Financial Priorities: Which Debts Should You Pay Off First?

There’s no one right answer, but you’ll probably want to order your debts by interest rate or by total balance—whichever works best for you.

Tackling your debt can be like cleaning up an attic filled with decades of accumulated junk. There’s just so much there, it’s tough to know where to start.

But much like cleaning out the attic, tackling your debt will seem much more possible once you develop a plan. And that plan starts with knowing which of the boxes of creepy dolls or which kinds of debt to remove first, respectively.

We spoke to the experts to find out which debts you should be tackling first. You’ll have to look elsewhere to deal with that creepy doll situation.


Take stock of your finances.

Before you decide which debts you’re going to focus on, you’ll need to take a good, comprehensive look at the state of your finances.

“First, take a very good look at all of your bills and put them into categories of monthly, weekly, yearly—and if there are other payment schedules, include them,” advised Leslie H. Tayne Esq. (@LeslieHTayneEsq), founder and head attorney at Tayne Law Group (@taynelawgroup). “This way you know what needs to be paid when. Then you can categorize those bills into necessities and wants.

“Take a good look at the wants to determine whether there are any you can cut down or eliminate so that you can free up cash flow for necessities. Then to get your finances in order, you need to know which necessity bills have to be paid first, what you can hold off or pay partially, and figure out a game plan for making payments. I use a desk calendar for bills and place the bills in red, so I know what to expect month-to-month. It keeps me organized and gives me a visual. You can also do this on an app or computer.”

Margaret M. Koosa (@magkoosa), CEO of The Alchemists, suggested determining the essentials before anything else: “One needs to determine their household essentials in their monthly budget. Cut down to the essentials to allow for the maximum amount to be put towards the payment strategy. (i.e. review cable, cell, dining out, unnecessary expenditures, etc).

“The status of one’s mortgage, car payments, tax debt, alimony, child support, etc, will impact what one needs to catch up on prior to paying down credit cards, student loans, etc. If one loses their home, their ability to get to work, wage garnishment, or imprisonment, then their credit card debt seems insignificant.”

Certified financial planner William F. Davis (@WFDCFP) offered a similar starting point: “When I work with new clients and we do a complete asset and liabilities statement, we prioritize what debts to pay off first—not necessarily to be able to pay them all off immediately, but rather finishing one, and then moving our focus to the next. Sometimes this takes a few months, sometimes it takes several years.”

But which debts should be addressed first?

The great debt debate: highest interest rate vs highest balance.

While you might prefer interesting movies, books, and television shows, when it comes to loans and debts, you’d rather go in the low-interest direction. Which is why you might want to get rid of the higher interest loans first, so the interest you owe on your debt won’t grow quite as quickly. And that’s often a good move. But not in every instance.

“Often you will hear people say to prioritize high-interest rate debt first, but it’s dependent on your financial situation,” explained Tayne. “Sometimes it’s about the credit you need the most, or accounts that are more aggressive in collection efforts.”

Tayne also talked about a debt payment method known as the debt snowball method: “It can also be helpful to pay off low balance debts first to free up cash flow to make more substantial payments on higher balance/interest cards. Once your first card is paid off, apply the total amount you were paying each month on that card to your next credit card.

“You will then be paying the minimum amount due on the second card plus the total monthly payment you were paying on your first credit card. Continue with this process with all your cards and other forms of bad debt. As you continue to pay off each debt, the monthly amount you are paying on the debt will increase allowing you to pay off balances faster.”

But you could also take the opposite method, depending on what suits you.

“If you want to save the most money, then list your loans with the highest rate loan at the top and list them in order with the lowest rate loan at the bottom,” empowerment coach Joyce Blue told us. “If you want more instant gratification, then list the smallest balance at the top and continue in this manner with the largest loan balance at the bottom.

“Then start making extra payments to the loan at the top of your list. Let’s say the minimum monthly payment is $100.00 and you have an extra $30.00 a month to that payment. Once that loan is paid off you take that $130.00 payment and start sending it to the next loan. Let’s say loan number two on the list has a $300.00 monthly payment, so you would be sending $430.00 a month. When that loan is paid off you’d start sending an extra $430.00 to loan number three on your list. Continue rolling payments to the next loan until they are all paid off.

Another debate to consider: good debt vs bad debt.

“Now there is ‘good’ debt vs. ‘bad’ debt to consider as well, says Blue. “As an example: a home loan is a good debt, so I usually suggest clients pay that last. However, there are still ways to save on the interest rates of good debt, as well, like splitting your payment in half and paying twice a month instead of once a month.”

“Good” debt is debt used to build your overall wealth. This is why mortgages are considered good debt since the value of your home will (theoretically) increase over time. You are using that debt to build up your assets. Another common example of good debt is student loans, as the education you’re receiving should increase your earning potential.

Meanwhile, “bad” debt is debt that doesn’t build your overall wealth. All it’s doing is sitting there, accruing interest and draining your bank account. The biggest example of bad debt is credit cards. It doesn’t matter how great you think you look in that awesome new jacket; it isn’t going to get any more valuable over time, so putting it on your credit card just decreases your total wealth.

When it comes to ordering your debts, paying off your “bad” debts first is a great idea. But you know what’s an even better idea? Using credit card offers to minimize your interest rates and maximize your debt payments.

“Determine the interest rate of every credit card, home equity loan, etc,” Koosa advised. “If one’s credit score allows the opportunity, transfer high-interest rate balances to 0% interest cards. There are promotional periods of 1-2 years, during which time, one can budget payments to have the balances potentially paid off prior to the interest rate increasing.”

With student debt, focus on your interest rates. 

Student loan debt may be a “good” form of debt, but it has also become one of the fastest growing kinds of debt, and that problem is only getting worse. We aren’t going to be able to get into macro solutions for that problem right now, but we can offer you this personal advice from Phil Risher, founder of the Young Adult Survival Guide (@yasurvivalguide):

“If you are a recent graduate and have student loans only, I would focus on the UNSUBSIDIZED LOANS first because they accrue interest daily from the time you take them out. SUBSIDIZED LOANS give you a 6 month grace period before interest accrual.”

Paying off your debt can feel like climbing a mountain. But once you can grab that first foothold, you’ll be on your way!

One kind of debt you should avoid at all costs is debts from high-interest no credit check loans like title loans, cash advances, and payday loans. While there are safe, responsible bad credit loans out there, getting in debt to a predatory lender could derail your financial security altogether. To learn about how you can improve your financial outlook, check out these related posts and articles from OppLoans:

How did you decide to prioritize your debts? We want to hear from you! You can find us on Facebook and Twitter.

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Contributors

Money relationship expert and self-empowerment coach, Joyce Blue is a certified Rapid Results coach. Joyce is passionate about empowering others to master their relationship with money, so all of their relationships thrive, they step into their power and fall in love with their lives. Contact Joyce at joyce@joyceblue.com or on Facebook and Instagram @EmpoweringYouLEC
Teaching and training are fundamentals of William F. Davis’s (@WFDCFP) professional and personal life, both as a financial advisor and competitive baseball and softball coach. As a former adjunct professor at Temple University and La Salle University, Bill started his career in financial planning in 2009 in the Learning Department of Janney Montgomery Scott, developing and implementing continuing education for the firms’ financial advisors within the Private Client Group. Deciding to establish his own financial planning practice, Bill joined Ameriprise in 2016. He continues to incorporate a learning perspective into everything he does, helping his clients understand and actively participate in their own personal financial planning process and ultimately take control of their financial lives.
As the Chief Executive Officer at The Alchemists, Margaret M. Koosa (@magkoosa) focuses on developing mutually beneficial relationships with community and professional resources in order to better support the individuals and businesses with whom we work. She has exceptional drive and a strong work ethic, which help her maintain high levels of activity and unprecedented customer service.
Phil Risher is the founder of Young Adult Survival Guide (@yasurvivalguide). Phil paid off $30,000 in student loans in 12 months making 48k. After, he saved up and bought his first place with cash at the age of 25. Phil now speaks with college students and young adults around the country about his 5-Step Guide to help them on their financial journey.
 Leslie H. Tayne, Esq. (@LeslieHTayneEsq) has nearly 20 years’ experience in the practice area of consumer and business financial debt-related services. Leslie is the founder and head attorney at Tayne Law Group (@taynelawgroup), which specializes in debt relief.

4 Simple Ways to Save Money on Your Grocery Bill—While Still Eating Healthy!

Start by planning ahead, stop by the bulk section to avoid costly food waste, then head on over to the frozen aisle to save money on produce—without sacrificing quality!

Eating: We’ve all got to do it! But unless you have your own farm, you’re probably going to have to pay for the food you need to eat. And unless you live in a food desert, which comes with its own issues to work through, you’ll probably be getting that food from a supermarket.

You could try to just get the cheapest food possible, but eating too much unhealthy food can lead to an increased risk of medical issues. And we surely don’t have to tell you that medical issues can get very, very expensive. So when shopping for groceries, you ideally would like them to be both affordable and nutritious. But how can you manage that?

We spoke to the experts to find the answers to that very question. Now let’s eat!


1. Meal plan to conserve ingredients and take advantage of sales. 

They say that you should never go to the supermarket hungry. And they are right. Without a proper plan, you might just end up grabbing whatever looks good without enough concern towards cost and nutrition. That’s why it’s important to plan ahead.

“Meal plan and use the same ingredients for several different meals,” suggested Sarah Moe, a money and business coach at Flauk. “The biggest waste of money when it comes to groceries is wasted food. An easy way to avoid this is to plan your meals and use the same ingredients for several different meals. For example, if you’re buying kale for a salad or specific recipe, look what else you can use it for (i.e. roasted kale chips, add it to chili or soup, or add it to an omelet). This also helps you get more creative in the kitchen.”

Knowing what you’ll need in advance can also provide other means to save.

“Here’s an amazing tip for cutting down grocery bills,” advised Talia Koren, meal prep expert and the founder of Workweek Lunch. “This involves some planning ahead. After you make your grocery list, go to the website of your regular grocery store. A lot of them now have features where you can add all of your grocery list items to their site and it spits out the estimated cost. This way, you can easily find brands on sale and give yourself a heads up about deals you wouldn’t have normally paid attention to when physically at the store. It works really well for me and my community.”

Once you know what you’re going to buy, how you’re going to buy is also important.

2. Use the bulk section to avoid expensive food waste.

Meal planning and deals will help you cut costs without sacrificing nutrition. But if you really want to save, you should look into buying in bulk.

“My suggestion is—use the bulk bins,” Mary Weidner, co-founder of Strongr Fastr (@strongrfastrapp), offered. “We’ve all run into those recipes where it asks for some ingredient that you rarely use and while buying a bag of it might be cheaper per ounce—if you’re never going to use it again or if it’s going to take you so long to use it that you’ll wonder if it’s still okay to eat—just buy the exact amount you need from the bulk section and pay a fraction of the price. This is a great tactic for those really expensive healthy foods where it’s such a large upfront cost for something you don’t need much of or just want to try out in a single recipe.

“I did this recently for some energy balls that a friend wanted me to make for a hike. The ingredient list had some things I don’t use too frequently like coconut shavings, dark chocolate chips, ground flax, small amounts of various nuts, etc. All of these things I could just buy the exact amount I needed and paid under a dollar for each of them, and now I don’t have 8 bags of ingredients I rarely use taking up space in my cabinets and slowly spoiling. Bonus: the bulk bins are better for the environment too if you bring your own containers. Cuts down on packaging and waste!”

Moe echoed the bulk-based advice: “When buying grains, nuts, or dried fruit head to the bulk section so you only get the amount you need rather than buying a whole 16 oz bag when the recipe only calls for 1/4 a cup. Buying in bulk is also often much cheaper than buying pre-packed food.”

But you don’t want to buy bulk all willy-nilly.

“While bulk shopping can help you save on 30 to 40 percent on your grocery bill, not everything is a smart buy when it comes to health foods,” warned savings expert and TV personality Andrea Woroch (@AndreaWoroch). “For instance, bulk containers or large bags of produce may lead to food waste if you can’t finish the fruits or veggies before they spoil. Focus your warehouse purchases on non-perishable health foods like quinoa, brown rice, almond butter and olive oil. Quinoa, touted as today’s leading super food and cleanest carb to eat, has a relatively long shelf life (two to three years dry) so you don’t have to worry about it going bad.”

Beyond buying bulk, there are other things that are affordable that might still be healthier than you’d think.

3. Go frozen, go generic, and don’t always go organic.

It’s easy to assume that the cheaper option is always going to be less nutritious. But that isn’t always the case!

“Frozen fruits and vegetables may seem like a less-healthy choice compared to fresh, but they’re actually just as nutritious and much cheaper,” explained Woroch. “That’s because produce is flash frozen at peak ripeness, retaining optimal flavor and nutrients. When buying frozen produce, don’t assume brand-names are superior to lesser-cost generic or store brands; after all, frozen peas are frozen peas! If you have room in your freezer, stock up during sale time when you can purchase frozen produce for as little as $1 per bag.

“Another misconception about healthy eating is that you must buy organic. However, not every fruit and vegetable needs to be purchased organic. Coined the ‘clean fifteen,’ produce with outer skins that you peel away like pineapple, avocado, onion, and sweet corn aren’t affected by pesticides. Produce you eat directly, skin and all, is better purchased organic if your goal is to avoid chemicals.”

And then sometimes, it helps to get back to nature.

4. Buying local often means buying cheaper, too. 

More natural isn’t always cheaper. If it was, you’d forget the supermarket and just move into a forest somewhere. But when it comes to the supermarket, the less super science they have to perform to get you your produce, the cheaper it’s likely to be.

As culinary nutrition consultant Julie Harrington (@ChefJulie_RD) told us: “The shorter the distance food has to travel, the less expensive it is for the consumer once it hits the store. Ever notice how expensive tomatoes and strawberries are during the winter? Grocery stores pay more to import produce from warmer climates during the winter, ultimately making the price you pay much higher.”

Woroch also recommended a way to skip the supermarket entirely for some produce: “Plant a garden. Why waste time and money at the grocery store when you can grow your own vegetable garden? Start small by planting just a couple of your favorite herbs like rosemary, sage, or dill and study up on gardening tips for optimal conditions. Apartment dwellers don’t  have to dismiss this tip, either; vegetables like lettuce, tomatoes, summer squash, eggplant, and peppers can be grown in containers on window sills.”

Follow all of this advice, and you can keep your wallet and your body healthy! To learn more about ways you can save, check out these related posts and articles from OppLoans:

What are your best tips for cutting down your grocery bill? We want to hear from you! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


Contributors

Julie Harrington (@ChefJulie_RD) is the Registered Dietitian and Culinary Nutrition Chef behind her website JulieHarringtonRD.com based in New Jersey. Cooking has always given Julie joy because of its powerful ability to connect people together. Julie’s passion is to educate others about nutrition through food and giving them the tools they need to build confidence in the kitchen. Along with being a cookbook author, most recently, her recipes have been featured in SHAPE, Huffington Post, US News & World Report, and Healthy Aperture. Follow along with Julie on social media: FacebookInstagramTwitter.
Talia Koren is a meal prep expert and the founder of Workweek Lunch, an online resource for quick, healthy meals on a budget for all diets. She has helped thousands of people all over the world crack the code to meal prep via her website and Instagram and has been featured in NBC Better, Women’s Health, Greatist and Entrepreneurial Chef.
Sarah Moe is a money and business coach at Flauk, a one-stop-shop for individuals who want to launch a business. Sarah is a recovering lawyer who has been traveling and working around the world for the past three years. She enjoys dancing to 90s hip-hop in her kitchen and is always searching for the best croissant.
Mary Weidner is a Co-Founder and COO of Strongr Fastr (@strongrfastrapp), a meal planning and strength training site. Previously, she was a Financial Planner for a large research department at the University of Wisconsin.
As a sought-after media source on all things finance and money-saving, Andrea Woroch (@AndreaWoroch) has appeared on hundreds of national and regional TV shows like Today, Good Morning America, CNN, MSNBC and more. In print and online, her advice and stories have appeared in New York Times, Money, Reader’s Digest, USA Today, Yahoo!, People, Forbes, Huffington Post and more. You can read more about her at www.AndreaWoroch.com.

Living With Bad Credit is One Thing, But Can You Make It in Life With NO Credit?

If you want to live your life without ever using credit—which means no loans and no credit cards—get ready to do a lot more transactions in straight cash.

We often write about bad credit. How you get it, how to manage it, and how to get rid of it. But what if you don’t have any credit at all? Humans aren’t born with credit scores and it is totally possible to get well into adulthood without one.

But can you have a successful life without a credit score in this day and age? And if so, how? With the help of our experts, those are the questions we’re going to answer for you today!


Let’s get the basics out of the way.

As we always like to do when we talk about credit, let’s cover what exactly a credit score is and how you might end up without one. A credit score is a three-digit number that determines how likely you are to be granted a loan and with what terms.

That number is generated from information in credit reports maintained by the three major credit bureaus: TransUnion, Experian, and Equifax. Factors in your score include payment history, amounts owed, length of credit history, credit mix, and recent credit inquiries.

To learn more about those individual parts of your score, check out our “Know Your Credit Score” blog series.

But what if you never use credit? If you’ve never taken out a personal loan or used a credit card? Well, then you might not have a credit score at all. And where exactly does that leave you? Can you just go through life without borrowing any money whatsoever?

Living well without credit is certainly possible.

We’ll be straightforward here: Many things in life are much easier when you have a good credit score. But lacking a credit score doesn’t mean you’ll be forced to go live in the woods. You can theoretically live your life without having any credit to your name. In fact, we heard from someone who did just that!

“Up until two years ago, I had zero credit,” recalled Mikhail Shvartsman, in-house counsel for USB Memory Direct (@usbmemorydirect). “I never opened a credit card, I bought pre-owned cars outright, and bought my house on foreclosure. You can’t possibly live without credit unless you buy your own assets.”

But as Shvartsman implied, you’re going to have to live your life in a very specific way if you’re hoping to get by without credit. He eventually found himself in a situation requiring a change of gears:

“After finishing law school, I had $200,000 in student loan debt. So why did this change my need for credit? I had to lease out my apartment and find a place closer to work. Credit helps you manage when you pay for things. You still have to pay all of your debts, but this way you can do it over time.

If you plan properly, and have a large enough salary, you can do this without the assistance of loans and credit cards. Regardless of my effort to do this, when it came time to rent an apartment closer to work, I knew I had to work on my credit.

“With just a $200,000 debt posted for my student loans, it took me two years to create a credit history enough to score me over 600. For you to survive without credit, you have to manage your own finances by saving at least 10 percent of your income each year. However, if you are not making enough to make ends meet, that is not likely.”

“The most important part is making sure 10 percent of your salary is enough to cover unforeseen costs. If you don’t own your own house, this is unlikely. When leasing or renting anything, lack of creditworthiness will often deter anyone from renting to you.

“In this case, without credit, you would have to be able to pay your rent for a year up front. If you do, then you still shouldn’t rent. You should use that money as a down-payment to own your property. In reality, the best practice is to build your credit, and not use it unless needed.”

Want to skip credit scores? Then get comfortable using cash.

Kalen Omo, of Omo Financial Coaching, gave us a slightly rosier idea of living without credit:

“I believe people today can absolutely live without a credit score. If mom and grandma could do it, why can’t I? As long as cold hard cash is the primary mode of payment for goods and services, you can live without a credit score.”

Omo went on to offer some common issues you might run into when living without credit and how you could handle them:

Buying a home: The best way to buy a home without a credit score is either through a process called manual underwriting, the way mom and grandma used to get mortgages, or the one hundred percent down plan (aka buy a house in cash).

Buying a car: If you’re wanting to buy a car, the best way to do exactly that without a credit score is saving up your money over time and buying it with cash. Also, because you are a cash buyer, you are also in a better negotiating position with the dealership, as you have walkaway power, and are not held to a car loan or its interest rate.

Renting a car: The best option is to do your research and find a rental car company that takes a debit card instead of a credit card. You may need to have a deposit put on your checking account, but as long as you bring the car back in the shape you left it in, you’ll get that back.”

So to sum it up, your life is going to look a lot like a cash-only venue.

But if you do want to fix it

As we said above, life will be easier with good credit. Even Shvartsman, who was doing really well with no credit history, eventually hit a point where he needed a decent credit score. But how can you go from no credit to good credit?

One of the most reliable ways is to get a secured credit card. That’s a credit card that requires a cash collateral but is much easier to qualify for. Then you just have to use about one-third of your credit limit each month and pay your bill in full and on time.

Here’s something that WON’T help your credit: Taking out a predatory payday loan or title loan. These are no credit check loans that almost always go unreported to the credit bureaus. (You should watch out for cash advance loans, too.) However, there are bad credit loans out there that do get reported to the credit bureaus, so keep your eye out for one of those—especially if they’re installment loans.

Life without credit isn’t impossible. But you’ll probably have an easier time if you start building up your credit now. To learn more about how you can improve your credit score, check out these related posts and articles from OppLoans:

Have you or someone you know chosen to live without credit? We want to hear from you! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


Contributors

Kalen Omo is the founder and owner of Omo Financial Coaching. Kalen has been in the world of personal finance since 2010 and has earned the title of Ramsey Solutions Master Financial Coach in 2017, after completing training with Ramsey Solutions, the company owned by National Best Selling Author and Financial Expert, Dave Ramsey. Kalen works with people’s personal finance issues and pain points ranging from budgeting to dealing with debt collectors to bankruptcy to estate planning to retirement. In his spare time, he enjoys spending time with his family, playing music, and is an avid musician.
Since Mikhail Shvartsman was a kid, he has loved fiddling with computers. Before law school, he worked in technology as a web developer, system administrator, and even worked in the realm of online marketing. He currently works as the general counsel of USB Memory Direct (@usbmemorydirect). Navigating the law for an electronics wholesaler and manufacturer allows him to grow his knowledge in both technology and law.

Forty-Six Percent of Millennials Feel Held Back by Credit Score

New survey by fintech firm OppLoans shows the impact of bad credit on young people.

CHICAGO—July 11, 2018—Are millennials too young to have bad credit? Definitely not. And it’s taking a toll.

According to data from a new survey by the fintech firm OppLoans, a shocking 46 percent of millennials already feel held back by their credit score. Bad credit was found to have a far-reaching impact on areas of life including purchasing a car, securing housing and applying for credit cards.

The survey of 2,000 Americans was conducted between June 7 and June 19 by the polling company OnePoll at the request of OppLoans. Of 1,000 millennial respondents, a significant percentage reported difficulties that sprung from poor credit scores.

  • Twenty-seven percent of millennials said a bad credit score had hurt their chances of buying a car.
  • Twenty-six percent said poor credit had hurt their chances of getting a loan.
  • Twenty-three percent said poor credit had hurt their chances of getting a credit card.
  • Twenty-five percent said poor credit had hurt their chances of getting an apartment or a house.
  • Fourteen percent said they lived with roommates because they couldn’t rent on their own due to bad credit.

“A low credit score can cause serious problems long before the common milestone of applying for a home mortgage,” said OppLoans CEO Jared Kaplan. “For a significant portion of millennials, the things that most people do in their 20s – rent an apartment, buy a car, get a credit card – are tough because of bad credit.”

Along with the survey, OppLoans released a list of seven money “hacks” to help young people keep their credit healthy. The tips are designed to provide millennials with simple, concrete ways to avoid credit damage and build a strong credit history.

“There are many easy ways that young people can avoid hurting their credit,” said Kaplan. “For instance, our survey found that 36 percent of millennials who missed a credit card payment simply forgot about it. Almost all credit card companies allow customers to set up automatic payment plans, and these can be programmed to cover only the minimum amount due if someone’s on a tight budget. This is an everyday hack that can help millennials avoid credit damage and late fees.”

A detailed list of the tips, as well as survey results and shareable infographics, are available on the OppLoans site.

Millennial Money Hacks

  1. Use a free budgeting app. Budgeting apps are a thing, and they’re perfect for tech-savvy millennials. They keep you organized and honest. Take advantage of them.
  2. Check your credit report. You can get a free credit report once a year upon request. Visit AnnualCreditReport.com for yours. Knowledge is power.
  3. Go cash-only. Credit cards are easy to overuse, but with cash, you can’t spend what you don’t have. Make a budget and withdraw fun money once a week. Once it’s gone, you’re done until next time.
  4. Set up automatic payments. Use these to avoid late fees and credit damage. But be careful: if you don’t have funds to cover the bill, you’ll overdraw your account. If you’re on a tight budget, consider setting your plan to pay only the minimum amount due, and deal with the rest manually.
  5. Call if you’re behind. Creditors lose money when they sell your debt to a collection agency. If you’re behind, they might be willing to negotiate with you. It doesn’t always work, but it’s worth a try.
  6. Close old utility accounts. Millennials move around a lot. In the shuffle, it’s easy to forget to close an account. Don’t let a silly slip-up damage your credit.
  7. Open a savings account. Millennials know it’s often too easy to withdraw money from a checking account. Set up a separate savings account and get in the habit of making regular deposits. Bonus: You’ll earn interest, and that’s a wonderful thing.

About OppLoans

OppLoans is one of the highest-rated online lenders and service providers in the industry. With faster funding, significantly lower rates, total transparency, and unmatched customer service, OppLoans provides non-prime borrowers a safe and reliable alternative to payday lending.

For more information regarding OppLoans, please visit the OppLoans website at OppLoans.com or call John O’Reilly at (312) 212-8079 extension 818.

Yes, You Can Get Fired For Having Bad Credit

you-can-get-fired-for-bad-creditMost people know that employers can check your credit score while hiring you, but they can also do it while you work there—and let you go if the results are bad.

If you were to make a list of things that would get you fired, where would you rank “having a bad credit score?” Surely it would be below all-time classics like “stealing money,” “calling your boss a bad word,” and “insisting that your coworkers call you Lord Fancy Pants The Fourth.” Honestly, most people don’t even realize that you can get fired for having a poor credit score.

But you can! And while it’s unlikely that a lousy credit score will get you canned—it’s much more likely to stop you from being hired in the first place—it certainly can happen, especially if you’re in one of the many states that don’t restrict the use of employer credit checks.


A quick refresher on creditworthiness and credit checks.

Your creditworthiness is summed up by your credit score, a three-digit number that created using information from your credit reports. The most common type of credit score is a FICO score, which was first created by Fair, Isaac and Company in the 1980’s (they’ve since changed their name to just FICO). Your FICO score is ranked on a scale from 300 to 850—the higher your score, the more creditworthy you’re considered to be.

Credit reports are documents that track your history of credit use. Most of the information on your reports date back seven years, but some information (like bankruptcies) can stay on your report for longer. Credit reports contain information on how much you owe, whether you pay your bills on time, the types of credit you have, recent hard credit checks, etc.

There aren’t any hard and fast rules on what defines “great” credit versus “good” or “bad” credit, but there are some general guidelines you can follow. If you have a score above 720, you won’t have to worry much about having a personal loan/apartment/job application denied or getting slammed with high interest rates. Meanwhile, if your score is below 630, that pretty much means you have bad credit and could find yourself paying for it in all sorts of ways.

When it comes to credit checks, only “hard” checks affect your score. These return a full copy of your report, unlike “soft” checks which only return a summary of your credit history. Hard credit checks are often run by potential lenders and landlords, but they can also be run by prospective or current employers. In order to run a hard check on your credit, the business in question must first obtain your express permission.

Want to read more about the difference between hard and soft credit checks? We’ve got a blog for that: How are Soft Credit Checks Different From Hard Checks?

Employers can check your credit before and after you are hired.

When it comes to credit checks and the possibility of unemployment, you are much more likely to run into problems while applying for a position than you are after you’ve been hired. Checking credit history as part of a background check is a fairly common part of the hiring process.

Depending on how that long hiring process lasts, though, you might end up serving in the job for a while before the employer gets the results and decides to terminate you. Additionally, employers can run a credit check after you’ve been hired or if you are up for a promotion and let you go if the results send up a red flag.

(Everything in this section depends on which state you live in. For a list of states that restricts how employers can use credit checks, scroll down.)

One thing that’s important to note here: These pre-employment credit checks will not actually return a copy of your credit score. Instead, they will only return a copy of your credit report. This will allow employers to view, for instance, your debt-to-income ratio and your history of bill payments.

Even with just a copy of your credit report, employers will be able to get a pretty good idea of how you have managed your debts over time, even if they aren’t given a single score to sum it all up. So if you have a bad credit score, your employment status could be at risk.

While there are no defined limits on what roles can require a credit check, it tends to be much more common in certain industries and job types than it is in others. Jobs in financial industries or finance positions—especially ones where you will be handling large amounts of money—commonly carry requirements for a credit check.

Certain states and cities limit what employers can do with credit checks.

If it hasn’t been made clear by now, the laws under the Fair Credit Reporting Act (FCRA) that dictate employer credit checks give them a fair amount of leeway. While a current or potential employer needs your permission to run a credit check, refusing to grant them that permission pretty much means that you either won’t get the job or won’t have your current job for long.

This is why 13 states, two cities, and the District of Columbia have passed laws limiting employers’ ability to check people’s credit. According to the good folks at Microbilt, an alternative credit reporting agency, the following areas have laws designed to rein in how employers use a person’s credit information:

  • California
  • Colorado
  • Connecticut
  • Delaware
  • Hawaii
  • Illinois
  • Chicago, Illinois
  • Maryland
  • Nevada
  • New York City, New York
  • Oregon
  • Philadelphia
  • Pennsylvania
  • Vermont
  • Washington State
  • Washington, D.C.

While the specifics vary from state to state (or city to city), many of them limit credit checks to managerial positions, finance jobs, or public safety officers. Some also limit what decisions can be made with this information, while a few of them outright ban the practice entirely. If you live in one of these areas, you can read more about your local laws in Microbilt’s report: State Laws Limiting Use of Credit Information For Employment.

When you have bad credit, an unexpected bill can mean turning to predatory no credit check loans like payday loans, cash advances, and title loans in order to get by. That part’s pretty obvious. And yet, bad credit can also affect your life in so many more additional ways.  For more information on how a bad credit score can negatively impact your everyday life, check out these related posts and articles from OppLoans:

Have you ever been fired or not hired because you failed a credit check? We want to hear from you! You can find us on Facebook and Twitter.

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46% of Millennials Feel Held Back by Their Credit Score

Our survey found that bad credit is taking a toll on young people in surprising ways.

Bad Credit Is Holding Back Millennials

Bad credit spells trouble at any age, and young people are not immune from its effects. In fact, our latest survey found that a shocking number of millennials are feeling the pinch, with 46 percent reporting that their credit score is holding them back.

What makes this number surprising isn’t that a big chunk of millennials have bad credit. (TransUnion found that 43 percent of millennials have subprime scores, compared to 20 percent for boomers and 9 percent for the silent generation.) Rather, what comes as a shock is that so many millennials are feeling the effects of bad credit so young, and it’s playing out in far-reaching ways.

What’s the Impact of Bad Credit on Young People?

For many older Americans, applying for a mortgage is the credit milestone that’s most significantly impacted by a low score. But bad credit can cause trouble long before that. Transportation, credit cards, housing—even though a lot of people don’t realize it, all of these can be impacted by bad credit. Our survey found that a significant number of millennials are struggling in these areas, precisely because of low credit scores.

  • 27% of millennials said a bad credit score had hurt their chances of buying a car.
  • 26% said poor credit had hurt their chances of getting a loan.
  • 23% said poor credit had hurt their chances of getting a credit card.
  • 25% said poor credit had hurt their chances of getting an apartment or a house.
  • 14% said they lived with roommates because they couldn’t rent on their own due to bad credit.

Car Loans

Buying a car is a rite of passage for many young people. But buying a car outright—even a cheap one—is outside the price range of most. The solution? Finance it.

While most people will qualify for an auto loan, the rate at which it’s offered will depend in large part on a borrower’s credit score. And, unfortunately, those with bad credit can expect a much higher cost. How much higher? Subprime borrowers will likely pay an interest rate four times that of borrowers with excellent credit.

Our survey found that 27 percent of millennials blame their credit score for preventing them from getting a new car.

Loans and Credit Cards

Another part of young adulthood is a first taste of financial independence. This includes a job to—hopefully—make ends meet, but rent and bills too. Loans and credit cards are also usually a part of this new reality.

Twenty-seven percent of millennials in our survey said they don’t apply for credit cards because they think they’ll be denied. A further 23 percent said bad credit had hurt their chances of getting a credit card in the past. Additionally, 15 percent said they regularly miss payments and their credit card debt is unmanageable.

With loans, millennials face similar difficulties. Twenty-six percent of respondents said a bad credit score had hurt their chances of getting a new loan or line of credit.

Housing

As young people more and more delay home ownership, it might seem that bad credit would impact their lives less and less. But this isn’t the case.

Our survey discovered that a significant percentage of millennials feel hindered by their credit score as they make housing decisions. A full quarter (25 percent) of millennials reported that bad credit had hurt their chances of getting an apartment or a house. And 20 percent of millennials said they can’t buy a home because they think their mortgage application will be denied.

For some millennials, the impact of bad credit on housing options has left them struggling to move beyond a dorm-like lifestyle. Fourteen percent said they’re forced to live with roommates because their credit prevents them from getting their own apartment.

Who’s to Blame?

Many would argue that part of being young is making mistakes. And certainly, we found that some of the credit damage that millennials suffer is due to easy-to-avoid mishaps.

Of the millennials who missed credit card payments in our survey, 36 percent said they simply forgot about it. Another 10 percent said they had a bill they didn’t know they had to pay. This means that nearly half of those who missed credit card payments could have avoided them if they kept better track of their bills or set up autopay on their accounts.

However, our survey also found that a significant percentage of millennials felt they were unprepared to tackle the financial challenges that tanked their credit. Twenty-four percent said they had received insufficient education about habits and techniques that build a strong credit history. It might not be surprising, then, that 15 percent of millennials said they regularly miss credit card payments, and 43 percent described their credit card debt as unmanageable.

How Can Millennials Avoid Bad Credit?

Bad credit is tough to fix. Black marks usually stay on a credit report for seven years, and even though lenders typically give more weight to recent credit history, a missed payment from long ago can still show up to haunt you.

The better option is to avoid the mishaps that sink your credit in the first place.

While going back in time isn’t possible, young people with short credit histories are in a position to put themselves on the right path early on. And it’s never too late to build good money habits, because even if mistakes have been made, good money habits and a strong credit history can help to counteract them.

To help millennials keep their credit healthy, we put together a list of money hacks designed specifically for the lives of young people. (Many of them are good advice for older generations, too.) These seven tips offer simple, concrete ways that millennials can avoid credit damage and begin to build a strong credit history.

  1. Use a free budgeting app. Budgeting apps are a thing, and they’re perfect for tech-savvy millennials. They keep you organized and honest. Take advantage of them.
  2. Check your credit report. You can get a free credit report once a year upon request. Visit www.AnnualCreditReport.com for yours. Knowledge is power.
  3. Go cash-only. Credit cards are easy to overuse, but with cash, you can’t spend what you don’t have. Make a budget and withdraw “fun” money once a week. Once it’s gone, you’re done until next time.
  4. Set up automatic payments. Use these to avoid late fees and credit damage. But be careful: if you don’t have funds to cover the bill, you’ll overdraw your account. If you’re on a tight budget, consider setting your plan to pay the minimum amount due, and deal with the rest manually.
  5. Call if you’re behind. Creditors lose money when they sell your debt to a collection agency. If you’re behind, they might be willing to negotiate with you. It doesn’t always work, but it’s worth a try.
  6. Close old utility accounts. Millennials move around a lot. In the shuffle, it’s easy to forget to close an account. Don’t let a silly slip-up damage your credit.
  7. Open a savings account. Millennials know it’s often too easy to withdraw money from a checking account. Set up a separate savings account and get in the habit of making regular deposits. Bonus: you’ll earn interest, and that’s a wonderful thing.

Survey Methodology

This survey was commissioned by OppLoans and conducted by OnePoll. It ran from June 7 to June 19, 2018. Two thousand Americans ages 18 and older were surveyed. One thousand respondents were between the ages of 18 and 34 and defined as “millennials.” OnePoll is a member of the European Society for Opinion and Marketing Research and employs members of the Market Research Society.

Fair-Use Policy

All data and images in this report are free to share and post. However, please provide a link back to this page to ensure context and accuracy.

How Do You Ask Someone to Be Your Cosigner?

how-to-ask-someone-to-be-your-cosignerIf you don’t have a great credit score or a large income, you might have to ask for help in order to get a loan or an apartment. What’s the best way to go about it?

Asking for help is never easy. You’d probably rather come across as someone who can take care of themselves all on their own. But asking for help shouldn’t be seen as a sign of weakness. In fact, knowing when to ask for help is one of the most important skills you can have.

But asking someone for help is even harder when it’s not just your pride on the line. It’s difficult to know exactly how to ask someone else to put something, whether it’s their money or even just their reputation, on the line for you.

If you need a personal loan but you can’t get approved for one, that means asking someone to be your cosigner. How might you approach that?


Why do I even need a cosigner?

You can sign on your own. You have a perfectly good signature. Why do you need a cosigner?

Odds are it’s because you want a loan or a lease and you can’t get it on your own. Maybe your credit is bad or maybe your income isn’t high enough. Or it could be both!

And needing a cosigner isn’t anything to be ashamed of. In some cities, you could need an annual income of more than forty times your monthly rent to sign a lease on an apartment by yourself. There’s no reason to feel embarrassed about having a less than extravagant income.

In addition to how much money you earn, a lousy credit score—or even a so-so score—could mean needing a cosigner with better credit to help you get a loan or a lease for an apartment.

Even if the person you’re asking is a good friend or family member, it can be awkward. You’re asking them to have a pretty significant amount of trust in you because if you don’t make your payments on time, it’ll negatively affect the cosigner’s credit—and they could be on the hook for payments you don’t or are unable to make!

Choose your cosigner wisely.

But where should you turn for a cosigner? Obviously, you’ll want someone who has the necessary income or credit score to actually help you get what you’re looking for. And it will need to be someone you trust who also trusts you.

But there are other things to consider when choosing who to ask, as we learned when we spoke to Casey Stubbs, founder of Finance and Markets (@FinanceMarkets1):

“When I first left the military to start going to college for my undergraduate degree, I too had to find a cosigner myself as I did not qualify to even rent an apartment on my own. What worked for me was simply to make sure that I had collateral that could cover my cosigner should something have happened to me, and finding someone who no longer needs to rely on credit as they already have paid off their house and their cars. If your parents have already paid their house off and have no intention of moving, chances are they could care less about their credit score dropping a few points during the application process, and they can be a great resource as well for you to start building credit on your own.”

So if you know anyone who you’re close with who doesn’t have to worry about their credit, it should be easier to get them on board. But regardless of who you ask, it’s important to ask in the right way.

Show them that you are trustworthy.

As we said at the start, asking for help isn’t always easy. So it helps to make sure you’re asking in a way that is likely to be well-received.

“If you cannot find someone who is indifferent to their credit score because they are still relying on credit heavily in their everyday lives,” advised Stubbs, “your best solution is to show them that you have the means to cover the debt, and that it is simply that you do not have enough to cover the bank’s standard, but that you do indeed have something to cover their loses should something happen to you down the line.”

It can also help if you present your case to the cosigner with the same preparation and consideration you’d give a bank.

“If you’re going to ask someone to be a cosigner on a loan or a lease, there are a couple of things you should do up front,” explained Michael Gerstman, CEO of Gerstman Financial Group. “First, you should insist on putting it in writing that you are committed to repaying the note under the terms of the note. That means no late payments.

“There should be a “personal penalty” for a default. For example, if I default on this loan, I’ll be cleaning your house once a week for the next three years. When both parties have ‘skin in the game’ the chances for a default are more limited.”

“I’d also make sure that if someone is agreeing to cosign a loan or lease they recognize I’d rather cut off my arm than default on a payment.”

But as long as you work out a payment plan and stick to it, you should be able to get the loan or lease you need without cutting off any limbs. Show that you have a plan and ask for help, and you’ll probably find that people will do what they can for you.

Finding a cosigner for a standard loan is far preferable to getting a predatory no credit check loan or cash advance. And even if you can’t find a cosigner, remember that payday loans and title loans are not your only option in a financial emergency. There are safer, more affordable bad credit loans out there. To learn more about navigating life when you have bad credit, check out these related posts and articles from OppLoans:

What are your stories of asking someone to be a cosigner? We want to hear from you! You can find us on Facebook and Twitter.

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Contributors

Michael Gerstman, ChFC, CLU, has been in the financial field for over 25 years. Michael is committed to helping clients make informed financial decisions and strives to use his knowledge, experience, and commitment to help people enjoy a comfortable lifestyle today while building towards a financially secure future tomorrow.
Casey Stubbs is a United States Army Veteran and lifelong entrepreneur dedicated to helping investors from all walks of life achieve financial freedom and abundance in their lives. After launching his first website, Winner’s Edge Trading, Casey has gone on to launch several other successful brands such as Trading Strategy Guides, Learn To Trade For Profit, and Finance and Markets (@FinanceMarkets1); all dedicated towards helping investors at every level learn how to profitably manage their investments, as well as their personal finances, for themselves.

If You Have Bad Credit, a Letter of Explanation Could Help

A letter of explanation could be the difference between getting your loan application approved and having it denied.

This might be surprising to hear, but certain important financial decisions can hinge on something as simple as a letter. That’s right! Letters of explanation are an important part of the lending industry; they allow borrowers to clarify certain items in their financial history, including a bad credit score.

Lousy credit can leave you high and dry when it comes to borrowing money, forcing you to use no credit check loans—like cash advances, title loans, and payday loans—when you have a fiscal emergency. And while there are plenty of safe, affordable bad credit loans out there, they won’t help if you’re looking to rent or buy a home. And that’s where one of these letters of could come in handy.


What is a letter of explanation?

Whoever came up with the name for letters of explanation was a pretty straightforward dude, because that name pretty much says it all. These letters are submitted as a part of a loan application process in order to explain certain aspects of your finances that might otherwise raise a red flag.

Letters of explanation are mostly associated with mortgages, because those loans have an incredibly stringent application process. Talk to anyone who’s in the middle of applying for a mortgage or has just finished applying for one and the half-deranged look in their eyes will tell you all you need to know about that.

These letters are necessary because sometimes there is more to a particular situation than meets the eye. Sometimes perfectly normal transactions can look suspicious if, for instance, they were done in cash; other times a recent change of job or address will trip up underwriters and require clarification.

Basically, lenders just want to confirm that you will be able to afford your loan. Letters of explanation help them get an accurate picture of your finances as they assess your application and decide whether or not to approve you for a loan.

And it’s not just lenders either. Remember that many landlords will check your credit when you are trying to rent from them, so a bad credit score could end up costing you that sweet apartment. Writing a letter of explanation to a prospective landlord or rental company can help your chances of being accepted.

Not all bad credit scores are created equal.

If you have a bad credit score—which is generally considered to be any score under 630—then it’s probably because you have made mistakes managing your credit. You have likely been missing payments, getting accounts sent to collections, or maxing out your credit cards—or some combination of all three!

In cases like these, where there has been a repeated pattern of mismanagement, a letter of explanation probably isn’t going to do you any good. Your credit score is reflecting your use of credit pretty accurately. A traditional lender like a bank or a mortgage company is right to worry. You’ll have to turn your behavior around and build your credit score back up before you can qualify for a regular loan.

However, if there are extenuating circumstances that have lead to your score dropping, a letter of explanation could definitely help. Did you end up in the hospital and your medical bills forced you to declare bankruptcy? Or what about a personal loan that you actually paid off but got sent to collections in error? Maybe you moved cities or states for a better paying job, but you had to put those moving expenses on your credit card.

There are tons of different scenarios where a one-time situation caused your score to drop. And these are the kinds of scenarios where you’ll want to write a letter of explanation where you lay out the situation and—this part is very important—make clear why said situation won’t really affect your finances moving forward.

One position where a letter of credit is a great idea is when there are errors on your credit report. If you are having trouble getting those errors resolved, you will for sure want to send a letter explaining the mix-up. After all, it’s quite literally not your fault that this information is lowering your score. To learn more about fixing credit report screw-ups, check out our blog post: How Do You Contest Errors On Your Credit Report?

5 tips for writing a bad credit letter of explanation.

So, now you know that a letter of explanation can be a useful tool for overcoming a lousy credit score. But a fat lot of good that information will do you without some tips to help you actually write one! Here are five pieces of advice to follow when composing a letter of explanation for poor credit:

Be formal: This is a business communication, not an email to your mom or a text to your bestie. Date your letter and make sure you sign it at the bottom. Also, avoid casual language as much as possible.

Be specific: Think of your letter as answering a very specific question about your finances. Include relevant dates, dollar amounts and your loan application number (if you have one). If you have documentation, include it. If you don’t, say that you don’t.

Be classy: In general, avoid “blaming” other people and companies for what happened to you. Even if what happened to you wasn’t your fault, stick to the “X happened” instead “X did this to me, that stupid jerk.” Take responsibility for the situation and promise better in the future.

Be brief: Your letter should only contain information that is absolutely relevant to matter at hand. With a bad credit score, your letter might be a little longer than a letter concerning a single transaction would be, but still: Make your letter as short as possible while still being effective.

Be honest: This is crucial. Do not lie and don’t ever exaggerate or twist the facts. That will come back to bite you big time. Make sure you cop to the role you played in the events. The more you come across as a straightforward, trustworthy person, the better.

A letter of explanation isn’t a magic wand that you can wave over a denied loan or rental application and magically get it approved. But it is certainly a useful tool for any person looking to borrow money or rent a home. There are so many parts of the great financial machine that are hopelessly complicated. Letters of explanation, on other hand, are just wonderfully simple.

To learn more about living life a lousy credit score, check out these related posts and articles from OppLoans:

Have you ever had to write a letter of explanation? We want to hear from you! Let us know on Facebook and Twitter.

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How to Protect Yourself from Payday Loan Call Scams

Scammers will try to intimidate you and collect on unpaid payday loans that—surprise twist—you never borrowed in the first place!

If you’ve had an unexpected bill pop up and you’re considering a payday loan to cover the cost, think again. Cuz no matter how imposing that bill seems to be, these short-term, high-interest loans could pose an even greater threat to your finances in the long-term. There are better ways to pay for emergency expenses, even if you have to take out a bad credit loan to do so.

But here’s the thing, even if you decide not to take out a payday loan, you can still end up getting taken for a ride. That’s right. A scammer could get ahold of your information and try to collect on a loan you never borrowed. Here’s how payday loan call scammers work, and what you can do to fight back.


What exactly is a payday loan, again?

Payday loans are a type of no credit check loan aimed at folks with lousy credit scores and, more often that not, lower incomes. They’re usually no larger than a few hundred dollars and are designed as an “advance” on the borrower’s paycheck. That’s how they got their name: the due date is usually set for borrower’s next pay day. They’re also called “cash advance” loans for much the same reason.

These loans have an average length of only two weeks but they come with an average APR of almost 400 percent! That’s because a two-week payday loan with a flat-rate interest charge of 15 percent works out to an average annual cost of 391 percent. Those small weekly rates add up over time.

To learn more, check out Payday Loan Rollover: How Short-Term Loans Turn Into Long-Term Debt.

There are two ways you can apply for a payday loan. The first is by walking into payday loan storefront and filling out an application. You’ll know these stores from the giant signs outside that screech “fast cash now!” and “easy cash guaranteed approval!”

The second way to apply is to fill out an application online. You go to the lender’s website, enter your info, and click “submit.” That’s where the trouble starts.

Here’s how the payday loan call scam works.

Many times when you are applying for an online loan, you aren’t actually going to the lender’s website. Instead, you are submitting an application to a lead generator, which then sells your information to lenders looking to get your business.

So even if you don’t end up taking out the payday loan that you’ve applied for, there is a record of your application that contains a whole bunch of personal information, plus how much you were looking to borrow. That record can easily end up being purchased by scammers.

Those scammers then call you and try to collect on a debt you never owed. They pretend that they are a representative from a payday loan company. Sometimes they’ll even say that they’re a lawyer for the company, because getting a call from a lawyer is always intimidating. They might also pretend to be from a government organization.

Once they get you on the phone, that’s when the threats begin. These scammers will use all sorts of low-down tactics to bully you into paying. They will yell and swear at you, they’ll threaten to sue you, to garnish your wages, or have the funds taken out of your account.

They’ll promise to call all your friends and family members and your employer to shame you into paying. They might even threaten to have you arrested! Basically, they will do everything they can to pressure you into paying them. It’s blackmailing a person who never did anything worth getting blackmailed over in the first place.

Protecting yourself from a payday loan call scam.

Remember, these guys (or girls) don’t have anything on you. They are putting on a big show to scare you. If you hold your ground and don’t give in, there really isn’t anything they can do to hurt you. It’s all bark and no bite.

The first thing you should do is ask for written confirmation that you owe the debt. Any caller who refuses to produce one is a scammer. And if they do provide you with a written record, you can check that against your own records. For instance, you can request a free copy of your credit report and see if this collection notice has shown up there as well.

Next, ask for all of the business’s information. Get the caller’s name and the name of their company. Get their address and their phone number too. Scammers don’t want people checking in on them so they won’t give you this information. Some quick research will reveal whether or not they’re a real company. Legit debt collectors on the other hand, will gladly offer it up.

And while you should be collecting all of their info, you should not be giving them any of your own. This is a tip that holds true for all phone scams. Do not give your personal information—account numbers, social security numbers—to anyone who calls you over the phone

Even if this scammer can’t get you to pay this fake debt, they might be able to steal your identity with the information they get from you. Do not let them bully you into giving them what they want. Stand firm and push back.

Lastly, report them. File a complaint with your state attorney general’s office, the Consumer Financial Protection Bureau (CFPB), and/or the Federal Trade Commission (FTC). Local police probably won’t be much help, as the scammer themselves is likely out of their jurisdiction, but these larger agencies might be able to do something.

With their sky-high interest rates and large lump-sum payments, payday loans are bad enough on their own. They don’t need any help. Don’t let one of these scammers turn a moment of desperation into further financial hardship.

To learn more about protecting yourself from scams, check out these related posts and articles from OppLoans:

Have you ever dealt with a payday loan call scam? We want to hear about it! Let us know on Facebook and Twitter.

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“Uh-Oh, I Need Money Now!” 4 Fast Cash Options for People With Bad Credit

There’s no perfect way to get money fast when you have bad credit, but these four choices can all be a good solution—so long as you’re careful.

Realizing that you need cash and need it yesterday is never a fun thought to have. But when surprise expenses or a financial emergency rear their ugly heads, that thought just might sum up your situation. Having an emergency fund for times like these is always the best way to go, but for folks who don’t have one, going on and on about the benefits of saving money isn’t going to help in the slightest.

Instead, you need some fast cash options that are going to help you right now—but that won’t leave your finances hurting in the long-term. And if you have bad credit, that second part can be a very tough ask. Getting the money is easy enough; escaping a predatory cycle of debt is much harder. This doesn’t mean that you can’t get the money you need, it just means that you’ll have to be careful when making your decision.

Here are four ways that you can get fast cash when you need it most. None of these options are perfect—and some are certainly riskier than others—but each of them can be useful in a pinch. No matter which option you choose, make sure you understand all the risks before signing up. Your future self, the one who has to live with consequences of the decision, will thank you.


1. Borrowing money from friends and family.

Look, nobody likes going to their friends and family, hat in hand, and asking for money. Even if they are more than happy to loan you the funds you need, it can still feel really embarrassing. And if they’re less than happy to loan you the money, well, then it feels a whole lot worse.

Still, this is your best option if you need fast cash. For one thing, friends and family are much less likely to charge you interest, which essentially means you’re borrowing that money for free. Plus, they are much more likely to be understanding if your repayment schedule is a little erratic—something that regular lenders tend not to be.

Borrowing money from friends and family, however, does come with some significant downsides. Screwing up your credit is one thing; screwing up your close relationships is something else entirely. Plus, there are lots of people whose friends and family members don’t have any more spare cash than they do, which makes this option a non-starter.

If you’re going to borrowing money in this fashion, make sure that both parties are crystal clear on the terms of the loan. You might even want to draw up your own loan agreement so that you both have something in writing. For a sample contract, and to learn more about this kind of casual borrowing, check out our blog post: How to Ask Friends and Family For Money.

2. Selling or pawning your stuff.

There are two ways that you can do this: You can outright sell your stuff, or you can pawn it with the plan to eventually get it back. Both of these options can be totally fine ways to get some extra cash, though they both have their risks and their downsides.

In order to sell your stuff, you’re probably going to have to do it online. That means using Craigslist, eBay, Facebook, or any one of numerous apps. There’s a lot of set-up involved when it comes to selling stuff online, which is time that you might not have available to spend. Plus, meeting with strangers from the internet is always a risky proposition.

For the most part, you aren’t going to sell your stuff for anywhere near what it’s really worth. And if you wait around for someone who’s willing to pay up, well, you need cash now, not later, right? And the more you are able to sell an item for, the more likely it is to be something you really don’t want to be selling.

Not getting full value will also come into play when you are pawning something. Plus, you’ll have to pay interest in order to get your item back. While most pawn shop loans are only a month-long, many of them will let you extend for several months at least. That means even more interest piling up.

If pawn shop loans had really low interest rates, this wouldn’t be so much of a problem. But they do. Pawn shop loans can have an average rate anywhere from 15 to 275 percent depending on the laws in your state. Yikes! To read more about pawning your valuables for some quick cash, head on over to our blog post: The Pros and Cons of Pawn Shop Cash Advances.

3. Take out a cash advance on your credit card.

Now, if you need emergency money and it doesn’t matter if it’s cash or not, then you can put the balance on your credit card. But this only applies if you already have a credit card with a low outstanding balance. Generally, you want to keep your credit card balances below thirty percent, but when an emergency strikes, you might not have any better options available.

If you don’t already have a credit card, however, then a poor credit score is going to limit your options for getting one. You might only be able to apply for a secured credit card, but that will require a cash deposit to set your credit limit, putting you right back where you started. Besides, it can take that card awhile to arrive, and by then it might be too late.

For emergency expenses that require cash, taking out a cash advance on your credit card might be your best bet. That doesn’t mean it doesn’t carry significant risks to your financial health, it just might be the least-bad option you have.

Credit card cash advances work a lot like using your debit card to get cash from an ATM. The main difference is that cash you get on a debit card is money you already have in your bank account, whereas a credit card cash advance is money that you’re borrowing. When you get an advance on your credit card, the amount you withdraw is then added your outstanding balance, just like when you use your card to make a purchase.

The biggest downside to credit card cash advances is that they are more expensive than regular credit card purchases. They come with an upfront fee just for making the transaction that averages $10 or 5 percent of the amount withdrawn, whichever is higher. The APRs for cash advances are also much higher than the APRs for regular transactions, and the lack of a 30-day grace period means that interest starts accruing immediately.

Lastly, there limits on credit card cash advances that, depending on the card, might be lower than the amount you need. These might be limits on the amount that you can withdraw per day or per transaction; your card also likely has an overall limit for cash advances. Even if a credit card cash advance is the best of your bad options, they’re still putting your finances at risk.

4. Shop around for the right bad credit loan.

When you have bad credit, you are likely going to be locked out of loans from traditional lenders. When they look at your credit score, what they see is a high likelihood that you won’t be able to pay them back. Instead, you will have to take out a bad credit loan that will come with much higher interest rates.

Still, some bad credit loans can be a great financial solution! So long as you can afford your payments, a higher interest rate can be an acceptable price to pay for access to credit you wouldn’t otherwise have. It’s all about finding the right bad credit loan and making sure you steer clear of the wrong ones.

There are three main types of bad credit loans out there, two of which should be avoided at pretty much all costs. payday loans and title loans risk trapping you in a predatory cycle of debt, while certain bad credit installment loans can actually help you improve your overall financial health.

Payday loans are a very common kind of short-term, small-dollar loan aimed at people with bad credit. They’re rarely larger than a few hundred dollars and are designed as an advance on the borrower’s next paycheck. The loan is often due on the customer’s next payday—that’s where the name comes from.

The average term for a payday loan is only two weeks, and the average interest charge for one of these loans is around $15 per $100 borrowed. That might seem like a reasonable cost, but it actually works out to an APR of 391 percent. Paying 15 percent to borrow money for only two weeks makes these loans much more expensive than standard personal loans.

The trouble with payday loans, however, isn’t just their cost; it’s the size of their payments. Payday loans are designed to be back in a single lump sum (principal plus interest) that can be very difficult for many people to afford. Only two weeks to pay back several hundred dollars can be tough when you don’t make that much money.

Trouble making those payments leads to some payday loan customers rolling over their loans, paying off the interest and getting an extension on their due date with even more interest added on. Customers can also reborrow their payday loans—paying off the original loan and then immediately taking out a new one to cover their other bills.

All of this can add up to a cycle of debt wherein the customer is trapped paying more and more interest on their loans without ever getting closer to paying off the loan itself or getting their finances stable enough where they don’t need a loan at all. Payday loans might seem like a good fit for short-term financial needs, but too often they end up presenting a long-term problem.

Title loans are another type of short-term no credit check loan, and they might even be more dangerous than payday loans. These loans get their name from the thing that they use as collateral: the title to borrower’s car, truck, or motor vehicle.

Since these loans use the borrower’s car as collateral, customers are often able to borrow more with a title loan than they could with a payday loan. But most title lenders will still lend their customers only a fraction of their vehicle’s true value. And if the person can’t pay it back, then the lender can repossess their car and sell it.

So how affordable are title loans? Well, Your average title loan has a repayment term of one month, and a monthly interest rate of 25 percent. Some quick math reveals that a 25 percent monthly rate adds up to an APR of 300 percent! Like payday loans, many title loan borrowers end up rolling over their title loan again and again, racking up thousands of dollars in fees and interest.

In the end, title loans don’t just put your finances at risk, they could endanger your very livelihood. Lots of folks out there need their cars in order to get to work, so having their car repossessed could very well lead to them getting fired. And according to the Consumer Financial Protection Bureau, one in five title loans ends in repossession. That number and those interest rates are much too high for a title loans to be a viable option.

Installment loans work a lot like regular personal loans. They are designed to be paid back in a series of regularly scheduled payments over a period of months or years. This gives them a leg up on payday and title loans, whose lump-sum payments make them far more difficult to pay back on time.

The main difference between regular loans and bad credit installment loans is the interest rates. And while these bad credit loans have much higher interest rates than regular loans, there are many installment lenders (like OppLoans) whose rates are much lower than the average payday or title lender.

What’s more, most installment loans are amortizing, which means that every payment you make goes towards both the principal and the interest. And since interest accrues on these loans over time—instead of being charged as a flat fee per loan period—paying your loan off early will save you money!

Overall, a long-term installment loan is a much better option than a short-term payday or title loan. Their payments are often more affordable, their principals are higher, and they let you save money by paying ahead of schedule. Plus, some installment lenders report payment information to the credit bureaus. That means that paying your loan back on-time could help your credit score!

But don’t let the relative security of an installment loan lull you into a sense of false security: You still have to make sure to do your research. There are a lot of untrustworthy lenders out their offering bad credit installment loans. Check out customer reviews and the lender’s BBB page, compare rates between lenders, and don’t sign anything before you fully understand the terms and conditions.

The best way to deal with emergency expenses is to already have money set aside. A well-stocked emergency fund will give you an interest-free solution to any surprise bills that come your way. But saving money is hard, especially if you’re living paycheck to paycheck. If you need fast cash, there are always solutions out there. It’s just about finding the one that’s right for you.

To learn more about living life with a bad credit score, check out these related posts and articles from OppLoans:

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