New and Improved Customer Care for Payday Loans

A new Consumer Charter was formed by four major trade organizations that represent 90 percent of the whole payday loan business in the United States. This new trade charter aims to further develop the standards of the market and increasingly improve service for customers.

Now, payday lending stores must make new commitments to consumers as stipulated in the Charter. For instance, they must comprehensively explain what a payday loan is and how these short-term loans work. Fees and other charges must also be illustrated clearly for the benefit of the customer. It is also illegal under this new charter to force or pressure customers to pay their loans or extend loan terms.

The financial capability of customer must be thoroughly considered by the lenders so that they could afford the loans. In order to make this possible, it will be mandatory for payday loan applicants to undergo thorough credit checking and assessments. If the debtor is unable to repay the loan or is having difficulties in paying their current loan within the span of 60 days then additional interest and charges on the loan would be frozen by the payday lenders.

If for example, the payday loan store decides to recover the customer’s debt through continuous payment authority, they should inform the client within three days prior to it. It is essential that they should also explain how this continuous payment authority works and inform customers that they have the civil right to refuse to it. Customers are given the right to choose what is best for them.

The new charges will be effective on November. 26 this year, this is going to be adopted with the existing codes of practice of payday loan lenders.

Caroline Walton, the current president of the Consumer Finance Association says that they have consulted the Government and consumers in the drafting of the Charter, this is essential in making payday loans’ standards better and more transparent.

Mortgage Lenders Target Borrowers With High Equity and Deposit

Although banks are reducing the cost of mortgage rates, experts say that the majority of these are aimed at lower-risk borrowers who are capable of making a large down payment.

Last Tuesday, the lowest-ever five-year fixed-rate mortgage at 2.95 percent was released by the Royal Bank of Scotland. This is lower in comparison with Santander and HSBC’s deals, which have a rate of 2.99 percent.

Similar to Santander and HSBC’s deals, RBS’ five-year fixed mortgage is only offered to borrowers who have equity or a down payment of a minimum of 40 percent. Moreover, RBS’ rate can be obtained by borrowers through payment of a fee worth £2,495.

According to Ray Boulger of mortgage broker John Charcol, even though the fee is higher compared with other deals, it will provide a good price for borrowers with mortgages of no less than £100,000.

Another competitive deal is a five-year fixed-rate mortgage at 3.39 percent offered by Nationwide Building Society. The mortgage is for borrowers who have equity or down payment of 30 percent or above, and it comes together with a £499 fee for purchases, £299 for first-time buyers, and £999 for remortgages.

Although the majority of the competition has been focused on attracting borrowers who have a large amount of down payment, there are a few lenders who also target first-time buyers.

Lloyds Banking Group said last Monday that it will offer £5bn to first-time homeowners by the end of this year. Moreover, it has lent to 25,000 first-time buyers in the first half of 2012, and targets to increase this to 50,000 by the end of this year.

In contrast, HSBS said early summer that it would lend more to first-time buyers from £3bn to £4bn.

According to Ben Thompson of Legal & General Mortgage Club, an increase in mortgage lending will encourage growth and boost competition. However, Thompson added that there is still limited assistance for borrowers with little equity.

Assess Financial Standing Through Debt-to-Income Ratio

Since November 2007, credit card debt has reached its highest ever. According to recent statistics from the Federal Reserve, an increasing number of consumers rely on credit cards for purchases since revolving debt increased by $8 billion, which in turn increased the overall credit card debt to $870 billion.

The trouble with credit card debt is that it can instantly become unmanageable. An increase in credit debt means a corresponding increase in monthly payments and the amount of debt accumulates even further.

If you observe that your credit card bills are increasing, start keeping tabs on your debts and finances. One tool that can help you is your debt-to-income ratio, which gives an accurate measure of your financial status and shows the relationship between your debt and your income.

To compute for your debt-to-income ratio, just divide your total monthly debt by your total monthly income and multiply it by 100. Next, the following ratios provide an assessment of your financial status.

If your ratio is lower than 36 percent, then you have a good financial standing and must maintain at this level by building your savings and making investments.

If your ratio is between 37 percent and 42 percent, then you have an acceptable financial standing but must still strive to cut down your debt. Try paying above the minimum amount required on your credit card bills so that it will decrease your debt more rapidly.

If your ratio is between 43 percent and 49 percent, then you are in the verge of financial trouble and must take corrective actions to immediately manage your finances. Consider balance transfers or debt consolidation loans to remove your outstanding debt.

If your ratio is 50 percent or above, then you have a financial problem so you must ask for assistance. Consider a financial planner or seek help from a credit counseling agency to discuss your options.

Regulation Over Payday Lenders in Texas

According to a recent report, approximately 8 percent of adults in Texas have taken on a payday loan in the past half decade. Moreover, this is one of the several disturbing results in a study conducted by Pew Charitable Trusts. The study emphasizes that the city of San Antonio must progress with plans to improve the laws for lenders.

In addition, the report found out that of the 28 states with the least regulations in terms of payday loans, Texas is one of them. What’s even more disturbing is the fact that most of the borrowers are using high-interest payday loans to pay for their everyday expenses.

In the United States, a total of $7.4 billion every year are spent by borrowers on payday loans and they pay an average of $520 as interest.

High-interest payday loans are supposed have a two-week term, and these are intended to assist consumers in times of unprecedented financial emergencies. Unfortunately, in reality the term is for five months and borrowers do not actually use it for unprecedented expenses. In fact, several of the loans are used to pay for utilities, credit card bills, mortgage or rent.

A lot of borrowers who take on payday loans most of the time end up drowning in debt, and having to refinance since they cannot pay back the primary loans on time.

In the following month, an ordinance that will put limits on payday loans is set to be proposed by the City Council, headed by Councilman Diego Bernal. The anticipated ordinance moves to restrict payday loans to 20 percent of a borrower’s gross monthly income, and restrict auto title loans to 3 percent of income or 70 percent of car’s value. Also, Bernal also wants the ordinance to control the loan terms and interests.

Because of the lack of regulation over Texas payday lenders, the Legislature must address this problem immediately.

Four Tips to Improve Your Finances

Most people would want to enhance their finances and live a luxurious life so they seek steps on how they can boost their finances, cut down their expenses and increase their bank balance. One of the best ways to increase your bank balance and income is to have financial investments. In terms of improving your finances, here are a few tips.

First, pay all your credit bills and pay back your debts. Once an outstanding debt is disclosed on your credit report, this will definitely have a negative impact on your credit score. That’s why it is recommended to always pay your debts on time and you can even decrease your credit card limits and expenses so that your debts will also decrease.

Second, pay your outstanding credit bill as soon as possible. Contrary to belief, delayed credit payment of a bill is actually recorded in your credit report every month, together with the number of days that you missed your due date. To avoid this, make sure to always pay your bills on time because this will work against the negative effects of delayed payments and helps your credit score to increase.

Third, you should not only aim to get a high credit score but also to maintain it once you achieve it. Again, make on-time payments so that you will have a good credit score, and in order to maintain it, make sure to pay in full as well. Moreover, if you pay your bills at once, this will also enhance your score much further.

Fourth, do not throw away your old accounts because this will be reflected in your credit score as well. The longer the duration of your credit background, the higher your score will be. In addition, be more cautious in opening new accounts as this can decrease your credit score, especially if they are too much.