“The return of the personal loan (MSN Money)” plus 1 more |
| The return of the personal loan (MSN Money) Posted: 08 Dec 2009 06:17 PM PST By SmartMoney Remember the personal loan? A few decades ago, it was one of the most accessible ways to finance a big purchase, meet an unexpected expense or consolidate other debts. Then came credit cards and home equity loans. Easy to get, even easier to tap and tax-deductible (in the case of home equity), they quickly trumped unsecured consumer loans, which often required an applicant to walk into a bank branch, bare his or her financial soul to a loan officer and jump through hoops to qualify.Banks liked credit cards and home equity loans, too. They were much easier to underwrite and cheaper to manage. Until a couple of years ago, "most big banks would actually hand you a credit card application if you walked in asking for a consumer loan that was on the smaller side," says Gerri Detweiler, a credit adviser for consumer information Web site Credit.com. But the real-estate crash and credit crunch vaporized home equity and credit card lines alike. Now, nearly 25% of American homeowners owe more on their mortgages than their homes are worth, according to First American CoreLogic. And in 2008 and 2009, credit card issuers have cut $1.5 trillion from consumers' available credit lines, according to research firm TowerGroup -- and will continue to cut through the end of 2012.
These trends are giving new life to the demand for personal loans. For example, in the past year, applications for Wells Fargo's personal-loan products have registered double-digit growth. The loans, which can range from $3,000 to $100,000 and carry a rate between 8.5% and 26.25%, depending on one's credit history and relationship with the bank, are marketed as debt consolidation vehicles. "We feel really good about (our product)," says Brent Vallat, the business manager for personal credit management at the bank. "It's the right product for the times, and it's a disciplined way for consumers to take control of their debts." Not all big banks offer unsecured personal loans. For example, JPMorgan Chase has rarely, if ever, extended personal loans. "The credit card has basically eliminated the need for personal loans," JPMorgan spokesman Tom Kelly says. The banks that do offer personal loans don't give them away like they once did credit cards or home equity lines. Wells Fargo, for example, requires prime credit and an existing relationship with the bank, Vallat says. That means you'd need to have a checking account with the bank and ideally something else (a savings account or certificate of deposit, for example) to help give the bank a clearer idea of how you manage your finances and your ability to repay the loan.And make no mistake: A regular income is mandatory. If you've been out of work and need some help making ends meet, a personal loan isn't for you. Bobby Britting, a research director in TowerGroup's consumer lending service, says that personal loans, a market estimated at $100 billion and a drop in the bucket compared with the market for credit cards and home equity, could represent too much risk for too little pay to be worthwhile for most big banks. "Just managing it across 50 states for not as big of a portfolio -- it's a lot of work," she says. "You can almost understand why, at this point when lenders need to focus on big things, they would say this is a niche market that we'd rather not deal with right now." If you're in the market for a personal loan, you have several options. Here are two to consider and two to avoid. This content has passed through fivefilters.org. |
| GE Capital outlook improving, losses to continue (Washington Post) Posted: 08 Dec 2009 02:06 PM PST The conglomerate told analysts Tuesday that profit is expected to be flat next year, ranging between $2 billion to $2.5 billion, and then rise in 2011. GE is ahead of schedule with plans to shrink the size of GE Capital, which once provided nearly half of the company's overall profits. And GE says credit markets are improving, making it easier and cheaper to borrow money. But some big problems that have beset GE Capital during the financial crisis and recession, like big losses, are expected to continue to dog the lender next year. Chief among them is commercial real estate, where losses have soared as the broader market crumbles. GE Capital owns properties such as office buildings and makes loans for other commercial projects. Overall losses are expected to peak in 2010 at $13.6 billion. GE said that while some other previously troubled lending areas have stabilized, such as consumer credit cards and mortgages in the United Kingdom, losses in commercial real estate could reach $2.9 billion next year. That would be up from a $2.1 billion for 2009. The company also says commercial real estate values are expected to fall another 13 percent next year. Values have tumbled in recent months as vacancies rise and loans are harder to come by. "The economic climate continues to be difficult," said Ron Pressman, CEO of GE Capital's real estate division. The GE Capital update was the third this year by the company in efforts to allay investor fears over the financing unit. Fairfield, Conn.-based GE lost its top credit rating, slashed its dividend by 68 percent and saw its stock fall 90 percent from its peak earlier this year due to GE Capital's problems. GE is relying on its big industrial units that make everything from refrigerators to power plant turbines to pull itself out of the recession. Last week, it announced plans to eventually sell its NBC entertainment unit to Comcast Corp. And it plans to rely much less on GE Capital profits. The company said it has made progress stabilizing what will eventually be a smaller GE Capital. It has cut its reliance on riskier debt and raised billions of dollars under a government program designed to ease credit in efforts to stabilize GE Capital's cash flow. GE said last week that the NBC deal will give it an expected $8 billion - money that will help it end 2010 with between $23 billion to $26 billion. GE plans to use the money to fund its industrial businesses and will likely add $2 billion to GE Capital in 2011. Shares of GE fell 36 cents, or 2.2 percent, to close at $15.72 Tuesday. This content has passed through fivefilters.org. |
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