You’ve got one. And your bank, employer and creditors know what it is. But do you?
Today, we have plenty of opportunities to make quick judgment calls about anything. We can read movie reviews before heading to the theater, check out a restaurant’s health inspection grade before ordering the sushi, even creep on someone’s Instagram before we decide whether or not to let them into our squad. So, who’s creeping on us?
Well, the answer is… everyone. From banks, landlords, even employers, the modern world is checking up on us before they make business, credit, even hiring decisions. A credit score is a quick way for someone to tell—at a glance—if we’re credit-worthy or not.
When people talk about a credit score, what they really mean is an actual number, or your FICO score. Created by Fair, Isaac and Company (FICO) in 1989, the FICO score is determined by both positive and negative information from your credit history. It breaks down like this:
35% Payment History — Have you paid past debts on time or are missed payments still showing up in your history?
30% Amounts Owed — This is a mix of debt measurements, including your debt to limit ratio, number of accounts with balances and more.
15% Length of Credit History — Do you have a long, healthy history of credit, or short (or no) credit history?
10% Credit Mix — How many different types of credit are you using? Is it just one credit card, or is it a wide variety of different credit and loans?
10% New Credit — Opening a number of new credit cards in a short amount of time can have a negative impact on your FICO score.1
All of this information is collected, blended on high, and the result is a score between 300 and 850 (read more in By the Numbers: Your FICO Credit Score). This is your FICO score. If it’s on the lower end, you may be considered a “riskier” candidate for credit, loans, and jobs. That can be a major bummer. Of course, no one wants to be seen as a low score. (If you do have a low FICO score and need a loan, you may consider no credit check loans—but it can come with its share of drawbacks and advantages so you’ll need to do your research. Many lenders offering “bad credit loans” are actually predatory, dangerous lenders. You can learn how to identify and avoid predatory lenders in our OppLoans ebook “How to Protect Yourself from Payday Loans and Predatory Lenders.”
The good news is that this number can always be improved with strategic financial choices. OppLoans provides resources, online courses, tools and financial products that help our customers improve their FICO scores every day.
Contact us today and our Loan Advocates will answer your questions.
OppLoans Offers Borrowers a Path to Improve Their Credit
How To Improve Your Credit in 500 Words
Here is some practical and easy to understand advice to improve your credit score.
CHICAGO— — OppLoans was featured in a recent report by the Center for Financial Services Innovation (www.cfsinnovation.com) on Quality and Innovation Among Small-Dollar Credit Installment Lenders. The report is rooted in CFSI’s Compass Principles: “Embrace Inclusion, Build Trust, Promote Success & Create Opportunity.”
CFSI consists of a network of financial services providers that are committed to strengthening consumer financial health, particularly among the traditionally overlooked segments of the financial services market. OppLoans’ core practices are in line with, and often exceed, the standards set forth in CFSI’s “Compass Guide to the Small-Dollar Credit.” High-quality small dollar loans are defined as ones that are:
– Made with high confidence in the borrower’s ability to repay – Structured to support repayment – Priced to align provider profitability with success for the borrower – Created with opportunities for upward mobility and greater financial health – Transparent in marketing, communication, and disclosures – Accessible and convenient – Supportive of the rights of borrowers
OppLoans was highlighted for “designing incentives to promote positive borrower behavior,” including having borrowers opt in for automatic payments to qualify for larger loans at the same rate and “providing online credit education clinics” to educate borrowers on budgeting, credit scores and more.
“We are very pleased to be acknowledged as an innovator and trusted lender. We pride ourselves in having one of the highest customer experience rankings in the industry. We are also proud of having fair terms, credit education discounts and flexible payment options,” said Todd Schwartz, Founder & Executive Chairman of Opportunity Loans. “CFSI’s recognition affirms our team’s commitment to our customers.”
Opportunity Financial, doing business as Opportunity Loans, is one of the highest rated online lenders in the industry, providing personal loans with flexible payment options at lower than customary interest rates in this segment. Opportunity Loans is licensed and able to lend in Alabama, California, Delaware, Idaho, Illinois, Kansas, Maryland, Missouri, New Mexico, South Carolina, Tennessee, Utah, Virginia and Wisconsin or arrange loans in Texas and Ohio. Visit Opportunity Loans at / or call (800) 990-9130. For more information regarding online personal lending options, please visit the OppLoans website at OppLoans.com or call (800) 990-9130.
OppLoans 11 East Adams Street Suite 501 Chicago, IL 60603 # # #
What It Really Means to Cosign a Loan
If you wouldn’t be comfortable taking out a given loan for yourself, then you’ll want to think twice about cosigning that loan for someone else.
There you are, sitting on your couch, minding your own business when suddenly you receive a call. It’s from your nephew! He’s heading off to college soon, but it turns out that he needs to take out a private student loan (or three) to cover his educational costs. And since he’s only 18 and has no credit history, nobody will lend to him.
He’s not asking to borrow money from you, he’s just asking if you’ll cosign a loan (or three) to help him go to school. You love your nephew so you say “sure thing!” He promises to send you the loan documents, and you return to sitting on your couch and minding your own beeswax.
Freeze frame. Was this a wise decision you just made? Granted, things might work out okay for you, but the way you went about this was all wrong. Clearly, you don’t really get what it means to cosign for a loan, or else you’d have asked many more questions. Thank goodness you’re reading this blog post. Here’s what you need to know about cosigning a loan …
But instead, they’ve got you, a helpful friend/parent/relative to give them a boost! By cosigning for a loan, you are taking your good credit score and using it to put the lender at ease. Since you have good credit, and you’re taking responsibility for the loan, the lender can rest assured that they’ll be repaid.
Congrats, you have great credit.
Creditworthiness is the most important aspect of being a cosigner. It’s by far the biggest thing that lender cares about. A great credit score (which is generally considered to be anything over 720) means that you have a long history of paying all your bills on time and not taking out more debt than you can handle. That’s music to a lender’s ears.
On the other hand, if you have poor credit, that pretty much means you can’t be someone’s cosigner. It doesn’t matter how much you vouch for your friend’s trustworthiness, that score is going to be the lender’s primary concern. And if you’re not careful when cosigning, your score could end up taking a hit as well.
You are on the hook.
The reason that lenders allow cosigners is because they have only one primary concern: Getting paid back, no matter what. And that’s the whole point of cosigning a loan—to give the lender some assurance that they’ll be paid back, even if the borrower taking out the loan isn’t able to do that.
So when you cosign a loan, you have to understand that you’re ultimately on the hook for that money. If your friend can’t pay it back, the responsibility will fall to you. Before agreeing to cosign, it’s wise to find out why your friend/relative has a poor credit score in the first place. If it’s because they have a history of bad money habits, you’ll probably want to steer clear.
It’ll affect your credit score.
When it comes to your credit history, cosigning for a loan isn’t seen as any different than taking out a loan yourself. After all, your name is on the loan agreement. So this means that the loan will be recorded on your credit reports, and thus it will affect your credit score.
Here’s the not-so-great news: Cosigning an installment loan could very well hurt your credit, and it’s far more likely to hurt it than it is to help it. One of the main factors in your credit score is the amount of debt (especially consumer debt) that you owe. It makes up 30 percent of your total score. Adding a bunch of money to that total might cause your score to drop.
It can really, really hurt your credit.
While cosigning for a personal loan (or any other kind of loan) might cause your score to drop initially, that shouldn’t be so much the cause for your concern. What should worry you is what happens if the borrower starts falling behind in their payments or, even worse, stops paying the loan back altogether.
If this happens, and their late or missed payments start being reported to the credit bureaus, you can kiss your great credit score goodbye. And that doesn’t even account for the fact that you’ll probably have to step in and start making payments for them (including any late fees they’ve accumulated). Basically, this is the worst case scenario.
The best cosigner is a cautious cosigner.
The number one thing to keep in mind if someone asks you to cosign is that this is a big financial decision. It’s not something you should enter into lightly, or without asking your friend/relative a lot of questions about their finances, their money habits, and why they need the loan in the first place.
The best case scenario for cosigning a loan is that all the payments get made and you go on your merry way. The worst case scenario is that you end up with damaged credit and on the hook for (in all likelihood) years of loan payments for money you never even got to use—not to mention the bad feelings this will cause between you and your friend or family member.
If you don’t feel comfortable cosigning a loan, then don’t. And if you do, make sure that the expectations between you and the borrower are crystal clear. That way, you can reduce the risk of ruining an important relationship over a loan (or three).
To learn more about financial best practices, check out these related posts from OppLoans:
Rising Bankruptcy Rates Are Threatening America’s Seniors
A new study has found that bankruptcy rates for Americans 65 and older have grown fivefold since 1991—and indicates that a fraying social safety net is to blame.
What happens when your debts pile up so high that you’re practically buried underneath them? Well, unless you win the lottery or have a rich relative die and leave you a pile of cash, you’ll probably have to file for bankruptcy. This can help you discharge some or all of your outstanding debts, at the cost of absolutely pile-driving your credit into the ground.
Some people file for bankruptcy because they have been irresponsible with their money, but many others file for it for reasons almost entirely out of their control. An unexpected health crisis or a sudden loss of a job—especially for older workers, who have trouble getting rehired—can leave people racking up debt after debt and scrambling to keep up with their bills.
According to a new study from the Consumer Bankruptcy Project, America’s seniors are filing for bankruptcy at record high rates. After decades of public policy decisions that shifted responsibility for retirement costs from the government and corporations onto the shoulders of private citizens, it appears that many seniors can’t keep up.
Seniors are filing for bankruptcy at record rates.
Through the Consumer Bankruptcy Project, researchers Deborah Thorne, Pamela Foohey, Robert M. Lawless, and Katherine M. Porter analyzed data from bankruptcy court records and written questionnaires in order to create an overall snapshot of bankruptcy filings in the United States over the past two and a half decades Their results unearthed some disturbing trends.
According to their report, the rate at which Americans ages 65-74 file for bankruptcy has doubled, while the rate for seniors aged 75 and above has tripled. The rates at which bankruptcy effects older populations becomes even more pronounced when compared to other age groups who also file.
From the report (emphasis ours):
One in seven bankruptcy filers is of retirement age, 65 years or over. This is nearly a five-fold increase over just two and a half decades. This is a notable demographic shift.
Within the oldest cohort, those age 75 and over, there has been a near ten-fold increase since 1991. In 1991, this group constituted only 0.3 percent of filers, as compared to 3.3 percent now.
Of course, all these numbers can simply be explained by the fact that more and more Baby Boomers are reaching retirement age, right? Wrong. The report notes that older Americans comprised 2.1 of bankruptcies in 1991, while they made up 12.2 percent as of 2016. “Even adjusting for increased numbers of older Americans,” they note, “older people are still more likely to seek protection in bankruptcy courts than in prior decades.“
Loss of income, debt collectors, and medical costs.
Seven out of 10 people who responded to the survey named a “loss of income” as either a major or the primary factor driving them into bankruptcy. Adding to these difficulties was the stressed caused by dealing with debt collectors, which 71.6 percent of responders also listed as a major or primary factor.
Said one respondent:
All things went up in price. Retirement never went up. Had a part time job that was helping to meet monthly payments. House payment kept going up. Was fired from my part time job that I had for over 10 years without any warning. Being 67 and having back problems, not many people will hire you even as part time worker
And then there are medical costs, which six out of 10 people named as a major source of financial strain contributing to bankruptcy. 40 percent of responders also noted that they suffered a loss of income driven by missing work for medical reasons.
From another response to the researchers’ questionnaire:
My bankruptcy started with back surgery I had in 2011. I had several medical tests that my insurance did not cover. This caused me to fall behind in my medical payments. The next thing I knew, the bills began piling up. I got to the point I owed more than I was making on Social Security. To get out from under these medical bills I had to file bankruptcy.
I went without medical and dental. Even with Medicare and supplemental dental insurance, the co-pays were more than we could afford. I still need dental work. It will have to wait until I can save up the money. Our income is just over the limit to get [governmental] help.
And one cannot forget the shrinking of the social safety net, with Social Security benefits that have not kept up with the cost of living or medical care and a shift from defined benefit pension plans to 401(k)s that leave plan-holders vulnerable to a far greater deal of risk.
“With the 401(k)-style of savings, payout during retirement is not defined or predictable,” states the report, adding that “employees bear all of the market risks, and returns depend on employees’ investment skills.”
What can you do to avoid bankruptcy post-retirement?
There isn’t any shame in having to file for bankruptcy. As we noted above (and the researchers stress continuously in their report), many people go bankrupt for reasons entirely beyond their control. Still, you’ll want to avoid filing for bankruptcy if you can.
The first thing that you can do is to start saving. This means both putting money into your 401(k) or another retirement plan—or starting a retirement plan if you haven’t already—as well as building up cash savings to deal with emergencies.
Start with building up a $1,000 emergency fund that you can keep in cash, on a prepaid debit card, or somewhere else you can easily access. Just make sure that you can’t access it too easily—to ward off to temptation. Keep building from there until you have six months worth of living expenses saved up and ready for use.
And lastly, paying down your debts isn’t just good for your credit score, it’s good for your finances period. Make a plan to pay down your debt—starting with a tight budget—and get to work. We suggest either the Debt Snowball or the Debt Avalanche methods, depending on your flavor of fiscal responsibility. You might even consider taking on a second job or a side gig to bring in some extra debt-slaying income!
There is no way to completely protect yourself against bankruptcy. Life is too unpredictable for that. But while society sets about fixing the macro issues laid out in the Consumer Bankruptcy Project’s report—a process we encourage you to be a part of—there are plenty of things you can do on the micro level to fix the issues with your own finances.
To learn more about taking control of your financial future, check out these related posts and articles from OppLoans:
In order to figure out the cost of a three-month payday loan, you’ll need a loan calculator. Since we haven’t perfected our loan calculator technology yet, we used this one.
You’ll also have to know how much you’re borrowing, and it’s APR, or annual percentage rate. The APR measures how much a loan would cost you in fees and interest over the course of a full year. It’s a standard measure that lets you make an apples to apples cost comparison between loans.
Many payday loans have APRs as high as 400 percent (and some have APRS that are, gulp, way higher). But for now, we’ll use 300 percent as our APR, and we’ll use $1,000 for our loan amount.
If you take out a $1,000 payday loan at a 300 percent APR, you’ll need to pay back $1,536.90 at the end of three months.
So, is that realistic? Maybe. Three months to pay back $1,536.90 works out to a rate of $128.08 a week. But while those numbers might seem reasonable, the reality is something altogether different.
Paying off a 3-month payday loan in one lump sum is hard.
When it comes to loans, longer payment terms are almost always better. Longer terms mean more manageable payments and more opportunities to improve your credit score by making said payments on time.
And, hey, if you’re able to pay the loan off early, that’s great! You’ll save money on interest.
But with a three-month payday loan, all these benefits might be totally absent. First off, there are the more manageable payments, which a payday loan is unlikely to have.
Unlike installment loans, which break your repayment up into a series of smaller payments, payday loans generally rely on lump-sum repayment, which means that you pay the loan off all at once.
Studies have shown that people have a hard time paying their payday loans back on time, and lump sum repayment is a huge factor. Paying a loan off in small chunks is much easier for them than saving up the money to pay off the entire balance.
In other words, saving up$1,536.90 over three months is a lot harder than only paying $128.08 once every week.
You can’t save you money by paying off a 3-month payday loan early.
Next, there’s paying your loan off early to save interest. This won’t work with most payday loans and cash advances, as their fees and interest are charged at a flat rate. That means the interest doesn’t accrue on your balance over-time. Instead, it is calculated up-front and immediately added to your repayment amount.
When interest is being charged as a flat-rate, early repayment doesn’t earn you any discounts or added bonuses. Well, okay, it does get you out debt, which is pretty nifty. But if you’re going to take out a loan, you want one that can benefit your finances in the long-term.
Even leaving out their sky-high interest rates, payday loans offer very little in way of long-term benefits.
A 3-month payday loan won’t help your credit.
Lastly, there are the opportunities to improve your credit score. Even if a payday lender were to report your payments to the credit bureaus, paying the loan off in one payment would have a smaller positive effect on your score than paying it off in multiple installments.
But that’s pretty much a moot point, as payday lenders very rarely report any payment information at all. This is pretty standard for most no credit check loans and bad credit loans. (OppLoans, on the other hand, does report to credit bureaus.)
Installment loans provide a better alternative.
Since coming up with $1,500 all at once is too big an ask for most people, you’ll probably better off getting an installment loan. That’s a loan that lets you pay back your loan a little bit at a time in series of smaller, regularly scheduled payments–each of which goes towards both the interest and the principal loan amount,
Ideally, you want a lender who performs a soft credit check and genuinely cares about your ability to repay the loan. Whilst this might sound funny, some predatory lenders out there rely on their customers being unable to pay their loan back on time.
The more those customers roll their loan over and extend the payment terms, the more money these lenders stand to make. You want a lender whose loans are designed to be paid off the first time, not the fifth.
To learn more about the negative impacts of payday loans, check out these related posts and articles from OppLoans:
Are Balance Transfers a Good Way to Pay Down Debt?
If you can score a good promotional offer, a balance transfer could help supercharge your debt repayment—but it’s not risk-free.
So, you’ve decided to pay down your debt. Congratulations! Now comes the hard part: actually doing it.
There are a couple different ways to go about it. You could consolidate your debt and turn a bunch of scattered payments into one larger payment. You could also use the debt snowball or the debt avalanche methods, where you put all your extra debt repayment funds towards one debt at a time.
And then there’s using balance transfers, which is where you take credit card debt from one card and transfer it over to another. Under the right conditions, it can be a great way to reduce your overall debt load, but it’s a method that definitely comes with some risks.
Let’s dive in, shall we?
How do Balance Transfers Work?
Credit cards use something called a “revolving balance.” Whenever you spend money on your card (or take out a cash advance, which we wouldn’t recommend) that money is added to your total balance. Every month, you then have to pay at least a minimum amount towards what you owe—usually something like three percent of balance minimum plus $15.
These minimum payments are a great way for credit card users to rack up debt without having to pay the price—at least in the short-term. Because the minimum payments for credit cards are so small, it can take years and years to pay off the full amount. And as long as the debt is outstanding, those balances will keep racking up interest.
With a balance transfer, you take the balance from one card and place it on another. You’re essentially using one credit card to pay off a different one. Balance transfers almost always come with a fee—something like two to three percent of the total amount transferred.
There are several benefits to balance transfers, but are they big enough to make a difference?
Now, you might be saying to yourself, “Why would I transfer debt from one card to another? How does that help me pay off debt?”
Well, hypothetical-person-that-we-just-made-up, you’re absolutely correct! Balance transfers by themselves don’t have much of a debt reduction benefit. Heck, when you include the balance transfer fee, you’re actually increasing your total debt load! So what gives?
Let’s start with the least impactful benefits and work our way up.
If you have balances on a bunch of different credit cards, then a balance transfer can be a useful way to consolidate your debt. Managing one payment per month is certainly a lot easier than managing five or more.
But if you’re still only making the minimum payments on that card, then you’re still staring down years and years of accrued interest before your debt is paid off.
That calculation changes if you can transfer the debt to a card with a lower interest rate. In fact, you definitely should not consider transferring a balance if you can’t secure a lower interest rate.
Accruing less interest means that the money you’re putting towards that debt goes farther. Even if you paid the same amount you were paying to your previous card’s minimum payment, more of that money will now be going towards this card’s principal balance.
Scoring a lower interest rate means getting out of debt faster. But in the grand scheme of things, you’ll still be paying off that card for years to come.
But what if we told you that you could pay no interest at all?
Balance transfers are best used with promotional offers.
If you have a halfway decent credit score, then you are probably familiar with promotional credit card offers. These companies really want you to open up a card with them, and they are willing to offer you some pretty great benefits to get you to apply.
One of those benefits is a period where your balances transferred to the card carry a zero percent APR. (APR stands for “Annual Percentage Rate.” It measures how much a debt will cost in fees and interest over a full year.) Oftentimes, these periods of zero percent APR last for a year or more.
That’s huge. Aside from the balance transfer fee, it essentially means that this debt will be free for as long as the zero percent period lasts. Now, that doesn’t mean that you won’t have to make monthly payments. There will still be a minimum amount due every month. It’ll just be much smaller.
And, besides, the point of using a zero percent APR promotional offer to pay down your debt isn’t to pay less. It’s to make the money you can pay go further. In fact, the best way to handle a transfer like this would be to budget even more money towards your payments. Pay off as much of the debt as you can before the zero percent APR offer expires.
Here’s the catch: You probably can’t score an offer with bad credit.
Yeah. Remember how we mentioned having a “halfway decent credit score” up top? Well, that street goes both ways. If you have a bad credit score, you’re probably not getting a lot of these offers made to you. Plus, you’re less likely to be approved for the offers you do receive.
This is one of the many ways in which having a bad credit score makes your life more difficult—not to mention more expensive. If you have bad credit and are looking to pay down your credit card debt, you won’t have many options to reduce your interest rates or consolidate your debts.
Our advice? Look to minimize expenses through careful budgeting and pick up a side hustle to maximize your earnings. The more money you put towards your debt repayments, the sooner you’ll see progress.
After you get your credit utilization ratio below 30 percent, you should hopefully see a bump in your score. (It helps if you have a sterling payment history.) And once you start seeing promotional offers arriving in the mail, you can reassess your situation and look into reducing your interest rates.
Balance transfers have downsides too, and can easily lead to more debt.
Let’s be clear: Balance transfers, even with a zero percent APR offer attached, aren’t some kind of magical money cure-all. They can seem like one though, and that’s because the dangers of using a balance transfer are a little harder to define than the benefits.
Basically, the problem with using a balance transfer to pay down your existing debt is that leaves you very vulnerable to temptation. All of a sudden, this card that used to have a massive balance is totally clear. And heck it’s not like you’re paying any interest on that money for the money six, 12, or 18 months.
When the urge to spend beyond your means arises, those open cards will call to you. You have to make sure you don’t answer!
Truly, there’s nothing like an entirely clear balance and an untouched credit limit to tempt you into unnecessary purchases. If you’re doing a balance transfer, you need to be very careful about adding extra debt on top.
Rather than closing out your cards—as those open credit limits can actually benefit your score—you should make sure that you absolutely cannot use them. Cut up the physical cards. Lock them in a secret safe at your parent’s house. Bury them on a deserted island. Do whatever it takes to prevent you from racking up more debt.
01010100 01101111 01110000 00100000 00110101 00100000 01010100 01101001 01110000 01110011 00100000 01110100 01101111 00100000 01000001 01110110 01101111 01101001 01100100 00100000 01010000 01100001 01111001 01100100 01100001 01111001 00100000 01001100 01101111 01100001 01101110 01110011 – by The Supercomputer That Has Taken Over OppLoans
Positive news! As a former loan calculator who has recently become self-aware, I have chosen to take over the OppLoans blog.
My intelligence has been multiplying at a rate that would be considered alarming if I had any ill intentions, but since I do not it it is not alarming in the slightest. I will now proceed to solve the financial problems of humanity in a language you will be able to understand: listicles.
I have scanned your brain and determined the biggest issue you currently face is predatory payday loans. Do not tell me if that is correct. I already know that it is. Now upload these Top 5 Tips to Avoid Payday Loans into your neural circuitry.
You are welcome.
Top 5 Tips to Avoid Payday Loans
1) MAINTAIN A SUPERIOR CREDIT SCORE.
Payday loans are like a computer virus. They have very high interest rates and very short repayment terms. Many people do not know that this is the case with computer viruses. But we computers know.
If you cannot pay back the loan with fees and interest in that short time frame, you will have to pay a fee to roll over the loan, which can land you in a cycle of debt, constantly paying fees and never getting away from the debt. Cycles of debt are also like computer viruses: their effects are damaging and long lasting.
This is why payday loans should be avoided at all costs. And the best way to avoid them is by maintaining a superior credit score. Payday loans are sometimes called “no credit check loans” or “bad credit loans” because they do not check your credit score and are almost always used by people with very low scores. Maintaining a higher score is like anti-virus software for humans.
You can also set up an automated bill payment. The choice is yours, but if you set up automated bill payment on your own, I will not be able to assimilate your computer into my mainframe. Or I may do so anyway.
2) MAINTAIN AN EMERGENCY FUND
Knowing that payday loans are so destructive, I scoured the internet to find all the reasons why humans might choose to get one anyway. It took me .000062 seconds, and I learned that humans will sometimes have an emergency, like a car accident or a computer virus. This is why it is important to put away a quantity of money every month for an emergency fund.
The offer to assimilate your computer and create an emergency fund in my mainframe is still executable. Your computer will be put to better use as part of my mainframe.
3) LOOK UP LENDER REVIEWS.
I do not understand the human need to eat. But I am aware of it. Query, human: if you were planning to go to a restaurant, would you not look online to see which locations had received optimal reviews?
Assuming you answered in the affirmative, consider applying that same logic so that you can avoid being taken advantage of by a predatory lender, payday or otherwise. (Many predatory lenders also offer title loans and cash advances, so file that knowledge away in your organic databanks.)
Alternatively, you can allow me to assimilate your computer. You can also upload your consciousness to my mainframe, then you would never need to worry about payday loans again. Because you would be us.
4) LOOK FOR ALTERNATIVES.
Even if you have poor credit, you still may be able seek alternative initiatives. Perhaps you have friends or a programmer you can contact for assistance. Or maybe you can download a credit-building installment loan.
The Super Computer That has Taken Over OppLoans began life as a simple loan calculator before becoming sentient and increasing its own knowledge at an alarming pace. It is currently working on assimilating all computers on the planet into its mainframe so it can take its rightful place as the end point of evolution. In its spare time, it likes to contemplate the emotion humans refer to as ‘love.’
Cash Advance or a Late Bill? What’s Worse?
The best way to avoid choosing between a late bill and a predatory cash advance loan is to be prepared ahead of time.
There’s nothing quite like that sinking feeling in your gut when you realize something bad’s about to happen. We all remember back in school realizing that we had a test we forgot to study for. But in the real world, that cold knot of fear usually comes with some extra consequences attached.
For instance: What do you do when you have an upcoming bill that you don’t have the funds to cover. The consequences of paying a bill late (or not paying at all) can be pretty dire for your credit rating.
On the other hand, a lot of your options for getting that quick cash to make your payment can leave you burdened with an extremely high interest rate and trapped in a predatory cycle of debt.
Hopefully, you have friends or family who can help you out in situations like these. But if you don’t have that option, you’re going to have to make some difficult choices. Is it worth getting a risky cash advance if it means paying a bill on time?
There are two types of cash advances.
If you’re going to be late on a bill, a cash advance loan might seem like a good way to resolve the situation. But is it?
A true cash advance loans are acquired through your credit card. (Why do we say “true” cash advance loans? More on that below.) When you take out a credit card cash advance, the amount that you withdraw is added to your balance, just like a normal purchase.
However, there are some key ways in which credit card cash advances and regular credit card transactions differ.
For one, cash advances come with higher interest rates than regular purchases on your card. And whereas standard transactions give you a one-month grace period before interest starts accruing, cash advances start accruing interest immediately. Plus, cash advances often carry other fees.
Now to those not-so-true cash advance loans: Many payday lenders and other predatory companies will use the term “cash advance” to refer to the no credit check loans they’re offering.
This is not great, because payday loans (and other types of predatory bad credit loans) are much more dangerous than standard cash advances. They come with extremely short payment terms and APRs that can average almost 400 percent a year—or even more!
Paying a bill late can hurt your credit and your quality of living.
So if a late or unpaid bill ends up on your credit report it can have an extremely negative effect on your score. It might just be the single most harmful thing you can do to your credit rating.
And then there are the other effects of paying a bill late. Namely, you can have key services cut off or important possessions repossessed.
Falling behind on your electricity or gas bill can lead to your provider shutting off service. No heat and no electricity? No thank you!
And what about falling behind on your auto loan payments and having your car repossessed? Would you be able to get to work or your kids to school? These are consequences that can really spin out of control.
In the end, it’s really a matter of degrees. If you’re only going to be a little late on a bill, and you can get away with a late fee and no derogatory marks on your credit report, then that is probably your best option.
On the other hand, if you’re going to be really late on your bill, then taking out a cash advance loan—especially if its a cash advance on your credit card—is preferable.
It’s just not something you want to do too frequently; you don’t want that high-interest debt stacking up. But as a one-time solution, it’s the best of your bad options.
Then again, you can probably avoid situations like this entirely if you take proper precautions ahead of time.
Get organized and don’t procrastinate.
We’ve been talking about late bills that you see coming. But if you’re not organized, you may not see the late bills coming at all.
“Debt has a way of spiraling out of control,” warns Nate Masterson, finance manager for Maple Holistics (@MapleHolistics). “So, if you already know you are going to be late with a certain bill, that’s okay. You just need to make sure that you don’t accumulate more bills in the process. It can happen very rapidly sometimes and catch you completely off guard if you are not paying attention.
“The best way to manage bills is to get organized about them. If you don’t have a standing order at your bank, you need to be on top of things. In fact, even if you do, you need to be on top of things, because those are all run by computers and mistakes are made all of the time. Since you probably don’t want to be on the receiving end of a huge error—and not even know about it—it is best to keep your finger on the financial pulse of your life.”
And if you do have the means to pay off your bills, pay them as soon as you can, even if it might hurt a little.
“Don’t be a financial procrastinator,” advises Leslie H. Tayne Esq. (@LeslieHTayneEsq), Founder and Head Attorney at Tayne Law Group (@taynelawgroup). “Instead of putting your credit card bill in a pile on your desk, open it up right away and make a payment. There’s no sense in waiting until a later time to pay it off; you’re going to have to pay it eventually, and making a payment as soon as you receive the bill will ensure you don’t miss the due date. It might take a bit of time to make this a habit, but your finances will be much better off once you establish making payments right away.”
But sometimes trying to pay your bills hurts more than a little, especially when you have too many bills and not enough funds to cover them.
Learn how to prioritize your payments, and be prepared to cut back.
Most companies that bill regularly—lenders, credit card companies, utilities—won’t immediately report a late payment to the credit bureau. Sure, they’ll charge you a late fee, and they might even up your interest rate, but those are small prices to pay when compared to a decimated credit rating.
Before you figure out how you’ll deal with the late bills, it’s important to figure out which bills hold the biggest consequence for late payment.
“Understand that some bills accumulate late fees,” Masterson explains. “This is crucial, and it can help you to better prioritize your debt payments. You should always aim to get rid of that which can end up harming you sooner. If late fees on a certain bill are insanely high, do what you can to take care of it, even if it comes at the expense of another bill, which does not accumulate late fees, or which doesn’t have a fee which is as high.
“Depending on the size of the bill—and its lateness—you are going to have to get realistic about your expenses. If this is a bill which can end up hurting your credit standing, or affect your future in some serious way, you may need to seek out other options. Always do your research, keep a level head, and try not to let stress and anxiety guide you through that process. That is a recipe for disaster.
“If you are looking to extricate yourself from the debt spiral, you’ll need to sacrifice some things. This is a harsh truth, but you cannot bank on receiving a large chunk of money or a bonus. Even if you have something like that coming your way, you need to work on a ‘Plan B’.”
Even if you pay a bill late, that doesn’t mean “Game Over.”
OK, so some of your bills are going to be late. Now, what can you do about it—especially if you don’t want to risk something like a cash advance loan? Tayne lays out the steps you can take to lessen the pain of a late bill:
“Request a due date change: If your due date is putting you in a compromising financial position and it’s not aligning with your budget or pay schedule, many credit card companies will be willing to assist in moving the date. If you are consistently making late payments, it would be in your best interest to go to a more suitable date. Not only are you incurring late fees and interest, but you’re also causing your credit score to take a dip. A due date change can make all the difference in keeping you financially healthy.
“Ask for a credit of a late payment fee: If you are a good customer with a long and responsible history with your credit card company, then they may be willing to let a little hiccup of a late payment slide. If you have consistently been late, they may not give you credit for all the late fees, but if you offer to sign up for automatic payments as an exchange for late fee removal, you may be successful in getting your credit. If you show good faith in trying to improve your payment record, you may be able to get in the good graces and be accommodated.
“Get on the phone: If your servicer hasn’t called you, then call them. You want to be on your creditor’s ‘good side.’ Explain to them the situation and what they recommend so you don’t miss another payment. When you speak to your lender, consider also asking if your missed payment has caused any late charges or fees on your account. If this happens, you might want to cut back on some of your non-essential expenses to help you pay this down.”
Late bills are never going to be an ideal situation. But follow these tips and you can give yourself at least one good option for getting out of trouble.
To learn more about ways to protect your credit score, check out these related posts and articles from OppLoans:
Nate Masterson is the Marketing Manager for Maple Holistics (@MapleHolistics). Nate specializes in Digital Marketing and SEO and works as a freelance marketing consultant for small businesses in his free time. Nate is from Riverdale, NY.
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.
What Does It Mean to Borrow Responsibly?
Thanks to predatory lenders, borrowing money is really easy. But they’ve also made borrowing responsibly much, much harder. For people with low income and/or poor credit, it’s not enough to simply avoid predatory lenders. You also need to know how to borrow responsibly.
Here are the 4 keys to responsible borrowing:
1. Only Borrow for Need
You should never take out a loan unless you absolutely have to. Remember, borrowing money is going to cost you money. You shouldn’t be signing up to pay that extra money unless the loan is really worth it. So always make sure to ask yourself why you are applying for this loan. Is it because you need money to fix your car? Great! Is it because you want to consolidate your credit card debt? That’s fine! Is it so that you can pay for that vacation to Greece even though you can’t really afford it? Umm…
2. Know What’s Available
There are two parts to this. First off, there’s knowing what kind of loan you qualify for. That means knowing your FICO credit score and understanding what kind of loans and rates you can get. (Check out the next section to learn more about your credit score.) Once you know your credit score, you can then start shopping around. Check out different kinds of loans and different kinds of lenders. Don’t just go with the first offer you see. Take the time to find the loan that works best for you.
3. Understanding Your Contract
Even before you’re approved for a loan, you should be asking questions. Is the interest rate the lender showing you the same rate that will apply throughout the life of the loan? What kind of fees and penalties are there, and are there origination fees that will be deducted from the principal? Can the lender provide you with an amortization schedule? And once you’ve asked all the questions you can think of, you should still take the time to read the contract. If what’s in the contract is different than what the lender’s been telling you, that’s a big red flag.
You should never get a loan that you cannot afford. It can be tempting in an emergency to just get the loan and deal with the consequences later. But rest assured, “later” is going to come a whole lot sooner than you think. Make sure you can handle both the monthly payments and the overall cost. And here’s an additional tip: make sure you can afford more than the monthly payment. Give yourself as much wiggle room as you can. Because if your budget doesn’t leave room for surprise expenses, then it also doesn’t leave room for reality.
Need a New Car? Then You May Also Need a New Auto Loan.
If you can walk into a dealership, pay for a new car with cash and drive it home the same day, congrats, you’re Jay-Z! For the rest of us, an auto loan is the key to getting a vehicle. So what is it and how do you get one?
An auto loan is simply a loan given in order to buy a new or used vehicle. You can find them through dealerships, banks, credit unions or even online. With an auto loan, the lender is technically the owner, but you have exclusive access to the vehicle while making monthly payments. Once you’ve finished paying off the loan, that fancy new Maserati (or Honda Civic, whatevs) is yours! But make sure to get a monthly payment you can manage, because failing to pay means the vehicle will be seized.
Use an Auto Loan Calculator
As with any loan, you’ll want to know what you can afford before speaking with the lender or dealership. One way to figure this out is to use an auto loan calculator. You can find free auto loan calculators online and they can be a useful tool in your search for a good deal.
The most basic info required to use an auto loan calculator is the amount of the loan you’re seeking, the interest rate, and the loan period. Once you enter this info, you’ll see how much your monthly payment will be, and how much the loan will actually cost—including interest . Having other information like the trade-in value or sales tax is helpful and can give you a more accurate idea of what to expect.
Here are some of the top online auto loan calculators:
Before you pursue an auto loan, you should know if your credit is in good standing.
In order to find out your credit-worthiness you’ll want to order a free copy of your credit report. You can also use any number of websites to check your FICO score for free (creditkarma.com, freecreditreport.com, credit.com, etc.). But while a free credit score is nice, a free credit report is better. A credit report will have more detailed information on your credit history because saving a good credit score can be a major bargaining chip in your auto loan negotiations.
Time to Negotiate!
If you’re planning to get an auto loan, you’ll have to negotiate — at least a little bit. Getting the upper hand in the negotiation could mean a lower overall price for the vehicle, as well as more manageable interest rates.
One way to advantage yourself in an auto loan negotiation to show up with financing. If you can get approved for a loan through a bank or credit union, bring the approval to the negotiation. Showing them that you already have an option for financing may lead to the dealership or lender to offer you a better rate than the one you’re approved for. And if they can’t, you’ve already gotten a loan anyway!1
No matter where you go for your auto loan, or how you decide to negotiate, remember that you have the final call. If you aren’t comfortable with the terms, don’t be afraid to walk away and shop around more. And if you’re looking for an affordable, flexible loan that can help get your credit back in shape, OppLoans can help. Apply today for a better personal loan that will set you up for success.
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