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Staying aware of the dangers of credit card debt consolidation

May 22, 2012 by author   Comments (0)

For the past few decades, interest rates have remained low prompting most consumers to increase their debt burden by opting for new lines of credit. As they increased their personal debt amount, they thought of consolidating them into single monthly payments. But be careful of this quick fix. You must have most commonly heard the benefits of credit card consolidation. It is not that there are no benefits of consolidating your debts. Just as everything has its pros and cons, there’s no exception with the different ways in which you can consolidate your debts. Read on to know about the dangers of debt consolidation.
 
1. Danger of taking out a home equity loan: Most debt experts might have recommended you to take out a home equity loan in order to consolidate your debts. They say that by leveraging your home’s value, you get cash in hand which can be utilized to pay off your debts. You also seem to save a lot on the interest rates as they are not subject to tax. But very few lenders will warn you of the risks of taking out a home equity loan. You can lose your home by just one fault of yours. If you fail to make your monthly payments towards the home equity loan, you can straightaway lose your home to foreclosure. Therefore, before consolidating your unsecured debts, make sure that you have the ability to make monthly payments on time.
 
2. Danger of going for a balance transfer: Most people, who do not own a house of their own, go for transferring their balance to a low interest credit card with 0% interest rate. There is again a loophole in this method of credit card consolidation. Most financially stressed debtors do not check the time for which the introductory period lasts. For most low interest credit cards the introductory period lasts for a very short time, after which the interest rate shoots up to an outrageously high level. If you’re able to transfer your entire balance within the introductory period, go for a balance transfer.
 
3. Danger of a debt consolidation loan: Did the credit card companies scare you into looking for a debt consolidation loan? Most debt consolidation loans carry lower interest rates than what you’re paying presently to your creditor. But do the lenders inform you that you can add on to the interest rates as your repayment term extends? Mostly, they don’t. As with a debt consolidation loan, you can lower your monthly payments, your repayment term automatically increases. With longer repayment term, you accrue more and more on the interest rates payments and ultimately you end up owing more money to the creditors.
 
Thus, before going for credit card consolidation, stay aware of the dangers that are involved in it. Try to remain safe with your finances so that you can secure your financial future.

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Things worth reading: 22nd May 2012

May 22, 2012 by skinnercm   Comments (0)

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Published / Preprint: Involving copula functions in Conditional Tail Expectation. (arXiv:1205.4345v1 [math.ST])

May 22, 2012 by MoneyScience   Comments (0)

We discuss a new notion of risk measures that preserve the property of coherence called Copula Conditional Tail Expectation (CCTE). This measure describes the expected amount of risk that can be experienced given that a potential bivariate risk exceeds a bivariate threshold value, and provides an important measure for right-tail risk. Our goal is to propose an alternative risk measure which takes into account the fluctuations of losses and possible correlations between random variables.

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Published / Preprint: Point process bridges and weak convergence of insider trading models. (arXiv:1205.4358v1 [math.PR])

May 22, 2012 by MoneyScience   Comments (0)

We construct explicitly a bridge process whose distribution, in its own filtration, is the same as the difference of two independent Poisson processes with the same intensity and its time 1 value satisfies a specific constraint. This construction allows us to show the existence of Glosten-Milgrom equilibrium and its associated optimal trading strategy for the insider. In the equilibrium the insider employs a mixed strategy to randomly submit two types of orders: one type trades in the same...

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Published / Preprint: Portfolio Selection with Small Transaction Costs and Binding Portfolio Constraints. (arXiv:1205.4588v1 [q-fin.PM])

May 22, 2012 by MoneyScience   Comments (0)

An investor with constant relative risk aversion and an infinite planning horizon trades a risky and a safe asset with constant investment opportunities, in the presence of small transaction costs and a binding exogenous portfolio constraint. We explicitly derive the optimal trading policy, its welfare, and implied trading volume. As an application, we study the problem of selecting a prime broker among alternatives with different lending rates and margin requirements. Moreover, we discuss how...

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