query: Is it a good idea to get an unsecured loan to pay off a credit card that won't lower a high rate?

positive: Why not just get another credit card and transfer the balance? Many of them will give you special perks like x months of no interest for doing so. Also, once you call to actually cancel the card you will see for sure whether they really have any power to negotiate rates. From their perspective 15% APR is more than 0%APR which is what they'd get if they lose your business.

positive: I think it depends on how you're approaching paying off the credit card. If you're doing some sort of debt snowball and/or throw all available cash at the card, it's not likely to matter much. If you're paying a set amount close to the minimum each month then you're probably better off getting a loan, use it to pay off the card and cut up the card. Well, I'd do the latter in either case... Mathematically it would matter if the interest rate on the card is 10%-15% higher than the personal loan but if you're throwing every spare dime at the card and the some, it might not matter. Another option if you have the discipline to pay the debt off quickly is to see if you can find a card with a cheap balance transfer, move the balance over and close the inflexible card.

positive: I am answering this in light of the OP mentioning the desire to buy a house.  A proper mortgage uses debt to income ratios. Typically 28/36 which means 28% of monthly gross can go toward PITI (principal, interest, tax, insurance) and the total debt can go as high as 36% including credit cards and car payment etc. So, if you earn $5000/mo (for easy math) the 8% gap (between 28 and 36) is $400. If you have zero debt, they don't let you use it for the mortgage, it's just ignored. So a low interest long term student loan should not be accelerated if you are planning to buy a house, better put that money to the down payment. But for credit cards, the $400/mo carries $8000 (banks treat it as though the payment is 5% of debt owed). So, I'd attack that debt with a vengeance.  No eating out, no movies, beer, etc. Pay it off as if your life depended on it, and you'll be happier in the long run.

positive: Take the consolidation loan and pay it off. Don't close the card. Opening a new account will have no bearing on your mortgage a year or two down the road. Keep paying on time -- that will make a big difference! JohnFX's suggestion to open a new card and do a transfer is  a great idea if you have good credit. Just read the fine print -- most cards charge a 3-5% transfer fee and some cards accrue interest if you don't pay within the promotional period.

positive: Go where your money is treated best.  If you can lower your APR, great. It should help a little bit with getting a mortgage if you can reduce your payment.  Your debt-to-income ratio would go down.

negative: Like all other loan-vs-savings questions, it depends on the terms of the loan. If you have a choice, the usual answer is to pay off the loan with the worst terms (which usually means the highest interest rate) first, and only start with savings when you've paid off all the high-interest loans entirely. If your student loan is on US terms, then pay it off as soon as you can, unless you have commercial debt (credit-card or unsecured personal loan), which you should pay off first, or unless you have or are realistically likely to get eligibility for a forgiveness program. But it does depends on the terms of the debt, which in turn depend on the country you studied in; on UK terms it's a very bad idea to pay off a student loan any faster than you have to.  Interest is restricted to the rate of inflation, so good investments probably beat the interest rate of the student loan; the required repayments vary with your income, so savings are more useful than debt repayment if you encounter income difficulties (e.g unemployment) in the future, and finally the debt is automatically forgiven after 30 years, so you may never have to pay it all back anyway - so why pay it off voluntarily if it would get forgiven eventually anyway?

negative: Get a loan at a decent interest rate and use that to pay off all of the credit cards. Then pay into that loan and leave the credit cards alone. Cancel them and don't use them. Credit card debt is possibly the worst kind of debt. So expensive. It's not designed for long term borrowing. It's designed to be paid off completely every month. Get a single loan and consolidate all your debt into it. It will have a lower interest rate and cost you a lot less in the long term.

negative: Everyone is telling you how to manage your finances, good for them that's not an answer to your question. The real answer solves how to get your money to travel. The bank likely might extend you a loan especially if you have assets greater than the amount borrowed.  However, a better solution (or alternative if the bank's rate are too high or they simply won't give it to you) is to go to a P2P lending platform these are copious in the UK and US. If I remember correctly there was a Canadian platform called CommunityLEnd or FinanceIT. The point here is this: Go borrow money at a lower rate than your credit card (there are other alternatives than P2P, you can google these, just make sure the rate is lower than your credit card). Pay the card off, and go on vacation just make sure you can pay it all off eventually otherwise you'll be swimming in debt you cant pay.

negative: A bank or credit card agency can deny your application for pretty much any reason. That said, it's extremely unlikely they'd do so for a secured credit card. This is because the credit is secured. If your sister is to get a card with, say, a $1000 limit, she will have to provide $1000 in security. This means the banks risk practically nothing. That said, I have found one reference that claims you need a score of above 600 to qualify for a secured credit card, though this is hard to believe. Secured credit cards are a reasonable way of building your credit back up. Just about the only other way for her credit rating to improve is for her history of bad debt to fall off the credit report, but that's going to take quite some time. She should be working hard to provide positive credit history to replace the old negative history, assuming her credit rating is important to her. It may not be; it's only important if she plans on taking on debt in the future. Honestly, a credit rating of around 500 is so bad that I wouldn't even worry much about lowering it. It's already low enough as to make it all but impossible to qualify for (unsecured) credit or loans. A single denial is unlikely to significantly affect the score, except in the very short term. With two bankruptcies, I encourage credit counselling for your sister. There are a number of good books available, too. Credit counselling should go into detail on credit scores, unsecured credit, proper budgeting, and all that sort of useful information.

negative: It's generally considered a bad idea to take a loan from your 401k, for the following reasons: You don't earn returns while the money is out You pay the loan back with after-tax money It's only considered a good idea for emergencies or where you need the money to pay off high interest rate debt like credit cards. Consider the stability of your employment, the expected rate of return and explore other avenues for funds  Source: MSN Money

negative: The calculations you suggest have some issues, but I think they are not necessary to answer the question: It sounds like you are buying the house either way. So the question really is simply whether to pay toward your house first or your loan first.  In that case, the answer is simple: pay whichever has the highest interest rate first.  Make the minimum payment on the other until the first is paid off.  Remember this and make it your mantra for the rest of your life.  If you have any debts (such as credit cards) that charge a rate higher than the two options you have presented, do them first. Now, be careful as you compute the interest rates.  Most likely you can deduct interest on your mortgage, so its effective interest rate is lower [it is (1-T)*R instead of R, where T is your marginal tax rate]. For a while, the cost of mortgage insurance will make your effective mortgage rate artificially high, but it sounds like you intend to get to that 20% hurdle pretty fast, so my guess is that this is not a big factor. Congratulations on your bonus and good luck with your new home.

negative: I used to do this all the time but it's more difficult now.  Just a general warning that this probably isn't a good idea unless you're very responsible with your money because it's easy to get yourself in a bad position if you're not careful. You can get a new credit card that does balance transfers and request balance transfer checks from them.  Then just use one of those balance transfer checks to mail a payment to the loan you want to transfer.  Make sure your don't use the entire credit line as the credit card will have the balance transfer fee put on it as well.  You used to be able to find credit cards with 0% balance transfer fee but I haven't seen one of those in ages.  Chase Slate is the lowest I've seen recently at 2%.   Alternately, if you have a lot of expenses every month then it's easy to find a credit card where all purchases are 0% interest for a year or more and use that to pay every possible expense for a few months and use the money you'd normally use to pay for those expenses to pay off the original loan.  If you're regular monthly expenses are high enough you can pay off the original loan quickly and then pay on the credit card with no interest as normal. The banks are looking to hook you so make sure you pay them off before the zero percent runs out or make sure you know what happens after it does.  Normally the rate sky rockets.  Also, don't use that card for anything else.  Credit card companies always put payments towards the lowest interest rate first so if you charge something that doesn't qualify for 0% then it will collect interest until you've paid off the entire 0% balance which will likely take a while and cost you a lot of money.   If you have to pay a balance transfer fee then figure out if it's less then you would have paid if you continued paying interest on the original loan.   Good luck.  I hope it works out for you.

negative: "The basic optimization rule on distributing windfalls toward debt is to pay off the highest interest rate debt first putting any extra money into that debt while making minimum payments to the other creditors. If the 5k in ""other debt"" is credit card debt it is virtually certain to be the highest interest rate debt. Pay it off immediately. Don't wait for the next statement. Once you are paying on credit cards there is no grace period and the sooner you pay it the less interest you will accrue. Second, keep 10k for emergencies but pretend you don't have it. Keep your spending as close as possible to what it is now. Check the interest rate on the auto loan v student loans. If the auto loan is materially higher pay it off, then pay the remaining 20k toward the student loans. Added this comment about credit with a view towards the OP's future: Something to consider for the longer term is getting your credit situation set up so that should you want to buy a new car or a home a few years down the road you will be paying the lowest possible interest. You can jump start your credit by taking out one or two secured credit cards from one of the banks that will, in a few years, unsecure your account, return your deposit, and leave no trace you ever opened a secured account. That's the route I took with Citi and Wells Fargo. While over spending on credit cards can be tempting, they are, with a solid payment history, the single most important positive attribute on a credit report and impact FICO scores more than other type of credit or debt. So make an absolute practice of only using them for things you would buy anyway and always, always, pay each monthly bill in full. This one thing will make it far easier to find a good rental, buy a car on the best terms, or get a mortgage at good rates. And remember: Credit is not equal to debt. Maximize the former and minimize the latter."

negative: If you hadn't done it already cut up the cards. Don't close the accounts because it could hurt your credit score even more. Switching some or all of the CC debt onto low rate cards, or a debt consolidation loan is a way that some people use to reduce their credit card payments.  The biggest risk is that you become less aggressive with the loan payback. If you were planning on paying $800 in minimum payments,plus $200 extra each month; then still pay $1000 with the new loan and remaining credit cards.  Another risk is that you start overusing the credit card again, because you have available credit on the card that was paid off with the loan. The third risk, which you haven't proposed, occurs when people switch unsecured credit card dept, to a secured 2nd mortgage debt. This then puts the family home at risk.

negative: To confirm: you say you have credit card debt of $18,000 with min. repayment of $466.06, plus on top of this you are also paying off a car loan and another personal loan. From my calculations if your monthly interest on your credit card is $237, the interest on your credit card should be about 15.8% p.a. Is this correct? Balance Transfer If you did a balance transfer of your $18,000 to a new credit card with 0% for 14 months and keep your repayments the same ($466) you would have saved yourself a bit over $3020 in interest over those 14 months. Your credit card balance after 14 months would be about $11,471 (instead of $14,476 with your current situation). If your interest after the 14 months went back to 15.8%  you would be able to pay the remaining $11,471 in 2.5 more years (keeping repayments at $466), saving 10 months off your repayments and a total of $4,781 in interest over 3 years and 8 months. The main emphasis here is that you are able to keep your repayments at least the same so you are able to pay off the debt quicker, and that your interest rate on the new credit card after the 14 months interest free is not more than your current interest rate of 15.8%. Things you should be careful about if you take this path: Debt Consolidation In regards to a Debt Consolidation for your personal loan and credit card (and possibly your car loan) into a single lower interest rate loan can be a good idea, but there are some pitfalls you should consider. Manly, if you are taking out a loan with a lower interest rate but a longer term to pay it off, you may end up paying less in monthly repayments but will end up paying more interest in the long run. If you do take this course of action try to keep your term to no longer than your current debt's terms, and try to keep your repayments as high as possible to pay the debt off as soon as possible and reduce any interest you have to pay. As you already have you credit card and personal loan with CBA talk to them to see what kind of deal they can give you. Again be wary of the fine print and read the PDS of any products you are thinking of getting. Refer to ASIC - Money Smart website for more valuable information you should consider before taking out any debt consolidation. Other Action You Can Take If you are finding that the repayments are really getting out of hand and no one will help you with any debt consolidation or reducing your interest rates on your debts, as a last resort you can apply for a Part 9 debt agreement. But be very careful as this is an alternative to bankruptcy, and like bankruptcy a debt agreement will appear on your credit file for seven years and your name will be listed on the National Personal Insolvency Index forever. Further Assistance and Help If you have trouble reading any PDS, or want further information or help regarding any issues I have raised or any other part of your financial situation you can contact Centrelink's Financial Information Service. They provide a free and confidential service that provides education and information on financial and lifestyle issues to all Australians.

negative: Because even if you won the lottery, without at least some credit history you will have trouble renting cars and hotel rooms. I learned about the importance, and limitations of credit history when, in the 90's, I switched from using credit cards to doing everything with a debit card and checks purely for convenience. Eventually, my unused credit cards were not renewed. At that point in my life I had saved a lot and had high liquidity. I even bought new autos every 5 years with cash. Then, last decade, I found it increasingly hard to rent cars and sometimes even a hotel rooms with a debit card even though I would say they could precharge whatever they thought necessary to cover any expenses I might run. I started investigating why and found out that hotels and car rentals saw having a credit card as a proxy for low risk that you would damage the car or hotel room and not pay. So then I researched credit cards, credit reports, and how they worked. They have nothing about any savings, investments, or bank accounts you have. I had no idea this was the case. And, since I hadn't had cards or bought anything on credit in over 10 years there were no records in my credit files. Old, closed accounts had fallen off after 10 years. So, I opened a couple of secured credit cards with the highest security deposit allowed. They unsecured after a year or so. Then, I added several rewards cards. I use them instead of a debit card and always pay in full and they provide some cash back so I save money compared to just using a debit card. After 4 years my credit score has gone to 800+ even though I have never carried any debt and use the cards as if they were debit cards. I was very foolish to have stopped using credit cards 20 years ago but just had no idea of the importance of an established credit history. And note that establishing a great credit history does not require that you borrow money or take out loans for anything. just get credit cards and pay them in full each month.

negative: You mentioned you have a bunch of credit cards with no balance, while others have fairly high balances I would not recommend you to close the 0 balance credit cards if they have lower APR. You can transfer the balance to those cards with lower APR. Now, if those 0 balance cards do not have lower APR, closing them will reduce my overall balance and hurt my credit rating and that is true, assume that you mean overall credit line instead of overall balance. But to my understanding, if you keep the payments good and on time, that effect is only temporary, and therefore you can definitely close them.  Don't forget, paying off your balance can also lower your utilization rate and therefore increase your credit ratings, and you can focus more on that instead. Also larger number of accounts with amounts owed can indicate higher risk of over-extension, therefore you should pay off your low balance accounts first, and do not open new credit accounts until you have paid off the current balance.

negative: the best thing to do is file bankrupt. your credit will be shot for 7 to 10 years. however usually 3 years after the bankrupt people will give you small lines of credit. then you rebuild on the small credit lines. and never get into a bad loan again you learn from mistakes. there is no shame in a mistake if you learned from it. I rebuilt my credit by using fingerhut. small credit limit on a cap 1 credit card 300 dollars unsecured card. personal loan of 1500 dollars to buy a old clunk for a car as I did not want to have five years of car payments. you can also get a secured credit card. and build credit with that. the bank will explain how to build credit using your own money. also you should know a lot of banks like your bankrupt stat. because they no you cant file for several more years. meaning if you don't pay your loan they can garnish you and you cant file bankrupt. you can get a new car loan with good interest rate. by taking 5000 dollars of your 15000 dollars savings down on the new loan. making your new car loan have better payments cheaper and better interest. and get a secured credit card of 2000 to build towards a unsecured credit card. keep all your new credit tabs small and pay on time.i would not use all your nest egg savings. that is not smart. get a lawyer and file. stay in school you will have a fresh start and you learned about upside down loans. don't listen to people trying to tell you bankruptsy is bad. it in a lot of ways gives you the upper hand in a no win debt or debts.

negative: "Yes, it can be a good idea to close unused credit cards.  I am going to give some reasons why it can be a good idea to close unused accounts, and then I will talk about why it is NOT necessarily a bad idea. Why it can be a good idea to close unused accounts ""I'd like to close the cards.""  That is reason enough.   Simplifying your financial life is a good thing.  Fewer accounts let you focus your energy on the accounts that you actually use. Unused accounts still need to be monitored for fraud. You mentioned that you have high credit card balances that you are carrying.  This may indicate that you have trouble using credit responsibly, and having more credit available to you might be a temptation for you. If these unused cards have annual fees, keeping them open will cost money. Unused cards sometimes get closed by the bank due to inactivity.  As a result, the advice often given is that, in addition to not closing them, you are supposed to charge something to it every month.  This, of course, takes more of your time and energy to worry about, as well as giving you another monthly bill to pay. Why it is NOT necessarily a bad idea to close unused accounts Other answers will tell you that it may hurt your credit score for two reasons: it would increase your utilization and lower your average account age.  Before we talk about the validity of these two points, we need to discuss the importance of the credit score. Depending on what your credit score currently is, these actions may have minimal impact on your life.  If you are in the mid 700's or higher, your score is excellent, and closing these cards will likely not impact anything for you in a significant way. If you aren't that high in your score yet, do you have an immediate need for a high score?  Are you planning on getting more credit cards, or take out any more loans?  I would suggest that, since you have credit card debt, you shouldn't be taking out any new loans until you get that cleaned up.  So your score in the mean time is not very important. Are you currently working on eliminating this credit card debt?  If so, your utilization number will improve, even after you close these accounts, when you get those paid off.  Utilization has only a temporary effect on your score; when your utilization improves, your score improves immediately. Your average account age may or may not improve when you close these accounts, depending on how old they are compared to the accounts you are leaving open.  However, the impact of this might not be as much as you think. I realize that this advice is different from other answers, or other things that you may read online.  But in my own life, I do a lot of things that are supposedly bad for the credit score: I only have two credit cards, ages 2.5 and 1.5 years.  (I closed my other cards when I got these.)  My typical monthly utilization is around 25% on these cards, although I pay off the balance in full each month, never paying interest.  I have no car loan anymore, and my mortgage is only 4 months old.  No other debt.  Despite those ""terrible"" credit practices, my credit score is very high. Conclusion Make your payments on time, get out of debt, and your score will be fine.  Don't keep unwanted accounts open just because someone told you that you should."

negative: Some things you should consider: Balance Transfer Debt Consolidation If you get approved for the Citibank 2 year interest free credit card on balance transfers, you will need another loan of $18K to consolidate your other debt. If you cannot get approval for the credit card you may need to get consolidation loan approval for your full $35K of debt. This approval again will depend on your income and your ability to make repayments. As it sounds like you don't have any assets, you may have to get an unsecured loan which comes with higher interest rates. Remember a consolidation loan is only worthwhile if you can get an interest rate lower than your current interest rates and if you pay as much as possible to reduce the term of the loan and the total interest you end up paying. You haven't given the interest rate for the consolidation loan, but lets assume you could get one at 12% p.a. over a 3 year period. For a loan of $18K you would have to pay $138 per week. Together with the $163.50 per week you would have to pay the credit card balance transfer, your total repayments per week for the first 2 years would be $301.50, then $138 per week for the 3rd year. This option sounds affordable, but without knowing what your income and current expenses are it is hard for others to determine for sure. If you had to get a consolidated loan for the full $35K at say 12% p.a. then your weekly repayments would be $268.30 over a 3 year period. This looks to be achievable too. Being Disciplined As you said you will need to be very disciplined in order to get out of this debt. You will need to set up a proper budget and watch every dollar you spend. You will need to restrict any spending on credit cards and getting any new personal loans. You say you will keep a small credit limit to pay for ongoing online payments for courses. Make sure you uses a 55 day interest free credit card (preferably with no annual fee) for this and pay the full amount due every month, so you don't end up paying any more interest on this card. In case of death would my debts pass on to my next of kin or family? If your debts are unsecured (which personal loans and credit cards are), then no your next of kin or family will not have to pay your debts if you die. When you die any money or assets (which would be sold) in your estate will first be used to pay off any of your debts. If there is not enough money or assets in your estate then your remaining debts may not need to be paid. Other people are only responsible for paying your debts after you die if: Bankruptcy An alternative to Bankruptcy is a Part 9 debt agreement, as I mentioned in my answer to your previous question. In this case you will still need to pay off at least part of the debt but will not be charged any further interest on the debt. This is not as severe as Bankruptcy, but as I mentioned before, should not be taken lightly. Like bankruptcy, a debt agreement will appear on your credit file for seven years and your name will be listed on the National Personal Insolvency Index forever. Bankruptcy or a Debt Agreement should only be used as a last resort if you are unable to undertake any other option. And remember, even if you do take this course of action, you will still need to be disciplined now and into the future, so you don't end up in a similar situation again.

negative: "My answer is similar to Ben Miller's, but let me make some slightly different points: There is one excellent reason to get a consolidation loan: You can often get a lower interest rate. If you are presently paying 19% on a credit card and you can roll that into a personal loan at 13.89%, you'll be saving over 5%, which can add up. I would definitely not consolidate a loan at 12.99% into a loan at 13.89%. Then you're just adding 1% to your interest rate. What's the benefit in this? Another good reasons for a consolidation loan is psychological. A consolidation loan with fixed payments forces you to pay that amount every month. You say you have trouble with credit cards. It's very easy to say to yourself, ""Oh, just this month I'm going to pay just the minimum so I can use my cash for this other Very Important Thing that I need to buy."" And then next month you find something else that you just absolutely have to buy. And again the next month, and the next, and your determination to seriously pay down your debt keeps getting pushed off. If you have a fixed monthly payment, you can't. You're committed. Also, if you have many credit cards, juggling payments on all of them can get complex and confusing. It's easy to lose track of how much you owe and to budget for payments. At worst, when there are many bills to pay you may forget one. (Personally I now have 3 bank cards, an airline card, and 2 store cards, and managing them is getting out of hand. I have good reasons for having so many cards: the airline card and the store cards give me special discounts. But it's confusing to keep track of.) As to adding $3,000 to the consolidation loan: Very, very bad idea. You are basically saying, ""I have to start seriously paying down my debt ... tomorrow. Today I need a some extra cash so I'm going to borrow just a little bit more, but I'm going to get started paying it off next month."" This is a trap, and the sort of trap that leads people into spiraling debt. Start paying off debt NOW, not at some vague time in the future that never seems to come."

negative: It sounds like you may need to look into the different types of personal loans that are available to you. Typically, they are in 2 categories: secured vs unsecured. A personal loan is usually of the unsecured variety, meaning that the bank is loaning you money with no collateral to use if you default. These loans will have much higher interest rates than a secured loan. A prime example of a secured loan would be a mortgage or an equity line of credit.  If you want an unsecured personal loan to use towards making those improvements, then whether or not you receive the loan will depend on your credit rating and income status. As Aganju stated, these loans don't really care what the money is used for. Because it's not your property that you're fixing up, you won't be able to get a secured loan against that property. If your mother took out a loan against her home (like a second mortgage), she may be able to get a significantly lower interest rate than what you'll get with an unsecured loan. She could also look into a renovation/remodeling loan, which would require information regarding the work being done such as costs and how it will improve the value of the property. If she used an equity line of credit instead, then they don't typically care what the money will be used for as it's just a credit line against the equity she's already built into her mortgage payments over the years.

negative: Just general advice but you should pay off your credit cards and car loans before buying a house. Or you may be able to add some extra on to the mortgage to pay off your credit card and car debt right away. Credit card interest rates can be ten times the interest rates on mortgages and car loans are not far behind. The sooner you get them paid off completely the sooner you will have enough money for mortgage payments.

negative: The biggest concern is how you get $250,000 in unsecured credit. It's unlikely that you will be loaned that amount at a percentage lower than what you expect to earn. Unsecured credit lines are rarely lower than 10% and usually approach 20%. On top of that, for a bank to approve you for that credit line, you have to have a high credit score and an income to support the payments on that credit line. But lets suspend disbelief and assume that you can get the money you want on loan. You would then be expected to pay back that 10%, but investments don't go up uniformly. Some years they go up 15-20% and other years they go down 10%. What do you do if you have to sell some of your investments in a down year? That money is no longer invested, and you can't recover it with the following up year because you had to take too much out to cover the loan payments. You'll be out of money long before the loan is repaid because you can expect there will be bad years in the stock market that will eat away at your investment. There were a lot of people who took their money out of the market after the crash of 2008. If they had left their money in through 2009, they would have made all that money back, but if you have a loan to pay you have to pull money out in the bad years as well as the good years. Unless you have a lucky streak of all good years, you're doomed.

negative: Are you doing the right thing? Yes, paying back some of the expense of college is a great way to show your gratitude. Could your sister also pitch in a little to help pay the debt down? Will you get approved for a $30,000 unsecured loan? You don't mention your credit rating but that will have an effect obviously. You might consider visiting a credit union with your father and co-signing a loan since it is his debt that you are assuming. You might still want to write a loan for your dad to sign even if he isn't co-signed on a loan. This could protect you in case of his death if there are other assets to divide. If you are not approved for a loan, you could also simply join your dad in paying down the highest-rate cards first and have a loan agreement for him to pay back that money if/when it is possible. You've mentioned that you have no collateral. There aren't many options for loans with no collateral. Your dad's bank or a credit union might consider a debt consolidation loan with you as a co-signer. That's why I mentioned going to a credit union. Talking to a loan officer at a local financial institution will make it easier to get approved. If they see that you are taking responsible steps to pay off the debt, that reduces your credit risk. If you do get a debt consolidation loan, they will probably ask your dad to close some credit card accounts.

negative: Good credit is calculated (by many lenders) by taking your FICO score which is calculated based upon what is in your credit report.  Building credit generally means building up your FICO score. Your FICO score is impacted my many factors, one small one of which is your utilization ratio of your installment loans like student loans.  This is the ratio of the current balance to your original balance.  To improve your score (slightly) you would want a lower ratio.  I would recommend paying your student loan down to 75% ratio as fast as you can and then you can go back to $50/month. A much better way to improve your FICO score is to have revolving credit.  Your student loans are not revolving, they are installment loans.  Therefore, you should open at least one credit card (assuming you currently have none) right away.  The longer you have had a credit card open, the better your FICO score gets.  Your revolving credit utilization ratio is way more important than your installment loan ratio.  Therefore, to maximize your FICO, try to never have more than 10% utilization on your revolving credit report to the credit bureaus each month.  Only the current month's ratio affects your score at any given moment.  You can ensure you don't go above 10% by paying your balance before the statement cuts each month to get it below 10% way before any payment would be due.  (You should always pay your remaining credit card statement balance in full each month by the due date after the statement cuts to avoid any interest charges.)  Note that there is a slight FICO advantage to having at least one major bank credit card instead of just only credit union credit cards.  Also, never let all your revolving credit report a zero balance in a month, you must always have at least $1 reporting to the credit bureaus on at least one of your open credit cards or your FICO score will take a big negative hit. If you cannot get a normal credit card, go to a credit union and find one that offers secured credit cards, or a bank that does.  A secured credit card is where you place a deposit with the bank that they hold and give you a credit limit to match your security.  Ideally it would be a card that graduates to unsecured after your demonstrate good history with them.  For example, the Navy Federal Credit Union secured card unsecures for many people.  I also believe the Wells Fargo Bank credit card (you can join if there is a family member who served or a roomate who did) also will unsecure.  The reason you want it to unsecure and not be forced to open a new account to get an unsecured account is that you want your average age and oldest age of open revolving credit accounts to be as high as possible as this is another impact on your FICO score. Credit unions that anyone can join include, Digital Federal Credit Union, the Pentagon Federal Credit Union (which offers a secured card that does not graduate), and The State Department Federal Credit Union (also offers secured card that I think does not graduate). One other method to boost your FICO score is to get added as an authorized user on one of your parent's credit cards that has been open a long time.  Not all lenders will report such an authorized user, however, ones that are known to do so are: Bank of America, Citi Bank, and Capital One.  It is a good sign that it will report if they ask for the social security number of the authorized user. However, note that the Authorized User addition can have no impact if the lender is using one of the newer versions of the FICO scoring model, only the older versions reward you for the age of accounts for which you are an authorized user. A very long term boost is to open your first American Express card underwritten directly by Amex such as their Zync card which is pretty easy to get.  The advantage of American express is that they remember the date your first credit card was opened with them and if you open new accounts in the future they will back date the date of their opening to match the date your first card was opened.  If you let your membership lapse, be sure to record the account number and date opened in your personal files so that you can help them locate it again if you reopen as they can have trouble if it has been on the order of ten years or more. Finally, note that the number of accounts opened in the last twelve months is a small negative mark on your score (along with number of inquiries), so if you open a lot of accounts all at once, in addition to bringing down your average age of accounts, you will also get dinged for how many were opened in the last year.

negative: There is one massive catch in this which I found out when I went to Nationwide to ask for a loan. I've got a credit card which they kept increasing my credit limit, it's now at something ridiculous - nearly £10,000 but they keep increasing it. I never use that card, when I went to Nationwide though they said they couldn't give me a loan because I had £10,000 credit already and if I reduced this credit this would affect my credit rating and they could potentially give me a loan. I then realised what MBNA had craftily done.  I have two cards with this bank, one with really low interest and the other with really high interest (and a high credit limit) - even though the other card has a zero balance loan companies still see it as money I could potentially go and spend, it doesn't matter to them that I've not spent any money on that card in about 12 months, to them it's the fact that they could give me a loan and then I could go and spend another £10,000 on that card (as you can see extremely risky).   Of course this means that what MBNA are craftily doing is giving me such a high credit, knowing full well that I'm not going to use it, but it also prevents their competitors from offering me a loan, even at a lower rate, because I've already got too much credit available. So yes there is a catch to giving you a high credit limit on your cards and it's to prevent you from either leaving that bank or getting a lower interest rate loan out to clear the debt.

negative: "0% furniture loans can hurt your credit rating. I was told by a bank mortgage officer (sorry I can't cite a document) that credit rating algorithms consider ""consumer"" loans like 0% appliance loans and certain store-specific credit cards as a negative factor, lowering your overall score. The rationalization given was that that taking that type of credit is an indicator that you have zero cash reserves. The actual algorithms are proprietary, so I don't know how you could verify this. If true, it runs counter to the conventional wisdom that getting credit and then paying it off builds your credit score."

negative: Building your credit takes time.  The basic idea is pay bills on time, and keep the available credit high.    So you spend between 10-30% on the card and pay off in full each month.  If you have student loans, once you start paying on those, that will help too, after you get some payment history, but again, it will take time.

negative: Fixed  You are confirming the amount you are going t pay over the term of the loan. Variable: 3.79% over 82mo. The total difference over the life of the loan comes to around $1200 That is the wrong way to calculate the variable portion. The variable is primarily set with a margin over a certain benchmark i.e. Fed rate. Assuming the Fed rate doesn't change over or only goes lower the variable rate is the one to go. If it rises then your payment will increase. And the margin they take over the benchmark rate may increase, so the total amount you pay might increase too.  I would assume a read through the T&Cs should clarify that for you. Is it ever a good idea to choose a variable rate loan? Only if you think we are in a low interest rate environment i.e. the economy is in doldrums and the Feds are trying to simulate the economy by decreasing the benchmark rates. And you are sure that the lender isn't going to increase his margins if the rate remains low for quite a substantial amount of time. And I might assume there will be penalties for paying off a loan quicker.

negative: "You can find out the most money they will loan you for a car loan when you approach your current bank/credit union. They should be willing to layout options based on your income, and credit history. You then have to decide if those terms work for you. There are several dangers with getting loan estimates, they may be willing to lend you more than you can actually handle. They think you can afford it, but maybe you can't. They may also have a loan with a longer term, which does bring the monthly cost down, but exposes you to being upside down on the loan. You then use this a a data point when looking at other lenders. The last place you look is the auto dealer. They will be trying to pressure you on both the loan and the price, that is not the time to do doing complex mental calculations. The Suntrust web page was interesting, it included the quote: The lowest rate in each range is for LightStream's unsecured auto loan   product and requires that you have an excellent credit profile. It also induced the example the rate of 2.19% - 4.24%   for a 24 to 36 month loan of $10,000 to $24,999 for a used car purchased from a dealer. Also note that my local credit union has a new/used loan at 1.49%, but you have to be a member. Sunstrust seems to be in the minority. In general a loan for X$ and y months will have a lower rate if it is secured with collateral.  But Suntrust is offering unsecured loans (i.e. no collateral) at a low rate. The big benefit for their product is that you get the cash today. You can get the cash before you know what you want to buy. You get the cash before you have negotiated with the dealer. That makes that step easier. Now will they in the near future ask for proof you bought a car with the money? no idea. If you went to the same web page and wanted a debt consolidation loan the rate for the same $ range and the same months is: 5.49% - 11.24% the quote now changes to: The lowest rate in each range requires that you have an excellent   credit profile. I have no idea what rate they will actually approve you for. It is possible that if you don't have excellent credit the rate rises quickly, but 4.24% for the worst auto loan is better than 5.49% for the best debt consolidation. Excellent Credit Given the unique nature of each individual’s credit situation,   LightStream believes there is no single definition for ""excellent   credit"". However, we find individuals with excellent credit usually   share the following characteristics: Finally, it should be noted again that each individual situation is   different and that we make our credit judgment based on the specific   facts of that situation. Ultimately our determination of excellent   credit is based on whether we conclude that there is a very high   likelihood that our loan will be repaid in a full and timely manner. All the rates mentioned in this answer are from 15 July 2017."

negative: "You really don't know how credit scoring works. Let's think about the purpose of a credit score: to assess whether you're a high default risk. A lender wants to know, in this order: Utilization factors into the solvency assessment. If you are at 100% utilization of your unsecured credit, you're insolvent -- you can't pay your bills. If you are at 0%, you're as solvent as you can be. Most people who use credit cards are somewhere in the middle. When a bank underwrites a large loan like a mortgage or car loan, they use your credit score an application information like income and employment history to figure out what kind of loan you qualify for. Credit cards are called ""revolving"" accounts for a reason -- you're supposed to use them to buy crap and pay your bill in full at the end of the month.  My advice to you:"

negative: This is a good idea, but it will barely affect your credit score at all.  Credit cards, while a good tool to use for giving a minor boost to your credit score and for purchasing things while also building up rewards with those purchases, aren't very good for building credit.   This is because when banks calculate your credit report, they look at your long-term credit history, and weigh larger, longer-term debt much higher than short-term debt that you pay off right away.  While having your credit card is better than nothing, it's a relatively small drop in the pond when it comes to credit.   I would still recommend getting a credit card though - it will, if you haven't already started paying off a debt like a student or car loan, give you a credit identity and rewards depending on the credit card you choose.  But if you do, do not ever let yourself fall into delinquency.  Failing to pay off loans will damage your credit score.  So if you do plan to get a credit card, it is much better to do as you've said and pay it all off as soon as possible.   Edit:  In addition to the above, using a credit card has the added benefit of having greater security over Debit cards, and ensures that your own money won't be stolen (though you will still have to report a fraudulent charge).

negative: "Your total debt is equal to your total non-credit debt (student loans, car loans) + your total available credit.   This is the truth of the ""low balance"" fear from lenders that you had heard about. Your credit utilization is across all of your cards.   So if you have two cards, both with 15K limits and one is maxed out and one is empty, that is 50% utilization.   If you have both cards with 7.5K balances, that is also 50% utilization. For the 8 cards that are paid off and still open, after you buy a house, I'd close any cards you aren't using.  Not everyone will agree with this. If possible, I would close the 8 cards now and pay off the 15K balance before buying a house.  If it's hard to pay it off now, it will be harder when you have a mortgage and home maintenance costs. If you want to buy the house before you pay off all of your credit card debt, I'd still close the 8 cards that are already paid off and pay down your last card to 4K (or less) to get under 25% utilization. The credit rating bureaus do not publish exactly how a different utilization rate of credit will affect your score, but it is known that lower utilization will improve your score.  FICO calls this ""Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)"" Also, the longevity of your credit history is based on type of account (credit cards, car loans, etc.) so if you keep one credit card open, you still keep your long ""history"" with credit cards on your credit report.  FICO calls this ""Time since accounts opened, by specific type of account"""

negative: "In the sole interest of improving your credit score, the thing you should focus on is lowering your overall utilization. The best thing you could do for this would be to get a loan to reconsolidate your credit card debts into a single, long term loan. The impact of this is that your credit card utilization, assuming the loan covers 100% of your balances, will suddenly drop to 0%, as you'll no longer have a balance on the cards. Additionally, at this point, with a consolidation loan, you'll be building loan history by making steady, fixed payments on the loan.  The loan will also, ideally, have a significantly lower interest rate than the cards, and thus will save you money that you'd otherwise be spending on interest.  A lot of others here will feed you some additonal, irrelevant advice - ""Pay off X credit card first!""; Ideally, you need to eliminate this debt. But to directly address the question of how you could improve your credit score, based on your utilization, I believe the best option would be for you to reconsolidate your credit card debt into a single loan, to reduce your utilization on the cards."

negative: "My biggest concern with this plan is that there's no going back should you decide that it is not going to work, either due to the strain on the relationship or for some other reason.   If you were borrowing from a relative in place of a mortgage or a car loan, you can always refinance, and might just pay a little more interest or closing costs from a bank.  Student loans are effectively unsecured, so your only option for a ""refinance"" would be to get a personal, unsecured loan (or borrow against existing collateral if you have it). You are going to have a tough time getting another 50k unsecured personal loan at anywhere near student-loan rates.   The other negative aspects (overall risk of borrowing from family, loss of possible tax deduction) make this plan a no-go for me. (I'm NOT saying that it's always a good idea to borrow from family for homes or cars, only that there's at least an exit plan should you both decide it was a bad idea)."

negative: "It can be difficult when all your disposable income is spoken for.  Your options depend on how good your credit is and how flexible your expenses are.  I don't have all the answers without more details (possibly not then).  However, couple of points of advice: Paying off that credit card debt (and not adding any more to it) is your #1 priority.  You should make minimum payments to every other debt until you have done that because the interest on it will kill you in the mean time.  It is always optimal to pay the maximum to your highest interest debt and minimum to all other debts. 11% doesn't sound very good on your house loan.  You may want to consider refinancing.  That is, if you can get a lower rate.  You may also want to get a longer term loan (if you have enough discipline to use the extra income to actually pay off your credit card and then the put it toward the house when the cards are paid off). Look at options to increase your income, at least temporarily.  Second jobs and such.  When your finances are more in order, you can back off. The debt ""trap"" is behavioral.  We humans tend to increase our spending until we can't any more.  But the reason we can't spend any more is that we have increased our debt until we have no flexible income.  Then we are stuck for a long time and have few options. The only way out (long term) is to change our habits so that we don't increase spending each time we pay down a debt or get an increase to our income.  Financial discipline is the only way to have financial security.  Almost always the first step is to pay off credit cards and stop maintaining a balance (always pay off every card at the end of each month).  Then start paying off other debts from highest interest rate to lowest. This is a hard challenge and one most of us face at some point in our lives.  Good luck!"


query: Bonds vs equities: crash theory

positive: Cash would be the better alternative assuming both stocks take a major hit in ALL categories AND the Fed raise rates at the same time for some reason. Money market funds that may have relatively low yields at the moment would likely be one of the few securities not to be repriced downward as interest rates rising would decrease bond values which could be another crash as I could somewhat question how broad of a crash are you talking here. There are more than a few different market segments so that while some parts may get hit really hard in a crash, would you really want to claim everything goes down? Blackrock's graphic shows in 2008 how bonds did the best and only it and cash had positive returns in that year but there is something to be said for how big is a crash: 20%, 50%, 90%?

positive: "Diversify into leveraged short/bear ETFs and then you can quit your job and yell at your boss ""F you I'm short your house!"" edit: this is a quote from Greg Lippmann and mentioned in the book ""The Big Short"""

positive: I would suggest looking into Relative Strength Asset Allocation.  This type of investment strategy keeps you invested in the best performing asset classes. As a result of investing in this manner it removes the guesswork and moves naturally (say into cash) when the stock market turns down. There is a good whitepaper on this subject by Mebane Faber titled Relative Strength Strategies for Investing.

negative: The 'appropriate' amount of cash/bonds to hold will be largely a matter of opinion, but here are the general reasons why having at least some is a good idea: Cash is very liquid, and bonds are often mostly liquid. This means you can access them very quickly, without taking on losses. To get the most liquidity out of your bonds, you can do what is called 'laddering'. This means that you take out different bond amounts with different maturity dates, and periodically renew them on a schedule, so that you always have some bonds maturing, which you can access without paying an interest penalty. You can look this term up online for more details. Cash and bonds are low risk. If you have absolutely no low-risk assets, then in the event of, say, a market crash, you may have no savings to fall back on. By owning some bonds, and some equities, you are able to earn a modest return, without being too risky. However, note that some bonds are just as risky as equities - any bond which pays an abnormally high interest rate does so because the entity backing the repayment (government, company, whomever) is thought to not be guaranteed to be able to do so. The 25% figure given by your author is his opinion on the appropriate mix of cash/bonds to equities, but there are many views on the matter. Consider that any 'rule of thumb' in personal finance should be for general consideration only.

negative: No. Busts are very infrequent, and if an equity were illiquid enough to be affected, the bust cost would be enormous. For a liquid equity, the amount of busted volume is insignificant except during a flash crash or flash spike.  Then it would be reasonable to redownload.

negative: I don't believe I said anything about the stock market going down, which happens regularly.  It's not like municipal bond markets crash very often—once every few generations, maybe. So her being off by a couple years would be insignificant.  Not saying I think it's going to happen. I'm just posing the question. If the municipal bond markets crashed within the next year, she would be vindicated.

negative: This depends on: Here in the US where I am, interest rates were around 3.9% when I fixed my mortgage. This underperforms the market, e.g., a total market ETF like $VTI or an SP500 ETF like $VOO have expected returns of ~7+%, the current market growth rate. So, in theory I am better off paying into the market, and making returns greater than my interest rate, rather than paying into the equity.  HOWEVER, past market returns do not guarantee future market returns. The market could reset. It could crash. Are you willing to accept this risk? You have to analyze what happens if the market suffers say a 30% correction and you lose a lot of money quickly.  I would certainly not invest in individual (non-ETF) stocks, or you are really exposing yourself to risk.

negative: In general, investors with a long period of time until they would need to withdraw the cash are best off holding mostly equities.  While the dividends that equities would return are less than the interest you would get in peer-to-peer lending, over long periods of time not only do you get the dividends from equity investment but the value of the stock will grow faster than  interest on loans. The higher returns from stocks, however, comes with more risk of big downturns.  Many people pull their investments out of stocks right after crashes which really hurts their long term returns.  So, in order to get the benefit of investing in stocks you need to be strong enough to continue to hold the stocks through the crash and into the recovery. As for which stocks to invest in, generally it is best to invest in low-fee index funds/etfs where you own a broad collection of stocks so that if (when) any one stock goes bust that your portfolio does not take much damage.  Try to own both international and domestic stocks to get good diversification.  The consensus recommends adding just a little bit of REITs and bonds to your investments, but for someone at 25 it might not be worth it yet. Warren Buffett had some good thoughts on index investing.

negative: They all basically mean the same thing - a type of debt than can be exchanged for (converted into) equity at some point. It's only the mechanics that can be different. A convertible bond is structured just like a regular bond - it (usually) pays periodic interest and has a face value that's due at maturity. The difference is that the bond holder has the option to exchange the debt for equity at some point during the life of the bond.  There can be restrictions on when that conversion is possible, and they typically define a quantity of equity (number of shares) that the bond can be converted into.  If the market price of the shares goes above a price that would make the shares more valuable than the bond, it's in the best interest of the bond holder to convert. A convertible note is typically used to describe a kind of startup financing that does not pay interest or have a face value that's redeemed, but instead is redeemed for equity as part of a later financing round.  Rather than specifying a specific number of shares, the bond holder receives equity at a certain discount to the rest of the market. So they both are debt instruments that can turn into equity investments, just through different mechanisms. A debenture is a fancy word for unsecured debt, and convertible debt could be used to described either structure above, so those terms could mean either type of structure.

negative: "There are many different methods for a corporation to get money, but they mostly fall into three categories: earnings, debt and equity.  Earnings would be just the corporation's accumulation of cash due to the operation of its business. Perhaps if cash was needed for a particular reason immediately, a business may consider selling a division or group of assets to another party, and using the proceeds for a different part of the business. Debt is money that (to put it simply) the corporation legally must repay to the lender, likely with periodic interest payments. Apart from the interest payments (if any) and the principal (original amount leant), the lender has no additional rights to the value of the company. There are, basically, 2 types of corporate debt: bank debt, and bonds.  Bank debt is just the corporation taking on a loan from a bank. Bonds are offered to the public - ie: you could potentially buy a ""Tesla Bond"", where you give Tesla $1k, and they give you a stated interest rate over time, and principal repayments according to a schedule. Which type of debt a corporation uses will depend mostly on the high cost of offering a public bond, the relationships with current banks, and the interest rates the corporation thinks it can get from either method. Equity [or, shares] is money that the corporation (to put it simply) likely does not have a legal obligation to repay, until the corporation is liquidated (sold at the end of its life) and all debt has already been repaid. But when the corporation is liquidated, the shareholders have a legal right to the entire value of the company, after those debts have been paid. So equity holders have higher risk than debt holders, but they also can share in higher reward. That is why stock prices are so volatile - the value of each share fluctuates based on the perceived value of the entire company.  Some equity may be offered with specific rules about dividend payments - maybe they are required [a 'preferred' share likely has a stated dividend rate almost like a bond, but also likely has a limited value it can ever receive back from the corporation], maybe they are at the discretion of the board of directors, maybe they will never happen. There are 2 broad ways for a corporation to get money from equity: a private offering, or a public offering. A private offering could be a small mom and pop store asking their neighbors to invest 5k so they can repair their business's roof, or it could be an 'Angel Investor' [think Shark Tank] contributing significant value and maybe even taking control of the company. Perhaps shares would be offered to all current shareholders first. A public offering would be one where shares would be offered up to the public on the stock exchange, so that anyone could subscribe to them. Why a corporation would use any of these different methods depends on the price it feels it could get from them, and also perhaps whether there are benefits to having different shareholders involved in the business [ie: an Angel investor would likely be involved in the business to protect his/her investment, and that leadership may be what the corporation actually needs, as much or more than money]. Whether a corporation chooses to gain cash from earnings, debt, or equity depends on many factors, including but not limited to: (1) what assets / earnings potential it currently has; (2) the cost of acquiring the cash [ie: the high cost of undergoing a public offering vs the lower cost of increasing a bank loan]; and (3) the ongoing costs of that cash to both the corporation and ultimately the other shareholders - ie: a 3% interest rate on debt vs a 6% dividend rate on preferred shares vs a 5% dividend rate on common shares [which would also share in the net value of the company with the other current shareholders].  In summary: Earnings would be generally preferred, but if the company needs cash immediately, that may not be suitable. Debt is generally cheap to acquire and interest rates are generally lower than required dividend rates. Equity is often expensive to acquire and maintain [either through dividend payments or by reduction of net value attributable to other current shareholders], but may be required if a new venture is risky. ie: a bank/bondholder may not want to lend money for a new tech idea because it is too risky to just get interest from - they want access to the potential earnings as well, through equity."

negative: If you want to make money while European equities markets are crashing and the Euro itself is devaluing: None of these strategies are to be taken lightly. All involve risk. There are probably numerous ways that you can lose even though it seems like you should win. Transaction fees could eat your profits, especially if you have only a small amount of capital to invest with. The worst part is that they all involve timing. If you think the crash is coming next week, you could, say, buy a bunch of puts. But if the crash doesn't come for another 6 months, all of your puts are going to expire worthless and you've lost all of your capital. Even worse, if you sell short an index ETF this week in advance of next week's impending crash, and some rescue package arrives over the weekend, equity prices could spike at the beginning of the week and you'd be screwed.

negative: "As Michael Pryor answered, a bond fund is a mutual fund that invests in bonds. I'd also consider an ETF based on bonds to be a bond fund, but I'm not sure that all investors would consider these as ""bond funds"". Not all bond funds are the same -- just like stock funds. You can classify bond funds based on the issuer of the bonds: You can also classify funds based on the time to maturity: In general, bond funds have lower risk and lower expected return than stock funds. Sometimes bond funds have price movements that are not tightly correlated to the price movements in the equity markets. This can make them a decent hedge against declines in your equity investments. See Michal Pryor's answer for some info on how you can get tax free treatment for your bond fund investments."

negative: There are two basic issues here.  First, there is the difference between accounting terms and their dictionary definitions.  Second, once you dig into it there are dichotomies similar to put vs call options, long sales vs short sales, bond yield vs interest rate.  (That is, while they are relatively simple ideas and opposite sides of the same coin, it will probably take some effort to get comfortable with them.) The salient points from the Wikipedia article on debits and credits: In double-entry bookkeeping debit is used for increases in asset and expense transactions and credit is used for increases in a liability, income (gain) or equity transaction. For bank transactions, money deposited in a checking account is treated as a credit transaction (increase) and money paid out is treated as a debit transaction, because checking account balances are bank liabilities. If cash is deposited, the cash becomes a bank asset and is treated as a debit transaction (increase) to a bank asset account. Thus a cash deposit becomes two equal increases: a debit to cash on hand and a credit to a customer's checking account. Your bank account is an asset to you, but a liability to your bank.  That makes for a third issue, namely perspective.

negative: And it'll be a big issue again when our current housing bubble bursts. Housing is even more expensive now than it was in 2008 before the crash, that just means people have even more equity to borrow against and end up underwater.   Our next real estate crash is going to be much worse than 2008's.

negative: "This effect has much empirical evidence as googling ""dividend price effect evidence"" will show. As the financial economic schools of thought run the gamut so do the theories.  One school goes as far to call it a market inefficiency since the earning power thus the value of an equity that's affected is no different or at least not riskier by the percentage of market capitalization paid. Most papers offer that by the efficient market hypothesis and arbitrage theory, the value of an equity is known by the market at any point in time given by its price, so if an equity pays a dividend, the adjusted price would be efficient since the holder receives no excess of the price instantly before payment as after including the dividend since that dividend information was already discounted so would otherwise produce an arbitrage."

negative: know GIPS, basic portfolio theory / allocation, stocks / bonds.  Honestly most of the stuff in private wealth management isn't that complex and banks tend to be ultra conservative, so expect boring work of holding bonds till maturity, SPY's, JNJ's, GE's, JPM's etc.

negative: Different stakeholders receive cash flows at different times. The easiest way for me to remember is if you're a debt holder vs equity owner on an income statement. Interest payments are made before net income, so debt holders are repaid before any residual cash flows go to equity owners.

negative: Yes. Using debt appropriately is a huge part of what's called optimal capital structure theory in the finance world. Debt is generally cheaper than equity financing due to the tax deductibility of interest and using it appropriately can really juice the profitability of a business as long as the rate of return on equity in the business exceeds the interest rate on the debt.

negative: Stock index funds are likely, but not certainly, to be a good long-term investment.  In countries other than the USA, there have been 30+ year periods where stocks either underperformed compared to bonds, or even lost value in absolute terms.  This suggests that it may be an overgeneralization to assume that they always do well in the long term.  Furthermore, it may suggest that they are persistently overvalued for the risk, and perhaps due for a long-term correction.  (If everybody assumes they're safe, the equity risk premium is likely to be eaten up.) Putting all of your money into them would, for most people, be taking an unnecessary risk.  You should cover some other asset classes too.  If stocks do very well, a portfolio with some allocation to more stable assets will still do fairly well.  If they crash, a portfolio with less risky assets will have a better chance of being at least adequate.

negative: In theory, yes, it makes sense to sell your current bonds in pursuit of higher yields. In practice, there are a lot of smart people out there who own bonds, and the market is very efficient, so you won't see opportunities to trade new bonds for old bonds with better yields from the same issuer. If you do find someone willing to buy your old bond for a higher amount, it probably points to a change in the contract that the new bonds were issued under. (see Argentina for an example)

negative: There is no such animal. If you are looking to give up FDIC protection, investing in a short-term, high quality bond fund or a tax-free bond fund with short durations is a good way to balance safety vs. return. Make sure you buy funds -- buying individual bonds isn't appropriate for folks without a high net worth. Another option is savings bonds, but the yields on these is awful today.

negative: To issue corporate grade bonds the approval process very nearly matches that for issuing corporate equity. You must register with the sec, and then generally there is a initial debt offering similar to an IPO. (I say similar in terms of the process itself, but the actual sale of bonds is nothing like that for equities). It would be rare for a partnership to be that large as to issue debt in the form of bonds (although there are some that are pretty big), but I suppose it is possible as long as they want to file with the sec.   Beyond that a business could privately place bonds with a large investor but there is still registration requirements with the sec.  All that being said, it is also pretty rare for public bonds to be issued by a company that doesn't already have public equity. And the amounts we are talking about here are huge. The most common trade in corporate debt is a round lot of 100,000. So this isn't something a small corporation would have access to or have a need for. Generally financing for a smaller business comes from a bank.

negative: "Assuming you are referring to macro corrections and crashes (as opposed to technical crashes like the ""flash crash"") -- It is certainly possible to sell stocks during a market drop -- by definition, the market is dropping not only because there are a larger number of sellers, but more importantly because there are a large number of transactions that are driving prices down. In fact, volumes are strongly correlated with volatility, so volumes are actually higher when the market is going down dramatically -- you can verify this on Yahoo or Google Finance (pick a liquid stock like SPY and look at 2008 vs recent years). That doesn't say anything about the kind of selling that occurs though. With respect to your question ""Whats the best strategy for selling stocks during a drop?"", it really depends on your objective. You can generally always sell at some price. That price will be worse during market crashes. Beyond the obvious fact that prices are declining, spreads in the market will be wider due to heightened volatility. Many people are forced to sell during crashes due to external and / or psychological pressures -- and sometimes selling is the right thing to do -- but the best strategy for long-term investors is often to just hold on."

negative: An accountant should be able to advise on the tax consequences of different classes of investments/assets/debts (e.g. RRSP, TFSA, mortgage). But I would not ask an accountant which specific securities to hold in these vehicles, or what asset allocation (in terms of geography, capitalization, or class (equity vs fixed income vs derivatives vs structured notes etc). An investment advisor would be better suited to matching your investments to your risk tolerance.

negative: That number may be based on a long term historical view of the stock market.  If you look at some long term charts for the DOW  or the S&P500, you'll see that overall the upward trend is pretty good.  However there are some pretty huge flat spots in those charts, and if the majority of your investements have been made during one of those periods, you may not have seen a lot of growth. If you look at periods between 10-17 years or so, you can find places where it would have really sucked to be you (look at the S&P chart and imagine 66 to 83.. OUCH!) and places where things were stellar.   If you expand to about say 30 years or so, then it's hard to find a period without at least some good growth in there somewhere.  If you panicked during a downturn and sold on the low, things of course get much worse.  How your own portfolio has done will depend a lot on how the funds you chose have done, how much you put into equity vs fixed income, and if the fixed income was in actual bonds, or a bond fund..   Bond funds are subject to a lot more fluxuation as interest rates rise or fall than something like a t-bill or i-bond that you own outright and plan to hold to maturity.

negative: "First, there will always be people who think the market is about to crash. It doesn't really crash very often. When it does crash, they always say they predicted it. Well, even a blind squirrel finds a nut once in a while. You could go short (short selling stocks), which requires a margin account that you have to qualify for (typically you can only short up to half the value of your account, in the US). And if you've maxed out your margin limits and your account continues to drop in value, you risk a margin call, which would force you to cover your shorts, which you may not be able to afford. You could invest in a fund that does the shorting for you. You could also consider actually buying good investments while their prices are low. Since you cannot predict the start, or end, of a ""crash"" you should consider dollar-cost-averaging until your stocks hit a price you've pre-determined is your ""trigger"", then purchase larger quantities at the bargain prices. The equity markets have never failed to recover from crashes. Ever."

negative: "Diversification is the only real free lunch in finance (reduction in risk without any reduction in expected returns), so clearly every good answer to your question will be ""yes.""  Diversification is good.""  Let's talk about many details your question solicits. Many funds are already pretty diversified.  If you buy a mutual fund, you are generally already getting a large portion of the gains from diversification.  There is a very large difference between the unnecessary risk in your portfolio if you only hold a couple of stocks and if you hold a mutual fund.  Should you be diversified across mutual funds as well?  It depends on what your funds are.  Many funds, such as target-date funds, are intended to be your sole investment.  If you have funds covering every major asset class, then there may not be any additional benefit to buying other funds. You probably could not have picked your ""favorite fund"" early on.  As humans, we have cognitive biases that make us think we knew things early on that we did not.  I'm sure at some point at the very beginning you had a positive feeling toward that fund.  Today you regret not acting on it and putting all your money there.  But the number of such feelings is very large and if you acted on all those, you would do a lot of crazy and harmful things.  You didn't know early on which fund would do well.  You could just as well have had a good feeling about a fund that subsequently did much worse than your diversified portfolio did. The advice you have had about your portfolio probably isn't based on sound finance theory.  You say you have always kept your investments in line with your age.  This implies that you believe the guidelines given you by your broker or financial advisor are based in finance theory.  Generally speaking, they are not.  They are rules of thumb that seemed good to someone but are not rigorously proven either in theory or empirics.  For example the notion that you should slowly shift your investments from speculative to conservative as you age is not based on sound finance theory.  It just seems good to the people who give advice on such things.  Nothing particularly wrong with it, I guess, but it's not remotely on par with the general concept of being well-diversified.  The latter is extremely well established and verified, both in theory and in practice.  Don't confuse the concept of diversification with the specific advice you have received from your advisor. A fund averaging very good returns is not an anomaly--at least going forward it will not be.  There are many thousand funds and a large distribution in their historical performance.  Just by random chance, some funds will have a truly outstanding track record.  Perhaps the manager really was skilled.  However, very careful empirical testing has shown the following: (1) You, me, and people whose profession it is to select outperforming mutual funds are unable to reliably detect which ones will outperform, except in hindsight  (2) A fund that has outperformed, even over a long horizon, is not more likely to outperform in the future. No one is stopping you from putting all your money in that fund. Depending on its investment objective, you may even have decent diversification if you do so.  However, please be aware that if you move your money based on historical outperformance, you will be acting on the same cognitive bias that makes gamblers believe they are on a ""hot streak"" and ""can't lose.""  They can, and so can you. ======== Edit to answer a more specific line of questions =========== One of your questions is whether it makes sense to buy a number of mutual funds as part of your diversification strategy.  This is a slightly more subtle question and I will indicate where there is uncertainty in my answer.   Diversifying across asset classes.  Most of the gains from diversification are available in a single fund.  There is a lot of idiosyncratic risk in one or two stocks and much less in a collection of hundreds of stocks, which is what any mutual fund will hold.  Still,you will probably want at least a couple of funds in your portfolio.  I will list them from most important to least and I will assume the bulk of your portfolio is in a total US equity fund (or S&P500-style fund) so that you are almost completely diversified already. Risky Bonds.  These are corporate, municipal, sovereign debt, and long-term treasury debt funds. There is almost certainly a good deal to be gained by having a portion of your portfolio in bonds, and normally a total market fund will not include bond exposure.  Bonds fund returns are closely related to interest rate and inflation changes.  They are also exposed to some market risk but it's more efficient to get that from equity.  The bond market is very large, so if you did market weights you would have more in bonds than in equity.  Normally people do not do this, though.  Instead you can get the exposure to interest rates by holding a lesser amount in longer-term bonds, rather than more in shorter-term bonds.  I don't believe in shifting your weights toward nor away from this type of bond (as opposed to equity) as you age so if you are getting that advice, know that it is not well-founded in theory.  Whatever your relative weight in risky bonds when you are young is should also be your weight when you are older. International. There are probably some gains from having some exposure to international markets, although these have decreased over time as economies have become more integrated.  If we followed market weights, you would actually put half your equity weight in an international fund.  Because international funds are taxed differently (gains are always taxed at the short-term capital gains rate) and because they have higher management fees, most people make only a small investment to international funds, if any at all. Emerging markets  International funds often ignore emerging markets in order to maintain liquidity and low fees.  You can get some exposure to these markets through emerging markets funds.  However, the value of public equity in emerging markets is small when compared with that of developed markets, so according to finance theory, your investment in them should be small as well.  That's a theoretical, not an empirical result. Emerging market funds charge high fees as well, so this one is kind of up to your taste.  I can't say whether it will work out in the future. Real estate.  You may want to get exposure to real estate by buying a real-estate fund (REIT).  Though, if you own a house you are already exposed to the real estate market, perhaps more than you want to be.  REITs often invest in commercial real estate, which is a little different from the residential market. Small Cap.  Although total market funds invest in all capitalization levels, the market is so skewed toward large firms that many total market funds don't have any significant small cap exposure.  It's common for individuals to hold a small cap fund to compensate for this, but it's not actually required by investment theory.  In principle, the most diversified portfolio should be market-cap weighted, so small cap should have negligible weight in your portfolio.  Many people hold small cap because historically it has outperformed large cap firms of equal risk, but this trend is uncertain.  Many researchers feel that the small cap ""premium"" may have been a short-term artifact in the data.  Given these facts and the fact that small-cap funds charge higher fees, it may make sense to pass on this asset class.  Depends on your opinion and beliefs. Value (or Growth) Funds.  Half the market can be classed as ""value"", while the other half is ""growth.""  Your total market fund should have equal representation in both so there is no diversification reason to buy a special value or growth fund.  Historically, value funds have outperformed over long horizons and many researchers think this will continue, but it's not exactly mandated by the theory.  If you choose to skew your portfolio by buying one of these, it should be a value fund. Sector funds.  There is, in general, no diversification reason to buy funds that invest in a particular sector.  If you are trying to hedge your income (like trying to avoid investing in the tech sector because you work in that sector) or your costs (buying energy because you buy use a disproportionate amount of energy) I could imagine you buying one of these funds. Risk-free bonds.  Funds specializing in short-term treasuries or short-term high-quality bonds of other types are basically a substitute for a savings account, CD, money market fund, or other cash equivalent.  Use as appropriate but there is little diversification here per se. In short, there is some value in diversifying across asset classes, and it is open to opinion how much you should do.  Less well-justified is diversifying across managers within the same asset class.  There's very little if any advantage to doing that."

negative: "That depends on how you're investing in them. Trading bonds is (arguably) riskier than trading stocks (because it has a lot of the same risks associated with stocks plus interest rate and inflation risk). That's true whether it's a recession or not. Holding bonds to maturity may or may not be recession-proof (or, perhaps more accurately, ""low risk"" as argued by @DepressedDaniel), depending on what kind of bonds they are. If you own bonds in stable governments (e.g. U.S. or German bonds or bonds in certain states or municipalities) or highly stable corporations, there's a very low risk of default even in a recession. (You didn't see companies like Microsoft, Google, or Apple going under during the 2008 crash). That's absolutely not the case for all kinds of bonds, though, especially if you're concerned about systemic risk. Just because a bond looks risk-free doesn't mean that it actually is - look how many AAA-rated securities went under during the 2008 recession. And many companies (CIT, Lehman Brothers) went bankrupt outright. To assess your exposure to risk, you have to look at a lot of factors, such as the credit-worthiness of the business, how ""recession-proof"" their product is, what kind of security or insurance you're being offered, etc. You can't even assume that bond insurance is an absolute guarantee against systemic risk - that's what got AIG into trouble, in fact. They were writing Credit Default Swaps (CDS), which are analogous to insurance on loans - basically, the seller of the CDS ""insures"" the debt (promises some kind of payment if a particular borrower defaults). When the entire credit market seized up, people naturally started asking AIG to make good on their agreement and compensate them for the loans that went bad; unfortunately, AIG didn't have the money and couldn't borrow it themselves (hence the government bailout). To address the whole issue of a company going bankrupt: it's not necessarily the case that your bonds would be completely worthless (so I disagree with the people who implied that this would be the case). They'd probably be worth a lot less than you paid for them originally, though (possibly as bad as pennies on the dollar depending on how much under water the company was). Also, depending on how long it takes to work out a deal that everyone could agree to, my understanding is that it could take a long time before you see any of your money. I think it's also possible that you'll get some of the money as equity (rather than cash) - in fact, that's how the U.S. government ended up owning a lot of Chrysler (they were Chrysler's largest lender when they went bankrupt, so the government ended up getting a lot of equity in the business as part of the settlement). Incidentally, there is a market for securities in bankrupt companies for people that don't have time to wait for the bankruptcy settlement. Naturally, people who buy securities that are in that much trouble generally expect a steep discount. To summarize:"

negative: True blue preferred shares are considered loose hybrids of credit and equity.  They are more senior than common equity in bankruptcy liquidation but pay out a dividend which is not mandatory. Financial institutions issue the bulk of genuine preferred shares because of their need for more flexibility than a bond but not so much that they can afford the cost to shareholders by diluting common equity. Since it is a credit-like security that receives none of the income from operations but merely pays out a potentially unpredictable yet fixed amount of income, it will perform much more like a bond, rising when interest rates fall and vice versa, and since interest rates do not move to the extent of common equity valuations, preferreds' price variances will correspond much more to bonds than common equities.  If the company stops paying the preferred dividend or looks to become in financial trouble, the price of the preferred share should be expected to fall. There are more modern preferred however.  It has now become popular to fund intermediate startups with convertible preferred shares.  Because these are derivatives based upon the common equity, they can be expected to be much more variant.

negative: I disagree with the theory that SUPPLY needs to increase... stagnant sales can just as easily suggest either equilibrium between supply and demand, or a problem with purchasing power.  I would want to know the home sale PRICES (today vs last month and vs last year)... and possibly salaries.  if prices are the same, then we're more or less in equilibrium... if sale prices are dropping, then we're in trouble... but in either case I question whether adding supply will do anything except lower prices and push the market power towards the buyer.

negative: Huh? I don't see how this effects inflation in practice.... (only in theory)  Basically, I sell short end bonds and buy longer end bonds pocketing the difference in yield and increasing my duration.  GLD and mining are hedges against inflation, markets are stupidly short term looking and care only about current expectations, if the current macro situation deteoriates we see prices fall.

negative: In my original question, I  was wondering if there was a mathematical convention to help in deciding on whether an equity offering OR debt offering would be a better choice. I should have clarified better in the question, I used Vs. which may have made it unclear.

negative: It's a race to the bottom. Use raising debt ceiling will mean moe helicopter money. Euro is also buying bonds. Uk is idiots having no clue what they're doing so it's also going down. You just have to spread risk to fight inflation and avoid a crash if it happens

negative: In answer to your last formulation, no. In a perfectly efficient market, different investors still have different risk tolerances (or utility functions). They're maximizing expected utility, not expected value.  The portfolios that maximize expected utility for different risk preferences are different, and thus generally have different expected values. (Look up mean-variance utility for a simple-ish example.)  Suppose you have log utility for money, u(x) = log(x), and your choice is to invest all of your money in either the risk-free bond or in the risky bond. In the risky bond, you have a positive probability of losing everything, achieving utility u(0) = -\infty. Your expected utility after purchase of the risky bond is:  Pr(default)*u(default) + (1-Pr(default))*u(nominalValue).  Since u(default)= -\infty, your expected utility is also negative infinity, and you would never make this investment. Instead you would purchase the risk-free bond.  But another person might have linear utility, u(x) = x, and he would be indifferent between the risk-free and risky bonds at the prices you mention above and might therefore purchase some. (In fact you probably would have bid up the price of the risk-free bond, so that the other investor strictly prefers the risky one.) So two different investors' portfolios will have different expected returns, in general, because of their different risk preferences. Risk-averse investors get lower expected value. This should be very intuitive from portfolio theory in general: stocks have higher expected returns, but more variance. Risk-tolerant people can accept more stocks and more variance, risk-averse people purchase less stocks and more bonds. The more general question about risk premia requires an equilibrium price analysis, which requires assumptions about the distribution of risk preferences among other things. Maybe John Cochrane's book would help with that---I don't know anything about financial economics. I would think that in the setup above, if you have positive quantities of these two investor types, the risk-free bond will become more expensive, so that the risky one offers a higher expected return. This is the general thing that happens in portfolio theory. Anyway. I'm not a financial economist or anything.  Here's a standard introduction to expected utility theory: http://web.stanford.edu/~jdlevin/Econ%20202/Uncertainty.pdf

negative: Why would someone invest in other instruments (e.g. stocks) to pay for   childrens' college education when the capital gains on those are   taxed, unlike a home equity loan? Many tax advantageous vehicles exist for the purpose of saving for college education such as 529 plans, Roth IRAs, Series EE and I bonds. Tax and penalty free distributions from a portfolio of stocks is possible if the distributions are for qualified education expenses and the account is in the form of a Roth IRA.  A house is collateral for a home equity line of credit.  A combination of unfortunate events could cause someone to default on the loan and loose their residence. Also, the tax advantages of 529 plans, and Roth IRAs are not applicable to purchase a motor boat.  With respect, some people like to leave the home equity loan untapped for other uses. More Details: 529 plans are not taxed by on the Federal level when the withdraws are used for college.  In many states, contributions to state sponsored 529 plans are deductible on the state level.  These are not self directed so you can't trade stocks/bonds in a 529 plan, however, certain plans allow you to lock in the rate you pay for credit at today's prices. If you want a self directed (ability to trade stocks/bonds) vehicle with tax free disbursements for qualified education, consider a Roth IRA. There are yearly contribution limits, and penalty if the proceeds are not used for qualified educational expenses. Also I believe interest revenue from Series EE and I bonds is tax free if the bond is used for education. There are special conditions and situations to 529 plans, Roth IRAs, Series EE and I bonds, the purpose of this answer was to expand upon the tax advantageous vehicles for higher education.