Budgeting, Christian Credit Counselors, Credit Cards, Credit Counseling, Debit & Your Credit Score, Debt, Money Management, Saving

Payday Loans: Borrower Beware

Considering Payday Loans

Strapped for cash? Thinking of getting a payday loan? Think again! Payday-Loan

It may be tempting to get a payday advance to hold you over for a week or two until your next paycheck. What could be the harm? The industry claims they’re providing needed credit to consumers who aren’t able to qualify for conventional loans. The industry claims they are helping those hurting for cash. However, many financially wise see these businesses as predatory. They could even be comparable to old-fashioned usury, luring the borrower further down debts beaten path – dead ending at a financial crisis.

Understanding Payday Loans

Payday lending, or cash advance, is a practice of using a post-dated check or electronic account information as collateral for a short-term loan. Borrowers simply need identification, a bank account and income from a job or benefits, such as Social Security or disability.

Loans aren’t dependent upon the borrower’s credit history. By design, this loan process keeps borrowers in debt. No matter the claim, these businesses are not there to help people out of a bad financial situation. Generally, these lenders don’t accept partial payments. When you can’t pay it off on time and in full, you have to renew the loan.The interest and fees add up quick and become shackles, keeping you in the cycle of debt. According to the Center for Responsible Lending, 90% of payday loans go to repeat borrowers—five or more loans per year. They’ve also reported that these lenders receive $4.2 billion in fees from Americans each year.

The Ins and Outs of Payday Loans

Let’s say you need a $400 loan and plan to pay it back with your next paycheck. You are required to give a post-dated check for $460 and receive in return the $400 cash. The lender agrees to hold the check until your next payday. Then, when the loan is due, the borrower has the option to redeem the check by paying $460 in cash, or renew the loan, known as flipping. Flipping involves paying off the $460 by taking out a new $400 loan, or allowing the lender to cash the original check. The finance fee of the initial loan is, in this case, $60, or 390% APR! If the borrower decides to renew the loan three times, which is what most do, the finance charge will end up being $240 – just to borrow $400!!

You can see from this example why this practice is very dangerous and controversial. Critics argue that the lenders are exploiting those who are already desperate because of their current financial crisis. Borrowers get trapped in a cycle of debt. Payday lenders depend on this, and they love the repeat borrower. Because of the controversy, fifteen states have made payday lending illegal.

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    Car, Christian Credit Counselors, Credit, Credit Cards, Credit Counseling, Debit & Your Credit Score, Debt, Debt Settlement, Finance, Goals, Personal Goals, Saving

    High Car Payments Can Drive You Over the Edge

    car

    High Car Payments

    It is an all too common story. Many people struggling with debt can trace the beginning of their debt problems to a new car purchase – a big monthly payment, financed for too long. Some households even have two vehicles with large payments in the $400 to $500 range. With the budget maxed out, you can see how this type of financial burden could lead to a crisis. It’s easy to start falling behind on your budget and ultimately turning to credit cards, cash advances or loans to make up where your cash flow is lacking.

    Test Drive the Monthly Payment

    You may think you’re getting a steal of a deal on that new SUV or speedster. After all, the dealer said he’d take $2,000 off the sticker price – how could you pass that one up! You know the saying: Buyer beware. Be aware of what you can afford, and go into the purchase with a plan. Find a comfortable monthly payment that allows room in your budget for maintenance, and possible gas and insurance increases. You want a vehicle that improves your lifestyle, not one that enslaves you to a high monthly expense.

    Car Payment Facts

    • Monthly payment

    Financial experts recommend spending no more than 15% of your monthly take-home pay on a car payment. If your budget is tight, a more conservative figure like 8% would be appropriate. Even though a lender may approve you for more than you have budgeted, you don’t need to spend it. Consider the future effects of your decision and your other lifestyle and financial goals. Balance is key to budgeting.

    • Term of the loan

    According to the Federal Reserve, the average auto loan term has been creeping up over the years. In 1998, the typical car loan was a 4-year term, and now, lenders commonly offer 6-year terms. It certainly lowers your monthly payment and may help you reach the 8% you budgeted for. However, it doesn’t come free of charge. Obviously, you’ll pay a lot more than you signed for because of the increase in overall interest. And, if you want or need to sell, chances are you’ll owe more than what the car is worth. It takes longer to build equity with a long-term loan. Consider what you can afford monthly and base a purchase on a four year loan. This doesn’t have to mean less car. Shopping used cars in your price range can offer a fleet of options.

    • Interest

    Do some investigating and shop around for the best interest rate before negotiating a purchase with a dealer. Check other dealerships and financial institutions. Dealerships and financial institutions often run promotions, offering incentives like lower interest rates, zero down and cash back. Also, if you can afford to send in payments above your monthly payment, it will pay down your premium faster, save on the overall interest and shorten the life of your loan.

    • Pleasure

    Don’t buy a vehicle that you don’t like or are embarrassed to drive. It is important that you are happy with your purchase for more reasons than simply the cost. The best car deal is one that you can afford, meets your lifestyle needs and that you enjoy driving.

    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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      Budgeting, Christian Credit Counselors, Credit, Credit Cards, Credit Counseling, Debit & Your Credit Score, Debt, Debt Settlement, Finance, Goals, Money Management, Personal Goals, Saving

      Credit – The Four Most Common Forms

      What is credit? art-credit-cards-620x349

      Credit is defined in a couple of ways. One is the amount of money you are approved to borrow from a lending institution. With this approval comes an agreement to repay the charges, any additional fees that can or will be applied, and to abide by time restrictions.

      Credit can also be classified as your borrowing reputation. It paints a picture of your payment history and provides the lender with information regarding the likelihood of your repayment, in other words, your risk factor.

      Use of Credit

      When used responsibly, credit can be a convenient and effective financial tool. From a simple credit card to an auto or home loan, credit is the American way of life. Cashless transactions are soon becoming the way of the future, and credit cards are among the most prevalent. Understanding credit is important in order to use credit to your advantage and to prevent the common financial pitfall – debt.

      Four Common Forms of Credit

      Revolving Credit

      This form of credit allows you to borrow money up to a certain amount. The lending institution sets a credit limit, or the most you can borrow. In revolving credit, the borrower revolves the balance by rolling from month to month until it is paid in full. Interest charges typically occur for any revolving balance. As the money is paid back, the difference between the maximum credit limit and the current balance is available to be borrowed. This is the most common form of credit issued by credit cards, such as Visa, MasterCard, and store and gas cards. Credit cards are considered unsecure credit because there is no collateral securing the amount borrowed.

      Charge Cards

      This form of credit is often mistaken to be the same as a revolving credit card. However, the major difference between a credit card and a charge card is the credit card can carry a balance, whereas the charge card must be paid in full each month. If the balance is not paid on time and in full, penalty fees will be added. American Express is an example of a well-known charge card. This form of credit is advantageous against accumulating credit card debt.

      Installment Credit

      Installment credit involves a set amount borrowed, a set monthly payment and a set timeframe of repayment. Interest charges are pre-determined and calculated into the set monthly payments. Common forms of installment credit agreements are home mortgages and auto loans.

      Installment credit is also typically secure. Secure credit requires security for the lender. The borrower must provide collateral, something of value pledge in order to guarantee loan repayment. If the borrower fails to repay, or defaults on the loan, the lender may confiscate the collateral. A home is an example of collateral on a mortgage, and a vehicle on an auto loan. If the borrower were to default, the home or vehicle would be repossessed.

      Non-Installment or Service Credit

      This form of credit allows the borrower to pay for a service, membership, etc. at a later date. Generally, payment is due the month following the service, and unpaid balances will incur a fee, interest, and/or penalty charges. Continued non-payment will result in service cancellation and can be reported to the credit bureau, affecting your credit score. Service or non-installment agreements are very common in our everyday life. Cell phone, gas and electricity, water and garbage are all examples of service credit.

      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, Credit, Credit Cards, Credit Counseling, Debit & Your Credit Score, Debt, Debt Settlement, Finance, Goals, Investing, Money Management, Personal Goals, Saving

        Making Money Matters Manageable in Your Marriage

        Mutual Money Management moneymarriage

        Is it love or money that makes the world go round? It’s both…Make money work for your marriage, not against it.  You need tips on strengthening your marriage through mutual management of your money.  This can be done and can even be fun!  Keep reading to find out how.

        Financial Honesty

        Have open, honest and non-confrontational discussions about your finances.  Set aside a regular time to talk about where you are, where you want to be and how you will get there…together.

        Budgeting and Strategic Spending

        Make budgeting a positive and fun project, rather than a chore.  Don’t view a budget as a way to plan spending out of your life.  News Flash: While you are alive, you will never stop spending money.  And, the ultimate goal is not to spend less, but to spend strategically and find ways to increase your income to continue to meet your financial goals.  Plan in the things you want and enjoy and work together to achieve them.

        Money Habits

        Be aware of your spouses habits and tendencies when it comes to finances.  Don’t eye one another to find fault, but look for opportunities to step in and offer encouragement or a listening ear.  Fear can lead people to hold onto finances tightly, or spend impulsively.  Find ways to help build faith and trust into each other, and encouraging one another daily.

        Reward Sacrifice

        Regardless of the roles you’ve decided upon in the area of finance, you are both working towards your mutual goals.  Look for opportunities to reward your spouse for their hard work.  Have they been making personal sacrifices to stay within the budget?  Acknowledge that in a way that will tell him or her: Thank you. I love you. I’m proud of you. I’m glad we are on the same team.

        Learn from Financial Freedom

        Get around other couples who are walking in financial freedom and learn from them.  Look for couples who are seasoned and successful in the area of mutual finance, and allow them to mentor you as a couple. They have been where you are and have insight into your success.

        The Three L’s

        Love much. Live well. Laugh often.  Always remember the love you have for your spouse.  Keep that as a forethought, prizing it more highly than anything money can buy.

        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, Credit, Credit Cards, Credit Counseling, Debit & Your Credit Score, Debt, Debt Settlement, Finance, Money Management, Personal Goals, Saving

          Money, Love, and Marriage

          il_570xN.417833387_htxl

          Marriage and Money

          Roses are red; violets are blue. No matter the cost, I’ll stand by you…

          Have you had the talk yet?…You know, the one about money, spending habits, future goals, budgeting…?

          If you haven’t, it should be a top priority for your relationship.  If you have, have it again.  Discussing finances should be a regular and healthy part of your lifestyle together.  Being on the same page in this area will protect your marriage (or future marriage) against the most common relational enemy.  You’ve heard the statistics.  Money and finances are the number one reason couples argue and ultimately divorce. Don’t let your marriage become a number.

          Make Finances a Joint Venture

          Regardless of you or your spouses accounting or investment skill set, planning out your financial future and implementing those strategies should be a mutual effort.  Coming together to decide matters in the area of finance will allow you both to be on the same page number…of the same book.  Couples drift away from each other day by day when they are not planning their future together.

          Relationships and matters of finance should not be left to one person alone, even if he or she is “better at it.”  This disconnects one partner from a key area and anytime one of the partners is left out of a major area of the relationship, it will lead to the two of them planning and living, by default, two separate lives.  We, as humans, are meant to be in relationship with each other, and drifters will eventually wash up on someone else’s shore.  So, make it a priority to come together and stay together in the area of financial planning.

          Tip for Financial Success

          Use this time of planning as an opportunity to build closeness into your relationship.

          Respect and Love

          The two greatest relational needs. Anytime you are communicating with your spouse, you are communicating either respect and love or their opposites.  Since the topic of finance can stir one or both of you up, be especially careful to communicate this respect, love and trust through words, tone and body language.

          Listen and Speak Lovingly

          Listen for his or her dreams, desires, goals, reasons.  Your partner has spending habits, as we all do.  Find out the why behind the what.  This will help you to understand your partner better and offer support when needed.

          Be a voice of encouragement. Speak highly of and to your spouse.  Build him or her up with your words. Remind your better-half how capable, intelligent and valued he or she is.  You have the power to build up or to tear down, and it starts with a simple comment.

          Give Financial Grace

          If this is a new process for your relationship, a new way of doing things financially.  Give yourselves grace to get through the transition. Old habits may die hard, but building new and healthy patterns into your relationship is definitely worth the initial investment!

          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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              Budgeting, Money Management

              Money Saving – Top Ten Tips

              Setting a Spending Plan

              At the beginning of each year, many Americans include “get out of debt” on their list of New Year’s resolutions and then seem to live under the illusion that they will be able to wish this into reality since a spending plan is never created or written down. The most important part of taking control of your finances is starting somewhere and starting now.

              The only way you will get out of debt is if you stop unneeded spending and start allocating the money you are saving toward your debts.

              Money Saving Tips

                1. Stop eating out –  Even if you only eat out once a week, if you spend $25 each time you eat out, you’d be saving $100 per month—so there you go, that’s already $100 you are saving.
                2. Stop spending at Starbucks –  Let’s low ball this and say you spend $3 each weekday on coffee, meaning you spend $60 per month. Now you’re at $160 saved.
                3. Use coupons wherever you go – Coupons.com has a plethora of coupons that you can print out. No one wants to be dubbed coupon-crazed, but one or two dollars here and there will definitely add up. Just make sure you aren’t buying something just because you have a coupon for it (and you don’t need it).
                4. Cut out luxuries – If you’re serious about getting out of debt, you can find alternatives to these luxuries.
                  • Ladies— getting your hair done; either go natural or do it yourself. Color out of a box will save you at the very least $50. This also goes for getting your nails done.
                  • This one is for guys and girls—cancel your gym membership and go hiking instead. You’ll save $20-$30 per month and you’ll get some fresh air in the meantime.
                  • If you can think of some other luxuries you can live without, like massages or having a monthly cleaner for your house, you’ll notice that you’ll save at least $100 on those alone.
                  • Now for something a little harder to cope with for some—cable. Cancel cable and watch shows for free online at hulu.com. Most shows are available online and you can watch them at anytime. This will save you at least $30 per month.
                5. Downsize your living space. You won’t have to stay in this situation forever, but this could be an easy way to save a few hundred dollars a month.
                6. Downsize your car. Sell your car and buy a less expensive car if you would be able to make a significant amount on the sale. If your family has two cars, try downsizing to one and sell the other. It may not be very convenient, but if you are serious about getting out of debt as soon as possible, these are some options that could help you right now
                7. Sell some of your items on Amazon or eBay.
                8. Work overtime or ask for a raise (only if you deserve it). This also means it’s important to make yourself an asset at your company–do your job.
                9. Take side-jobs if you can. Learn a new skill or use a skill you already have to make some extra cash outside of your current job.
                10. Rent out an extra room in your house if you have one. Advertise this availability amongst your friends and family and post it at church. You’ll need to choose a renter wisely since they will be living under your roof.

              Have more tips to add? Share them in the comments below!

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                Holiday Tips, Money Management, Saving

                Budgeting for a Festive St. Patrick’s Day

                Happy St. Patrick’s Day!

                Another holiday means more temptation to go out and spend money to celebrate. Whether you are Irish or not, people like to take the opportunity today to wear green, eat some corned beef, and wash it down with an Irish brew. There are many other ways to celebrate today as well. Here are some budgeting ideas for you to save some green this St. Patrick’s Day.

                1. Check out a local parade and get into the Irish spirit. This is great for the whole family and will most likely be free of charge.
                2. If you want to decorate a little bit around the house, don’t go to expensive craft stores. Opt to go to the Dollar Store to find great St. Patty’s decorations, and save some green.
                3. If you wish to celebrate by eating some traditional Irish food, instead of going out to a restaurant, find an easy recipe online and try to make it yourself. Visit Allrecipes.com or foodnetwork.com and filter the search to meet your needs. If you are planning on making tonight a date night, cook the meal together and have fun with it!
                4. Rent a movie inspired by the Irish. 411mania.com offers a list of the top 10 movies to watch on St. Patrick’s Day. Make an Irish coffee and bundle up on the couch for a relaxing evening.
                5. If you do not want to celebrate St. Patrick’s Day, that is okay! Today is the start of the NCAA’s March Madness. So kick back and watch some basketball. You can still enjoy an Irish brew if you like, I won’t tell.

                I hope you all have a Happy St. Patrick’s Day! Most importantly, even if you are feeling the luck of the Irish, be safe.

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                  Taxes

                  The Social Security Tax Break and its Advantages

                  The Social Security Tax Break Facts

                  In December President Obama signed a Social Security tax break into law. This was good news, because it reduced the amount of Social Security tax taken out of workers’ pay, meaning an increase in a worker’s take-home pay. This doesn’t apply to everyone, and is only for one year, but by dropping the Social Security tax rate to 4.2% instead of the original 6.2% people below the pay cap, $106, 800, can see some extra money coming in.

                  For more information about tax breaks read Carla Fried’s article here.

                  By now, workers’ who are affected by this should have seen the adjustment in their pay. For example, for every $1,000 you earn in pay, instead of taking out $62 (6.2%), only $42 (4.2%) will be taken out. This tax break was meant to increase consumer spending but if you do notice this change, put the extra money to good use.

                  Paying Bills

                  First and foremost, use it to help pay off credit card debt or your current bills. Everyone is suffering from the economy, and with this little help from the tax break, people should use this extra money to their advantage. Pay off bills in full if you can, don’t settle for the minimum. Or if you are in debt, put as much money as you can toward that so you can pay it off sooner.

                  Increase Your Savings

                  Another way to utilize your additional income is to save it. When people receive a bonus or gift of cash, they usually spend it because they figure it is money they wouldn’t usually have. So don’t think of this tax break as a bonus or gift. Think of it as a start to a new savings account, or add it to your current savings account. Save it, and pretend like you never saw it. Don’t be tempted to spend, because you never know when you will need it for a rainy day.

                  These are the two most important ways to help in securing your financial future. I hope you take them into consideration and put that extra money to good use.

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