You Can Get Bad Debt Through Credit Card Over Spending

Decades ago, personal loans and financial loan from banks were not very popular in the industrial market, thus consumers buy their commodities with cash, and debts were not a major problem for individuals as well.

Today, the situation has changed tremendously. Consumers tend to buy everything with their credit cards and they rarely pay or carry cash with them. This often leads to overspending, and overspending leads to over commitment, which leads to bad credit.

Over the years, the rate of borrowing of individual families has increased to 12.5 as of the month of December last year; this is alarming because if nothing is done about it, it will be a sure blow to the United States’ economy. The government has already tried to control the situation by imposing the Guidelines to Responsible Lending last September of 2010.

Banks are starting to make a business out of customers by making personal loans easier to apply for. They have come up with many marketing strategies to encourage customers to borrow from them; the most recent is a preapproved loan which would entitle someone to a personal loan without the need to sign any documents.

Good debts can get you interest revenues from the loans you have, however if you are not going to plan on these debts, they might back fire and turn into bad debts. The lending market is still healthy for now, and financial institutions are still providing loans for people even if the Bank Negara is ruling against it.

Here are some situations that you must be careful not to over-commit because the repayment of your loan might become a huge problem.

First, if you have lost your job and you have too many liabilities to pay and no means to pay them until you get a new job, then you are in trouble. To save yourself from this situation you should make sure you have saved money to sustain you in case of emergencies.

Second, if you your debts become more expensive. According to statistics by the Negara Bank, the basic household expenses have grown to 88.6 per cent from 1993 to 2010. It is in our nature to spend more when we have more money, thus in order to prevent trouble we must learn to be conscious in our spending all the time regardless with how much money we are carrying.

Equifax Partners with LendingMetrics

Equifax, one of the three credit reporting agencies, is now in a long-term partnership with LendingMetrics, which is the payday and lending data authority, in order to assist lenders in payday lending matters. The partnership happens at an important time for the payday lending industry since on July 25, 2012, the Code of Practice will be implemented.

Last September 2011, the Dynamic Application Search (DAS) tool was introduced by LendingMetrics that will help payday lenders to disclose data so as to responsibly increase credit. DAS is being used by approximately two-thirds of the payday market and it offers real time loan application and performance data to assist payday lenders distinguish consumers who might be trying to get several loans at a time. Moreover, it also recognizes real time fraud.

At present, Equifax will present lenders with a whole resolution for evaluating the risk of a payday loan applicant, assisting them to complete the most recent OFT and BIS regulatory requirements, and also fighting bank account and ID fraud.

In addition, Equifax will be giving access to its consumer credit data. The Insight payment performance data will be accessed by payday lenders and the lenders’ payment performance data will also be accessed by Equifax, which is in compliance with the SCOR reciprocity regulation. Moreover, users of LendingMetrics can use the anti-money laundering identity check of Equifax and their Bank Check Advanced to verify that the bank account used is really owned by the applicant.

The latest Code of Practice obliges that proper affordability checks are done by lenders prior to approval of loans or permitting customers to delay paying off the money, also known as a roll over. As a result of the partnership, Equifax and LendingMetrics provide a collective solution that assists payday lenders meet their obligations.

According to David Wylie, the Managing Director of LendingMetrics, their partnership agreement with Equifax will give payday lenders assistance as the sector grows.

Six Substitutes for a Payday Loan

A few people have considered payday loans as a part of their life. In fact, based on data from the Consumer Credit Counseling Services, 1.2 million people used them in the previous year. While payday loans can be an option in solving a financial problem, it is quite expensive and a temporary, short-term solution.

Since a payday loan will more or less make your debts worse, here are some alternatives to getting a payday loan.

First, reduce your spending and budget. Getting a payday loan entails a greater risk of having more debt, so budget your money well in order to allocate enough for your expenses.

Second, request for an advance from your employer. Some companies with good cash flow will more likely allow you to get your wage in advance and they typically deduct the amount in your next pay slip. Moreover, you can also ask to work overtime from your employer so that you can increase your salary and sort out your expenses.

Third, you can get benefits entitled to you. Check for benefits that you qualify for. Some of these benefits are Working Tax Credit, Child Benefit, and Jobseeker’s Allowance.

Fourth, you can get an authorized overdraft from your bank. Normally, overdrafts have interest rates between 12 percent and 20 percent.

Fifth, consider getting a budgeting loan. This kind of loan is offered by the Government to those on income support, income-related allowance, income-based jobseeker’s allowance and pension credit. The loans they offer range from £100 to £1,500, which are not charged with interest and you have 104 weeks to pay it back.

Sixth, look for a free debt advice. Based on the data of CCCS, 45 percent of people wait for more than one year before deciding to get some debt help. Some charities that might be of help include Consumer Credit Counseling Service, National Debtline, and Citizens Advice Bureau.

Payday Loan Scams Revealed

Credit.com has always been avid in warning people about fraud and phony payday loans and finally their efforts have been fruitful. The Federal Trade Commission has been successful in their court hearing last February in closing a $5 million payday loan company who used threats on American citizens, forcing them to pay loans that do not even exist.

This payday loan scam was aired in ABC News, and their modus operandi was revealed to the public. These criminals are usually working in India pretending to be call center agents from debt collecting companies. The payments that the victims make are received by a center in California that is owned by a Kirit-Pate a half Indian, half American citizen who is allegedly one of the leaders of the scams.

However, there seems to be no end to the schemes of these fake debt collection companies for just a few months after the FTC won the case hearing, the phone calls are starting to emerge again, pesteringinnocent citizens.

This scam includes sending threatening emails or messages to a person and his entire family, they require a deadline from their “customers” and they make sure they take advantage of them by making them think they are going to be in serious trouble with the law if they fail to meet the deadline that they imposed. What is worse is that these scammers would often claim to be a legal officer working for the government.

To avoid being a victim of these crooks, here are some things you need to bear in mind:

First, the FTC and Credit.com says that most of the scammers who might call you have obvious Indian accents. Their names may also sound very American.

Second, the callers often claim to be from a company that sounds official or a branch of a court, however if you really check the names of the companies, they do not exist.

Third, these fake debt collectors would pressure you to pay the loan immediately and would insist you would be legally accountable if you do not.

To be safe from being taken advantage of these criminals, you should always put this in mind: never give into intimidation. Loan collectors cannot get you arrested, they cannot call your boss or your friends or anyone from your family to make you pay fake debts. Their only option is to get into your head and get you to do what they want.

Rise in Student Loan Delinquencies Pushes Colleges to Act

College education is a privilege only a few can obtain, and for people like Mercadi Crawford who is only raised by a single parent, getting the money to go to a university would require student loaning. Ms. Crawford is the only person in her family who graduated from high school, and is also the only one in her family to go to college.

She admits she had no idea about the complications of student loaning when she first applied to go to the Texas Southern University. But if there was one thing she did know, it is that she would need to get a loan in order to afford her tuition in college.

But unlike other students like her, she first sought to understand the terms and conditions she would be subjected to when she applies for student loaning. She applied for the school’s financial literacy lessons and she kept her loans low at $10,000.

She says that knowing the money would come with a price, she tried not to borrow much more than she needed. Texas State University is one of the few colleges that offer this kind of program to educate students about the risks and consequences of student loaning.

Some of the topics that are included in the curriculum are Budgeting and Building Credit as a College Student and Managing Your Student Loan. Rice University offers online courses in budgeting, financial planning and student loan payment.

There are also courses that teach freshmen college students how to deal with bad credit and some schools are even hiring personnel to aid students in speeding up their loan payments.

Student loan debt has succeeded the amount of debt people have in their credit cards. In fact, two thirds of seniors in universities have left their colleges with a debt of $25,250 this is five percent more than 2009 according to Project Student Debt.

The unemployment rate for that year has also increased by 9.1 percent, higher than it ever was. DelisaFalks, the executive director of scholarships and financial aids in Texas A and M University says that students ought to be taught how to loan wisely.

In their program, the students are required to fill up an online calculator that estimates their monthly payments for the future.

These safety precautions that colleges are taking are very much necessary to save the nation and its citizens from slipping further into the havoc of debt.