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Pay Day Loans – Legislating Rates

The payday loan industry is enormous at over 85 billion dollars. In 2008 the state of Ohio passed legislation limiting the interest rate to 28% for businesses offering payday advance loans. This puts the interest rate at close to the same rate as a credit card. The state supported this bill by 64%. Proponents of the bill noted that payday loans cause the poor to get caught in a vicious cycle of debt that they cannot escape.

The interest rates on these types of loans ranges from 300% -600%. It is also important to understand the amount of risk involved with this type of transaction for the person lending the money. Given the size of the industry it would seem that there is plenty of profit motive to enter the market and that someone would lend at a lower percentage to pick up more business. However, the only thing to factor in must be the size of risk involved. More innovative online pay day lenders such as those that offer no fax payday loan have actually decided to stop lending in Ohio due to the new legislation.

This limits choice for Ohioans and others in States that limit pay day interest rates. Some have suggested that state level assistance programs may be necessary in the absence of this form of credit.

I’m interested to hear your thoughts on the subject. Leave a comment and let me know what you think. Does the new legislation protect those who would otherwise be taken advantage of or is this a necessary service that people depend on that will no longer be an option?

How old are you in credit years?

I came across this fun credit quiz that will tell you your credit age. It takes about 2 minutes to take the quiz. At the end you will get your credit age and a description of your credit self.

I’m interested to hear how many of you are credit newbies versus connoisseurs. You can leave a comment and let everyone know how you did. I would be interested to hear if any of you seemed to struggle on a particular section of the quiz or were troubled. I know personally, I pay off my credit card every month but the amount of credit on the card I use is high relative to my credit limit. I didn’t realize, but this can actually be viewed as a negative.

Oh, and by the way my credit age was also 47. In this case I am assuming that older is better, but I’m not really sure. I had my cousin take the quiz and she failed miserably. I think that explains a lot. This is the same woman who collects tons of longaberger baskets and complains about not having any money. Hmm, I don’t know what could be the problem.

Anyway, here is the link to the quiz Credit Quiz. Don’t forget to tell everyone how you did.

Ultimatum game – How to trade effectively

In life we are constantly making deals in ways we might not even think of. It doesn’t have to be as big as buying a house, paying off debt or some other major life event. We make deals as simple as splitting a piece of gum with someone. Traditionally, I’ve used the 50/50 split rule. It seems intuitive and fair. Growing up when I used to split a piece of gum my mom used to tell me, “you split, I pick.” This method ensured that we both had a common interest in making sure the split was as fair as possible. However, you may be able to get a little more if you don’t get to greedy.

Enter the science of what economists call the ultimatum game. In this scenario, there are two participants. One participant is given a sum of money. He or she is told that they must make an offer to the second participant. If the 2nd participant accepts the offer they can both keep the money. Remember, the 2nd participant will always be better off by accepting some offer. For example, a single penny is better than nothing. As you can imagine, the 2nd participant declines the offer at some level. What numerous studies have shown is that regardless of income level or size of offer that the 2nd participant usually declines when their share drops below 30%.

This has numerous implications for deal making and sharing of resources. As long as you can position yourself to let the other person think they are getting more than 30% of the benefit in a deal there is a good chance they will accept.

If they have the gum in the future you may want to opt for a more even split :)

Faxless Payday Loan: Helping Hand or Quick Sand?

Helping HandWhen we talk about loans in any forms, they are always related to debts.

Taking loans can offer you two things: good debts and bad debts – good debts put money in your pocket, bad debts lose money from your pocket.

Your financial needs, situation and knowledge play important roles in making the loan bad debt or good debt.

Loans come in many flavours – One of the most talk about, in my opinion, is payday loans. Why is that?

Faxless payday loan – offering you financial solution, fast – a bit too fast to handle

Payday loan is a small amount, short-term loan that is intended to cover borrower’s financial need until his/her next paycheck received.

With the advent of the Internet, payday loans are becoming more and more accessible. The term “faxless payday loan” refers to payday loan which application is processed online, thanks to the Internet.

While in essence payday loan aims to help people regardless of their credit score, many accuse payday loan as the culprit that drown many people deeper in debt.

Not quite.

In my opinion, people inherit a common weakness. They want more for less, and they want it fast.

People are always looking for fast and instant remedies for their problems, including financial problems. Just like everything in life, such as fast food, instant means immediate gratification first and quality second.

Payday loan offers fast solution. Faxless payday loan even does things faster, due to online application processing and instant approval. The drawback, as always, is the sky-high interest rate.

Those bring interesting relationship: No matter how negative the reputation of payday loan is, it seems that more and more people need payday loan these days, and payday loan providers are thriving these days. Some sort of love-hate relationship between lenders and borrowers.

Reality check: Stop blaming payday loans – have you ever look things from the eye of payday loan providers?

I am appalled to know people are blaming payday loan. Although I’m not offering any payday loans or similar things and not involving in one either, I think there are too much bad apples thrown at lenders, accusing them as scammers.

Have you ever thought that it is borrower’s responsibility to keep him/her-self well-informed regarding what type of loans he/she is about to take? It is borrower’s responsibility to know what question to ask and when to take payday loans.

Many payday loan providers I know are trying hard to offer a solution. They bear huge risks – they lend to borrowers with no regard of their credit scores. That is why payday loans charge huge interest rate: to supplement the high risks of lending to borrowers with bad credit ratings.

The right borrowers do regard payday loans as the life-savers. do help people – the right one and the well-informed one, that is – getting out of debt.

How to use payday loan to your benefit

First thing first – learn everything you can about payday loan. It is your responsibility to learn about payday loan, about the providers, and about what to expect and when.

Always plan everything – You need to know how much will you get from the lenders, the amount of the interest you owe to the lenders, and most importantly, how the short-term loans can help you getting out of debt, and for how long. You can actually ask the payday loan providers to provide you with a calculation on how much would you pay in the end of the loan period.

If the plan looks positive, go for it. If not, run away from it.

One, last advice: Never, ever take any form of loans without the right knowledge about the loans. That only makes payday loan quick sand, not helping hands.

Image by toolfan.hess.

Government Grants to Pay-Off Your Credit Card Debt: Blessings in Disguise

National Debt CountIf you are hoping for a miracle in clearing your credit card debts, you will probably wasting your time.

But if you are diligent enough in looking for information in the right places, you might found something that could be very well your small miracle.

One of the small miracles in today’s recession is Federal grants for credit card debt.

What is Federal grants for credit card debt?

In essence, the Federal grants for credit card debt is Government grants that allow you to pay off all your credit card debts, should you meet the criteria and requirements.

The main purposes of this grant are:

  • To stop you from drowning deeper into debt by taking new loans to pay off your previously taken loans.
  • To help you sustain your credit ratings and reputation.

The best thing of Federal grants is obvious – It doesn’t require to be paid back.

However, there are certain criteria and requirements to be met to be eligible – the first and foremost criteria, you have to be a US citizen, as this grants only apply in the United States.

Federal grants can have tax implications so consult your tax preparer before you file the 1040EZ.

First of all, you need to know how to apply for one.

How to get Federal grants for credit card debt

In general, the requirements to apply for the grants are as follow:

  1. Find the right Government Agencies and seek the information about the Government grants and funding programs – You can find such information from these Government’s sites: CFDA.gov and Grants.gov.
  2. Have the needed information ready: proof of income, your loan monthly payments information, and your total amount of loan taken.
  3. Along with the information the Government Agencies gather about your financial status, your application is then assessed to determine whether you qualify or not.
  4. You will be informed regarding your eligibility, and if you are judged to be eligible, your debt will be cleared as the government pays off the debt on your behalf.

Beware of scams

Just like anything that involves money, there are some organisations and companies that claim to help you getting the grant you’ve always wanted. They are too smart to know that, these days, people are often acting irrationally to get out of debt as soon as possible, by any means.

You homework is to keep your head cool and rational, while focusing your effort to find the right information. Again, the good places to start are these Government’s sites: CFDA.gov and Grants.gov.

Hopefully this post will help you with an opportunity to have a fresh start and build your personal finance the right way.

Image by Kevin Krejci.

New Year, New Hope: Plan Your Finance to Yield the Best Return

Finance InstitutionForget what some people said about how bleak the year 2009 is. The truth is, all we need right now is financial planning.

The premise – plan your finance well, and it will deliver you from financial woes that hit many who unprepared in 2007 and 2008.

The significance of financial planning in 2009

Financial planning has always been important.

Unfortunately, not all people believe the fact, until they were hit by financial problems. ‘Thanks’ to recession, the financial problems are magnified – due to the recession, financial planning has never been this important in the history of the mankind!

Particularly in 2009, financial planning is probably your most important task to do, either for your business finances or personal finances.

Creating a form of safety net or save haven for your money and finance will not only help you survive the recession, but also triumph over it.

Even better, you need to find a way to utilise all financial knowledge and tools you have to yield the best return for every penny or cent you have.

Here’s several plan ‘items’ you should consider thinking about.

Plan #1: Saving and deposit account – forget about it! Says hello to precious metals

As we know, banking and financial institutions are one of the hardest hit in today’s recession. In the US, the Fed squeezes record-amount of fund to keep those institutions afloat. Why? One of their fear: People rush to close their accounts.

However, in my opinion, that’s what you suppose to do – forget your saving and deposit account.

I’m not suggesting you to close your saving and deposit accounts – they are important parts in diversification. What I’m suggesting you is NOT to put too much money in them.

With the rising inflation in every part of the world, your saving and deposit accounts interest rates are becoming more and more insignificant.

You need to get back to what all the money in the world should base upon – gold and the other precious metals. Although the price of the metals are sky high, they are one of the safest investment forms today.

Plan #2: Utilise your credit cards better

Unlike most financial planners suggest, I suggest you not to cut your credit cards.

Instead, I recommend you to consolidate your credit cards – transfer your existing credit cards to lower APR ones or to credit card issuers that offer the most perks and rewards.

How to know which ones you should transfer balance to or apply for, invest some time to browse the Net for reviews and recommendations on credit cards issuer. Credit card sites offer alternatives you can consider, including which credit cards are good for what purposes.

My favourite credit cards story is that of my colleague’s – he shop for his business needs with his business credit cards. With tens of thousands dollar month after month business spending made on his credit cards, he is enabled to vacationing regularly and staying in luxury hotels, courtesy of his business credit card issuers – a win-win situation for credit card issuers and holders.

Plan #3: Cut bad debts, utilise good debts

When I say ‘utilise your credit card better’ in plan #2 above, I think credit cards as your ‘bridging’ in your financial planning. That being said, avoid using credit cards for loan purposes, as the interest rates are high.

Instead, cut any debts related to credit cards. In fact, cut any debts that are aimed to people with low credit scores, such as payday loan. Not that payday loan is not useful – it does in certain circumstances – but you should consider a lower interest loans that brings positive cash flow to your pocket.

Happy holiday and happy planning!

You need a break somehow, and be prepared for the coming 2009. Remember the butterfly effect I mentioned in my previous articles – what you do and think about your finances will affect your community – being positive is contagious, and it will eventually end the recession somehow.

I wish you have a happy holiday and happy planning!

Image by Zach Alexander.

Why US is Consumer Debt Ridden?

US is well known as one of the biggest creditors, as well as debtors in the world.

Although US helps funding other countries, especially developing countries, it own people is debt ridden.

Why such a contrast? In my opinion, culture and opportunities are the main culprit.

Taking consumer debts, especially with the ever-present of very interesting credit cards offer has been a trend, if not a culture in every American life.

Credit card, a major part of the cashless society movement, offers convenience to its holder. It’s unbelievable today if we know someone without having at least one plastic in one’s wallet.

Nothing wrong with the credit card – it’s the holder that cause the problems

Credit cards are basically useful and convenient. You don’t have to carry cash with you, bringing convenience in your daily life, as well as minimising the risk of, say, pick pocketing.

With low interest cards being offered these days, with additional perks, such as 0 APR or interest free period for a limited time, consumers are attracted to sign for one.

No matter how much information on credit cards benefit available, the debt-ridden US today is suffering simply due to the nature of human being – spend what they see, and spend even more what they don’t see.

For example, if you had a $100 in your wallet, you have the tendency to spend it recklessly when you go to the supermarket. This ‘genetic’ problem is amplified by the availability of credit cards. Suppose you were given a limit, say $500. You will always have the tendency to spend more than you should, because you don’t ‘see’ the money you have in your pocket. This is amplified by the sense of ‘you-can-pay-the-bill-later’.

Credit cards can actually deliver you from debt

Here’s a good news for responsible and well informed credit card holders – you can actually clear your debt with the help of credit cards, as well as helping you raise your credit score.

Clearing debts – Using credit cards smart and cautiously will allow you to have 30-day interest free loan. The key is to pay your bills before it’s due, and pay them in full.

Raising credit score – Choose reputable credit card issuers, and use your plastics as usual. The key is never pays your bills late. Do this regularly will give you a ‘shining’ report.

Choose your credit cards wisely, and they will help you in your personal finance.

Use the Plastic to Repair Your Credit Rating

People are always looking for the shortest path to solve their personal finance problems.

Often, taking the shortest path might not be your best way to improve your situation. Even in most cases, people recklessly apply for cash advances or use credit card financing without knowing the consequences of their decision.

When it comes to personal financial management, your mindset and knowledge play important roles.

Repair your credit rating, get out of debt

Poor or below average credit rating are commonly due to the following reasons: bankruptcy, poor spending habit, late payment, and pressing personal issue.

  • Bankruptcy – Both business and personal bankruptcy leave you unable to pay your debt.
  • Poor spending habit – this is the main culprit of personal bankruptcy – spending more than you can afford and often followed with late payments.
  • Late payment – Either forgetting or not having the resouce, late payments will always damage your credit reputation.
  • Pressing personal issue – An immediately needed large chunk of money is also the common cause of bad credit rating.

Plastic favours

Even loans with the highest APR can do your personal finance a favour, if you know how to play the money and mind game of getting out of debt.

If your credit rating is relatively poor, one of the effective ways to build your credit rating is by applying for a secured credit card.

A bank card is secured if you have deposited a sum of money onto a bank account to secure the credit. Typically, the credit card limit given is 50 to 100 per cent of the amount of money you deposited into the account.

Pay your bills on time, and build your credit reputation. Just make sure your chose issuer has the Credit Burreau informed about your application.

Escape yourself from getting scammed

As secured credit cards application are having lower qualifying criteria than unsecured credit cards, making it a choice for both applicants and, unfortunately, scammers.

Avoid secured credit card ads that have misleading offer, such as: “Call us to get approved instantly”, “Bad credit rep, no problem – Fast and easy approval”, and many more.

This is the reality: No one can guarantee to get you credit. Those calls you made, especially to 900 calls (you are charged a premium just for calling), are aimed to get the information from you, and maybe redirect your call or send your information to others.

Please be careful about the appealing, and often too good to be true, offers for secured credit card. Getting out is more difficult that getting in.

Consult a credit consultant or respectable credit card issuer about secrued credit cards and how it can be used to repair your credit rating.

Does Short Term Financial Fix Can Really Solve Financial Problems?

Most people would do anything to solve financial problems, as financial problems almost always come along with relationship problems.

As money is still a taboo topic today, financial problems are getting worse by not having a constructive and honest conversation about money.

An article by Psychology Today explained that although money is an emotionally loaded topic, it is still taboo topic to talk in family conversation. The result, as financial problems strike, is that most family ‘blindly’ take any financial help on sight, often in the form of unsecured loans.

Personal loans, mostly short term, are often viewed as a solution by family facing financial hardships. Come in the form of payday loans and cash advances, personal loans offer short term remedies for those financial problems.

This is where the problem lies.

Personal loans themselves are actually useful and purposed to help people. However, taking loans without proper money knowledge will eventually make the financial hardship even worse. This, in turn, creates a general opinion that personal short-term loans are negative and should be avoided whenever possible.

I viewed the negative reputation of personal short term loans is a misled perception. The high APR is often considered as the main culprit of many financial hardships, thus receiving negative reputation. The facts often prove the otherwise. The limited knowledge and wrong mindset of the borrowers are the actual culprit.

Personal loans as short term financial fix

Most personal loans are installment loans – a certain amount of loan should be paid back at the definite due date until all the total amount are paid off. This, in itself, is actually helping borrowers to cut the headaches and avoid late payment penalties. Some personal short term loan providers are even allowing you to pay off loan whenever you can, thus limiting the amount of interest paid.

Although short term loans are notably higher in APR than traditional loans, the fast approval and low credit score-friendliness are strong appeals for people and family with immediate need of cash.

Short term loan CAN solve financial problems

Short term loans, with the right attitude and knowledge, can solve financial problems, as well as relationship problems.

I suggest you to learn about the good debt and bad debt. Good debts put money in your pocket, while bad debts take money from it. In other words, use your personal short term loans not as your source for personal shopping and debt clearing, but for cash management enhancing purposes, such as securing profitable side business deals.

As long as you understand the concept of good debt and bad debt, short term loans offer options for your personal finance management endeavour.

Payday Loan for People with Low Credit Score: Hope or Nightmare?

There always be a pro-contra on payday loan. The largest pro-contra on payday loan is due to the premise that payday loan is purposed to help people getting small amount of cash, usually $100 to $500, quick.

Typically, the ones who need payday loans are those that need cash quick and low credit score.

What is a payday loan or payday cash advance? Payday loan is a form of cash advance , where borrower receive a short-term loan, which amount is usually between $100 to $500, and payable within under 1 month period, until payday.

The psychology of payday loan

Most people always have a certain needs that are related to money, such as covering daily expense. This fact, along with the fact that most payday loan taker is low income person, have made payday loan a viable option.

The psychology is simple – a pressing need requires an immediate gratification. This is where payday loan comes into play.

Unfortunately, many slump into bad debts simply because they don’t understand about payday loan, or they don’t have the right reason to take payday loan.

The pros of payday loan

Most payday loan providers offer fast approvals and open for low credit score applicant.

Online payday loan provider, such as Payday One – a US-based and state licensed payday loans provider – offer 24/7 access to payday information and application.

The cons of payday loan

The high interest rate is the main drawback of payday loan. The interest rate is approximately 400% APR, which means a $100 loan should be repaid $115 within 2 weeks.

Moreover, if you are not careful in managing your payday loans, you can easily get trapped in a vicious cycle of borrowing money to cover other loans. This is what often happens, and give payday loans negative reputation.

Payday loan: a hope or a nightmare?

The pitfall is not on the payday loan – the concept of payday loan itself is plausible and actually purposed to help people with financial difficulties.

It is the borrower financial knowledge and mindset that determine whether payday loan is a hope or a nightmare. No matter your credit scores – it is your vision of what to be made of payday loans that will actually allow you the make payday loans as a financial leverage.

Credit Card Minds

Many people think credit cards as the temporary solution for their long term financial problems. What I mean by financial problems is not financial hardship, but financial knowledge.

Credit cards main selling points are convenience, cashless and rewards. People sign for credit cards for those perks.

While credit card offers today is interesting – some offered 0% APR on Purchases, even 0% on everything – many people will eventually build up their credit card debts.

The question – why with all of the free and 0% offers some people still in deep credit card debts, that take years to clear and have to pay hefty amount of outstanding plus interest?

The answer – it is ‘humane’ that people always want more. Along with bad personal financial management, bad spending habit and wrong money mindset, here are why people stumble on credit card debts.

  • You make more money, you spend more money
    People always want to get rich. However, people forget that being rich doesn’t mean you have a lot of money. For some, being rich is status – no matter how much debt they have. Some of status symbol is credit cards. Having a strong financial knowledge will help you to make more and spend not too much.
  • You spend what you see and always want what you don’t see
    “If you have $100 in your wallet, how long will it last?” Most people will answer, “Right away!” Not many people have the strong will to spend carefully of their cash. Most of us need the cash to be ‘secured’ from ourselves to investment instruments, such as deposits or mutual funds. Credit cards alleviate this problems.
  • Convenience often makes you go loose
    Fast food is convenient – you can eat as you go. This, not considering the content of the fast food itself, will cause people to eat more, simply because of the convenience. This also applies to credit cards. Convenience in credit cards will likely cause you to spend more than you should.

I don’t recommend you not to have credit cards. Credit cards are actually very useful in our daily lives. However, I strongly recommend you not to have credit card outstanding debts.

Having a credit card today does offer you perks, such as:

  • 0% is always a good deal
    0% APR on Purchases, 0% APR balance transfer, free annual fee, and even 0% everything – the competing credit card issuers mean benefit for us consumers.
  • Convenient
    Convenience is credit cards main selling point – credit cards is easy to carry and secure – if anything goes wrong, call your issuers to block the cards.
  • Reward is, well, rewarding
    Frequent fliers, hotel deals, dining deals, cash backs, and other rewards are lavishing frequent shoppers.
  • Saving with credit cards
    You can save a lot of money if you know which credit card issuers offering what – Go to credit card comparison websites to learn more which issuers are the right ones for you.

I strongly recommend you to have the right mindset before applying for any credit cards, to get all the benefits of credit cards, such as savings, and avoid all the problems that most people with credit cards have, such as outstanding debts.

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