I often think that life doesnt get any easier, but
it gets better. It gets better when we remain optimistic because
we believe there is enough for every body. As for those economic
theories of scarcity, they are artificial.
Everyone should own a house; it is fundamental to the concept
of the household as a basic unit within the society. The majority
of people dream of a home they can call their own, and soon
after the car.
To own your first car, you need a down payment, if you dont
have all the money, and need a loan. To get a loan, you need
collateral. Often, the prospective first-time owner has no
other property and no collateral. So lenders ask for life
In order to use life insurance to help with qualifying for
the loan, the important consideration is the duration of the
loan. If the loan is short-term, say four to five years, like
a typical motorcar loan, the life insurance policy must have
enough cash value.
In order to have enough cash value, the life insurance policy
must be at least five to seven years old. That kind of time
frame will normally allow for enough cash value.
Brand new policy contracts have very little cash value and
are not useful in motorcar loans.
If you fail to make the monthly payments for the car, the
car will be seized and you can lose everything.
If you fail to make the payments on the insurance policy,
the cash value will be used automatically to pay the premiums
for as long as possible. When there is no more cash value,
you will lose that too.
So it is not wise to enter into that kind of financial transaction
unless you have done some checks and balances. You must also
have some reserve cash, for accidents and incidents.
When you want the home, you will need a down payment. Some
lenders require five per cent while others maintain the typical
ten per cent on the local market.
In the foreign markets, a home mortgage transaction requires
a down payment that can be higher than 20 per cent of the
market value of the property.
Once again, you will need life insurance for collateral.
Since this is now a long-term loan, 20 years on average, the
life insurance cash value is not necessary. Most lenders will
accept term insurance, with no cash value.
A mortgage for half a million dollars, requires cash in
hand of at least $50,000.
How can you accumulate that sum?
If you can find a plan that pays nine per cent per annum,
you can deposit $2,000 per month, and in two years, your
business fix. Or, you can deposit $400 per month, and
in eight years you should have the cash in hand.
The problem is that plans that pay as high as nine per cent
per year, will not give you short-term access to your funds.
Seldom can you get back your money after two years. So if
you have the time, you can accumulate the funds.
If you have the down payment, and qualify in terms of salary,
do you have the life insurance collateral?
The next step is getting the loan. This is where you have
to do some footwork and some headwork.
As a rule of thumb, one loan arrangement is never significantly
cheaper than another. They are all priced in the same market,
and give more or less the same value for your money.
So what you have to shop for is the payment plan that is
most convenient to your life plan.
Next week, well see what the market has to offer.
And it does get better.