?Foreclosure Auctions: A Bargain Hunter's Dream

By Michael Geoffrey

Buying a home at a foreclosure auction could be perfect for you if you are interested in purchasing a home for the lowest price possible. The courts will determine the price of foreclosure homes, which is most commonly below the market valued price of the home. If the lending agency that forecloses on the home requests that they do so, the court can use three different appraisals to determine the value of foreclosed property. These appraisals can be appealed by the lender, however.

However, once the value has been determined, the foreclosure auctions will be advertised for several weeks prior to the date of the auction and most states stipulate the house cannot be sold for less that two-third of the appraised value. If you attend foreclosure auctions do not expect to find a huge crowd of people vying for the right to own a cheap house.

Foreclosure auctions tend to be very simple events and the only people in attendance are often the lender who started the foreclosure process and one or two people who are thinking about buying the property. A foreclosure auction where lots of people attend and more than two or three separate bids are made would be a rare occurrence.

Getting Ready to Purchase a Foreclosure Home

Winning bidders at foreclosure auctions are expected to provide payment of 10 percent of the purchase price at the end of the auction. The payment has to be in some for of earnest money such as cash, certified cashier check or money order.

Most auctions will not accept these payments by credit card or personal check. The house will be resold immediately if the winning bidder is unable to make the 10% payment in an accepted form at the end of the auction.

Winning bidders are responsible for obtaining mortgage loans for the balance of the foreclosure auctions' price within an established time limit, normally 30 days, and if unable to find appropriate funding, will lose not only their right to buy the house, but also the 10 percent deposit they put down on the house. Most people to buy a house through foreclosure auctions will have their financing in place before placing a bid.

When a home has to be sold a second time because of the first winner's inability to pay, the first winning bidder may have to pay any difference in price between their winning bid and the second one, besides losing out on their 10% payment. Remember that winning a bid of a foreclosure home is like entering into a contract and the auction sales are final.

About the Author:

Know how credit card reduction services can affect your credit score? There are some things you need to know before you use these debt reduction services. Get the inside scoop on what you need to know on the Debt Smackdown website at http://www.debtsmackdown.com

What Varieties of Options are Out There in Student Loans?

By William Blake

Whether you are in your first 4 years of college or are attending graduate school you are paying several times more for your college education than your parents and grandparents paid. This increase makes it difficult for students. But there are programs out there that give much needed assistance.

Initially a college student may avail himself of many different programs to pay for college. There are student loans, grants and scholarships and some students must take advantage of all three.

Stafford loans are very popular and there are two types. The unsubsidized loan is a bit more expensive because you are responsible for accrued interest from the very beginning of the loan. Though they cost more, these types of Stafford loans are easier to qualify for. A subsidized loan in which the government makes your interest payments until 6 months after you finish college are of course less expensive because you save on all that interest. However, these loans have stricter requirements, offered only to low-income families.

A detailed breakdown of what can be borrowed by who is available at: http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp or http://www.salliemae.com/get_student_loan/find_student_loan/undergrad_student_loan/federal_student_loans/stafford_loans/

Graduate students have to work a bit harder for financial aid. Graduate school is more expensive and less scholarship opportunities are available. Typically a graduate student has to work as a research assistant or other employment related to their major to pay their tuition.

Recently a new option has become available to graduate students: PLUS loans. Though the acronym stands for Parent Loans for Undergraduate Students, they are now an option for many grad students. In the undergraduate case, parents are the borrower and are responsible for repayment. In the case of grad students, they become the responsible party.

The Pluses of a PLUS loan

First, they're available. Since they're based on credit quality, not need-based, most borrowers can qualify. Relatively few grad students have had time to get into the credit binds that working adults often fall into. As a result, though their history may be sparse, they usually have few bad marks on their credit report. That makes the decision easier for college financial aid officials, who determine eligibility.

About the Author:

Before you consider consolidation as a way to get out of debt, you need to consider the debt consolidation loan consequences. It isn't always the best solution to consolidate your debt. Find out why on the Inside Debt Consolidation website at http://www.insidedebtconsolidation.com

Tips for Planning for Your Retirement

By Michael Geoffrey

Retirement is a huge milestone in a person's life. Retirement planning is crucial because it will have such an impact on your future. It will not only impact you financially, but in every other way. Because it is so important many questions arise as to how to be best prepared for this life altering time.

Informed and advance retirement planning is crucial if you want to be ready, and so that you can actually enjoy your years of retirement and live comfortably. One of the first and most important things that you need to know when it comes to retirement planning is that you want to start planning as early as possible. Even if you start in your early twenties, which may sound ridiculous to some people, you will be doing yourself a huge favor in the end.

Plan your retirement with breathing room. Don't lock yourself into a fixed budget that will only sustain you for 15 or 20 years. Some people enjoy 25 or 30 years of retirement - some even more. It is best to be prepared and plan for a long life of retirement.

A Smart Choice

The best idea is to create a financial plan for yourself, one that is created with a certified financial planner who will be able to ensure that you take all necessary factors and issues into consideration and that the results you are coming up with are accurate.

These projections will give you a clear picture of where you will be financially when you are ready to retire. That will be a good guide for you in deciding how much you want to save each month and year towards your retirement.

You may feel that you have very little to put away each month for your retirement. But it is amazing how those small amounts grow over time. Also, there may be months when you have a little extra besides your designated amount for retirement account. Padding that account a little here and there when possible will really pay off down the road.

There is no way you can go wrong saving for you future. The more money you save the more comfortable your retirement years will be. You will not have to sacrifice your lifestyle in the least when you make the transition from worker to retiree.

About the Author:

Is secured debt consolidation a good way to get your debt paid off? Find out more about how it works and whether it's a good choice or not on the Debt Smackdown website.

Coffee Shop Rumors Rampant About Reverse Mortgage

By Smagmatti Vanrock

You've seen the spokesmen on TV and youre getting solicitations in the mail about reverse mortgages. Maybe you're well versed in them and know your stuff.

That puts you in the minority. Most seniors have very little idea of what a reverse mortgage actually is.

Reverse mortgages are being talked about by people who dont always know the truth, and too often seniors make unwise decisions based on what they hear without a second thought.

In the reverse mortgage industry, there were some individuals who were manipulated.

If a person had money questions or a financial dilemma, they would turn to their financial adviser or planner, who would then refer them to a certain reverse mortgage lender that they knew and could vouch for.

When it came time to close, the statement showed a consulting fee was owed to the financial adviser, in the amount of 10 grand.

Since the estate planner was paid from the referral, they were not always just serving the needs of the client.

Thanks to current laws (such as those under the Real Estate Settlement Procedures Act) and senior advocacy groups, the kind of example above is no longer possible. Being taken advantage of is difficult with so many people on the lookout for you.

Don't get me wrong; a lender can still egg you on to choose a reverse mortgage, even when it may not be the wisest choice.

Does that mean a lender wont try to talk you into a reverse mortgage even though it may not be the best financial choice at the time? No.

But even this has its checks and balances. All reverse mortgage borrowers are required to counsel with an approved HUD reverse mortgage counselor prior to moving forward with a reverse mortgage.

This adviser will tell you the honest truth because there is nothing in it for them. They are there to guide, and if your outlook isn't the best based on what you've chosen to do, they will shout it from the rooftops.

You may be considering or your know someone who is considering a reverse mortgage. Everyone seems to have an opinion. Some are based upon the facts, but most are total hogwash. Get your facts straight before you form your opinion.

About the Author:

Perhaps youve heard some rumors yourself. Download a tremendous California reverse mortgage guide here. For supplemental information and the best responses to top questions about the reverse mortgage in California are here.

Today's best mortgages: How to Qualify

By Mortgage Wizard

Equity With the majority of the country in a declining real estate market the amount of equity you have in your home plays a major factor in your loan qualification. Homes that are similar in size to your home and are in the same vicinity determine the current value of your home. What have the homes that have recently sold in your area gone for? Most homes are losing value due to the rise in the current foreclosure market. If the bank had to foreclose on a property they need to be able to sell it for what the market supports so this is how they value it. (Bank foreclosures are not in the interest of the bank.)

If you are looking to purchase a home or refinance your existing home into a lower rate or different loan program the amount of equity you have in the property is one determining factor for what loan programs you qualify for and if you can get the best current market rate.

Income "Can they afford the new payment if we give them a loan?" This is the first question the bank is going to ask themselves before they agree to extend you a mortgage. You need to be able to document your current income and your income for the two years prior to show you have a history of sustained or increased income. The banks look at your current debt to judge your ability to handle your loan payment. If your loan is under $417,000 they want to make sure that your income is double your monthly debts. (excluding utilities and other miscellaneous debts that do not get reported to the credit agencies. If your loan amount is over $417,000 the same rules apply but they look to see that your debt is at or below 45% of your income.

Assets When determining if a borrower has the capacity to be able to repay a mortgage loan on time liquid assets are taken into account. Most banks like to see that anyone they lend to has a between 2 and 6 months of mortgage payments saved up somewhere in accounts they have access to. This provides a buffer for stability in case someone is between jobs or an unforeseen bill comes up one month. Lenders like to know that someone has enough money saved to be able to overcome unforeseeable events such as paying for car repairs in the event of an accident. Without any assets saved up a person could be forced to reallocate money that typically is used for their mortgage payment for something else.

Credit Score Assuming all your other qualifying factors are in line 720 seems to be the magic number to qualify for the lowest mortgage rates available. Most consumer credit reports are only from one credit bureau but this is not how lenders gauge your credit. They look at the three major bureaus (Experian, Equifax, and Transunion). Some creditors only report to one bureau so the scores at each are usually different. As a standard practice all lenders look at all three scores and take your middle score. If you have an 810 at one bureau, 725 at another, and a 650 at the third you will qualify your rate off the 725 score. Your credit score is a way to determine your willingness and ability to repay your debts. If you pay you will be rewarded with better financing options.

Now that you know what will be looked at when you apply for a loan and if you meet all this criteria you can begin your search to find the best mortgage companies that deliver what they promise. Your home financing is one of the largest investments you will make in your entire life. If you have proven that you will honor your commitments you should get a great deal!

About the Author:

The Mortgage Wizard's goal is to help inform consumers about mortgage financing. Here is a resource to see daily mortgage rates online that are below the national averages and geared towards qualified borrowers.

What Does It Mean to Be a Private Money Lender?

By Tomasheus Privetsky

Although there are lots of people out there who have the potential to become successful real estate investors, very few attempt to. Most shrug off this avenue to riches because they don't have the money to invest in a property and they feel that it would be too difficult to secure financing in the form of a bank loan or loan from some other hard money lender. Little do they know that there is an easier and better way for a real estate investor to finance his properties - through private money lenders.

Private Money Lenders Explained

A private money loan is one that is financed through an individual who has spare money to lend and who wants to make a small profit off of that money. This is the most flexible financing option for real estate investors because you get to borrow money from a regular individual, just like you and me, instead of a bank or other lending institution - which can be very impersonal and formal. Banks and lending institutions have rules and regulations that they must follow when deciding who to lend money to, but private money lenders do not.

Why Private Money Loans Are a Better Way to Finance Your Properties

Because private money lenders don't have to follow the same strict rules and regulations imposed by the government and board of directors in the same way banks and other traditional lending institutions do, they can choose whom they invest with. That means they may be very willing to lend you money if they see you as someone they want to invest with, regardless of a substandard credit rating or other financial missteps.

Benefits of Using a Private Money Lender

As an investor, you can appeal and make your case to a private money lender, explain to them why they should invest in your property, and allow them to come to their own conclusion. But the benefits of a private money loan do not end there. If the lender is interested in your offer, the two of you can then work out a financing and repayment arrangement that benefits both parties. You and the lender can both state your expectations and agree on an interest rate and payment schedule that makes both of you happy.

A private money loan is a short-term loan and therefore, the private money lender may be willing to wait until after you have refurbished and sold the house to receive any payments. This lets you focus on fixing and selling the property instead of having to worry about paying for a property that hasn't actually made you any money yet.

The Downside of Traditional Hard Money Loans

While private money loans benefit both borrower and lender, bank loans usually give the benefit to the bank. They get to set the standards on their side, and if you are lucky enough to get a loan through them, they also get to set the interest rate and determine what other fees might be. In general, you're not going to be allowed to make payment arrangements or other special arrangements, but will have to stick to the schedule the bank sets. This means that even if your credit history is perfect, and even if you can receive financing from a traditional lender, using a private money lender may still offer you more advantages.

Summarizing the Benefits of Working with a Private Money Lender

Private Lender can lend freely and does not have to abide by tough rules and restrictions. Allows real estate investors with problematic personal credit histories to secure financing for their properties.

Opens the lines of communication between lender and borrower. Borrower can negotiate an interest rate or flat fee that is almost guaranteed to save money over a traditional loan.

As the borrower, you can negotiate with the private money lender to customize payment arrangements that will be beneficial to you both. If the lender is amenable, you may be able to suspend payments altogether until you've "flipped" your property.

No financial application is required. Borrower can appeal directly to the private money lender and convince him to take a chance on the property in question.

Private Lender will see borrower as a real person with a real goal, instead of just a paper application that must pass ridged guidelines.

All of these benefits make private money loans the most flexible funding option for real estate investors. A private money loan allows you a variety of options and opens the door for many real estate investors who would otherwise be turned down by a traditional lender.

About the Author:

You don't need an above average credit score or a large down payment to get financing for your real estate deals. Simply look for a Private Money Lender in your area.

Getting Fast Cash Personal Loans

By Dave Davis

Now that the holidays are over, you may need to get your hands on some extra funds. The last two months have probably been quite expensive and your bills might be stacking up. If this is the case for you, consider a fast cash personal loan.

There are multiple methods that can be used to secure fast cash. The first is by taking out a signature loan from a bank. You will have to have good credit to use this method, but your interest rate will be quite reasonable.

The interest rate will probably be quite high though, especially if you do have poor credit. The good news is that they are one of the quickest ways to get money. The turnaround time between application, approval and receiving the money is usually within a day. Most places will approve your loan within a couple of hours. Once the loan is approved, they can directly deposit the full loan amount into your savings or checking account within 24 hours.

Another way you can get your hands on some money is by taking out a secured loan with collateral. Cars, homes, and insurance policies are commonly used for collateral for this type of loan. Since the bank is taking on less risk with this type of loan, they will usually offer you a great interest rate.

Even though offering your car title as collateral gives you a larger loan amount, if you cant repay it on time and in full, you will lose your car. Only you can decide if the risk is worth it. And the best risk, is one that you are certain you can repay.

If you need a longer term for your loan, providing the bank with collateral will really reduce your interest and payments. Since the bank has less risk, they will give you a better deal. If you can pay the loan off quickly it would be better to not tie up your assets.

With these kinds of loans, you get the money in your hands quickly, which for most people is a good thing. But if it ends up costing you more than you can afford to pay the loan back over time, then perhaps what you think you need, is not worth it.

About the Author:

Dave helps people to learn about different personal loans that can be used to secure funds. high risk personal loans are easy to get and are available for different levels of credit.

Home Budget Planning: Tips About Avoiding Credit Card Debt

By Jenni Snook

Credit card debt is not something that is unavoidable, and despite it being the cause of over a million bankruptcies every year, it is something that can be successfully avoiding with some simply home budget planning on your behalf. This is because many apply for and obtain credit cards without fully understanding the contract. Moreover, people with credit cards go on to spend like crazy without keeping track of expenses, miss payments, and get the shock of their lives when they have to pay annual fees, and as a result their debt increases enormously.

Many people are quick to blame the credit card companies for their dire situations, but it's about time that people take responsibility for their own actions.

One piece of careless spending with the plastic does not normally accumulate a large amount of debt. What makes people rack up a large amount of debt is not documenting each additional purchase they make with their card. As a result, everyone is capable of getting themselves out of a dire debt situation. All you have to do is simply spend less than what you bring in. With this in mind you can begin what is a long-term solution to gradually reduce your debt.

You will find it more effective to use your won't power than your willpower in this case. Work out what you need and rationalise it against your income and if you can give yourself a small luxury every now and then, it will help to stay on target. It's likely that you will have to focus a fair bit on debt reduction and elimination, but it will happen and the speed at which it occurs may surprise you.

At the beginning, it will not be easy to keep to your debt reduction plan, but keep in mind that at the end of it all, it will be worth the effort.

Even after successfully reducing your debt, it's important that your old habits don't re-appear. The only way you can end up being the winner in this situation is by focussing all your energy on sticking to your new spending habits. It's a bit like dieting, it's hard in the beginning learning the new habits, but the result will be well worth it when you find your finances healthy again.

You can resolve a lot of your financial problems in your life with some simple Home Budget Planning and by not spending money you don't have is a great start!

About the Author:

Jenni Snook is the chief columnist of http://www.HomeBudgetPlanning.com, a website focused on giving people important yet very usable advice on how home budget planning can boost your quality of life.

Credit Repair Help - It's Not As Hard As You Think!

By Mark Alison

It's really hard to go and live in this world with bad credit. People everywhere are in debt and in need of help. What are you supposed to do when you want to make that big purchase and the loan gets denied?

It's not that hard to get your credit repaired. All it takes is a little time and a little effort on your part. You must be diligent with your spending and take a few simple steps. Repairing your credit will not happen overnight.

First thing to do, must do is create a budget. This will allow you to know how much money each month you can spend on your debts. It's best if you document for one month your spending habits. You never know how much you spend eating out and buying fancy coffees.

We need to then know what's in your credit report. There are three credit card companies, Equifax, Experian, and Trans Union. There are many places to go that will get you a report from all three. These reports will list everything you owe to the people who have reported it.

Contacting the creditors is the next step. You need to speak to them to offer a payment plan. They will be willing to work with you because they want the money owed to them. If you offer to pay off the full balance and settle right then and there, usually they will give you a discount and ask you only pay the principal. Any agreements should be mailed to you in writing.

Now you need to close out and pay your credit card debts. Destroy the cards and start paying them off. The best idea is to close all the accounts you have except your three oldest ones. You see, credit scores are based on the account history as well as other factors. Even if these lines of credit are opened, you don't need to use them unless it's an emergency.

You must make all your payments on time and avoid bankruptcy. It's a good idea to join a credit union as well. They offer a better chance of giving you a consolidation loan if you want to go that route.

About the Author:

Click Here For More Simple Steps To Credit Repair!

Can You Get a Mortgage Loan with Bad Credit?

By Mark Dawson

Do you know your credit score? If you know the number and it isn't that high, you may be asking yourself if you will still qualify for a mortgage. It won't be easy to get a mortgage with bad credit, but it still should be possible.

One of the things that a loan advisor will look at, when considering taking or rejecting a mortgage application, is your credit score. If you know this is going to be a problem, then look at getting this improved as soon as possible. Such as, limit the number of credit cards you have, debt and the number of credit checks done on you and late payments. The better the credit score, the better the interest rate, but even though your credit maybe bad, it does not necessarily mean you will be declined a mortgage.

If there is no hope for your credit, you need to look for other ways to buy a house, because a mortgage probably won't ever be granted to you. You can thank these mortgage rules on the downturn of the economy, which is making it difficult for those with bad credit to get a mortgage. One way that those with terrible credit can get approved is to ask someone to cosign the mortgage papers with them. This is risky for the cosigner, because they are putting their credit on the line for you.

If you have managed to improve your credit over the last six months i.e. paying bills on time and reducing your debt, you could attempt to get a mortgage. Compare banks to check who is offering the best rates and to see who can you offer you the best deal possible. You may not get the best rate, however you can always remortgage in a few years time, if you continue to improve your credit score.

You're probably going to be left with paying a higher interest if you have a poor credit rating. The mortgage company may well insist that you get insurance, if you don't have funds to cover the down payment. This could increase the cost considerably, so you need to ensure you budget for everything and know exactly how much you will be paying each month. If you default on a mortgage, it is very unlikely that you would ever get another mortgage in the future.

Is it possible to get a mortgage if your credit is so bad that you had to file for bankruptcy or if you've defaulted on a mortgage in the past? Well, right now it is going to be very iffy whether or not you can get a mortgage, if you really want one the best bet is to shop around. You might have to pay a lot in interest for a bank to trust you, and it just may not be worth it.

To get the best deals, make sure you manage your outgoings and keep your credit scoring good!

About the Author:

Mark Dawson writes for the the Loan Arrangers where you can compare loans and apply online for homeowner loans, and bad credit loans.

Identity Theft Insurance: Will It Protect Your Identity?

By Harvey Warmuth

With over 79 million cases of identity theft in the last year, it is one of the most rapid growing crimes in the US. Identity theft costs consumers billions of dollars each year, and is very expensive to the individual that becomes a victim of this crime.

Identity theft is often looked at as an individual's problem, though it ultimately affects each and every one of us. We all suffer when identity theft occurs. Identity theft is a type of consumer fraud that occurs when someone steals or assumes another person's identity for the purpose of financial gain, ultimately through some sort of criminal activity.

Thieves will use an identity theft victim's sensitive personal financial data to commit the crime. The data they will use includes credit card numbers, bank account information, and Social Security Numbers. Through the unauthorized use of such information, the thieves intend to get a financial gain through illegal means.

The crime of identity theft is relatively new, and is becoming very popular with thieves. You must be very aware of how you handle your financial information so that you do not become a victim of identity theft. Also, you have to be extremely careful with your online activities, including the use of email, as this is a very popular way for a thief to steal your identity.

There are companies that offer identity protection solutions which compliment the steps that you should be personally taking to secure your identity. Due to the fact that the crime of identity theft is on the rise, you need to take some serious measures in the fight against identity theft. One of the best steps to take is to make use of one of these identity theft services.

The biggest step you can take when it comes to identity theft protection is to put a fraud alert on your credit reports. This is something that you can do yourself, or you can use the services of an identity theft protection company to do this for you. The latter choice is a great one for convenience sake, as you will need to renew the fraud alert every 90 days, so sometimes it is best to have a service do this for you.

Identity theft protection is becoming more and more important, as identity theft itself becomes a bigger and bigger issue. Identity theft protection services are rapidly becoming the number one way to protect yourself against identity theft.

An identity theft protection solution not only guards against identity theft, but will help you recover if you do become a victim of identity theft. Every passing day increases your chance of having your identity stolen, so you need to be doing all that you can to protect your identity.

Identity theft is the fastest-growing white-collar crime in the US, and it often has devastating effects on those that become its victim. Take the necessary steps today to ensure that you do not become identity thefts next victim.

About the Author:

Author Harvey Warmuth is concerned about the increase in the rate of identity theft and greatly believes in the use of protection against identity theft. To get more information regarding how identity theft shield can protect your good name, visit his website.

What to do with my 401K when I switch jobs or retire?

By Tony Bellows

You will hardly ever find a person that stays with the same company of employment for the entirety of their career. In fact, more than likely a person will change jobs and companies several times during their life. Since the majority of companies offer a 401k retirement package, these people that change companies may end up holding multiple 401k accounts under their name.

What should you do with your 401k fund after switching companies? You might look into a 401k rollover to IRA.

Rolling your 401k fund into an IRA can be beneficial in multiple ways. I'll briefly discuss a few of them.

To begin, if a person changes companies 3 times, they will own 4 401k policies (3 from the previous employers and 1 from the new one). Having multiple accounts can be difficult to manage. You would have to follow paper on all 4 accounts instead of just 1. And most people will get discouraged by the excess paperwork and stop taking the needed interest in their portfolio. This can create huge problems down the road.

By rolling your 401k into an IRA fund after each job change, you can consolidate that paperwork and make your retirement much easier to manage. And you can continue to add your 401k plans to a single IRA as often as necessary. That same person that changed jobs 3 times in their career would have now only 1 401k and 1 IRA. That would be worlds easier to handle.

Also, Leaving your retirement plans in the hands of your previous employers is a bit risky. If the company goes bankrupt you lose everything. Transferring and consolidating those accounts all into 1 IRA with a separate financial institution is much less risky.

And the best part of it is that you will put yourself in control of your own future. And who better to handle it that the person that cares most about it?

But I still recommend that you take advantage of the 401k options your current employer offers. Strive to contribute the maximum amount that they will match because doubling your investment is always a good deal. Then if you are able to contribute more than the maximum, put the extra in your IRA.

About the Author:

Learn more about a 401k rollover to ira

Want To Know What Penny Stocks To Buy? Look Inside....

By Sam Lockwood

Penny stocks have been around since the 19th century, and they've also been a big part of the American investment system ever since they developed. This era is actually the one that gave these stocks their names, as modern penny stocks cost far more than a penny. They average between ten cents and five dollars apiece in modern money. Why don't we take a look at some of the risks you'll encounter when dealing in penny stocks, then ways they can help you turn a profit.

Penny stocks are share offerings made by companies that are either too new or too small to be listed in the major exchanges. These have a potential to grow a lot for a relatively small initial investment, but they can also be part of unpleasant pump and dump schemes. Like anything else in the over the counter (OTC) market, the buyer should beware.

Choosing penny stocks in a reasonable fashion means having the business model of the company selling them independently appraised. This is like buying shares in any other company that's being publicly traded. It's important to understand the company's business model, what they're doing, who's competing with them, what they make and what products are being offered.

One of the most appealing things about penny stocks is that the majority of businesses offering them are quite simply put together. One typical type is that of a mining company, which will only be profitable when the price of the material it mines reaches a certain level. There are also some oil exploration stocks which use this kind of valuation.

Penny stocks are rated as a high risk vehicle by the Securities and Exchange Commission. Some of the risks involved include incomplete or indirect reporting of finances, fraud, and limited liquidity. People playing using a day trading strategy, sudden demand on penny stocks can create wide ranging volatility, which also makes it hard to short sell them.

The reporting guidelines on penny stocks are a lot less strict than they are for stocks listed on the national exchanges. In fact, some stocks will just delist for a few days. In the investment type known as the Pink Sheets, there's almost no regulatory requirement on penny stocks, no minimum accounting standards or reporting guidelines.

Due to this lack of standardization, this kind of stock is extremely vulnerable to being manipulated and even used for fraud. People posing as independent observers will use their influence to run up penny stock prices, then they'll sell and delist the stock. This is the classic scam referred to as pump and dump.

That doesn't mean you should be scared away from these kinds of stocks completely. There are plenty of reasonable startup companies, and they need somewhere to start. If you're able to pick a winner out of them, you'll get a significant return.

If you're able to spot a company with lots of promise, you could get an enormous payday. Even if you lose four out of five of your picks, the single winner you get will give you enough to forget about the other losses.

About the Author:

To Find more penny stocks tips have a look at our website - we set it up for people who want to make money! Click Here for a proven penny stock strategy you can start using today!