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MBA: Mortgage applications rise

he number of people taking out new home loans and refinancing existing ones rose during the week ended Nov. 6.

The Mortgage Bankers Association’s Market Composite Index, a measure of mortgage loan application volume, increased 3.2 percent on a seasonally adjusted basis from a week earlier.

The Refinance Index increased 11.3 percent from the previous week.

The refinance share of mortgage activity increased to 71.5 percent of total applications from 66.1 percent the previous week, the highest share since May.

The average interest rate for 30-year, fixed-rate mortgages decreased to 4.9 percent from 4.97 percent, with points increasing to 1.03 from 1. The average interest rate for 15-year, fixed-rate mortgages remained unchanged, at 4.33 percent, with points decreasing to 1.15 from 1.33.

The average interest rate for one-year ARMs increased to 6.85 percent from 6.83 percent.

Student loan debt consolidation - The Wrong Choice If You Are In Deep Credit Card Debt

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The most used program is the debt management plan. This plan is used to pay off the credit card debts and other unsecured debts. The scattered debts are consolidated into one loan or a monthly payment for the debtor. This amount is used to pay off each of the creditors, thus the debtor only pays one amount instead of paying to many creditors and keeping a track of it. The decreasing debt is a motivation and feel good factor in the statement.

Obama Asks for SBA Loan Expansion, Franchisees Agree

WASHINGTON - President Barack Obama announced plans Wednesday afternoon to shift some of Wall Street’s bailout funds over to community banks in order to spur lending to small businesses, which has slowed to a trickle. With SBA administrator Karen Mills and Secretary of the Treasury, Tim Geithner, flanking him, President Obama made several announcements to boost small business.

The President’s speech took place with the backdrop of Metropolitan Archives, a family-operated records storage company in Landover, Maryland.

President Barack Obama, who as a high school student served ice cream in a Honolulu Baskin Robbins franchise, described how small business owners and their tireless work ethic form the backbone of the American economy. “Hewlett-Packard began in a garage. Google began as a research project. McDonald's started with just one restaurant,” he said.

The president went on to say that although small business creates 65 percent of all new jobs, small businesses have been some of the hardest hit by the recession. “From the middle of 2007 through the end of 2008, small businesses lost 2.4 million jobs,” said the President. “And because banks shrunk from lending in the midst of the financial crisis, it's been difficult for entrepreneurs to take out the loans they need to start a business. For those who do own a small business, it's been difficult to finance inventories and make payroll, or expand if things are going well.”

The White House is requesting that Congress increase Small Business Administration 7(a) and 504 loans, used by small business owners to typically buy equipment, land and buildings, from the current cap of $2 million to $5 million.

“These larger loans will help more small business owners and franchisees grow,” Obama declared.

The Administration plans to bring together regulators, congressional leaders, lenders and small businesses to discuss what steps are necessary to get the small business credit pump flowing again.

“I'm confident that the steps we announced today will do that for small business owners across the country, men and women we hear from every day,” said the president.

Franchisee Help

International Franchise Association CEO Matthew Shay thinks the loan cap increase is a good idea. During the year, the IFA has lobbied Congress, the Treasury, Small Business Administration and Federal Reserve to help change the lack of capital access for franchise chains.

“There are over 400 different franchise brands in the United States that have an average initial investment requirement of $750,000 to $2 million per unit,” observes Shay. “These franchised small businesses reach the SBA’s current loan limit of $2 million by the time they want to build the second or third store. By increasing the loan limit to $5 million, at an annual growth rate of 5 percent, these businesses could create 450,000 to 650,000 new direct and indirect jobs within the next 12 to 18 months.”

The International Franchise Association, representing the needs of some 1,100 franchisors, arranged for franchisor members to have their franchisees attend the meeting. Franchisee Vinay Patel of JAI hotels, Meineke dealer Chris Schmitz, and other franchisees were in attendance, many are members or leaders of franchisee associations.

Franchisee Chris Schmitz, also president of the Meineke Dealers Association, an independent franchisee association, said, “Ken Walker [CEO of franchisor Meineke] asked me to represent franchisees on behalf of the IFA.”

Ken Walker is scheduled to be the next chairman of the International Franchise Association.

Schmitz says that President Obama's message was good news for all franchisees. "Including those looking for capital to make ends meet, expand their current operations, acquire additional units, or even those looking to sell or divest," he states. He adds, "Increasing the availability and flow of credit can be an integral part of revitalizing a down economy and stemming the tide of rising unemployment, provided the Congress follows through with the initiative.”

Dunkin’ Donuts franchisee Andy Cabral was also in attendance, and was pointed out by the President.

“Andy started his business on an SBA loan and now runs 10 stores across Maryland and Virginia that employ 130 people,” President Obama stated in his speech. “And Andy has already seen one loan fall through the cracks because of the financial crisis and he's hit the cap on his SBA loans. But the measure we're announcing today will help Andy and other franchisees pursue their plans to expand and create more jobs.”

“Administration officials noted that the desire to increase the size of the SBA loans was driven in part by meetings with large franchise corporations like Dunkin' Donuts,” reports BusinessWeek. "’What drives them is when they can get top-notch people that want to start four to five franchises at once,’ the official said. Ware says he thinks this reasoning is sound. ‘It is not Dunkin' Donuts that will be getting the money, it will be the owner of the franchise out there in Nebraska,’ he said.”

President Obama concluded the meeting, saying, “I know that times are tough and I can only imagine what many of you are going through, in terms of keeping things going in the midst of a very tough economic climate, but I guarantee you this: This administration is going to stand behind small businesses. You are our highest priority because we are confident that when you are succeeding, America succeeds.”

Tuition Is Up, Loans Are Shifting

To no one's surprise, tuition is up this year, with the largest percentage increases coming at public institutions that face significant cuts in state appropriations.

The College Board released its annual studies on tuition and financial aid trends Tuesday, and tried to put a non-alarmist spin on numbers that are scary to many students and their families. For instance, board officials noted that, after adjusting for inflation, the average net price paid for tuition and fees by public four-year college students is lower in 2009-10 than it was five years ago. But whether those figures will comfort parents writing checks -- or legislators hearing complaints from those parents -- is doubtful.

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Here are the overall figures for the 2009-10 academic year:

Tuition and Fees by Sector

Sector	2009-10 Tuition and Fees	One-Year Dollar Increase	One-Year % Increase	Previous Year's % Increase
Private, nonprofit four-year colleges	$26,273	$1,096	4.4%	5.9%
Public four-year colleges, in-state residents	$7,020	$429	6.5%	6.4%
Public four-year colleges, out-of-state residents	$18,548	$1,088	6.2%	5.2%
Community colleges	$2,544	$172	7.3%	4.7%
For-profit colleges	$14,174	$859	6.5%	4.5%

The changes show that the private colleges tended to moderate their tuition increases this year. Many private institutions were worried about sticker price scaring off families from even finding out about aid possibilities, so many of these colleges said that they were committed this year to minimizing increases.

The biggest percentage increase comes in the sector -- community colleges -- where charges are at the lowest levels. But as College Board officials noted, the national average figures for community colleges are skewed seriously by California, where 17 percent of all community college students are enrolled. Because California's economic free-fall has led to unusually steep increases in charges, and the base there was quite low to start, the national figures understate average costs and overstate the percentage increase for everyone outside California. For the rest of the country, average tuition and fees total $2,917 this year, 6.2 percent more than last year.

For residential students at four-year colleges, room and board are also key parts of the total bill. Public institutions reported an average of $8,193, up 5.4 percent. Private institutions reported average charges of $9,363, up 4.2 percent.

One of the recurring frustrations of educators about discussions of college costs is that so much public attention goes to the relatively small share of institutions (elite privates) where total costs now top $50,000. Even though many of these institutions are among the most generous in giving aid, the high sticker prices are terrifying to many. One set of data released by the College Board Tuesday shows the percentage of four-year college students enrolled in institutions with various levels of tuition charges. Nearly three-fourths of undergraduates at four-year public colleges and universities attend institutions where tuition and fees are less than $9,000.

Distribution of Four-Year College Students by Tuition and Fees Totals, and Sector

Price	Public	Private
$39,000 and up	0%	7%
$36,000 to $39,000	0%	13%
$33,000 to $36,000	<1%>	7%
$30,000 to $33,000	<1%>	9%
$27,000 to $30,000	<1%>	14%
$24,000 to $27,000	2%	12%
$21,000 to $24,000	2%	11%
$18,000 to $21,000	2%	8%
$15,000 to $18,000	3%	6%
$12,000 to $15,000	4%	4%
$9,000 to $12,000	13%	2%
$6,000 to $9,000	41%	2%
$3,000 to $6,000	32%	5%
Less than $3,000	1%	0%

"Net price," what students pay after they receive aid, is significantly lower than sticker price, reflecting the reality that at many institutions, relatively small percentages of students pay the advertised full price. The College Board data for this year show that students at private colleges receive an average of $14,400 in total grant aid and federal tax breaks, meaning that the net price of tuition is about $11,900 on average.

At public four-year colleges, average grant packages and tax breaks total about $5,400, reducing average net tuition and fees (for in-state residents) to about $1,600. At community colleges, the average grant and tax breaks total about $3,000, meaning that the funds cover tuition costs (on average) and leave about $500 for living expenses.

Much of the information about student aid provided in the report (which generally covers data a year older than the tuition data) illustrates the vast sums that the state and federal governments and institutions spend on assistance to enable students to enroll. But notable in the data is continued evidence that significant portions of student aid go not to those at the lowest levels of income levels, but to families with incomes in the six figures -- in many cases to attract students who might otherwise attend other institutions.

At public four-year institutions, for example, only about one-third of institutional aid was need-based. And among non-need based aid, the average award at public institutions was higher for those in the highest income brackets than the lowest, $730 vs. $570.

The annual release of the College Board data prompts most higher education associations to release statements regretting any increase in charges but praising their particular sector for hard work at minimizing tuition and providing student aid. One group in higher education on Tuesday issued a statement criticizing higher ed -- and drawing particular attention to how grant aid is used and the equity issues raised by providing so much to those who may not need it.

Lauren Asher, president of the Institute for College Access and Success, noted that two-thirds of public four-year colleges' aid is distributed without considering financial need. "Economic constraints can lead well-qualified students to lower their academic aspirations or give up on college altogether without adequate aid. It is particularly disturbing that public colleges are using such large share of their financial aid resources for so-called 'merit aid' in these tough times," she said.

In terms of student loans, the big shift in 2008-9 was away from non-federal loans. As credit markets tightened, borrowing dropped significantly and federal borrowing increased. The College Board estimates that non-federal education loans declined by almost 50 percent from 2007-8 to 2008-9, while total education borrowing increased 5 percent. In dollars, that means a federal loan increase of $15 billion and a non-federal loan decline of about $11 billion. While the loss of some lenders was unnerving to those who relied on them, many aid experts have for years been worrying about the growth in private loan volume, given that these loans give student borrowers far fewer protections than they receive in the federal program (and many students don't understand the differences between the programs).

Among other highlights of the report on student aid and loans:

• From 1998-99 through 2008-09, grant aid per undergraduate increased by an average of 3.4 percent, adjusted for inflation, while loans increased by 4 percent a year.
• About 8.5 million taxpayers benefited from education tax credits and deductions in 2008.
• While many policy discussions on federal aid policy focus on the value of the maximum Pell Grant, only about one fourth of Pell recipients in 2007-8 received the maximum grant. In 2008-9, the average Pell Grant was $2,973, while the maximum was $4,731.
• Of 2007-8 bachelor’s degree recipients, 34 percent graduated without student loan debt, while 10 percent had borrowed at least $40,000. At public colleges, those figures were 38 percent and 6 percent, respectively. At private colleges, only 4 percent had no debt, and 24 percent had at least $40,000 in debt.

USA Funds Prevents $23.7 Billion in Student Loan Defaults

Nation's leading student loan guarantor maintains 93 percent default aversion
success rate


USA Funds®, the nation's leading education loan guarantor, reports that it prevented $23.7 billion in defaults on more than 1.5 million past-due federal student loan accounts during the fiscal year ending Sept. 30. USA Funds' default prevention efforts were successful in averting default on more than 93 percent of loan accounts on which payments were reported by the lender as being 60 days or more past due.


USA Funds' default prevention efforts saved U.S. taxpayers an estimated $22.5 billion and student loan borrowers a projected $7.8 billion in additional costs associated with student loan default.


"The severe economic recession has generated a significant increase in student loan payment delinquencies," said Carl C. Dalstrom, USA Funds president and CEO. "Despite these challenges USA Funds has worked hard to maintain its default prevention success rate to spare taxpayers and student loan borrowers the expense of default."


As part of its default prevention efforts, USA Funds supports a team of 250 full-time professionals who work to contact student loan borrowers who have fallen behind in their payments and counsel them about the options for resolving their payment issues. Those options include scheduling a payment; flexible repayment plans, including income-based repayment options; and deferment and forbearance to temporarily postpone or reduce a borrower's monthly payments.


Last year this default prevention team made more than 85 million phone calls and sent 2.7 million pieces of correspondence to borrowers to assist them in resolving their student loan payment issues.


To promote successful student loan repayment, USA Funds supports additional services, including online borrower counseling programs, personal finance education for college students, as well as default prevention support to higher education institutions.


If, in spite of these efforts, borrowers default on their loans, federal law requires USA Funds to continue to pursue recovery of outstanding amounts owed taxpayers. During the past fiscal year, USA Funds recovered more than $1.2 billion from borrowers in default on their loans. This figure includes more than $459 million in rehabilitated loans, which permit borrowers who previously defaulted on their federal student loans to restore their accounts to repayment and improve their credit record.


Headquartered in Indianapolis, USA Funds is a nonprofit corporation that works to enhance postsecondary education preparedness, access and success by providing and supporting financial and other valued services.

Can’t afford your student loan payment? Maybe you should push pause

You have a $120,000 college degree and no job. That won’t stop your student loan bills from arriving. The grace period on student loans for the class of 2009 is about to expire. One option for anyone in a bind is deferment or forbearance, which allow for the postponement of payment under select circumstances. Here’s what you need to know.

Eligibility: Most people know federal loans can be deferred if you enter graduate school or the military. But you can also get a deferment for unemployment or economic hardship. To qualify for the latter, you can’t earn more than $16,245 a year. You’re eligible if you get public assistance or volunteer with the Peace Corps.

If you don’t qualify for a deferment, you might be able to postpone payments if you’re dealing with health issues or other circumstances. The government calls this a forbearance. Patricia Christel, a Sallie Mae spokeswoman, said the company is trying harder to work out payment arrangements rather than immediately using forbearance.

Economic hardship deferments are granted one year, while unemployment deferments are granted in six-month increments. You can reapply as needed for a total of three years each. Expect less leniency with forbearance on private loans.

Drawbacks: These measures should be used as a last resort, since interest continues accruing. One way to minimize the impact is to pay the interest costs while your loan is in deferment or forbearance. Otherwise, it will be added to the loan amount.

The exception is if you have a subsidized loan, which is when the government covers the interest while you’re in school. The government will also pick up interest during a deferment.

Other options: A relatively new option for federal loans is the Income-Based Repayment program. The program caps monthly payments at 15 percent of your earnings above a certain threshold, currently around $16,000. Those who earn less than that may not have to make monthly payments. Any debt remaining after 25 years is forgiven. You can also change payment plans with private loans. Or your lender may be willing to rework the terms of your loan.

Ignoring bills: The benefit of getting a deferment or forbearance is that your loan remains in good standing, and there is no impact on your credit report.

Otherwise, federal loans usually go into default if you don’t make payments for nine months. Sallie Mae says its private loans typically go into default after seven months. In default the entire balance of your loan becomes due. Your loan might be turned over to a collection agency, and you’ll be liable for the costs of collection. Your wages could also be garnished, and your tax refunds could be intercepted.

Student loans typically aren’t discharged with a bankruptcy. And once in default, you can’t get a deferment or forbearance. So don’t let it reach that point

Obama Extols Impact of Lower Mortgage Loan Rates

President Obama touted his administration's efforts to lower mortgage interest rates in a round-table discussion yesterday with Washington-area homeowners who have benefited from refinancing into more affordable loans

The discussion in the White House's Roosevelt Room included Gail Johnson, a registered nurse from the District who discovered in June that the payments for her adjustable-rate mortgage were about to increase dramatically. She saved $400 a month after refinancing.
It also included Woodbridge couple Pedro and Luz Cruz, who reduced their payments by $700 a month in February. That was enough to compensate for a cutback in Pedro Cruz's work hours.
Cruz said he had used up most of his savings to keep up with his mortgage payments before receiving a prized 4.75 percent interest rate and extending the terms of his loan to 20 years from 15 years. Without refinancing, Cruz said in an interview, he feared he would behind in his payments and possibly lose his home.

"The main message we want to send today is, is that the programs that have been put in place can help responsible folks who have been making their payments, who are not looking for a handout," Obama said, "but this allows them to make some changes that will leave money in their pockets and leave them more secure in their homes."
Obama pointed to a boom in refinancing that has accompanied lower mortgage rates, which were at an average 4.87 percent for a 30-year, fixed-rate loan this week, according to a survey by Freddie Mac. Refinancing applications have risen 88 percent since February, according to the Mortgage Bankers Association. And Fannie Mae has said that its refinancing volume jumped to $77 billion in March, twice the level of the previous month.
Obama's round table also included Jeffrey and Shelby Haggray, who refinanced the mortgage and home-equity line on their District home in January. Their monthly payments had risen by hundreds of dollars a month over time and became unaffordable, Jeffrey Haggray said. The new mortgage lowered their payments and helped extinguish several debts including a car loan, lowering their household expenses by about $1,200 a month. "Over the course of the 30 years, it will save us thousands of dollars annually," he said.
He said the new loan has an adjustable interest rate, which is at about 6 percent now, so the couple is likely to refinance again. "We're already anticipating refinancing in the future to secure an even better rate," he said.
Despite the uptick in refinancing, the president's housing program, launched last month, has yet to have a significant impact. Additionally, homeowners with jumbo mortgages -- loans higher than $729,750 in the Washington area and $417,000 in most of the rest of the country -- still struggle to take advantage of lower rates.
The program Obama launched last month allows borrowers with little or no equity to refinance as long as their mortgage is backed by Fannie Mae and Freddie Mac. Lenders began delivering refinanced loans under that program to Freddie Mac on April 1, and Fannie Mae received several thousand applications on Monday when its computer systems were updated for the program. But not all banks have implemented the program.
It is taking even longer for some lenders to launch the foreclosure-prevention part of Obama's housing program. Under that program, the government will pay lenders to reduce payments to affordable levels for troubled homeowners.
The administration is finalizing agreements with lenders and is still working on the details of the part of the effort that will deal with borrowers who have two loans.
"We are in the process of rolling out some additional phases to the program," Obama said.

Home Equity Loan

home equity loan is a fixed-rate loan with a fixed payment schedule based on the available equity in your home. You receive your loan money all at once and then pay it back in predictable, fixed monthly payments.
Rates on home equity loans run a few percentage points higher than a home equity line of credit (HELOC), but you have the added security knowing the rate and payment will always stay the same.
Home equity loans are usually tied to the Prime Rate published in The Wall Street Journal. The prime rate is also used to set credit card rates and auto loans.
At this writing the prime rate is 3.25 percent, which is down from 5.25 percent last year. Rates have been going down this past year because the economy is in a recession. Lower home equity loan rates are good news for home owners looking to tap into their equity.
Popular uses for home equity loans include:
Debt consolidation - Paying off higher interest credit card debt. Most credit card rates are in the double digits, whereas home equity loan rates are in the single digits as of April 8th, 2009.
Auto loan - Rates on home equity loans usually run lower than auto loans.
Home remodeling - Tapping into your home equity is a good source of funds for updating or adding an addition onto your home.
Another added benefit of a home equity loan is you can take a tax deduction for some or all of the interest you pay on the loan. Before you get a home equity loan consult your tax advisor to find out what the tax deductions might be for you.

Home Loan Education

Many say your home is the wisest investment you'll make. Historically, it's an asset you can count on during difficult times, and it's something you can pass on to your family.
Your home is a financial tool; you build equity as you pay your loan and as the value increases in favorable market conditions. Over the past 30 years, the median price of existing homes has increased an average of more than 6 percent every year. Home values nearly double every 10 years, according to historical data from the National Association of Realtors.1
Unlock Your Home's Equity With Wells Fargo Financial
Refinancing your home loan can help you free up your budget by taking advantage of the equity you've built. For many homeowners, it's a great way to restructure high-interest bills and thereby reduce your current monthly payments.
You could free up extra money each month to spend however you’d like. Or, you may choose to get cash back to pay for your immediate financing needs. With home loans and home equity lines of credit, the interest you pay may be tax deductible.2
What Is A Mortgage Loan?
A mortgage is a document that gives a lender an interest in real property. It provides the lender assurances that you’ll honor your promise to repay the money you’ve borrowed. Your promise to repay is found in the written instrument known as the note. Together, a mortgage and note are often simply referred to as a mortgage loan.
Mortgage loans come in many different shapes and sizes, all with their own advantages and disadvantages. It is important to learn about all the mortgage loan options available, so you can select the one that’s right for you, your financial situation and your personal goals.
Wells Fargo Financial offers two types of mortgage loans you can choose from when you’re ready to refinance.
Fixed-Rate Mortgage Loans
Fixed-rate mortgages offer predictable monthly payments throughout the life of the loan and give protection from rising interest rates. They work well for those with a fixed or slowly-increasing income and have a lower tolerance for financial risk. Fixed-rate mortgages are generally well-suited for borrowers who plan to stay in their home for a longer period of time. Fixed-rate mortgages are often considered more conservative and can give you the security of knowing your monthly principal and interest payment will not change over the life of your loan.
Adjustable-Rate Mortgage (ARM) Loans
ARMs have adjustable interest rate and payments; however, they remain the same for the first three years. The interest rate and payments could adjust every six months thereafter based on market conditions. ARMs may be more appropriate for borrowers who may want to sell or refinance early, can make larger monthly payments after the rate adjusts or are looking to buy a home when interest rates are relatively high.

loan

loan is a type of debt. This article focuses exclusively on monetary loans, although, in practice, any material object might be lent. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.
The borrower initially does receive an amount of money from the lender, which he has to pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A loan is of the annuity type if the amount paid periodically (for paying off and interest together) is fixed.
A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan.
Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding.
Legally, a loan is a contractual promise between two parties where one party, the creditor, agrees to provide a sum of money to a debtor, who promises to return the money to the creditor either in one lump sum or in parts over a fixed period in time. This agreement may include providing additional payments of rental charges on the funds advanced to the debtor for the time the funds are in the hands of the debtor (interest)

Types of loans

Secured
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan.
A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security — a lien on the title to the house — until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter — often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.
A type of loan especially used in limited partnership agreements is the recourse note.
A stock hedge loan is a special type of securities lending whereby the stock of a borrower is hedged by the lender against loss, using options or other hedging strategies to reduce lender risk.[citation needed]
A pre-settlement loan is a non-recourse debt, this is when a monetary loan is given based on the merit and awardable amount in a lawsuit case. Only certain types of lawsuit cases are eligible for a pre-settlement loan.[citation needed] This is considered a secured non-recourse debt due to the fact if the case reaches a verdict in favor of the defendant the loan is forgiven.

[edit] Unsecured
Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be available from financial institutions under many different guises or marketing packages:
credit card debt
personal loans
bank overdrafts
credit facilities or lines of credit
corporate bonds
The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.

[edit] Abuses in lending
Predatory lending is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the moneylender is not authorised, it could be considered a loan shark.
Usury is a different form of abuse, where the lender charges excessive interest. In different time periods and cultures the acceptable interest rate has varied, from no interest at all to unlimited interest rates. Credit card companies in some countries have been accused by consumer organisations of lending at usurious interest rates and making money out of frivolous "extra charges".
Abuses can also take place in the form of the customer abusing the lender by not repaying the loan or with an intent to defraud the lender.

United States taxes
Most of the basic rules governing how loans are handled for tax purposes in the United States are uncodified by both Congress (the Internal Revenue Code) and the Treasury Department (Treasury Regulations — another set of rules that interpret the Internal Revenue Code).Yet such rules are universally accepted.
1. A loan is not gross income to the borrower.Since the borrower has the obligation to repay the loan, the borrower has no accession to wealth.
2. The lender may not deduct the amount of the loan. The rationale here is that one asset (the cash) has been converted into a different asset (a promise of repayment). Deductions are not typically available when an outlay serves to create a new or different asset.
3. The amount paid to satisfy the loan obligation is not deductible by the borrower.
4. Repayment of the loan is not gross income to the lender. In effect, the promise of repayment is converted back to cash, with no accession to wealth by the lender.
5. Interest paid to the lender is included in the lender’s gross income.Interest paid represents compensation for the use of the lender’s money or property and thus represents profit or an accession to wealth to the lender. Interest income can be attributed to lenders even if the lender doesn’t charge a minimum amount of interest.
6. Interest paid to the lender may be deductible by the borrower. In general, interest paid in connection with the borrower’s business activity is deductible, while interest paid on personal loans are not deductible. The major exception here is interest paid on a home mortgage.

Income from discharge of indebtedness
Although a loan does not start out as income to the borrower, it becomes income to the borrower if the borrower is discharged of indebtedness. Thus, if a debt is discharged, then the borrower essentially has received income equal to the amount of the indebtedness. The Internal Revenue Code lists “Income from Discharge of Indebtedness” in Section 62(a)(12) as a source of gross income.
Example: X owes Y $50,000. If Y discharges the indebtedness, then X no longer owes Y $50,000. For purposes of calculating income, this should be treated the same way as if Y gave X $50,000.
For a more detailed description of the “discharge of indebtedness”, look at Section 108 (Cancellation of Debt (COD) Income) of the Internal Revenue Code.