Advanced Fee Loans

If you’re looking for a loan or credit card but don’t think you’ll qualify – or if you’ve been turned down by a bank because of your credit history – you may be tempted by ads and websites that guarantee loans or credit cards, regardless of your credit history. Should you apply, you’ll likely find out that you have to pay a fee just for the promise of the loan. You best policy is to ignore these ads or sites.

If you have to pay a fee for the promise of a loan or credit card, you’re dealing with a scam artist. More than likely, you’ll get just an application for a credit card, a stored value or debit card, or a card that has so many strings attached, it’s practically worthless.

Be alert to tricks of the advance fee loan trade so you can avoid them. For example,

A lender who isn’t interested in your credit history is cause for concern. Ads that say “Bad credit? No problem,” “We don’t care about your past. You deserve a loan,” “Get money fast,” or even “No hassle – guaranteed” often indicate a scam.

If disclosures about fees aren’t clear and prominent, take your business elsewhere. Scam lenders may say you’ve been approved for a loan, then call or email demanding a fee before you can get access to any money.

If the offer of the loan is made by phone but you have to pay before you get access to any money, it’s illegal. It’s illegal for companies doing business in the U.S. by phone to promise you a loan and ask you to pay for it before they make good on their promise.

A lender who uses a copy-cat or a want to be name is a reason for you to be suspicious. Crooks give their companies names that sound like well-known or respected organizations and create fancy-looking websites. Some scam artists pretend to be the Better Business Bureau or another reputable organization, and some produce forged paperwork or pay people who pretend to be references.

A lender who is not registered in your state is a red flag. Lenders and loan brokers are required to register in the states where they do business. To check registration, call your state Attorney General’s office or your state’s Department of Banking or Financial Regulation. The numbers are listed in the Blue Pages of your telephone directory.

A lender who asks you to wire money or pay an individual is questionable at best. Don’t pay a person for a loan or credit card directly; legitimate lenders don’t ask you to do that. In addition, don’t use a wire transfer service or send money orders for the promise of a loan. You have little recourse if there’s a problem with a wire transaction, and legitimate lenders don’t pressure their customers to wire funds or send them by courier.

Watch Your Spending

Spending money is easy. Spending money wisely is another thing altogether. If you’ve ever heard the advice, “never go to the grocery store without a list or when you’re hungry,” chances are you know why- you’re likely to buy more than you need and spend more, too. Regardless of where you’re shopping and how you pay for your purchases, remember to:

Shop around. A “sale” price isn’t always the “best” price. Some merchants may offer a sale price on the item you want for a limited time; other merchants may offer items at a discount everyday. Other merchants may offer a deep discount on one item – but only if you agree to spend a minimum that is several hundred dollars more.

Go online. Check out websites that compare prices. If you decide to buy from an online merchant, keep shipping costs and delivery time in mind.

Look for price matching policies. Some merchants will match, or even beat, a competitor’s prices.

Clip coupons. Coupons are useful when they save you money on what you’re already planning to buy. You can find some coupons in the Sunday paper or often, at coupon exchanges at your local library. Or you can download others – full coupons or simply codes – from manufacturer and retailer sites online. If you are shopping online, you simply enter the code at checkout.

Use debit and credit cards sparingly. To minimize interest and other charges, try to limit credit card purchases to an amount you can pay in full at the end of the month. If you use a debit card, don’t rely on an overdraft feature to spend money you don’t have. When you leave your house, carry only the card you may need to use rather than all your cards “just in case.”

Keep track of your spending. Incidental and impulse purchases add up. Jotting down what you spend after every purchase helps keep you mindful of your limits. At least once a month, use credit card, checking, and other records to review what you’ve bought. Then ask yourself if it makes sense to reallocate some of this spending to an emergency savings account.

Savings

You know it’s important to save money, whether it’s for an emergency fund, your retirement, or to buy something special. But it’s not always easy to stash any spare cash.

To Do

Consider yourself a creditor. When you pay your bills, write a check to yourself. Decide on a realistic amount. Deposit the money into a savings, investment, or retirement account. Then, pay your other bills as usual. If you find that you don’t have enough money to cover all your expenses, write down the amount you are short and look for ways to trim your budget: Borrow books from the library rather than buying new; brew your own coffee rather than buying it; consider raising the deductible on your auto insurance; buy store brands instead of name brands; cancel subscriptions to magazines you don’t read or can find at the library or online.

Once you establish a regular savings plan, consider increasing your monthly deposit if you get a pay raise, or when you pay off a debt. For example, once you pay off your car loan, student loan, or other installment debt, deposit that amount into a savings account. Once your toddler is out of diapers, deposit the amount you spent on diapers into savings. You won’t miss the money if it’s put into savings, but more than likely, you’ll find a way to spend it if it’s in your checking account.

If you need some fast cash, consider selling items around the house you no longer use, either online, at a garage sale, or at a local consignment shop. When you sell online, you may use an auction or classified ad site. Check the sites for policies and procedures. When you agree to consign items to a shop, you’re a consignor. You still own your stuff, but you give the shop the right to sell it. The shop becomes the consignee. When the items sell, you get a percentage of the selling price that you agreed to in advance. A profit split of 50/50 or 60/40, with the higher percentage going to the shop, is typical.

Avoid payday lenders. A payday loan is a cash advance secured by a personal check or paid by electronic transfer. It is very expensive credit. How expensive? Say you need to borrow $100 for two weeks. You write a personal check for $115; $15 is the fee to borrow the money. The check casher 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 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, which works out to 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.

Creating a Budget

A budget is a tool to help you plan, prioritize, and manage your income and expenses. Review your budget often and update it when you are experiencing a change in income and expenses.

Creating a Budget

Write down your monthly take-home pay. Or if you’re out of work, your unemployment compensation. If you’re in sales – or work on commission – you may have to estimate, since your income may vary from month to month. List income you receive from any source, like a part-time job, a tax refund, gifts, unemployment, public assistance, dividends, and alimony or child support. Add the entries to determine your actual income for that month. Keep in mind, some of these amounts may fluctuate.

List how much you deposit in savings each month from your take-home income, even if it’s only a small amount.

List your fixed monthly expenses – the predictable, set amounts for the must-have items and services that you pay for each month – like rent or mortgage, car payment, and telephone, cable, or Internet access.

List your variable expenses – the amounts that change, as well as the expenses you pay weekly, monthly, quarterly, semi-annually, or every year – like groceries, clothing, haircuts, property taxes, auto and homeowners insurance, and gas and electric.

List estimates for once-in-a-while expenses – like birthday and wedding gifts, or holiday gifts and entertainment.

Total your fixed and variable expenses and divide by 12 to get a monthly estimate.

If after paying your bills and putting money in savings, you still have funds, you can carry over the balance for the next month or use it for unexpected expenses. If this month’s balance is negative, look for ways to cut back on the variable expenses.

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Vehicle Reposession

If you’re like most people, you rely on your vehicle to get you where you need to go – and when you need to go – whether it’s to work, school, the grocery store, or the soccer field. But if you’re late with your car payments, or in some states, if you don’t have adequate auto insurance, your vehicle could be taken away from you.

To Do

If you know you’re going to be late with a car payment, contact your creditor right away. It’s easier to try to prevent vehicle repossession than to dispute it later.

• Many creditors will work with customers they believe will be able to pay, even if a little late.
• You may be able to negotiate a revised schedule of payments.
• If you can reach an agreement to change your original contract, get it in writing to avoid questions later.

If your vehicle is repossessed:

• your creditor may decide to keep it as compensation for your debt or resell it in a public or private sale.
• you may be able to buy back the vehicle by paying the full amount you owe (usually, that includes your past due payments and the entire remaining debt), in addition to the expenses connected with the repossession, like storage, preparation for sale, and attorney fees.
• check with your state consumer protection agency. Some states have laws that allow you to “reinstate” your loan. This means you can reclaim your car by paying the amount you are behind on your loan, plus your creditor’s repossession expenses.
• a creditor may not keep or sell any personal property found inside the vehicle.