario can go a long way toward tuition, books and other course materials. To qualify, applicants must have been laid-off, and they are not working or working a temporary job to cover expenses. People who have not been laid-off but who have been unemployed for six months or longer and belong to a low-income household may also qualify. 

    Ontario Learn and Stay Grant

    Launched in 2023, the Ontario Learn and Stay Grant program was designed to provide full, upfront tuition for those living in communities across the province who are studying practical nursing, paramedical training and medical lab tech skills, for example. Applications for 2024 will open this spring. Already in school? You can still apply after you’ve started a course, as long as you do so 60 days before you finish your studies with an approved institution.

    The government is providing $61 billion in funding to be divided among all applicants between now and Spring 2026. The key stipulation here is that you must agree to stay and work within what the province defines as an underserved community after graduation. Grey Bruce and Simcoe counties, for instance, have described the Ontario Stay and Learn Grant as a way to address the many health-care jobs it will have to fill over the next decade.

    Ontario Graduate Scholarship 

    The Ontario Graduate Scholarship Program (OGS) is similar to the Canada Graduate Scholarship, but is offered at the provincial level. OGS is a merit-based scholarship that assesses applicants based on the ranking criteria of the school you’ve been accepted to attend. In other words, participating schools, which include Queen’s University, Western University, the University of Toronto and the University of Waterloo, and others, will determine who receives scholarships. 

    The scholarship amount awarded is based on the number of consecutive terms you’ll be enrolled up to a maximum of six consecutive terms. Up to $10,000 is available for two consecutive study terms or $15,000 for three consecutive study terms. Check for other equivalents to OGS in B.C., Alberta and other provinces. 

    Corporate and non-profit funding for school

    If you’ve exhausted government funding options or want to go that extra mile to secure dollars you can invest in your education, then there are plenty of corporate scholarships worth considering. The RBC Future Launch scholarship offers $1,500 to those aged 15 to 29 who are taking short-term courses, workshops or certification programs. And BMO Funding Futures Scholarships is a four-year, renewable scholarship that has recently focused on Black Canadians and provided $500,000 to 150 students.

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    Robert Furtado

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  • Should retirees consider a home equity sharing agreement (HESA)? – MoneySense

    Should retirees consider a home equity sharing agreement (HESA)? – MoneySense

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    Clay raised seed funding in 2023 and is initially launching the product to home owners in the Greater Toronto Area as an alternative to reverse mortgages and the simple—although not always ideal—option of selling a property to downsize or become renters.

    What is a home equity sharing agreement?

    The HESA is a relatively straightforward concept. You give some of your home equity to Clay in exchange for cash today. Clay will get paid when you sell your home in the future, up to 25 years down the road, meaning you don’t need to make monthly payments in the meantime.

    The limit for a HESA is up to 17.5% of your home’s value, up to $500,000. However, most home owners will get nowhere near that $500,000 limit. The average Canadian home price in December 2023 was $657,145, according to the Canadian Real Estate Association. That would translate to a potential lump sum cash payment of $115,000. The maximum payment of $500,000 would apply to homes valued at around $2.8 million.

    An interesting option with the HESA is that you can buy back Clay’s share of your home anytime after the first five years. So, it’s not an irreversible decision. But there are a few costs to consider.

    Before you can access a HESA, your property is independently appraised to determine its fair market value. Clay will then apply a risk adjustment rate of 5% to determine its starting value for the HESA. Home owners must cover a 5% origination fee and a closing fee of 1% of Clay’s share of your home appreciation (or $500, whichever is greater). The home owner must also pay the cost of inspections, appraisals and fees to cover the registration of Clay’s charge on the property.

    So, Clay gets a good deal on purchasing some of your home’s equity at a lower price, and you pay the ongoing maintenance costs for 100% of the property going forward. The origination and closing fees can also add up. These nuances help make the HESA a good investment for Clay.

    Should retirees consider a HESA?

    I give Clay credit for its innovative approach to helping seniors access their home equity in retirement. Retirees who can’t tap into their home’s value may not have sufficient income to cover their expenses. Some retirees want to use home equity for gifting to their children during their lives, sometimes to help them get into homes of their own.

    A simple alternative may be to downsize or to sell and become a renter. But downsizing can be costly when you consider the transaction costs, including real estate commissions and land transfer tax.

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    Jason Heath, CFP

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  • LoanDepot says 16.6 million customers had 'sensitive personal' information stolen in cyberattack | TechCrunch

    LoanDepot says 16.6 million customers had 'sensitive personal' information stolen in cyberattack | TechCrunch

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    About 16.6 million LoanDepot customers had their “sensitive personal” information” stolen in a cyberattack earlier this month, which the loan and mortgage giant has described as ransomware.

    The loan company said in a filing with federal regulators on Monday that it would notify the affected customers of the data breach.

    LoanDepot did not say what kind of sensitive and personal customer data was stolen. When reached by email, LoanDepot spokesperson Jonathan Fine declined to tell TechCrunch what specific types of customer data was taken.

    While LoanDepot says on its cyber incident updates page that it has brought some customer portals back online, many of its online services remain inaccessible into their second week. LoanDepot chief executive Frank Martell said in the filing that the company is making progress in “quickly bringing our systems back online and restoring normal business operations.”

    Customers have said they have been unable to make payments or access their online accounts since the incident, which began around January 8.

    LoanDepot said it has “not yet determined” whether the cybersecurity incident will materially impact the company’s financial condition.

    Do you work at LoanDepot and know more about the incident? You can contact Zack Whittaker on Signal and WhatsApp at +1 646-755-8849, or by email. You also can contact us via SecureDrop.

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    Zack Whittaker

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  • Education loans see record 20.6% surge in April-Oct

    Education loans see record 20.6% surge in April-Oct

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    Education loans registered a record year-on-year growth of 20.6 per cent at ₹1,10,715 crore in the current financial year till October compared with ₹96,853 crore in the year-ago period.

    According to Reserve Bank of India (RBI) data, spurt in education loans was the highest in the last five years.. The growth registered in the comparable period was 12.3 per cent FY23 and (-) 3.1 per cent in FY22.  

    Factors driving the spurt

    The increase in demand was driven by many factors. “Low base and revival of offline campus courses in India as well as abroad has been driving the fresh and pent-up demand for education loans,’‘ Bibekananda Panda, Senior Economist, State Bank of India told businessline. 

    For the last one year, foreign education loans with an average ticket size of ₹40 lakh-60 lakh accounted for nearly 65 per cent of loans disbursed.

    Moreover, the recent action by the RBI in tightening the credit to some of the retail segments by increasing risk weights for banks as well as NBFCs have spared education loans. “This may support the flow of credit to the sector in the forthcoming months,” Panda added. 

    Our enquiries with banks revealed that loans for education in the US are on the higher side. The US Embassy and its consulates in India issued a record 1.40 lakh student visas between October 2022 and September 2023 this year. “A good number of these admissions are supported by education loans, which also pushed up the portfolio for banks,” said a senior official of Union Bank of India. 

    The hassle-free loan application and disbursal process is also among the factors that are driving growth in the loan portfolio.

    NBFCs are also quite active in the segment. Some of them, including HDFC Credila, are offering education loan upto ₹50 lakh without collateral and the process is entirely digitised with Video Know Your Customer (KYC) and speedy disbursal within a week from the date of application.

    According to data of rating agencies, education loans of NBFCs grew 100 per cent (in Assets Under Management) in FY23 compared with previous year.  

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  • EMI cards are the most preferred medium for short-term credit: Home Credit survey

    EMI cards are the most preferred medium for short-term credit: Home Credit survey

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    EMI (equated monthly installment) cards are the most preferred medium for taking short-term credit, with 49 per cent of borrowers choosing the mode in 2023 owing to higher trust and faster disbursals, as per a survey by Home Credit India, the local arm of Dutch consumer finance provider Home Credit.

    Further, embedded finance has gained traction, with 50 per cent of borrowers open to opting for the same during e-shopping. However, the share of the segment has fallen 10 per cent y-o-y due to stringent RBI regulations on BNPL (Buy Now, Pay Later) and PPI (prepaid payment instruments) products, leading to fewer offers.

    Borrowing trends

    Trends in borrowing have shifted from ‘running the household’ in 2021 to ‘consumer durables’ in 2023, with 44 per cent of borrowers purchasing smartphones and home appliances in 2023. However, on a whole, the share of consumer durable loans declined by 9 per cent, whereas business-related borrowing increased by 5 per cent.

    The ‘How India Borrows Survey 2023’ was conducted across 17 cities with data from 1,842 borrowers in the age group of 18–55 years with an average monthly income of ₹31,000.

    One-fourth of borrowers opted for the online channel for availing loans, even as loans initiated through telecalling increased from 16 per cent in 2022 to 19 per cent in 2023, and those through POS or bank branches declined from 56 per cent to 51 per cent.

    “Over half the borrowers (51 per cent) are looking forward to completing their entire future loan application on the mobile app without any physical interaction with POS or banks. The preference for online loan mediums is primarily driven by younger and aspirational small-town borrowers,” the report said, highlighting cities such as Dehradun, Ludhiana, Ahmedabad, and Chandigarh.

    Concerning trend

    The report also highlighted a concerning trend: that only 18 per cent of borrowers understood data privacy rules, and 88 per cent had only a superficial understanding. Further, only 23 per cent understand the usage of their personal data by loan apps.

    While 60 per cent of borrowers were worried about how their personal data is collected and used, and 58 per cent believed the apps collect more data than required, nearly 60 per cent — especially borrowers from Tier-I towns — said they don’t have control over the data being shared by them.

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  • L&T Finance inks $125-m pact with ADB to support rural India

    L&T Finance inks $125-m pact with ADB to support rural India

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    L&T Finance, one of the leading non-banking financial companies in the country, has signed a financing pact with ADB for $125 million to support financing in rural and peri-urban areas of India, particularly for women borrowers.

    The funding comprises a loan of up to USD 125 million from ADB and an agreement to syndicate an additional $125 million in co-financing from other development partners. At least 40 percent of the proceeds are allocated to women borrowers, while the rest will support farmers, micro, small, and medium-sized enterprises (MSMEs), as well as loans to purchase new two-wheeled vehicles.

    Commenting at the signing ceremony, Sachinn Joshi, Group Chief Financial Officer, L&T Finance, said, “This collaboration with ADB aligns with our core values of social responsibility. We believe this partnership with ADB is a significant step and will boost our ongoing efforts to bridge the financial gap and promote inclusive economic growth across the country. For our company, this long-term loan forms part of our continuous strategy of diversifying our funding sources. At L&T Finance, we recognise the deep impact that financial inclusion has on the communities we serve. And, through our on-lending activities in the underserved and lagging states in India, we pursue to be a catalyst for empowering individuals, especially women, farmers, and MSMEs, thus fostering economic resilience.”

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