I received an email from A New Horizon, a credit counseling and debt solutions company, pointing out that some credit card issuers have loosened their requirements for hardship repayment plans. This could mean that you have a better chance at qualifying for a debt hardship plan if you are looking to repay your debt. However, it is important to consider the following things when going for financial hardship debt plans:

1. You may have to close your account: Many issuers will require that you close your account to take advantage of the lower interest rates or waived fees that come with a hardship debt repayment plan.
2. Your credit score could drop: Depending on the program you end up with, and if your credit account is closed, you may end up with a lower credit score, resulting in difficulties if you plan to apply for new credit anytime soon.
3. Be aware of fees charged by third parties: While some people benefit from having a third party help arrange matters for them, the fact of the matter is that many credit counseling and debt solutions companies charge high fees. It is possible to go directly to your credit card issuer and attempt to negotiate a lower interest rate or access to a hardship program.

In the end, it is nice that these hardship programs exist, but you should be careful before entering one. Read the fine print, and carefully consider your options before committing.

Image source: Daylife

Post from: EveryJoe

Credit Card Issuers Offer Hardship Programs

Some of the things I like about Barack Obama include his quiet confidence and his talk of unity. I also like how he lays out the problem, and talks about a solution. I’m seriously hoping that the vast amounts of money that he plans to spend on economic stimulus will be more than just throwing money at the problem. And it certainly sounds like President-elect Obama means to try to make thoughtful, useful expenditures. He focuses on:

• Infrastructure.
• Health care reform.
• Renewable energy.
• Tax cuts.

My favorite points are infrastructure and renewable energy. Investing in these items will actually help us prepare for the future, as well as put people to work and give them a chance to help stymie the foreclosure problem. I like the idea of actually investing in our infrastructure and developing renewable energy. These are vital elements to our national security, as well as our economic vitality.

Tax cuts are nice, and I am glad that they are expected to be aimed at helping the middle class. It’s more of a “trickle up” approach that will hopefully work better than the “trickle down” approach that has been dominating so far. It would be nice, though, if our leaders, rather than trying to encourage us to spend the money, would advise us to pay off credit card debt and make wise investments, rather than engaging in another round of consumer spending. And, of course, I don’t think that Obama’s health care reform goes far enough.

At any rate, the address was reasonably encouraging overall. But we’ll have to wait until later this month, when the pork starts being inserted into the economic stimulus bill and battles erupt as the new administration comes in.

What do you think of the economic stimulus plan laid out by Barack Obama?

Post from: EveryJoe

What Do I Think About the Economic Stimulus Plan From Barack Obama?

Indeed, everything our leaders have been doing, in the name of fixing the economy, has been aimed at increasing consumer spending. And now it looks like they are down to the final straw. Witness the latest TARP program, which is aimed specifically at boosting consumer spending fueled by debt.

TARP to encourage investment in consumer debt-backed securities

The latest TARP plan offers up to $200 billion in special loans to investors who will then buy consumer debt backed securities — securities based on credit card debt, student loans and auto loans. The idea is to encourage investment in these vehicles so that lenders will loosen their recently-tightened requirements and then allow more lending to take place. Consumers will borrow more so that they can spend, spend, spend to save the economy and our American way of life.

Regular readers know that I am in favor of a radical shift from a debt-based economy to one that is more stable (though less sexy in terms of growth) and based more on disciplined spending within our means, saving and exporting technology, goods and services to other countries rather than being the world’s biggest consumer.

Unfortunately, our leaders still persist in pursuing an economic model that is not good for the individual personal finance situation. It is a model that insists that we all be in just enough debt that we keep making interest payments — but that we never quite escape and we never quite go under.

Does anyone else think there is something wrong with this?

Post from: EveryJoe

Fed, Treasury Ready to Boost Credit Card Debt-Fueled Consumer Spending

Or, it could be that they just can’t get any credit. With the credit market freeze, it’s actually getting increasingly difficult to borrow. The banks are wary of lending. Turns out lending to anyone hasn’t been working out all that well. As a result, though, even people with good credit are having a hard time getting credit or loans.

Credit limits are dropping

Another personal finance issue emerging from the current economic crisis is the fact that credit limits are actually dropping. Over at Gail’s Blog, I read this interesting tidbit:

Of the 20% of American Express clients who saw their limits reviewed as a part of normal operating procedure, FIFTY PERCENT saw their limits go DOWN. That means that to maintain a healthy credit ratio (remember, no more than 60% of you limit should be used) a lot of people are going to have to find the money somewhere, or reconcile themselves to watching their scores plunge. Someone with a $2,500 balance on a card with a $5,000 limit is using 50% of their credit line. But if that limit drops to $2,500, they’re now using 100% of their available credit, which is the biggest of no-nos.

You can see how this is a Big Problem. Not just from the standpoint of having debt (because, really, perhaps it means that we’ll start changing the way we do things), but from a credit score standpoint.

If you have been somewhat responsible and have been trying to get out of debt and fix your credit, this is a big step backward for some people. It means that now — in terms of credit — you have to essentially start from pretty close to scratch because your score is going to drop.

Another area of credit getting hit: The HELOC. If you have a HELOC, be aware that your limit might be decreasing, or that an outright freeze may be placed on it. Be watching the mail for that letter…

image credit: sxc.hu

Post from: EveryJoe

Rate of Borrowing Decreases — Along with Credit Lines

For those of you struggling with credit card debt, you have a great opportunity.

With interest rates dropping, your credit card interest rate is likely to drop as well. This means that more of your payment will go to the principal. It’s the perfect time to aggressively pay down some of your credit card debt.

image credit: sxc.hu

Post from: EveryJoe

NOW is the Time to Take Advantage of Low Interest Rates

So, with inspiration from Ginger at Girls Just Wanna Have Funds, I am sharing my  loan experiences with the world.

I do hope that you’ll join in by leaving a comment, and/or a link to any post you write on the subject.

Payday loan

I think I’ll get the ugly out of the way right now. I was young. In college. Poor. Too proud to ask my parents for help. I went to a post-dated check place, with proof of my summer job as a waitress (my position in the school’s cafeteria was suspended until fall semester), and got enough to pay a month’s rent and any other expenses that came up before the tip money accumulated enough for me to start living on.

A payday loan is about the worst loan you can have. Ever. It’s right there with car title loan. The interest rate is abominable, and it is very easy to renew. It is very easy to slip into a habit of constantly renewing and watching the fees stack up. In fact, the “nice” man at the payday loan place invited me back in a couple more weeks for an extension of the loan. It would be no trouble at all. I never went back.

Credit cards

Since I’ve started with the worst (and most embarrassing) loan, might as well move on to the next. Credit cards. A racked up a ton of credit card debt (I *had* to get my payday loan because the single card I had at the time was maxed out at $800 ) while in college. Mostly on road trips and other frivolity. By the time I graduated, I had three credit cards — all of them nearly maxed out.

Now, though, my husband and I try to be very careful. We have specific uses for our credit cards, according to the rewards they offer, and we pay the balances off each month. It was so hard to dig out of that high interest credit card debt that I do not want to try it again.

Car loan

I got my first car loan at age 18. My parents co-signed. The next car loan I got (after I had paid off the first loan and later totaled my precious car), was one that my husband and I bought together after we married. It’s been paid off for just over a year, and we are hoping to save up for the next car so that we can buy it outright. This is done by continuing to make the “car payment” to a high yield savings account. And made possible by the fact that we refuse to buy new.

Mortgage

We bought our first house last year. Very exciting. Next time, though, I’ve told my husband that he has to give better warning. We only put down a 3% down payment (it’s an FHA loan) because my husbad announced his intention to buy suddenly, just two weeks after insisting that we wouldn’t buy while he was at school. But it is a 30-year-fixed with a decent interest rate.

Student loans

We’ll be paying these off for-e-ver. Even though I had a scholarship and a part-time job, I still took out some loans. And then there was grad school. At Syracuse University. One year there cost more than four years at my undergraduate state school in Utah. Not only did we take out federal loans for my grad school, but I also took out private loans. And now my husband is in school.

We’ve started paying off my student loans, and as soon as Josh is done and gets a job, everything he makes will go to the student loans (we live mainly on what I make). So we should be able to pay off the student loans in 3-5 years after he finishes.

What about you? What are your loan experiences?

image credit: sxc.hu

Post from: EveryJoe

The Good, The Bad and the Ugly: My Loan Experiences

All of this is somewhat excerbated by the recent attempts to shore up the economy by rewarding those who haven’t been quite as responsible, reports BusinessWeek:

All of which might be tolerable to the lonely and beleaguered saver if he weren’t taunted daily by lopsidedly pro-spending, pro-creditor news stories. Forget about moral hazard. Forget about rewarding profligacy. Washington is hell bent on putting a floor beneath the housing market. And subtlety got vetoed out of the process.

Some of the stories that have come recently include these gems:

• There has been an increase in Chapter 7 bankruptcy filings.
• Bear Stearns was “saved” with government help.
• Fannie and Freddie have been authorized to increase the mortgage amounts they can accept.
• The FDIC could lower mortgage rates for delinquent borrowers at IndyMac.
• Worries abound that Lehman may be the next bank that is “too big to fail.”
• Some banks are halting foreclosures.
• Congress is considering allowing the DAP loophole to remain open for a while.
• Another round of stimulus checks is being considered.

On top of this, there is no real effort by our leaders to encourage us to save. Quite the opposite. Everything is aimed at keeping consumerism going, and helping debt remain a cornerstone of the economy.

And this not good news for savers, since such policies usually mean interest rate cuts to keep economic growth “sustainable” (which also contributes to increased inflation). And those cuts directly affect the rates of return you receive on your cash savings — money market accounts, high yield savings accounts and CDs. So, if you are a saver, your money probably isn’t working as hard for you as you would like.

On the other hand, if you are trying to pay off debt, now is the time to do it. With interest rates so low, more of your credit card payment can go to the principal. If you have credit card debt, perhaps it is time to shift focus a bit more toward dramatically paying down that debt while the interest rates are more in your favor.

Are you a saver? Do you feel as though you are getting railed?

Post from: EveryJoe

Savers Losing Out in the Current Economy

Rise Above Debt Relief has a different approach. Recently, I spoke with Jeff Boulton, CEO of the company, about his approach to debt management.

“We really take a counseling approach to debt relief,” Boulton said. “We help people pay their creditors, as well as help them set up a savings plan. And we counsel with them to help them build a solid financial foundation.”

The other thing I really like about Rise Above Debt Relief is that the program actually says no to some people. “We actually turn a lot of people away,” Boulton explained. “because debt settlement isn’t for everyone. Some people would do better with another approach. We talk to potential clients, and if there is another service, or if they could do it themselves with a debt snowball, we tell them how to do that instead — at no cost to them.”

“We are really rigorous about the people we accept into the program,” Boulton continued, “We view this as the last option before bankruptcy.”

Of course, this debt negotiation program has a fee, but Boulton is up front about it. “It’s a 13 percent flat fee, based on total debt entered into the program.” But he also pointed out that in many cases, borrowers pay much more than that when they struggle to pay interest.

Additionally, Rise Above Debt Relief offers financial counseling and free budgeting software. “We want to help people move on from their debt and start building wealth,” Boulton said.

Right now, debt settlement is all that is offered by Rise Above Debt Relief, but Boulton hopes to offer other debt management services soon. But, for now, his company remains one of the best debt negotiation programs I have seen.

“It comes down to education,” Boulton explained. “Get people on a budget, and get them away from living off credit cards. And with Rise Above Debt Relief, anybody can call in and get sound advice and not be pushed into something they aren’t going to need.”

Disclosure: I have not been paid by Rise Above Debt Relief. I am impressed, however, by Jeff Boulton and his ideas. I have not tried the company’s services, but they appear to be sound and helpful for those in serious debt.

Post from: EveryJoe

A New Kind of Debt Negotiation? Rise Above Debt Relief

1. How to improve your credit score (from paying down credit card debt to paying your bills on time).
2. What goes into a credit score (payment history, amounts owed, etc.).
3. Why your credit score is important (better rates, loan approval and more).
4. Where to find your credit score (MyFico.com, major credit bureaus).

But what isn’t addressed very much is how much you will pay to see your credit score.

It doesn’t cost that much: $5.95 to $15.95 per score, depending on where you go and the services that come with it.

But it still costs money. And you usually have to pay for each score individually — unless you get some sort of complete score, which will cost between $35 and $50 for a report plus all three scores.

Quite honestly, I think that lenders and creditors, employers and landlords, should pay to see this information and only after you have granted your permission.

But I think that you should have access to it for free. And not just the free annual credit report from each bureau that is required by law (it doesn’t include your credit score). It’s information about your life and your habits and it affects your personal finances in a very real way. You shouldn’t have to pay for what already should be yours. But you do anyway.

What do you think? Should you have to pay to see your credit score?

image credit: sxc.hu

Post from: EveryJoe

Want Your Credit Score? Be Prepared to Pay For It

What is compound interest?

This is a great question that takes us back to Money 101.

Compound interest is an interest charge on both the principal of a loan and the interest. This means that the interest charge is added to the balance of the loan, and you are charged interest on both. (Simple interest, by contrast, is charged only on the principal of the loan.)

One of the reasons that credit card debt is so hard to pay off is that it works on compound interest. Not only that, but credit card interest charges are often accrued daily. This means that at the end of every day, your interest rate is figured and then added to the balance. Then you pay interest on the principal and the interest charges you are accruing.

Of course, the upside to compound interest is that it can work for you if you save your money in the right kinds of accounts.

Post from: EveryJoe

Ask The Piggy Bank: What is Compound Interest?