Entries from January 2011 ↓

Repeat Payday Loans – Why they Eventually Become Predators

The payday loans are considered as debts that will capture the borrower in a debt cycle that will continue for several years.   Many people across the United States live only for their salaries.  This would mean that people will simply not have enough to spend on other expenses and emergencies.  There are options to the payday loan lenders.   You have the choice of borrowing money from your relatives, your parents, friends, co-workers, or even take a cash advance from your employer.  Many financial experts actually recommend these alternatives compared to the loans or debts.  Studies have shown that the loans will only provide you short term relief from the expenses that you have.  However, these loans are designed to catch the debtor in a debt cycle that will be never ending.

The Center for Responsible Lending conducted several surveys that showed at least three quarters of the loan volume of the payday industry came from the renewals of the older loans.  This means that when the loans become due, the borrower has no other choice but to re-borrow the loan as they still do not have enough money to pay for their expenses.  This repeated borrowing is a process that is often seen as predatory as it creeps up and eats away on the financial income of the household.  Furthermore, the studies conducted by the CLR have shown that at least 80 percent of the payday debtors have conducted multiple transactions to save themselves from the charges of late payments and penalties.

The rapid rate of re-borrowing will show that most of the debtors who take out the payday debt will not clear it out before taking out a new loan.  For example, a loan of $300 with a $50 for 14 days when extended will have a total charge of $100.  This means that in 12 months of the loan extension, you would have already paid $1,200 in interest, which is far higher than the value of the cash that you have received from the lender.

In fact, if you are not careful enough and let the loans be paid on time, then you can easily increase the debt to thousands of dollars.  The business of the payday lenders is to create a product that will not easily be paid by the borrower.  On this reason alone, it is important that you find alternative means to the cash.  If you cannot do so, then take out the loan and assure yourself to pay it and not extend it when it becomes due.

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Start Eliminating Credit Card Debt

A lot of people want think that it is impossible to eliminate credit card debt, thus they immediately file for bankruptcy. Little did these people know that there are other ways to help them solve their financial dilemmas. In fact, some options can be done yourself while some, especially those severe cases, need the guidance of debt relief experts.

If you need help with debt, you might want to consider doing the following measures:

Reduce unnecessary expenses

First, set things straight and focus on your goal of reducing monthly expenses. You can do this by creating a budget list every time you go out to shop. For instance, before doing your your grocery shopping, list down every product that you need like cereals, fruits, juices, and other necessary grocery items. This will prevent you from getting items that are not part of your list, and at the same time will save you a lot of time shopping because you need not go from one aisle to another since you know all the things that you need to purchase.

Avoid splurging on luxury items

Another thing that you can do is to decrease the amount that you spend on luxury items like clothes, shoes, appliances, gadgets, and more. This is until you are able to get back to your tracks because if you want to significantly see an improvement on the amount of money that you owe, then you should do your part in controlling the amount of money that you spend.

Instead of splurging money, save it up and put it in a savings account. So, when the need arises, you will have extra money to use. This will prevent you from using your credit cards or getting a loan elsewhere that imposes high interest rate, which accumulates if left unpaid.

Pay your creditors on or before the schedule

Regarding the use of credit cards, there is really no urgent reason why you should stop using them – that is if you are able to pay them on time. However, if you have the habit of neglecting your bills, then avoid frequent use of your cards for the meantime because unpaid or late payments will just result to additional charges and can accumulate over time.

These are just several tips on how you can eliminate credit card debt. If you are still looking for effective strategies, you can visit online hubs or debt help communities and pick a lesson or two from the experiences of former debtors.

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Working On A Perfect Credit Score

There are a lot of people out there that have heard of a perfect credit score. These same people probably fully understand that if they were to have a perfect score they would be able to own just about anything that they want. But, there are not many individuals that know what a perfect score actually is, let alone how to get one. This article will discuss that in a little more detail so that you have better financial planning ideas about what you are looking to go.

Perfect credit means that your score would be 850 points. There are very few people that have this score. Most of the time you are considered to have a good score if your is roughly 750 and still many people have a score that is about 670. However, you can always spend some time looking on the internet in order to get a free credit report that will help you fully understand what your score is. You are actually entitled to this one time a year and some websites will even let you do this for free one time each year. You just need to search the internet for these sites.

When you do find a website that will allow you to do this you will want to make sure that you are looking at all of the information that is on your credit report. The information that you find there will effect your credit score. Therefore, you want to make sure that the information is accurate.

When you find information that is inaccurate you will want to question this and you will want to dispute it if necessary. Many people do not want to do this but mistakes do happen and the little mistakes can really effect your over all credit score. Just remember that the more informed you are, the better your score can be.

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What Commercial Banks Do

Commercial banks are in the classic business of accepting deposits and making loans. The business is both retail and wholesale.

Retail banking covers current accounts, check facilities, savings accounts, credit cards and loan facilities like overdrafts, personal loans and mortgages. Increasingly, Internet developments are leading to the spread of home banking. Clearing of payments may involve checks or electronic payment systems. Checks are expensive and banks are trying to reduce their use through Internet banking and the use of debit cards. Key issues in retail banking today are the growing competition, control of costs, sales of non-banking products and the use of information technology. In particular, growing links between banks and insurance companies have led to the word “bancassurance”.

Wholesale banking covers bank lending to larger entities then those met in retail banking and activities-the money markets, foreign exchange and finance for trade. Those may be uncommitted or committed. Uncommitted facilities include overdrafts, lines of credit and banker’s acceptance. Committed facilities include term loans, standby credit, revolving credit and project finance. Syndicated loans are common for large value domestic and cross-border business. There are arranging banks, co-managers, which is paying banks and agent banks.

Various fees are involved — facility or front end fee, underwriting fees, agent fees and commitment fees. Finally, there is the loan margin. The loan agreement covers the amount alone, its purpose, and draw down facilities, interest calculations and provisions. Among the provisions will be covenants. These are designed to protect the bank’s financial position if the borrower financial situation worsens. They include interest cover, networks, total borrowing, gearing and current ratio. Other provisions cover events of default. There will also be a negative pledge-the client undertakes not to offer security against the loan from another party. Falling profit margins on corporate loans have led many commercial banks into riskier lending.

If you enjoyed reading this financial topic then you may be interested in the online turnkey business opportunity and an online forex trading business.

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Pick Your Plastic: How to Choose the Right Credit Card

There are lots of good uses for the seemingly dozens of credit card offers most people get in the mail every week. You can construct a small shrine to spending with them, arranging the envelopes artfully amidst candles and incense. That’s probably a fire hazard, though. You can also scrawl grocery lists on the back. Or you can do my personal favorite, taping the offers to a brick, writing “return to sender” on the envelope, and sticking them in the mailbox.

Rather than signing up for any old card that comes in the mail, take the chance to evaluate how you’re going to use the card, which rewards will be best for you, and any hidden fees or gotchas that may be nestled amongst the fine print. Here are a few great cards for different types of spenders.

For the Small Business: American Express Costco TrueEarnings Card
If you’re an owner of a small business or work for yourself, you’ve got your own unique spending patterns. Perhaps you’re picking up 48-packs of paper towels at Costco before flying across the country for a conference. (Who isn’t, right?) This card could be a great option for you. It rewards spending on flights, restaurants, and gas, and Costco members get it free.
APR: 0% for 6 months, then 15.24%
Pros: 3% cash back on gas and restaurants, 2% on travel, 1% on everything else. No annual fee if you’re a Costco member.
The Fine Print: After you spend $3000, the cash back on gas goes down to 1%

If You Want a Free Flight: AirTran Airways A+ Visa
In these days of bankrupt airlines, signing up for an airline credit card can be a bit risky. You run the chance of booking your free flight and showing up at the check-in counter, only to find the flight attendants packing up for a little permanent vacay.
These cards are still a good way to get a free flight, though, if you play your cards right. The strategy: get the card, spend enough to get the rewards points, take the free flight, cancel your card. It’s as easy as that. This AirTran card will let you earn that free flight fast, so you can get your reward and move on.
APR: 0% for the first 6 months, then 15.24% or 18.24 depending on your credit score; $49 annual fee
Pros: Earn enough credits for a free one way flight, if you spend $750 within 90 days of opening the card.
The Fine Print: You can incur a 30.24% penalty APR if you pay late, go over your credit limit, etc.

If You’re Not a Big Spender: Capital One No Hassle Cash Rewards
The problem with a lot of rewards cards is that you can’t expect to actually feel rewarded until you’ve spent upwards of $5,000 with your card. Since I’m just using my card to buy groceries and the intermittent piece of consumer electronics, it’s not ideal for me to have one of these big spending cards. If you’re in this category too, you probably want a card that rewards you for purchases no matter what you spend, and that doesn’t nickel and dime you with lots of hidden fees. Like this Capital One card, for instance.
APR: 0% until November 2011, 11.9% after
Pros: 2% cash back at groceries and gas stations, 1% elsewhere; no annual fee; you may request your cash back whenever you want
The Fine Print: There is a 29.4% penalty APR.

Joy Paley is a guest blogger for Pounding the Pavement and a writer on the subject of becoming a nail technician for the Guide to Career Education.

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Getting Out Of Debt In 7 Easy Steps

If you are really serious about getting out of debt and putting your best foot forward towards financial freedom, there is some advice that you can use to make this really happen. The idea is to take small steps towards that goal until it is fully realized.

By following these easy steps you will be able to get rid of all your debt and have a fresh beginning. If you’re ready to get started, read through each step and get it fully implemented before moving onto the next.

1. Put away $1000

You should always have an emergency fund that you can count on as a backup plan. Unexpected events will happen in your life and you can count on them as much as you can count on waking up the next morning. There is no way to avoid emergency situations and you absolutely have to have $1000 as a minimum set aside.

2. Pay off all your debts

You will need to make a list of all your debts in the order of smallest to largest. The list will only consist of the amount of the debt and you shouldn’t worry about interest rates. That would only be a consideration if two debts on the list have the exact same amount owing. Paying off your small debts first will start the momentum of getting a debt completely handled and scratched off the list. Once a few of these debts have disappeared you will feel lighter and more able to tackle the rest.

3. Grow your emergency fund

Open up a savings account and start saving extra money that will be added to the thousand dollars that you already have in your emergency fund. You should build up to an amount that equals approximately 3 to 6 months worth of expenses. This builds up a buffer for unexpected emergencies.

4. Start investing

Once you have completed all the previous steps you only have your house payment left to worry about. At this point you can start investing money. A good rule of thumb is to invest 15% of the income earned and save the rest of your extra income for the next two steps.

5. Start saving for college

It is a good idea to start saving for college tuition for your children as soon as you possibly can. You don’t want your children to have expensive loans that they have to pay off as soon as they are finished school and starting their first job. The best way to help them out is by setting up a college education savings program.

6. Pay off your mortgage

The rest of your extra money should be put towards getting the mortgage off your list of debts. Since you are attacking only one single debt, you will see it decrease at a phenomenal rate. What a relief it will be to have your mortgage completely paid off and be completely debt free.

7. Be grateful and give

Continue to grow your earnings so that you can leave a good inheritance to your children and give to charities. There are a lot of people out there that could really use some financial help and it is up to you to find the charity of your choice that you want to support.

These steps are a fail proof system of getting out of debt. If you follow them and don’t jump ahead to the next step before the previous step is done, you’ll definitely get out of debt and enjoy all the benefits that go along with it.

This article was written by personal finance writer Timothy Ng from Sydney, Australia. He is genuinely passionate about helping people compare credit cards and helping them through researching to find the best credit card.

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