18 Nov
2011

After Feds cut interest rates to below 1% on December 16th, mortgage rates fell to the lowest point since 1976. Many homeowners rushed to refinance their mortgages effectively lowering their monthly payments by hundreds of dollars. Should a mortgage refinance be in your future?

The biggest thing standing between you and a new mortgage is the cost. Remember the fees you paid when you closed on your home, those are the same fees you’ll pay when you refinance your mortgage. So, refinancing your mortgage will cost thousands of dollars – 3% to 6% of your loan amount, according to National City Mortgage, headquartered in Miamisburg, Ohio.

Whether the cost outweighs the benefit depends on how much you save each month on your mortgage payments and how long you plan to stay in your house. For example, if you pay $2,500 in fees to refinance your mortgage and lower your monthly payment by $200, it will take you just more than a year to break even. It only makes sense to refinance your mortgage if you plan to stay in your home longer than the time to break even. If you’re in it for the long haul, refinancing your mortgage is definitely something you can consider.

While mortgage refinancing is perhaps just as attractive, it’s not as easy as it was during the height of the credit boom. First, refinancing options are far more limited with only 15-year and 30-year fixed-rate mortgages available. It makes sense though, since most homeowners want to refinance their way out of the unpredictable adjustable rate mortgages that played a major role in the current economic crisis.

Not only are there fewer choices of loans for refinancing, qualification is also more difficult. Borrowers need to have 10%-20% equity in their homes or a down payment of that amount.

As always credit history plays a major role in qualifying for a mortgage refinance. Borrowers should have good-to-excellent credit scores to get the best rates on a new loan. Subprime refinance loans are rare, perhaps even impossible.

If your current mortgage has a prepayment penalty, it could cost you more to get out of your current mortgage and into a new one. Work with your lender to negotiate an elimination of the penalty.

18 Nov
2011

Posted by: LaToya Irby

Credit card issuers are on a rampage – cutting credit limits, increasing interest rates, and closing inactive credit card accounts. Though you don’t have much control over rising interest rates and decreased credit limits, you can keep your credit cards open by using them every once in awhile.

For more credit card facts, visit here.

Credit card companies don’t make any money on accounts that aren’t used. In fact, it costs them money. During this credit crisis, it’s risky for credit card companies to have unused credit cards on their books, because it’s hard to predict what you’re going to do with the credit card. You could decide to max out the card one day and never pay back the balance. In this case, it’s cheaper for the credit card company to just let you go.

Another part of your credit score measures your level of debt by comparing your total balances to your total credit limits. The higher your credit card balances in relation to your credit limits, the lower your credit score will be. Having a credit card closed raises your ratio of balances to credit limits – your credit utilization – and lowers your credit score.

If your credit card has recently been closed, call your credit card issuer and request to have your account reopened. It helps if you’ve been a long-time, timely-paying customer.

Keep your credit card open by using it periodically and paying the balance off when the billing statement comes. By doing this, you’re letting your credit card know that you still appreciate and use the credit card.

18 Nov
2011

Posted by: LaToya Irby

When you’re strapped for cash and still have some available credit on one of your credit cards, a credit card cash advance is one way to temporarily make ends meet. Considering the cost of a cash advance, you might question whether it’s such a good idea?

A cash advance fee is one of the costs of a credit card cash advance. Cash advance fees can be a percentage of your advance – typically between 1% and 4% of the amount you take out. Or, the fee could be a flat rate. Some credit cards use a combination of the two to come up with your cash advance fee. For example, you might pay $15 or 4% of the cash advance, whichever is greater.

When you use an ATM to take out a cash advance on your credit card, you’ll also pay an ATM fee to the bank who owns the machine

The highest costs of all are the finance charges that are applied to cash advance balances. Different types of credit card balances typically have different interest rates. You might have one interest rate for purchases, another for balance transfers, and yet another for cash advances. Of all the interest rates, cash advance rates are the highest. This means you’ll have the highest finance charges on your cash advance.

Unlike purchases, you don’t get a grace period for cash advances, so interest starts accruing the day you take it out. You’ll pay interest on a cash advance even if you pay off the balance when your statement comes. Until you pay off the cash advance in full, your balance accrues monthly interest, making it harder to repay.

The way credit card companies apply payments to your credit card could mean your cash advance balance increases rather than decreases. When you have multiple types of balances on your credit card, your issuer probably applies your payment to the lowest interest rate balance first. Meanwhile, the highest interest rate balance (your cash advance) isn’t credited any payment at all until it’s the only balance you’re carrying.

For more credit card information, please click here.

If you want to take out a cash advance on your credit card, make sure you understand the cost. Use a credit card that currently has a $0 balance to keep your cash advance from growing out of control.

18 Nov
2011

In some cases, mortgage loan modification only postpones the inevitable. Rather than helping you afford your mortgage payments, a modification can put your monthly loan payments out of reach and leading you to foreclosure anyway.

Once you’ve become 2-4 months behind on your mortgage, you likely qualify for mortgage loan modification with your lender. If you’re approved for loan modification, your lender freezes your interest rate for a period of time to keep it from continuing to adjust upward. Then, your delinquent payments are added into your loan balance and your payments are recalculated. The loan is reset and you’re no longer behind. You continue to pay your loan off at the new terms.

In some cases, interest rates don’t decrease with a modified loan, meaning your monthly payments would remain the same. However, once your delinquent amount is added back into the loan and your payments are recalculated, you end up with a higher monthly payment. You ward off foreclosure in the near future, but unless you increase your income, your mortgage payments remain unaffordable.

Don’t make a loan modification decision based on desperation. Before you agree to a loan modification, make sure you understand how it will impact your monthly payments. If your payments are going to go up, ask your lender about other options.

Negotiate a lower interest rate as part of your modification terms. Unless your interest rate goes down, your monthly mortgage payments will remain the same or even increase. Sure, you avoid foreclosure for a little while, but without lower payments, the risk remains. You can also ask your lender to waive some of the late fees charged on your missed payments.

Get foreclosure-prevention counseling from a local consumer credit counseling. Advocates can sometimes help you negotiate better terms with your mortgage lender.

18 Nov
2011

If you have trouble managing your debt on your own, you’re not alone. Many people go to a debt consolidation company to help deal with creditors and lower their debt payments. Before you hire a company, make sure you get some information to help you choose.

You can also visit Money Now! USA’s website to learn even more about debt consolidation.

Look at the company’s reputation. Check with the Better Business Bureau (www.bbb.org) to find out if other consumers have made complaints against the company. Several unresolved complaints against a company is a sign that they don’t follow through on their promises to customers. No matter how much you may want to go with a company, it’s best to move on when their BBB standing isn’t acceptable.

Make sure the company offers different services. A good debt consolidation company will do more than combine your debt payments; it will also give you sound money management advice. Look for a company that will help you learn to budget and stay out of debt as well as work with your creditors to reduce your debt.

Choose a company with reasonable prices. Debt consolidation companies should charge reasonable fees for the services they provide. They also should be upfront about the fee. If a company hides details about the cost of their services, be suspicious. Ask about having your fee waived or reduced if you will have a hard time paying it.

Watch out for scams. Unless you have a lot of money, debt management will not be a quick fix. Stay away from debt consolidation companies that offer those “too good to be true” solutions to your debt. Expect to send affordable monthly payments for two to five years to get your debt paid off. Anything other than that is a watch-out.

A lot of debt consolidation companies take advantage of vulnerable consumers. Take your time and look for a good company to keep from becoming the victim of a scam.

18 Nov
2011

In the United States, we pay income taxes to the government to pay for things like roads, schools, the military, hospitals, and other government-funded projects. Both businesses and individuals pay taxes on the money they receive. Businesses pay taxes on the revenue they bring in. Likewise, people pay taxes on their income.

The Internal Revenue Service, IRS, is responsible for collecting the federal income tax and enforcing the income tax laws put into place by the President and Congress.

Income taxes aren’t optional. Every person and business in the United States is subject to income tax. That doesn’t mean you’ll actually have to pay income taxes every year. It just means your income could be taxed under certain circumstances. If your income is above a certain level, you must file a tax return, even if you don’t expect to pay any income tax. You’re subject to penalties if you don’t file an income tax return when you’re required to do so by law.

When you owe income taxes, you pay them throughout the year. During your first week of work with a new company, you’ll typically fill out a W-4 or W-9 form. With Form W-4, you indicate your filing status and number of exemptions and the employer withholds the appropriate amount of taxes. Your employer will send taxes to the federal government – and state and local governments, if applicable – on your behalf based on what you filled out on your W-4. As a contractor, you fill out a Form W-9and simply give the company your tax payer identification number (social security number) to report your earnings to the government. You’re responsible for paying your own income taxes to the IRS.

Once the tax year has ended, you file an income tax return with the IRS. If you paid more taxes than you should have during the year, you’ll receive an income tax refund. On the other hand, if you didn’t pay enough taxes, you’ll owe taxes to the government. The taxes you owe from the previous year must be paid by April 15 or you’ll be subject to interest and penalties.

Different incomes are taxed at different tax rates. The tax brackets are: 10%, 15%, 25%, 28%, 33%, and 35%. The higher your income, the higher your tax bracket. For example, in 2008 a single individual’s income that’s less $8,025 is taxed at 10%, while income over $357,700 is taxed at 35%. The tax brackets change from one year to the next. It’s a good idea to check the IRS’ website (www.irs.gov) to find out your tax rate for that year.

You can reduce your tax liability by taking advantage of certain tax benefits that reduce your taxable income. For example, you may be able to claim contributions you’ve made to a charitable organization. Contributing to certain retirement accounts, like a 401(k), can also reduce your taxable income. Keep up with your tax-deductible expenses throughout the year to make it easier for your tax-preparer to file your income taxes. You might be unable to claim certain tax benefits if you don’t have the right records.

18 Nov
2011

Payday Loans are indeed a subject of much passionate discussion. In this Article we examine both sides of the issue starting with an Editorial from the New York Times – Borrowers Bled Dry

Here is the highly disputed report by Center of Responsible Lending cited in the Editorial: Phantom Demand: Short-term due date generates need for repeat payday loans, accounting for 76% of total volume

The report from CRL claims that the use of “churning” or taking out a new payday loans within a 2 week period, traps borrowers in an endless cycle of debt. They estimate that 76% of payday loan volume is created by the churn of loans. The reports suggests that borrowers remain trapped in the cycle of taking out new payday loans because of the fees charged by the lenders, but we can disprove this with simple math. Even at 400% APR the monthly interest for these short term loans is 33%. So if a borrower takes out a 400.00 Loan and repays in 6 weeks – they pay around 198 in Fees. The amount due after 6 weeks is around 466.00 of which only 66 dollars are fees, based on the normal 2 week extension. Let’s look at the numbers: 66 of 466 dollars are ONLY 14% of the total. It is not the 66 dollars or even the total 198 in fees that are causing the borrowers to take out another loan within 2 weeks. Churning is nothing but the effect of overextended consumers who are paying very high fees on everything, not just payday loans. The center for responsible lending makes the great mistake of only looking at one element in the financial life of payday loan borrowers. Payday loan fees alone are not the sole cause for the churn of loans: declining real wages, 50 dollar late fees for rentals, pawnshops fees, Bank NSF fees at hundreds of dollars a month, Compound Credit Card Interest, Increasing in consumer prices, and a volatile employment market all contribute to the “Payday Loan Trap.”

Because of all these microeconomic effects – borrowers are not seeking a one-time demand for credit as this report suggested on page 13 of the CFRL report. Here is a quote from the report “Our analysis finds that 59 million payday loans are opened, not due to a financial emergency, but primarily because the borrower could not repay a previous payday loan and afford their regular expenses without it.”

More evidence disproving the CRL Report:

In this study it is suggested that payday loan borrowing does not contribute to more bankruptcies.

Clemson University – John E. Walker Department of Economics: Restrictions on Credit: A Public Policy Analysis of Payday Lending

“Using state-level data between 1990 and 2006, we find no empirical evidence that payday lending leads to more bankruptcy filings; this finding casts doubt on the “cycle of debt” argument against payday lending.”

In this study from the University of Chicago it is suggested that Payday Loans could reduce foreclosures and Crime.

University of Chicago – Adair Morse Booth School of Business:

In this Study they take a look at what happens after payday loans are restricted in two different states, the results were negative.

The Federal Reserve Bank Donald P. Morgan http://www.federalreserve.gov/

“Payday loans are widely condemned as a predatory debt trap. We test that claim by researching how households in Georgia and North Carolina have fared since those states banned payday loans in May 2004 and December 2005. Compared with households in all other states, households in Georgia have bounced more checks, complained more to the Federal Trade Commission about lenders and debt collectors, and filed for Chapter 7 bankruptcy protection at a higher rate. North Carolina households have fared about the same. This negative correlation-reduced payday credit supply, increased credit problems contradicts the debt trap critique of payday lending, but is consistent with the hypothesis that payday credit is preferable to substitutes such as the bounced-check ‘protection’ sold by credit unions and banks or loans from pawnshops.”

18 Nov
2011

Because of the U.S. economic crisis, you’ll find that credit cards and loans are more difficult to obtain, but here are some tips to survive the credit crisis.

Use your emergency fund (not a credit card) for emergencies.
You should have between three and six months of living expenses in a savings account that you only touch for an absolute, you-would-die-without-it emergency. When an emergency arises, e.g. a job loss, use your emergency fund to carry you. When you spend from your emergency fund, replace what you’ve spent as quickly as possible. If you don’t have an emergency fund, spend the next few months building one.

Avoid applying for new credit and loans.
Right now, banks are stingy with lending, so unless you have excellent credit, your application will likely be denied. If you’re approved, you’ll have a higher, more expensive interest rate. Neither of those are desirable outcomes. Not only that, putting in applications for credit will hurt your credit score, making it harder to get approved. Avoid making new credit applications during the credit crisis.

Keep your credit card balances low and check your limit before purchases.
Credit card issuers are becoming known for slashing credit limits. Your limit could be cut close to or even below your current balance, putting you at risk for over-the-limit fees, interest rate hikes, and even a credit score decrease.

Check your credit limit before using your credit card. This way you won’t unknowingly exceed your credit limit.
A zero balance is the only way to protect yourself from the negative effects of a credit limit decrease. Be careful, if you don’t use your credit card at all, your creditor might close the account completely to free up credit for other customers.

Watch out for sudden interest rate increases.
Banks make money through your interest payments. The higher your interest rate, the more money the bank makes from you. Your credit card agreement probably includes a “universal default” clause that lets your creditor increase your interest rate at “any time, for any reason.” So, you could see your interest rate increase at anytime, good credit or bad.

In most cases, the creditor has to notify you, in writing, about increased rates and let you opt-out of the higher rate. Opting-out lets you pay off your balance at the old interest rate. The catch is your account will be closed and you won’t be able to use it anymore. Just like with credit limit cuts, keeping a zero balance on your credit cards is the best way to avoid the high cost of interest rate increases.

Live within your means.
This is a tenet you should always live by, credit crisis or not. If you don’t already have one, set a budget to help guide your spending. Cut back on unnecessary expenses so you’re not tempted to pull money from savings or rely on debt to make ends meet.

Pay off your debt.
Now’s a good time to pay off your credit card debt, but only after you have a good emergency fund to fall back on. Then, work on paying off your high interest credit card debt because it’s costing you money each month.

18 Nov
2011

Frequency of Use
Like any financial product – there are giant pitfalls if Payday Loans are not used correctly. In practice, Payday Loans are to be used for short term financial emergencies. The truth is over 60% of payday advance loan consumers do not use these short term loans for only the occasional 1-3 times a year emergencies, they use them as an over-priced credit line.

Payday Advance Loans can be a great help for consumers who need emergency cash, but they can really hurt consumers financially if they use them too often. When borrowers use these loans over and over again, they are paying a added premium on their wages. According to The Washington State Department of Financial Institutions, 19% of consumers use Payday Advances at least once a year and 11.5 % of consumers use Payday Advances at least twice a year. You can view this report by clicking here.

The problem lies with the consumers that use these loans over 10 times a year. They are paying more interest and slowly falling into the payday loan trap.

If a consumer uses these loans more than 10 times a year, they are likely paying 500 or more in interest to their online or local payday loan store.

Of course that is not bad compared with compound interest of credit cards, or the super high interest consumers pay the first few years of a home mortgage. But and extra 500 or 1000 in interest can add up over a year period.

When payday loans cause big damage
There are other factors to consider when overusing payday loans also. MercuryNews.com reports on the effects on payday loan borrowers and filling for Bankruptcy. http://www.mercurynews.com/opinion/ci_13620914 They cite a report from the group “The Silicon Valley Community Foundation” According to this study, payday loan applicants whose loans are approved are twice as likely to file for bankruptcy within two years as applicants who are rejected. The pileup of fees is the primary reason.

The bottom is this: Too much of anything is bad for you, and Payday Loans are no different. Misusing these types of financial products can lead to cash flow and legal issues. Used with care, Payday Loans can help consumers avoid fees, and manage a short term financial crisis.

Apply Now!

If you want more information on Payday Loans, you can also visit these websites:

Community Financial Services Association of America (CFSA)
Online Lenders Alliance
VAPL
The Federal Trade Commission
Payday Pundit
Advance America
Money Now! USA

18 Nov
2011

Timing they say, is everything. With a loan, it’s more than everything. If you cannot get the funds you need in time it can create incredible stress on your finances.

How fast your loan proceeds hit your bank account is key, you don’t want to wait too long. You need money now. This is important when considering taking out a payday advance.

How fast you get your money depends on two main factors:

What time of day you apply -

How fast the your lender wires you loan proceeds -

What day you apply -

Time of Day With an Instant Payday Advance You can receive funds as fast as one hour as long as you apply before the cut off time for the lender. In most cases that would be before 4PM Eastern Standard Time. If you apply after that time, it is likely you will get money delivered to your bank account the next day.

Fast Lenders Not all lenders can wire funds as fast as 1 Hour. It is possible you lender is set at the “Money Overnight” method. That is still pretty fast and pretty much the industry standard. The best tip we can offer is try to apply in the mourning during the weekday when the lenders’ call centers are in operation.

Instant Payday Advances – Holidays and Weekends Please keep in mind when applying for a payday loan, if you apply on a banking holiday or weekend you will not receive your money until the following day. On banking holidays the federal reserve is closed and transfer of monies between banks, .i.e the lenders bank account and your bank account is not possible.

The following holidays are banking holidays:

• New Years Day — January 1
• Martin L King’s Birthday — 3rd Monday in January
• President’s Day — 3rd Monday in February
• Memorial Day — Last Monday in May
• Independence Day — July 4
• Labor Day — 1st Monday in September
• Columbus Day — 2nd Monday in October
• Veteran’s Day — November 11
• Thanksgiving Day — 4th Thursday in November
• Christmas Day — December 25