Tag Archive | Credit (finance)

Revamped Payday Loan Regulations under review

As the 2016 summer weather has continued to heat up so, too, has the drama surrounding payday loans, car title loans and other types of alternative financial services. From the most popular news websites to popular talk shows, payday loans are being discussed quite a bit. Why so much attention right now? Because in June the Consumer Financial Protection Bureau (CFPB) officially published its proposed rule to regulate payday loans, title loans and other types of alternative loans. The CFPB has even asked the public for feedback on the proposed rule.Banks Being Scrutinized By Regulators for Payday-Like Loans

Financial experts have even been tasked with looking the rule over and letting the public know what they think about it. Though payday loans have been a hot topic, financial experts have repeatedly stressed that the general public still lacks a fundamental understanding of payday loans, and the alternative financial services industry in general. Being as most media pieces on payday lending rules seem to be centered on the CFPB, it is easy to understand why some people tune out when they hear this topic being addressed. Understanding the new rule, what the CFPB is trying to do and how the payday lending industry could be affected by the rule are all things that American consumers should pay closer attention to.

The CFPB is officially recognized as an ‘administrative agency. What the heck does that mean? Essentially, an administrative agency is a lawmaking organization that specializes in a particular area. For example, the Environmental Protection Agency is one such agency that makes laws related to the environment, and the IRS (boo!) is the best known administrative agency related to revenue processing. The CFPB is a relatively new administrative agency. It was created as part of Dodd-Frank back in 2010. The Bureau was given the power to make laws related to consumer financial issues. It does this by creating rules. Once those rules get finalized they become federal law. The public is being given the opportunity to review the rules the CFPB creates, and we can also comment on any proposed rules. The official name of the newest rule is the “Payday, Vehicle Title and Certain High Cost Installment Loans” rule. It proposes to implement new consumer “protections” that the CFPB states will prevent consumers from getting into long term cycles of debt.

It is important for people to check out the rule and provide feedback. This is especially true for people who operate payday lending locations, work at them or enjoy having the ability to take out the types of loans that they want to. The proposed rule is currently available to look at on the CFPB’s website. Be warned, though, like other laws and federal rules, the new rule is very wordy and reading all of it could take a good chunk of time. Don’t let that dissuade you from at least giving it a look and deciding for yourself what you think about the proposed rule.

Going online for most folks may be more about checking out news sites and social media sites, but that doesn’t mean that you shouldn’t take a bit of time out of your day to check out important stuff, like this proposed new rule. A lot of opponents of the CFPB have accused the agency of running roughshod as of late. Looking at the new rule and then finding out what opponents of the rule believe will help you to be better informed about this important topic. Just because an administrative agency has the power to do something that does not necessarily mean that it should. Take a look for yourself and let the CFPB know what you think.

Are Payday Loans really the Debt Traps they are made out to be?

When you’re poor you don’t have the same kind of options that other folks have when it comes to borrowing money. As a matter of fact, there really aren’t many lending options that are currently available to lower income Americans. One type of lending that has been helpful to poorer people over the years may soon wind up going away forever. The Consumer Financial Protection Bureau (CFPB) has created new rules that may prevent poor people from getting access to short term lines of credit. And these rules were created because the CFPB says it wants to get rid of “debt traps” that are caused by the payday lending industry.

About Payday LoansBanks Being Scrutinized By Regulators for Payday-Like Loans

The payday lending industry really started to take off in the 90s. Most folks have seen the small storefront locations that these lenders use as their base of operations. The lenders provide small dollar loans (usually for just a few hundred dollars) to their customers. The customer pays back the loan in a week or two and is charged a flat rate fee that must be paid back in addition to the money borrowed. It is typical for payday lenders to charge about $15 for every $100 a person borrows. So, if someone takes out a $200 payday loan, they must pay the lender $230 after the two week loan term is up. Pretty easy to understand, right?

The CFPB doesn’t think that process is very simple or easy to understand. In fact, they seem to believe that American consumers are so dumb that they couldn’t possibly understand and abide by those types of loan terms. That is why they have amped up their efforts to effectively eliminate the payday lending industry. They are looking to implement their proposed rules on a federal basis, so all the states have to fall in line with how the CFPB wants to regulate this industry.

One problem is, however, that individual states have already been doing a pretty good job of regulating the payday lending industry without eliminating the industry altogether. This doesn’t appear to be enough for the CFPB, though, as they have been pushing very hard to get their new rules implemented as soon as possible.

The New Rules

The CFPB wants to make lenders assess whether or not a borrower can pay back loans prior to the loan being made. They also want to make it more difficult for people to roll over old loans into new ones. If these rules become the law of the land, they will certainly shake up the payday lending industry. But that might not be a good thing after all.

We have to use critical thinking here to figure out why people take out payday loans. They do so because they need access to fast cash. Many of these people have low credit scores and/or very little access to traditional banking services. These folks have the same types of emergency expenses that everyone runs into from time to time. But without a lot of cash on hand or the ability to borrow from banks/credit card companies, they instead turn to payday lenders. The bottom line – people take out payday loans because they need to. They have no other avenues to pursue when they need emergency money. If the CFPB’s new rules drive thousands of lenders out of business we could potentially see millions of American households left with no option available to them at all when they need to take care of emergency expenses.

This is just another example of people/organizations saying they have someone’s best interest at heart, but really doing nothing more than making life more difficult for that person. Without payday lenders to turn to when hard financial times hit, poor people may wind up with nowhere else to turn than illegal (loan shark) lenders. That certainly isn’t the kind of outcome that anyone wants to see take place.

How to get a Quick $500 for a Casino Trip with your Buddies

Every once in a while you just have to get out with the buddies. And if you are serious about having a good time, you know there is nothing like heading out for a road trip to the casino. Whether you head out to Vegas or keep your trip more on the local side of things, you know that great times await when you and some of your best friends have a night/weekend of gambling and fun. The bad thing is, though, that you cannot head out the door for one of these trips without a little bit of cash in your pocket. Many guys find that they are flat broke when these types of trips are scheduled to take place, and often don’t know what to do.

Fear not! You don’t have to miss out on all the good times that are sure to happen when the next casino trip rolls around. We’ve put together some tips that will help you to get $500 or so for a great time with your crew…Casino

One option is to use a website or local reseller to sell off some of your seldom used belongings. Find that you don’t get to play golf all that much these days, and willing to part with that old set of clubs? You may find that a local sporting goods reseller in your area is willing to give you a bit of cash to take them off your hands. Have electronics or other stuff to sell? You might want to use eBay or even Craigslist to create a quick, 2 day sale.

The downside with these methods is that you will often only get pennies on the dollar from your initial purchase price. A reseller might only give you $20 or $30 for a set of clubs that you paid hundreds for, and online auctions can often not pan out as you might expect. Still, though, if you have a bunch of stuff you don’t mind getting rid of, and don’t mind taking less for them than they are worth, this is a valid way for those of you who need a quick $500 for a trip to the casino with your buddies. But you may have to sell of quite a bit of stuff in order to make that much money.

Another Method for a Quick $500 for a Casino Trip

If you don’t feel like conducting a fire sale on all of your best stuff in order to make the casino trip, you might want to consider getting a payday advance loan. There are a lot of people who deride these types of loans, but the fact of the matter is that these loans are often the best way to get quick cash for emergencies. And getting out there with your buddies for some gambling qualifies as an emergency in this case.

Payday lenders usually charge about $15 for every $100 you borrow. They get paid back two weeks after you get the loan. So if you’re short on cash because you’re between paydays at work, you get to pay the loan back once that next check is in the bank. So, you could potentially borrow $500 and pay back $575 in two weeks. These types of loans give you cash with a time buffer, so you can not worry about paying them back until you have your next check from work. For those seriously looking for how to get a quick $500 for a casino trip with buddies, the simple payday loan may be the easiest way to get it done.

Think about these options, and the next time you need cash in order to have a bit of fun with your friends, you at least now have a couple of options that may work out quite well for you.

Should You Use Retirement Funds to Pay Off Credit Card Debt?

It is not hard for credit card debt to get sky high and very difficult to deal with. A gas card here, that you use to pay for groceries and gasoline, along with a Visa and MasterCard to buy clothes, gifts and even day-to-day essentials, and before you know it you are in over your head. It is not difficult at all to find yourself staring at $10,000, $15,000 or even more than $20,000 in credit card debt if you’re not careful.  But with all your other bills to take care of as well, how can you pay off that much debt?

Some people choose to use their retirement funds to pay off large amounts of credit card debt. For example, someone with $15,000 in credit card debt may choose to dip into their 401(k) in order to pay off all the debt in one fell swoop. While it might feel good to get rid of all that debt, doing so via your retirement funding may not be the best option.credit card debt

When you withdraw money early from you retirement account, you have to pay penalty fees and additional taxes. Remember, retirement accounts are made up of money that has not yet been taxed. Because of this, you can expect to pay a pretty penny when you dip into this account before retirement. In fact, you’ll likely have to pay a 10 percent penalty when you get the money. If you were to completely close out a retirement account – say one that is worth roughly $15,000, you can expect to pay close to $3,000 before you even get the money.

There are other cons to taking out retirement money early too. You wind up losing compound interest that you built up on that money. Retirement accounts are designed to build up over time via compound interest. The longer you allow the money to compound, the faster it begins to grow. It would take nearly 12 years of your money growing at a rate of six percent for it to double. However, in less than 25 years that money would be worth four times as much as it is right now. When you raid your 401(k) to pay off credit card debt, you wind up robbing your future self of a heck of a lot of additional retirement cash.

If you have an orphaned 401(k) account (one from a previous job) and find yourself tempted to use it to pay off debts, you might want to roll it into a new account. You could choose to roll it into your new employer’s 401(k) account once you are allowed to. Or, you could put those funds into an IRA that will allow you hold onto your money and tax benefits, while keeping it in place for your retirement.

Before you think that we are telling you not to use retirement money to pay off credit card debt, we do have to address the fact that compound interest also applies to credit card debt. In your retirement account, compound interest works in your favor. On your credit cards, though, it is working against you. If you are only able to make the minimum payment on a credit card debt of $15,000, you may find yourself paying on that account until you retire, anyway.

To find out whether or not you should take money from your retirement fund to pay for huge debts, you should probably take time out of your schedule to speak with a financial professional who specializes in these types of issues. There are times when you may be best served by doing so, but you shouldn’t do so without understanding all of the pros and cons of the situation. We hope that this article has helped you to understand a few of the pros and cons you should be aware of prior to making any final decisions about your debt.

Understanding the Risks of Letting Someone Use Your Credit Card

It is great to have family members and friends that you love. And most of us like to do favors for those folks when we can help them out. Sometimes, though, relatives or friends may ask a bit more of you than you are comfortable with. For example, what if a loved one asks you if they can “borrow” your credit card? They offer to make payments on them and then you can take the credit card back. In other words, they want to use a line of credit – one in your name – as short-term personal loan. Is it a good idea to come through with this kind of financial assistance for family or friends?bad_credit_card_management

No. Essentially, this person would be asking you to add them as an authorized user on a new line of credit or an existing credit card account. Even if you implicitly trust this person to make payments, it is a dangerous game to open a line of credit and to essentially give someone free reign to do what they want with it. You have to ask yourself why this person does not have their own credit card to use, and what you would do if the worst case happened and they were unable to make payments on the account.

Loved Ones with Bad Credit

Chances are that if someone is asking you to add them as an authorized user on your credit card account that they do not have a good credit score. If they did, they would have no problem opening a new account on their own. Now, what does the bad credit score say about this person? It does not imply that they are irresponsible or that they spend like crazy. It does, however, indicate that they have had problems in the past with lines of credit, and those problems may still be something that your loved one has not sorted out yet.

What if they do not pay?

This is where you could really get into trouble. You have someone who is charging things on the account and they are unable to make the payments. If you are flush with cash at the end of every month and have no problems making the payments for them, then this situation could be okay. However, most of us don’t have unlimited supplies of cash just sitting around and ready to use to help bail someone out of a financial mess.

And that is just what you would end up with if you let someone make purchases on one of your credit card accounts – a big financial mess. Worse than that, you’d also end up with a strained relationship with the person as well. Money can buy a lot of things in this world, but it cannot patch up a strained family relationship or a ruined friendship. If it came down to it, and you didn’t have the money to make payments for an authorized user on your account, you would be the one holding the bag. Your own credit score would take a hit. This would likely drive a wedge between you and your friend/family member. That’s something that you simply don’t want to deal with at any point in time.

Keep this advice in mind, and be prepared to let down these types of requests gently. Explain that you don’t have the resources to pay for another line of credit each month and that you don’t want to add any authorized users to your lines of credit. It may be awkward, but it is better than dealing with a low credit score and a damaged relationship with someone you care about.

A New Perspective on the Debate about the Payday Lending Industry

Other than the estimated 12 million people who take out payday loans each year, just about everyone else despises these types of loans. Those who have taken up arms against payday lenders include consumer advocate groups, clergy members, writers, professors and even the President of the United States. Is it really right for all of these people to hate the payday lending industry, though? Many of the aspects of payday loans that people seem to vilify the most – ongoing debt cycles, allegedly targeting low income people and minorities – don’t really prove to be true when one takes an honest look at the short term lending industry. This is not to say that the industry is perfect, by any stretch of the imagination. However, it is in everyone’s best interest to learn the truth and then to make a judgement call from there.

Let’s take a look at a few aspects of short term loans and see if it is really justifiable for anyone to outright hate the payday lending industry in this country.

Payday Loan Fees

payday-onlineWhen people write scathing articles about payday loans, they often focus on the fees that the lending companies charge. At many payday lending locations, the lenders charge about $15 dollars for every $100 that is borrowed. Those types of fees would be alarming if they were attached to a mortgage or a high dollar loan. But considering that the majority of borrowers understand these rates for what they are – flat rate fees, and not yearly percentage rate fees – one should come to the conclusion that these rates are not all that high or difficult to repay.

And there are plenty of payday lending companies for people to choose from. It is not like there is a monopoly on this industry, and that borrowers are forced to pay these types of fees by a single lending company that is controlling all of the short term lending going on in the United States. There are thousands of local lending locations and hundreds of online lenders that people can choose to get loans from. Of course, some people are disturbed by the fact that there are so many payday lending locations. You don’t hear those same pundits getting upset about the number of McDonald’s locations, do you? Of course not. In a free market economy, businesses are free to develop and thrive IF the market for the businesses’ services or fees actually exist.

This leads to a very interesting point that many who oppose payday lending never seem to get: There is a great demand for short term loans all across the land. People who either don’t or won’t deal with mainstream banks and lenders, still need to borrow money. If these people – hard working adults who understand exactly how much they need to pay back within a short loan term – choose to do business with payday lender, who is anyone else to try to eliminate this industry; and industry that provides vital financial services to a large section of the population?

The fact of the matter is that there is no way to make everyone see eye-to-eye about the topic of the payday lending industry in the United States. However, the time has come for people to get a better understanding of this industry, and some of the reasons that people seem to loathe payday lending companies as a whole. It is only when we can get past the rhetoric and accusations that we ever get a better handle on any topic that might be considered controversial to others.

Less Than Half of Americans Really Understand Bad Credit Scores

Everyone knows the importance of staying on top of their financial situation. We do all that we can to live on a reasonable budget, to pay bills on time and maybe even to save a little bit of money. One of the measures of how well we are doing financially is our credit score. Like everyone else, you probably know that it is in your best interest to have a higher credit score. But do you know the impact that a bad credit score can have on your entire life? If you are like more than 50 percent of American consumers, you may not.credit-score

It is true that credit scores can be a bit difficult to understand at times. For example, you may have up to three different FICO scores, dependent upon which of the three credit reporting agencies you choose to turn to when you are checking up on your credit score.

A new report published by the Consumer Federation of America (CFA) indicates that very few American consumers actually understand just how much their credit scores really matter. It appears that there is a fundamental lack of understanding about how credit scores are calculated and the different things that actually affect how high or low a credit score really is.

The study, which is quite enlightening, states that less than 50 percent of consumers in the United States know how costly it can be to have a bad credit score. The report also shows that people do not know that multiple credit checks can cause their credit scores to drop.

Every year the CFA releases its Annual Survey of Consumer Knowledge About Credit Scores, and this yearly report may help to explain just why so many Americans are in rough financial conditions. There are multiple sites that allow people to get free annual credit checks, but it appears that most people either aren’t aware of these sites or simply do not understand how to put the information from their credit reports to good use.

According to the study, the U.S., as a nation, has a current $800 billion in credit card debt. To top that off, our total consumer debt level is right around $25 trillion! With so much money on the line, you would expect that American consumers would be better educated about their credit scores. Sadly, though, that does not seem to be the case.

Stephen Brobeck, the executive director over at the CFA, said, “Credit reports and scores are so important to consumers that they should be trying to improve their knowledge.”

The CFA study shows that only 29 percent of people know that people with bad credit scores will likely pay up to $5,000 more on a typical car loan than someone with good credit will end up paying over the same amount of time.

It is too bad that so few people really understand what their credit score means. It is likely, however, that this lack of understanding is going to continue to cost people even more money in the years to come. And right now is simply a time when none of us can really afford to pay more than we should have to. We can all hope that people begin to take their credit scores a little more seriously in the coming year and that we all – as a nation of consumers – begin to work toward improving our credit scores, while reducing our overall level of consumer debt. If we plan on really recovering from the recent financial problems that we have all dealt with, it is high time that we all begin doing what we can to improve our financial outlook.

The Student’s Guide to Financial Assistance with Bad Credit

The cost of a higher education keeps getting more and more expensive. According to a report from the College Board, the average student at a private university paid a little more than $40,000 in the 2013-2014 school year for college expenses, like tuition and room & board.
There are not a lot of folks out there who can pay that kind of cost directly out of their pockets. As such, most college students wind up applying for some type of financial aid to help cover the costs of their education.low-interest-student-loans

Students with bad credit scores may find it challenging to get the financial aid that they need. It is important for these students to know that their credit score will affect their chances at getting some types of financial aid, but not all of them.

Here are a few steps that students with bad credit can take to improve their chances at getting the money they need to earn their college degrees.

Apply for federal financial education aid before you do anything else

You can finance your education in one of two ways: you can get federal aid from the government or choose to get money from private lenders. It is best to try to get federal aid first, especially if your credit score is low. The government does not take your credit history into account when you apply for government educational aid. To get financial aid from the government, though, you need to apply via the FAFSA program. Once you apply, the government will take a look at your financial situation and they will then let you know if you qualify for any educational grants or loans. The government also charges lower interest rates than private lenders, which is another reason to try them first.

Don’t Borrow More than you need

The federal funding may help you with college costs, but those types of loans may not cover everything. You may need to borrow money for living expenses and other bills. You can try to get a student loan from a private lender. These types of loans involve credit checks, and the banks are a bit stricter about who they loan money to. In order to up your chances of landing a private loan, don’t apply for any more than you really need to borrow. In other words, take out the smallest loan possible the first time around. Banks are more likely to approve small loans than larger ones, and if you pay on time, it will help to raise your credit score.

You Can Ask a Family Member to Cosign

If you cannot get a loan from the bank on your own, it may be wise to get a family member to cosign on your loan application. If a family member with good credit is willing to be a cosigner, you may get the loan you need to pay for extra educational expenses. Remember, though, that your cosigner is placing trust in you, and if you do not pay your loan payments on time, you could affect the cosigner’s credit score.

These tips should help you out as you continue to look for ways to fund your higher education. The real goal should be to finish your education with the lowest amount of debt as is possible. Try to cut costs when possible and to pay your student loans off sooner rather than later. It is much easier to enjoy life after college when you are not worried about paying off a large amount of educational related debt.

A New Approach to Cash Loans

Disposable-cash-for-student-loansThere is a small business in the Bronx that offers healthy foods to the residents in that area. This business is owned by one Hamad Ali, and it continues to thrive in one of the most economically challenged areas in this New York borough. As you might imagine, Mr. Ali, like many other small business owners, has had issues with getting financial services from mainstream banks. However, Mr. Ali currently gets financial services, including the ability to get fast cash loans, from a very different type of financial institution.

“I’ve been in New York more than 30 years doing business with all the banks—Chase, Citi, all of them—and they never cared about me,” said Mr. Ali. “But my bank now, it is a lovely bank.”

So what is the name of this bank that actually seems to care about small business owners and financially challenged residents? It is called Spring Bank, and in many ways it operates like most other commercial banks. However, Spring Bank is a bit different in that it was developed by and primarily serves the people and businesses of this community. Community developed banks have been around since 1994 and they fill in the gaps that big banks simply do not want to serve.

Spring Bank, much like payday lending companies and other alternative financial institutions, provides desperately needed financial services, like checking/savings accounts and the ability to get cash loans, to people who are grossly underserved by traditional banks. The unbanked people of this nation make up a huge share of the market, and thanks to the Spring Bank, unbanked and underbanked people have a bank that they can turn to when they need financial assistance.

Spring Bank has been around for around seven years and boasts a remarkable $105 million in assets. This bank focuses on working with local business owners who may not qualify for business loans offered by traditional banks.

Melanie Stern, Spring Bank’s director of consumer lending said, “Most of the people who need these loans can’t afford the interest rates.” To reach those people, and to provide services, like affordable cash loans, Stern rolled out a new kind of financial product that is called Borrow and Save. The way this works is that Spring Bank uses $700,000 in CDFI grants to help subprime borrowers pay for necessary products and services. At the same time, the Borrow and Save program assists their customers in building up a savings account, while improving their credit scores at the same time. These financial services may help the unbanked people in the Bronx to get mainstream loans and checking accounts in the future.

At its core, the Borrow and Save program is akin to a one year small dollar loan of up to $1500. Once a borrower is approved, one fourth of the total loan amount is placed into a savings account and the money then becomes available to the person when the total loan has been repaid.
Community developed banks, like Spring Bank, may not revolutionize the lending industry. But as is the case with other alternative lenders, like payday loans lenders, Spring Bank is certainly doing its part to offer valuable financial services to people who have not been able to get these types of financial services from mainstream credit card companies and big banks. It may be happening slowly, but people are finally starting to realize that alternative lending companies really are valuable assets to the people and businesses that they serve in vastly underbanked areas of this country.

Could Payday Loan Regulations Hurt the Women Who Use Them?

More women than men use payday loans and cited in the Pew Charitable Trust study. With lawmakers trying to make more and more regulations for the payday loan industry, will the women who use these loans suffer as a result? It is hard to say, but unfortunately it could be a reality.

So why is it that payday lenders are being looked at for regulations? People do not think that those who use these loans do not understand the fees associated with the loan. They do not give the people who use these loans much credit; they do not seem to think that they educate themselves prior to getting a loan. This should really be considered an insult as studies in the past have shown that everyone, including women, understand the fees associated with the loan and would prefer to pay that instead of late fees or overdraft fees.atm_bank_fees

So what happens when women cannot get the payday loan that they need because of regulations? One thing that will be seen immediately is that those who have no other option to get access to a line of credit will no longer have anywhere to go. Women who have bad credit, no credit, or whatever their situation is could end up losing the only line of credit that they can get at that time.

Another problem with this is that if the women who need this line of credit and can no longer get it they could end up in even more financial trouble. If they do not have anywhere else to turn and they need money to feed their kids, or for gas to get to work, or for the bills that have started to pile up they will end up in a worse financial place than they were before.

Let’s face it, if women all across the country are having a harder time getting the loan that they need there could be a lot of bills that go unpaid. This could lead to companies losing money and feeling the need to raise prices. It can also lead to the women having to leave their home because they cannot pay their mortgage or rent. If this happens all across the country, then the economy will end up taking another big hit that it just simply cannot afford to take.

It is not fare for a Politian and lawmaker to decide what is best and what is right for the women of this country. If they take away our ability to get the payday loans we need, a lot of problems can happen not just for the women of this country but also for this country’s economics. Lawmakers need to realize that there are many smart women who get this loan and understand what it is they are going to be paying, give them some credit and stop trying to take a lifeline away from them.