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Tracey Espinoza remembers the day in 2013 when she had to leave the home she loved due to foreclosure. As she was packing up her bedding, she thought, “Well, at least they can’t take my pillows. At least I don’t think they can.”
Like many Americans, Tracy and her family got caught up in the aftermath of the economic downturn of 2008 to 2011. By 2012 neither her nor her husband’s salary had increased and getting another job at higher pay wasn’t panning out.
Complicating matters, they’d had two children in the previous four years, and Tracy cut back work to part-time to care for them. When Tracy could not find full time work in her field, they were unable to keep up with mortgage payments and fell into foreclosure, ruining their credit. When her husband’s 8-year-old Toyota Acura needed a new transmission, they turned to a “bad credit” credit card to pay for it. He needed to get to work reliably—without missing a day—after all.
Even now in 2020, wages have not caught up with the stock market rebound. A Wall Street Journal article quoted the senior human resources manager of Ohio’s First Solar manufacturing saying, “Wage pressure? I don’t think we’ve necessarily seen that.” After all, at their last job call, 700 people showed up for 120 positions. They had their pick.
Surmounting the “Bad Credit” Stigma
“Bad credit” loans and credit cards suffer from a somewhat undeserved reputation. Where “good credit” typically starts at the 700 score and above, “fair,” “poor” and “bad credit” make up the tiers beneath. With over 50% of Americans now in these “subprime” categories, many turn to higher rate loans to keep their computers, cars and even bodies working so they can earn a living.
Where “Bad Credit” Loans Do the Most Good
These three situations prompt borrowers to gather their courage and get a “bad credit” loan to keep going.
Building Credit: If you’re in the subprime credit category, most likely you’ve learned that every credit card you apply for checks or “dings” your credit record. Every “ding” drops your credit score by 10 points or more. Ironically, those with the best credit use credit cards the least. They have the most “available” credit. Of the $30,000 that their banks, mortgage holders and auto lenders feel they can afford to borrow, they may currently be using $3,000 of it. We all should be there someday! Borrowers working to build their credit rating, on the other hand, can avoid incurring a credit check and subsequent credit “ding” by getting a bad or low credit loan. Typically, the lender requires no collateral and will not contact Experian, TransUnion or EquiFax, the three largest credit reporting agencies. It simply needs bank statements, pay stubs, proof of residency and limited other documents.
Keeping Income Earning Tools Functioning: Many Americans today are abandoning corporate careers for freelance work. In fact, software giant Intuit performed a study of thousands of American workers and found an interesting draw to an independent lifestyle. Their findings prompted them to declare that by the year 2020, 40% of the American workforce will be freelance. While the freedom and the endless pajama-wearing is great, freelancers have to pay for lots of things that don’t even cross the corporate employee’s mind. These items include: computer repair, subscriptions to SaaS services, and transportation. When any one of these breaks down, the time and the repair budget fall on the freelancer. With work mounting, rectifying issues as quickly as possible becomes paramount. If clients have not paid but bills are due, freelancers and other entrepreneurs often have to resort to credit cards. The start-up business may not even have a credit line established. Therefore, they fall into the “subprime” category. Should they give up on their business? Is THAT the American Way? The most successful freelancers work back channels and creative pathways to reach their goals. Many businesses have resorted to “bad credit” loans and even credit cards to stay in business until their breakthrough.
When Fees and Penalties Are Burdensome: A 5% late payment on a $2,500 rent runs to $125 of money-for-nothing. A bad credit loan, on the other hand, comes in handy when big payments come due. When an unavoidable fee or penalty comes within just a few days of a paycheck or accounts receivable avalanche of past due payments from clients, it makes sense to pay the expense and then quickly pay off the short-term loan.
First Financial Welcomes Bad Credit Borrowers
First Financial can find the right loan instrument, even for those with poor, fair or bad credit. Because more than 50% of Americans fall into the subprime category, enterprising alternative banks (with all the security the big, bricks and mortar banks offer) deliver affordable loans. Apply for a bad credit or low credit score in minutes here. Follow us on Facebook to get smart about building your fin
The average American carries approximately $6,375 in credit card debt. For many, the stress associated with trying to pay off this high level of debt is significant.
If you find yourself in the group of people stressed about how to go about paying off credit card debt, you will be happy to learn there are some tips and tricks you can use. While your debt may seem insurmountable now, with time, effort, and dedication, you can get out of debt for good.
If you’re ready to learn what steps to begin taking, keep reading.
Are you carrying a balance on more than one credit card? If so, you need to make sure you are always paying the minimum required on each.
However, don’t stop there. Once the minimums are paid, you need to concentrate on paying down the balance on each card. Be sure you choose one card to focus on at a time.
You can choose the card with the highest interest rate to pay off first, or the one with the smallest balance. Both of these strategies are effective but choose the one that works for you, and then stick with it.
If you want to get out of credit card debt and stay out of it – for good – you have to take some drastic steps. One of these is to destroy the cards.
Regardless of what you think, there is no such thing as responsible credit card use. There is no good reason to keep these cards around, especially the department store cards that would not even be helpful in an emergency situation.
While this step may sound somewhat drastic, it’s the only surefire way you won’t get right back into credit card debt once you have paid everything off.
Another option is to consolidate your debt. You can combine several of the higher-interest balances into a single payment. In most cases, the transfer fee is going to be three to five percent, but you can compensate for this with the savings you are going to see from the transfer.
If you have any equity in your home, you may be able to use that to pay down your credit card debt, as well. Home equity lines of credit often provide a lower interest rate than what the typical credit card charges.
It’s important to understand that closing costs will apply. However, the benefit is that the equity interest payments are usually tax-deductible.
If you choose the consolidation path, remember, you need to control your spending. This can help you avoid accumulating new debt, along with the debt that’s just been consolidated.
If you are planning to pay off and destroy your credit cards, then you still need to ensure you have some type of safety net for emergency situations. This is where an emergency fund comes in.
Building an emergency fund can take some time, but it will also be valuable if you encounter an unexpected expense or some type of income disruption. All you have to do to create an emergency fund is put a little back from each of your paychecks. By doing this, you can avoid missed payments and the need to use a credit card in the future.
You need to get a handle on your budget and make sure you fully understand what it is and how you can make the most of it. For example, top priorities should be transportation, groceries, housing costs, and entertainment.
A great way to begin this reorganization process is by looking at your credit card statements, as most issuers categorize your spending.
Be sure you scrutinize this information closely. Find areas where you can cut back how much you are spending. Then take the money that you have “found” and put it toward paying down the debt you have.
If you are like most people, you didn’t get into credit card debt overnight. As a result, you are aren’t going to be able to get out of it that quickly either (unless you find a windfall of some sort).
Be patient and continue on the path to living a debt free life. While this is bound to take some time, in the end, it will be well worth it, and you will be in a position to take charge of your finances and finally achieve the financial freedom that you want and need.
There’s no question that paying off credit card debt is something that takes time. However, it’s possible when you use the right tactics and rely on the right information.
Be sure to use the tips and information found here, as they’re going to help you on your journey to financial freedom. You may also want to reach out to a financial advisor, who can provide you even more information on how to best manage your finances to remain debt free.
If you are ready to take control of your finances, rather than letting them control you, we can help. Our team can provide the information you need on any finance related topic. For example, we have a recent blog on how to take the pain out of monitoring your finances.
Stay tuned to our blog for more insights.
Most people have some debt, but if your situation has gotten out of hand, now is the time to figure out how you can pay it off before it gets even worse. By figuring out how much you owe, picking a strategy to pay it off, and making a couple sacrifices along the way, you could be debt free by Christmas.
Here’s how to get started:
The first step to paying off the debt you owe is to figure out exactly how much debt you’re in. You may have avoided doing this because you’re scared of the number, but it essential as it will help you keep perspective and figure out a plan to pay it off. Gather all debts you owe, from credit cards to student loans to medical expenses, and calculate how much it all adds up to.
The next step is to develop a strategy to pay off the debt. This is important. Picking and being able to stick to a strategy will help you pay down the debt faster, while also knowing that the sacrifices you’re making to do so have a set end date, giving you some peace of mind. There are two main strategies to pay off debt: Debt avalanche and debt snowball. The first one is the fastest, and has you pay off the debts with the highest interest rates first. This can save you a lot of money over the long term, but you won’t feel much progress is being made at first.
If you feel as if you need to see yourself making progress to stick to a strategy, debt snowball is likely for you. This strategy takes the opposite approach. Arrange your debts from smallest to biggest (ignore the interest rate) and begin paying off the smallest ones first. This will help you see that you are making progress, but will likely cost you money over the long term due to interest.
Another excellent way to help you pay down your debt steadily is to set aside a set amount of money every month and put it towards the debt. Start out by calculating how much you need to spend per month on necessities (include building up an emergency fund) and then subtract that from your total monthly income to get an idea about how much you can put towards the debt every month. The higher the debt, the more of that money you will want to dedicate towards it.
Even with these strategies, paying off these debts is no easy task. It takes persistence and sacrifice for possibly years. One way to help you but a bigger dent in the amount you owe is to get a side job. Even if it’s just on the weekends doing something simple, you could easily find yourself with a couple extra hundred dollars at the end of every month to put towards the debt. It may not sound like a lot, but it could save you hundreds if not thousands over the long run, and you’ll have that debt paid down much quicker.
When calculating your total monthly expenses, chances are the rent towards your apartment is what is eating up most of your budget. You could downsize to a smaller apartment, but this would involve lots of paperwork and being stuck there for a few years. An alternative solution is to rent out a room in someone’s house or apartment. There is little to no hassle, and with the money saved, you could put even more towards the debt or perhaps avoid getting that side job. Either way, if you owe a lot of money, this is certainly an option to look into.
The small personal loan has gotten many out of difficult situations.
Unfortunately, death is a fact of life and often strikes at the most unexpected times. Not only is it hard to go through the emotional trauma of losing someone close to you, but making the funeral arrangements in just a few short days, while also figuring out how you’re going to pay for them is extremely rough. Funerals aren’t cheap, even with relatively affordable caskets the cost can still easily run up to the thousands. If the deceased person’s assets cannot cover the expense of the funeral service, taking out a small loan with a low interest rate is one of the best routes you can take to cover the cost and work your way towards paying it off.
Most people who receive a small personal loan get one to consolidate their debt. Consolidating your debt allows you to combine multiple types of debt, such as car loans or debt accumulated from credit cards, into one total loan with a fixed interest rate, consistent monthly payment, and a closed-end term. Doing this can have multiple advantages. It can lower the interest rate on the debt, and you may also qualify to have a lower monthly payment that is paid off over a longer period. Either way, consumers with multiple outstanding debts should definitely explore consolidation.
Another effective use of a small personal loan is to use it to pay off credit card debt. Of course, this may sound counterproductive, taking out a loan and possibly going into debt again just to pay off existing debt. However, many loans are available at a low rate, which limits the amount of interest you will have to pay, along with along with an end date to help you plan out your financial future. According to Ryan Bailey, who is in charge of consumer deposits, payments, and non-real estate lending at a TD Bank branch, who says that “With an unsecured loan, you pay it off in 5 years, generally at a much lower interest rate, so it saves payment, and you actually get it paid off.”
Life is unpredictable and sometimes you or a loved one may end up in the Hospital. Even with health insurance, costs can often be extremely high, especially for long stays. That is why so many people take out personal loans to cover unexpected health care costs. Don’t wait to do this – credit reporting agencies may be notified of missed payments and this will damage your credit score. A personal loan can allow you to pay off your medical expenses while keeping your credit score intact.
Did your old car suddenly break down and you need to buy a new one but don’t have enough money saved? Or can you afford one, but don’t qualify for a secured loan because of your credit history? A personal loan could very well be the answer. People who qualify for personal loans are more than free to put them towards a big purchase, such as buying a car, motorcycle, a small house or a boat.
Your wedding day will be one of the most unforgettable moments of your life, and it is totally reasonable that you may want to spare no expense. You already know the cost is going to add up quickly. Between the reception, the dress and tuxedo, to hosting possibly over a hundred guests, weddings are very expensive. This does not even include the cost of the rings as well as a possible honeymoon afterwards. Many couples look to personal loans to help them finance their big day. They can be used towards the expenses previously mentioned, and can ensure your wedding day will be one of the highlights of your life.
As you’ve gathered from reading this article, personal loans have many practical uses and cover a wide variety of expenses. First Financial knows how unpredictable life can be and how hard it is to keep a large sum of money sitting idle just waiting for something to happen. That’s why our loans cover more than just mentioned above. A small personal loan can also help you finance veterinary care for your pet. Or say a loved one in a different country has suddenly fallen very ill and you have to find a way to be there with them. Whatever it is, rest assured that our loans are consumer friendly with low interest rates and set end dates. In a perfect world, money shouldn’t decide if your pet can get a surgery to extend its life or if you can visit a sick relative, and with a loan from First Financial, it doesn’t have to.
Like any financial option, the cash advance serves consumers well when used properly. We reveal the best ways to manage the cash advance in our previous posts about when to use it and strategies to pay it off.
While a cash advance can help you keep your computer, car or apartment, some use a second cash advance to pay for the first and then get caught up in an ever increasing interest rate and fee cycle. This habit erodes your long-term financial health.
When you get your very first cash advance, to ensure you can pay it off, try to make these lifestyle changes:
While the cash advance does come in handy in many situations, before applying for a cash advance, make sure you can answer the following questions positively.
When considering personal loans, don’t forget that online lenders have the automation and reduced overhead to offer the best loans and terms. First Financial is the national leader in providing cash advances for borrowers of all types, even bad credit borrowers. Just fill out some forms, upload documents and get the money in your account in a matter of days. The Better Business Bureau rates First Financial A+ because we make customer service our highest priority.
Many consumers have received phone calls explaining that they can settle their credit card debt for a fraction of its total. While this is possible, taking the debt settlement route can have negative consequences on your long-term financial health.
Debt settlement works this way: a company acts as an intermediary, making calls to your credit card company or another creditor for you.
The personal loan, on the other hand, is simply a lump sum of money you win from a bank or alternative lender after filling out an application form and submitting some financial documentation.
But to further guide you in deciding which path to take, here are the risks and rewards of debt settlement versus the personal loan.
Debt settlement comes with the following potential risks.
A debt settlement company negotiates with your creditor to demand less money that what you actually owe. Your creditor, in turn reports this event to the credit bureau, explaining in detail that your debt was settled for less than how much was owed. Credit bureaus degrade your credit score. Further, seeing this history future car, home and bank lenders will be reluctant to do business with you.
The money you escaped paying isn’t the free pass debt settlement companies imply. The IRS will demand a slice of this “discount” in your taxes. You will pay taxes on it as if it is income. Your debt settlement company sends information to the IRS and to you. In fact, if you do choose to use a debt settlement company, make sure to ask up from what the tax implications are.
Debt settlement does help consumers reduce their debt. Also, when you try of applying for a loan when you still have not fixed your debt yet, you are certainly going to have a hard time. As a matter of fact, lenders are highly unlikely to be willing to work with you if this is the case. But when you do eliminate your debt, you will be attracting more lenders to work with you and even open up a lot of other opportunities for your own success.
Giving your lender a lesser amount of the amount owed leaves more money for you to use to buy a car, home or other asset. Make sure you maximize the amount forgiven you will only be successful in this when you have already mastered the labyrinth of debt settlement.
Aggressive creditors can make your life a nightmare. Even more frightening, when you do not respond, they file a lawsuit which could be served in public and end up garnishing your wages. Debt settlement puts this interference to a stop.
Many are surprised that personal loan rates are typically sometimes twice as high or higher than home and auto loan rates. The better your credit score, the lower rate you will get. Still, those with personal loans pay a lot of end their creditors calls.
Some lenders charge high penalties if you pay the loan off early. Make sure to read the terms and regulations of the contract or ask your loan officer. First Financial personal loans never have penalties for early pay off.
A personal loan should be simple: you apply for a personal loan, the company pays for your debt, and in turn, you will be going to pay the company. View additional fees or meeting with bankers with suspicion.
The thing about having a personal loan is that it can pay off your credit card debt in no time. The credit bureaus also see this move as a commitment to pay the debt rather than escape it by going into debt settlement. This move reveals your habits of paying your debts and impresses lenders.
A personal loan does not require property for collateral. Therefore, if you do default on it, you aren’t at risk for foreclosure or repossession.
When considering personal loans, don’t forget that online lenders have the automation and reduced overhead to offer the best loans and terms. First Financial is the national leader in providing personal loans for borrowers of all types, even bad credit borrowers. Just fill out our simple application form, and get the money in your account in a matter of days. The Better Business Bureau rates First Financial A+ because we make customer service our highest priority.
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