loans and credit

Personal loans for people with bad credit are becoming more and more common. The story is a familiar one in this economy; due to a variety of circumstances you’ve fallen on hard times, and need to get a loan to offer some relief. Unfortunately, these very same circumstances may have hurt your credit score, and now you’re wondering what to do.

While it is true that you have to be extra vigilant, fear not as all is not lost. You do have a number of options, but the question is which one is going to be best for your situation, with the best personal loan rates and least risk. With the right preparation and a little research you should be able to find that answer. Here are some options that you may want to consider:

• First Things First. A wise first move is to get a free copy of your credit report and look it over to make sure your impression of your credit is correct, as it’s possible that it’s not as bad as you think. Regardless, it’s a smart move to do this if only to be certain that all information is up to date and correct.
• Family or Friends. Maybe the best place to start, despite the discomfort of having to ask. The benefit is obvious in that the cost of the loan is typically just that—the amount of the loan.
• Credit Unions. Another good initial choice, as credit unions are typically a little more understanding than some of the other lenders, and there is an advantage to meeting someone in person instead of just being a faceless set of numbers.
• Online Lenders. One great benefit of going this route is that you are able to get a much wider selection of possible lenders to find personal loans, and the competition is fairly fierce, making the possibility of getting a better deal a little more likely.
• Payday Loan. This should absolutely be your last choice, and the option that springs to mind in connection with the “borrower beware” of the title. If you have absolutely no other choice, a payday loan can help in extreme circumstances if the loan needed is very short term, and is saving you from a catastrophe, like losing your home.

Before accepting any personal loan offer, you’ll want to be sure that your credit report is accurate and that you have shopped around, as not all loans are created equal. By taking the time to research and understand the situation thoroughly, you may well be putting more of that much needed money into your pocket.

When you are in need of some extra cash, a small personal loan could be the answer. While you could go to a payday loan or cash advance loan place, banks are the best place for personal loans. However, even when you go to a bank, you have to be aware of some “tactics” that may get you in over your head. You just might be surprised at banks’ secrets to make more money.

#1 Super-Sized Loans Mean More Money
Banks are in business to make money. They are not there as good-will people there to loan us money when we need it. They are in business to make a profit. One way they make a profit is by supersizing your loan. Yes, banks have a minimum amount they will loan out so if you only want a couple hundred dollars, they are not the places to go. Additionally, you need to be careful when approaching a bank; they will try to upsell you so they can make a bigger profit. The best thing to do is to go in with a set figure to borrow and don’t borrow more, no matter how nice they make the deal sound.

#2 More Interest Means More Money
While everyone knows banks make money off the interest payments, what you may not know is how they go about doing that. Many banks will have a penalty for paying personal loans off early. They want to make sure they get every penny of interest; therefore, they do not allow you to pay it off too soon. Some will go as far as penalizing you for making payments more than five days in advance. To guard against this (or at least protect yourself), find out the policy for early and pre-payments.

#3 Lenders Have Quotas
The lender at the bank has a quota. They are expected to lend out a certain amount of money each month and year. When they meet these quotas, they get bonuses and such. Therefore, they will want to give out personal loans as much as you want to borrow the money. This makes negotiation your best friend. You have the right to negotiate terms, payment dates, interest and even schedules. The better credit you have, the more leverage you have to negotiate. After all, if you have good credit, you can always go to another bank.

#4 Automatic Withdraw Guarantees Payment
If you go to your bank and try to get a loan, then you are in good shape. You should be able to negotiate a lower interest rate by allowing them to automatically withdraw the money from your checking account, just be sure you have the money each month.

Does the city in which you live determine whether your future is one filled with debt consolidation or one marked by wealth accumulation? It might. After all, if you live in a city that features a high rate of job growth, low unemployment levels, affordable housing prices and reasonable costs on other necessities such as gas and rent, the odds are lower that you’ll run into the kind of financial troubles that you’d find if you lived in a city that had high unemployment rates, unaffordable housing and little to no job growth. Keeping that in mind, house hunters might take a look at the Web site for Kiplinger’s magazine. The site boasts the magazine’s annual list of top cities in which to live. The list might serve as a good guide for consumers looking to avoid debt consolidation, foreclosure, bankruptcy and other financial nightmares.

Austin Tops the List

Kiplinger’s ranked Austin, Texas, as the top city for the next decade. The magazine pointed to the city’s vibrant small business community, not to mention the many venture capital funds in the area that provide financial backing to entrepreneurs and their ideas. The city is also known as a fun place to live, thanks to its many musical festivals, its eclectic mix of restaurants and shops and its many entertainment options. Of course, you don’t have to move to Texas if you want to live in a top city for the next decade. Kiplinger’s also has good things to say about Seattle, which it cites for its well-educated workforce, top universities and the headquarters of such corporate giants as Microsoft, Boeing and Amazon. Running out the top five were Washington D.C., which boasts 11 of the 25 richest counties in the United States; Boulder, Colorado, home to federal research laboratories; and Salt Lake City, Utah, with its low taxes and cost of living.

The Next Five

Rochester, Minnesota; Des Moines, Iowa; Burlington, Vermont; West Hartford, Connecticut; and Topeka, Kansas complete Kiplinger’s list of top cities for the next decade. It’s a nice list, showcasing cities from a wide swath of the country. Of course, even if you live in Austin, Texas, there’s no guarantee that you won’t need debt consolidation loans in the future. Sure, your job prospects may be brighter. Your chances of landing a higher-paying job might be stronger.

But even so, that innovative start-up company at which you work may still go out of business. Your boss may slash your annual income to avoid future layoffs. No city, even those ranked highly by respected glossy magazines, are safe from the effects of today’s challenging economy. Still, if you have your choice, it’s not a bad idea to take root in one of these thriving metropolises. It’s one thing you can do to reduce your chances of needing a debt consolidation loan in the future.

The number of consumers turning to debt consolidation loans to prevent losing their home to foreclosure may finally be leveling off. At least that’s what a new report from RealtyTrac.com, an online provider of housing foreclosure data, would lead you to believe. According to the company, the number of housing foreclosures across the country dropped 2 percent in February when compared to January. This marks the second straight month in which housing foreclosures have fallen. Is it a sign that housing foreclosures are finally leveling off? If so, it may mean a drop in the number of homeowners turning to debt consolidation loans as a way to stave off losing their homes.

Foreclosure Figures

According to RealtyTrac, the number of homes taken by banks in repossessions fell to 78,683 during February. That’s down from 87,648 one month earlier. Of course, the news isn’t all good: Even though foreclosures fell in February from one month earlier, they were still higher than in February of 2009. In fact, housing foreclosures were 6 percent higher. Still, the RealtyTrac data does offer hope that the worst of the nation’s housing foreclosure crisis has passed. Last year, U.S. property owners received a record 2.8 million foreclosure filings. The 6-percent jump in February from one year earlier, though, represents the smallest percentage increase since RealtyTrac began figuring year-over-year increases back in January of 2006.

A Dip in Loan Consolidations?

Homeowners have several choices when they’re facing a foreclosure: They can request a loan modification from their mortgage lender or bank. They can simply stop making their monthly mortgage payments and walk away from their home. Or they can take out a debt consolidation loan. When they do this, their debts, including their monthly mortgage payments, are consolidated into one single monthly payment. If they stay current on this payment, they won’t lose their home. The question now facing the owners of loan consolidation companies is this: If the foreclosure rate continues to level off and, even, begin to fall, will they see significant drops in business?

The Prediction Game

Of course, consumers turn to debt consolidation loans for a number of reasons. Preventing foreclosure is just one of them. But you can bet that the debt consolidation business will take at least a small hit if the number of housing foreclosures does fall. After all, many consumers only turn to debt consolidation as an absolute last resort. Consumers who are not worried about losing their homes may find other alternatives to debt consolidation.

Are you considering a debt consolidation loan? Be warned: You might have to pay more for your auto or homeowners insurance. The two might not seem to be related. But many insurance companies consider the three-digit credit scores of their clients when deciding how much they’ll have to pay for their auto or homeowners insurance. And when these clients lose their jobs, get temporarily laid off or see their work hours cut, they often have to resort to debt consolidation loans to handle the credit card debt they have little choice to but to rack up. The problem is, these loans, useful though they may be, have a negative impact on consumers’ credit scores: Their credit, or FICO, scores fall, causing insurance companies to view them as more of a risk.

An Unfair System?

Not everyone thinks that this should be the case. In fact, Mike Kreidler, the state insurance commissioner for Washington, earlier this year told a legislative panel that insurance companies should be banned from using credit scores to determine how much their customers pay for home or auto insurance. Kreidler argued that poor credit scores are no indication that customers are more likely to default on their insurance premiums. In today’s dismal economy, especially, even responsible consumers lose their jobs and have to turn to debt consolidation loans to survive. These consumers shouldn’t have to suffer because of this, Kreidler said.

The Insurers’ Point Of View

Not surprisingly, the insurance industry disagrees. Officials with insurance companies told the same legislative panel that credit scores do help them determine which customers are good or bad risks. They said that these scores are important tools that the companies need to properly set customer rates. It’s a debate not likely to be settled soon. There simply isn’t much middle ground.

What Consumers Can Do

Consumers can protect themselves from higher insurance rates by only taking out debt consolidation loans as a last resort. These loans are often necessary during financial emergencies. If you’ve been out of work for a year – not unusual in today’s economy – you’ve undoubtedly had to rely on your credit cards to cover a greater percentage of your day-to-day living expenses. A debt consolidation loan may be the only way for you to gain at least some control over these debts. Just be aware of the negatives associated with consolidating your debt. It’s a solution, yes, but not necessarily an ideal one. Be sure to research the effects that such a loan will have on your credit score as well as the interest rate and terms of the loan itself.

If you are up to your eyebrows in debt and feel out of control, personal loans can come to the rescue. In fact, the number one use of a personal line of credit is to consolidate unsecured debts. Debt consolidation offers many advantages to consumers such as reduced monthly payment amounts; a single payment per month instead of multiple payments; and it allows you to catch up or avoid going into default on loans that you may fall behind on. In this article, we break down the basics of debt consolidation so you can decide if using a personal loan for this purpose will work for you.

What Debt Consolidation Means

When you use personal loans to consolidate unsecured debt, you are practicing “debt consolidation.” Basically, this means you are taking out a new, big loan to cover the balances left on all your other unsecured debts. The old debts are paid off. Under the terms of your new personal loan, you make one monthly payment rather than several payments as you did when you had several loans to pay. In some ways, it’s like starting over with your consumer debt.

Advantages of Debt Consolidation

Many people use debt consolidation as a way to manage debts that have gotten out of control. If you cannot keep track of all the loan payments you must make per month and fall behind, then the convenience of having only one payment to make per month may be well worth it. In addition, personal loans may have a longer term, allowing you to pay off the debt over a longer period of time and giving you a smaller monthly payment. Personal loans also have a lower interest rate than many unsecured debts, such as credit cards. By consolidating these debts under a lower interest rate, you could save thousands of dollars in the long run.

What Debts Are Eligible for Consolidation?

Almost any unsecured debt is eligible for debt consolidation. This includes credit card debt, medical debt, debts for services such as household goods or furniture obtained with a store line of credit, and so forth. Secured debt, such as your home, your car, and student loans, is not eligible for this kind of debt consolidation. If you have any questions about the process, your bank or credit union should be able to help. Other possible resources for personal loans include other banks, such as Internet banks; person to person lending sites; and specialty lenders who focus on offering debt consolidation to consumers.

Preparing yourself for your financial future is critical, especially now when the outlook seems darkest. Even though it may not seem like the time to better your financial future, with the economy in a recession, it is a “bear market” in the finance world right now, meaning that investor confidence is shaken so prices are lower. Even if your goal is simply to maintain your financial situation, there are things that you can do to better insulate yourself from market fluctuations.

1. Fixed Expenses
No matter what the economic situation, the less money you owe the better. Spend any extra money you have on trying to pay down credit card bills and any loans you may have.

Fixed expenses can also be beneficial when planning your financial situation. If you do have any adjustable rate loans or credit cards, trade them in for a fixed-rate, you will always know exactly how much the payment is.

2. Self-Reliance
Self-reliance comes in several forms, all equally important. Firstly, try to rely on your own ability to pay on any optional expense or purchase. Give careful attention to what you spend money on and what you would like to do. For many people, it is possible to cut back on daily expenses enough to pay for the vacation, home renovation, etc. that they would have taken out a loan to do.

Self-reliance is also important as regards retirement. Social Security and Medicare will likely not be able to fill the needs of many Americans by the time they reach the golden age of 65 years old. Instead, find avenues in which to invest your money to save for the years ahead.

3. Portfolio Tactics
If you decide to invest in the financial markets, be it stocks, bonds, mutual funds, etc., spend some time developing tactics for your portfolio. The most important financial concept you will ever learn is “hedging”. Hedging is the practice of balancing one investment against another so that at least one investment is always making money. Traditional investors used to hedge one stock against another (i.e. Coke against Pepsi) instead of hedging types of investments (mutual funds against currency, or stocks against commodities).

When investing in financial markets, make sure that, if the bottom fell out tomorrow, your investments would still be earning some kind of return.

Cash advances rarely save consumers money, no matter in what form they are taken. Payday loans, which provide consumers with cash to tide them over until their regular paychecks arrive, often come with high interest rates and origination fees. When consumers take cash advances from their credit cards, they are almost always socked with sky-high interest rates. But what about cash advances from your income taxes? When consumers request quick income tax refunds from tax-preparation firms or other companies, how much extra do they have to pay? Turns out, it can be quite a bit. The fees associated with instant income tax refunds are so high, that both the Indiana and Illinois attorney general offices in a story printed on the Web site of television station WFIE advised consumers to wait for their tax refund to be mailed to them by the IRS. Those consumers who are patient enough to do this will then receive their full refund without losing any money to cash advance fees.

The Lure of Quick Cash

Some people rely on their income tax refunds to purchase new furniture for their living rooms, the latest high-priced video game system or a cruise to Alaska. Others need their refund money to help pay off their credit-card debt or their other bills. Many of these consumers want their refund money as soon as they file their taxes. There are plenty of businesses out there willing to give them a check for this money, minus, of course, some hefty fees.

The story by WFIE quoted the owner of an Indiana tax-preparation service as saying that he charges customers who want their refund the next day $147 plus 1 percent of whatever amount they want back. This makes instant income-tax refunds just as expensive as other cash advances.

You Pay for Speed

The truth is, consumers will always pay more if they need money quickly. It’s always best to avoid cash advances, whether they come in the form of a payday loan or an instant income-tax refund. Consumers who are patient can avoid the high fees or interest rates that come with these advances. Unfortunately, in today’s weak economy, a growing number of consumers are finding it difficult to pay their regular bills. They may have lost their jobs or seen their hours cut. For these consumers, cash advances might now be an unfortunate fact of life, at least until the economy again begins showing signs of life.

Since Congress was unable to come to an agreement, the jobless will no longer be able to apply for federal unemployment benefits or the COBRA health insurance subsidy. Due to the extreme economic circumstances, Congress offered additional unemployment benefits beyond what the states presented. The expiration of those benefits means more than 1 million unemployed will no longer receive benefits. If government continues to take no action, that number will soar to approximately 5 million by June, according to the National Unemployment Law Project. What can you do to survive until you get a new job?

Go to School

Granted, when you’re struggling to make ends meet and face the prospect of losing benefits, it may not seem intuitive to return to school. However, you need every possible advantage to shorten your time among the unemployed. In addition to job hunting and networking, attending a class or two will not only reduce your stress, but also increase your chances of finding a new job.

Volunteer

A great way to fill your days between job searching is to get out and volunteer. You’ll be able to help others, learn new skills, and meet new people, which could lead to a new opportunity. There is a tremendous number of people who are in need of help. Spending your time helping others will give you something else to focus on and make you feel better.

Start Your Own Business

The entrepreneurial spirit of individuals in this country is what makes it so amazing. Most of us have, at one time or another, dreamed of becoming our own boss. As bad as times are these days, there’s possibly no better time to venture out on your own. With nothing left to lose, some of the risk of starting your own business is eliminated.

I realize that as you’re trying to put food on the table and pay your bills, it can seem overwhelming to do anything beyond finding your next job. However, the greatest opportunities are often borne out of the most dire situations. There’s nothing you can do about expiring health benefits, but you can take action to improve your situation.

According to trends being reported in the past few weeks, the amount of personal loans being taken out by consumers has dropped sharply. Yet, as fewer consumers borrow personal loans, the cash advance industry is growing and thriving. Why is one loan product decreasing at the same time that another, similar loan type is increasing? As traditional financial institutions tighten their belts while trying to ride out the shaky economy, a personal line of credit is becoming increasingly difficult for the average consumer to obtain. Instead of trying to win over a bank or credit union, more consumers are turning to payday lenders, since there is no credit check on a cash advance loan.

The Economy as Creator of Financial Change

So the economy could well be the impetus for a growth in one financial arena, the check-cashing and payday loan industry, while blamed for the cutbacks in the area of personal lending by traditional financial institutions. More people are willing to put up with the high interest rates that payday lenders charge in order to obtain a small loan (typically $500-$1500) that can help them pay off the same kind of expenses that a personal loan would pay. However, as lawmakers determine whether or not to place a cap on interest rates on payday loans, the cash advance industry could soon be facing the same belt-tightening that banks and credit unions are experiencing. Opponents of the reforms say that an interest rate cap would severely cut back profits; indeed, payday lenders have already cut back stores in two states where reforms have already taken place. So what do all of these potential problems mean for the average consumer?

Do You Need Extra Cash?

If you are in need of extra cash, you should know that now is not the best time to do a little loan shopping. While you might have gotten several bites about 5 years ago, it is actually quite difficult to get a loan from anyone today. If you need a small amount to cover an emergency expense and your credit history is not exactly stellar, then perhaps a cash advance would work best. If you need a large amount of money to cover a single large purchase, such as home remodeling or repair, and assuming you have a better than average FICO score, then a personal loan might be the best choice for your situation. No matter what your situation, only borrow as much as you can afford to pay back in a reasonable amount of time; otherwise you could find yourself drowning in personal loans and debt.