Monthly Archives: October 2009

Payday Loans in Virginia: Your Rights as a Borrower

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Since January 1, 2009 Virginia has had new payday loan regulations in force. It’s important to know your rights when you take out a payday loan, to protect yourself against unscrupulous lenders that you might come across once in a while.

1. A payday loan provider in Virginia is required to give you a minimum of two pay periods to complete your loan repayments.
a. If you get paid every week or more frequently, you’re entitled to at least 14 days to pay back your payday loan.
b. If you get paid every two weeks, your loan period must be at least 28 days.
c. If you get paid twice a month, you’ll be given at least 31 days to repay your loan.
d. If you get paid once a month or you used your monthly government benefit checks as income to support your payday loan application, your minimum loan period is 62 days.

2. A payday loan issuer is not permitted to give you a loan if you already have an outstanding loan from any payday lender.

3. A payday loan company is prohibited from threatening to initiate criminal proceedings against you if you don’t make your loan repayments. The new law states that a lender that does so will be fined three times the cost of your loan.

4. A Virginia payday lender is not allowed to harass or abuse you if you fail to make your loan repayments.

5. A payday loan company is not permitted to issue a new loan until at least one day after you paid back your last payday loan.

6. Internet payday loans are illegal in Virginia and can therefore not be enforced.

7. A payday lender is not permitted to lend to those serving in the armed forces or their immediate family members.

8. You are entitled to repay only part of your loan at a time.

9. You are entitled to enter an extended payment plan. Your lender is obliged to inform you about this right.
a. The loan issuer has to allow you at least 60 days to pay back your debt in a minimum of four equal payments.
b. You may only request a repayment plan once a year.

10. When you apply for your fifth payday loan within six months, the lender must give you a choice between:
a. Taking out the loan, paying it off as agreed and then not being allowed another payday loan for 45 days or more.
b. Being given an extended term loan that can be repaid in four or more equal installments over a minimum period of 60 days. Once you have paid back your extended term loan, you may not take out another payday loan for 90 days or more.

Please be aware that title loans or lines of credit secured on your motor vehicle are not covered by these laws. You should avoid car title loans as they are totally unregulated in Virginia.

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Electronic Debits on Payday Loans: Know Your Rights

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For many, the web is the most convenient place to get a payday loan. The lending company transfers the money to your bank account electronically so that you can access it the following business day. When it’s time to pay back the loan, the payday lender debits your account for the loan amount plus the fees you owe. Or, if you’ve asked to extend your payday loan – or you have a loan agreement that includes several repayments – they draw the appropriate finance charges from your bank account.

But what if the payday loan issuer turns out to be dishonest and takes more money than they should, or they make a mistake and don’t correct it? While the majority of cash advance loan operators are legitimate firms that are run on ethical lines, there’s always the odd one that charges its customers too much. So, it’s useful to know your rights when it comes to electronic debits by payday lenders, in case you ever have a bad experience.

The first thing you should know is that under both federal law and loan industry regulations you’re entitled to ask your bank to stop an electronic debit by any creditor including a payday lender. You still have to pay back whatever you owe, but it is a way to avoid paying the bank’s steep overdraft and bounced check charges if your account is empty.

If your loan is set up to be repaid in a single payment, federal law doesn’t allow you to cancel a debit arrangement but industry regulations do. With payday loan that’s amortized over several payments, you’re supported by both sets of rules. In particular, the Electronic Fund Transfer Act (EFTA at 15 U.S.C. 1693a (9)) says you can cancel authorization for any given debit as well as for future debits. Your bank is permitted to charge you a fee for this service.

You’ll need to give your bank at least three days’ notice, either in writing or orally, of your request. The bank might ask you to follow up an oral instruction with a written letter within two weeks. In addition, you’ll have to send your payday loan provider a letter informing them of your action, and send a copy to the bank too. If you still owe money on your cash advance, you should make other arrangements for your repayment to avoid defaulting. Remember to check your bank statements carefully over the next few months to make sure there aren’t any unauthorized withdrawals on your account.

When you sign up for an online cash advance, the loan agreement must state that you have the right to instruct your bank not to permit the lender to draw funds from your account. As with any legal document, make sure you read the fine print before you sign anything, and don’t be afraid to ask questions. Just make sure you remember to let the lender know you’ve exercised your rights, and then send them a check to settle your outstanding debt.

Payday Loans: 5 Ways to Raise Your Chances of Getting Approved

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When you apply for a payday loan, whether online or from your local cash advance store, you most probably need the money really urgently. You want to be sure that you’ll get a “yes” from the payday lender you send your application to so that you can have the cash in your hand quickly. Here are five of the best ways to ensure that you’ll be successful in your search for a short-term emergency loan:

1. Only apply to a payday loan company that is licensed to conduct business in your home state. Obviously, this applies to web-based firms in particular. Do a search for payday loan + California (or the state where you live). Then carefully check the sites of each lender you’re considering to see if they really operate in your state. There’s no point wasting your time filling out the application form if they’re not allowed to lend to you.

2. Complete the application form properly, whether it’s online or a paper form at a payday loan office. You have to fill in all the fields, including all your employment details. Make sure you give the correct telephone number for your workplace to enable the loan officer to call and verify that you really work there. If you miss this detail, your application will be delayed or even denied.

3. Prepare all the documents you need before you start completing the form. You’ll need to supply your ID, bank account details (for an online payday loan), employment data, and possibly other information too, so it’s best to have all the paperwork at hand so you don’t make any mistakes. If you go to a paycheck advance store, you’ll have to bring all the documents so they can take copies. Some online lenders will ask you to fax them copies of your documents, although most don’t these days.

4. Make sure you can prove that you bring in at least $1,000 a month. Some lenders set $1,200 as their minimum approval threshold, but either way you need to have a verifiable regular income. It doesn’t necessarily have to come from a job, however. If you receive Social Security, a pension, child support or alimony, you can count that. In a few states, they’ll even allow you to list your unemployment check as a source of income.

5. Show stability in your employment, your bank account and even your address. Since your payday lender wants to know that you’ll be able to pay back your loan with your next paycheck (or the next few), a stable employment record will make them more confident that you’ll keep up your side of the bargain. For that reason, many cash advance loan providers won’t deal with someone who has been in a job less than four to six months. Having a newly-opened bank account can also disqualify you as a borrower, as can a recent move to a new address.

Exposing Myths About Payday Loans

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Payday loans are gaining in popularity as the economic crisis continues to cause hardship for families everywhere. Many people are unable to put any money into their savings, which leaves them without a reserve to draw on when a financial emergency crops up. A payday loan can be the ideal solution when you have to get your hands on a few hundred dollars in cash but you’re still waiting for your paycheck to arrive.

But with so many people looking at applying for a payday loan for the first time, it’s inevitable that there are some misconceptions about these short-term lending products. Here we try to clear up some of the most common myths about payday loans.

All payday lenders are disreputable and dishonest: There are certainly shady operators out there, but the majority of payday loan issuers play by all the rules and are in business for the long haul. The rapid growth in the industry has brought a lot of new lenders to the market in recent years, however, particularly on the internet. Given how quickly and easily one can set up a website and market a service, you do have to be careful when picking a web-based company to borrow from. Check them out online and through your Better Business Bureau and the Federal Trade Commission to see what people are saying about them before you apply.

I don’t have a house or car to offer as security for a payday loan: One great thing about a paycheck loan is that you don’t need any collateral. The lender probably won’t even check your credit either, since they’re really only interested in seeing that you can repay the loan with your income.

I won’t be able to get a payday loan because my credit is terrible: This is absolutely not true. Some loan providers will check your credit if you ask for more than $1,000, while many never check any applicants’ credit records at all. This is another advantage of payday loans – they’re designed to be accessible to as many people as possible, so the lender just needs to be convinced that you’ll be able to pay them back. Also, since the loan companies know that their interest rates are unusually high, they have to provide a service to people with no collateral and/or poor credit – demographics that most other lenders won’t do business with.

I don’t have a bank account, but that’s OK isn’t it?: No, sorry, but you do need a bank account to get my payday loan. If you’re getting your loan online, the money is deposited in your account and then debited again, along with the relevant fees, on the due date. That’s one of the reasons why you can get this type of loan with so few checks. Similarly, if you get a payday loan from a bricks-and-mortar lending outlet in your neighborhood, you’ll have to give them a personal check from your account as security.

How to Negotiate a Discount on Almost Anything

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Everyone loves to get something for less than the sticker price, but most of us simply don’t know how to ask for a discount. The formula for striking a real bargain on a product or serve basically has three components: be friendly, have the right information, and be bold enough to ask for a price break.

Perhaps the most important of these is being nice. You tend to get further with a pleasant manner than a pushy attitude. Always smile and be patient and positive, and you’ll be surprised how easy it is to get the salesperson on your side. Never be a jerk, because nobody wants to help a jerk. Try to win them over by saying things like:

• “I’m sure you can see how frustrating this is”
• “I’ve always paid my bill on time. Can you help me out with this late fee?”
• “I’ve been doing business with your company for 10 years now. Is there anything you could do to help me?”
• “Can you work with me?”
• “I’ve always been happy with the service I’ve received from your company”

Do a bit of research before you start haggling for a discount. These days it’s easy to find information about products, prices and companies on the web. Arm yourself with price data from a rival’s website or a comparison shopping site before you go to the store or call the company in question. But even if you don’t have any hard facts to back up your claim to a discount, you can look for other factors. Try asking for a service during the off season or non-peak hours, buy in bulk, offer to take a damaged product off their hands or relieve them of excess stock. Here are some phrases to remember:

• “I was at – competing store – yesterday and they’re selling these for $20 right now”
• “This has some scratches on it. Would you be willing to give me a 25% discount?”
• “This is my favorite store. The place down the street is selling these shoes for $45. Can you work with me here?”
• “I noticed you’ve had this in the store for a few months now. I’d consider buying it right now if you could give me a good price”
• “I really love this dress but it’s a bit above my budget. Is there anything you can do to help me?”

You’d be amazed how far you can go just by asking. Don’t be shy, but keep it friendly so neither you nor the salesperson feels upset if you can’t strike a deal. And you can always go back and try again another time. Sometimes it helps to offer cash on the spot, especially for relatively expensive items. Also, make sure you’re discreet – the salesperson probably wouldn’t want everyone to know you’re getting a discount. And you might get the best result when the store or office is less busy, so the salesperson has time to consider your proposal properly.

7 Credit Score Pitfalls

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Like it or not, many aspects of your life are ruled by your credit score. If you have a below-average credit score, you’re regarded as a higher risk by lenders, and a mortgage, auto loan or credit card will come with a higher than normal interest rate. Or you might not even get approved for a loan or credit card at all.

If you’re trying to rent an apartment, you should expect the landlord to check your credit – and you may well be turned down if your score isn’t that great. The same applies when you’re looking for a job. Prospective employers often request an applicant’s credit report if they’re thinking of making an offer. In today’s tight job market, you need all the help you can get, so don’t let your credit score lose you the opportunity to get a good job.

Points are added and subtracted to your credit score based on the content of your credit report at any given time. These are some of the most important mistakes to avoid if you don’t want your credit score to take a hit:

Don’t be a late payer: Pay your credit card and utility bills on time if you want to maximize your score. Although the new rules allow you to be late occasionally, making a habit of it will put a note on your credit report and lower your score.

Avoid having your credit card account sent to a collection agency: If you haven’t paid your credit card bill for a few months, the issuer will stop trying to pursue you for the money and hand the job over to a collector. This is also noted on your credit report.

Don’t default on a loan: Likewise, not paying back a loan will severely dent your score.

Stay out of bankruptcy: Going bankrupt deals a big blow to your credit. Try alternatives such as consumer credit counseling instead.

Avoid foreclosure: Even falling behind on your mortgage affects your credit. Having your home foreclosed also makes it harder and more expensive to get a home payday loan in the future.

Don’t max out your credit cards: Lenders want to see that you can manage your credit sensibly, so don’t charge more than two-thirds of your limit. Otherwise, they’ll suspect you’re living beyond your means and that you’re a bad credit risk.

Avoid applying for multiple offers: Each time you open a new account, the average age of your credit history drops, which is bad for your credit score. Also, whenever a prospective lender asks to access your credit record, a so-called hard enquiry is generated, and this too takes a toll on your score. You’re less likely to be approved by a bank, credit card company or other lender if you have several hard enquiries on your record within a short time, as they view people who make several different applications at the same time as poor credit risks.

3 Ways to Prepare Your Finances for Parenthood

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Congratulations! You’re expecting your first child, and you couldn’t be more excited. It’s likely you’re starting to feel a bit overwhelmed too. So many questions – will your baby have blue eyes or brown, will he or she be a scientist, an artist or an accountant? And what are we going to call him or her? Oh, and how are we going to pay for everything he or she needs for the next 18 years, or even longer?

There are a lot of things you can’t control when it comes to your baby, but there are some steps you can take to help prepare your finances for the daunting task of raising a child to adulthood:

1. Open a 529 college savings account: One thing you need to remember is that it’s more important to save for your own retirement than for your kids’ college education. So if money is a bit tight, your retirement fund should get all your money. However, you should still open a 529 college savings account for the cash gifts your son or daughter receives until he or she goes to college. Whenever the child gets a birthday check from grandparents or godparents, cash for graduating from high school, or even receives his or her wages from a part-time job, consider putting some or all of the money in the 529 account.

This is a tax-deferred savings account that is sponsored by your state and managed by a state-appointed fund manager. In some states, contributions to a 529 account are fully or partially tax-deductible, and as long it’s used to pay for college tuition, fees, room and board, the money isn’t taxed when it’s withdrawn either. With the cost of a college education expected to increase threefold over the next couple of decades, you need to maximize your college savings in any way you can!

2. Buy life insurance: Life insurance is a must when you have a family. It’s more economical to go for a 20- or 30-year level term life policy than a permanent plan, however. Figure out how much income you would need to replace, and for how many years, including paying off your home instant online payday loan and sending your kids to college, if appropriate. Even if one parent is at home looking after the children, you’ll need to insure each of you for at least $100,000 a year. Remember that the surviving parent might need to hire someone to help with housekeeping, childcare and so on.

3. Start living on one income right away: When your little bundle of joy arrives, you’ll probably have to manage on one income for a while, so why not start now? If you make the necessary adjustments to your lifestyle while you’re pregnant, you’ll be able to save some money for the new baby in addition to getting used to living on less. Even if the baby’s mother plans to return to work, the current employment crisis means it’s by no means certain that you’ll both have an income to rely on.

How to Slash Your Insurance Costs When You’re Unemployed

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When you’ve lost your job, chances are you’re trying to save money wherever you can. Insurance premiums account for a sizeable portion of most people’s monthly outgoings, but you’ll be pleased to learn that there are ways to cut your costs without sacrificing vital coverage.

You can save hundreds or even thousands of dollars a year by asking for discounts and making other wise choices. Even if you’re not unemployed you can use many of these tricks to keep a lid on your insurance costs. Check out comparison sites such as NetQuote.com and Insurance.com to hunt down the best deals on the coverage you need. Here are some other useful tips:

Medical insurance: If you lose your job, you can keep paying for your health insurance yourself via the Cobra scheme for up to 18 months. Your premiums can be pretty expensive, especially if you’re living on your unemployment check, but you must try to keep your coverage in case you need medical care. However, the government stimulus package is now picking up part of the tab. You’ll get a 65% price reduction for the first 9 months, which will bring average monthly premiums down to $140 for an individual and $377 for a family.

Car insurance: Get rid of unnecessary coverage, and you’ll save a bundle. If you’re not driving to work, you could be in line for a low mileage discount of 10-20% if you let your insurer know you’re putting much fewer miles on your vehicle. Is your car more than eight years old and worth only a few thousand dollars? If yes, you can save $200 to $1,000 a year if you drop your collision coverage. Take a defensive driving class and you could slice 7-10% off your auto insurance. Or you might get up to 15% off when you purchase all your insurance products from the same company.

Homeowners’ insurance: You might not know that when estimating your home’s value for insurance purposes, you should focus on the cost of rebuilding the house in its present location. Therefore, you don’t need to include the value of the land, which could save you hundreds of dollars a year. Installing safety and security devices will also earn you discounts, on top of providing peace of mind for your family. Get a smoke alarm, fire extinguisher, deadbolt or home alarm system put in and your insurance company might cut 5-10% off your premium.

Life insurance: if you make an effort to improve your health and your habits, your life insurance company might reward you with a hefty discount. Give up smoking or reduce your cholesterol level and you could save as much as 40% on your monthly payments. In most cases, you’re required to have a policy that’s been active for at least a year, and you’ll have to produce your medical records or submit to a health check in order to prove your claims.

Three Ways to Handle Unexpected Expenses

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Most of us are fortunate enough to have a few different options for raising a bit of money when we need it. Here are three of the most popular methods of covering a sudden but important expense:

Raid your savings: Finance experts say you should always have an emergency fund stashed away in a savings account for those times when you need to pay for something urgently, or when you lose your job. Having a bit of money put away can save you from having to pay the interest on a loan. Make sure you get a good return on your rainy-day fund by putting it in a high-interest account, but be wary of locking it away in a CD, for instance, to avoid heavy penalties for early withdrawals. Once you’re back on your feet, don’t forget to replace the money you’ve used.

Tap into your home equity: This can be one of the cheapest ways to raise cash. If your house or condo is worth a fair bit more than the balance on your mortgage, you can take out part of the value in cash. You can either get a home equity loan, which is a lump sum, or a home equity line of credit. This is a credit facility that allows you to draw as much as you need at any time, up to your limit, in much the same way as a credit card.

Since they are secured on your home, interest rates on both these home equity options are comparatively low. A home equity line of credit carries an especially low rate, and can be a very attractive way to borrow money since you only pay interest on your current balance. The interest you pay on either product is normally tax-deductible, but you should still consult a professional financial advisor to see if this is really the best option for you. If you miss a repayment or default on your loan, you stand to lose your home. Also, keep in mind that your home equity loan or line of credit increases your mortgage. Therefore, if your emergency drags on for longer than anticipated, or the property market crashes, your home could end up being worth less than you owe on it.

Use your credit cards: Your “flexible friends” can save your bacon when you’re out of cash. If you have a medical bill or auto repair charge to settle, you could put it on your credit card and then pay it off over a few months. Remember that you’ll be charged a fairly high rate of interest, though, so pay as much as you can every month. Cut some other expenditures if necessary, to minimize your overall interest costs. If you’re unemployed, don’t be tempted to use your credit card to pay for your day-to-day expenses. You do have to pay back what you owe, and you’ll probably hit your credit limit quickly.

The Pros and Cons of Cash Advance Loans

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It’s a good idea to be aware of the advantages and disadvantages of a cash advance loan before you commit yourself. With the right information in hand, you’ll be in a better position to make a balanced decision about whether this is an appropriate financial product for you.

Both the CFA (Consumer Federation of America) and the FTC (Federal Trade Commission) have raised concerns about the cash advance or payday loan industry, using terms such as “legal loan sharking” and “predatory lending”. They say cash advance loans are too easy to get, and too pricy, and that they force a large number of financially vulnerable people into a dangerous debt cycle. It is true that many borrowers have trouble paying back their payday loans and end up with an even bigger debt thanks to the new fees that get tacked on every couple of weeks.

On an annualized basis, a cash advance loan is usually a lot more expensive than other types of loan such as an advance on your credit card or a bank loan. Lenders are required by the Truth in Lending Act to provide the APR or annualized percentage rate of a loan – which makes it easy to compare it with other loans – in addition to the basic finance charge.

Many cash advance companies don’t do this, however, and some of their customers might take out loans without realizing the full implications of, for example, a $20 per $100 loan fee. With a payday loan, this means that you pay $20 for every $100 you borrow, every two weeks – not every year. The APR on this loan works out to 520% – that’s the interest rate you would pay if you held the loan for a whole year. Although it’s very rare to keep a cash advance loan for that long, this shows how expensive they can be unless you pay them back quickly.

So if they’re that expensive, why would you want to get a cash advance loan? Well, they can be great when you need some cash in a hurry to cover a hospital bill, a home repair or some other sudden emergency expense. A lot of people, even those with poor credit or who have filed for bankruptcy, and who have no assets to offer as security, can get a cash advance loan. You can access your loan within a day, or even within an hour if you get one from a walk-in lending store.

If you pay the money back within the standard two-week loan period, it can be cheaper to take out a payday loan than to bounce a check if your bank account is going through a dry spell while you’re waiting for your paycheck to be deposited. Your bank will charge you $25-35 in NSF fees and the same again in overdraft fees each time you make an unauthorized withdrawal or write an unsupported check. In comparison, you take out a two-week loan and pay $15-20 for every $100 you borrow.