Get help with debt before seeking an auto loan
If you have plans to finance a vehicle anytime soon, it’s a good idea to get help with debt first to boost your credit score. Having weak credit could result in getting a higher dealer rate markup, according to the Center for Responsible Lending (CRL). As a result, people with lower credit scores are more likely to default on loans and have their vehicles repossessed.
Targeting people with low credit scores
The dealer rate markup is the hidden rate auto dealers add to a customer’s loan when they sell the note to a third-party lender. According to the CRL report:
In particular, on loans made through the dealership, the dealer can markup the interest rate above what the consumer’s credit would qualify for. This interest rate markup, also known as “dealer reserve” or “dealer participation,” is described by dealers as the way they are compensated for time spent putting a financing deal together. However, since consumers usually do not know what they can actually qualify for, the markup is often a hidden cost for the consumer.
The average rate markup in 2009 was $714 per consumer with an average rate markup of 2.47 percent (1.01 percent for new vehicles and 2.91 percent for used cars). Consumers who financed through dealerships can end up paying over $25.8 billion in interest rate markups over the life of their auto loans. You’re likely to get a larger rate markup if you:
Get a loan with a longer maturity
Purchase a used car
Finance a smaller amount for a vehicle
The CRL report also found that rate markups are strongly related to 90-day delinquency rates for finance companies that target borrowers with low FICO scores. Rate markups increase the odds of delinquency by 12 percent.
Find the right debt solutions
Hold off on purchasing a vehicle until you look for ways to deal with credit card debt and other bills that may be dragging down your credit score. Among the debt solutions you may want to consider are debt counseling, debt settlement, working with a debt consolidator or a combination of these methods.
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Loading ...Will debt ceiling deal lead more people to seek help with debt?
Will the government’s agreement on the debt ceiling result in more people struggling with student loan debt? While the deal keeps the Pell Grant program intact, loans subsidized by the government will take a hit in July 2012. That could result in students struggling to keep up with interest, ratcheting up their total debt.
Currently, subsidized loans don’t require payments on interest until after students leave school. But the government’s debt ceiling deal would require graduate students to begin paying interest on student loans while they are still in school. If they don’t make payments on interest it would accumulate, which could lead to more people struggling to afford student loan payments after graduating.
Get help with debt
There are some options for dealing with mounting student loan debt. Student loan debt consolidation could allow you to combine several loans into one monthly payment and interest rate. Federal student loans should be consolidated separately from private loans. When you consolidate debt that could you to avoid defaulting on loans and allow you to maintain your credit.
Debt counseling combined with a debt reduction plan also could help you manage student loans. A debt counseling firm can help you go through all your debts and set up a budget to handle everything. Look for a reputable debt counselor who gives you detailed information about all fees, policies and procedures. Never pay upfront fees before receiving services.
Bankruptcy won’t help
Some consumers mistakenly believe that if they file for bankruptcy that they’re student loan woes will end. Unfortunately, it is highly unlikely that your student loans would be discharged if you were to file for bankruptcy. Only if you were able to prove that student loans were an “undue hardship” on your financially would you qualify to have them discharged. However, the loans could be discharged if you were disabled.
(No Ratings Yet) Loading ...File your tax returns to avoid tax liens, other problems
If you owe a lot of tax debt you may be tempted to put off filing your return, but that is a huge mistake that can result in some serious repercussions, including tax liens.
Are you facing jail time?
While the Internal Revenue Service (IRS) doesn’t throw people in jail for not paying their taxes, you could end up in the slammer for not filing your tax return. (Actor Wesley Snipes is currently serving three years in prison for failing to file tax returns.) So even if your tax debt seem insurmountable, you need to prepare your return and get it filed by the appropriate deadline. Then, take steps to get the debt help you need to clean up your situation.
What if you can’t pay?
Keep in mind that the IRS isn’t trying to lock up everybody who can’t pay tax debt. Not filing a past due return usually results in one of the following actions:
Penalties and interest are assessed, which increases the amount of tax owed
The IRS may file a substitute return for you that may not accurately represent your situation. If this occurs, you should file a return anyway to make sure the information is correct.
Once a tax is assessed, the IRS may place a levy on wages or bank accounts, or file tax liens against your property.
Ultimately, you can’t avoid the IRS. Even if you choose to file for bankruptcy, any tax debt owed to the IRS takes priority over other debts you may owe. It’s better to contact the IRS to get help with debt than to keep avoiding your problems.
You may be able to set up a payment plan that takes into account your current income and other factors. There is a solution to your tax woes if you’re willing to face up to the problem.
(No Ratings Yet) Loading ...Student loan debt run amok
Student loan debt in America has ballooned by more than 511 percent since 1999 to about $930 billion, and that has many people sounding alarms about that debt potentially causing another bubble. During that same period, all other household debt rose 100 percent; that includes credit card debt, autos and mortgages.
Debt affects economy
A Fox News article quoted Mark Kantrowitz, publisher of financial aid Web site Finaid, as saying, “Student loan debt has become a macroeconomic factor; it affects the economy. Students who graduate with excessive debt are more likely to delay buying a car, buying a house, getting married, having children, saving for their retirement….They’re spending less because they first have to tackle their student loan debt.”
Because so many students are graduating with limited job prospects, there is a growing fear that even more people won’t be able to repay student loan debt if the economy continues to stumble. Because more people are defaulting on loans, some schools are even offering debt counseling and budgeting sessions before students can begin attending, like the program at Tidewater Community College.
Debt reduction plan
It’s a good idea to have a student loan debt reduction plan in place before even enrolling in college. While many students and parents choose schools based strictly upon the prestige of an institution, it isn’t necessary to attend the most elite or expensive colleges to get a good education. There are many successful people who attended less expensive state schools and community colleges without running up unmanageable student loan tabs.
When applying to colleges, do research on what people in your intended major do after graduation. You can get a good idea of how much income you might earn upon graduating by looking at career and salary Web sites. If you major in a field such computers or engineering, it’s likely that you will earn a higher salary upon graduating than someone majoring in the fine arts or humanities. Equip yourself with as much information as possible before even leaving college so you’ll have realistic expectations about dealing with student loan debt.
(No Ratings Yet) Loading ...File your tax returns to avoid tax liens, other problems
If you owe a lot of tax debt you may be tempted to put off filing your return, but that is a huge mistake that can result in some serious repercussions, including tax liens.
Are you facing jail time?
While the Internal Revenue Service (IRS) doesn’t throw people in jail for not paying their taxes, you could end up in the slammer for not filing your tax return. (Actor Wesley Snipes is currently serving three years in prison for failing to file tax returns.) So even if your tax debt seem insurmountable, you need to prepare your return and get it filed by the appropriate deadline. Then, take steps to get the debt help you need to clean up your situation.
What if you can’t pay?
Keep in mind that the IRS isn’t trying to lock up everybody who can’t pay tax debt. Not filing a past due return usually results in one of the following actions:
- Penalties and interest are assessed, which increases the amount of tax owed
- The IRS may file a substitute return for you that may not accurately represent your situation. If this occurs, you should file a return anyway to make sure the information is correct.
- Once a tax is assessed, the IRS may place a levy on wages or bank accounts, or file tax liens against your property.
Ultimately, you can’t avoid the IRS. Even if you choose to file for bankruptcy, any tax debt owed to the IRS takes priority over other debts you may owe. It’s better to contact the IRS to get help with debt than to keep avoiding your problems.
You may be able to set up a payment plan that takes into account your current income and other factors. There is a solution to your tax woes if you’re willing to face up to the problem.
(No Ratings Yet) Loading ...New York City goes after debt settlement firms
Be careful who you go to for credit card debt relief. There are a lot of debt settlement companies out there who don’t deliver on all the promises they make but get paid anyway. Fraudulent credit card debt settlement programs have become such a problem in New York that the city’s Department of Consumer Affairs (DCA) is warning consumers about using them.
Debt settlement firms offer ‘false hope’
The DCA recently issued subpoenas to 15 debt settlement companies that were the subject of complaints by city residents or are based in the New York area. DCA Commissioner Jonathan Mintz said in a statement:
These so-called ‘debt settlement’ companies bombard New Yorkers with ads that fraudulently offer false hope, but instead deliver nothing but added fees and long-lasting financial ruin. Today we are issuing subpoenas to 15 debt settlement companies that are using such aggressive and deceptive tactics to prey on vulnerable consumers here in New York so that we can reveal the full extent of their wrongdoing and harm. I urge those struggling with debt to resist these too-good-to-be-true offers and instead take advantage of the City’s free, professional one-on-one financial counseling at one of more than 20 Financial Empowerment Centers.
Some debt settlement programs have come under fire for charging upfront fees to consumers without actually helping them find credit debt relief. In some cases consumers struggling with thousands of dollars of credit card debt are left worse off than before they signed up to get help with debt.
You can get help with debt
If you’re struggling with credit card debt, there is help available. But keep in mind that you don’t have to pay someone a lot of money to settle your debt. While there are legitimate debt settlement programs out there, you may be able to negotiate directly with your creditors to set up a plan.
(No Ratings Yet) Loading ...Ultimate debt relief: Understanding the psychology of debt
You’ve dug yourself into a hole with credit card debt and wonder what’s next. Digging out of debt is important, but first you may have to dig deeper for understanding psychological factors leading to credit card debt.
Devil in the details: discover what you’re buying, where and why you’re using credit
Financial anthropologist and money coach Denise Hughes identifies factors contributing to problems involving credit card debt:
- Having a different “money-style” than your spouse or partner: Using credit cards for funding purchases you want to keep secret, or revenge shopping when you’ve had a domestic spat are examples of how conflicts over money can create credit card debt.
- Compulsive shopping: Rewarding yourself with a plastic-funded shopping spree after a bad day at work may seem therapeutic, but it can lead to family problems, divorce and bankruptcy.
- Entitlement and deserving: Do you treat yourself because you “deserve it”? Do you over-spend when you’re angry, depressed or lonely?
- Making purchases using revolving credit: Buying things that you cannot pay for within one billing cycle causes credit card debt to increase and can lead to penalty fees and lower credit scores.
Using credit cards in place of meeting deep-seated psychological needs such as feeling loved and appreciated, having fun, having an influence over your own life, and enjoying personal freedom can lead to financial problems.
Attempting to replace vital emotional needs with over-spending using credit cards suggests that you’re attempting to fill a vacancy in your life by buying things. Consulting with a financial advisor or consumer debt counseling service can help with improving your finances and quality of life.
(No Ratings Yet) Loading ...Check your credit report as part of debt reduction plan
It’s important to know what’s in your credit file if you’re following a debt reduction plan. The information contained in your credit report can serve as a cautionary tale about your past spending habits, and as motivation for getting your finances back on track.
How to check your credit report
Check your credit report at least once a year. You’re entitled to get a free report every 12 months from each of the three major credit reporting agencies: Equifax, Experian and TransUnion. If it’s been a long time since you’ve seen your reports, request all three to become familiar with the information contained within them. After that you may want to stagger reviewing the reports throughout the year. Visit Annualcreditreport.com to request a copy of your files.
Reviewing reports can help with debt
So exactly how does reviewing a credit report help with debt reduction? Information on your report can be used to determine who you owe money to and how much your outstanding balances are. While you probably already are familiar with the monthly statements you receive for various loans and other accounts, there’s always the possibility that you have outstanding credit card debt or other obligations you haven’t dealt with like accounts that have been turned over to collections.
Reviewing your report also allows you to correct any inaccurate information. Check everything from your name, social security number and addresses, to names of creditors owed. Credit reports often have incorrect or outdated information, and it’s on you to fix it. You can also ask to have certain information removed from your file, such as bankruptcies older than 10 years.
Change your habits to repair credit
As you make changes in your spending habits and begin to pay down debt, you’ll see that reflected in your credit report and credit score. Credit scores can be increased by lowering your debt-to-income ratio, paying off credit card debt and paying bills on time. If you need help setting up a debt reduction plan that can help improve your credit history, consider finding a reputable debt counseling firm that can help.
(No Ratings Yet) Loading ...Poll: Kids worry about having enough money, too much debt
A U.K. study found that two thirds of kids 12 to 16 are worried about not having enough money in the future. The poll conducted by the Personal Finance Education Group, a charity focused on financial education, surveyed 1,000 kids between the ages of 12 to 16.
Will they have too much credit card debt?
Among the survey’s findings, 62 percent are worried about not having enough money and 30 percent worry about being in debt in the future. The poll also found that 77 percent of kids want to attend a university in the future, but half of them worried about getting a job later in life even if they get a degree.
Most of the kids polled (95 percent) said is important to learn to manage their money. Topping the list of the things they are most interested in learning about are: household bills, budgeting, saving, and the cost of having their own house of apartment, among other things.
Parents can teach children
Kids want to learn about handling money, avoiding credit card debt and other financial information. Much of what they will learn about handling money is likely to come from watching their parents. So if you are a parent and have a lot of credit card debt and other bills, it’s a good idea to start making some changes in your own financial behavior. Getting help with debt can allow you to form better financial habits that can be passed on to your kids.
If you aren’t sure where to start, it may be wise to find a reputable debt counseling firm. Finding debt solutions now can help you avoid even bigger problems down the line and put the steps in place for your kids to have a brighter financial future. As you work through your financial difficulties be open with your kids about your efforts to manage money more wisely.
(No Ratings Yet) Loading ...Consumer sentiment rose slightly in June, but overall consumers are negative about their financial situation. The Consumer Sentiment Index edged up to 48.5 from the previous month, with people earning less than $50,000 and senior citizens having the weakest consumer sentiment. A number above 50 indicates more people feel positive.
Economy still hasn’t recovered
“The economy is treading water and really hasn’t shown any momentum toward recovery,” said Ed Farrell, a director at Consumer Reports National Survey Research Center. “Consumers remain cautious, especially households with income less than $50,000, who have been hurt the worst and face the biggest stresses regarding jobs, unpaid bills, and health care access and affordability.”
One of the biggest concerns among consumers is the job market. The U.S. unemployment rate is at 9.2 percent and many Americans are struggling to keep up with mortgage payments, credit card debt and other bills. The Consumer Reports Trouble Tracker showed that people are dealing with more money problems than the previous month, although their problems aren’t as severe as a year earlier.
Finding debt solutions
If you’re feeling negative about your finances because you have a lot of credit card debt and other bills, it may be time to make some changes. Getting help with debt is important whether you are employed or jobless. Among the debt solutions to consider is debt counseling. Tackling a mound of debt and other financial problems can be overwhelming, so having help could make the process more manageable.
You could also consider credit consolidation. This would allow you to combine multiple credit card debts and other bills to make the payments more manageable and pay less interest over time. You can consolidate debt on your own with a bit of organization and persistence. However, if you choose to use a debt consolidator, take time to research different programs and get all the terms and conditions before signing up.
(No Ratings Yet) Loading ...- This blog covers a wide variety of debt consolidation and loan topics.
We rely on a large network of financial experts and leading authors to write the content for the DebtHelp.com Blog.
Get help with debt before seeking an auto loan
Keeping your personal "debt ceiling" from crashing down
Will debt ceiling deal lead more people to seek help with debt?
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno. She enjoys writing informative articles about debt management and personal finance.
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