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Archive for November, 2012

Is Credit Card Insurance A Good Idea?

Written by Toi Williams on Nov 30th, 2012 | Filed under: credit cards

Getting insurance protection for your credit card may seem like a good way to ensure your future financial security, but in most cases, paying for the insurance is a bad idea.  The insurance is typically billed as a way to cover your balance, up to a certain amount, in case the cardholder loses their job, has to take care of a family member, or their spouse becomes unemployed.  The truth is that credit-card-based insurance programs are often expensive and the terms are confusing.

Exclusions

Signing up for an insurance policy for your credit card sounds like a good precaution to take and can seem like a reasonable expense.  Unfortunately, these insurance plans often have disclaimers that make the insurance invalid when the cardholder actually needs the protection.  Each plan has its own loopholes and exclusions that the issuer can use to avoid paying any benefit at all.  It can be very difficult to get the credit card company to refund monies paid for the insurance, even when the insurance doesn’t cover situations that you thought it would.

Interest Charges

In most cases, the insurance will cover the cardholder’s minimum monthly credit-card payments for a limited time.  However, even if the company covers the minimum monthly payments, interest would still continue to accrue on the principal, so it actually would cost more over time with all the extra money paid in interest charges. According to a study last year by the Government Accountability Office, cardholders received $0.21 in tangible financial benefits for every dollar spent on fees for such credit-card-based insurance programs.

Precautions

If you do decide that you need to have credit card insurance, it is important for you to take some reasonable precautions.  Read the terms of the insurance yourself to make sure that it covers a job loss or medical problem that you might actually experience.  If you find that nearly every situation is excluded from coverage, it is a clear red flag that you may not get the payout you expect if a disaster occurs.


Things To Think About When Considering Consolidating Debts

Written by Toi Williams on Nov 26th, 2012 | Filed under: debt relief

For some the phrase “debt consolidation” brings to mind financial scams, disreputable companies, and unsuspecting consumers. However, debt consolidation is a legitimate tactic for managing your debt under the right circumstances.  Debt consolidation is the action of combining all your bills into one debt, with the new debt having a balance equal to the sum of the other debts.  Consolidating your debts into one bill can make it easier to get out from under them.

Types Of Debt Consolidation Loans

There are various ways to approach debt consolidation.  A standard debt consolidation loan requires you to get a loan from a bank, credit union, or peer-to-peer lender, that consolidates all your debts into a single new loan with a lower interest rate. To get a standard debt consolidation loan, contact your local credit unions and banks to see what interest rates they can offer you, and then compare those rates to see which one offers the best deal.

A credit card balance transfer moves all of your credit card debt onto one new card that often has an introductory 0% interest period, which can help significantly if you are sure you can pay off your balance during that time period.  A student loan consolidation allows you to borrow from the federal government and take advantage of low interest rates and flexible repayment schedules.  Keep in mind that the government may be able to garnishee your wages if you default on your federal student loans.

Things To Watch Out For

Some companies advertise themselves as “debt consolidation providers” when they provide debt management services.  Such companies know people are looking for debt consolidation loans and are banking on people not knowing the difference between debt management and debt consolidation.  Watch out for any company that tries to sell you something other than debt consolidation and do not fall for the lies of fast-talking salesmen that try to convince you that they can make your debt go away quickly.


Smart Money Management Moves To Make

Written by Toi Williams on Nov 23rd, 2012 | Filed under: mindset

People find themselves facing high debt levels because they routinely spend more than they can afford.  The issues caused by high debt levels can last for many years and it can be difficult to get out of debt.  You must rein in your spending so that you will have money available for financial emergencies and other expenses.  It is important to learn money management tips that can save you money and help you create a cushion for any financial emergencies that may occur in the future.

Pay What Its Worth

Many items people purchase regularly are overpriced and expensive compared to purchasing the same items from the grocery store or preparing them at home.  Coffee made at home costs around a tenth as much as specialty coffees made in coffee shops.  Snack from a vending machine are easily twice as much as purchasing a pack of the items at the grocery store.  Instead of seeking convenience, seek out the best values and lowest prices for the items that you want.

Document All Spending

You should track all financial transactions and how they were paid for to learn what you are spending your money on each month.  Having accurate documentation will show you the amount of money you are spending and expose any areas where spending could be reduced to save more money.  Documenting your spending will also prevent you from spending more than you can afford because you will be able to see how much you are spending in real time as the money adds up each month.

Make Savings Deposits Automatic

Most employers now allow employees that direct deposit their paychecks to split their funds into different accounts.  The employees can easily set up an automatic deposit to have a portion of their paycheck sent directly to their savings account.  Having the savings directly deposited prevents spending and eliminates forgetfulness as an excuse for not saving.


Three Signs That You Are Facing Financial Problems

Written by Toi Williams on Nov 18th, 2012 | Filed under: mindset

Are you kidding yourself about your financial situation?  People often go into denial in the face of money problems, but ignoring the problem is not a viable solution and just extends the eventual pain of getting your finances under control.  In the United States, consumer debt is at an all-time high and personal savings rates remain in the low single digits.  Reining in a budget can be unpleasant, but it is the only way to get yourself out of debt and improve your financial security.  As long as you are paying interest rather than earning it, you are falling behind rather than getting ahead.

Here are some signs that you are facing significant financial issues.

Your Debt Level Increases

If you are continuously spending more than you are earning and your debt levels keep inching upward, you are clearly in financial trouble.  In order to get your finances under control, you must create a budgeting plan that allows you to pay off your debts and start saving for your future.  Until your debts have been paid off, put away the credit cards and live solely on the income that you bring home to avoid creating more debt.

You Cannot Afford Your Housing Payment

If your income has shrunk or your housing payment has risen, you may find that your housing payment has become unaffordable.  If your housing payment is more than 30% of your take home pay, it is time to take action.  If you own a home, your options are to try to refinance your mortgage or sell your home to move to a smaller house or an apartment.  If you are renting, you may need to find a cheaper rental so that you can save more money.

You Borrow Money To Take Vacations

It is a bad idea to borrow money for short-term purchases that do not provide you with long term benefits.  If you are borrowing money to take a vacation, you cannot afford to take a vacation.  Spend more of your time at home and save your money until you can afford to pay for the trip outright.


Can You Get An Auto Loan With Bad Credit?

Written by Toi Williams on Nov 10th, 2012 | Filed under: loans

An auto loan is a very important financial instrument, as it helps you get an expensive item that may have been really difficult to get otherwise and it helps you build your credit record.  If you have bad credit, it can be difficult to find an auto loan that meets your needs.  It is important for you to get the best auto loan for your financial situation.  Here are several things that you should keep in mind when you are trying to find the best auto loan to purchase the car you desire.

Do Your Research

Getting the best auto loan will take time and research to determine, so make sure that you do your due diligence before signing any paperwork for the loan.  Different lenders have different types of auto loans available and the differences can either cost or save you a great deal of money.  Before shopping for a car, try to get pre-qualified for an auto loan through your bank or credit union because they often have better deals than what is available at the dealership.

Review Your Credit Before Shopping

Your personal financial situation and previous credit history will play a big role in the interest rate that you are offered for the auto loan.  Based on your credit score, the lender will decide how much of a credit risk you are and whether they will be able to make back the money that they lend to you.  Before you begin to shop for a vehicle, check your credit score to see where you stand and review your credit report for any errors that can be fixed to increase your score.

Expand Your Options

If you are unable to get approved for an amount large enough to purchase a new car, you may want to consider trying to get approval for a lesser amount and purchase a used car.  A used car may not be quite as desirable as a car where you are the first true owner, but if a used car fits your financial situation, then a used car is better than no car at all.  It is important to not create more debt than you can comfortably pay off, so a cheaper car may be a better option for your current financial situation.