The next time you apply for a payday loan or a small business loan from your financial institution, the application’s success may depend on your Facebook friends, according to the latest patent filings from Facebook.
The social network juggernaut filed for a patent from the U.S. Patent and Trademark Office for a method that could potentially assist in long-term credit and bad credit loan lenders observe the social habits and connections of an application to conclude if they’re eligible for a loan.
Facebook purchased the patent from Friendster in 2010, which was established by Christopher Launt, who is now employed by getinsured.com. It was first identified by Smartup Legal.
A footnote in the patent outlines that when a customer applies for a loan then the lender would be able to peruse Facebook and find out the credit standing of the individual’s social media friends. Therefore, if the average credit rating of an applicant’s connections maintains a minimum credit score then the application would be approved.
“When an individual applies for a loan, the lender examines the credit ratings of members of the individual’s social network who are connected to the individual through authorized nodes,” the patent states. “If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application. Otherwise, the loan application is rejected.”
Indeed, this perhaps would be a welcomed addition to the application process for the finance industry. Banks, for example, may add this to their arsenal of metric data for the review process. Some experts say they feel very uncomfortable by this concept.
“We have been exploring this method of determining an applicants trust score for several years now. Our initial data suggest that people of similar wealth and financial status tend to gravitate together. We hope to begin utilizing this as one of several tools to determine a borrowers trust score for bad credit loans by the end of 2015.” – Chris Lions CEO, Swift Bad Credit Loans. Continue reading
On Thursday, MasterCard released its quarterly financial statements, which showed better than expected results. The American Multinational Financial Services Corporation reported a profit of $1.02 Billion or $0.87 per share, an increase in profit levels by 15.5% for the quarter ending in September. The stock value of MasterCard was also on the up by 6.5% at around $81 in early morning trading on Thursday and went up as high as $81.69. This rise in stock value represents the confidence that investors have in the directorship of MasterCard and their optimism that it will continue to grow and outperform all expectations in the future as well.
MasterCard’s performance has topped the expectations that had been made by various experienced analysts from all over the globe. The double digit increase was not only observed in the profit levels, but also revenue and payment volume levels, hence delivering strong results in a mixed economic environment. Revenue stood at a staggering $2.5 Billion, an increase by 13%. This financial performance by MasterCard shows the confidence consumers have in their current economy, which seems to be strong and stable which in return is driving consumer spending. With an increase in Consumer Spending, the demand for both credit cards and debit cards increases. Hence the payment volumes also increases as consumers spend more to make purchases.
MasterCard, which happens to be an international services corporation, is a popular choice among customers when it comes to purchasing a debit card or a credit card. The company reported that the purchase volume was up by 11% to $843 Billion and the cross border volume increased by 15%. The transactions that were made through MasterCard cards were up by 10 % to around $11billion. Gross Dollar volume stood at $1.2 trillion, which again represents a 12 % increase. These results show that earnings have certainly improved for MasterCard due to the continued stability of global economy. Continue reading
Initiating a business especially in this economic crisis is not an easy thing to do. Times have changed and a very few people, if any have the assets to start the business on their own.
This is why; almost everyone needs a business loan. However, business loans aren’t easily granted because so many small and large companies are seeking them, the guidelines for giving one have become stricter and so not everyone that goes to a bank for a business loan comes out with one. A large percentage of applicants will be approved for loans simply because their business doesn’t have any credit yet or has bad credit.
Now although there are no sure recipes for getting the business loan, there are a few things that you could do to make your chances of getting the loan higher. Before you apply for a loan, here are some of the questions that you will need to answer to the bank where you are applying.
How much money do you need?
You cannot apply to a business loan unless and until you do not know the amount which you will need. Keep in mind that before going on the venture for a loan, you will have to sit down and decide about the kind of investment that needs to be made. Don’t think your loan request is too high or too low because banks deal with this kind of things on a daily basis.
What will you do with the money?
Next, the company where you have applied for the loan will also probably want to know where you will be spending the loan that is being granted to you. For example you may need it to make recruitments or other business related actions, or may need it to pay off business debts. Whatever the case, you need to be clear on why you are asking for the loan. Continue reading
One of the reasons why we pay financial advisers and analysts to handle our investment accounts is because they are better able to deal with the confusing mathematics associated with the returns of an overall portfolio.
However, if we ignore the complicated statistics of correlations, related exposures, and other advanced statistical metrics, we can start to take control of our own personal investment portfolios by understanding how it is that the returns of the full collection of securities are calculated. By being aware of how it is that these weighted averages will build up the actual returns that we see in our bank accounts, we can then begin to look at how it is that taking on different amounts of risk will pay off or punish us in the future.
The first step to calculating our portfolio returns is to total up the value of all the money in our accounts. For now, let’s assume that our total portfolio value is $10,000. From there, we divide out the dollar value of each investment in the portfolio by the total amount, to find out how much of our portfolios is made up by that one investment.
If we have a portfolio of 4 investments worth $2,500 each, we therefore have an individual weighting of 25% for each security. The last step is to then multiply out the yield returns of these securities by their individual weightings, and to add them up. This will present us with the expected return of each security in the portfolio, after taking into consideration the fact that each of the different securities will be producing different amounts of returns. The table below illustrates our example: Continue reading
One of the more popular financial tricks in personal finance is referred to as the Rule of 72. Acting as a tool for quick estimations, the equation states that dividing the number 72 by the interest rate of an investment will show you how many years it takes to double your money in a given investment. As such, an investment into a savings account that pays 3% interest will double its principle amount in 24 years. Comparatively, an investment in a bond that pays 5% will double in 14.5 years. With that in mind, we can look at how it is that this rule can be taken a step further to evaluate our future wealth goals.
The first way to look at the ability of the rule of 72 to help us understand our ability to meet our long term financial goals is in terms of its applications in a portfolio. While we might have a bond that will double in 14.5 years, a portion of our money will still be in that savings account at 3% that will take 24 years to double.
If we have equal amounts of money in either of these products, we need to look at the average term values of these investments, and re-evaluate to determine how long it will take for the portfolio as a whole to double. We therefore need to divide each of these values by 2 (because they both make up half of our portfolio), and add them together. Continue reading
A loan is when a borrower receives a sum of money from a lender (called the principal), and agrees to repay the borrowed money to the lender at a later date. Normally the borrowed funds are paid back to the lender in installments, with a lump sum paid at the end of maturity. There are cases such as in an annuity, where equal installments are paid during the life of the loan eventually paying off the loan at maturity. The loan is generally provided to a borrower at cost, referred to as interest on the debt. The interest provides an incentive for the lender to participate in loaning out funds.
In a legal loan, the terms of the agreement are enforced by a contract. Covenants, which are stipulations of the loan, are determined by investor s and how likely they believe the company will be able to return the principal. The more unlikely a company is to repay the debt, the more covenants will be included to protect the investor.
That said, a worthy borrower that has strong cash flow and solid earnings will be provided funds with less covenants attached to their loan offering. On the flip side of that a borrow with a poor credit history who applies for bad credit personal loans will have a much harder time obtaining reasonable loan terms. A loan is just like any other debt instrument, in that, the stronger the creditworthiness of the borrower the better the terms of the deal. Continue reading
Credit cards are by far one of the more complicated financial innovations in terms of personal finance. Ignoring the complexities of cash back and rewards points, as well as the benefits of a grace period on the first month’s interest, the way in which credit cards compound interest is slightly different than the way in which a normal loan or revolving line of credit would operate.
As such, the equation for calculating how much time you have left on your credit card at a certain payment amount is a fairly complex beast. That being said, the underlying assumptions of the equation should be enough on its own to motivate us towards doing the math, and finding out how to get rid of these balances as soon as possible.
Credit cards differ from personal loans because of the way in which they compound interest on top of the full monthly balance that was carried, even if a payment has been made on the loan amount. This means that the amount of interest that we are paying on a credit card will always be higher than on even a comparable revolving line of credit. The addition of interest upon payments also results in a somewhat different payment schedule for the loan, as well as a period of latency between when we think we’ve paid off a card, and when we have actually paid off the card. Continue reading
Having looked at how present value and future value equations can help us to understand what our payment schedules look like in terms of their true values, we can now start to dive into the equations that bankers use to determine how much our monthly payments on various types of loans will be. From there, we can apply that amount to our debt-servicing ratio to see just how much capacity for debt we have as a borrower.
The loan payment equation comes off as being particularly complicated, but it’s actually quite simple when we look at it conceptually. We are simply determining the optimized rate of the declining balance, and then assigning that percentage a dollar value. In symbolic terms, it works out to the following:
Payment=Principle*Interest RatePayment Periods1-(1+Interest RatePayment Periods) –Payment Continue reading
In the previous article we discussed how it is that we can use the present value function to understand what a set payment schedule is worth to us in terms of dollars today. While present value is very useful for us to compare different investment opportunities in terms of their worth to us today, the future value equation helps us to evaluate the true costs of our debts and obligations, by showing us exactly how much will be paid out in total over the course of the same payment schedule.
The future value equation is similar to the present value function, in that it requires the same information to calculate (payment amount, number of payment periods, and interest rate). That being said, the future value equation differs slightly in the way that it is calculated.
Future Value=Payments (1+Interest Rate) #PeriodsInterest Rate-1Interest Rate
Looking again at our bond that pays out $200 semi-annually for 5 years in an environment where a savings account pays out 3%/year, which we will remember had a present value of $1844.44, we can see that the equation is calculated as follows: Continue reading
One of the most valuable additions to a savers toolkit is the present value calculation. Even though it comes off as a bit scary at first, the amount of value it creates as a tool for understanding our financial position by putting the numbers right in front of us. By using the present value function, we can then start to look at how it is that our future obligations and investments impact us today.
The present value equation looks at money that we will be receiving at a later date, and tells us how much that amount of money is worth to us today. From there, we can compare the different aspects of our financial position to find out which obligation should take on a higher priority to pay off first, or which investment is worth more to us in the longer term.
To calculate the present value of a payment schedule, we need to know the number of payments that will be made/received, the number of periods in which we will receive these payments, and the interest rate under which these payments will be operating. From there, we multiply the dollar value of the payments by the inverse of the interest rate, less the interest rate multiplied by its full percentage amount, to the power of the number of periods in which we will receive/pay those payments. Don’t let the verbal explanation confuse you, it’s much simpler when you see it symbolically: Continue reading