Nearly every retail company has a special financing plan for their products that is supposed to help the consumer pay for the items they want. These special financing plans seem like a win-win situation for both the buyer and the seller. The buyer gets to buy the things that they want and the seller makes a sale that they may not have made otherwise. But there is often a third winner in this scenario as well – the financing company. These special financing plans often cost more than the buyer thinks and the costs are well hidden so that the buyer does not realize how much they really will be paying. Here are some things that you should know about special financing plans.
In many cases, special financing plans include additional fees that are hidden in the payment plan so you do not realize how much you are actually paying in fees. Because these special financing plans are essentially loans, the financing company can add loan origination fees and other fees to the amount that the person must pay to completely repay the loan. Before signing up for one of these plans, make sure that you read all of the information available to ensure that you know what fees are being charged and how much you are going to pay for them.
One of the worst surprises to come from special financing plans is when retroactive interest (sometimes called deferred interest) kicks in. Retroactive interest occurs when the buyer fails to pay off the entire amount of the purchase before the promotional period runs out. At the end of the term, the lender can charge interest dating from your date of purchase, often resulting in hundreds of dollars of additional charges that must be paid off to clear the account. If you are able to pay off the entire amount before the end of the term, then you have nothing to worry about, but if you are unable to do this, then the special financing will cost you much more than you thought.
$0 Payment Plans
Another common feature of special financing plans is no payments required during the promotional period. This feature is basically a trap to get you to put off making payments on the purchase until the financing company can charge you interest on it. The feature gives you the impression that you have plenty of time to pay off the amount even if you do not start making payments right away, but as time flies by, your chances of paying off the amount in time get slimmer and slimmer. Finally, time runs out and you get hit with interest charges from the date of making the purchase, significantly increasing the amount that you end up paying for your purchase.
If you are looking for a long term financial solution, you may want to stay away from so-called alternative lending forms. However, the reality is also that title loans are becoming increasing popular. This is because they can instantly solve a potential financial emergency. This has great surface value, as there are also very few requirements to apply for such a loan.
Application Requirements for Title Loans
There are a few requirements for those who want to apply for title loans. These include:
- You must own the vehicle in full, without liens.
- You must have a regular monthly income.
- You must have valid ID.
- You must prove your residency.
- You must be willing to have your vehicle inspected.
This makes car title loans slightly different from payday loans. This is because for a payday loan, you only have to prove that you are receiving an income. A title loan has slightly more stringent requirements.
What Will You Get?
Very simply put, when you own a vehicle title, you can always access a quick source of money, regardless of your credit history. You will generally find auto title loans online, and they are targeted at the sub-prime market. They are a short term solution that usually has to be paid back within 30 days.
Very simply put, these loans are a solution for those people who still have past financial decisions looming over their heads. If you have a poor credit score, it may take as much as seven years before you are able to apply for regular financial products again. Unfortunately, this means that you will have to pay for higher interest rates as well. On the other hand, although the interest rate is high, the loan is usually only in place for a month, so you don’t actually pay that much more.
You do, however, have to understand that these loans are a type of secured loan. Your vehicle is the collateral. If you do not pay your loan back on time, the lender will think nothing of repossessing your vehicle. Another thing to understand is that you will usually only be able to borrow 50% of the value of your vehicle, but if your car is repossessed and sold, you will not see any of the money above and beyond your loan principal. This is because the rest will be used to cover the interest rate, the repossession feeds and the court fees. Furthermore, the note that will be on your credit score after this will be even worse and will make it far more difficult for you to apply for any kind of credit for at least seven year.
Whenever you apply for a loan, regardless of your current credit status, you have to be sure that you will be able to pay it back. If you have any worries about this, you may want to search for an alternative solution. Perhaps it would be better to simply sell your vehicle, for instance.
The thought of having to file for bankruptcy is horrifying for most people. Most of us have been conditioned to believe that we should pay all of our debts, regardless of the hardship it causes in the household, and to believe that people that file for bankruptcy are behaving less than honorably. When facing the choice of filing for bankruptcy, many people feel as if they are all alone in their situation and are reluctant to seek help because of their embarrassment at their financial predicament. These people need to realize that filing for bankruptcy is more common than they think and that there is nothing for them to be ashamed of. Here are some of the most common reasons that people file for bankruptcy.
Loss Of A Job
If a person loses their job and has difficulty finding another that pays the same amount or more, their bills and expenses can quickly pile up to an unmanageable amount. If they try to use their credit cards to cover the gap, they can also find themselves facing mountains of high interest credit card debt. This debt spiral will continue until the person finds a job that will allow them to begin paying off this debt or they file for bankruptcy to stop the financial hemorrhaging and the badgering of unpaid creditors.
Unexpected Medical Expenses
Unexpected medical expenses is another reason why many people have to file for bankruptcy. A recent study from Harvard University showed that approximately 62 percent of personal bankruptcies in the United States are due to medical expenses, with 72 percent of those who filed having health insurance at the time of their illness or injury. A single hospital stay can result in thousands of dollars in charges not covered by health insurance, leaving those unprepared for the expense with little choice other than to file for bankruptcy.
Loss Of A Spouse
The loss of a spouse due to death or divorce is already a traumatic experience, but the experience can get even more distressing if the loss of income and the amount of debt carried by the couple is now on the shoulders of one party. In these cases, the only way to protect the assets that the person has accumulated over their lifetime is to file for bankruptcy for protection from creditors. While choosing to file for bankruptcy will not wipe the slate clean, it will give the person a better foundation to rebuild their finances in the future.
According to Lanemegleren, the average American household that has one or more credit cards carries around $16,000 in credit card debt. At any given time the average interest rate runs anywhere from 16 to 19%. Borrowing is not always bad; there are some debts that are considered to be good and necessary.
Borrowing for your college education or to buy a home is considered a sensible option. Just make sure to go only for the best rates and do not borrow more than what you can pay. On the other hand, a bad debt is incurring a debt for something that isn’t really necessary or is beyond your means like using your credit card for expensive meals or luxury vacations. These are expenses that you can instead save for.
Following are some tips to control and manage your personal debt:
- Get a grip on your spending habits.
A lot of people spend a lot of money buying on impulse. List down and analyze your regular monthly expenditures. Cut down on items that are not really necessary and set aside the money you save to pay off your existing debts.
- Settle first the debts that bear higher interest rates.
You can get out of debt more quickly if you prioritize reducing the balance of the credit card or loan that charges the highest interest rate. Just make sure to make at least the minimum payments for the rest of your debts. Once the priority debt is fully settled, focus on the one that has the second highest interest rate, and so on.
- Mind where you obtain credit.
Although it is very tempting to dip into your 401k or borrow against your home, it is a very risky proposition. For one, you could possibly lose your home or you may fall short of your investment target once your time to retire comes.
- Prepare for emergencies.
Make sure you save at least an equivalent of 3 to 6 months’ worth of living expenses to be used for emergency purposes. If you have nothing stowed for emergencies like a damaged car or broken heating system, your finances may be seriously upset.
- Don’t be over eager in paying off your mortgage.
If you have other debts to pay, do not put all your available funds to pay your mortgage off. For one, mortgages usually charge lower interest rates than most other debts. You can opt for refinancing if you wish to lower your monthly payments.
- Never fall for the minimum payment trap.
Paying just the minimum due on all your credit cards will only cover the interest and very little of the principal. Thus, it will take you many years to fully pay all your debts. In essence, you will end up paying a lot more in finance charges than the original amount you borrowed or charged to your card.
- Don’t hesitate to ask for help if you need it.
If you feel your debt is getting out of hand, seek help before it’s too late. You can consult a debt counselor to find ways on how to better manage your finances. Just be wary of unscrupulous debt counseling agencies out there that are only after a quick buck.