The last thing you want to worry about when making a big purchase is being scammed. Whether you’re buying or selling something, you don’t want your money or investments to go to waste. Making any financial decision can be unsettling for your budget when faced with a chance of fraud. That’s where certified checks can help add security. But first, what is a certified check?
A certified check is authorized by a bank to guarantee buyers have the funds before writing the check. This ensures that the person receiving payment isn’t left hanging, and the buyer double-checks they have enough funds to make the purchase.
Why Use a Certified Check?
A certified check is one of the most secure payment options available. When you’re selling or buying expensive items, you want to ensure you get what you were expecting. Certified checks generally require a bank or credit union to set aside money in the buyer’s account until the check has gone through. This way, the bank verifies the buyer has enough cash to make the purchase and the seller gets paid. If you’re selling a big ticket item, you can request payment with a certified check.
If you’re buying an expensive item, certified checks will offer your seller additional security. It will prove to the seller that you’re serious about your choice and that your finances are in place for this investment.
Certified Check vs. Cashier’s Check
A cashier’s check is also used for large purchases and authorized by a bank or credit union. The main difference between cashier’s checks and certified checks is where the money’s stored until it’s cashed out. Before signing a cashier’s check, banks will move the funds into a separate account for security purposes. Then, a bank representative will sign the check over to the receiver.
Even though both check types are generally safe, cashier’s checks tend to be more secure. As banks take the buyer’s funds when they authorize the check, your funds are waiting at the bank instead of in your buyer’s account until cashed out.
How to Get a Certified Check
For buyers looking to get certified checks, most banks or credit unions offer these services. While you’re able to get them at financial institutions that offer these services, fees may apply at banks you don’t have an account with. If you’re in need of a certified check, read our tips below:
Call your bank to ensure you meet all their requirements.
Visit the bank in person to avoid any mishaps or miscommunication.
Funds needed for the check amount
Name of the recipient
Your account number
Verify your identity and funds with a photo ID and bank account numbers for authorization. You may be asked to sign the check in front of a teller for them to certify it.
Bring extra cash in case your bank charges a service fee, typically anywhere from $5 to $25. A bank you already do service with may waive your fee.
The Pros and Cons of Certified Checks
Certified checks lower the risk of carrying around large sums of money or bounced checks. There are a few pros and cons to weigh before choosing your payment option as a buyer or seller.
Safer way to carry cash: Certified checks are great tools for large purchases. It can be impractical to carry around a large stack of cash or the risk of a regular check. This way, you’re able to cash in your earnings, or pay the seller without any worries.
Adds additional payment security: For large purchases where a buyers credit score or payment is questioned, this adds additional security. Since the bank issuing the check double-checks that the funds are there, it takes more risk out of the deal.
Scammers may be ready to scam: One downside of this payment option is the risk of scams. It’s common for businesses to purchase bulk products out of state in exchange for a certified check. If you realize your purchase is a scam after sending your check, you may not be able to stop the payment from going through.
Potential service fees: As always, bank services usually come at a price. In this case, most banks and credit unions will bill you for the time used to certify the check. Generally, these services cost anywhere from $5 to $25. If you decide to request a certified check from a bank you already do business with, they may waive your fee.
4 Tips to Prevent Check Fraud
Forty-seven percent of industry money losses were from fraudulent checks in 2018. Taking the extra steps to double-check your buyer’s payment could prevent your budget from taking a hit. Follow the steps below to ensure you and your earnings are on the right track:
1. Research Your Buyer
People may use fake names, addresses, phone numbers, and more to get away with a scam. Without knowing the identity of the person you’re selling to, it may be hard to get your money if things go wrong. Research your buyer or safely meet with them in person to get a better feel for their identity.
2. Call or Visit Your Buyer’s Bank of Choice
For more security, reach out to the financial institution where the check is issued. Contact your buyer to see where they’ll be authorizing their check. Look up the branch’s phone number and call to verify the check went through. Avoid calling any phone numbers the buyer gives you in case they provide you with the wrong number.
3. Immediately Double-Check With Your Bank
Right after you get paid, go straight to the bank or call to ensure there weren’t any complications processing the check. Ask your bank or credit union if the funds made it to your account safe and sound.
4. Save All Documentation
Receipts, emails, and other information can build a case in the event you don’t receive your payment. Keep all documentation or files until you’ve been paid in full. As long as you have all the details, you’ll have a better chance of building a case.
A certified check is a check that’s authorized by a bank to guarantee buyers have the funds before writing the check.
When you’re selling or buying a large item, certified checks are a less risky payment option.
If you’re unsure about your buyer, do more digging. Research them, call the buyer’s bank, and save all documents and files from the exchange.
Call your bank beforehand to ensure you meet all the requirements and ask about service fees.
Having an uneasy feeling about selling or buying a large ticket item is normal. You don’t want your hard-earned money or investments going to waste over a bounced check or scam. Certified checks can be a safer payment option and it’s worth the extra research for your budget’s sake.
A “rule of thumb” is a mental shortcut. It’s a heuristic. It’s not always true, but it’s usually true. It saves you time and brainpower. Rather than re-inventing the wheel for every money problem you face, personal finance rules of thumb let you apply wisdom from the past to reach quick solutions.
Table of Contents show
I’m going to do my best Buzzfeed impression today and give you a list of 75 personal finance rules of thumb. Some are efficient packets of advice while others are mathematical shortcuts to save brain space. Either way, I bet you’ll learn a thing or two—quickly—from this list.
These basic personal finance rules of thumb apply to everybody. They’re simple and universal.
1. The Order of Operations (since this is one of the bedrocks of personal finance, I wrote a PDF explaining all the details. Since you’re a reader here, it’s free.)
2. Insurance protects wealth. It doesn’t build wealth.
3. Cash is good for current expenses and emergencies, but nothing more. Holding too much cash means you’re losing long-term value.
4. Time is money. Wealth is a measure of how much time your money can buy.
5. Set specific financial goals. Specific numbers, specific dates. Don’t put off for tomorrow what you can do today.
6. Keep an eye on your credit score. Check-in at least once a year.
7. Converting wages to salary: $1/per hour = $2000 per year.
8. Don’t mess with City Hall. Don’t cheat on your taxes.
9. You can afford anything. You can’t afford everything.
10. Money saved is money earned. When you look at your bottom line, saving a dollar has the equivalent effect as earning a dollar. Saving and earning are equally important.
I love budgeting, but not everyone is as zealous as me. Still, if you’re looking to budget (or even if you’re not), I think these budgeting rules of thumb are worth following.
11. You need a budget. The key to getting your financial life under control is making a budget and sticking to it. That is the first step for every financial decision.
12. The 50-30-20 rule of budgeting. After taxes, 50% of your money should cover needs, 30% should cover wants, and 20% should repay debts or invest.
13. Use “sinking funds” to save for rainy days. You know it’ll rain eventually.
14. Don’t mix savings and checking. One saves, the other spends.
15. Children cost about $10,000 per kid, per year. Family planning = financial planning.
16. Spend less than you earn. You might say, “Duh!” But if you’re not measuring your spending (e.g. with a budget), are you sure you meet this rule?
Investing & Retirement
Basic investing, in my opinion, is a ‘must know’ for future financial success. The following rules of thumb will help you dip your toe in those waters.
17. Don’t handpick stocks. Choose index funds instead. Very simple, very effective.
18. People who invest full-time are smarter than you. You can’t beat them.
19. The Rule of 72 (it’s doctor-approved). An investment annual growth rate multiplied by its doubling time equals (roughly) 72. A 4% investment will double in 18 years (4*18 = 72). A 12% investment will double in 6 years (12*6 = 72).
20. “Don’t do something, just sit there.” -Jack Bogle, on how bad it is to worry about your investments and act on those emotions.
21. Get the employer match. If your employer has a retirement program (e.g. 401k, pension), make sure you get all the free money you can.
22. Balance pre-tax and post-tax investments. It’s hard to know what tax rates will be like when you retire, so balancing between pre-tax and post-tax investing now will also keep your tax bill balanced later.
23. Keep costs low. Investing fees and expense ratios can eat up your profits. So keep those fees as low as possible.
24. Don’t touch your retirement money. It can be tempting to dip into long-term savings for an important current need. But fight that urge. You’ll thank yourself later.
25. Rebalancing should be part of your investing plan. Portfolios that start diversified can become concentrated some one asset does well and others do poorly. Rebalancing helps you rest your diversification and low er your risk.
26. The 4% Rule for retirement. Save enough money for retirement so that your first year of expenses equals 4% (or less) of your total nest egg.
27. Save for your retirement first, your kids’ college second. Retirees don’t get scholarships.
28. $1 invested in stocks today = $10 in 30 years.
29. Inflation is about 3% per year. If you want to be conservative, use 3.5% in your money math.
30. Stocks earn 7% per year, after adjusting for inflation.
31. Own your age in bonds. Or, own 120 minus your age in bonds. The heuristic used to be that a 30-year old should have a portfolio that’s 30% bonds, 40-year old 40% bonds, etc. More recently, the “120 minus your age” rule has become more prevalent. 30-year old should own 10% bonds, 40-year old 20% bonds, etc.
32. Don’t invest in the unknown. Or as Warren Buffett suggests, “Invest in what you know.”
Home & Auto
For many of you, home and car ownershipcontribute to your everyday finances. The following personal finance rules of thumb will be especially helpful for you.
33. Your house’s sticker price should be less than 3x your family’s combined income. Being “house poor”—or having too expensive of a house compared to your income—is one of the most common financial pitfalls. Avoid it if you can.
34. Broken appliance? Replace it if 1) the appliance is 8+ years old or 2) the repair would cost more than half of a new appliance.
35. Used car or new car? The cost difference isn’t what it used to be. The choice is even.
36. A car’s total lifetime cost is about 3x its sticker price. Choose wisely!
37. 20-4-10 rule of buying a vehicle. Put 20% of the vehicle down in cash, with a loan of 4 years or less, with a monthly payment that is less than 10% of your monthly income.
38. Re-financing a mortgage makes sense once interest rates drop by 1% (or more) from your current rate.
39. Don’t pre-pay your mortgage (unless your other bases are fully covered). Mortgages interest is deductible, and current interest rates are low. While pre-paying your mortgage saves you that little bit of interest, there’s likely a better use for you extra cash.
40. Set aside 1% of your home’s value each year for future maintenance and repairs.
41. The average car costs about 50 cents per mile over the course of its life.
42. Paying interest on a depreciating asset (e.g. a car) is losing twice.
43. Your main home isn’t an investment. You shouldn’t plan on both living in your house forever and selling it for profit. The logic doesn’t work.
44. Pay cash for cars, if you can. Paying interest on a car is a losing move.
45. If you’re buying a fixer-upper, consider the 70% rule to sort out worthy properties.
46. If you’re buying a rental property, the 1% rule easily evaluates if you’ll get a positive cash flow.
Spending & Debt
Do you spend money? (“What kind of question is that?”)Then these personal finance rules of thumb will apply to you.
47. Pay off your credit card every month.
48. In debt? Use psychology to help yourself. Consider the debt snowball or debt avalanche.
49. When making a purchase, consider cost-per-use.
50. Make your spending tangible with a ‘cash diet.’
51. Never pay full price. Shop around and do your research to get the best deals. You can earn cash back when you shop online, score a discount with a coupon code, or a voucher for free shipping.
52. Buying experiences makes you happier than buying things.
53. Shop by yourself. Peer pressure increases spending.
54. Shop with a list, and stick to it. Stores are designed to pull you into purchases you weren’t expecting.
55. Spend on the person you are, not the person you want to be. I love cooking, but I can’t justify $1000 of professional-grade kitchenware.
56. The bigger the purchase, the more time it deserves. Organic vs. normal peanut butter? Don’t spend 10 minutes thinking about it. $100K on a timeshare? Don’t pull the trigger when you’re three margaritas deep.
57. Use less than 30% of your available credit. Credit usage plays a major role in your credit score. Consistently maxing out your credit hurts your credit score. Aim to keep your usage low (paying off every month, preferably).
58. Unexpected windfall? Use 5% or less to treat yourself, but use the rest wisely (e.g. invest for later).
59. Aim to keep your student loans less than one year’s salary in your field.
The Mental Side of Personal Finance
At the end of the day, you are what you do. Psychology and behavior play an essential role in personal finance. That’s why these behavioral rules of thumb are vital.
60. Consider peace of mind. Paying off your mortgage isn’t always the optimum use of extra money. But the peace of mind that comes with eliminating debt—it’s huge.
61. Small habits build up to big impacts. It feels like a baby step now, but give yourself time.
62. Give your brain some time. Humans might rule the animal kingdom, but it doesn’t mean we aren’t impulsive. Give your brain some time to think before making big financial decisions.
63. The 30 Day Rule. Wait 30 days before you make a purchase of a “want” above a certain dollar amount. If you still want it after waiting and you can afford it, then buy it.
64. Pay yourself first. Put money away (into savings or investment accounts) before you ever have a chance to spend it.
65. As a family, don’t fall into the two-income trap. If you can, try to support your lifestyle off of only one income. Should one spouse lose their job, the family finances will still be stable.
66. Every dollar counts. Money is fungible. There are plenty of ways to supplement your income stream.
67. Savor what you have before buying new stuff. Consider the fulfillment curve.
68. Negotiating your salary can be one of the most important financial moves you make. Increasing your income might be more important than anything else on this list.
69. Direct deposit is the nudge you need. If you don’t see your paycheck, you’re less likely to spend it.
70. Don’t let comparison steal your joy. Instead, use comparisons to set goals. (net worth).
71. Learning is earning. Education is 5x more impactful to work-life earnings than other demographics.
72. If you wouldn’t pay in cash, then don’t pay in credit. Swiping a credit card feels so easy compared to handing over a stack of cash. Don’t let your brain fool itself.
73. Envision a leaky bucket. Water leaking from the bottom is just as consequential as water entering the top. We often ignore financial leaks (e.g. fees), since they’re not as glamorous—but we shouldn’t.
74. Forget the Joneses. Use comparisons to motivate healthier habits, not useless spending.
75. Talk about money! I know it’s sometimes frowned upon (like politics or religion), but you can learn a ton from talking to your peers about money. Unsure where to start? You can talk to me!
The Last Personal Finance Rule of Thumb
Last but not least, an investment in knowledge pays the best interest.
Boom! Got ’em again! Ben Franklin streaks in for another meta appearance. Thanks Ben!
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From early January to mid-February, you might receive a number of tax documents in the mail. They can range from expected W-2s from your employer to forms about mortgage interest you paid. One form that many people don’t expect is the 1099-C. Discover why you would receive such a form and what the IRS expects you to do with it. Make sure to consult with your tax professional for your specific situation.
What Is a 1099-C Form?
A 1099-C is a tax form required by the IRS in certain situations where your debts have been forgiven or canceled. The IRS requires a 1099-C form for certain acts of debt forgiveness because it sees that forgiven debt as a form of income.
For example, if you borrowed $12,000 for a personal loan and only paid back $6,000, you still received the original $12,000. Not paying back the other half of the loan means you got the benefit of that money without paying for it. The IRS considers that to be income in many cases.
Why Did You Get a 1099-C Form?
Not every debt cancellation involves a 1099-C form. But if you received this form in the mail, it’s because of a debt cancellation that occurred at some point during the tax year.
Box 6 on the 1099-C form should have a code to help you determine why you received the form. You can also learn more about 1099-C cancellation of debt processes and the reasons you might receive such a form if you’re not sure whether yours is accurate.
The IRS provides instructions and information about 1099-C forms and cancellation of debt in general. That includes a list of potential codes that might be found in Box 6:
A—Bankruptcy (Title 11)
B—Other judicial debt relief
C—Statute of limitations or expiration of deficiency period
E—Debt relief from probate or similar proceeding
G—Decision or policy to discontinue collection
H—Other actual discharge before identifiable event
What Should You Do with a 1099-C Form?
You should never ignore any tax form you receive, as each might have positive or negative implications on your tax return. But you should also not panic if you receive a 1099-C form indicating a large amount of income. It doesn’t necessarily mean that you will owe a lot more in taxes.
First, find out whether the type of debt cancellation on the 1099-C form is excluded from taxable income. The IRS provides a list of exclusions, which include debts that were forgiven because you were insolvent or involved in certain types of bankruptcies. It’s a good idea to double check with your bankruptcy lawyer about whether you need to claim 1099-C income relevant to your bankruptcy discharge.
Once you know whether you need to claim the income or not, you must incorporate the 1099-C into your federal tax filing. If the canceled debt doesn’t fall under an exclusion, you report it as “other income” on your tax return.
That income will be included with your other income in determining how much tax you must pay for the year. In short, you’ll have to pay taxes on the extra income. That might mean your refund is reduced or that you owe more taxes than you would otherwise.
In cases where the 1099-C canceled debt falls under an IRS exclusion—which means you don’t have to pay taxes on all or some of the income—you still may need to file a form. The creditor that sent you the 1099-C also sent a copy to the IRS. If you don’t acknowledge the form and income on your own tax filing, it could raise a red flag. Red flags could result in an audit or having to prove to the IRS later that you didn’t owe taxes on that money.
Luckily, the IRS provides a form for this purpose. It’s Form 982, the Reduction of Tax Attributes Due to Discharge of Indebtedness.
What to Do if You Received a 1099-C Form After Filing Your Taxes
If you don’t know a 1099-C form is coming—and many people don’t realize they might receive one—you could file your taxes before it arrives. You should file an amended return if this happens. That’s true even if the 1099-C doesn’t change your tax obligation, as you might want to get the Form 982 on record for documentation purposes.
What’s the 1099-C Statute of Limitations?
There aren’t really statutes of limitations on cancellation of debt, though the IRS does have rules about when these forms should be filed. The creditor must file a 1099-C the year following the calendar year when a qualifying event occurs. That just means the creditor must file the next year if they discharge or forgive a debt.
If the creditor files a 1099-C with the IRS, then typically it must provide you with a copy by January 31 so you have it for tax filing purposes that year. This is similar to the rule for W-2s from employers.
However, there is no rule for how long a creditor can carry debt on its books before it decides it’s uncollectible. So, if your debt isn’t canceled via repossession, bankruptcy, or other processes, cancellation could happen at any time. The creditor doesn’t have to tell you about it other than sending the 1099-C.
Is a 1099-C Form Good or Bad for Your Credit?
The 1099-C form shouldn’t have any impact on your credit. However, the activity that led to the 1099-C probably does impact your credit. Typically, by the time a creditor forgives a debt, you’ve engaged in at least one of the following activities:
Failed to make payments for an extended period of time
Negotiated a settlement on the debt
Entered into a program with the creditor because you can’t pay the debt, such as a home short sale or voluntary repossession
Been sent to collections
Had a foreclosure or repossession
Gone through a bankruptcy
All of those are negative items that can impact your credit report and score for years. So, while getting a 1099-C itself doesn’t change your credit at all, you’ve probably already experienced a negative hit to your score.
Get Tax Help if You Receive a 1099-C
As with other tax topics, the 1099-C can be complicated. It’s a good idea to work with a professional when dealing with complicated tax matters or trying to reduce your tax burden legally.
There are plenty of different home loan products that home buyers can choose from, with popular products including FHA and VA loans. The Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) are both government-backed programs, but they have their own set of benefits and drawbacks.
When looking to buy a house, which is best: VA or FHA? The answer depends entirely on what the buyer is looking for.
Here’s a breakdown of some of the big differences between the two mortgage products:
Click to check today’s VA rates.
For home buyers looking to avoid a downpayment, it’s tough to beat VA loans. VA loans don’t require any type of downpayment – part of the program’s guarantee.
FHA loans will require a downpayment of at least 3.5%, but that’s still well below that traditional 20 percent that many home buyers assume they need.
In terms of getting the lowest downpayment possible, VA loans have FHA loans beat.
If you make a downpayment of less than 20 percent on an FHA loan, you can expect to be paying a mortgage insurance premium, or MIP. This will be paid either upfront at the closing of the FHA loan or monthly, with the annual fee being spread over all 12 months.
Unlike other types of mortgage insurance, MIP will also last the life of the FHA loan. That means an FHA buyer with less than 20 percent down will be required to refinance their loan after they’ve established enough equity in their home.
VA loans, on the other hand, require no type of insurance regardless of how much the buyer puts down. This is another part of the VA’s guarantee – the VA insures the loan, so any type of insurance is moved away from the home buyer.
It’s difficult to peg mortgage rates since they’re always changing, but one thing is clear: VA loans typically come with a lower mortgage rate than FHA loans.
Mortgage software giant Ellie Mae demonstrates this. Each month, they compile a report of all the loans that go through their software. That report is then released, giving home buyers valuable information to work with.
In October, the average mortgage rate for a VA loan was 26 basis points (0.26%) lower than the average rate for an FHA loan. October wasn’t a fluke, either; VA loans routinely have lower mortgage rates than FHA loans.
Check today’s VA loan rates.
While VA loans have an edge with downpayment, mortgage rates and insurance, home buyers will still need to qualify for the loans. Here’s how different qualification requirements compare for both products:
Technically, VA loans have no minimum credit score and FHA loans can be approved with scores as low as 520. But in the real world, lenders will want to see a credit score of at least 580 for FHA loans, and usually around 620 for VA loans.
According to Ellie Mae’s October 2020 Origination Report, the average credit score for closed VA loans in October 2020 was 725, compared to 683 for FHA loans. Granted, this does not show what the minimum requirement is for either product. However, generally speaking, FHA loans are usually more flexible with credit scores than VA loans.
With the debt-to-income ratio (DTI), both VA and FHA home buyers will want to keep their total debt to income below 45 percent. This means that the total monthly amount spent on debt (including the mortgage you’re trying to get) needs to be below 45 percent of monthly income.
Neither product has an edge here, but it’s still an important part of qualifying to pay attention to.
Anyone can be eligible for an FHA loan, but only specific veterans and military members can get a VA loan. Usually, most veterans are eligible, so long as they’ve served for 2 years or more. Requirements for eligibility do change, though, depending on when the individual served, how they served and why they retired from the military.
For a more in-depth look at VA loan eligibility, click here.
Ease of using the product
VA loans have a reputation for going slower than other loan products, but that’s not entirely the case. According to Ellie Mae, the average VA loan closed in 51 days – just one day slower than the average FHA loan.
The longest part of the VA home buying process can be the VA appraisal. With some preparation, this process can go smoothly, as with all the other steps of buying a home with a VA loan. Click here to find out how to make the VA appraisal process go smoothly.
Which is best?
On paper, VA loans have more benefits than FHA loans. Each situation is different, though, so it’s impossible to say whether or not one product is definitively better than the other.
That being said, VA eligible home buyers will likely want to take advantage of the VA’s mortgage product.
Making payments late or missing payments completely spells bad news for your credit rating. When you miss too many payments, your creditor may charge off the debt. When your debt is charged off as a bad debt, don’t fool yourself into thinking it goes away.
A charged off debt can lead to harassing phone calls, garnished wages, and a major drop in your credit score. According to the Federal Reserve, consumer loans had a charge-off rate of around 2.3% in the final quarter of 2019. Credit card debt was more likely to be charged off than other forms of debt. But what is a charge-off, and how much does it impact your credit if your balance is charged off as bad debt? Find out more below, including what you can do about charge-offs on your credit report.
What Is a Charge-Off?
A charge-off occurs when you don’t pay the full minimum payment on a debt for several months and your creditor writes it off as a bad debt. Basically, it means the company has given up hope that you’ll pay back the money you borrowed and considers the debt a loss on their profit-and-loss statement. The creditor closes your account, which could be a personal loan, credit card, revolving charge account or another debt you’ve failed to pay as promised, and it’s charged off as a bad debt.
If you make payments that are less than the monthly minimum amount due, your account can still be charged off as bad debt. You must bring your account current to avoid it being charged off. Once your debt is charged off, your creditor will send a negative report to one or more of the credit reporting agencies. It may also attempt to collect on the debt through its own collection department, by sending your account to a third-party debt collector, or by selling the debt to a debt buyer.
When Will a Charge-Off Happen?
Charge-offs typically don’t happen until your payments are severely late. When you start missing payments, creditors will first send letters reminding you of your past-due bill. If that fails, they move on to the collections process. The standard time for creditors to perform a charge-off is after 120 to 180 days of nonpayment.
Does Charged Off Mean Your Debt Is Paid Off?
Charged off doesn’t mean your debt is forgiven. Don’t be misled into believing that because the creditor wrote off your balance that you no longer need to pay the debt.
Even when a company writes off your debt as a loss for its own accounting purposes, it still has the right to pursue collection. This could include suing you in court for what you owe and requesting a garnishment of your wages. Unless you settle or file for certain types of bankruptcy—or the statute of limitations in your state has been reached—you’re still responsible for paying back the debt.
How Does Charged Off Debt Affect Your Credit Score
Charge-offs affect your credit report because they’re caused by missed payments. FICO research indicates that a single late payment negatively impacts your credit score. Missing a payment by 90 days can drop your score over 100 points—but missing it by just 30 days can also have a significant negative affect on your score.
Because a charge-off results from missing payments, you have both the late payments and a charge-off listed on your credit report. Even with good credit, a single charge-off lowers your credit score substantially. Late and delinquent payments have the largest impact on your credit score because up to 35% of your score is determined by your payment history. A lower credit score can cause higher insurance rates, larger housing and utility deposits, increased interest rates and denials for new loans and credit cards.
How Long Does Charged-Off Debt Stay on Your Credit Report?
Just like late payments, a charged-off debt stays on your credit report for seven years. The seven-year clock starts on the date of the last scheduled payment you didn’t make and doesn’t restart if the debt is sold to a collection agency or debt buyer. Paying the charged-off amount won’t remove it from your credit report. The account’s status is simply changed to “charged-off paid” or “charged-off settled,” which remains on your credit report until the end of the seven-year period, when it automatically falls off your report.
How to Remove a Legitimate Charge-Off from Your Credit Report
The only way to have a legitimate charge-off removed from your credit report before the seven-year period expires is to convince the original reporting entity to do so. That’s typically the creditor that wrote the debt off.
While this tactic is hit or miss, success can mean a major positive for your credit report. And even if you’re not successful, you can still get a bit of a bump in your credit history by paying off charged-off debt. Here’s how it works.
You need to have enough money to negotiate with. Before you start negotiating, determine how much you can realistically pay and how soon you can pay it. If you can pay in full right away, you have more leverage to have the charge-off removed you’re your credit report, but you can also ask if they’re willing to make payment arrangements Consider saving up money or taking out a debt consolidation loan.
Once you have enough money to negotiate, contact the original creditor. Make sure you’re speaking to someone who has the authority to negotiate with you and make agreements about actions on your credit report.
Let the creditor know how much you can pay and that you’re able to make the payment today in exchange for calling the debt paid off and removing the charge-off from your credit report.
Get any agreement in writing from the creditor before you make a payment.
If the creditor won’t delete the charge-off from your credit report but does agree to settle your debt for less than you owe, consider the offer. Make sure they agree to mark the charge-off as paid-in-full on your credit report. That shows future creditors that you did make an effort to pay your debts and can be a critical requirement if you ever apply for a mortgage.
How to Dispute a Charge-Off on Your Credit Report
Sometimes, the charge-off on your credit report isn’t accurate. Perhaps you never owed the debt to begin with or you did pay it, and the profit-and-loss write off is a clerical error. You can work to get such items removed from your credit report by disputing them and asking the creditor to verify what they reported. Write a dispute letter yourself or work with a credit repair company to help clear up your report.
When you sign up for ExtraCredit, you get exclusive discounts to reputable credit repair services—plus access to 28 of your FICO scores from all three credit reports and additional features.
How to Avoid Balances Being Charged Off as Bad Debt
Even better than working to settle a debt and potentially get a charge-off removed is avoiding the issue in the first place. The ideal time to act is as soon as you see you’re struggling to make regular payments. Waiting until items are charged off as bad debt means your credit score will take numerous hits as you miss payments.
But if you can’t pay your debts, what choice do you have? Turns out you have many options, including some of the ones summarized below.
Consolidate your debt. Apply for a debt consolidation loan that lets you bring several debt items under a single account. You may be able to qualify for more favorable terms that reduce the amount you pay each month to make it easier to manage your debt. But this is more likely before your credit score drops due to missed payments and charge-offs.
Get a balance transfer card. If the debt you’re struggling with is credit card related, apply for a balance transfer card. If you can get approved for a card with a 0% APR offer, you may reduce how much you have to pay each month and make it easier to pay down your debts.
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Reach out to the creditor for help. Most creditors have programs designed to help account holders who are experiencing emergency financial situations. As soon as you know you can’t pay your bills, call the customer service line for your account and ask if there are programs you can apply for to modify your loans or seek other assistance. Just make sure the new agreement you make is possible with your budget.
Take Charge of Your Debt
The worst thing you can do is ignore debt you owe. It won’t go away, and things get progressively worse for your credit history and score when you let them fester. So, check out your free Credit Report Card today to see where your credit is falling short and start looking for ways you can realistically handle debts that you owe to improve your credit in the future.
Love the idea of working with animals, but don’t have the resources or desire to go through vet school? You can still put your love of pets or wildlife to work in your career. Here are twelve jobs working with animals that can pay the bills for any animal lover.
Groomers help pets look their best by cleaning them, trimming fur and providing other services. Pay depends on skills, certifications, experience and which state you work in. The highest pay in each region typically going to specialists who provide boutique grooming services.
Here are the job details:
Median Salary: $34,702
Salary Range: $22,666 to $51,323
Minimum Qualifications: high school diploma or equivalent
How to Become One: Typically, animal caretakers must have at least a high school diploma or GED. Most training takes place on the job, but some choose to study at a grooming school. Employers generally prefer candidates to have some experience working with animals.
2. Pet Sitter and Dog Walker
Pet sitters and dog walkers care for pets while owners are traveling or unavailable. You might choose to work through a service that pays you as an employee or hire your own services out as a freelance dog walker or pet sitter. In the latter case, you may make more money per job but will also have to handle your own marketing and business administration expenses.
Here are the job details:
Median Salary: $31,095
Salary Range: $20,211 to $45,826
Minimum Qualifications: varies
How to Become One: Employers may require a high school diploma or GED and some training or certification. However, if you want to freelance as a dog walker, you may just need experience and references, so concerned pet owners can learn more about you.
3. Veterinary Assistant
Veterinary assistants work in a vet office, clinic or animal hospital helping veterinarians with animal care. They are responsible for assisting with routine tasks, which might include checking in patients or helping as the vet provides services.
Here are the job details:
Median Salary: $30,898
Salary Range: $19,431 to $43,072
Minimum Qualifications: high school diploma or equivalent
How to Become One: If you want to become a veterinary assistant, you should at least have a high school diploma. Most veterinary assistants learn their trade on the job. Certification isn’t always required, but it could help you get promoted or obtain an advanced position.
4. Research Animal Caretaker
Laboratory animal caretakers work in labs with animal scientists, biologists or veterinarians. They feed, care for and monitor the well-being of lab animals.
Here are the job details:
Median Salary: $37,890
Salary Range: $35,215 to $46,105
Minimum Qualifications: high school diploma or equivalent
How to Become One: Laboratory animal caretakers are required to at least have a high school diploma. Most laboratory animal caretakers learn their trade through on-the-job training. Certification isn’t required to become a laboratory animal caretaker, but some employers prefer it. Having a certification could also help you get promoted.
5. Animal Trainer
Animal trainers are responsible for training animals for tasks such as riding, performance, obedience or assisting the disabled. They can also help animals become more comfortable with human interaction.
Here are the job details:
Median Salary: $30,430
Salary Range: $20,810 to $59,110
Minimum Qualifications: no formal education requirements
How to Become One: There are no formal education requirements to become an animal trainer. Those who train animals usually receive on-the-job training. In addition, animal trainers can receive education through organizations such as the Humane Society of the United States and earn certificates or other credentials to help them move up in their careers.
6. Veterinary Technician
Veterinary technicians perform medical testing with the supervision of a licensed veterinarian. They help diagnose an animal’s injury or illness and may also perform some routine procedures, such as ultrasounds, catheterization or EKGs, and administer anesthesia.
Here are the job details:
Median Salary: $35,308
Salary Range: $24,619 to $48,002
Minimum Qualifications: an associate degree
How to Become One: Typically, you must complete at least an associate degree or get a certification from an accredited program. Depending on the state, you may need to pass an exam and become registered, licensed or certified. Many employers look for techs with at least some experience in the field, which means many vet techs start in an assistant position.
7. Animal Control Worker
Animal control workers help ensure the proper treatment of animals, investigate cases of mistreatment, may help locate abandoned animals and may be called on to deal with nuisance animals of certain types.
Here are the job details:
Median Salary: $38,490
Salary Range: $23,160 to $58,220
Minimum Qualifications: varies by location
How to Become One: Animal control workers are required to have a minimum of a high school diploma or the equivalent. Additional training usually takes place on the job. The National Animal Care & Control Association offers training programs. In addition, some states require certification in animal control.
8. Conservation & Forest Technician
Conservation and forest workers help keep track of wildlife, gather data, suppress forest fires and work to improve the health of forests. They may lead guided tours or help train others in managing natural habitats.
Here are the job details:
Median Salary: $39,180
Salary Range: $26,160 to $56,410
Minimum Qualifications: high school diploma or equivalent
How to Become One: In many cases, all you need is a high school diploma. You receive on-the-job training, but you can potentially advance your career with certifications or degrees in various sciences.
Breeders select and breed animals according to characteristics and genealogy. They may use artificial insemination equipment and need to keep meticulous records on animal health, genetics, dates of birth and family history.
Here are the job details:
Median Salary: $46,420
Salary Range: $26,030 to $69,550
Minimum Qualifications: high school diploma or equivalent
How to Become One: Animal breeders are required to have a minimum of a high school education. In addition, breeders learn their skill through short-term on-the-job training. Those who want to breed zoo animals are required to have a bachelor’s degree in veterinary science and, depending on career goals, may also want to pursue postgraduate study in zoology.
10. Biological Technician
Biological technicians help medical scientists in the laboratory. They are responsible for the setup, operation and maintenance of laboratory equipment. They also monitor experiments.
Here are the job details:
Median Salary: $49,110
Salary Range: $29,540 to $73,350
Minimum Qualifications: bachelor’s degree
How to Become One: Biological technicians generally need a bachelor’s degree in biology or a similar field. Technicians must also acquire laboratory experience and a working knowledge of computers and lab equipment.
11. Zoologist & Wildlife Biologist
Zoologists and wildlife biologists study how animals and wildlife interact with their environment. They may also help care for animals in captivity.
Here are the job details:
Median Salary: $67,200
Salary Range: $38,880 to $101,780
Minimum Qualifications: bachelor’s degree
How to Become One: A bachelor’s degree is necessary for those seeking entry-level positions. A master’s degree is usually required for advanced or scientific positions. Those who want to lead independent research or work at a university might want to consider a doctoral degree.
12. Conservation Scientist
Conservation land managers work with conservation groups, landowners or other entities to protect specific wildlife and land. Often, they do so because the area is a habitat for certain animals, particularly endangered animals.
Here are the job details:
Median Salary: $67,040
Salary Range: $39,270 to $98,060
Minimum Qualifications: bachelor’s degree
How to Become One: Conservation scientists usually need a minimum of a bachelor’s degree, preferably in natural resource management, agriculture or another related field. Experience can be gained through internships and volunteer work. Some states require those desiring to become foresters to obtain a license.
Start Working Now to Land a Job Working with Animals
First, check out Monster.com‘s resume services and bring out the most relevant facts in your work history. Get tips and help polishing your resume so it shines when it hits employee inboxes or application systems. Then, upload your resume to ZipRecruiter and start connecting immediately with employers who are looking for people with a passion for jobs working with animals.
Life can feel overwhelming when you’re saddled with loads of debt from different creditors. Maybe you carry multiple credit card balances on top of having a high-interest personal loan.
Or maybe you have a loan with an adjustable-rate and your payments are starting to rise each month, making your budget more and more uncomfortable.
In these situations, it may be wise to look at a debt consolidation loan. For some people, it’s a smart choice that gets your debts organized while potentially lowering your monthly payments. Ready to learn more? Let’s get started.
Best Debt Consolidation Loan Lenders of 2021
We’ve compiled a list of the best debt consolidation loans online, along with their basic eligibility requirements. Research each one carefully to see which one can help you with your debt consolidation.
Different lenders are ideal for different borrowers. Review these options and take a look at which ones best suit your needs as well as your credit profile. Once you have your own shortlist, you can get prequalified to compare loan options and find the best offer.
Since 2012, DebtConsolidation.com has worked with borrowers to find the best debt consolidation service for their unique situation. If you are not really sure where to get started with your debt repayment process, then this is a good place to start.
The company offers many resources, tools, and relief programs on how to get out of debt quickly. Wherever you are at on your debt repayment journey, they may be able to help.
After you provide some information about your debts, the website will present the best way forward. You may be matched to debt consolidation loans, debt settlement companies, or credit counseling depending on your individual situation.
You can easily compare several different options through this service which is a great way to start your debt repayment journey off right!
It is completely free to use their services. However, when you are matched to a partner, the partner may charge fees for their services. Always make sure to understand the exact terms of your debt consolidation loan before moving forward with any company.
Marcus by Goldman Sachs
If you’re looking for an online-only lender, then Marcus by Goldman Sachs may be the right choice for you. Marcus offers personal loans that can be used for debt consolidation.
If you have a credit score of 660 or higher, you may qualify for a personal loan between $3,500 and $40,000. The APR range is between 6.99% and 28.99%.
One of the best things about taking out a loan through Marcus is how transparent the bank is. There are no hidden fees and that includes late fees, which is pretty rare among other lenders.
Plus, the bank gives you the option to choose your own payment due date. After making 12 months of consecutive payments, you can defer one monthly payment if you want.
The only real downside is that you’ll need good to excellent credit to qualify. And Marcus won’t let you apply with a co-signer.
Read our full review of Marcus
Avant is designed for borrowers with average credit or better and offers a number of perks for debt consolidation.
You can get help with your debt management by getting free access to resources, plus you receive regular updates on your VantageScore to track your credit repair process.
In fact, the average borrower using the funds for debt consolidation sees a 12-point increase within the first six months. So who can get a loan through Avant?
Most borrowers have a credit score between 600 and 700. While you don’t need to meet a minimum income threshold, most customers earn between $40,000 and $100,000 each year.
One of the great things about borrowing with them is that once you are approved and agree to your loan terms, you can get funding in as little as a day. This is a great benefit if you have a number of due dates coming up and want to get started paying off your current creditors as soon as possible.
Their loan terms range anywhere between two and five years, so you can choose to either pay off your debt aggressively or take the slow and steady route.
Read our full review of Avant
If you have fair to good credit, you may be eligible for a debt consolidation loan from Payoff. The company offers debt consolidation loans with competitive rates and flexible repayment terms. Payoff focuses on helping borrowers pay down their high-interest credit card debt.
Payoff does this by providing debt consolidation loans between $5,000 and $35,000. The APR range is between 5.99% and 24.99%, depending on your credit score. The repayment terms will be between two and five years.
One of the advantages of taking out a debt consolidation loan through Payoff is the additional support they provide. Payoff doesn’t just want to help you repay your debt; they want to help you build a solid financial future.
The lender will provide financial recommendations, tools, and resources to help you stay on track. This will help you meet your short-term goals and build positive long-term financial habits.
Read our full review of PayOff
Upstart’s target borrower is a younger person with less established credit. So maybe you don’t have a problem with bad credit, but you have a problem with no credit. When you apply for an Upstart loan, more emphasis is placed on your academic history than your credit history.
They’ll review your college, your major, your job, and even your grades to help make you a loan offer. The minimum credit score is 620. Most borrowers are between 22 and 35 years old, but there are no technical age restrictions.
However, one requirement is that you must be a college graduate, which obviously limits the applicant pool. And while loan amounts range up to $25,000, you only have one term option: three years.
They don’t offer the most flexibility, but it does have competitive rates and a unique approval model that may help some borrowers who want a loan.
Read our full review of Upstart
PersonalLoans.com directly helps individuals with low credit scores so this is a great place to come if you’re still in the credit repair process.
However, there are a few restrictions: you cannot have had a late payment of more than 60 days on your credit report, a recent bankruptcy, or a recent charge-off. But if you meet these basic guidelines, PersonalLoans.com may be a good option for you.
PersonalLoans.com is unique in that it’s a loan broker, not an actual lender. Through the application, you’ll get offers from traditional installment lenders, bank lenders, and even peer-to-peer lenders.
Your actual loan agreement that you choose is signed between you and the lender, not PersonalLoans.com. This provides a convenient way to compare rates and terms through just a single application process.
Read our full review of PersonalLoans.com
LendingClub is a peer-to-peer lender. That means rather than having your loan funded directly by the lender, your loan application is posted for individual investors to fund.
Additionally, your interest rate and terms are determined by your credit profile. The minimum credit score is just a 600, but the average borrowers is higher.
LendingClub boasts competitive rates; in fact, its website claims that the average debt consolidation borrower lowers their interest rate by 30%. You can use the website’s personal loan calculator to determine how much you could actually save by consolidating your debt.
There’s also a large-cap on loans, all the way up to $40,000. That’s on the higher end for many online lenders, especially those open to individuals with lower credit.
Read our full review of LendingClub
Upgrade appeals to all different types of borrowers. When assessing a new borrower, the lender considers various factors, including their credit score, free cash flow, and debt-to-income ratio.
The company offers personal loans that can be used for many different purposes, including debt consolidation. Upgrade will even make payments directly to your lender for added convenience.
If you have a minimum credit score of 600, you may qualify for a personal loan between $1,000 and $50,000. When you apply, the lender will do a soft pull on your credit so it won’t affect your credit score.
Upgrade is one of the best options for borrowers with poor credit and borrowers with a high debt-to-income ratio. And the lender offers a hardship program, so if you fall on difficult times financially, you may receive a temporary deduction on your monthly payments.
Read our full review of Upgrade
Discover offers personal loans for borrowers with good to excellent credit. You can use a personal loan from Discover to consolidate your existing high-interest credit card debt.
If you qualify, you’ll receive a personal loan between $2,500 and $35,000. The APR range is 6.99% to 24.99%. And the bank never charges any origination fees.
You must have a minimum credit score of 660 to qualify, so Discover isn’t a good option for borrowers with bad credit. And unfortunately, Discover doesn’t give borrowers the option to apply with a co-signer.
Read our full review of Discover
With an A+ rating from the Better Business Bureau, OneMain is a lender committed to customer satisfaction. While they offer debt consolidation loans up to $25,000, you can also get a loan for as little as $1,500.
This is one of the lowest loan minimums we’ve seen, which is perfect if you have just a small amount of debt you’d like to consolidate because of exorbitant or adjustable interest rates.
In addition to applying online, you can also elect to meet with a financial adviser at a OneMain branch location.
In fact, part of the application process entails meeting with someone either at a branch or remote location to ensure you understand all of your loan options. This is a great step that most online lenders lack, allowing you to really take the time to weigh your options and decide which is best for you.
Read our full review of OneMain
Best Debt Settlement Companies of 2021
Taking out a debt consolidation loan is just one option when you want to lower your monthly payments. Another way to go is enrolling in a debt settlement program. Rather than paying off your lender in full, a debt settlement company can help negotiate an amount to repay so that the debt is considered settled.
In the meantime, you agree to freeze your credit cards and deposit cash each month into an account that will eventually be used to pay off the settlement.
However, the downside is that to make this strategy work, you must stop making payments on your owed amounts, which will cause them to go into default. That means your credit score will take a nosedive. But, the goal is to pay less than what you owe.
If you have enough debt that it seems impossible for you to ever repay, debt settlement might be a better option than filing for bankruptcy. Below are Crediful’s top two picks for debt settlement companies. You can find the full list here.
Accredited Debt Relief
Accredited regularly works with major banks and lenders to help clients negotiate settlements. These include Bank of America, Wells Fargo, Chase, Capital One, Discover, and other financial institutions of all sizes, both large and small.
They’ll even work with retailers if you have store cards with major balances. While results vary from person to person, they offer examples of clients saving anywhere between 50% and 80% on their amounts owed.
Read our full review of Accredited Debt Relief
National Debt Relief
National Debt Relief has an A+ rating with the Better Business Bureau and prides itself on trying to help those who truly have financial hardships in their lives.
One benefit of working with this company is that your funds are held in an FDIC-insured account that is opened in your name.
That means you have full control over the account and don’t run the risk of being scammed out of your money — you can rest assured that National is a reputable company.
Plus, the team is fully versed in consumer and financial law so you can trust that your interests are being served to the fullest legal extent possible.
Read our full review of National Debt Relief
What is debt consolidation?
Debt consolidation allows you to pull all of your smaller existing debts into one new debt that you pay each month. When you take out a debt consolidation loan, you receive funds to pay off all of your existing debt, like your credit card balances and high-interest loans.
You then make a single monthly payment to your lender, rather than making multiple payments each month. Keep in mind that this is different from debt settlement in that you’re not negotiating a new amount owed. Instead, you keep the same amount of debt but pay it off in a different way.
Depending on your personal situation, debt consolidation comes with both pros and cons. It’s important to weigh both sides carefully before deciding if a debt consolidation loan is right for you.
Let’s delve into the details so that you can get closer to making a decision.
Advantages of Debt Consolidation
There are a number of advantages associated with debt consolidation loans.
Lower Your Monthly Payments
The biggest benefit is the ability to lower your combined monthly payments. Because interest rates on credit cards are so high, it’s possible that you can find a lower interest rate on a debt consolidation loan instead, which means lower payments.
However, your actual interest rate depends on several factors, especially your credit score. It’s important to compare interest rates and the total cost of the debt consolidation loan to your current payments to make sure you don’t end up paying more over time. The goal is to save you money.
Improve Your Credit Score
Another advantage of debt consolidation is that it can actually help increase your credit score. While your amount of debt stays the same, installment loans are viewed more favorably than credit card debt.
So if the majority of your debt comes from maxed-out credit cards, you could potentially see a rise in your credit score because your credit utilization on each individual card has gone down.
A debt consolidation loan streamlines your monthly payments. Rather than being inundated with multiple due dates each month, you simply have one to remember. This also contributes to building a healthy credit score because it lowers your chance of having a late payment.
Disadvantages of Debt Consolidation
In some cases, debt consolidation loans might not be a great idea. We talked about the total cost of the loan, which needs to be reviewed holistically, not just as a monthly payment. This is true for several reasons.
First, most lenders charge some sort of fee when you take out a new loan. The most common is an origination fee, typically charged as a percentage of the total loan amount.
So if you need a $10,000 loan and there is a 4% origination fee, you’ll only actually receive $9,600. Next, compare interest rates and loan terms.
Even if the monthly payments look good on paper, you may be paying a lot more over an extended payment period. You can use the APR to compare interest rates and fees, but you also need to consider how much you’ll spend on interest over the entire loan term.
Changing Your Spending Habits
Finally, it doesn’t necessarily fix the root problem of your debt.
This isn’t something you need to worry about if your debt results from a one-time incident, such as an expensive medical procedure or temporary job loss. But if you habitually spend more than you earn and are still incurring new debt, then debt consolidation loans will not help you in the long run.
If this sounds like you, try to figure out how you can curb your spending to stop accruing more debt. You can even talk to a debt counselor to help create a sound management plan for your finances.
A payday loan is a short-term loan with a high annual percentage rate. Also known as cash advance and check advance loans, payday loans are designed to cover you until payday and there are very few issues if you repay the loan in full before the payment date. Fail to do so, however, and you could be hit with severe penalties.
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Lenders may ask the borrower to write a postdated check for the date of their next paycheck, only to hit them with rollover fees if that check bounces or they request an extension. It’s this rollover that causes so many issues for borrowers and it’s the reason there have been some huge changes in this industry over the last decade or so.
How Do Payday Loans Work?
Payday lending seems like a simple, easy, and problem free process, but that’s what the payday lender relies on.
The idea is quite simple. Imagine, for instance, that your car suddenly breaks down, payday is 10 days away, and you don’t have a single cent to your name. The mechanic quotes you $300 for the fix, and because you’re already drowning in debt and have already sold everything valuable, your only option is payday lending.
The payday lender offers you the $300 for a small fee. They remind you that if you repay this small short-term cash sum on payday, you won’t incur many fees or any real issues. But a lot can happen in 10 days.
More bills can land in your mailbox, more expenses can arrive out of nowhere, and before you know it, all of your paycheck has been allocated for other expenses. The payday lender offers to rollover your loan for another month (another “payday”) and because you don’t have much choice, you agree.
But in doing so, you’ve just been hit with more high fees, more compounding interest, and a sum that just seems to keep on growing. By the time your next payday arrives, you’re only able to afford a small repayment, and from that moment on you’re locked into a debt that doesn’t seem to go anywhere.
Payday loans have been criticized for being predatory and it’s easy to see why. Banks and credit unions profit more from high-income individuals as they borrow and invest more money. A single high-income consumer can be worth more than a dozen consumers straddling the poverty line.
Payday lenders, however, target their services at low-income individuals. They offer small-dollar loans and seem to profit the most when payment dates are missed and interest rates compound, something that is infinitely more probable with low-income consumers.
Low-income consumers are also more likely to need a small cash boost every now and then and less likely to have the collateral needed for a low-interest title loan. According to official statistics, during the heyday of payday loans, most lenders were divorced renters struggling to make ends meet.
Nearly a tenth of consumers earning less than $15.000 have used payday loans, compared to fewer than 1% for those earning more than $100,000. Close to 70% of all payday loans are used for recurring expenses, such as utility bills and other debts, while 16% are used for emergency purchases.
Pros and Cons of Taking Out a Payday Loan
Regardless of what the lender or the commercial tells you, all forms of credit carry risk, and payday loans are no exception. In fact, it is one of the riskiest forms of credit available, dragging you into a cycle of debt that you may struggle to escape from. Issues aside, however, there are some benefits to these loans, and we need to look at the cons as well as the pros.
Pros: You Don’t Need Good Credit
Payday loans don’t require impeccable credit scores and many lenders won’t even check an applicant’s credit report. They can afford to do this because they charge high interest and fees, and this allows them to offset many of the costs associated with the increased liability and risk.
If you’re struggling to cover your bills and have just been hit with an unexpected expense, this can be a godsend—it’s a last resort option that could buy you some time until payday.
Pros: It’s Quick
Payday loans give you money when you need it, something that many other loans and credit offers simply can’t provide. If you need money right now, a payday lender can help; whereas another lender may require a few days to transfer that money or provide you with a suitable line of credit.
Some lenders provide 24/7 access to money, with online applications offering instant decisions and promising a money transfer within 24 hours.
Pro: They Require Very Little
A payday loan lender has a very short list of criteria for its applicants to meet. A traditional lender may request your Social Security Number, proof of ID, and a credit check, but the average payday lender will ask for none of these things.
Generally, you will be asked to prove that you are in employment, have a bank account, and are at least 18 years old—that’s it. You may also be required to submit proof that you are a US citizen.
Cons: High Risk of Defaulting
A study by the Center for Responsible Lending found that nearly half of all payday loans go into default within just 2 years. That’s a staggering statistic when you consider that the average default rate for personal loans and credit cards is between 1% and 4%.
It proves the point that many payday lender critics have been making for years: Payday loans are predatory and high-risk. The average credit or loan account is only provided after the applicant has undergone a strict underwriting process. The lender takes its time to check that the applicant is suitable, looking at their credit history, credit score, and more, and only giving them the credit/loan when they are confident it will be repaid.
This may seem like an unnecessary and frustrating process, but as the above statistics prove, it’s not just for the benefit of the lender as it also protects the consumer from a disastrous default.
Con: High Fees
High interest rates aren’t the only reason payday lenders are considered predatory. Like all lenders, they charge fees for late payments. But unlike other lenders, these fees are astronomical and if you’re late by several weeks or months, those fees can be worth more than the initial balance.
A few years ago, a survey on payday lending discovered that the average borrower had accumulated $458 worth of fees, even though the median loan was nearly half that amount.
Cons: There are Better Options
If you have a respectable credit history or any kind of collateral, there are better options available. A bank or credit union can provide you with small short-term loans you can repay over many months without accumulating astronomical sums of interest.
The interest rates are much lower, the fees are more manageable, and unless your credit score is really poor, you should be offered more favorable terms than what you can get from a payday lender.
Even a credit card can offer you better terms. Generally speaking, a credit card has some of the highest interest rates of any unsecured debt, but it can’t compare to a payday loan. It also has very little impact on your credit score and many credit card providers offer 0% on purchases for the first-few months.
What’s more, if things go wrong with a credit card, you have more options than you have with a payday loan, including a balance transfer credit card or a debt settlement program.
Why Do Payday Loans Charge So Much Interest?
If we were to take a cynical view, we could say that payday loans charge a lot simply because the lender can get away with charging a lot. After all, a payday loan lender targets the lowest-income individuals, the ones who need money the most and find themselves in desperate situations.
However, this doesn’t paint a complete picture. In actual fact, it all comes down to risk and reward. A lender increases its interest rate when an applicant is at a greater risk of default.
The reason you can get low rates when you have a great credit score and high rates when you don’t, is because the former group is more likely to pay on time and in full, whereas the latter group is more likely to default.
Lending is all about balancing the probabilities, and because a short-term loan is at serious risk of defaulting, the costs are very high.
Payday Loans and Your Credit Score
Your credit will only be affected if the lender reports to the credit bureaus. This is something that many consumers overlook, incorrectly assuming that every payment will result in a positive report and every missed payment in a negative one.
If the lender doesn’t report to the main credit bureaus, there will be no changes to your report and the account will not even show. This is how many payday lenders operate. They rarely run credit checks, so your report won’t be hit with an inquiry, and they tend not to report on-time payments.
However, it’s a different story if you miss those payments. A lender can report missed payments and defaults and may also sell your account to a debt collector, at which point your credit score will take a hit.
If you’re concerned about how an application will impact your credit score, speak with the lender or read the terms and conditions before applying. And remember to always meet your payments on time to avoid any negative marks on your credit report and, more importantly, to ensure you’re not hit with additional fees.
Payday Loans vs Personal Loans
A personal loan is generally a much better option than a payday loan. These loans are designed to help you cover emergency expenses, pay for home improvements, launch businesses, and, in the case of debt consolidation loans, to clear your debt.
The interest rates are around 6% to 10% for lenders with respectable credit scores, and while they often charge an origination fee and late fees, they are generally much cheaper options. You can repay the loan at a time that suits you and tailor the payments to fit your monthly expenses, ensuring that they don’t leave you short at the end of the month.
You can get a personal loan from a bank or a credit union; whenever you need the money, just compare, apply, and then wait for it to hit your account. The money paid by these loans is generally much higher than that offered by payday loans and you can stretch it out over a few years if needed.
What is an Unsecured Loan?
Personal and payday loans are both classed as unsecured loans, as the lender doesn’t secure them against money or assets. Secured loans are typically secured against your home (mortgage, home equity loan) or your car (auto loan, title loan). They can also be secured against a cash deposit, as is the case with secured credit cards.
Although this may seem like a negative, considering a lender can repossess your asset if you fail to meet the payment terms, it actually provides many positives. For instance, a secured loan gives the lender more recourse if anything goes wrong, which means the underwriters don’t need to account for a lot of risk. As a result, the lender is more likely to offer you a low interest rate.
Where cash advance loans and other small loans are concerned, there is generally no option for securing the loan. The lender won’t be interested, and neither should you—what’s the point of securing a $30,000 car against a $1,000 loan!?
New Payday Loan Regulations
Payday lenders are subject to very strict rules and regulations and this industry has undergone some serious changes in recent years. In some states, limits are imposed to prevent high interest rates; in others, payday lenders are banned from operating altogether.
The golden age of payday lending has passed, there’s no doubt about that. In fact, many lenders left the US markets and took their business to countries like the UK, only for the UK authorities to impose many of the same restrictions after a few years of pandemonium. In the US, the industry thrived during the end of the 2000s and the beginning of the 2010s, but it has since been losing ground and the practice is illegal or highly restricted in many states.
Are Payday Loans Still Legal?
Payday loans are legal in 27 states, but many states have imposed strict rules and regulations governing everything from loan amounts to fees. The states where payday lenders are not allowed to operate are:
It is still possible to apply for personal loans and title loans in these states, but high-interest, cash advance loans are out of the question, for the time being at least.
Debt Rollover Rules for Payday Lenders
One of the things that regulations cover is something known as Debt Rollover, whereby a consumer rolls their debt over into the next billing period, accruing fees and continuing to pay interest. The more rollovers there are, the greater the risk and the higher the detriment to the borrower.
Debt rollovers are at fault for many of the issues concerning payday loans. They create a cycle of persistent debt, as the borrower is forced to acquire additional debt to repay the payday loan debt.
In the following states, payday loans are legal but restricted to between 0 and 1 rollovers:
Other states tend to limit debt rollovers to 2, but there are some notable exceptions. In South Dakota and Delaware, as many as 4 are allowed, while the state of Missouri allows for 6. However, the borrower must reduce the principal of the loan by at least 5% during each successive rollover.
Are These Changes for the Best?
If you’re a payday lender, the aforementioned rules and regulations are definitely not a good thing. Payday lenders rely on persistent debt. They make money from the poorest percentage of the population as they are the ones most likely to get trapped in that cycle.
For responsible borrowers, however, they turn something potentially disastrous into something that could serve a purpose. Payday loans still carry a huge risk, especially if there is any chance that you won’t repay the loan in time, but the limits imposed on interest rates and rollovers reduces the astronomical costs.
In that sense, they are definitely for the best, but there are still risks and potential pitfalls, so be sure to keep these in mind before you apply for any short-term loans.
Buying a car is perhaps one of the most expensive purchases you’re going to make in your life — besides buying a house. The cost of a vehicle varies depending on the month, day or time of the year. So knowing the best time to buy a car, whether it is new or used, can save you thousands of dollars.
The key is to be ready to make a move when the right time presents itself.
If you’re planning to buy a set of wheels in the near future, here’s a list of the best time to buy a car.
The best month of the year to buy a car is December;
Best time of the month to buy a car;
During the holidays;
Buy a car when there is high supply and short demand;
When you’re buying an old model car;
The best time to buy a car is when your finance is organized;
Buy a car when you have a good credit score.
Always seek professional advice before applying for a car loan.
The best time of the year to buy a car: December
December is the perfect and ideal time to buy a car, whether used or new, for several reasons. One reason is that car dealers are desperate to meet annual quotas at the end of the year.
If they can achieve their quotas, that usually means they will get a bonus. As they get closer to the end of the year, they are more willing to drop the prices.
They may even sell at a loss just to meet their quotas. As a buyer, this is a good opportunity to pitch a low price on a car a dealer has in stock.
Second, car dealers need to get rid of this year model for the new year model. As the new year is quickly approaching, car dealerships will start thinking about the new models.
And once they get into January and start taking delivery for the new-year models, they will do everything they can to get rid of last year model in December, including lowering their prices.
Need to buy a new car? Compare car loans with LendingTree.
There’s not too much competition in December among buyers. Another reason that December is the best time to buy a car is that there is less competition.
People tend to be more occupied with Christmas shopping and traveling to visit friends and family in December.
So that means fewer people are visiting car dealerships in December, making it harder for car dealers. That it turns make them more willing to lower the price of the car.
Car dealers have more competition among themselves in December. Because fewer people visit car dealership around this time, care dealers tend to fight with each other to make a sale.
As a buyer, if you receive a quote from one car dealer and threaten to go elsewhere, the car dealer will more likely give you a better deal.
For all of the reasons stated above, the month December is the best time to buy a car.
Supply and Demand
If there is a short supply for a particular car that you want and there is a high demand for it, 10 out of 10, it will not be on sale or discounted –regardless of the time of the year.
So, this would not be the best time to buy such a car.
On the other hand, if a car is unpopular and the supply for it exceeds demand, it will be more likely to be sold at a discount.
Comparing a range of car loans will help you identify the best one for you.
End of the month: best time to buy a car
The best time to buy a car is the last day or the last few days of the month.
As explained above, many car dealers have certain sale quotas to meet for the month. As the end of the month is approaching, they will review their numbers.
And if they are behind, they’ll be more likely to lower their prices. This is a good time for you to purchase your vehicle.
While December is the best time to buy a car, you may not have the time to wait for that long.
Indeed, one reason you’re buying a car might be for work or family commitments.
If that’s the case, you have other options. The holidays are some of the best time to buy a car.
Some of the months are the worst time of the year to buy a car. But holidays have great sales and offer great discount.
They’re the perfect time to buy a car. In fact, it’s common for car dealers to lower prices of their cars during holidays, such Memorial Day weekend, Labor Day, and Black Friday.
When it’s time to borrow money to buy a car, shop around. Don’t just go to your bank or agree to the car dealer’s in-house finance because it seems easy in the moment to do so. Compare and assess the finance options from a range of reputable lenders.
Best time of the week to buy a car
Timing is important when it comes to buying a car. But how do you know the best time of the week to buy a car. It’s simple. Avoid the weekend.
The key is to show up to the car dealership when there are fewer buyers. Fewer buyers than less competition.
Therefore, there is a low demand. So, shop for your car on a Monday, Tuesday or Wednesday when people are typically at work.
Those days tend to be the slowest. Therefore, you may be able to negotiate a more affordable deal.
Buy an this year car model
When a new car model is coming, sales of the this year car model will typically decline, simply because buyers prefer to wait for the new car model.
Demand therefore drops for this year model. And car dealers have no choice but to lower the price of the old model to make sure the old stock sells before the new stocks arrive.
As a buyer, this is an ideal time to buy your car.
When your finance is organized
The best time to buy a car is not whether you can get one on sale. Rather, it’s whether you are financially ready.
Yes you can a get car at a discount and save money along the way.
However, it can also be a costly mistake if your finance is not in shape.
For instance, you still have to think about the car loan payment you will pay every month. And if for some reason you can’t make these payments down the line, there’s the risk of a default.
In other words, being unable to repay your car loan could result in your car being seized and your credit profile being damaged.
So, the ideal time to buy a car is when you’re financially ready.
When you have a good credit score
You will need a good credit score in order to get approved for a car loan. Even if you can get a loan with a bad credit score, the interest will like be outrageous. So, request a free copy of your credit report.
If your credit score is bad, it may not be the best time to buy a car. It makes sense then to postpone on buying a car and take steps to raise your credit score.
The bottom line
Timing is an important factor to consider when to buy a car. In other words, the best time of the year, the month, the week to buy a car can make a big difference to your financial situation.
As you can see, the month of December is by far the best time to buy a car. But you shouldn’t be in a hurry to buy a car if you’re not ready or your financial situation is not in shape. Patience is key.
If you’re set on a particular car, then a car loan is going to be the next step. There are many options available. The key is to shop around and compare. By comparing different loan offers, you can pick the best one that will save you money.
Up Next in buying a car:
Work With A Financial Advisor Near You
If you have questions beyond the best time to buy a car you can talk to a financial advisor who can review your finances and help you reach your goals. Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
If you’ve been thinking about canceling a credit card, it’s critical to understand how it will affect your entire financial life. Laura covers 10 dos and don’ts for when to cancel a credit card that will help you minimize credit damage and improve your finances.
Laura Adams, MBA
June 17, 2020
12 Credit Myths and Truths You Should Know
The Connection Between Credit Cards and Your Credit
The only way to build credit is to have active credit accounts in your name and to use them responsibly over time. That’s where credit cards come into play.
One of the biggest factors in how credit scores are calculated is called your credit utilization ratio. It only applies to revolving accounts, such as credit cards and lines of credit, which don’t have a fixed term. Credit utilization isn’t measured for installment loans, such as mortgages and car loans, because they do have a set ending or maturity date.Credit utilization is a simple formula that equals your total account balance divided by your total credit limit. For example, if you have a credit card with a balance of $1,000 and a credit limit of $2,000, your utilization ratio is 50% ($1,000 / $2,000 = 0.50).
Keeping a low utilization, such as below 20%, is optimal for good credit.
Keeping a low utilization, such as below 20%, is optimal for good credit. So, by paying down your balance on the card to $400, you could reduce your utilization ratio to 20% ($400 / $2,000 = 0.20) and boost your credit scores.
A low utilization ratio says that you’re using credit responsibly. A high ratio indicates that you may be maxed out and even getting close to missing a payment.
Many people mistakenly believe that getting rid of their credit cards will automatically improve their credit. The surprising truth is that canceling credit cards usually hurts it because your available credit on the card plunges to zero, which instantly increases your utilization and causes your credit scores to drop right away.
However, whether closing a card is right for you really depends on your current and future financial situation. Use the following do and don’ts to know when ditching a card is best and how to do it with minimal damage to your credit.
RELATED: 5 Ways to Get a Loan With Bad Credit
10 dos and don’ts for when to cancel a credit card
1. Do cancel credit cards that are a net loss
If you’re like Maria and have great credit with an unused card that’s costing you money, you may want to consider canceling it. Many rewards cards come with an annual fee, especially when they offer cashback, airline miles, or points for merchandise. In some cases, using the rewards easily offsets the annual fee.
If you won’t use the card or can’t afford the annual fee, common sense should be the deciding factor, not your credit score.
However, if you won’t use the card or can’t afford the annual fee, common sense should be the deciding factor, not your credit score. However, one option is to replace a card that charges an annual fee with another card that doesn’t, ideally before you cancel the first one. That allows you to swap out one credit limit for another one and avoid any damage to your credit.
2. Do cancel credit cards that tempt you to overspend
I also don’t recommend keeping a credit card if it tempts you to overspend. Taking a temporary hit to your credit might be worth it to prevent bigger problems in your financial life.
3. Do cancel credit cards to simplify your financial life
If you’ve missed payments or can’t keep up with transactions because you have too many cards, it might be worth it to strategically cancel one or more credit cards. Keep reading for tips to minimize the potential damage to your credit.
4. Do cancel credit cards with low credit limits first
If you cancel a credit card, choosing one with a higher credit limit poses more of a threat than getting rid of one with a smaller limit. The lower your credit limit on a card, the less closing it could negatively affect your credit.
As I previously mentioned, for optimal credit, it’s best to never carry a balance that exceeds 20% of your available credit limit. If you’re not sure what your credit limits are, you can review them by getting a free copy of your credit report at annualcreditreport.com.
5. Do cancel credit cards you recently opened by mistake
A common credit dilemma is what to do after opening a new credit card that you felt pressured into at a retail store. Sales clerks make getting a huge discount with a new card signup sound too good to pass up. In some cases, you may not even realize that what you’re signing up for is a credit card.
If you’re loyal to a store and make frequent purchases there, having its branded credit card can give you nice savings and promotional benefits that make it worthwhile. While you can’t erase the card from your credit history, if you decide that you’d rather not have the account, closing it sooner rather than later is better for your credit.
Free Resource: Credit Score Survival Kit – a video tutorial, e-book, and audiobook to help build credit fast!
6. Don’t cancel your only credit card
In addition to maintaining low credit utilization, the health of your credit depends on having a mix of credit accounts. That shows you can handle different types of credit, such as installment loans and revolving accounts. But if you cancel your only credit card, that would leave you deficient in the revolving credit category.
It’s better to spread out your balances on multiple cards and maintain low utilization on each of them, rather than have one card that you charge to the limit.
Therefore, I don’t recommend canceling a credit card if it’s your only one. Having at least one card in the mix rounds out your credit file. Ideally, you would have a total of two or three cards that come from different issuers, such as Visa, Mastercard, American Express, or Discover.
If you have more than one line of credit or credit card, most credit scoring models calculate your utilization ratio for each account and collectively on all your accounts. So, it’s better to spread out your balances on multiple cards and maintain low utilization on each of them, rather than have one card that you charge to the limit.
Depending on the types of charges you make, you may need a low-rate card for times when you must carry a balance and a higher-rate rewards card for charges that you always pay off each month. No annual fee cards are best, but as I previously mentioned, rewards cards that come with a fee may be worth it.
7. Don’t cancel credit cards you’ve had for a long time
As if credit utilization and having a mix of credit accounts weren’t enough, a canceled credit card hurts your credit in other ways. Another factor that’s used in calculating credit scores is how long you’ve had credit accounts.
Having a long, rich credit history boosts your scores and makes you appear less risky to potential lenders and merchants. Canceling a long-standing credit card causes your average age of credit history to decrease, which hurts your credit. So, value credit cards that you’ve had for a long time more than those you’ve recently opened.
8. Don’t cancel multiple cards at the same time
If you have more than one credit card that you want to cancel, don’t shut them all down at the exact same time. It’s better to space out cancellations over time, such as one every six months, to minimize the damage to your credit health.
9. Don’t cancel credit cards if you’re planning to make a big purchase
If you’re planning to finance a big purchase, such as a home or vehicle, in the next three to six months, it’s not wise to cancel any credit cards. If your utilization rate increases and your credit scores suddenly take a dive during the application process, you may ruin your chances of getting a low-interest loan.
If you’re planning to finance a big purchase, such as a home or vehicle, in the next three to six months, it’s not wise to cancel any credit cards.
Maria didn’t mention if she’s looking to use her great credit to borrow money any time soon. But it’s an important issue that I recommend she consider.
10. Don’t cancel credit cards because you’ve made late payments
Never cancel a credit card with negative information, such as late payments or being in collections, thinking that it will disappear from your credit file. All credit accounts stay on your credit report for seven years from the date you became delinquent, even after you or a card issuer closes it. Accounts with only positive information remain in your credit file longer, for up to 10 years
What should you do with unused credit cards?
If you or Maria go through these dos and don’ts and decide that it’s better not to cancel a credit card, use it occasionally to make small purchases that you pay off in full. That keeps it active and allows you to continue adding positive information to your credit history.
However, I don’t recommend keeping a credit card that you’re not using responsibly or that tempts you to overspend. Taking a temporary hit to your credit might be worth it to prevent bigger problems in your financial life.