Thursday, August 9, 2007

Do you need auto insurance when you travel?

Money News: Making sure you are a car is covered before driving off into the sun can be just as important as taking out travel insurance, the RAC has advised holidaymakers.Adam Cracknell, spokesman for the organisation, said that liability for damage to other vehicles and causing injuries to other motorists can incur "very high costs".Being covered ensures that policy holders have access to expertise in dealing with such situations."Getting car insurance if you're driving abroad is as valuable as getting travel insurance," he argued."If you were involved in a road traffic accident in France and then you passed on your insurance details, they are trained to deal with that and can sort it all out for you. It can be less stressful than sorting it out on your own."He added that take up of the RAC's European recovery service has increased by ten per cent on last year Other products offered by the RAC include car insurance, car breakdown cover, vehicle status checks, car loans and its route planner.

Wednesday, August 8, 2007

All About IRAs

At every dinner party or social event, someone starts talking about the magic of IRAs. But which one should you choose?
Motley Fool:
The Individual Retirement Account (IRA) brings together two tremendously powerful forces, both of which benefit you: 1) compound interest, and 2) tax savings.
If you've got money that you can afford to invest for the long term, there's really no reason not to open an IRA. Lethargy is not a good reason. Inertia is not a good reason. Keeping your eyes wide shut about your future is not a good reason. Compound interest becomes even more powerful when it is not held back by the drag coefficient of taxes.
In those golden years, you want to be able to go out and buy the gold-plated golf clubs, jet out to Hawaii to circle the big island on a dolphin's back, savor the flavor of fine French food, make generous contributions to a cause that stirs your passions, or hire a trainer to help you get in shape for your Space Shuttle mission. You also want the opportunity to become your family's Most Beloved Ancestor -- the more you save, and the more you have at the end of the day, the more you're likely to have left over to spread around to your heirs. So you're really doing everyone a favor -- yourself included.
The language of IRAs is often clouded with terms like "AGI" and "minimum distributions" and "rollovers." Yes, you'll find those self-same terms here, but we'll do our best to make it all meaningful and digestible. To that end we've added a little glossary to have as a handy reference.
So, here we present most everything you'd like to know about IRAs. Your mouth will drop open in glad delirium as you learn that there are actually 11 (count 'em, 11!) types of IRAs. You'll find out about the eight exceptions to the 10% penalty. You'll journey through the land of Roth, and determine whether you should take advantage of the IRA that carries its name. (Hey! This is starting to sound like an epic!) You'll learn about Education IRAs, contribution/deduction limits, and rollovers.
Here we've gathered together the far-flung strands of IRA trivia in Fooldom, and arranged them in one easy-to-use, easy-to-print collection.
Adjust your screen for maximum viewing pleasure -- fire up the printer, if you so choose -- and read on!

Tuesday, August 7, 2007

Which Credit Card should I apply for?

Choosing a credit card can be a confusing situation. The Federal Reserve Board has some great advice:
Shopping around for a credit card can save you money on interest and fees. You’ll want to find one with features that match your needs. This information can help you understand the features of credit cards Compare credit card features and costs Know your rights when using your credit card File a complaint if you have a problem with your credit card.

Monday, August 6, 2007

Student loans can be a confusing issue.

SF Chronicle:

Because August is the month when students and their families are scrambling to get college loans before school starts, I decided to answer this question from Pat H., which raises issues every borrower should know.
"I plan to be the co-signer on a student loan for my nephew starting college in South Carolina," Pat writes. "He has Stafford loans and Pell grants, but needs money for rent, food, gas, health insurance, etc. I have been checking Web sites for private student loans and the best interest rate I have found is 8.5 percent. All rates are variable. His mother does not have the credit history necessary to get a loan, so I will be the co-signer and use my credit. I believe we will need about $10,000 for the coming school year. Do you have any tips on finding a good loan?"
Before getting a private loan, Pat's nephew should first take out the maximum he can in federally guaranteed college loans. These include Stafford loans for students and Plus loans for parents and graduate students. These loans have lower rates and fees than private loans.
Unlike private loans, Plus loans are not dependent on the borrower's credit score, but parents do have to pass a credit check. A parent with an "adverse credit history" (including a bankruptcy in the past five years) can be denied a Plus loan. When that happens, there are two other options for getting federal loans, says Mark Kantrowitz, publisher of
Pat's nephew should contact his college financial aid office. If his mother has been turned down for a Plus loan, he could be eligible for an additional unsubsidized Stafford loan, on top of his original Stafford loan.
The additional loan is $4,000 per year for freshman and sophomore years and $5,000 per year thereafter.
Even if his mother has not applied for a Plus loan, the nephew might be able to convince the financial aid office that she would not qualify, without the mother needing to apply.
Another option when a parent is turned down for a Plus loan is to get another relative who can pass the credit check to endorse a Plus loan and promise to repay it if the parent can't.
Pat's nephew should pursue the first option first because the maximum interest rate on a Stafford loan is only 6.8 percent compared with 7.9 or 8.5 percent (depending on school) on a Plus loan. Fees are also lower on Stafford loans.
If the nephew can't get the additional Stafford loan or it isn't enough to meet his needs, Pat should consider endorsing a Plus loan. The annual limit on a Plus loan is equal to the cost of attendance (including tuition, room, board, books and other costs) minus any other financial aid the student receives. This could eliminate the need for a private loan.
Shopping for federal loans: Students who attend a college that participates in the government's direct lending program usually must get their Stafford and Plus loans from the U.S. Department of Education.
Students at schools that participate in the Federal Family Education Loan program can get their Stafford and Plus loans from any bank or other private-sector lender that offers them.
The government sets the maximum interest rate and fees that lenders can charge, but some offer discounts so it pays to shop around.
Most schools offer a list of preferred lenders, which is a good place to start but not end.
New York Attorney General Andrew Cuomo's office found that many schools were receiving incentives to put lenders on those lists, creating potential conflicts of interest.
Although those incentives are disappearing, students also should consider lenders not on those lists.
Many lenders require students to jump through hoops to get discounts, such as signing up for direct debit or making 36 or 48 months of consecutive on-time payments. Very few recent college grads never miss a payment.
That's why Kantrowitz says borrowers should focus on discounts that are impossible to lose. He says My Rich Uncle and Northstar/Total Higher Education are two lenders that offer discounts with no strings.
To learn more about discounts and find lists of discounts offered by many lenders, go to
This page also links to a new loan discount analyzer that lets you compare fee and rate discounts from various lenders to see which is the cheapest overall. "It's a complicated calculator," Kantrowitz admits, but it's the only one of its kind.
Some states, including Maine, Massachusetts, New Hampshire and Texas, have attractive loan programs for students who are either from that state or going to school in that state. If the state offers such a plan, it will probably be on the school's preferred lender list.
A number of Web sites have sprung up that let students shop for loans from various lenders. Most of these sites, including and, get referral fees or are owned by participating lenders.
Finaid, which does not market loans, is sponsored by Citibank.
Private loans: When parents can't take out Plus loans or choose not to - perhaps because they don't want to be on the hook - students usually turn to private loans.
This is expensive because lenders base their interest rates on the borrower's credit score. The lower the score, the higher the rate. Most students have very low scores because they have no credit history.
Students can lower their interest rate by getting a co-signer with a higher credit score. The co-singer becomes legally obligated for the loan.
Lenders advertise their lowest rate, but "you usually have to have a FICO score above 800" to get that rate, Kantrowitz says. Less than 10 percent of borrowers get the lowest rate, while "about three-quarters get the worst rate," he adds.
Today, rates on private student loans typically range from around 8.25 percent to 18 percent or more. All rates are variable and pegged to the prime or Libor benchmark rates.
Fees are also based on the borrower's credit score and range from zero to 11 percent of the loan amount, Kantrowitz says.
Borrowers can't find out what rate and fees they will get until they apply for a loan.
Every loan application, however, knocks up to 5 points off your FICO score, Kantrowitz says.
"Most lenders have five or six credit tiers between their best and worst scores. If you apply for too many loans, it could pop you down into the next credit tier" and cost you even more, he adds.
On his Web site, Kantrowitz lists about 35 lenders and their range of rates for private student loans. Go to
Picking the lender with the lowest advertised rate can backfire. "The lenders with the lowest best rate often also have the highest worst rate," Kantrowitz says.
What usually works best is picking a lender whose rate is among the lowest and has a narrow spread between its highest and lowest rates, he adds.
If everything else is the same, it's usually better to choose a loan pegged to Libor than prime, he says.