Personal Loans and Debt

So you have gotten in debt over your head and now you are looking for a way to get out of the debt hole without filing bankruptcy. But how should you start?
You may be thinking of getting a personal loan to pay off these debts but before you do know what's good and bad before you go apply for a loan.


How Personal Loans Can Kill Debt

by Terry C


One of the most controversial areas in financial planning is the concept of debt consolidation loans. The idea behind a debt consolidation loan is that you take your high-interest debt, which is usually debt from credit cards or from retail accounts, and you put it into a single loan with better terms and a lower interest rate.

What does it do?

A debt consolidation loan might take five smaller loans or accounts, pay them all off, and give you a single larger loan. A debt consolidation loan doesn’t actually reduce your debt, it just forces it all into one optimized bucket. This kind of personal loan lets you create a debt consolidation plan that will, eventually, get you out of debt altogether.

What’s bad about it?

First of all, you need to know that a personal loan for debt consolidation, as said above, doesn’t do anything to reduce your debt it just organizes it. In addition, it takes longer to pay off debt that’s been consolidated. Yes, there may be a lower interest rate, but you may wind up paying the same or more in fees and interest because of the longer term. There’s also the danger that the person who takes out a personal loan for debt consolidation will turn right around and incur more debt, especially if the debt being paid off was in the form of credit cards or retail credit accounts.

Why it’s still a good idea

Given all of that, there are still compelling reasons to use this kind of a loan. Here are some of the reasons a debt consolidation personal loan is a good idea:

* Lower interest rate. With some credit card rates at 20 percent or higher, you’re going to save money on interest with this kind of a loan.
* Ease of use. Trying to keep track of six or seven different accounts to pay each month can be a nightmare. The simple act of organizing your debt makes it less likely you’ll make a mistake and miss a payment on one of the accounts one month.
* A fixed interest rate. Retail credit accounts and credit cards often have rates that change. With a personal loan, you lock in a rate and make it easier to plan financially.

If you do it right, pay it off on time and don’t re-incur some of the types of debt that led to the problem in the first place, a debt consolidation personal loan can be a wonderful thing.

How does BAD Credit Affect My Finances? How can I Rebuild My Credit?

How does bad credit affect my finances?

Individuals with bad credit find it much more difficult (and often impossible) to be approved for loans, credit cards, mortgages, or even accounts with utility companies. Because approval is difficult to obtain, the individual must save more cash before being able to afford things like a house, a car, phone service, or tuition.

When those with bad credit are able to gain approval for loans or other lines of credit, they can often expect higher interest rates and higher payments than those with good credit are typically afforded.

How can I rebuild my credit?

The most important step to rebuilding your credit (or avoiding bad credit to begin with) is to always pay bills on or before their due date. This includes credit cards, mortgages, car loans, personal loans, medical bills, utility bills, rent, or any other financial obligation you have that may be reported on your credit history.

Aside from paying bills on time, reducing your debt is also an important step in rebuilding your credit. If you owe a lot of money on credit cards, for instance, paying down those balances can help improve your credit profile.

Suprise for Credit Card Users

Creative new fees escape CARD Act rules...

New report highlights ways Credit Card issuers have gotten around the new law!
By Tamara E. Holmes

While the Credit CARD Act of 2009 puts an end to abusive tactics card issuers have long used to boost their profits, consumers need only to look at their card statements to know there's no reason to celebrate.

New credit card traps

In the past year, card issuers have rolled out or expanded their use of other ways to collect millions more in fees each year, many of which are hidden to consumers, according to the Durham, N.C.-based Center for Responsible Lending's Dec. 10 report,

"Dodging Reform: As Some Credit Card Abuses Are Outlawed, New Ones Proliferate."

"Credit card issuers are going to more than ever try to find ways to make extra profits," says Joshua M. Frank, a senior researcher with the Center and author of the report. New charges and changes to the way fees are calculated are adding to the balances of a growing number of cardholders. While some of the practices were instituted after the Credit CARD Act was approved in May, others were quietly being put in place earlier as a result of the recession. The one thing they have in common, says Frank, is that "none of them are explicitly prohibited by the Credit CARD Act."

Hidden rate changes
Consumers with fixed rate credit cards won't have to worry about interest rate changes to current balances if they pay on time, under the Credit CARD Act. The vast majority of cardholders, however, carry variable rate cards, in which the interest rate is determined by adding a fixed percentage to the rate of an index such as the prime rate. For them, things get a little murkier.

In the past, issuers would generally use the highest prime rate in a cardholders current billing cycle as the starting point for determining a credit cards rate for the month. However, a number of issuers have amended their terms this year so that they now can select the highest prime rate in the previous 90-day cycle, a move that costs consumers $720 million a year, the Center for Responsible Lending estimates. As a result, the interest rate paid by cardholders may not go down in a given month even if the prime rate goes down. "It's so hidden and obscure that it can't be interpreted as anything other than a way to extract money from people in ways they don't understand," says Frank.

Credit card issuers are going to more than ever try to find ways to make extra profits.
-- Joshua Franks
Center for Responsible Lending

Variable rate cardholders are also impacted by another pricing strategy, as many issuers have begun setting "floors" -- limits to how low a cardholders variable rate can go. While the rate will rise with the prime rate, it won't go any lower than the floor even if the prime rate goes beneath that point. As of December 2009, the prime rate is at the historically low level of 3.25 percent. But "if you get a card in the future and the prime rate is, say 6 percent, then you wouldn't get the benefits of a decrease in the rate that would likely occur," Frank says.

New and expanded fees
Changes to interest rate calculations aren't the only ways issuers are mounting charges on consumers. A number of fees have become more prevalent this year, according to the center's study.

* Minimum finance charges can be greater than the amount of interest owed. As a result, if a consumer owes only $0.50 in interest, he may have to pay $2 because that's the minimum interest fee.

* Card issuers charge late fees that vary according to the card balance, so those who owe the most pay the highest fees. "But right now almost nine out of 10 people are in the top late fee category," says Frank. Though issuers often tout the lowest late fees, "the average fee that people pay has gotten higher and higher."

* Cardholders who don't incur regular charges risk being hit with inactivity fees. This strategy is even applied to cardholders who've opted out of a change of terms to the account and can no longer charge new items. Although their inactivity is forced, they may end up paying an additional $36 per year.

* Foreign transaction fees, which cardholders pay when a currency exchange takes place, are nothing new. But this year, more card issuers redefined "foreign" more broadly to include any transaction that at any point touched a foreign bank, even if the exchange took place in U.S. dollars. Likewise, the fee has inched upward with a majority of issuers charging 3 percent in 2009, compared with 2 percent in 2004.

* Card issuers are also cashing in on cardholders' use of balance transfer offers and cash advances. Not only are the fees for these transactions rising, but many card issuers are implementing minimum charges and removing caps they once had in place to keep the costs from surpassing a certain level. For example, a card issuer may implement a 4 percent transaction fee on cash advances with a $20 minimum. If a cardholder borrows $100, the 4 percent transaction fee would be $4. However, because of the minimum rule, the cardholder would pay an additional $16.

An exercise of choice
Consumers have more control over some charges than others, such as the ability to use a card to avoid an inactivity fee, but they need to keep a close eye on credit card statements. "We are seeing a lot of changes in the agreements so it's something for people to be really aware of in the next three to six months," says Sarah Fouquart, a group manager with Troy, Mich.-based GreenPath Debt Solutions. Those who don't understand the changes should ask their issuers about them, Fouquart adds.

While many of the top credit card issuers are embracing these new fees, consumers might also look to smaller regional banks or credit unions to avoid paying some of these additional costs, suggests Frank. "Usually you'll find that these organizations care more about the relationship with the customer than making a quick profit on one product," Frank says.

New fees and charges are unlikely to disappear anytime soon, but consumers still have options. "There's no harm in shopping around a little bit," says Fouquart.

How to Improve your credit , the easy way...

While talking to a friend of mine about our credit score I found that even though she and her husband had always tried to keep their credit score in a higher bracket, they had dropped below what is considered "good" because of a late payment on some bills. It wasn't because they didn't have the money but because she was hospitalized and during this time the bills were forgotten. Even though they explained why the bills were late it still caused their credit score to drop. The credit score companies don't accept excuses.

So I suggested that they take out a small loan at their bank.
She cocked her head to one side, gave me a strange look, then asked, "Now why would we want to do that? We don't need a loan."

Okay I guess you are wondering why I said that too. Well let me explain...
When you borrow money from a bank and pay off the loan before it is due, they report your prompt payment and it raises your credit score.

But what if you don't have any money to spare and your bank wont give you a loan? Here is what you can do...

Borrow, beg or sell something worth at least $50, $100 if at all possible.
Open up a savings account with this money then use it as collateral to secure a loan from the bank. Either the same amount you have in the account or less. Never ask for a loan that is more than what you have in the account. Just before the payment on the loan is due you use the money in the savings account to pay it off. Do this at another bank, and another until your credit score reaches the excellent mark. No doubt you will now be able to secure a loan with almost any bank without any collateral, as long as it is a reasonable amount. Never take out a loan of any size if you can't make the payments on time.

Bail Out for Moms

New laws allow moms with over $9100 in credit card debt to remove up to 75% of it.
No hidden costs or fees!


LOWER YOUR MONTHLY PAYMENTS
UP TO 60% OF YOUR DEBT GONE

RELIEF FOR UNSECURED DEBT
NO HOME OWNERSHIP REQUIRED

GET DEBT FREE IN 12-36 MONTHS
AVOID BANKRUPTCY! ACT NOW!

http://debtbailouts.org/

House votes to accelerate credit card reform rules

As a credit card holder and user I think this should have been done at the time this bill was signed. The interest rate should have been frozen at the time lenders were notified of the passing of this bill. It seems it would be illegal to raise the interest on any paying customer, as it is much like "price gouging". These credit card lenders have been changing to higher interest rates even on the people who have never made a late payment. Is this the way to treat your paying customers? I think not! More people will be declaring bankruptcy to get out of paying their credit card debts. After all who wants to pay $400 or more for an item that sells for $80. Don't they realize there are other lenders who charge less interest on a loan? Seems as if these credit card lenders have become "Loan Sharks".

"Lawmakers say that many credit card companies have used the grace period to increase rates. According to a recent Pew study, even the lowest interest rates offered on most bank cards have jumped by more than 20% since last year.

"The same companies that were in my office that claimed they needed months at least to make changes to their systems, apparently only needed, in some cases, days to find ways to raise interest rates and decrease credit limits on customers across the country," said Rep. Dan Maffei, a New York Democrat.

Read more here: House Credit Card Reform Rules

Pre-Paid Credit Card

Before you think about getting and using a pre-paid credit card you should know what it may cost you. Check out the money you may lose when you use this type of credit card.