loans and credit

Let’s face it, personal loans for bad credit seem to be a tough proposition at first glance. The truth is, the loans are typically available, it’s just how you go about securing one that can make the difference between getting a good loan, and a not so good loan. If you follow a few
simple steps, you can help to ensure that you get the best deal possible.

We all go through tough times, and usually we hear things like “hang in there, it will get better,” and while that is true, we often feel that we need to be doing something, sometimes anything, to help the situation along. When the problem is money, that’s when people typically start looking at various options. Here are some things to consider concerning a loan:

• How Bad Is Your Credit, Really? Obviously, personal loan rates will be dictated by the state that your credit is in, and even if you think that it’s bad, you should still get a free credit report to see if it’s really that bad, if there are any errors negatively affecting your score, and if it is current. It is not unheard of for credit bureaus to make mistakes, and you should be sure that they haven’t.

• Just Browsing. That should be your initial mindset when shopping for poor credit personal loans, and shop you should! While local credit unions and banks can issue loans, they are not the only ones! Make sure to check online, where you can access loan possibilities from around the country. This is a most important step, and could save you a considerable amount of money.

• Borrow Only What You Need. Little Suzy needs some dental work immediately, but do you also need a trip to Las Vegas right now? The point is, don’t make the mistake some people do by borrowing more than you need, then letting temptation allow you to make bad financial decisions that are only worsening your debt situation. Instead, manage the money smartly, and try to pay it back as quickly as possible and you’ll actually be helping your credit score.

Those are a few tips that may help you while shopping for the right loan, and remember that it’s possible to find a “low rate personal loan” relatively speaking, even if your credit’s not great. However, remember that you play a big role in this process, and it is in your best interest to shop around, research, and fully understand what you can afford and what you are taking on. If you do all this, and keep your wits about you, you should be in as good a shape as possible for your situation.

A survey recently about what people are doing with their 401K balances when they leave their job revealed disturbing results. Millions of workers make the choice to cash out on their retirement plans when leaving a company, sacrificing the potential for tax-deferred growth, paying IRS penalties, and essentially making the decision to start over on saving for retirement. It’s easy to blame the economy and the tough time people are having making ends meet on this trend, but the survey results have been the same since 2005.

The trends show that young people are the most likely to cash out, probably because balances are smaller and they feel like they have more time to start over and rebuild. However, it’s younger workers who are giving up the most when they cash out thanks to the power of compounding returns. Of workers in their 20’s leaving jobs, 60% currently are cashing out their 401K balances.

Whenever leaving a job with a 401K, you have a choice of what to do with the funds that are fully vested and in your name. The choice you make for your retirement dollars will have a big impact on the lifestyle you’re able to enjoy during your retirement. Here are the choices available, in most cases, when leaving a job with a 401K.

– Cash Out: If you’re under age 59 and a half, the IRS is going to charge you a 10% penalty for cashing out early from your 401K unless you qualify for an exception. In addition to the penalty, taxes will be due on any amount withdrawn from a 401K. Between these two financial consequences, a worker is giving up somewhere between 15 and 40% of their retirement savings to get their hands on the cash today. This is an option that should only be chosen during a time of extreme financial need.

– Rollover to an IRA: About a quarter of workers leaving their jobs roll the money out of their employer-sponsored retirement plan and into another qualified plan. One advantage of a rollover into an IRA is that the rollover is not a taxable event and the money continues to grow on a tax deferred basis. Another is that in an IRA, the investment options are much more diverse than in a 401K, where owners are usually limited to just a few mutual fund choices.

– Rollover to a Qualified Plan: In addition to IRA accounts, some employees roll their 401K balances into the retirement plan with their new employers. Not all 401K plans accept rollovers from other qualified plans so you’ll need to ask your HR department about portability in their 401K plan. The advantage of this type of a rollover is that it keeps your retirement dollars consolidated and avoids overlap concerns. The disadvantage is that the investment options are more limited than in an IRA account.

– Leave It With Old Employer: The final option is that the retirement money that has been saved can be kept in the 401K plan with the old employer. This is easy to do and about a third of all workers leave their 401K behind when they leave their employer. The advantage is that it requires you to do nothing, but many people like to cut all ties with former employers and this option does leave some strings attached. In addition, 401K assets can be frozen occasionally if the company sponsoring the plan goes into bankruptcy.

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Consumers looking for financial relief might be able to find it with a combination of debt consolidation and mortgage loan modification. Consumers struggling with debt are usually behind on their credit card bills. At the same time, many are struggling to make their mortgage payments each month. This combination can lead consumers to future financial problems. Fortunately, there are solutions for both problems: debt consolidation loans and mortgage loan modification programs.

Debt Consolidation

Consumers who face overwhelming credit card debt often turn to debt consolidation programs to help them reduce that debt. Debt consolidation companies take consumers’ debts and combine them into one monthly payment. As long as consumers pay this monthly payment on time each month, they won’t have to worry about collection agency calls. These loans aren’t perfect, of course. For one thing, they can be pricey. Debt consolidation services often charge high interest rates and origination fees. Secondly, these loans also hurt consumers’ credit scores. In today’s financial world, having a low credit score can be a burden; lenders rely on these three-digit numbers to determine who gets loan money and at what interest rates. Still, by taking out debt consolidation loans, consumers can ease the stress that comes with high credit card bills.

Mortgage Loan Modification

For consumers struggling with mortgage loan debt, there is another solution: loan modifications. Consumers who are struggling to make their mortgage payments each month can call their lenders or banks and ask for a modification that will leave them with a smaller payment each month. Lenders can do this by reducing homeowners’ interest rates, forgiving a portion of their principal balances or restructuring the terms of their loan. Usually, homeowners who want a modification will have to write a financial hardship letter explaining why they can no longer afford their monthly payments and will have to show financial proof, in the form of copies of their credit card bills or paychecks, that their gross monthly income has, for whatever reason, taken a serious fall that makes their mortgage payments unaffordable.

Financial Savvy

Consumers who do turn to debt consolidation loans or mortgage loan modifications for financial relief must then take steps to make sure they never need these services again. It makes little sense to use a debt consolidation loan only to run up your credit cards again. It makes just as little sense to apply for a mortgage loan modification only to find that you still can’t pay your mortgage loan even in its smaller form. It’s not easy for consumers to keep their finances spotless, but with a bit of help from debt consolidation programs and mortgage loan modifications consumers do have options for starting over.

You may see ads online or hear radio spots promising free or no-charge debt consolidation loans. If you do, here’s a quick bit of advice: Don’t believe it. There is no such thing as a free debt consolidation program. Remember, debt consolidation companies are in business to make money. They’re not in business to help consumers who’ve run up too much debt. A credit card debt consolidation loan may be the right choice for you if your credit card debt has reached overwhelming levels. But never think that you’re not going to pay for debt consolidation help. Free debt consolidation simply doesn’t exist.

How Debt Consolidation Works
Debt consolidation loans are fairly simple products. Consumers with high credit card or other debt meet with a company that sets them up with a debt consolidation program. Usually, this company will take consumers’ debts and combine them into one monthly loan, a loan that consumers can comfortably afford to pay each month. As long as consumers make their payments each month on time, they’ll gradually pay down their debt and avoid the harassing calls of the collection agencies. It’s one way for debt-burdened consumers to relieve some of the stress that comes with high credit card debt.

The Negatives
Like all debt solutions, debt consolidation programs do come with certain negatives. Most debt consolidation companies charge high origination fees. They also charge high interest rates. This means that consumers will, over the long run, pay more to pay off their debt under a debt consolidation program than they would if they had paid off their debt on their own. A credit card debt consolidation loan also damages consumer’s credit scores. This is important: Mortgage, auto and personal lenders today rely heavily on consumers’ three-digit credit scores when determining who gets their money and at what interest rates. Those consumers with low credit scores, which they’ll have after taking out debt consolidation loans, will end up paying more each month for whatever money they borrow in the future, at least until they improve their credit scores again.

The Positives
Consumers have to balance the pros and the cons when debating whether they should take out debt consolidation loans. The main positive is the peace of mind that a debt consolidation loan can bring. Consumers won’t have to lie awake nights wondering how many collection agency calls they’ll receive tomorrow. They won’t have to worry that their mailbox will be stuffed with past-due notices the following day. Yes, debt consolidation loans do come with negatives. But for many consumers, these negatives are worth the financial relief that they can bring.

Businesses of all sizes can benefit from debt consolidation. Drowning in debt personally or professionally isn’t fun either way. Worse yet, business debt can force a company to close its doors forever. If you’re the business owner, this can also cause you to lose your source of income, which can lead to personal debt issues too. Rather than close your business because it is drowning in debt, consider debt consolidation as a solution to regaining control of your business finances. As the business owner, business debt consolidation requires you to take steps that are similar to ones you take in a personal debt consolidation but, instead, focuses on business debt instead of your personal debt.

Steps to Business Debt Consolidation
The first place to start with a debt consolidation for your business is to compile all of your business credit card and bill statements. Gathering all of the information together helps you to gain a full understanding of how much debt the business is in. Once you have the information together, create two piles for the bills and statements. Mark one pile “good debt” and the other pile “bad debt.” Good debt is tax-deductible debt. For example, a mortgage on the business property your business occupies is generally a good debt because the interest portion of the mortgage is tax deductible. High interest rate business credit card debt, on the other hand, is bad debt because this interest is generally not tax deductible as a business expense. Concentrate on consolidating and paying off your bad debt before the good debt. Once you know which debts you want to consolidate and how much you need to consolidate, you can then review the business debt consolidation options available. The three primary options are a debt consolidation loan, a small business loan, or commercial debt counseling. When comparing your options, consider the interest rates, fees, terms, and conditions of each option, and then choose the solution that works best for your business.

Tips for Business Debt Consolidation
One source for obtaining a debt consolidation loan is from a Small Business Administration (SBA) lender. SBA loans typically offer lower interest rates than other debt consolidation loans. Also, make sure that the debt consolidation loan term doesn’t simply extend the number of years you have to pay off the debt since this simply requires you to pay more in the long-run. You can apply for a small business loan from a private or commercial lender or seek the help of a commercial debt counseling agency to create a debt consolidation plan for your business and then help you to implement the plan.

Debt consolidation and settlement remains a sound option for consumers in serious financial straits. But consumers must do their research before signing on to work with any company that specializes in debt management. Otherwise, they’ll end up working with someone like Chicago lawyer Robert Lock. This attorney faces serious charges from credit giant Capital One and the West Virginia attorney general, both of whom allege that Lock and the debt management company he operates, Credit Collections Defense Network, promised consumers they’d settle their debt and boost their credit scores, but then did nothing for them.

Legal Problems

According to a story in the Chicago Tribune, West Virginia officials say that Credit Collections Defense Network promised clients that it could settle their credit-card debt for less than what they owed. The company also promised that clients would boost their credit scores if they followed the firm’s debt management plan. According to the West Virginia attorney general’s office, the company collected more than $20,000 from about 20 West Virginia consumers who never had any of their debts settled or resolved in any way. Unfortunately, Credit Collections Defense Network is not the only scam artist operating in the debt consolidation and settlement business.

Consumer Research

Consumers in need of debt consolidation or settlement services need to do their own research before signing up with any company that works in this field. Most firms in the business are upfront about the services they offer and the results that consumers can expect. But some are less than honest or ethical. Before signing up with a debt consolidation or settlement firm, consumers need to request these companies’ fees in writing. They also need to know exactly what interest rates they’ll be paying on any debt consolidation loans. Finally, they must ask companies how they work. If the firms promise to settle consumer debt, consumers need to ask how these companies do that.

Due Diligence the Key

As when signing up for any financial service, the onus is on consumers to do the research necessary to determine whether they’re getting a fair deal or they are being scammed. This requires consumers to ask the right questions, and to be willing to demand to have the answers to these questions put in writing. When reading about companies such as Credit Collections Defense Network, it’s little wonder that so many states either have or are debating laws to regulate the way debt management firms operate. Debt consolidation and settlement services are a financial safety net for many consumers. But for those who work with dishonest or unethical companies, it can also be a further drain on their already stretched finances.

If you’re struggling with debt, you have a choice: Should you work with credit counseling companies, take out a debt consolidation loan or sign up with a debt settlement company? Each option comes with its own pluses and minuses, and deciphering them all can be quite challenging. Fortunately, the website of Fox Business recently ran an informative story from CreditCards.com, which provided an in-depth look at the many forms of debt management available to consumers. Which form is best? Not surprisingly, there is no one right answer. It all depends on your financial situation and goals.

Debt Consolidation

The CreditCards.com story rightly sums up debt consolidation loans as a safety net of sorts for consumers whose debt has grown out of control. If you’re lying awake at night worrying about your credit-card bills, or if collection agencies are calling you every day, you might be a candidate for debt consolidation. These loans funnel all of your outstanding debts into one loan, with a monthly payment that you can afford. While you’re making your payment, collection agencies will no longer be harassing you. There are some drawbacks, though; for one, taking out debt consolidation loans will lower your credit score. Secondly, these loans often come with high interest rates. You’ll end up paying more than your total debt by the time you finish paying off a debt consolidation loan.

Debt Settlement

You can look at debt settlement as one step higher than debt consolidation. These companies promise to shave large chunks off your debt by negotiating settlements with your creditors. You, of course, pay them a fee for this service. Debt settlement can be an option for consumers whose debt levels are so high that they can’t ever envision paying them off. The problems with debt settlement are pretty significant, though: Working with debt settlement companies looks terrible on your credit report. And the fees these companies charge can be pricey.

Credit Counseling

Credit counseling might be a must no matter which debt management option you choose. Counselors can help you change your negative spending habits. This is important; if you don’t do this, the odds are good that you’ll simply run up your debt once again, playing havoc with your credit score. Make sure, though, when you work with a credit counseling service that it’s a non-profit one. Some of these won’t charge you any fees. But if you do work with a counselor who does charge, make sure that the fees are reasonable. Debt consolidation loans, debt settlement and credit counseling are all options for people struggling with debt. Which one works best for you depends on the amount of your debt.

Debt repayment, rather than taking out personal loans to cover the cost of debt consolidation, is gathering speed as a trend among consumers. According to recent figures compiled by Sainsbury’s Finance, a bank based out of Great Britain, only 1 pound in every 50 taken out by consumers is used to pay off debt consolidation, as compared to 1 in every 13 just two years ago. According to the bank, this means that while personal loans for other purposes continue to increase, loans for debt consolidation have shrunk. Consumers are more likely to take out a personal loan for a large single purchase, such as home renovation or a car nowadays.

While this trend has been tracked in Great Britain, it is gaining popularity stateside as well. Financial analysts like Suze Orman and Dave Ramsey have continued to beat the drum for living a debt-free lifestyle for years; the recent recession made that message a lot more relevant for many people who had gotten overextended on credit or were living with an underwater mortgage. So if personal loans are being eschewed for debt consolidation purposes as people choose to pay off debt, what are they still being used for?

Personal Loans for Emergency Medical Procedures

Although consumers are cutting back on unnecessary expenditures in order to become debt-free, there is one area that remains difficult to anticipate or cut back on–personal medical expenses. If you are in need of a sudden procedure that is not covered by your insurance company, or if your deductible is very high, you may need a personal line of credit to cover the costs. Most consumers prefer to use a personal loan to cover medical costs, rather than a cash advance or credit cards, since the interest rate on personal loans is much lower. This makes it possible to pay off your procedure without racking up huge amounts of interest.

Personal Loans for Emergency Repairs

As more and more consumers embrace the debt-free lifestyle, they are choosing to repair things that, ordinarily, they would have simply replaced. For example, more consumers are choosing to repair their cars instead of buying new ones. So how do you afford a sudden, costly repair such as a new transmission or engine work? Often, consumers turn to personal loans to cover these sudden and necessary procedures. You can still remain committed to your debt-free lifestyle if you use the loan wisely and take out the least amount you need. Since they carry a lower rate of interest than a cash advance or a credit card, they remain a viable way to afford repairs without getting over your head in debt.

If you see an Internet ad promising you an Obama free debt consolidation program, don’t click. The odds are great that a traditional debt settlement or consolidation company is behind the ad. That’s because the Obama administration, despite what you may see in pop-up ads, does not offer any government-sponsored debt consolidation programs. In other words, while the Obama administration does offer bailouts to banks, mortgage lenders, insurance companies and homeowners facing foreclosure, it doesn’t provide any similar programs for consumers struggling to get a handle on their credit card debt.

Beware Misleading Ads

Financial columnist Steve Bucci, who serves as the Debt Advisor writer for financial site, Bankrate.com, recently addressed this issue. He made it perfectly clear: There is no such thing as an Obama-sponsored credit card relief program. This means that consumers who want to consolidate credit card debt have to do so on their own, without any help from federal agencies. There are plenty of companies out there that do offer debt consolidation counseling, debt settlement and debt consolidation services. But consumers who take advantage of these programs to reduce or settle their debt will have to pay for the services out of their own pockets. All those annoying Internet ads, then, showing dancing silhouettes or jogging women are more or less lying to consumers.

Don’t Click!

Consumers who click on these online ads that promise Obama credit card relief or Obama debt consolidation programs will undoubtedly be taken to the home page of a for-profit debt consolidation or settlement company. If consumers contact these companies, by phone or e-mail, they’ll receive a standard pitch: The company will promise to either settle or consolidate their debt for a fee. It’s the fees that consumers have to watch out for. Settling or consolidating credit card debt is beneficial. Consumers just have to do their research to make sure that they’re not spending too much to do so.

Homework

Companies that offer to consolidate debt or settle it are performing an important service. They shouldn’t, though, resort to misleading advertising tactics, something that they do far too often. The debt reduction business is a competitive one, so the companies working in it aren’t averse to making misleading claims if it means more business. Consumers, then, should make sure that they know they are signing up with a for-profit, private business, and that they’re not working with the federal government. They should also make sure they understand exactly what fees and interest rates debt consolidation or settlement firms are charging them before they sign any contracts.

Most people write out their budgets from time to time in search of little costs that could be eliminated in order to stretch their paycheck a little further. The problem is that it’s easy to identify the big costs that we are responsible for each month, but think about all the small things that we spend money on without even thinking about it. The fact is that most people could save hundreds of dollars every month and thousands of dollars every year by making a conscience effort to eliminate some of these small costs.

Everyone has different areas that they could cut spending on in order to save more money, but here are some of the more common areas where improvement can be surprisingly easy.

– Buy Generic Brands: You may not want to buy generic brands of everything you use, but there are some items in just about every aisle of a grocery store that feature a generic product that is virtually identical to the original. Saving just $5 a week by picking generic instead of brand name goods will result in almost $300 a year in savings.

– Brown Bag Your Lunch: Think about how much money you spend on your lunch break each day. Many people routinely spend $8 – $10 a day on a sandwich and a bag of chips. If you’re spending $40 a week on lunch, plus occasional dinners, breakfasts, and trips to the coffee shop, then you’re devoting a significant amount of money to eating at restaurants. For a real eye-opener, write down every dollar you spend on food at restaurants for a month. Bringing a lunch even two days a week can result in savings of over a thousand dollars over the course of a year, and that’s real money!

– Avoid Banking Fees: Look back at your past few banking statements and add up the amount of money you spent in fees. Things like ATM fees, overdraft fees, and other charges for the privilege of banking somewhere are great for banks, but terrible consumers, especially when you’re earning almost no interest on your money. Open a free checking or savings account with a bank near your home of office that you can use to access cash without paying fees or get cash back with your debit card at grocery stores. A $1.50 ATM fee doesn’t sound like much, but they add up quickly.

– Buy Only What You Need: We all like to treat ourselves to something once in a while that we wouldn’t normally buy, but impulse purchases need to be kept to a minimum. One of the easiest traps to fall into is buying something because it’s on sale. If you weren’t planning to purchase that item when you walked into the store, then the few dollars you save compared to the regular price has just caused you to spend money that you had not budgeted for. Coupon shopping can lead to the same unnecessary spending.

– Break Bad Habits: If you smoke, drink excessively, or have some other habit that you spend money on each month the financial benefits to ridding yourself of that habit can be just as important as the health benefits. Think about how much money a smoker spends on cigarettes each month. Quitting smoking will not only lead to better physical health, but it will make a big difference in a person’s financial health as well.