What I Can Teach You About Services

Benefits of Debt Management Programs

Which among the many debt relief options do your think is best for you? We all have different financial situations, but if it is debt relief we are talking about then debt management programs will prove to have more advantages that any other option for debt relief.

You can get a certified credit counselor who can review your debts and give you the best advice on which debt solution is best for your situation. The good thing is that these days everything can be done the comfort of your home. You can have it with an online search and a little verification to validate their claims.

The main benefit of a debt management programs is the reduction of monthly debt payments. This could run between thirty to fifty percent reduction or cutback. In this program, all your current debt will be consolidated and will be charged a lot interest rate of six to ten percent. Your debt payment can be drastically reduced by this debt management programs so that your monthly payments will be more manageable.

The other nice thing about consolidating your debt with a debt management program is you only have to make one payment on all the debts included in your program. You make one payment each month instead of worrying over multiples bills and their due dates. With this set up, you can even apply for the autopay system where the lender will simply automatically charge your bank account once a month on a specified date.

Spontaneous payments can automatically eliminate penalties and if your credit counselor negotiates with your creditors they can waive penalty interest rates and penalty fees applied to your account.

Although there is only one monthly payment for all your debts included in your debt management program, if you want to get out of debt faster than you can reenroll in a debt management program. So even if you pay less each month, the reduction in interest payment allows you to pay off your debts sooner because you pay less in accrued interest.

We all have different financial situation but those who have enrolled in debt management program can once again rebuild their credit rating since the debts entered in the program will no longer be penalized on your credit report.

The best thing about enrolling in a debt management program is getting peace of mind that you have avoided facing bigger financial problems because you finally have control over your debt.

So in order to be successful you have a personal credit counselor who will not just be an administrator, but they can help your with financial education and the tools you need to succeed.

Source: debt management

Payday Loans – What You Can Do About Them

“Loan-Sharking” equates to usury, which is charging interest above an established legal rate. “Pay Advance”, “Check Advance”, “Deferred Deposit”, “Payday Loan”, or any other label like it is lower than loan-sharking. It is a legal, multi-billion dollar industry that you do not want to get lured into.

As a young military in Korea years ago, I remember none of us had much money. Gambling and “other pastimes” took the little we had before month’s end– but there were always the “friendly”, black-market loan sharks offering 50% interest loans very close by. Guess who was also 5 feet away from the pay station on pay day… the Korean version of Don Corleone, of course.

It has not changed much over the years or location or title. The Payday or cash advance lender still preys on the financially struggling individual. The pay back still revolves around payday. The rates are still exorbitant. What has changed is that it is now legal, the “APR” exceeds 350%, and the client is not restricted to the military. The prey are now thousands of struggling, hard working folks who are having a tough time making it to the end of the month. Many toil on very low paying jobs, have serious medical debt, gambling addictions or worse. But they all are collecting pay stubs and maintain a checking account.

So the hard working, debt-burdened consumer sees a warm, friendly, office with an innocent name such as Pay Advance. “Is this an opportunity or what?” Sure it is… for the lender. Here’s a scenario from real life copied from e-mail sent to me.

“I owe nine check advance companies (companies that will let you write a check for cash with a fee included) a total of $3000. I also have approximately 15 checks I have bounced as a result of trying to pay off these check advance companies. The total amount due of all the checks with fees is approximately $1500. I have people calling me all the time and they are also calling my boss at work. They tell me I can not make partial payments on my checks and almost all of them want their money within ten days or they will turn it over to the county courts office.”

Not An Isolated Case

Check advance operations are springing up across the nation and may be one of the fastest growing industries we have. The former owners of Blockbuster Videos sold their successful corporation to reinvest in their first pay advance operation. That was 3 years ago. There are now 1500 offices and that is just one conglomerate. Business growth like this does not occur without phenomenal profit potential. I would consider a 200%, 300%, or 400% APR a sizable potential profit, wouldn’t you?

But another e-mail referred to an article in a Memphis newspaper. The author of the article queried one of the owners/managers of a check advance business and pointed out that high fees [$20 for 7 days on $300] worked out to be a 360% APR. The payday loan owner said, “It did not matter what the yearly rate was if you only needed the loan for a short period of time.”

The owner is right- or is he? We have already addressed the fact that the tendency is to use such a system again and again. If I pay a loan back and then take out another, and then another, and then another, I bet I can make a strong case for 360% APR.

But it is not an APR.

It is a fee. The Glossary of Political Economy Terms from Auburn University defines Interest rate as “The price(s) of obtaining the temporary use of money that one borrows from someone else who actually owns it, normally expressed as a percentage of the amount borrowed per year.” A fee, on the other hand, is “a charge for services rendered”.

Therefore, it is not an “excessive APR” because it’s a fee and any comparison to usury is comparing apples and oranges. So how could it possibly be loan-sharking? DUH. What is wrong with me. But here is another little tidbit. Collectors cannot take partial payment for advance check pay back because advance pay is not considered a loan. Advance check operations fall under non-sufficient fund (NSF) laws, which means they can demand the local district attorney’s office to act as their collection agency.

No wonder these operations are flourishing. They have it all going for them.

Authoritative Words From Others.

The Consumer Federation of America calls it legal loan sharking:

“The Consumer Federation of America describes them [Payday Loans] best: ‘Payday loans are single-payment, short-term loans based on personal checks held for future deposit or on electronic access to personal checking accounts. In a typical transaction, a consumer writes a check for $117.65 to borrow $100 cash, with the total amount due by next payday or in up to 14 days. The $17.65 finance charge computes to a 459% annual percentage rate.’”

And the very respected American Association of Retired Persons has this to say:

“typically involve small amounts of money lent for a short period at very high interest rates. The customer — usually a low-income individual who is excluded from mainstream lending sources…. Many borrowers end up renewing the loan over and over again because they cannot pay off the loan and still have insufficient funds to cover the check when the loan period ends. In the example above [charge $15 for a $100 loan for two weeks], they would pay another $15 each time they extended the loan, receiving no additional money in return. While the effective annual interest rate depends on the fee and how many times the borrower pays an additional fee to renew the loan, estimated annual percentage rates around the country range from 700% to 2,000%.”

Alternatives to Payday Loans

FTC and Consumer Federation of America (among others) suggest some of these alternatives to Payday Loans:

1. Make a realistic budget, and figure your monthly and daily expenditures.

a. Avoid unnecessary purchases – even small daily items.

b. Build some savings – even small deposits can help – to avoid borrowing for emergencies, unexpected expenses or other items.

c. Putting the amount of the fee that would be paid on a typical $300 payday loan in a savings account for six months can give you a buffer against financial emergencies.

2. Find out if you have, or can get, overdraft protection on your checking account. If you are regularly using most or all of the funds in your account and if you make a mistake in your checking (or savings) account ledger or records, overdraft protection can help protect you from further credit problems. Find out the terms of overdraft protection.

3. If you need help working out a debt repayment plan with creditors or developing a budget, contact your local consumer credit counseling service. There are non-profit groups in every state that offer credit guidance to consumers. These services are available at little or no cost. Also, check with your employer, credit union or housing authority for no- or low-cost credit counseling programs.

4. If you decide you must use a payday loan, borrow only as much as you can afford to pay with your next paycheck and still have enough to make it to the next payday.

5. Ask your creditors for more time to pay your bills. Find out what they will charge for that service – as a late charge, an additional finance charge or a higher interest rate.

6. Shop for the lowest cost credit available from cash advances on credit cards, small loans from a credit union or a small loan company.

7. Consider asking your employer for an advance or turning to friends or family when an emergency arises. Put in writing a good faith agreement to pay them back by a certain date.

8. Some community-based organizations may make small business loans to individuals.

9. Ask for more time to pay utility bills.

Breaking Out of the Downward Spiral

Please understand, I am not advocating not paying your just debt. But the following are ideas presented to me by others who have been caught up in the payday loan spider’s web. They are offered to your for your prudent decisions.

1. “Came to a point that I could not pay them. I called them and told them. They asked what I could send them and placed an amount. One even told me if I could not make a payment, just to call.”

2. “Criminal bad-check laws do not usually include post-dated checks. Furthermore these can be discharged in bankruptcy. At the time you write these checks, the lender knows they are bad because they are post dated. They therefore are not generally considered “bad checks” but “bad debts”, and ordinary debt laws apply. So, at least from a legal point of view, skipping out on the payday lender is no worse than skipping out on any other lender.”

3. “I would close the checking account. Open a new one and then start paying them with money orders. This might be a temporary option so that you can get caught up on your mortgage. I would hate for you to get even further behind just to pay the Check for Cash people.”

4. “Stop payment on the outstanding checks they already have prior to closing the account to de-fuse the possibility of getting stuck in the ChexSystem mess.”

5. “I was once caught up in the payday advance situation. What I ended up putting a stop payment on the checks (2) and then making payment arrangements with the company. Even though they weren’t too happy, at least I was making a dent in the debt and not incurring any more charges. Although one of the places wrote it off to a collection company, they still accepted getting $25 a month each. Then I could use my paychecks to pay my bills, instead of the fees they charge you. While it may not be the perfect solution, at least you will break the payday cycle. Hope this helps. Also when I made the payments I used money orders.”

6. “Check the laws for your state regarding the Check for Cash places. I know in Florida you can contact the lender and tell them you will not be able to pay the check. They give you 90 days to pay the check but you must enter into a debt counseling class. Maybe your state has a law like this.”

7. “I wrote to the payday companies, certified mail (even if they are in your hometown, I’d do this because it legally proves you contacted them). I told them that due to unforeseen circumstances, I could no longer pay them. I offered a payment plan that was more than fair, even including their interest fees. A few of them refused, but they ended up having to accept what I could pay, and those that refused ended up not even getting the interest.”

8. “Stop paying them. I believe that all states now have laws prohibiting them from prosecuting you. If you’ve written the letter telling them they can’t pay, and then stop payment on the check, you will have protected yourself somewhat if they chose to go after a civil judgment (they won’t). Then, make payments YOU can afford…DO NOT let them set the terms. Once you get your mortgage, electric and phone caught up, increase the payments to the payday loan people significantly until you can pay them off, but don’t increase them to the point you can’t pay them.”

9. “The best thing to do is to contact the payday lender as soon as you find out that you cannot pay them (due to your employer changing paydays, or other reasons). IT really helps if you can provide documentation or a contact (such as your boss, or payroll company), to back up your story. Most payday lenders are flexible, and would rather get paid late, then not at all. Again, think of yourself as a lender, and your brother-in-law that owed you money came to you and explained that his baby unexpectedly got sick. You are more inclined to believe him if he shows you bill from the doctor with a date on it that is after you loaned him the money, right?”

10. “Section 3-104(2)(b) of the UCC, defines a check as ‘a draft drawn on a bank and payable on demand.’ A postdated check, since it is not payable on demand, does not satisfy this demand. Consequently, it has generally been held by most states that the giving of a post-dated check does not constitute a present fraud nor is it within the scope of the bad check laws.”

What can we as a society do?

Consumer Federation of America offers major insight to answer this question in the following statement.

“Failing an outright ban on cash advance loans, this type of loan should be explicitly regulated through state small loan laws requiring licensing or registration with state banking officials. Disclosures must comply with the federal Truth in Lending Act.”

1. There should be an absolute cap on effective annual interest rates. States should limit the size of these loans, set a minimum term that realistically permits the loan to be repaid, require written contracts, forbid multiple loans and roll-over of cash advances into new loans, and prohibit lenders from threatening borrowers with bad check laws if they fall behind on payments.

2. Lenders should not be permitted to bring criminal prosecution for failure to pay cash advance loans on checks and these loans should be treated as unsecured debt for purposes of bankruptcy. States should collect industry-wide data to monitor the business.

3. The federal government should close any loopholes that permit national banks to make payday loans in any state that prohibits state check cashiers or state chartered financial institutions from making this type of loan. The Comptroller should require banks to comply with the consumer protections in the states where they do business.

Personal Loan – A Useful Tool For Your Personal Needs

There is no such thing as a universal best loan deal… Instead, there are different types of personal loans for people with different financial circumstances that can be categorised as follows:

  • Urgent monetary needs like surgery, extended treatments, late education fees, debt consolidation and more
  • Routine monetary needs related to home, business, health, education, wedding, vacation, holiday season, vehicle, debts, bad credit and more
  • Lifestyle luxuries like spa treatment, flying lessons, cosmetic surgery, gambling and more
    Based on reason, some of the most popular personal loan varieties are homeowner loans or home improvement loans, debt consolidation loans, holiday loans, car loans, wedding loans, education loans and bad credit loans. One may even find a personal loan for business purposes.
    Personal loans have the following sub-types:
  • Secured personal loans for homeowners and property owners
  • Unsecured personal loans for tenants, homeowners, property owners and students

    According to recent statistics, more and more people in the UK are availing secured personal loans, as they are much cheaper than other loan options like unsecured personal loans and payment cards (credit cards, store cards, charge cards and overdrafts).

    A secured personal loan is availed by offering collateral against the loan amount. Presence of collateral makes it easy for the lender to part with his money and facilitate the borrower with quick attention, high credit limit, competitive low APR, flexible payback terms and negotiable loan conditions. Hence, opting for a secured personal loan makes sense when the monetary requirement is big or credit record is poor or an unsecured loan application has been denied.

    A secured loan deal has one risk (collateral seizure) – in case of repeated defaults or non-payment, the lender gets the authority to sell the pledged asset to recover his investment. And, one limitation (slow approval process) – the loan application can only be approved after time-consuming property evaluation along with other credibility factors.

    However, it makes no sense risking a property for something that could be solved by another mean like unsecured personal loan. The most outstanding features of an unsecured personal loan are: no collateral (no deposit against the loan amount), less paperwork (no red tape), quick service (fast loan processing) and no immediate risks in the event of repeated defaults or non-repayment. Hence, opting for an unsecured personal loan makes sense when:

  • The loan seeker is incapable of offering collateral, as he does not own one (tenant) or is living with his parents (student)
  • The loan seeker is unwilling to get into property related legalities or risk his property for a small amount (homeowner or property owner)
  • The monetary requirement is small and offering collateral may not be necessary (routine lifestyle needs)
  • The need is urgent and getting into lengthy property evaluation procedures may not be feasible (urgent needs)

    An unsecured personal loan too has certain limitations – limited amount, high APR, fixed payback terms, non-negotiable loan clauses – because in the absence of collateral, the stakes are normally high for the lender.
    There are a variety of lenders offering personal loans [http://www.loans-bazaar.co.uk/personal-loans.html] in the UK today, from traditional high street banks and building societies to online banks and supermarkets. With varying personal loan deals – APR’s, Payback Methods, Accelerated Repayments, Repayment Holidays, PPI (Payment Protection Insurance) – credit shopping becomes imperative.