Month: March 2014 | Debt Management Credit Counseling Corp.

Thrifty Spending Issue 103

April 21, 2014March 30, 2014 by jstokes

FEATURE ARTICLE: What to do with your tax refund Expecting a hefty tax refund this year? You may have visions of plasma televisions and Hawaiian vacations. But with the economy locked in recession and the unemployment rate at a 25-year high, there might be more practical ways to spend the extra cash.

MONEY SAVING TIP: The ExtraBucks Rewards at CVS can be overwhelming when you first sign up, but it is one of those loyalty cards that pays off.

DID YOU KNOW…offers to repair your credit can be a rip off?

Credit repair agencies enjoy soliciting their special industry knowledge and insights, and people often assume these firms can do things that individuals can’t.

SafeIDLock Your Credit

March 28, 2014 by jstokes

In a matter of minutes, your identity could be stolen and you could face a long road of financial problems. This is actually easy to avoid with SafeIDLock. If you have already experienced identity theft, SafeIDLock will help you restore your identity.

Part of DMCC’s mission is to educate consumers on how to improve their credit and provide a prosperous financial future for themselves and their families. One of the ways DMCC does this is by reviewing consumer’s credit reports. At times, our clients are surprised to find unknown credit lines on their reports. Some of our clients have had to struggle correcting their credit reports after being victims of identity theft. SafeIDLock helps eliminate all of this. They will protect your identity by monitoring public and private networks and alert you of any suspicious activity associated with your name. You will also be given access to monitor your own Experian credit report and view your credit score 24/7.

Be proactive and contact DMCC (866-618-3328) to speak to one of our certified credit counselors. They will discuss with you the plan available through SafeIDLock, so you can avoid becoming a victim of identity theft. It is safe and effective.

Check for a recall before purchasing that car!

December 8, 2022March 18, 2014 by jstokes

An auto recall means that a specific vehicle may not meet safety, operating or emissions standards. Recalls can be issued by the either the manufacturer or the Environmental Protection Agency (EPA), according to the Recalls website, which is provided for consumers by the government. Recalls are covered by the manufacturer at a same-make dealership free of charge.

Purchasing a car, even a used model, is the second largest investment we usually make so it is important to do some research before you purchase a vehicle. If you plan a vehicle purchase go to the National Highway Safety Administration website, (NHTSA) http://www.nhtsa.gov/Vehicle+Safety/Recalls+&+Defects and do some investigation. Try and visit the site every few months as recalls happen frequently and could happen during your vehicle ownership.

Before making that purchase contact a DMCC Certified Credit Counselor and consider a budget review. Knowing how much you can afford before you buy will help you make an affordable choice.

DMCC is a 501 (c)3 nonprofit organization committed to educating consumers on financial issues and providing personal assistance to consumers who have become overextended with debt. Education is provided free of charge to consumers, as well as personal counseling to identify the best options for the repayment of their debt. To speak to a certified credit counselor, call toll-free 866-618-3328 or email contact@dmcconline.org

Are you in debt trouble?

December 8, 2022March 18, 2014 by jstokes

Signs that you may be in trouble with your debt!

The following are indications you have a debt problem:

1. You do not have any savings.

2. You make minimum payments on your credit cards.

3. You use credit cards for things you used to buy with cash, such as groceries.

4. You use increasing amounts of your total income to pay off debts.

5. You have more than two or three major credit cards.

6. After you pay your credit card bill, you increase your balance by the same amount (or more) the following month.

7. You are at or near your credit limit on your credit cards.

8. You count on the float in order to pay your bills, writing a check hoping that you’ll be able to cover it by the time it clears your bank.

9. You are unsure of the total amount you owe on all your debts.

10. You take out cash advances on your credit card to pay other bills.

11. You have tried to make a purchase with your credit card and been declined.

12. You have been denied credit.

13. You bounce checks.

14. You get calls from collectors.

15. You lie to your spouse or other family member about your spending, hide credit card statements or constantly argue with family members about your finances.

Here are some other warning signs that you might be piling up too much debt:

• You cannot pay off the bill in full each month. Even before you get to the stage where you’re only paying the minimum, there are warning signs. If you rarely see your credit card balance drop to zero, you need to start rethinking your spending/saving plan.

• You are charging because you haven’t got the money. If you are making purchases with your credit card because you can’t afford to pay cash for it, that’s a strong sign you are in financial trouble.

• You are near or at the limit with your credit cards. You have spent yourself into a corner, and the credit you need for everyday life is used up.

• You are suffering physically. Your brain is recognizing that your spending patterns are in conflict with your income and your anxiety level increases.

• You are running up unsecured lines of credit. Many institutions offer lines of credit or overdraft protection on checking or savings accounts. If you are utilizing these services on your accounts month to month, then you have a problem. Because these services usually have a cost associated with them, they can be costly every time they are used.

If you realize that you are in over your head, the sooner you act, the easier it will be to get out from under the burden of debt. Beware of companies that promise to fix your credit. Talk to a Certified Credit Counselor at DMCC today and start with a free budget counseling session and get control of your finances today!

Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives

December 8, 2022March 17, 2014 by jstokes

Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives

“I just need enough cash to tide me over until payday.”

“GET CASH UNTIL PAYDAY! . . . $100 OR MORE . . . FAST.”

The ads are on the radio, television, the Internet, even in the mail. They refer to payday loans, cash advance loans, check advance loans, post-dated check loans, or deferred deposit loans. The Federal Trade Commission, the nation’s consumer protection agency, says that regardless of their name, these small, short-term, high-rate loans by check cashers, finance companies and others all come at a very high price.

Here’s how they work: A borrower writes a personal check payable to the lender for the amount the person wants to borrow, plus the fee they must pay for borrowing. The company gives the borrower the amount of the check less the fee, and agrees to hold the check until the loan is due, usually the borrower’s next payday. Or, with the borrower’s permission, the company deposits the amount borrowed — less the fee — into the borrower’s checking account electronically. The loan amount is due to be debited the next payday. The fees on these loans can be a percentage of the face value of the check — or they can be based on increments of money borrowed: say, a fee for every $50 or $100 borrowed. The borrower is charged new fees each time the same loan is extended or “rolled over.”

A payday loan — that is, a cash advance secured by a personal check or paid by electronic transfer is very expensive credit. How expensive? Say you need to borrow $100 for two weeks. You write a personal check for $115, with $15 the fee to borrow the money. The check casher or payday lender agrees to hold your check until your next payday. When that day comes around, either the lender deposits the check and you redeem it by paying the $115 in cash, or you roll-over the loan and are charged $15 more to extend the financing for 14 more days. If you agree to electronic payments instead of a check, here’s what would happen on your next payday: the company would debit the full amount of the loan from your checking account electronically, or extend the loan for an additional $15. The cost of the initial $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Alternatives to Payday Loans

Before you decide to take out a payday loan, consider some alternatives.

Consider a small loan from your credit union or a small loan company. Some banks may offer short-term loans for small amounts at competitive rates. A local community-based organization may make small business loans to people. A cash advance on a credit card also may be possible, but it may have a higher interest rate than other sources of funds: find out the terms before you decide. In any case, shop first and compare all available offers.
Shop for the credit offer with the lowest cost. Compare the APR and the finance charge, which includes loan fees, interest and other credit costs. You are looking for the lowest APR. Military personnel have special protections against super-high fees or rates, and all consumers in some states and the District of Columbia have some protections dealing with limits on rates. Even with these protections, payday loans can be expensive, particularly if you roll-over the loan and are responsible for paying additional fees. Other credit offers may come with lower rates and costs.
Contact your creditors or loan servicer as quickly as possible if you are having trouble with your payments, and ask for more time. Many may be willing to work with consumers who they believe are acting in good faith. They may offer an extension on your bills; make sure to find out what the charges would be for that service — a late charge, an additional finance charge, or a higher interest rate.
Contact Debt Management Credit Counseling, (DMCC) if you need help working out a debt repayment plan with creditors or developing a budget.
Make a realistic budget, including your monthly and daily expenditures, and plan, plan, plan. Try to avoid unnecessary purchases: the costs of small, every-day items like a cup of coffee add up. At the same time, try to build some savings: small deposits do help. A savings plan — however modest — can help you avoid borrowing for emergencies. Saving the fee on a $300 payday loan for six months, for example, can help you create a buffer against financial emergencies.

The bottom line on payday loans: Try to find an alternative. If you must use one, try to limit the amount. Borrow only as much as you can afford to pay with your next paycheck — and still have enough to make it to next payday.

Protections for Military Consumers:

Payday loans (and certain other financing) offered to servicemembers and their dependents must include certain protections, under Federal law and a Department of Defense rule. For example, for payday loans offered after October 1, 2007, the military annual percentage rate cannot exceed 36%. Most fees and charges, with few exceptions, are included in the rate. Creditors also may not, for example, require use of a check or access to a bank account for the loan, mandatory arbitration, and unreasonable legal notices. Military consumers also must be given certain disclosures about the loan costs and your rights. Credit agreements that violate the protections are void. Creditors that offer payday loans may ask loan applicants to sign a statement about their military affiliation.

Even with these protections, payday loans can be costly, especially if you roll-over the loan. You instead may be able to obtain financial assistance from military aid societies, such as the Army Emergency Relief, Navy and Marine Corps Relief Society, Air Force Aid Society, or Coast Guard Mutual Aid. You may be able to borrow from families or friends, or get an advance on your paycheck from your employer. If you still need credit, loans from a credit union, bank, or a small loan company may offer you lower rates and costs. They may have special offers for military applicants, and may help you start a savings account. A cash advance on your credit card may be possible, but it could be costly. Find out the terms for any credit before you sign. You may request free legal advice about a credit application from a service legal assistance office, or financial counseling from a consumer credit counselor, including about deferring your payments.

What is the Real APR on PayDay Loans?

December 8, 2022March 11, 2014 by jstokes

Recently, several members of an online network were having a discussion about a payday loan. The payday loan company would loan someone $100, and they would have to pay $115.00 back two weeks later. What is the interest rate? (No, this isn’t a word problem on a math test!)

The payday loan company said that the interest rate is 15%, since 15% of the loan is being repaid as interest. While accurate from one perspective, this number is very misleading. The interest rate on nearly all loans is determined on an Annual Percentage Rate, or APR. This means that you look at the interest that would be paid on the loan in a year, divide it by the principal balance, and come up with the APR. For example, if you borrow $100 on January 1 and pay $1 per month in interest for 12 months, the loan has a 12% APR, since 12 ÷ 100 = 0.12 = 12%.

This works for larger loans as well. If you pay $500 per month interest on a $100,000 loan, the APR is computed this way:

$500 x 12 months = $6,000.
$6,000 ÷ $100,000 = 0.06 = 6%

So if you’re paying $500 per month interest on a $100,000 loan, the APR is 6%.

Let’s look at that payday loan again…

$15.00 interest for 2 weeks = $390 per year.
$390 ÷ $100 = 3.90 = 390% APR

So that loan that requires you to pay “only” $115 back in two weeks really has a 390% APR!

If you or someone you know has been overwhelmed with payday loan debt, you may be eligible for a payday loan repayment program. Florida Residents are eligible for a 60-day deferment. Call DMCC 866.618.3328 for more information and free assistance.

New Research: Payday loans become gateway to long-term debt

December 8, 2022March 10, 2014 by jstokes

In the latest of a series of research reports, the Center for Responsible Lending (CRL) has found that payday loan customers remain indebted double the time that the Federal Deposit Insurance Corporation recommends.

“Payday Loans Inc.: Short on Credit, Long on Debt” verifies how what begins as usually a two-week, small-dollar loan becomes a deepening pit of debt lasting on average 212 days in the first year of borrowing and growing to 372 days in the succeeding year. Yet, according to FDIC guidance, no Payday borrower should be indebted for more than 90 days in any 12-month period.

The report also shows how the size of these loans grow over time as well. Although the first Payday loan is typically only $279, the average customer will borrow more in principal and reaches $466 over time. The catch is that as the amount borrowed increases, so do the applicable fees and interest that the borrower must also pay. According to CRL, much of the problem with fully retiring payday debt is due to the industry requirement that borrowers pay the entire loan with the next paycheck. For most borrowers, this specific loan term denies them the ability to financially manage the rest of their lives. The financial burden of only having two weeks to repay can be insurmountable. For many borrowers, even a $300 loan eats up all remaining funds after the borrower has paid for just their most basic living expenses, because they have such a short time to pay the loan back.

At a time when so many people of modest means are striving to financially piece their lives together, dollars are particularly dear. Quick cash may be available from payday lenders. But, there is nothing quick about getting rid of that debt. Borrowers beware.

If you have Payday Loans that you are struggling to repay, or are caught up in the seemingly never ending cycle of renewing loans, DMCC can help.

Click Here to learn about DMCC’s Pay Day Loan Assistance.

Face Your Mortgage Issues Directly and Realistically

December 8, 2022March 3, 2014 by Aldo Gonzalez

Nobody likes to take a call from the collections department. It doesn’t matter if the call is about a credit card, a utility bill, a bounced check or anything else that may be delinquent. Avoiding the issue may seem like a good strategy to those who really hate conflict, but it is usually the worst thing you can do. This is especially true when it comes to a mortgage.

Your lender does not want your house. Yes, they may be very forward in telling you that foreclosure could happen if you do not pay, but they would much rather have a good loan than face the headache of the foreclosure process, reconditioning a property and finding a way to sell it. In the current economic climate, lenders are more desperate than ever to keep you in your house, but they cannot do it unless you talk to them.

Consider this: Freddie Mac has estimated the cost of a foreclosure to the bank to be around $60,000. Officials at HSBC have estimated that the average loss on a foreclosed home is 20 to 25% of the value of the loan. This means that on a $400,000 home, they could lose $80,000 to $100,000. Doesn’t it make sense that the bank would prefer to cut its losses?

In order to work with you, the lender needs to speak to you. The sooner they can speak to you, the better your chances of working a deal with them. In another article, titled “Mortgage Options to Avoid Losing Your Home”, the specifics of what types of deals you may be able to obtain are spelled out. This article will deal only with what you need to do and what you need to be prepared to provide if you want to avoid foreclosure.

• Find out who actually owns your mortgage and deal with them directly. In most cases, you are making your payments to a company that is merely servicing your loan. That company may not be in a position to make the best deal with you. The actual owner of the mortgage has the most to lose if you reach the point of foreclosure and thus has the most to gain by working something out with you.

• Ask to speak with the “Loss Mitigation” department. Almost every lender has such a department. Those that didn’t in the past have created one because the losses from foreclosure have become so extensive. The collections department has one job: get money from you. The loss mitigation department is there to try to help you either keep your house, or at least make the process of losing it less painful, less expensive and less stressful.

• Don’t wait until they have already begun the foreclosure process. Your best deal will come when the bank has not already spent a lot of money with attorneys. Remember, to work something out, you need to make it easier and less expensive for the lender as well as yourself.

• Be prepared to show need and ability. The loss mitigation department usually has many different options to help you keep your home, but they need to see that you can make some sort of payment and you need to show them that there is a legitimate reason for your delinquency. Too many people are simply taking advantage of bad economic times to try to get a better deal. You will need to be able prove your income and explain your circumstances if you expect to get help.

• Understand that you may need to make sacrifices. You are not going to get a lot of sympathy from your lender if you own a 40 foot boat or you drive almost new luxury cars that are paid in full. You may have to consider liquidating some assets and downsizing to items that fulfill needs and not expensive desires.

• Don’t lose your home in order to salvage credit cards and personal loans. You may have to stop paying unsecured debts altogether or at least put them on a Debt Management Plan or even a Debt Settlement Plan. It might be a good idea to consult with a certified credit counselor at a credit counseling agency to find out about your options with your other debts. A reduction in payments on your other debts could make more of your income available to help save your home.

• Don’t abandon the property or let it deteriorate. Even when there is no way you can keep your home, because of the current difficulties in selling a home, the lender may be willing to offer you some assistance. Some lenders are letting people stay in homes and maintain them for little or even no rent just to keep the value up. Others are offering thousands of dollars in relocation money to people as long as they leave the house in good condition. Be sure you discuss these options with your lender if you are in the worst-case scenario of losing your home. You may find that the lender will make your transition easier or even profitable.

• You don’t have to do it alone. There are HUD approved housing counseling agencies that may be able to help you work something out with your lenders for little or no cost. There are also companies out there that will charge you a fee for their services, but unless the services include a legal challenge to the loan documents, they are unlikely to be able to do more than a HUD approved agency.

If you live in South Florida, DMCC is a HUD Approved Housing Agency that may be able to help you. If you live outside South Florida, you can contact HUD at (800) 569-4287 for a list approved agencies in your local area. For FHA insured loans, if you feel your lender is not being responsive to your requests for help, you can call (800) CALL- FHA.