Personal loan business not a guaranteed success for Goldman Sachs

Source - http://www.forbes.com/sites/nickclements/2015/06/25/personal-loan-business-not-a-guaranteed-success-for-goldman-sachs/

Last week, Goldman Sachs captured headlines with its plans to expand into online consumer lending. Goldman Sachs is famous for its investment banking, trading and wealth management prowess. Making a $5,000 loan to a working class American family couldn’t seem further from their area of expertise. I actually believe they have a good chance of creating a sizeable, profitable franchise. And I explained why I thought Goldman Sachs could succeed last week.

However, their success is far from guaranteed. After publishing the post, I received a lot of feedback from people who had a very different view. In today’s post, I wanted to share some of their best arguments.

Investment Banking and Retail Banking Cultures Don’t Mix

Consumer franchises can take years to build properly. However, once built, the business provides a steady and stable annual annuity. The dynamics of building and managing a consumer business are very different from building and managing a business that is driven by closing deals or trading.
Some of the biggest culprits of the 2008 mortgage crisis were investment banks like Bear Stearns and Lehman Brothers, who brought a short-term mentality and high compensation to the traditionally boring world of mortgages.

I remember having a conversation in 2009 with a former Bear Stearns mortgage banker. He described the way they ran their mortgage operation, and as a retail banker it terrified me. He would start each day talking to the trading floor. He would understand what exposure the traders wanted, and then he would go to the mortgage distribution partners and find a way of originating it. The view was simple: if the market is willing to buy it, the investment bank was willing to sell it. When I joined retail banking, I was taught basic risk management skills from my first day on the job. You only make a loan to someone who can demonstrate the ability and willingness to repay.

Investment banks have the ability to sell assets all over the world, quickly. Historically, poor mortgage underwriting would punish the bank making the bad loans. Regulators would often have to step in and rescue the depositors. But in the last crisis, German banks had exposure to Nevada subprime mortgages. And we did not know who to blame.

Will Goldman Sachs really be able to think like a balance sheet lender, with a long term perspective? Or will they be tempted to relax underwriting standards, package loans and sell them globally? A trading operation would probably prefer originating, selling, and taking a fee. And if they worried about asset quality, they would short the market rather than change underwriting quality, preserving the fee income stream while protecting the balance sheet. That is a very different approach from a commercial bank.

Infographic Credit Cards in USA

 

http://www.buzzsprout.com/45810

financial advice video

Cool video on personal finance I found

Get on your bike for the personal loans rant

Being a humble servant of the paper is a hard life; trying to get yourself some of that precious dough. It is the easiest course of action to rely on money for the better way of life. Being in receipt of much needed cash is a large part of the problematic nature of modern existence. With so many people needing some extra money at this time of year it is no surprise that millions of pounds of personal loan cash has been taken out.

With the numbers of borrowers hitting record highs and with lending becoming ever more easy, the cash loans industry has become a major fixture of many peoples emergency planning. Personal loans - see here for info, are the speediest means of finding some extra money in the United Kingdom. The major obstacle to many a good persons funding is the problems related to being in debt from previous loans. This is something that many people face with a varying degree. The ease with which some people manage to get all their costs covered shouldn't be overlooked.

It is something that many people rely on with such a fanatic desire. Probably the simple mathematics that control our global economy is not an issue many people wish to face. With a number of same day loan options out there, it is no wonder that we see such figures. Many of the recent development that have been observed revolve around the determined efforts of a limited number of high-profile individuals using a great deal of pressure to keep the boat steady, a guarantee that should be only given the respect that such matters deserve.

Trimming down for summer

If you are looking to lose weight in 2013 and live inside the United Kingdom, then there are plenty of ways of doing so that can range from fun to boring to downright naughty, but some of these options require you to invest financially, while others are free - what options do you have? Some people chose to run around fields and spring through the air over the grass and breathe the air in. Other people take the short cut and generally look to get in to the gym and work hard to generate a real sweat and to burn off all the calories.

If you go swimming and there happens to be a very cold stream of water running through the place where you are taking a dip, then it may be chilly. Other people try to diet and eat the right foods and drink the right beverages then that could really aid your regime would if you stick to the plan and don't mess about. Getting the right supplements is also costly, with such a variety and number out there, it is no surprise that some financial assistance is often sought. When it comes to unsecured loans people also cannot mess around with their finances.

That is why in the modern era there are many places that can be found online that provide quick finance. Personal loans from most websites are available 7 days a week and three hundred and sixty five days a year. This means people who need quick and easy finance and small loans can do so with no fuss and with little stress. All in all, this makes for a very happy set of circumstances for those seeking quick finance in an emergency situation.

What Happens If You Don't Pay Off Your Student Loans?

How bad is defaulting on student loans? What happens when you just can't pay them?

Bankruptcy Student Loans

Student Loans - Declaration of Bankruptcy Not Allowed

Filing bankruptcy is utilized by most people so that they will be able to clean out their debts. Cleaning out your debts will open the door towards a new financial start. Before you apply for bankruptcy, you have to think, and rethink about it. You have to put into consideration the types of debts which you wish to clean out. There are a lot of debts which cannot be eliminated by declaring bankruptcy.


One example of this is the declaration of bankruptcy on student loans. Declaration of bankruptcy on this type of loan is normally not allowed. So if you are a student who is worrying over his loans, you cannot run away from it. Instead, you can face it through the bankruptcy student loans.

You are still a student but you have just filed for bankruptcy. Bankruptcy student loans may just be your savior or the ones which will provide you the much needed financial assistance. What are the loans which can help you after you filed bankruptcy? Even if you are already bankrupt, you can still apply for a government student loan since this loan is not a private one. Your needs are the basis of a government loan and not your credit.

What Government Loan Covers

If you are already bankrupt but still wants to pursue your studies, a government loan may help you when it comes to paying the school expenses and the tuition fees. You have to remember, though, that the government loan may not cover all of your expenses or debts. It can only give you enough money which will cover a year. So if you are studying in an expensive school, the loan may not even be able to cover your expenses. However, if you are studying in a graduate school or a major university, the government loan may be sufficient to cover the tuition fee.

If the government loan is not sufficient, you have to look for other alternatives. You may consider the private loans. But since you are already bankrupt and the private loans are based on credit, there is the possibility that your application will not be approved. You would probably end up not studying for several years because you have to build your credit bank up.

Ask About Interest Rate First

 

Bankruptcy student loans may also be offered by some lenders. Before you grab the opportunity, ask first about the interest rate. You may be able to make a loan but the lenders will require you to pay for a high interest rate. Since the interest rate is very high, you might just end up paying for the debt two to three times over.

The payments also depend upon the type of loan which you will make. It will also depend upon the interest rate set by the company or the lenders. If your only option is the government loan, do not give up trying to look for other alternatives even if these alternatives seem too be so rare and hard to find. To help you out, you may even consider applying for a job so that you will be able to pay for your books or for your housing expense. You may also consider transferring to another school wherein you only need to pay for cheaper fees.

Student Loan Debt Statistics In America

Government to Forgive Student Loans at Corinthian Colleges

In a move against what he called “the ethics of payday lending” in higher education, Secretary of Education Arne Duncan announced Monday that the Education Department would forgive the federal loans of tens of thousands of students who attended Corinthian Colleges, a for-profit college company that closed and filed for bankruptcy last month, amid widespread charges of fraud.

Mr. Duncan also said the department planned to develop a process to allow any student — whether from Corinthian or elsewhere — to be forgiven their loans if they had been defrauded by their colleges.

A special master would be appointed within three weeks, department officials said, to create procedures to apply for relief that are “durable, not just for Corinthian but beyond.”

Taxpayers could pay a huge price for forgiving so many federal loans; the government has never before opened debt relief to such a potentially large pool of students. The department estimated that if all 350,000 Corinthian students over the last five years applied for and received the debt relief, that cost alone could be as much as $3.5 billion.

In a news conference call on Monday afternoon, Mr. Duncan emphasized the plight of students who took on huge debt and ended up with a degree that meant little to employers, or no degree at all.

“You’d have to be made of stone not to feel for these students,” he said. “Some of these schools have brought the ethics of payday lending into higher education.”

He added, “This is our first major action on this but obviously it won’t be the last.”

Where students had been defrauded by their colleges, Mr. Duncan said, he was committed to making sure they received all the relief they were entitled to under law.

“We will make this process as easy as possible for them, including by considering claims in groups wherever possible, and hold institutions accountable,” he said.

Lauren Asher, president of the Institute for College Access and Success, praised the department’s move. “It’s important and it’s new, and it means the department is recognizing that students defrauded by Corinthian and other unscrupulous for-profit colleges deserve relief.”

But not everyone praised the plan.

“Students have been hurt, but the department is establishing a precedent that puts taxpayers on the hook for what a college may have done,” said Senator Lamar Alexander, Republican of Tennessee, and chairman of the Health, Education, Labor and Pensions Committee.

“This is one more reason it was a bad idea to make the U.S. Department of Education the banker for students as well as the regulator of their colleges,” he continued. “If your car is a lemon you don’t sue the bank that made the auto loan; you sue the car company.”

At the same time, many advocacy groups said the department’s plan did not go nearly far enough to ensure real relief for defrauded debtors.

“Each student is still going to find out about it, and apply, and it’s a complex process,” said Luke Herrine, a member of the Debt Collective, which organized a debt strike by Corinthian students, the first of its kind. “There’s no reason why they couldn’t have given blanket relief to some of these groups of students.”

Student loan debt is over $1.2 trillion, more than double the amount of a decade ago. Forty million Americans have outstanding student loans.

For-profit colleges typically get the vast majority of their revenue from federal student loans, and account for nearly half of the defaults on these loans. Many of these colleges have been criticized for spending more on marketing and recruitment than on instruction.

Founded in 1995, Corinthian became one of the country’s largest for-profit education companies, buying up struggling vocational colleges across the country. It formerly had more than 110,000 students at 100 Heald, Everest and Wyotech campuses nationwide.

Consolidate Loan Student

Student Loans Overview

Student loans are considerably new phenomenon these days. Usually, debts are only incurred by working people who are typically the people who are burdened with a lot of expenses. At the same time, these are the people who are already employed. Hence, they have more credible credit record. But at the turn o 20th century, governments and private loan providers opened such opportunities to students who want to finish their schooling amidst financial challenges.


But being students does not make them less of a debtor- many students are already wise in handling their finances- especially regarding the repayment of their student loans. More and more students are following the steps of the consolidate loan students so as help them maximize their student loans and to make repayments easier.

Consolidate Student Loans 

 

Consolidate loans students take advantage of the significant savings that they get when they consolidate their loans. In these cases, all the accumulated student loans are taken together so instead of having a number of different loans with different repayment schemes, students will only have one loan to pay- one that has a significantly low payment monthly. So instead of paying a lot of money to different institutions, students will only have to pay a lump sum amount to one institution for all their loans. It is also flexible enough to suit the situation of the payer.

For instance they can arrange for longer repayment schedule so that they can further diminish the amount of monthly payments. They can also take advantage of the low interest rate for all of their loans instead of paying based on the fluctuating interest rates. The best time for consolidation is always immediately after the graduation because the student can take advantage of low interest rate to lock their loan with. At the same time if they can also take advantage of the long grace period for repayment effectively avoiding penalties charged for late payments and prolonged repayment periods.

With consolidation significantly decreasing the monthly payments, the credit score of these students or new professionals enable them to pay on a regular basis. As a result, their credit score would be boosted and they can enjoy lower interest rate for their loans! This form of consolidation also does away with co- signer saving other people from gaining liability for whatever unfortunate incident that may befall the debtor that will hinder him/her from paying such debt.

 The Other Side Of Student Loan Consolidation 

 

Though consolidate loan student can be considered laudable for their wise ways of handling their student loans, every coin have two sides. Similarly, student loan consolidation can be very helpful for debtors but that does not mean that it would be the answer for all the students who have student loans. It is always wise to carefully assess whether such consolidation is the key for proper debt management or not.

It should always be kept in mind that consolidation is not always the best decision for every set of loans. It would be a good start to ask if you would indeed save a lot from that consolidation. Another would be if it would be right to consolidate such loans together or not.

Some N.S. private college students missing loan payments at high rates

Expert says some career colleges may be training students in communities where there are too few jobs.

News from http://www.cbc.ca/news/canada/nova-scotia/some-n-s-private-college-students-missing-loan-payments-at-high-rates-1.3116207 

Former students at some Nova Scotia private career colleges fell behind on their student loans at far higher rates than other post-secondaries, unable or unwilling to pay back millions of dollars that were borrowed for education.

Provincial loan data shows that 6,774 Nova Scotia students defaulted over a six-year period. An analysis by CBC News found more than 27 per cent had attended provincial private colleges, even though those institutions reap a far smaller proportion of the total student loans issued by government.

• Mactech Distance Education under scrutiny for student loan defaults
  
• How much Nova Scotians are defaulting on student loans
  
• Visit CBC News Investigates
  

Part of the problem may be that some career colleges are training people for jobs in communities where unemployment is high and work is hard to find, according to one expert in regional innovation.

"When you see high default rates, it's telling you that there's something really wrong," says Ken Coates, a professor at the University of Saskatchewan.

"And what can be wrong is either the quality of the program, the ability, talent and motivation of the students, or the job market on the outside.

"In places like the Maritimes, the number one challenge that you have usually isn't the institution so much as the job markets. Cape Breton and some of the rural areas of Nova Scotia, very serious problems with having decent, high paying jobs available for people who graduate from programs."

Coates says too little is known about career colleges in Canada. Some recruit heavily with dubious promises, but others are "extraordinarily" successful at turning out well-trained students who find good jobs.

Over a six year period analysed by CBC News, Nova Scotia students who attended universities, community colleges and private institutions both here and out of province defaulted on $33.6 million.

By the end of December 2013, the province had only managed to collect $10.5 million of the money owed.

The highest number of students in arrears (1,200) went to the Nova Scotia Community College. The college, however, also has more students taking out loans than any other post-secondary in the province.

By and large, students who attended Nova Scotia universities have good repayment rates.

So too do those who went to some private colleges. Few students default, for instance, at the Commercial Safety College in Debert or at Medavie HealthEd, a paramedic school.

But others, including Mactech Distance Education, have struggled with significantly high numbers of students who fail to repay money they borrowed for their education.

The head of the National Association of Career Colleges says it's unfair to compare private colleges to universities.

Serge Buy says those who enrol at career colleges are typically older: they can't rely on parents to help fund their education and must juggle other financial obligations while trying to upgrade their education.

Repayment rates 'misleading'

"The repayment rate is one item, and I think it is a misleading item that is used by some to evaluate the performance of career colleges," Buy says.

Rather than comparing student loan data, provinces like Nova Scotia should instead gather post-graduation employment statistics for all post-secondaries and make the numbers public, he says.

The province is considering that as it begins discussing new regulations after passing fresh amendments this spring to its private college legislation. The aim, it says, is improved accountability.

The province however does not distinguish between post-secondaries when they grant student loans, so long as the school is designated. It means that students with similar personal and financial circumstances have the same chance of qualifying for a loan to attend Dalhousie University as they do a private college with a high default rate.

'Extremely easy' to qualify for loans

Ryan Graves says it was "extremely easy" to qualify for $28,000 in loans when he signed up for web and graphic design courses at Sydney-headquartered Centre for Distance Education.

He would check assignments online, consult textbooks and while there were instructors available, Graves says most of his studies were self-directed. He made the "president's list" but felt his portfolio was basic and ended up dropping out of his second year, dissatisfied with his education.

"They act like it's preparing you for a job," says Graves, who has been unemployed and is on a repayment assistance program to help with his student loans. "To me it seemed like they were always relying on the naivety of the student."

The head of CD-ED, however, says the vast majority of students do find work. Lori MacMullin says the school's research shows 83 per cent of CD-ED graduates find jobs in their field of study.
Still, federal student loan data show that last year just 59 per cent of students were paying on time, well below the national average of 87 per cent.

But MacMullin notes that's a large improvement over previous years and feels the school is "moving in the right direction."

She says CD-ED works with students to make sure they understand their loan obligations, however private colleges aren't allowed to know who is at risk of going into default.

"Perhaps if we had more control over that, we could make a difference and we certainly would be willing to do so," she says.

 

 

Quote

"Beware of little expenses. A small leak will sink a great ship."

- Benjamin Franklin

Welcome

I love blogging. I hope the information I share about personal finance loans will be helpful for you!