In the past getting a loan used to be a pretty intimidating process, getting dressed in your Sunday best, looking your best and venturing into town to the bank for a date with the Bank Manager. Once there you used to have to throw yourself at the mercy of the manager and plead for them to lend you money, getting declined for a loan was often a demoralising and embarrassing process.

These days applying for a loan is much more stress-free with the decision on whether you get given the money being based more on details such as your income, credit report and other factors, but still people can get turned down for reasons other than a poor credit record. In light of the recent credit crunch many banks are being more cautious about whom they lend money to and in some cases have ceased offering unsecured loans.

Luckily there is another option for those turned away, and no it isn’t visiting the local mafia! Peer to Peer Lending is a recent phenomenon in the lending business where organisations bring people looking to borrow money together with people who are willing to lend money. Companies such as Prosper, Zopa and Lending Club offer this service and have proved popular.

These personal loans are a bit of a hit and miss though with some lenders sticking to a high Interest rate in order to make their investment worthwhile, lenders are warned that the larger the amount they are willing to lend is, then the more risk they are putting themselves into. Obviously all loans from these services are not secured loans and so there is little equity for the lenders to be assured by.

Lenders are urged to check the site’s procedures for getting repayments as in some cases the lenders may default on their repayments and this is to be expected as the type of borrowers this scheme appeals to are mostly people who have been deemed high risk by the banks and refused conventional loans.

Posted by pooch | No Comments »

More and more families are relying on credit cards to weather the storm during economic hardships and are being targeted by billion dollar credit card companies and their criminal practices. Recent emphasis on this topic has been making headlines but little has been done to crack down on predatory lending practices.

The most widely spread tactic used by credit card companies is targeting low income, high debt, or minority markets. On top of offering high interest credit to consumers with a higher debt to income ratio, said lenders often times tack on absorbent fees, added-on products or features and charge excessive penalties. So in essence, if you have not-so-great credit you are a credit card companies ideal client. What a great way to kick the hard working American people when they are down. What is worse, is that when offered these lines of credit, more often than not, they do not give you the amount that they offer. As well, they include “acceptance” fees of nearly one-third of the limit that is given, also processing fees, annual fees, etc. So by the time the card reaches the consumer they are nearly maxed out, most of the time not knowing, and as soon as they use the extended credit they go over the limit and are charged costly penalties.

Many companies that use these strategies to fatten their pockets also fail to follow the guidelines set under the Fair Credit Reporting Act (FCRA). Many reports of collection agencies calling numerous times a day, at late hours or extremely early in the morning, using profanity, false titles, and claims and/or threats to extort payment from the targeted consumer. Little is done to protect or educate the nations public about the laws that are set aside to protect them. A large portion of said companies also include “mandatory arbitration” clauses into their contracts which make it very difficult if not impossible to take action against them.

The fact is, what these lenders are doing is deceptive in nature. They justify their fees and rates by targeting “high risk” consumers and then trap them further into the credit trap. Further-more, they justify the rates, fees and penalties they charge because the consumers that they themselves target are “high-risk”. How about them apples?

Additionally, Credit card companies have been adding universal default clauses to the terms of credit card agreements. The universal default clause allows credit card companies to pull your credit report on a regular basis. If you have been late on any payments, a higher interest rate can be added to your credit card or all of your credit cards. This includes even being one day late on your mortgage, car, or utility bill (if it is reported to the credit reporting agencies). This could not only increase the interest rate on future purchases, but also raise the interest rate on the consumers entire outstanding balance. I.E. if you are late even just once on your car payment, your credit card interest rate could jump from 8% to 29% without you ever being notified. This will be very harmful for consumers who are late on even just one payment with a different credit card or payment that is reported to your credit report.

In following articles I will talk more about how to prevent predatory lending, what to do if you feel victimized or targeted, and ways to get out of credit card debt. I will also cover topics dealing with foreclosure, medical bills and the like. If you would like immediate assistance with getting out of the credit card trap visit my website or if you have general questions I will be happy to offer my knowledge and experience.

Posted by admin | No Comments »

Consumers complain, and rightfully so, about credit card interest rates that average 19% per year and go up from there. Those rates are certainly higher than those charged by banks, were personal loans can often be had at half of that rate, provided that your credit is good. On the other hand, credit card interest rates are bargains when compared to those charged by payday loan companies, where interest rates can often exceed 400% per year. Consumers usually take out such loans, which require repayment in two weeks time, only when they have no other lending options available to them, such as when their credit card balances are full. Four hundred percent per year sounds completely insane, until you consider that there is a form of lending that is potentially even more expensive – the car title loan.

Car title loans work much like payday loans and have similar terms. Payday loans are short-term loans, usually two weeks in duration. The borrower pays a fee, which amounts to interest, that can average between $15 and $30 per $100 borrowed. If the loan is repaid in two weeks, the loan is retired. If the loan is not repaid, the borrower can usually renew it for another two weeks by paying the fee a second time. This is known as rolling over the loan. These loans have no collateral required; proof of a bank account and steady employment is usually enough to secure the loan.

Car title loans differ from payday loans in that the loan is secured by the title to the borrowers car. The duration of the loan is typically 30 days rather than two weeks, but the loans often work the same way. At the end of the loan period, the borrower can either repay or roll over the loan for another month. The difference, and it is a big one, is that failure to repay a car title loan allows the lender to repossess the borrowers car! At that time, the lender may sell the car and keep they money that they are owed. Most states require the lender to return any extra funds, but some states actually permit the lender to keep all of the money.

One would think that by requiring collateral in the form of a car title, the lenders could offer loans at a more affordable rate than those offered by payday lenders. They probably can, but in practice, the interest rates are very similar, which makes a car title loan a very risky way to borrow money. Most people need their car to get to their job; if your car is gone, so is your opportunity to repay the loan or to buy another car.

Lawmakers in various states have been trying to crack down on the growing car title loan industry, but they often meet with resistance from industry lobbyists and Republican legislators who think that the free market should decide how lending businesses work. Unfortunately, the free market is not available to most car title borrowers, who only go to such lenders after they have exhausted all other borrowing avenues, such as banks, credit cards, and even payday loans.

The bottom line is this – No matter what the interest may be, putting up the title to your only means of transportation as collateral for a $500 loan is a bad idea.

Posted by admin | No Comments »