Check With More Than One Lender When Refinancing Student Loans

Check With More Than One Lender When Refinancing Student Loans

What excuses do people use when stuck with high interest student loans? Many times borrowers believe they aren’t eligible to refinance, or they’ve been turned down by lenders in the past. Some might think the process is too complex or time consuming. Still others aren’t fully informed.

The truth is the availability of student loan refinancing exists for millions of borrowers. And the process has never been easier.

Eight Million Missing Out

Experts estimate that approximately 8 million Americans are eligible to refinance their student loan debt. Some of these borrowers may have attempted to refinance in the past but got turned down by one or two lenders. This statistic should open their eyes: 68 percent of eligible borrowers are turned down by three or more lenders.

Not Worth The Hassle?

Some continue to balk since they know that going from door to door seeking refinancing can be a chore. Who likes rejection? Also, applying for credit inquiries from individual lenders may negatively affect your credit score. For a long time, these concerns were legitimate. The refinancing process was arduous due to the distance between borrowers and lenders. Also, there was no easy way to instantly compare real interest rates from multiple lenders.

The good news is that there is a way around all this. Even more, the solution goes far beyond just convenience. It’s a method that can help you get the best interest rate out there.

Lender Marketplace Solution

Just as the travel industry has been revolutionized by sites that let you see actual prices for air fares and hotel rooms, a lender marketplace can show you rates you’re prequalified for with multiple lenders. Many have already taken advantage of a lender marketplace to lower their student loan payments. In a nutshell, the marketplace lets you answer a few questions about yourself, and see personalized rates from lenders who are competing for your business..

The results are incredibly advantageous. For example:

  1. See real rates from multiple lenders in minutes.
  2. Many lenders will compete for most eligible borrowers.  No more door-to-door shopping.
  3. Competition between lenders drives interest rates down.
  4. Your credit score is not affected when you request personalized rates.
  5. The options are presented in a simple, easy to understand manner.
  6. The marketplace puts you in contact with the lender of your choice — you’re not steered to any company.
  7. The interest rates presented to you are real and customized to your situation.

What Refinancing Does For You

When you refinance your student loan, you exchange your old loan for a new one, typically with a lower interest rate. This can allow you to lower your monthly payment yet still keep the total number of payments the same. If you want to reduce your monthly payment by a lot, you can refinance into a loan with a longer repayment term, but you may pay more over the life of your loan. If you would rather maximize your savings over the life of the loan, you could increase your monthly payment and reduce the loan term. What you decide depends on your current financial situation and personal preferences.

In the end, student loan refinancing gives you something everyone wants: options to restructure your loan to save money and personalize it to your needs. So even if you tried to refinance in the past and were turned down, try again. Leverage the lender marketplace and get a better deal.

Please Critique My 2018 RRSP Investments

Please Critique My 2018 RRSP Investments

Have you kids made your RRSP contributions yet? Don’t sweat it, you’ve got hours left until you miss the deadline.

God, you people and your procrastinating make me sick. I got my contribution in more than a week before the deadline. There’s no need to say it; I am a better person than you are.

I used to be very patient when putting money to work, waiting for an outrageously good opportunity to pile into some obscure value stock. While I still follow such a strategy in my TFSA, I’ve started to take a different approach in my other accounts. I’m looking for high quality businesses trading at half decent prices. Yes, kids, I’ve turned into one of those guys.

In fact, as you’ll see, not only do my new investments pay a dividend, but they also have a history of consistently upping their payouts over the years. That sound you just heard? It was Dividend Growth Investor getting a bit of a chubb.

Let’s not delay any longer. Here’s what I bought with my latest RRSP contribution.

The Keg (18.2%)

I touched on the logic behind buying The Keg Royalty Fund (TSX:KEG.UN) when revisiting my Pizza Pizza shares.

There’s a lot to like about the restaurant royalty business. The cash comes directly off the top line, which insulates it from a lot of the challenges that keep down operators. The bad news about this arrangement is it stymies hardcore dividend growth since there’s virtually no operating leverage. If a restaurant can grow sales by 5% while keeping costs the same, it has a huge impact to the bottom line. A royalty trust would see profits go up by about 5%. Big whoop.

I chose The Keg over some of its competitors for one important reason. Cara Operations just announced it would be acquiring the restaurant operations. Cara, which owns brands like Swiss Chalet, Harvey’s, New York Fries, and many others, is a hell of an operator. It’s capable of taking The Keg to the next level, which will likely include further expansion into the United States.

In the meantime, I’m paid 6.3% to wait. If same store sales go up 2% a year and the company expands operations by 2% a year, I’m looking at a 10%+ return over time. I think 2% expansion is a pretty achievable goal, since the company only has 106 locations today.

Essentially, I’m buying a 6% yield that I believe has the ability to grow slightly above inflation for a long time. I expect capital appreciation to be somewhat minimal, although keep in mind that shares are up 53% in the last decade.

BCE (45.1%)

I think Canada’s so-called Big 3 telecoms are pretty much like legalized crack dealers. Have you seen how often the average person checks their phone? It’s bananas.

While I do prefer Telus over BCE (TSX:BCE)(NYSE:BCE) because the former is a pure-play telecom, there’s a lot to like about BCE too. It boasts nearly 14 million customers between its wireless, internet, and television divisions. Management continues to grow the company by making smart acquisitions, including picking up a former member of my borrow to invest portfolio, Manitoba Telecom. And thanks to a recent sell-off, shares are down nearly 10%. This has boosted the yield to a succulent 5.4%.

BCE isn’t necessarily cheap, but companies like it never really enter value territory. It did approximately $3.5 billion in free cash flow in 2017, putting shares at just over 14 times that metric. Or, if you’re a traditional P/E guy, shares trade at about 17 times earnings. Again, not really cheap, but hardly expensive.

Canadian Utilities (33.5%)

Fun fact: Canadian Utilities (TSX:CU) shares are down approximately 13% over the last five years despite:

  • Increasing revenue from $3.0 billion in 2012 to $4 billion in 2017
  • Investing nearly $9 billion in capital expenditures from 2013 to 2017
  • Hiking the dividend nearly 40%

Of course, it’s not all sunshine and blowjobs for Canada’s second-largest utility. 2017’s results were weighed down by a charge associated with one of the company’s big new growth projects. But normalized earnings were $2.23 per share, putting the company at just 15 times earnings.

Free cash flow was even better. CU generated $1.3 billion in cash from operations. It spent $1.2 billion on capital expenditures, but the vast majority of those expenses were for growth projects. I estimate true free cash flow (which would be cash from operations minus maintenance capex) to be approximately $1 billion. Shares today have a current market cap of $9.1 billion.

Oh, and shares yield 4.7% today. They haven’t yielded this much since Nortel was very much a thing.

Let’s wrap this up

There you have it, kids. These are the three stocks I bought with this year’s RRSP contribution. All are expected to be core holdings for a long period of time. As dividends accumulate in my account I’ll put those back to work. It’s all pretty simple.

Let me know what you think of these buys. Am I a genius? A maroon? Or something in between? The comment section awaits. I might even respond.

Relax. The Average Person Won’t Starve in Retirement

Relax. The Average Person Won’t Starve in Retirement

According to every study that makes the rounds, the average person is screwed come retirement age. More screwed than Jenna Haze’s average day at work.

(Edit: She’s been retired since 2012. Way to be up on the trends, Nelson)

They all point towards the same things. The average Canadian barely has two spare nickels to rub together at the best of times. They’re not putting any money towards a rainy day, never mind their golden years. The only reason why we keep getting richer is because the top 5% keep it going. Everyone else continues to struggle.

But here’s the interesting part. The average person has saved bugger all for retirement for decades now. Sure, many people used to be able to count on pensions, but it’s not like everyone who worked in the 60s had a gold-plated pension.

Enter Nelson’s friend

Let me tell you a story about a buddy of mine, a guy who retired about five years ago.

Despite only qualifying for a small pension from his long-time employer, he’s doing fine. Both he and his wife get CPP and OAS. They shoveled a little money into RRSPs over the years. Put all those income sources together and they earn about $30,000 a year. This is easily enough for them to live a relatively comfortable life.

Perhaps most importantly, they live a simple existence. Only one car is needed, since they spend the majority of their time at home. Fancy business casual clothes aren’t needed as an office wardrobe. There’s no need to put aside 10% of their income for retirement. Their tax bill is nonexistent.

Think about all the expenses a regular working Joe has. The government takes off anywhere from 20% to 50% of his pay for various deductions. Taxes make up a big percentage, of course, but so do CPP and EI. There are commuting costs as well as socializing after work. And somebody is always selling something for their kid. Hell, the cost of working can easily eat up a third of your salary. That’s bananas!

The cost of living goes down in retirement. It’s that simple.

Humans are smart

I’ve long been an advocate of working part-time during retirement. It allows you to do something productive, get out of the house, and, most importantly, will help stretch meager savings so they last longer.

Even if a retiree gets a shit-ass job making $15 per hour for 10 hours a week, that works out to $7,500 a year. Just about everyone can work 10 hours a week. Using the 4% withdrawal rate, that’s the equivalent of an additional $300,000 in retirement savings.

Too old to work a traditional job? No problem. The internet makes it incredibly easy to earn a little money while sitting on your ass. Or you can drive an Uber. By the time automation makes Uber drivers obsolete, you’ll be dead.

People have other levers they can pull too. Downsizing is going to become increasingly common over the next couple decades, especially in expensive markets. Single retirees can get roommates, or, gasp!, move in with their kids. My cheap small town sees a steady influx of retirees who like the laid back lifestyle, decent amenities, and, most importantly, inexpensive real estate.

Humans are smart creatures. They will find a way to survive. Sure, it might not be ideal, but are these options really that bad? Let’s put things into perspective here.

Fear from asset managers

Let’s face it. Many of these fears are hoisted upon us by the people in charge of managing our money. Of course they’re going to tell you to save more. They’re directly poised to benefit from this relationship.

It’s like asking your barber if you need a haircut. Which reminds me — I really need a haircut. I look like a hobo who’s intentionally trying to play the part.

Now don’t get me wrong. Saving for retirement is a good thing. I like knowing I’ll have options in my golden years. And there’s nothing that beats that feeling of security. Except orgasms, of course.

Us financial folk also have to realize we’re preaching to the choir a bit here. The average Financial Uproar reader already knows the benefit of saving for retirement. If anything, y’all are oversaving for your golden years.

Compare that to your friend who can barely keep themselves above zero. Getting them to go from struggling week-to-week to putting aside 15% of their income is going to be a big challenge. Some find the light and get reformed, but most don’t. They’ll struggle for their entire lives, yet somehow won’t starve.

Besides, if everyone invested, think about how expensive the stock market would be. I’d have to slit my wrists.

The Easy Way to Build Your Own AirBnb Empire

The Easy Way to Build Your Own AirBnb Empire

So last week we talked about AirBnb. I told you kids about how I had a garage I was interested in converting into an apartment, which had the potential to do a 40% annual return. That, my friends, is the very definition of succulent.

I won’t likely pursue this, for a number of reasons. First off, I’m kinda lazy. I don’t want to go and babysit a unit like that. Go somewhere else, you damn kids. I prefer more passive sources of income. And perhaps most importantly, after a short discussion with someone who is reasonably aware of local zoning laws, I was told my chances to convert my garage were slim to none. Interestingly, however, my chances of converting it into a bedroom or home office were good. Perhaps I’ll keep that in mind for the future.

It’s easy to argue I’m going about the AirBnb business the wrong way. If I was serious about it, here’s what I’d do.

All about protecting capital

Most people don’t have thousands of dollars to spare, just sitting around to convert space into something that can be rented out. Hell, most people don’t have space for their mountains of crap, never mind guests. Actually, I take that back. Most of us have too much damn space. We just like stretching out, that’s all.

Think about all the expense of buying a condo to rent out this way. You’d have to scrounge up at least 5% down — although 20% is more likely — spend money on insurance, taxes, and all the furniture it takes to make such a place happen. In a market like Toronto or Montreal, you could be looking at $100,000 just to get started.

That’s nuts, especially when we consider the uncertainty surrounding these types of places. At this point, most cities don’t care much about folks renting out apartments like hotel rooms. This could change, especially in cities that have high local taxes on hotel stays. The government always gets their cut.

The far easier way is to simply rent a place on a monthly basis and then use it as your base of operations.

The biggest advantage is it lowers the cost of entry. All you need to come up with is first month’s rent, last month’s rent, and cash for furniture. Instead of spending $100,000 to start, you’re looking at a bill of less than $10,000. Hell, if you’re a Craigslist master, you probably won’t need much more than $5,000 to get going.

Just stay out of the intimate encounters page, champ. ACTUALLY NO TAKING A HOOKER BACK TO YOUR AIRBNB PLACE IS GENIUS.

It also allows you to be nimble. Pick a bad location? No problem. You’ll lose one or two months rent, max. That’s far less than paying some broker 5% of the value of a condo to get rid of it. Being nimble is a good thing.

Expansion potential is much better, too. Earnings from one unit can easily be reinvested in another, which allows you to start building up an empire with very little capital out of your own pocket. Landlords like it too; it’s much easier to sue a business guy with some assets than a random dirtbag who rents an apartment.

Or, better yet, partner with your local landlord. Offer to do all the work for 33% of the profits. Or 20% of the profits. Whatever works for you. It’s better to take an even lower return in that situation, simply because you have no capital at risk. It’s the same concept as using seller financing, which is the ticket.

Wrapping it up

I’m a little skeptical this whole AirBnb thing will continue forever. I have nothing against the concept, I just think local governments will eventually ask these folks to start coughing up the same taxes hoteliers pay. This immediately eliminates AirBnb’s competitive advantage.

But there’s nothing stopping you from getting on the gravy train. The best way to do so is to keep as much of your money firmly inside your wallet. Capital is precious; use it wisely.

Old Man Yells at Cloud: Public Mobile Edition

Old Man Yells at Cloud: Public Mobile Edition

In late 2016, back when I took this here blogening seriously, I felt the need to inform you kids about the newest plan from upstart mobile provider Public Mobile. Despite being owned by Telus, the large Canadian telecom which makes up a big chunk of my wife’s RRSP, ol’ Pubby ran things a little differently than the rest of its peers.

It’s an entirely self-serve operation. You had to physically order your own sim card and stick the thing in yourself. Then you have to navigate the website on your own to sign up for service. You can’t call in for help; in fact, Public Mobile doesn’t even have a phone number. If you’re confused, they make you hit up the forums of the website, where poorly paid moderators answer all your pressing questions. Alas, those rat bastards refused to play along when I asked what they were wearing.

In exchange for all of this, Public Mobile offered some uber cheap cell phone service. I personally signed up for a plan that gave me unlimited in-province calling, unlimited text messages and 12 GB of data every three months for $120. After qualifying for a few different discount bonuses (including referring some friends and signing up for credit card auto-pay), I got my cell phone bill down to around $35 a month.

The best part? Public Mobile promised the rate would stay the same as long as you kept paying your bill. I had locked myself into a very good plan for potentially a long time. After all, the company’s marketing was very clear. There would be “no surprises.”

Everything was all fine and good, until last week. That’s when the surprises started.

“You bastards”

So there I was, sitting at work, entertaining everyone with my stories of meeting randoms off the internet, when I got a text message from the fine folks at Public Mobile.

publicmobile

(Click to embiggen)

My succulent plan was no more. THOSE RAT BASTARDS. MORE LIKE PUBIC MOBILE, AMIRITE?

I was pretty pissed, but was resigned to the fact that the price would be going up. $140 every three months (after bonuses) was still a pretty good deal for what I was getting, and if there’s one thing these companies understand, it’s my laziness. Most people would just shrug and move on. That’s what I was prepared to do.

Good thing the rest of Public Mobile’s customers aren’t as lazy as me. They actually did something about it. Oh, did they ever.

Thousands of them took to the internet to voice their displeasure. Reddit threads quickly blew up, as hundreds of users pledged to report Public Mobile to the CRTC for false advertising. Remember, the company promised “no surprises.” Countless more took to Twitter and voiced their displeasure, tagging local media and consumer-minded TV shows like CBC Marketplace. Apparently there are some 300,000 Public Mobile customers, and most of them were PISSED.

24 hours later, the company caved.

It sent out a new text to affected subscribers saying it wouldn’t go through with the price increase. But it did keep the possibility of hiking fees at some point alive. In an official statement, General Manager Dave MacLean said “while all good things must come to an end at some point — that point is not today.”

Cheap asses everywhere rejoiced their victory, at least for now.

The lessons learned

This wouldn’t be a Financial Uproar post without looking at the bigger picture. How can you personally profit from this information?

Let’s talk a little about being the low cost provider of something. While it can be a lucrative spot to be in a market for the right organization, it usually isn’t a smart idea. For every company like Wal-Mart, there are a million imitators that fail badly.

Let’s face it; price-conscious customers are a pain in the ass. All they care about is getting the best value for their dollars. If you target that market, be prepared to be fought tooth and nail over every price increase. Meanwhile, the top end of the market is much easier. They’ll gladly accept price hikes in exchange for a better product.

Many companies begin as price leaders before realizing it’s a crummy place to be. Westjet got its start undercutting Air Canada. These days the average Westjet fare is no lower than the competition. McDonald’s is no cheaper than Wendy’s or Burger King. Pepsi tried to be the better value proposition than Coke for years before finally giving up. And so on. There are hundreds of other examples.

Of course, Public Mobile is only a small part of Telus, which is a behemoth. At the end of the day, thousands of people leaving Public Mobile is nothing more than an annoying inconvenience. When you’ve got close to nine million subscribers, you can afford to piss off a few customers. Besides, both Bell and Rogers are doing the same thing, somehow. We’re naturally wired to hate all utilities, which is why they end up being pretty good investments.