What is SubPrime Crisis? Part.2

Credit agencies specialize in subprime collapse and the financial world follows. What relationship there between the U.S. housing market and the global economy? The answer lies in the word "securitization" To summarize; securitization is to transform its debts or other financial assets into securities that can then discuss the financial markets.

To finance these loans, the specialized agencies transformed risk loans granted to their client’s financial products that would be traded on financial markets. Financial products created were classified as high-risk products and products like any risky potential gains are much greater than other products without risk. As the U.S. housing market had risen in real estate related products for more money but since the summer of 2007.


Anyone wishing to generate significant capital gains has to accept this kind of high risk. Excluding finance against certain products, most of financial products sold, were fairly opaque to the "fill" of various financial products without specifying its nature as subprime "securitized." Banks and institutional investors bought financial products without knowing that they contained subprime-related products.

     A large number of banks have in their portfolios of subprime-related products leading to the fall in the value of their portfolios following the sub prime crisis.  Unable to identify clearly the financial products purchased containing products related to subprime, no Bank, no investor is able to measure the real impact of the crisis on their portfolios. The defaults of subprime loans in the U.S. are at the early, early impairment placed by investors are only the beginning of the crisis.

   Banks do not assess their knowledge related to subprime losses, bankruptcies of several dozen organizations credit risk and market stress pushing banks to conduct extremely suspicious and dare them to lend more money for fear of not being reimbursed following a hypothetical bankruptcy of the borrower.

The crisis of summer 2007 caused many challenges and pointed out the following discrepancies.
     One of the key players in finance is singled out, these are the rating agencies that failed to anticipate the decline in U.S. housing market and lower the rating agencies to credit risk.
     Non-transparency of financial products linked to subprime mortgages and bad categorization are also challenged: Some products were produced in monetary corresponding to products of low risk.

What is SubPrime Crisis? Part.1

The subprime crisis hit the world of finance in August 2007. The consequences have been immediate and impacts on the economies of societies and countries are still not clearly known.  Before returning to the origin of the crisis and its ripple effect, Let us first understand what is subprime.
The subprime mortgages are subprime.  In simple words, the principle allows a person to purchase a property for a fixed interest rate particularly low the first 2 years (e.g. 1.45%) and then switch to a floating rate contains a risk premium (e.g. 8%). In return, the property is mortgaged.

In this case, credits are awarded after consideration of the desired value of the property contrary to practices where banks extend credit after the creditworthiness of the borrower. The monthly payments increase significantly after the second year, making it impossible for most buyers to repay their loans.
The latter sold their property with a capital gain (the U.S. housing market growing 10% per year) enabling them to repay the loan and interest. In 2007, Beneficiaries wishing to sell their subprime real estate at the end of second year was leading a face down in the U.S. housing market.
The property value has decreased since purchase and no longer allows the sale to repay the subprime credit. The borrower's credit subprime personal files for bankruptcy, the bank gets the house and put on sale. It will be sold with a significant loss may go beyond 20%.

At least, nearly 1.5 million procedures were personal bankruptcy during and after the U.S. Senate nearly 3 million households could lose their homes. Credit agencies are faced subprime loan defaults pile up and generate huge losses due to losses made on the sale of foreclosed homes. These significant losses have caused the bankruptcy of more than thirty credit agencies; they always present provisioning amounts of losses of hundreds of millions of dollars.

Leasing Advantages and Disadvantages

The principle of leasing is simple: the company who need a well-form application to a leasing company that buys the specified property and leases it for a given period. Leasing may involve equipment (equipment leasing), or property leasing.


The advantages of leasing for the company are numerous. First, it provides full funding of the property value without any input from the business, and enables companies to acquire property without incurring costly debt alleged purchase of the product. Rents paid by the company are also operating expenses deductible from income tax.
The use of leasing also allows the company to avoid cash flow problems generated by the VAT. Indeed, early activity, the input tax on purchases often exceeds the VAT collected on sales, and requires the company to meet this need cash.

However, the main obstacle to the use of leasing is cost. Indeed, it is superior to that of a conventional bank loan, since the leasing company is compensated by its margin on the rent of the lease. On the other hand, it is more difficult to rent property very specific (obsolescence of the property, equipment not resalable ...), the leasing companies were reluctant to acquire such property.

The second risk is default by the tenant. The leasing contract is in effect a final commitment to time-limited undertaking that requires the user to pay rents fixed date. Otherwise, the company will be forced to return the property but will also be required to pay all rent yet due until the end of the contract.

Car Loans Part.3

Long Term Rental:

The leasing allows the borrower to sign a lease with stable monthly payments without an option to purchase the vehicle at the end of the contract. In recent years this type of credit can be offered by banks. LLD can change the car but will not become the owner. This is a simple car rental.

Personal Loan:

Personal loan is the specialty of banks and credit institutions. It is rather for persons wishing to receive an immediate cash reserve, which can quickly become the vehicle owner, or make another use of money lent. It requires little or no personal contribution. The interest rate, duration and amount of stipends are known input. However, this type of auto loan has many disadvantages. First, the credit contract is not related to the purchase of the vehicle, so if the car purchase is not made, refunds of credit are required. Second, interest rates are excessively high (around 15%). This type of car loan remains a last resort in case of refusal of financial institutions or banks manufacturers.



And the last one often used by car manufacturers. It is to pay low monthly payments for several months and at the end of the credit if the borrower wishes to purchase the vehicle, it pays a higher amount.

* Before getting a Car Loan, consider your budget!

The need for a new car may be acute in many circumstances of life: birth of a child, moving, education, inheritance, changing jobs, etc.. But everyone must remain vigilant in its budget and its operating margins, particularly when the credits begin to accumulate. If you already have a mortgage, consumer credits, but you are thinking of buying a new car, a credit solution is not to give up your projects: the purchase of credit. The purchase of credit will allow you to keep your monthly payments at a reasonable level and keep control of your various loans.

Car Loans Part.2

How to choose car loan?

The acquisition of an automobile represents a considerable investment. For budgetary reasons, it is not always possible for the buyer to pay "cash" and leave with the car of his or her choice. Also, it is sometimes unavoidable and often relevant to carry out a car loan. Today the majority of vehicles purchases in the world are also financed through a vehicle loan. Like the mortgage, there are many forms according to the use made of the vehicle and the objective of the borrower. The borrower's interest is carefully consider while selecting the types of car loans and compare them to make the right choices according to their budget. There are 6 main types of car loan:

 The appropriation:

This is the classic car loan monthly payments that you can subscribe on-site sales. This credit is automatically canceled if the purchase does not occur. In case of dispute on the vehicle purchased, refunds of credit will be suspended. The overall effective rate (interest expense) of this appropriation is less than that of a personal loan. The term of the financing (12 to 60 months) is chosen by the borrower according to his budget. The appropriation is for the buyer who takes out a classic car loan with a maximum of security against repayment of credit. Note that it is for individuals and professionals alike.

 Exchange offer:

It combines classic credit Car loans and bridge loans. The bridge loan provides a "transition" between buying a new car and selling the old one. The sale reimburses the bridge loan and a portion of the purchase of the new car.

 Lease purchase option:

Credit Hire with Option to Purchase is distributed primarily by financial companies of auto manufacturers and some specialized agencies. Its principle is: the borrower leases a vehicle over a period defined by the contract, setting a monthly "rent". He holds the same time an option to purchase the vehicle at the end of the lease period at an acquisition price agreed when signing the contract. Only a guarantee deposit is required at the start of the loan representing between 0 and 15% of the value of the vehicle. The interest rate does not come into play in the lease-purchase. For professionals, this type of loan is called upon leasing.