Debt Management Advice & Tips for Students

For many students, money management is a challenge. Faced with the temptation of alcohol, clothing, food, late night partying and spring break trips, many students still find it difficult to stick to a budget. To stay on track financially, track costs, and reduce your expenses wherever possible you need to be fully aware of where your money goes and how you can manage the inevitable debt that will be accrued.  Here is some advice and handy hints designed to help students make sure that they can manage their college and university debts a lot better.
Be Aware of the Fees
Although it may be tempting to skip a re-payment or write a check you know will bounce if funds are low, do not forget the associated costs may put you deeper in the hole. Many banks, a bounced check or overdraft could end up costing you $25 to $35 and costs will continue to accrue for each additional withdrawal. Closely monitor your bank account and also pay attention to payment deadlines.
Try Not to Use Credit Cards
The major credit card providers love to target students during their college days as they know that they operate on a small budget. During a four-year academic course you can accumulate a lot of debt and if you are only able to pay the minimum payment the interest can add up fast. Avoid ending your college course with a large credit card debt and try to avoid major credit cards entirely. With the temptation of spring break trips and other last-minute spending, debt can be built easily and quickly become debilitating.
Perhaps Sell Your Car
On many campuses, a car can add additional charges for parking, gas and maintenance fees. If you live on campus or nearby, then store or sell your car at home with your parents. This will help you to save money on gas and insurance and you might even cut back on expensive road trips if you can only rely on public transportation to get you and your friends there.
Benefit Services
Most universities and colleges provide services for students from everything from health care to travel. Identify your high-cost areas and search for any assistance and support options that are on campus. You may find that you can get cheaper gym membership on campus or could learn that your university has partnerships with local businesses for price reductions on activities and services.
Make a Personal Budget
When you live on a fixed income or a scholarship then it is important to keep track of your out-going costs. At the beginning of each semester or term, make a budget that takes into account the money you take in and your expenses.  Do not forget to consider the cost of travel, food and books for classes. When you are aware of your financial situation, it is easier to stay on track and manage your student debts and finances a lot better.

Guest Post Author Details: Thanks to the Wall Street Subscriptions website for this guest post.  If you are student studying financial and business disciplines then you should consider a student discount offer on the Barron’s Magazine.  It contains up to date news and interviews with people working in finance and also lists valuable internship opportunities with large companies.  Please click here to find out more.

Photo By Images_of_Money on Flickr License By http://creativecommons.org/licenses/by-sa/2.0/deed.en

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Credit Cards or Short Term Loans. Which Do You Preffer?

When in need of funds, what is the first thing that comes to mind? Two of the most common services people use when in need of money are credit cards and short term loans, each of them with their own advantages and disadvantages. Here are some facts that may help you choose the method best suited for your needs when in need of cash.

Credit Cards - Is one card enough?

First I would like to apologize for my prejudice but I fully support companies that run their prospective employees credit histories before interviewing them. Barring few exceptions such as certain communities that do not apply for the credit card in the first place, research supports that most individuals with bad credit are irresponsible with corporate money as well.
Most of us would have got our first credit card at our college campus or from the local bank where we receive our paycheck.

The interesting thing when using credit cards is that they create this greedy behavior that makes you think you need to have many store credit cards rather than just sticking to one credit card that offers the maximum credit line. During my research I observed that if one is patient and does not accept every credit card offer that comes in the mail then invariably the local bank where you deposit your paycheck would eventually offer you a balanced credit line that will never go in default and work as a real companion. Multiple credit card ownership sends a signal to different credit card companies to restrain from giving out their best credit rates and maximum credit line as your loyalty can rightfully switch each month.

For some reason all of us feel that we must carry at least one credit card from each major brand such as American Express, Discover, Visa, Master Card etc. My research shows this is not true and in my travels to dozens of countries I felt that most of the respectable merchants accept all variations and brands of credit cards.

Therefore multiple credit card brands are a merchant centric problem and as a credit card user you essentially should be comfortable with any single major brand. As a thumb rule the overall credit card line of credit normally offered is anything between one year’ salary to a maximum of two years’ salary for individuals with high credit score. Usually it is prudent not to accept a credit card with a lower interest rate but instead take the offer to your local bank and ask them to reduce your rate of interest on existing credit card.

Short Term Loans -

Payday Loans are like tug of war. On one end you find most of the payday lenders who know that the money they lend will not come back easily while on the other end we find the borrower who resorts to short term loans when all other options are closed.
Research shows that as high as 60% payday borrowers have to be dragged to legal courts. This happens because payday loan providers have managed to offer their services to the most risky and most poorly served strata of population. Invariably the law sides with the borrowers and in most cases the lender is barely able to recover only his principal sum. Still this tug of war continues between the lenders and borrowers.

From a payday lender’s viewpoint the money they loan to each borrower is so small that in spite of very high interest rates the actual factual amount collected is miniscule and therefore it becomes a viable business only if the number of borrowers is very large.

From a borrowers viewpoint the money borrowed is so small that she/he is able to pay it off in a single transaction thereby getting a sense of relief that she/he is not been chased by one more loan collection shark.
In spite of this tug of war there are huge defaulters and the cost of collection for such small amounts from borrowers with negative net worth is prohibitively high.
Both credit cards and payday loans have both several disadvantages and several advantages and what it comes down to eventually is the situation of the borrower and prefferences.

Whichever method you decide to choose when in need of cash, you should always remember to never borrow more than you need, pay extra attention to the interest rate and if possible try not to borrow at all. Think budgeting.

My name is Chris Smith, I work in finance and one of my goals is to help people in need of money make educated choices when their hard earned money is concerned.

Photo By 401(K) 2012 on Flickr License By http://creativecommons.org/licenses/by-sa/2.0/deed.en

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Thinking Of Taking Out A Payday Loan? Have You Considered Other Financial Aids First?.

Payday loans can be a great short-term aid when you find yourself in a difficult financial situation; they are quick and easy to apply for and are widely available these days. These short-term loans are not the only financial facility available to those enduring a rough economic spell. However recent research from the Consumer Credit Counseling Service (CCCS) and Turn2us would suggest that most people are not aware of this, or simply choose to ignore other financial resources and turn to payday loans instead.

Statistics from the CCCS and Turn2us study have revealed that:

-          27% did not look into any other financial solution before they applied for a payday loan

-          48% who are not currently employed  have not checked to see if they are entitled to welfare benefit before taking out a payday loan even though unemployed people are twice as likely to take out payday loans than anyone else

-          51%  later regret their decision to take out a payday loan

-          30% are worse off after taking out a payday loan

The survey also claimed that of the 13m people living below the poverty line in the UK, only 7.6m are claiming state support- meaning that over £19m in benefits is not being claimed. So if you fall into this category and are struggling financially, your first port of call should be checking your eligibility for welfare benefits before you start researching other financial aids.

There are also a number of alternatives to payday loans or things you can do to help your economic woes:

-          Talk to your creditors about extending your payment dates

-          Ask your employer for a payday advance (similar to a payday loan but without the excessive interest and fees)

-          Take out a small loan from your bank (if you have a steady income and good credit rating/history)

-          Extend your bank account overdraft

-          Use savings or your emergency fund if you have any

You should also revisit your monthly budget for your household, thoroughly examining your incomings and outgoings for each month to see if there are any regular purchases or bills that you could cut out to save money.

If you find yourself in a difficult financial situation you should always seek independent financial advice before you apply for any economic relief. Organisations like Citizens Advice, National Debtline and Consumer Credit Counselling Services (CCCS) all offer free impartial advice concerning financial matters.

Cost is an online comparison service for all your insurance, finance, travel and utility needs

Photo By rinkjustice License By http://creativecommons.org/licenses/by/2.0/deed.en

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Disadvantages Of Fixed Rate Mortgages

A fixed rate mortgage is an agreement which states you will make the same repayment amount each month during a certain period (called fixed rate period/term). When this initial period comes to an end you will then start making repayments based on your lenders’ Standard Variable Rate (SVR). This mortgage type has benefits of course, like standard set fees which can be a great help when budgeting or saving money and can provide much-needed economic certainty and relief.  
All mortgages are serious financial agreements and should not be entered into without serious consideration. Anybody thinking about taking out a fixed rate mortgage should know the following drawbacks and disadvantages that these mortgage types entail before they start researching them:
The first disadvantage is that due to the nature of this mortgage type (that it does not rely on or vary because of interest rates) you will not benefit from cheaper repayments when the Bank of England’s base rate is low and interest rates are therefore more favourable. Therefore you will not profit from favorable economic conditions as you are paying a standard flat (fixed) rate each month.
Fixed rate mortgages will almost always include a charge for paying off your mortgage early. Usually called an Early Repayment Fee, you will most likely also be charged for remortgaging during the fixed rate period.
The best fixed rate mortgages will more often than not charge a high arrangement fee (also called booking fee, completion fee or administration fee). This fee can be anything from several hundred pounds to a couple of thousand pounds so be sure to look out for these as many are hidden or disguised by the cheap mortgage deal presented.
Besides the standard fixed rate mortgage type, there are ‘flexible’ fixed rate mortgages which may be a better option depending on your circumstances. The main difference with the flexible mortgage type is that there are no charges incurred if a customer wishes to make a series of overpayment on their mortgage- you would only be charged if you wanted to repay the mortgage in full (Redemption Penalty).
If you are not so cautious with your money and you’re always seeking the best deal or a bargain, a fixed rate mortgage may not be the best mortgage for you. You may wish to research a variable rate mortgage if you want to enjoy cheaper repayments when the country is also enjoying better interest rates.

Cost is an online comparison website that specialists in all insurance, finance, travel and utility needs.

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The Comeback Of The Sub-Prime Credit Market

When the great recession of 2008 hit, sub-prime borrowers, meaning those considered as “high-risk” clients, where shunned down of credit card accounts, student loans and financial loans. Heck, even people with great credit ratings were denied of loans. But as lending companies were paid and their losses were recovered, they are opening their doors again for sub-prime borrowers, who are generally defined as people with credit scores of 660 and below.
Some of the companies which are opening their doors for those who were once considered as high-risk customers are GM Financial and Capital One. Testing the waters and trying to follow suit are JP Morgan Chase and HSBC.

Fantastic figures

In December 2011, credit card companies approved accounts for 1.1 million users with sub-prime credit. The dramatic increase in rate was 12.3%, compared to the new credit cards released in December 2010.
As for auto loans, 23% of those granted money in the last quarter of 2011 were high-risk consumers, a  far cry from the 17% who were given the opportunity to make car loans in 2009. Despite these impressive figures mortgage loans remain closed for sub-prime borrowers.

Why do business with sub-prime clients?
So why are lending companies knocking on the doors of sub-prime consumers once again? Industry experts believe that it’s because with their credit scores, they have to get used to paying higher interest rates – as much as 29 percent. They also pay additional fees when they go beyond the due date.
Because of these projected profits, most credit card and lending companies are sending flyers and invitation letters to people who were not able to pay them in the past – inviting them to apply for credit and auto loans, among many others.

Concerns

While financial experts worry that this leniency in lending will result to the nightmare that was the 2008 credit crisis – lending companies assert that they have learned from the mistakes they made in the past. For example, JP Morgan Chase is carefully evaluating borrowers to determine if they can pay the fees or if they’ll just run away and change their names and addresses.
As for the Office of the Comptroller of the Currency, as long as banks’ lending money to borrowers are conscious of the standards and the risk of transacting with high-risk clients, there’s no problem in catering to the needs of these individuals.

Sign of an improving economy

While some experts worry that extending credit to high-risk individuals can bring about another credit fiasco, some industry leaders believe that it’s a sign that the American economy is improving.
Despite the high unemployment rate, borrowers, especially those from the sub-prime bracket, have done their best to pay off at least some of their debts. Because of the decreased rates of delinquency and auto loans, banks feel that they can cater to customers who were shunned during the recession. Lenders also believe that they will miss out on the clients which will bring them some profit if they just focus on the people who pay their debts well and on time.
With these great promises, economists can do nothing but hope that this will give sub-prime consumers a chance to capitalize on the opportunity, which might help strengthen America’s economy once again.

This article is provided courtesy of Bad Credit Loans Direct, a consumer finance website providing information and tools on small loans for bad credit and other personal credit services.

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What You'll Need In Order To Get A Business Loan

So, you have this brilliant idea for a new business, and you are chomping at the bit to get started.  You have your website, your business cards, a small home office, and your two week’s notice letter ready to hand over to your boss, but you have just one small problem: you don’t have the money to get your business started.  You know that you need a loan of sorts, but how can a small business owner actually get a business loan.  Well, here a few things most lending institutions are going to want before considering you for a loan:

Prior Year’s Tax Returns

If you are a new business owner, it is going to be very difficult to get a loan against your business because it has no financial history, so, if this is your situation, then you will want to get the loan against your personal profile.  The bank or other financial institution will probably ask for the last two to three years of your tax returns, so make sure that you have those handy and organized.

Check Your Credit Report

Know what your credit score is, and get a copy of your recent credit report.  Make sure that everything is accurate.  If you’ve closed or paid off accounts in the past, but it is not updated on your credit report, make sure that you contact the creditor to get that resolved.  You want to make sure that your credit history is as clean as possible and that your credit score is as high as possible before applying for a loan.

Give a Clear Idea of Why You Need the Money

Obviously, you need to have an idea of why you need x amount of money, and the lending institution is of course going to want to know why as well.  Make sure you have a clear answer.  It would also be helpful to have a business plan prepared in case they ask for you.

For Existing Business Owners

If you have owned a business, then you may be able to get a loan against your business.  In this case, the procedure is roughly the same, but if your business has its own credit history, like with a corporation, then you can borrow against that instead of your own personal credit history.  Typically banks and other lending institutions will lend you 10%-20% of your gross annual income which could certainly help to grow your business.

Brandon Jones enjoys covering small business help topics.

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