My Life, My Decisions
                                                 (A Life Time Decision)

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The future depends on what we do in the present. ;             ... Mahatma Gandhi

Financing/Funding


Financing/Funding is well understood by us in various situations, but re-financing is slightly complex and unless given proper attention, may create some problems. Financing or borrowing money is common, because every body needs it at some of time in his life for different reasons.


Generally, One borrows moneys or takes Loan for following needs:


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Refinancing:

Refinancing refers to the replacement of an existing loan/ debt. It is generally required ,when individuals change their monthly payments or want to modify the rate of interest on their loans, it usually involves a penalty fee.


It may be another debt obligation having different terms. The terms and conditions of refinancing may vary widely such as, inherent risk, projected risk, political stability, banking regulations, borrower's credit worthiness etc.
A common form of refinancing is of primary residency mortgage.
If the replacement of debt occurs under financial distress, refinancing might be referred to as debt restructuring. A loan (debt) might be refinanced for various reasons,e.g.:

  1. To take advantage of a better interest rate (a reduced monthly payment or a reduced term)
  2. To consolidate other debt(s) into one loan (a potentially longer/shorter term contingent on interest rate differential and fees)
  3. To reduce the monthly repayment amount (often for a longer term, contingent on interest rate differential and fees)
  4. To reduce or alter risk (e.g. switching from a variable-rate to a fixed-rate loan)
  5. To free up cash (often for a longer term, contingent on interest rate differential and fees)

Refinancing for reasons 2, 3, and 5 are usually undertaken by borrowers who are in financial difficulty in order to reduce their monthly repayment obligations, with the penalty that they will take longer to pay off their debt.


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Crowdfunding:


Crowdfunding is probably the latest in the series of raising funds. It is an age old phenomenon when people used to get money/help from their nears and dears one as a way of donations.


Today, with Internet and of course with social media sites, this phenomenon is becoming popular. Some websites are dedicated to crowdfunding where both the donor/investor and the receiver/borrower can participate and after necessary information exchange may decide to donate or invest in the borrower venture without even physically meeting each other.

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Peer-to-Peer Funding:


Peer-2-Peer Lending also known as P-2-P funding, is a way of lending money to people for their personal requirements. It may also be provided for business purposes. All the transactions are through service provider’s web portal i.e. through online working. Since overheads are fairly low because of online working, both the parties get benefitted.


The lender gets better returns and the borrower gets lower interest rates, all this after the service charges paid to the service provider.

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