Whatever your 'lending'
need, please review all 'pay-back' terms.
What's
In The Small Print...Or Under The Hood?
Today, loans exist
for every conceivable need. However, the greater the need
and the risk, the greater the re-payment terms for the lender.
That's logical. If you have bad credit (read: increased
risk), the lender wants to ensure his/her money
gets repaid.
Therefore, you
will pay more in interest and/or points.
Many people living
paycheck to paycheck or recently unemployed need a little
financial help. Sometimes they need a car and go to the
'buy here, pay here' car dealers.
Be careful. Many
of these dealers charge more than the state-allowable interest
rate (read: usury law) and install GPS
tracking devices without your knowledge.
Yes, this is true.
Unbeknownst to you, these car dealers know exactly where
'their' car is at all times. Stop paying and they know
exactly where to go to re-possess it.
Too Much Week &
Not Enough Paycheck....
The payday lending
industry has exploded...with a store on what seems to
be every street corner with their bright flashing neon
reminiscent of pawn shops. With some of these 'payday
lenders,' they rip off people desperate for a little money
to hold them over until payday.
For years, this
took place with many good people in the military, who
took out 'payday' loans, only to get squeezed with outrageous
fees. And then the government stepped in to curb this
theft.
Where's
The Help When Needed?
Unfortunately, if
you have damaged credit or no banking relationship, you
may be forced to the payday lenders. According to the Florida
Attorney General, the payday lending industry receives many
complaints about undisclosed repayment terms, etc.
You must know the
terms before grabbing the money. Look at www.lendingclub.com
-- apparently, this peer-to-peer lending concept is explodying
in popularity, aimed at people with 'better' credit who
don't or can't go to the banks or payday lenders.
When faced with
a financial decision, you first need to evaluate your
situation and consider all your options. Whether a car
loan, a student loan, a payday loan or any other kind
of loan, carefully review your options:
Step 1:
Evaluate your situation.
Consider the answers
to the following questions in order to gain a complete
understanding of your situation:
• Exactly how much do you owe right now?
• When do you have to pay?
• Have you talked to the creditor or lender about
your options?
• Does the lender or creditor offer a payment plan?
• What are the consequences of not paying?
Step 2:
What are your options?
Based on the questions above, what
are your options. Is this a short-term crisis with small
utility bills, for instance? As with any financial crisis,
please…please call your creditor(s) and talk to
family and friends.
Don’t alienate family and
friends in a crisis, despite any embarrassment or humility
you may feel. Put that aside and realize that everybody
experiences unforeseen crises in life. Our friends and
family may be able to help brainstorm options where we
cannot see options—we’re too close to the
epicenter of the financial storm.
As for contacting your creditors,
do it early. Get the name & extension of all people
with whom you speak and take good notes. You will not
be the first or the last to notify a creditor of a hardship
and a request for their help.
Step 3: Take action
In a crisis, you may get relief
from one of the following sources. Of course, each provides
relief, though each comes with caveats as well:
• Credit cards – Credit cards
allow you to stay afloat. If you must, you can pay only
your minimum each month—not good but neither is
your situation. It would be nice if you could keep debt2credit
around 30-35%. However, do what you must to provide for
your family.
• Family & friends –
Should I even mention this option? If you do borrown from
a friend or family member, complete a Promissory Note
(an official IOU). Show that you expect no special favors
and that you will honor the terms of the Note. If you
need a copy of a Promissory Note, ask us.
• Savings – If you have a
401(k), you may be able to tap it under a “hardship
distribution” policy. Depending upon the situation,
you may have to pay a 10% penalty on the amount you withdraw,
however. Again, a family crisis requires some concessions—10%
is a small price to pay for peace of mind. If you have
a 403b, you may be able to take a loan and then pay it
back. Call your plan administrator for details.
• Emergency payday lenders –
If you cannot withdraw from your savings, don’t
have access to credit cards, and can’t borrow from
a relative, you may need to turn to an emergency payday
lender. You can borrow from $200 to $1,000 with these
14-30 day loans. The fees for these loans range between
8-25% of the amount you borrow. As with any loan—but
especially with payday loans—carefully understand
the terms for repayment.
• Personal loans – You can
borrow $1,000 to $15,000 with a personal loan. These loans
have a 1-4 year term and work best if you have a stable
income and need cash for a financial emergency. The annual
percentage rate for a personal loan ranges from 5-20%.
• Home equity loans – If you own
your home and have equity, you may be able to get a HELOC
(home equity line of credit or a home equity loan. The
difference: with a HELOC you might get the loan for $50,000
but you’re only paying interest on the amount you
spend. Whereas with a home equity loan, you immediately
get a check for the full $50,000 for instance and immediately
pay interest.
Last, don’t forget (I know
you won’t) that a HELOC and home equity loan are
tied to your home. If you miss payments, you risk foreclosure.
|
In
a bind, we went to our church for help. That
support turned out to be the help we desperately
needed…we are so grateful. My advice is
to tell people you trust about your problems.
Help is out there…people want to help....
