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Posted by on Apr 7, 2006 in BORROWING SOMEONE ELSE’S MONEY, RISKS WITH MONEY | 0 comments

Regulation allows potential creditors access to medical records

On the Money From the  April 7, 2006 print edition The last time you applied for a loan, the fact you had measles at age 9 probably didn’t enter your mind. Likewise, the application didn’t ask about your plans to repair that pesky left knee meniscus tear. Nevertheless, a new federal rule that went into effect April 1 — Regulation FF — grants exceptions that allow creditors to obtain or use medical information for determining credit-worthiness. Although limited to circumstances that creditors believe are “necessary and appropriate,” they may use certain health information as part of their evaluation process. Also, the rule allows creditors to share medical information with affiliates in certain situations. The Fair Credit Reporting Act (FCRA), defines “medical information” as information or data, whether oral or recorded, in any form or medium, created by or derived from a health care provider or the consumer that relates to 1) the past, present or future physical, mental, behavioral health or condition of an individual; 2) health care provided to...

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Posted by on Jul 1, 2005 in BORROWING SOMEONE ELSE’S MONEY | 0 comments

Money matters: You’re both a lender, borrower

On the Money From the July 1, 2005 print edition A recent advertising package from a financial company exhorted the benefits of an “Interest Cancellation Account.” The claim was that by becoming involved with their institution, a consumer could “cancel” interest charges on their mortgage. Using evocative phrases such as, “dramatically reduce interest” and “innovative principles of money management,” the company seemed to imply it had discovered some miraculous way to erase most of the cost of borrowing. The company had built an entire campaign around one of the basic principles of finance — the time value of money. Repay debt more quickly and the interest cost is reduced. Invest money as soon as possible and the total return increases. You don’t pay interest on money you don’t owe. As with all financial transactions, there are always two sides — a lender and a borrower. Both are concerned with the time value of money from opposite ends of the spectrum. More importantly, all of us are simultaneously lenders and...

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Posted by on Dec 6, 2002 in BORROWING SOMEONE ELSE’S MONEY | 0 comments

The real cost of a loan often is hidden in the details

On the Money From the December 6, 2002 print edition To paraphrase a famous nursery rhythm; “This little piggy went to market, this little piggy stayed home, this little piggy had roast beef, this little piggy had none, and THIS little piggy went wee, wee, wee-all the way to the bank!” The last piggy worked for the pig that “had roast beef” who loaned it to the piggy that “had none.” And that little piggy had made an 89 percent annualized return on her money, even though the interest rate was “only” 10.5 percent per year. How did this happen? Let’s dissect the transaction and discover how the real cost of a loan (and the genuine profit to the lender) is not always what it might seem. From the borrower’s perspective, the essential calculation for cost-of-money is based upon how much cash changed hands-not annual interest rate, accrued expenses, opportunity cost, amortized liability, or any other finance-industry term. In plain English, how much cash did you get for how much you gave...

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Posted by on Aug 2, 2002 in BORROWING SOMEONE ELSE’S MONEY | 0 comments

Borrowers should be aware of the wide range of collateral options

On the Money From the August 2, 2002 print edition If you’ve ever applied for a loan, you’ve no doubt heard the term “collateral.” During the early stages of a business needing capital, the word “collateral” may have been uttered so many times that the very sound of those syllables causes gastric distress. Lack of traditional collateral may force the frustrated borrower to think back to the old Bob Dylan song: “But I went into a bank, to get some bail for Arab, and all the boys back in the tank. They asked me for some collateral, and I pulled down my pants!” Collateral is an asset pledged to a lender until a loan is repaid. If the loan is not repaid, the lender may seize the collateral and sell it to pay off the loan. (Making the Dylan song even more fun to think about-but hardly practical in the banking biz.) Obvious forms of collateral include houses, cars, stocks, bonds, and cash; all things that are readily convertible into cash to...

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Posted by on May 24, 2002 in BORROWING SOMEONE ELSE’S MONEY | 0 comments

When it comes to financing, cash flow still rules the roost

On the Money From the  May 24, 2002 print edition While the markets often focus on items such as net income, total assets, earnings per share, net worth, PE ratio, etc., the fact is this: You can’t spend any of those things. You can, however, spend cash — arguably the most important measure of immediate value. Unfortunately, the “Consolidated Statement of Cash-flows” is the last document in a presentation of “Standard Financial Statements.” First is the Balance Sheet (primarily a measure of assets), then the Income Statement (mainly a presentation of earnings) and after that, almost as an afterthought, is the Cash-Flow statement. By the time most readers digest the first two presentations, there’s hardly space for the beleaguered Statement of Cash-Flows. Nevertheless, this statement is the most valuable component of the financials. Why? Because cash is cash; you can spend cash. Since our society has evolved to the point where we use “fiat money” rather than actual merchandise in our transactions, cash is the medium by which we convert and conduct...

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