Debt

Clever Tools To Help You In The Fight Against Bad Debt

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Bad debts can be incredibly harmful and impact your life in a multitude of different ways. You will find borrowing money becomes impossible, or, at the very least, extremely expensive. It will be tough to get simple things like a smartphone contract, and you might even struggle to pass a landlord’s credit check if you need to rent a house.

And more employers than ever before are starting to use credit checks in the hiring process – so your bad debts might even restrict your ability to work.

As you can see, bad debts can literally ruin your life – so you need to work fast – and hard – to make things right. With this in mind, here are few excellent tools that can help you get your finances back on track.

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Credit reference agencies

Credit reference companies such as Experian and Equifax hold a lot of information about your financial history, and lenders, retailers, landlords and even utility companies will often use them before offering you credit. And, if you have bad debts, it will impact your score – meaning you may not be able to borrow money, get a mortgage, or rent a property. So, you have to make sure that you know your current position by signing up to one of the services and checking your credit report. Highlight all debts that are causing you problems and ensure that you target these first when you start thinking about repayments.

Online money managers

There are plenty of money management tools out there which can help you organise your finances – which is critical if you want to tackle your debts. Services such as 7 Days, 7 Ways and YNAB will help you track every penny you are spending and work out what you owe, where your spending priorities should be and offer advice on boosting your income.

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PPI checkers

If you have ever owned a credit card in the past decade or so, there is a good chance that you will have been charged payment protection insurance – or PPI. Plenty of people have been mis-sold PPI, and in many cases, you can claim it back from the banks. So, find out how a PPI refund is calculated, and do some quick maths to get an estimate of what you are owed. Apply for compensation if you have believe you have been mis-sold, and if you receive a lump sum, you can put that towards your debts. Bear in mind that if you have credit card debt, there is a good chance that PPI payments will make up a substantial proportion of that debt – so your compensation might reduce your overall debt by a significant amount.

Bill Alert tools

When you need to pay off a lot of bills, tracking when they are due can get complicated. However, it’s something you must do if you want to keep lenders happy and improve your credit score. The good news is that tools such as Finovera and many others can help make it easier for you to deal with your bills from one place. So, when due dates come, you get an alert sent to you so that you can avoid all the associated charges that accompany missing payments.

Any more tools to add? Let us know about them in the comments section below.

 


Crushed Under The Strains Of Debt? Don’t Worry

The pressure and weight of debt can feel like a very real thing. It’s almost like the feel of a car on your back and the larger your debts, the larger the weight and the higher the pressure.

Of course, this isn’t a great way to feel mentally stable or healthy. The pressures of debt can really harm us.

The important thing to do when facing any amount of debt is not to worry. It’s more than likely in your control. In the very worst case scenario, you can of course file for bankruptcy – but you should always try and fight forth and crush your debts. It’s going to take a long time, but you can do it.

It’s important to focus early on and beat your debts down. If you have debt, it is a bad idea to accumulate more debt. If these debts are in the form of loan repayments, it can be a good idea to pay more than the monthly repayment charge so you can speed up the repayment process.

The best way to cut your debt down is to lower your spending. Budget, track your spending and keep a hold on every single one of your receipts. It’s important to know what you are buying each month and what you can afford to save on. If you reduce your monthly spend, you can eat into your debts faster. Spend less than you earn and build an excess – this habit is a great way to build some savings when you find your way out of the debts you owe.

Be careful of incoming phone calls during a period of debt – these can be companies chasing your debt as the debt has been sold onto them by the company you were originally indebted to. Sometimes your debt can be passed onto multiple companies and all these companies will do is chase you for the same debt. Bad form by them, but it happens. The other side of this is that there are companies and agencies who can help with debt relief – here’s a third-party review of a service – it is important to take on advice and help if you are unsure.

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A great idea if your debt is racking up is to negotiate payments with each and every single company you owe. Sometimes, this can save you a lot of money and might knock a huge percentage off of your total debt and it could give you access to some fairer payment terms and even freeze the interest so your debt isn’t growing while you are trying your very hardest to pay it off.

When you do eventually fight your way out of debt – learn from your mistakes that might have been the reason for the debt in the first place. It’s a good idea to only spend what you can actually afford. Debt is more often than a not a symptom of a larger problem and we do use money to fill holes in our lives. It’s important that that behaviour comes to an end when we find the path to financial health and wellbeing.

 


Get Ready To Claw Your Way Out Of Debt

It doesn’t matter how you got into debt. You might have some bad habits. Perhaps you didn’t prepare and safeguard your finances enough. Perhaps a crisis struck and you had no opportunity to protect your money. Whatever the cause, the reality is that being in debt is a dangerous situation to be in. The longer you keep it around, the worse it can get. But you can claw yourself out before the spiral pulls you too deep. All you have to do is relax, plan, and commit.

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Know your assets

Alright, it’s time to stop procrastinating and ignoring the issue. If you want to get into a better financial position, you need to know all the gory details about just how bad things are at the moment. The best way to do that is to find out exactly what your net worth is. That means calculating all your debts and loans, all your liabilities. Then you need to look at all your assets. This means your home, your car, your most valuable possessions, all your accounts and what’s owed to you. If your net worth is still in the positives, then you know that should worse come to worst, your assets will cover all your liabilities.

Budget like a boss

If you have a steady income of any kind, now is the time to get strict with it. A budget doesn’t just tell you how much you spend, it helps you figure out how much you should. Calculate your essential expenditures and set them aside. The bills, the mortgage, all the things you have to pay. Then take a significant portion of the money left over and set it aside for debt repayments. The more you can afford to spare, the better. This is what you pay towards debts as soon as it hits your bank account.

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Tackle the big and little things

A lot of guides will tell you to try grocery shopping at other places, to negotiate down your bills, and cancel subscriptions you’re not using. These are all wise decisions, but if you want to significantly increase your debt repayment fund, you’re going to need to reduce the big expenses, too. For example, looking at your car, you might want to trade your car in for one that’s more efficient and has lower emissions, even if it’s not as flash. Or you might consider shopping around for a different insurance deal. You can even pay lower premiums with the agreement that you pay out more upfront when you’re making a claim.

Directing your funds wisely

When you have money set aside, you need to decide where it’s going. All debt repayments that have minimums need to have their minimums met without question. But you should direct the rest you have left over to one debt at a time. Prioritize, so you can eliminate one debt wholesale before moving onto the next. It’s a good idea to tackle those with the highest interest first. That way, you have less money in total to pay out.

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Shuffle your debt around some

That said, there might be a way to curb the risk of interest growing too large to handle. Debt consolidation and debt relief loans can be a wise choice, but you need to look at the terms of the agreement carefully. How does it benefit you? Does it put a cap on the interest? Does it make your monthly payments more manageable? Does it give you more time to pay? If the answer to those questions is ‘yes’, then you should consider it.

Close your credit cards

Debt consolidation is like controlling a fire. Using a credit card to pay off debt is more like fighting fire with fire. It’s only kicking the can a little further down the road. You’re going to have to pick it up eventually. If your credit score is low, then you might only be making your interest rates worse. We know that it looks like a viable option when you’re panicking, but you need to resist the urge to use open lines of credit to fight debt unless you’re 100% sure it’s benefiting you by making it more manageable in the long-term. The best way to resist that urge is by closing any credit cards that are yet unused.

You need to celebrate every little victory, whether it’s closing one debt or reducing the overall amount you have to pay. It means you’re one step closer to freedom. Take care of yourself and remember that debt can happen to absolutely anyone. Money stress and lowered self-esteem are real issues, so be kind to yourself. You’ll feel all the better for it when you make it back to the top.


Fearful of Borrowing? Here’s How to do it Cautiously & Safely

Are you the kind of person that worried about borrowing and the effect it will have? Sure, debts can be disastrous; that’s why you should always be careful and cautious when borrowing. That’s not always easy to do, though. However, it’s worth learning more about borrowing and how to do it safely if you want to take out a loan with confidence. That way, you won’t have to worry about it too much. Your mind will be clear, and you’ll be able to take the steps that need to be taken.

Making sure that you borrow in a way that is cautious and careful will help you to avoid all of the common mistakes people make. That can only be a good thing for you and your own financial future, so it’s something you should definitely do. Below, you will find some tips and guidance that will help you to borrow in the right way. Take the time to read it all and make sure that you understand what you’re getting into before you take out the loan.

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Look for Alternatives to Borrowing First of All

First of all, you should question whether or not borrowing is the right move for you at all. It could be the case that you’d be better off doing something else instead. It’s a simple case of looking to avoid debts that could cause you trouble later on. If there is an alternative out there that’s better than borrowing money, then it definitely makes sense to take it. For example, you could get an advance from your boss. Or you could borrow money from a family member on a more casual basis. Or you could cut your expenses and use the money you save to spend on whatever you want. However, if none of those options are possible, you’ll need to borrow.

Be Aware of the Risks Attached to Each Type of Loan

There are so many types of loan out there, and you really do need to understand them before you borrow. When you know more about the possibilities on offer, you can be sure that you will make the right financial choice for you. In particular, you should be aware of the various risks that are attached to each type of loan out there. If you can build up your knowledge, you won’t ever need to miss a trick. You won’t want to take out the wrong kind of loan if it means that you end up in a worse financial situation than you need to be in. Talk to a financial advisor if you want to be 100% that you know what you’re getting into.

Be Careful Not to Borrow Money to Pay Off Other Debts

If your main motivation for borrowing money is to pay off existing debts, you should be very careful. This is not always something that is advisable. When you do this, you’re liable to get even further into a debt spiral that could become disastrous for you. To put it simply, piling debts on top of debts doesn’t often turn out well for you. There are some circumstances in which borrowing can be used to alleviate existing debts, but it requires a particular kind of loan. They are known as consolidation loans, and they are used to pay off numerous small debts. They replace them with one large one, which should be easier to manage.

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Know the Difference Between Secured and Unsecured Loans

The main distinction between loans that you should be aware of is the difference between secured and unsecured loan. When a loan is secured, it means that it is secured against something you own. This could be your house or another expensive asset of yours. So, what does this mean in reality? Well, it means that the lender could take possession of the house or the other asset if you fail to make the repayments. So, you need to be aware of this before you go ahead. That’s why unsecured loans are generally considered to be much less risky for borrowers. Assess your circumstances and decide which option will be best for you.

Only Borrow from Recognised Lenders

There is a real risk of borrowing from loan sharks when you are not careful about who you borrow from. Loans sharks don’t always look like dark and shady characters. In fact, they often look the same as your ordinary bank manager. They put on a suit, look professional and manage to win more people over this way. But make no mistake, these people are criminals, and they will stop at nothing to get their money back. So, you should only ever borrow money from a recognised lender. They should be recognised by the relevant industry bodies and be known to the public. If you’re not sure, ask questions. Never borrow unless you’re sure they are a legitimate company.

Always Shop Around and Compare Deals

You should always make sure that you shop around when you’re about to take out a loan. If you fail to shop around and look at all the options, you could miss the deal that’s the best one for you. Everyone knows that shopping around pays off. But that doesn’t just apply when you are buying a car or a home. It’s just as important, maybe more so, when you are looking for a loan to take out. There is no way to find out whether or not you are getting value unless you compare offers and deals. There should be no difference between the way you would shop around when purchasing any other item, so don’t neglect this. If an installment loan is what you’re looking for, there are plenty of online lenders to consider too.

Think Carefully About Loan Insurance

Loan insurance is one option that will be available to you when you take out a loan. You should think very carefully about whether this is something that will be good for you or not. For some people, loan insurance can help them out when something goes wrong. But for most people, loan insurance represents a waste of money that is probably not worth paying for. It’s all about deciding whether going without loan insurance is a risk you want to take or not. That’s for you to think about, but don’t make a decision without considering all the ramifications first.

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Don’t Lie to Secure a Loan

There is always a temptation to lie when you are applying for a loan. People think that if they present themselves and their financial situation more positively, it will make them more likely to be approved. Even if this is true, and it often isn’t, it’s still not a good thing for you to do. Banks have rules in place for a reason. If they don’t want to give you a particular loan, there will be a reason for it. It might be the case they don’t want to put that level of financial burden on you because they don’t think that you will be able to cope with it and pay the money back.

Check Your Credit Score and How it Will Impact Things

Check your credit score before, during and after taking out a loan. You need to be aware of it before you apply because it could affect whether or not your application gets approved. Make an effort to improve it in the months leading up to your application. And when you have the loan, be sure to meet the repayments on time, every time. If you fail to do that, your credit score will take a battering, and you will have to deal with the consequences of this later on, which is never much fun. So, keep an eye on your credit score and think about how you can keep it in good shape.

Plan Your Repayments In Advance

Before you even take out the loan, you should be sure to have a repayment plan in place. When you do, you can be sure that the debt will be manageable for you. If you feel like you will be spending too much on the repayments and your margins will be tight, it might be better to borrow less. Either way, planning out how you will pay the money pack in advance of taking out the loan is very important. Not doing this would be a big mistake, but it’s one that many people make.

Don’t Settle for Making Minimum Repayments

It’s not always a great idea to only pay back the minimum amount required of you. This might seem like the best option. But if you can, you should definitely try to pay back more. You’ll be making those repayments forever if you are only paying back a small amount each month. And that means you’ll have to deal with more interest as well. Therefore, think carefully about how much and how fast you can afford to pay back the money. The sooner you do it, the better.

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Student loan debt repayment made easier – Forthcoming changes in favor of students

These days, being an average student has become more of an expensive pastime. The average 2016 college graduate who borrowed student loans left their school with more than $38,000 in debt. This picture can be even grimmer for certain other majors as the average student loan debt for law school grads was around $140,616 and medical students were even worse off with $162,765 in loans. It is indeed fortunate enough that there were new programs which were constantly being introduced every year in an effort to offer relief to the student borrowers.

So, if you’re someone who is about to seek student loan repayment help in 2016, you will most probably encounter the following developments which may offer you just exactly whatever you’re searching for. Check out what you may expect from student loan lenders and how you can benefit by paying off debt.

The introduction of REPAYE

This was introduced in 2016 as an ally to other repayment programs which were driven by income and this is known as the REPAYE or the Revised Pay As You Earn program which opens repayment assistance up to 5 million borrowers every year. Borrowers will easily be able to cap their monthly student loan instalment at 10% of their discretionary income. As a complementary bonus, those on the REPAYE program will have remaining balances which are forgiven after 20 years of timely payments for the students who are undergraduate and 25 years for students who are graduate. The only catch here is that you will be liable to pay taxes on the amount which is forgiven.

New refinancing options sponsored by state

As all sorts of federal benefits have been exhausted and requirements have been tightened for the soaring graduates saddled with student loan debt, more and more states started offering brand new student loan refinancing options for the borrowers. To cite as an example, Minnesota is a state which launched its personal program in 2016. Their Self Refi Program lets Minnesota residents with student loan debt to refinance at rates which are as low as 3% if they are able to meet some requirements. The only benefit of this program is that they may deter the indebted students from relying on private loan programs which may be predatory or even pricier.

Workplace assistance of student loan repayment

As per a study from the Society of Human Resources Management, around 3% of US employers have started offering student loan assistance as a part of their employee benefits. As more employers realize the need for this kind of benefit, the number will gradually grow as they will then start rolling benefits into already existing packages which lure young students. In fact, as per a survey done by Student Loan Hero, more than half of the respondents valued student loan repayment over other employee benefits like 401(k) match.

Get On Your Feet Loan Forgiveness program

This has been introduced in 2016 to a horde of generous and grateful students. The New York Get On Your Feet program is yet another example of a student loan repayment benefit which is one of a kind. This is offered at the state level and it is limited because it is only offered to students in New York. The program provides up to 24 months of federal student debt relief who abide by the eligibility requirements.

Therefore, if you’re someone who is struggling with student loan debt payments, you should inform yourself about the above mentioned student loan repayment assistance programs. It is only when you know them that you can use them.

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Different Types of Student Loans Explained

Students seeking financial assistance to attend college have many options. Ideally, you have some money set aside and your parents are willing and able to help you pay for a college education, but if you still need money for tuition, books, and living expenses, there are a variety of loan options available to you. Here are a few different types explained.

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Direct Student Loans

The most common type of loan that college students receive is a direct student loan, which is granted by the federal government (through the U.S. Department of Education) when students apply for federal financial aid through FAFSA (the Free Application for Federal Student Aid). Within this category, there are Stafford loans, federal plus loans, and consolidated loans.

Stafford Loans

There are two types of Stafford loans: subsidized and unsubsidized. Subsidized Stafford loans are so named because they are government subsidized, which means the Department of Education pays the interest on the loans while you’re in school (at least half-time), for six months after you graduate, and during a deferral period. In addition, subsidized federal loans are based on financial need, with the amount determined by your school.

Unsubsidized loans do not require you to prove financial need, but your school still determines the amount, factoring in the cost of attendance, as well as any other financial aid you already receive (i.e. grants, scholarships, etc.). Also, you’re responsible for all of the interest accrued on your loans.

Federal Plus Loans

This type of direct loan is intended to cover the gap in expenses not already paid for by other types of financial aid (grants and Stafford loans). These loans are still federal, but they are based on credit score and may have less favorable terms for repayment, although the interest rates are still low.

Consolidated Loans

Students may take out several loans throughout the course of their college career. This type of direct loan consolidates all of these student loans into a single loan so that students paying down debt need to only make one payment.

Perkins Loans

While this loan program falls under the scope of federal loans, it is actually administered by individual schools and granted only to students with extreme financial need. For this reason, Perkins loans are not nearly as common as, say, Stafford loans.

Private Loans

Suppose you’re unable to receive all the funding you need for your school expenses through federal financial aid. If you can’t earn enough at a job or gain other funding through grants and scholarships, you’ll have to look for another source of funding.

Luckily, you can also take out student loans from private lenders to make up the difference and meet all of your financial obligations while you’re in college. Just keep in mind that private loans have very different terms, so make sure you understand the loan agreement.

References:
https://studentaid.ed.gov/types/loans/subsidized-unsubsidized
https://www.nerdwallet.com/blog/loans/debt-consolidation-loans/


Dealing with debts during a divorce – Handling your financial obligations

For an American, debt may be as common as baseball or apple pie and this kind of acceptance of debt is due to the fact that majority of the American couples owe a huge amount of money to their credit card lenders. They have taken out auto loans on their cars and have mortgages on their homes and have also over-utilized credit cards both for emergency and luxury purchases. However, all these debts seem to be inconsequential as long as you’re residing in wedding bliss. Everything seems to be right in paradise but as and when the marriage falls apart, the immediate question that arises is who gets left with the bills?

You can definitely file a divorce from your spouse for personal reasons but unless you take those extra steps to safeguard yourself, eliminating debt from credit cards which are jointly held is way more difficult. Something that you should remember is that the credit card companies aren’t bound by divorce decrees and hence they may run after you for debt that you and your spouse had jointly incurred when your marriage was running fine. This is the main reason why divorce attorneys always advise people to leave their marriage with no joint debt. Your ultimate goal should be to remove your personal liability from the debts accrued by your partner.

Consequences of a new single life with joint debt

When you opt for a divorce, your first consideration should be the consequences that you may face when you enter your newly single life with the jointly held debt. It is indeed painful to be liable for the debts of your ex-spouse! If your ex decides to file bankruptcy and not pay what he is supposed to pay, the creditor may hold you responsible for paying off the full amount of debt along with the penalties and interest. Although you may include provisions in divorce agreement and force your ex to pay off the debts, getting back to the court is definitely time-consuming and expensive.

There are many couples for whom this becomes a matter of emotional game. They think that if he or she can spend money, they can too. This is how they run up their credit cards. Little do they realise that you can actually save yourself enough money if you work an agreement about who is supposed to pay off the card. You may even seek help of a financial planner or an advisor or a mediator.

Knowing your options of handling joint credit card debt

There are numerous options for tackling joint credit card debt and which one you choose depends on the present state of the relationship that you share with your ex-spouse. One of the best ways to be sure that no joint debt disturbs you is by cancelling all joint credit cards. You may cancel all your credit cards that you know you have and then put them in your own name. This way you may prevent incurring more debt. Equal distribution is one of the last things that you may do in the divorce process under which the equal distribution of debts and assets is ultimately finalized.

On the other hand, if you think you’re drowning in debt and you fail to extricate yourself even after seeking help of a credit counselor, you may think of filing bankruptcy to get rid of credit card debt and also other debts. If you can’t avoid carrying joint debt in your post-divorce life, you may structure your divorce agreement in order to safeguard yourself. If the cards are in both names of the spouse and the divorce decree directs a single person to pay them, then he is liable to pay off the debts in the eyes of the court.

Hence, if you’ve just went through a divorce, it is needless to say that you are going through an emotional turmoil. Amidst all this, if you don’t want to go through a financial turmoil as well, take the required steps to handle your joint credit card debt by following the advice mentioned above.

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New changes to the retirement account rules to know of – Retire debt-free

Did you know that contributing a portion of your income to retirement accounts can help you qualify for tax breaks and sometimes even for employer contributions? Another new and lucrative perk which retirement accounts like 401(k) or IRA will now have is a legal necessity for investment advice which isn’t biased. Apart from this one, there have been some more tweaks and changes to retirement account which is definitely going to have an impact on the people who are eligible to contribute and how big or huge their tax savings are going to be. If you’re a baby boomer, you should know about the recent changes that may affect your tax savings. Check them out.

Change #1: Legal unbiased advice in your best interest

This new rule is all set to start in April 2017 and according to it, a financial professional who makes recommendations on investment about your IRA or 401(k) is legally obligated to offer you advice in your best interests. He should recommend you the funds which provide highest compensation to the financial advisor. This is a part of the fiduciary level of care where the advisor is asked to act as according to the best interest of the client. However, this new rule will only be applicable to retirement account and advice on any other kinds of tax or financial issues won’t be held under this rule.

Change #2: Charitable contributions on IRA

Withdrawing money from the conventional IRA account is necessary after attaining the age of 70 and half and income tax remains due on every single contribution. But in case you donate a portion or the entire part of the distribution to a qualified charity organization and you’ve crossed 70 and half years of age, you won’t be liable to pay taxes on this transaction. Such IRA tax-free charity contributions have always been a temporary feature of IRAs since the year 2006 but it was recently that it was made permanent.

Change #3: Income limits of Roth IRA become higher

You can easily earn an added $1000 in the year 2016 and yet save for retirement. The eligibility of Roth IRA will phase out for people whose gross income is between $117,000 and $132,000. Usually it is a rule that Roth deposits are done with after-tax dollars but the earnings that you make every year aren’t taxes. Withdrawing money after attaining 59 and half years of age from Roth accounts which are more than 5 years old are also considered as tax free. Though it won’t help you with the present tax picture but it will definitely assist you in the long run.

Change #4: The new retirement account, myRA

There’s a new retirement account, the myRA which was launched throughout the nation in November, 2015. This new account has been targeted at people who don’t have access to 401(k) plans. Individuals who want to save can contribute $5500 per annum to this new Roth account and if they’re more than 50 years of age, the amount can be $6500. There’s only 1 investment option, a variable interest paying Treasury savings bond. However, as soon as you hit the maximum balance that you can maintain on your myRA account ($15,000) or if the account turns more than 30 years old, the money will automatically be transferred to the private sector Roth IRA.

Hence, if you’re a retirement investor, you need to be up to date with the changes that are happening within the industry. Take into account the above mentioned changes brought about to the retirement accounts and measure your steps according to the rules.

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US government express concerns about the risky state of car loans

As per recent reports, a top banking regulator warned that the $1 trillion auto loan industry is gradually getting pretty dangerous in 2016. There is unprecedented growth in auto loans, shrinking values of cars and a sharp rise in auto loan delinquencies, as per the Office of the Comptroller of the Currency. The banking watchdog also put emphasis on the cut-throat competition within the banks which finally led them to make the underwriting standards more lenient than before.

Risks in auto lending keeps growing and the OCC stated in its annual report mentioning the details of the key risks that are faced by the US banks. Neither did the OCC call out the names of specific banks which are threatened by auto loan lending issues nor did they mention that this issue might pose to be a great risk to the financial system at large. Nevertheless, the report echoes certain concerns which have been raised by other regarding car loans, particularly the subprime or the low quality ones. Jamie Dimon, JP Morgan Chase boss recently opined in an industry conference that auto lending looks stretched in spite of the banks being careful about issuing them.

Soaring delinquencies on car loans

Earlier in 2016, Fitch Rating pointed out the fact that the rate of delinquent subprime auto loans has reached their highest level since 1996. The volume of auto loans recently exceeded $1 trillion, a figure that is up by more than 45% from the latter half of 2009. What is the reason behind this statistic? Well, Americans are seen to have buying a large number of cars, with sales hitting a record high level since 2015. Since cars have become more expensive, the loan amounts are also bigger and the defaults too. Wells Fargo and Ally Financial are 2 of the largest providers of auto loans in America.

The OCC warned that the banks may face bigger losses from sub-prime auto loans and they may require setting aside enough money to cushion themselves against those losses. Some risk management practices of lenders have not kept pace with the increasing risk and growth in portfolios. There is too much of indirect auto lending where banks offer cash to dealers to lend to people who are about to buy cars and this is yet another risky area which can watch out for ‘significant fair lending risk’.

Comptroller of the Currency Thomas Curry had once again raised the red flag previously about auto loan ending warning the lenders that some activity in auto lending reminded him of what took place in mortgage-backed securities in the run-up for the crisis. Auto lending has recently seen a sharp rise than before due to the lower interest rates, strong consumer demand and cheap gasoline prices. During the financial crisis too, the auto loans performed relatively well and market watchers interpreted this as the sign that the car loans are safe enough as cash-strapped people too had to pay for transportation costs. Auto lenders also have simple time collecting collateral on a defaulting auto loan by repossessing the car just as they do foreclosing on a house which is covered by a bad mortgage loan.

So, it is important to remember that auto loans don’t seem to pose the systemic risk which mortgage loans did before they started facing the Wall Street meltdown in 2008. Overall, auto loans make up a smaller universe of lending as compared to mortgages. Banks too are even pretty stronger to deal with any possible losses due to auto loan defaults.


Different Loans for Different Purposes

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Sometimes unexpected events come along that require your immediate attention, such as a car repair or medical bill. When this happens if you don’t have wiggle room in your budget or savings account, it can cause stress.

The good news is that there are a number of loan and cash advance options available that can get you the money you need to pay for these additional expenses. Since there are many different types of loans, it’s a good idea to find out which one best suits your personal needs. Before taking on any loan, make sure that you understand the terms of repayment and that you are able to make the installments on time.

How much do you need to borrow?

Loans vary, and in order to apply for the appropriate loan, it’s important to figure out the exact amount that you need to borrow. If it’s something like a car repair that costs roughly 1,000 dollars, taking on a personal loan for a period of 12 months can get you the money you need quickly. If, however, you prefer not to have continuous payments looming over your head for that length of time, a personal loan offered online through a lender like MaxLend can give you the same advantage of a quick payment with a short-term loan. The payments will be higher but you will only have to secure it for a few months.

Taking a cash advance from a credit card

You can also choose to take a cash advance from your credit card. The interest rates are usually much higher than a personal loan, however, if you are unable to secure a personal loan due to a high-debt-to-income ratio or a lower credit score, this can offer a quick fix. If you choose this as the best option, try to pay the balance off as quickly as possible to avoid paying two or maybe three times more than the actual cost of the repair.

When you need access to a large sum of money

If on the other hand, you’re in need of a major home renovation and you have a mortgage, a HELOC gives you access to a large sum of money that you can borrow from as you need to. You must have a good standing with your mortgage and the interest rate derives from the current market and other variables. You can also borrow funds from your 401K. You can usually borrow up to 50% of your savings and while there is interest attached you are paying the money back to you.

Removing debt and freeing up your money

A consolidated loan or a personal loan is ideal if you have a lot of outstanding debt in the form of credit cards and medical bills. These monthly payments can occupy a large portion of your budget and by consolidating them into one much lower monthly payment you’ll not only free up money but you’ll put an end to the high monthly interest rate.

Payday loans

If your credit score is poor and you need access to money fast for an unavoidable expense a payday loan can get you money in your hands usually within a few days. However, the repayment terms are short term and the interest can amount to two, three and even four times more than the original borrowed amount. In this instance, if you have nowhere else to turn, such as a family member or friend, make sure that you make every effort to pay the loan off quickly.

Even the best-planned budgets can need help from time to time. Just make sure before you put your signature on the dotted for the loan that you understand the repayment terms and that you are able to afford the loan. Learning to be financially responsible will save you from paying higher interest rates or getting denied a car loan down the road.

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