Car, Christian Credit Counselors, Consumer, Finance

Car Buying – Four Tips to do it without Regrets

1. Don’t trade in your car

It is a known fact that the dealership is only interested in making money off of you.  So when you decide to succumb to the convenience of trading in your car, know that you will get a lot less than if you had sold it.

2. They will try to up-sell you

The dealer will offer many deluxe options for your new (or leased) car, don’t fall for it! Especially if it is a leased car–you will be customizing their car that must be returned at the end of the contract, and with no refund for the customizations. If you want something added to the car, shop around for the best deal.

3. Get the proper insurance

.Worst case scenario: you get in a car accident directly after driving off the dealership lot.   You paid $35,000 for the car but as soon as you drove away its worth depreciated to $20,000.  The insurance company will only pay you what it’s worth, but you still owe the total of $35,000.  For scenarios like these, there is Guaranteed Auto Protection or GAP insurance.  This means the difference will be covered and you won’t be stuck with a $15,000 bill and no car.

4. Buy a car that makes sense

. Many people shopping for a car look for something they like now, but to get the most out of a car you must see yourself being able to drive it for the next 10 years.  Think of the repairs it will need and whether it will be worth buying the extended warranty. Whatever car you decide on, make sure it will fit your needs for years to come.

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    Credit Cards

    The Credit Card Act – Facts You need to Know

    The Credit Card Act

    The Credit Card Act was signed into law in 2009 under President Barack Obama. The act set up several provisions aimed at limiting how credit card companies can charge consumers. In July 2011, the Consumer Financial Protection Bureau (CFPB) opened as a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

    The Card Act helped curb the practices that made banks wealthy and consumers were going to be satisfied. But when it was put into practice, there were still complaints. Especially from stay-at-home moms and dads; under the current provisions, they cannot obtain a credit card because creditors only take individual income into consideration, not household income. Complaints such as these needed a venue to be expressed and Tuesday, the CFPB unveiled its online credit card complaint database for all consumers.

    “By making our data publicly available, initially in the area of credit cards, we hope to improve the transparency and efficiency of this essential consumer market,” Richard Cordray, director of the CFPB, said in a statement.

    How the Consumer Financial Protection Bureau Works

    The function of the bureau is to acquire all consumer complaints and create new regulations from the information gathered. Complaints received are put in categories and from there, companies can respond to a consumer in one of four ways. Consumers can expect to receive a refund, an explanation, a correction or change in account terms, or have the case closed. Companies have up to 15 days to respond and a total of 60 days to close a complaint.

    With this new database, complaints made are now viewable by everyone. According to the Government Executive website, the bureau received 45,630 complaints between July 21, 2011, and June 1, 2012. With this new information readily available, consumers can view which companies to steer clear of.

    Shame on Capital One

    Currently, the bank topping the list with the most complaints is Capital One. This move by the CFPB could lead credit card companies to change their policies, benefitting consumers. The next step will be to see the new regulations added to the Credit Card Act in response to complaints received.

    Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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      Christian Credit Counselors, Debit & Your Credit Score, Money Management

      Credit Reports – The Knowledge You need to Know

      Improving Your Credit Score

      The best way to improve your credit score is to improve your knowledge on credit reports.  There are three major credit bureaus that put together your credit report: Equifax, TransUnion, and Experian.  Although the information they gather is yours, you do not own it, these agencies own your information.  They have collected the information and they give you the right to view it.  You can view your credit report for free on www.anualcreditreport.com.  You can view one or all three, depending what you need it for.  Your credit score will be between 500 and 840, anything over 700 is a good score.

      How your score is tabulated is unknown, but what makes up your credit score is no secret.  Some of the items that are calculated into your credit score are employment, department store credit card(s), credit card(s), installment loan(s), collection item(s), and inquiries.

      Department Store Credit Card Accounts

      For department store credit card accounts they look at highest credit allowed, balance, and date opened.  The rating scale on this account is R1 to R9 with R9 being the worst.  The R stands for revolving, and it tracks how well you pay.  A similar scale is used for installment loans, I1 to I9, where I9 means the account is in collection.  On this scale, I7 means they took back the collateral.  For example, on a car loan I7 means the car was repossessed.  All accounts, department store credit cards, credit cards, installment loans, etc., have a twenty four month window.  If you fall behind and make a late payment on any account, you must make twenty three on time payments to get the late payment to drop off.  Inquiries made on your account have a very small effect.  If you are shopping for a new car, the inquiries made by the dealerships have no significant effect on your score.  However, if you have fifteen inquiries in one month it will cause a big impact because it appears you are desperate for credit and this raises a big flag.

      This information is sold to banks by the credit bureaus; this is how they make money.  With this information banks look at who is a credit risk, will pay over a long period of time, and earn them the most money.  For example, banks look at bankruptcy filers to offer them a credit card with high interest.  Also, the bank is attracted to those who recently purchased a home because most of them will make big purchases like furniture, home improvements, etc.

      Managing Your Money

      There are some simple rules that will help you better manage your money and increase your credit score.  Prioritize your bills, and pay your bills immediately.  As stated by the President and CEO of Christian Credit Counselors, Greg McTaggart, “the longer you have that credit card, the more they make off of you.”  Think of your purchases.  Do not just focus on the present, focus on what you will need 4 to 8 years from now.  Poor planning leads to impulse buying, pre-schedule bills, balance check book, and have cushion for savings and emergencies.  To avoid fraudulent activity on your credit report, do not give out your information generously.  Check your report annually and dispute any irregularities with the credit bureau.

      Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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        Kids & Money, Loans, Student Loans

        Student Loan Forgiveness Options

        Student Loan Forgiveness

        After my last post about Student Loans, I received a question asking for more in depth information about student loan forgiveness.  I researched and found the following information.  These are the careers that can possibly eliminate your student loans.  If you decide to partake in one of these programs, make sure beforehand that you can use it towards loan forgiveness.

        Military Forgiveness

        Students who are in the Army National Guard may be eligible for their Student Loan Repayment Program, which offers up to $10,000.

        Teaching Forgiveness

        Students who become full-time teachers in an elementary or secondary school that serves students from low-income families can have a portion of their Perkins Loan forgiven under The National Defense Education Act. This program forgives 15% of your loan for the first and second years of teaching service, 20% for the third and fourth, and 30% for the fifth. Contact your school district’s administration to see which schools are eligible.

        See also the US Department of Education’s pages on Cancellation/Deferment Options for Teachers and Cancellation for Childcare Providers, as well as the Teacher Loan Forgiveness Form.

        The US Department of Education maintains a database of low-income schools eligible for teacher loan cancellation for Perkins and Stafford loans.

        Legal and Medical Studies

        Many law schools forgive the loans of students who serve in public interest or non-profit positions. For more information, contact Equal Justice Works.

        The US Department of Health and Human Services offers loan forgiveness programs through the National Health Service Corps and the Nursing Education Loan Repayment Program. These programs offer loan forgiveness to physicians and registered nurses who agree to practice for a set number of years in areas that lack adequate medical care (including remote and/or economically depressed regions).

        The US National Institutes of Health’s NIH Loan Repayment Programs repays up to $35,000/year of student loan debt for US citizens who are conducting clinical medical research.

        The US Department of Agriculture’s Veterinary Medicine Loan Repayment Program (VMLRP) offers loan forgiveness of $25,000 per year for three years for veterinarians who commit to work in a veterinary shortage area for three years. The application deadline is June 30.

        Federal Agencies

        The Federal Student Loan Repayment Program allows federal agencies to establish loan forgiveness programs to help recruit and retain employees. This is technically a loan repayment program and not a loan forgiveness program, as the agencies make payments directly to the loan holder and the payments represent taxable income to the employee. The agencies can repay up to $10,000 in Federal student loans per employee per calendar year, with a cumulative maximum of $60,000 per employee. Employees must agree to work for the agency for at least 3 years.

        Public Service Loan Forgiveness Program

        This program lets borrowers off the hook from their remaining student loan debt after 10 years of full-time employment in public service.

        To be in the program, borrowers must be employed by the federal, state or local government; or any nonprofit, 501(c)(3) organization; or work full-time for AmeriCorps or Peace Corps.

        To qualify for loan forgiveness, the borrower must have made 120 payments during a decade as part of the Department of Education’s Direct Loan program.

        But, if the payments fall short or the borrower stops working full time, then there is the same risk of being kicked out of the program, with no loan forgiveness.

        I hope this information helps you further understand your options for eliminating student loans.

        Information found on finaid.org and money.cnn.com

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          Budgeting, Kids & Money, Loans, Saving, Student Loans

          Student Loans: A Necessary Evil?

          Student Loans and Debt

          More than ever before, a college degree has become a necessity.  But many parents and students wonder how they are going to pay for college.  With a high number of students graduating college with student loans, the average debt will likely hit a record $28,700, projected by Mark Kantrowitz, publisher of Finaid.org.  It is important to have the necessary information on student loans before signing on the dotted line.

          Government and Private Student Loans

          There are two types of student loans – government and private.  Government student loans have flexibility with programs to help students pay back the loan because they can change the rules whenever.  This can work towards the advantage of the borrower but can also hurt the borrower.  If the student will take out multiple loans, a government loan is better because it provides continuity.

          Private loans are provided by traditional banks and they do not have as many programs to help students repay their loans.  These loans come with a low interest rate but can hurt the borrower because it accumulates over time.  Also, most of these loans include a clause that does not allow the signer to file for bankruptcy.  After graduation, you get a six-month grace period during which you don’t have to pay back your loans giving you time to find a job.

          Financial Respoinsibility

          If you decide you need a student loan, you must decide who will be signing for it.  There are two options, the student, who must be at least eighteen years old, or a (step) parent.  If a step parent or parent decides to sign he or she is now responsible for the full payment of this loan.

          For example, if a step parent signs and afterwards gets a divorce, the step parent is still held responsible for the full payment.  Also, if a student signs for a three year loan for $30,000 but he or she drops out of school after the first semester he or she must still pay the full amount of the loan.  The result is parent and child is equally stuck.

          Budgeting for the Loan

          Ideally, the student should work while going to school and open a savings account.  This way the student will have a cushion for after graduation.  This cushion should include living money and money to make loan payments.  Proper budgeting and planning when a student begins school will be more beneficial than starting to plan after graduation.

          However, if there was no proper budgeting or planning there are ways you can receive help.  Keep in communication with the lender, there are consolidation programs and government programs that can help.  Consolidation programs are for students who took out multiple student loans throughout their school career.  For example, John has four $100 monthly payments to different banks.

          Loans and Credit Consolidation

          With consolidation, his overall payments will be lowered and he will have the benefit of simplicity which will help him track the progress of his student loans.  With government loans, a student can work for a nonprofit organization or public agency for ten years which will reduce the amount owed on the account.  Also, if you are willing to commit a year volunteering for AmeriCorps, you get $4,725 to pay off your college debts, and a stipend up to $7,400.  For more information visit their website.

          In addition you can work for 27 months with the Peace Corps.  If you travel with the Peace Corps, you will get to defer most of your student loans until after you leave the program, and may get some of your loans reduced by as much as 70%. Visit their website for more details.  If you decide one of these programs is beneficial to you, make sure you have it approved before hand, know the rules, and always get it in writing.

          Other options for repayment include: pay in full, standard payment, graduated payment, income-based payment, and long-term payment.  In the majority of cases paying in full is never an option.  Standard payments are monthly payments with interest over a period of 10 years.  It gives you a great interest rate but high monthly payments.  For graduated payments, the payments will start low but increase every couple years for a 10-30 year period.  With income-based payment, your monthly payments are decided proportionate to your income and you get 15 years to pay it off.  The long-term payment method is a monthly payment plus interest for 30 years.

          Regardless of whether you decide student loans are for you or not, you now have the knowledge to make the right decision.

          Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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