- 1) the representative’s employing member firm has written procedures allowing borrowing from or lending to customers;
- 2) the borrowing or lending meets at least one of the conditions specified in Rule 3240(a)(2);
- 3) the registered person notifies the firm of the borrowing or lending arrangement and obtains pre-approval in writing.
benefits and hazards of borrowing
Credit and simple interest
Credit and simple interest
- An institution, such as a bank, may decide to provide you with a credit card. This card will usually have a “credit limit.” This will be the maximum amount they are willing to lend you. You can then use the card to charge purchases up to that limit.
- money you can earn by initially investing some money (the principal). A percentage (the interest) of the principal is added to the principal, making your initial investment grow!
- While amortization schedules are often printed out for monthly accrual loans, I have never seen one for a simple interest loan. The logistics are just too formidable. Where an amortization schedule for a 30-year monthly accrual mortgage has 30x12 = 360 lines of numbers, the simple interest loan has 30x365 = 10, 950 lines. Assuming 50 lines a page, you would need 219 hard copy pages.
- Automatic payroll deductions to make saving effortless
- Reduced tax liability, since certain contributions lower your taxable income
- Matched contributions from some employers, up to a certain percent (check with your benefits administrator)
- Long-term savings growth opportunity across a variety of investment options
Tips for borrowing
- always look at the total amount you will have to repay when borrowing money. A shorter repayment period may be better than a slightly lower Annual Percentage Rate (APR) amount
- make sure you know the difference between secured and unsecured loans. A secured loan means you can lose your home if you don't keep up the repayments
- work out your budget before you borrow to make sure you can afford the repayments
- never borrow money on the spur of the moment. If you're buying something really expensive such as a car or furniture, think about payment options beforehand. The credit offered by the sales staff may be more expensive than other options
Lending rate is the bank rate that usually meets the short- and medium-term financing needs of the private sector. This rate is normally differentiated according to creditworthiness of borrowers and objectives of financing. The terms and conditions attached to these rates differ by country, however, limiting their comparability.
1. Borrowing is not a substitute for earning: Anyone can get into a situation where they have to borrow money from time to time. If this happens too often you have to look very carefully at your income: it’s a sign that it is not enough for your life. If you can’t change your income, you’ll have to change your life.
2. Borrow money as a last resort. Never borrow money lightly. Try to find another way first. Yep, it is better to sell something. Even better to earn a bit of money on the side even if you have to do work you’d not consider normally. When we were in debt, I thought of applying to stack shelves in a supermarket – they didn’t want me because I have two PhDs. Then I started writing!
3. Don’t borrow for rubbish. This is my way to tell you not to borrow for consumables that are not immediately necessary (like food, for instance) and items that…well, you can go without for a long time. If you are thinking to borrow money for a new pair of designer shoes, don’t do it. If you don’t have enough money to buy Christmas presents to all your family and friends – don’t do it!
4. Borrow money for things that make money. Yes, this makes sense. Particularly if you have access to very low interest borrowing. You have to be really certain though that what you are buying will make you money (and this is the hard part, trust me).
5. Research your lenders. Sometimes we can get a bit desperate. When we are desperate we trust because we want to do so not because we have sufficient information, have formed a reasonably reliable opinion and have made a rational judgement. Don’t do that! Research your lender and research the conditions for lending/
6. Trust your lender. See rule #5 – trust is not a feeling when you borrow money. Trust is a result of well informed decision.
7. Make sure your lender is regulated. It doesn’t matter whether you are in the US, Europe or on one of the other continents. In most countries, there are authorities that regulate lending. Make sure that the lender you borrow money from is regulated. Otherwise, you may find yourself in a cowboy nightmare scenario.
8. Loans are not for Christmas. While you may decide to borrow money so that your Christmas is ‘magic’ (I’d never do this one but then again, it’s your life and you can waste it if you wish) your loan will endure. Don’t ignore it; it is there and it will need to be paid off one day. The sooner you pay it off the better.
9. Mobilise your support network if you have it. Most personal finance will tell you not to borrow from family and friends. I think that people should use their support networks in times of crisis; and family and friends are your network. Call your parents if you are in trouble – just be straight and don’t mess about. You have to pay back the money you borrowed; you’ll have to respond in kind if and when these people need you as well.
10. Have a repayment plan before you borrow. This is most important. It doesn’t matter who you borrow money from: if you don’t have a plan about how to repay the loan before you borrow, you’ll get in trouble.