Guest's article: Debt Consolidation Loans

Pros & Cons of Debt Consolidation Loans

Before you look into the pros and cons of a debt consolidation loan, know that your financial situation is unique from everyone else & what is beneficial for one person may not be beneficial for you. You need to find a debt consolidation loan that is right for you. Before applying, weigh up the pros and cons of using these loans. How much debt you have, the type of debt it is and the overwhelming need to be out of debt (or not) is what will help you determine the best option to take. The good news is debt consolidation loans are one of the best ways to position for financial success in the long term.

Benefits of Debt Consolidation Loans
Depending on the type of loan you get, the benefits may vary. However here are some aspects to consider:
• One easy manageable repayment. People who have serious financial issues usually have multiple debts, which mean that each month you have many debts to remember to pay. The more debts you have the more likely you are to miss a repayment. With one payment it is far easier to manage your debt repayments.
• Getting a lower interest rate can save you thousands of dollars. Some home equity loans, or other secured loans can charge a rate that is half of what a typical credit card company charges. In the long term, you could be saving thousands of dollars with just a few percentages of difference in interest.
• You may qualify for lower monthly payments on your debt consolidation loan. Consolidating all your debts into one loan may result in a lower monthly repayment due to the lower interest rate. You can take advantage of this by making extra repayments each month and therefore saving even more money in the long term.

These benefits make debt consolidation worth considering, however if mismanaged there can be downsides to debt consolidation.

Draw Backs
Debt consolidation loans can have a few cons, too. Consider how these would affect you.
• It is easy to get into even more debt. As you now have a lower monthly repayment and no longer paying multiple debts, it easy for you to go back to bad spending habits. Debt consolidation along with other debt solutions needs to be used with better money management & responsibility.
• You could lose assets. If you get a home equity loan to consolidate debt and end up in financial trouble again, your house could be in jeopardy. Because the house is backing up the value of the money you owe, creditors can repossess the home if you default on the loan.
• It might take you longer to pay off the debt. Depending on the terms you set up for the debt consolidation loan you applied for, you might end up repaying that debt for a longer period. For example, a home equity loan could be paid off over ten, fifteen or more years, which would extend the debt out. Depending on the situation, you could be paying more in interest because of the extended term of the loan. A good way to avoid this problem, though, is to make extra repayments.
You should take the cons of a debt consolidation loan seriously before applying.

What Debt Solution is right for you?
Are debt consolidation loans the right option for you? For many people, they do help to get out of debt quickly, but are they right for you? Consider your financial situation, your likelihood of getting into debt again and the benefits of having just one loan to pay. Take steps to protect yourself too, such as repaying debts ahead of schedule and keeping interest rates low. Doing these things can protect you in the long term.

#102- Auditing operating cost- understanding cost drivers

Auditing operating costs is always not an easy task. A good audit procedure requires auditor to develp a thorough understanding of the nature of the cost,determination of fixed / variable costs, understand the cost drivers of the costs (especially for variable costs),understand the linkage between the costs and the revenues.

Significant assertion of auditing an operating cost is to ensure that the cost recorded is complete (i.e. completeness).

First of all, we need to understand the nature of the costs (i.e. what type of costs, when was the costs incurred, is the individual amount incurred significant, etc). After develop the understanding of the nature of the costs, we need to understand whether the costs is a fixed costs, or variable costs.

Then, we need to understand the cost driver of the costs. This procedure is especially important for variable costs component. Auditor need to understand what are the factors that drive the cost (for instance, transportation cost could be significant to a trading house). The cost driver for transportation cost is the level of business activities / number of deliveries completed

Auditor can analyze the company's record on number of deliverties completed for the year, and compare our expectation to the cost variation. To illustrate, while number of deliveries go up, we will expect total transportation cost to increase. A good understanding of the cost drivers allow the auditor to have complete understanding of the costs/ and develop a good audit approach to analyze the cost variation.

#101- Fraud cases in Singapore- China Hongxing and Hongwei Technologies

Accounting irregularities are detected in two S-chip companies in Singapore, namely: China Hongxing Sport and Hongwei Technologies. Coincidentally, the financial auditor of these two companies is Ernst & Young LLP.It's noted that the auditor is facing difficulty in ascertaining certain assets, liabilites, and expenses. Details are as below:

Hongwei Technologies- the auditor is facing difficulty in confirming the cash and bank balances

China Hongxing- the auditor noted irregularities in the cash and bank balances, accounts receivables, accounts payables, and other expenses

The board of directors have engaged independent investigator in resolving the issues highlighted by Ernst & Young LLP.