For instance, you might go weak and over extend your credit far beyond repair. That is where bankruptcy proceedings can be the way out. Not a pretty way out, but a way out nonetheless. Then again there might be need to temporarily spend more money than you have. Lines of credit, credit cards, personal loans, and payday loans might be the solution.
When I was researching these options, I came across one that was very interesting. For older people, who have built up a home in their lifetime, but now need money for their daily or special expenses, where would they turn to? Luckily eastern philosophy or not, there seems to be a solution nonetheless. One alternative to consider is that of a reverse mortgage.
In this kind of mortgage, and hold your breath here, the borrower does not have to repay. Could that actually be right? Well kind of. If senior citizens have built up equity in their homes, they can actually, borrow a lump sum or a stream of money against that equity. Unlike regular mortgages, they do not have to make periodic payments. This is because the requirement to repay the borrowing is triggered by specific situations.
Some of these specific situations are: in case the old borrower decides to sell the property. In most such cases, the reverse mortgager would have first right to the money, or second in case the original mortgage was still running. Another common event is the demise of the old person who borrowed the money. In this case too the lender takes possession of the property and disposes it off.
The only other situation is that the borrower discontinues using the home as a place of residence. This could be because, she or he probably moves into an old age home or something similar.
The important point to keep in mind is that an option such as the reverse mortgage enables an otherwise illiquid retiree to get liquidity and the ensuing peace of mind. This peace of mind is driven by the fact that there are no periodic payments to take care of.
Naturally, like any other financial arrangement, the reverse mortgage too is subject to various regulations and legislations. In many territories, there is a minimum age set for an issuer to write such an arrangement. In some other territories, there is a provision that allows a borrower to actually avail of sequential multiple borrowings of this nature, assuming that the equity or value of the underlying property is escalating.
Though the logic of this mode of funding is simple to grasp, the computations that go into reaching the mortgage able amount is anything but trivial. Factors considered include, the overall interest rates prevalent in the economy. The equity built into the property. The market value of the asset. The age of the borrower. Mode of funding - lump sum vs. line of credit. And then there are many more.
No business today can be fully secure and safe while conducting business with its clients and dealers. There is always the risk of default or non-payment from the customer's side. No one running a business can claim a hundred percent record in collecting sales receivables. There are often other factors like geo-political risks and changes in the macro business environment that cause a default in payment for goods. How do you safeguard your business against this risk? The answer is credit insurance cover when you engage in large sales transactions.
Given the nature of such commercial transactions, there are some risks that the enterprise that has supplied the goods or services must deal with. Some of the common risks associated with global commerce are the risk of overdue payments, the risk of repeated delays in realizing the payment from some customers and the risk of the customer going back on the commitments made at the time of the sale. Or indeed going out of business. You cannot expect to get credit insurance cover for other sales risks such as a customer refusing to accept goods on the grounds that they are defective or for some other valid reason. Credit insurance also does not extend cover to sales transactions that are disputed by either entity in the transaction.
Credit Insurance is therefore most effective when you negotiate the details of the insurance cover in advance with the insurance broker or underwriter. Some providers of insurance cover try to introduce restrictive clauses to reduce the effectiveness of export credit insurance policies. This makes it all the more important that you choose an independent insurance broker for your company credit risk insurance requirements. It is also advisable to negotiate a detailed terms of reference as an appendix to every company credit risk insurance cover that you commit to. This will help you to get your claims processed more quickly in case you have to activate the insurance cover.
Some of the reliable companies that you can consider for getting your sales transactions insured are Atradius, Euler Hermes, AIG, Coface and Ducroire. These insurance companies have dedicated insurance advisers who are aware of the international laws governing trade and commerce. They also have a list of firms that are not reliable and are likely to go back on their commitments in commercial transactions. All this information could e very useful for your business as it goes in for an export credit insurance cover.
Most reputable credit insurance brokers will deal with all the major underwriters including Atradius, Euler Hermes, AIG, Coface and Ducroire and have dedicated insurance advisers who are aware of the international laws governing trade and commerce as well as market knowledge of where the most appropriate cover could be obtained. They are also aware of the firms that are less reliable and are likely to be difficult when dealing with claims. Finding a good credit insurance broker is vital if your business is likely to require export credit insurance cover.
Both Ajeet Khurana & Uk Credit are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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