Archive for the ‘Personal Finances’ Category

Student Loan Defaults on the Rise

May 5, 2010, by FreeScore

student loan defaults According to a recent report, the number of student-loan defaults by recent graduates has increased from last year.

A report conducted by the Department of Education shows that the proportion of borrowers who began repaying student loans between October 2007 and September 2008 and who subsequently defaulted by the end of September 2009 has risen 7.2 percent from the 6.7-percent rate seen in 2007.

Those in danger of defaulting on student loans are urged to contact lenders and try to develop a more agreeable repayment plan, Forbes reports. Student-loan defaults can negatively affect the credit of recent graduates, making it more difficult to secure loans at low interest rates.

The recession has been difficult on recent graduates, many of whom are entering the job market with little experience and are competing with millions of Americans who’ve been laid off. With the national unemployment rate at almost 10 percent and a new batch of graduates entering the market this spring, concerns have been raised about young Americans’ abilities to keep up with loan payments.

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Freedom From Debt is Americans’ Prime Financial Concern

May 4, 2010, by FreeScore

consumer debtA new survey reveals how Americans view financial success in the age of the recession. A study conducted by TD Ameritrade reveals that 39 percent of Americans define financial success as being debt-free, while 29 percent of those surveyed qualify “success” as the ability to save money for long-term goals.

“These findings show the true impact the past few years have had on Americans and the way they think about money,” remarked Diane Young, TD Ameritrade’s director of retirement and goal planning. “While it is promising that people understand the importance of eliminating debt, there is a big need to focus on saving for retirement and then, perhaps education. The idea is to find a way to control debt while saving.”

TD Ameritrade suggests that consumers can overcome debt by creating and sticking to a budget and continuing to contribute to an employer-sponsored retirement plan.

The economic collapse that sparked the Great Recession has left millions of Americans struggling to pay off consumer debt while getting their credit back on track.  As a result, more consumers are focusing on saving money and spending wisely.

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Save Money by Taking Advantage of Travel Deals

April 30, 2010, by FreeScore

vacationsThe beginning of summer generally signals sunscreen and travel itineraries, but many families this year are unsure about whether they can afford a summer vacation. The recession has many consumers struggling to pay down debt and focus on savings, but reasonably-priced vacations are available if families know where to look.

Families can save money by traveling to off-season destinations, such as Florida, Puerto Rico and Mexico, according to WeJustGotBack.com, a family trip-planning advisor. Families can also save money on travel expenses by flying out during a weekday rather than leaving and returning on a weekend, the website reports.

Many groups, such as AAA, offer travel discounts for a low membership fee. Families who take advantage of discounts easily get their money’s worth, the website reports. Individuals can save money by choosing hotels with amenities such as a kitchen or coffeemaker to save money on food bills and daily coffee trips.

Vacations are an important way to escape the stresses of everyday life and spend time with loved ones, but they don’t have to be expensive or extravagant to be worthwhile. There are many cheaper summer options available to families.

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Is a Student Credit Card Right for Your Child?

April 29, 2010, by FreeScore

student credit cardsSending a son or daughter off to college leaves many parents scrambling to make sure their child has everything he or she needs. More often than not, this includes a credit card, even if it’s for emergencies.

Obtaining a student credit card often requires a parent or guardian to co-sign for the credit card. Before putting pen to paper, parents should carefully weigh the implications co-signing a credit card may have on their credit standing.

Student credit cards are a great way for students to begin building their credit, but parents are liable for any credit card bills their children fail to pay. Accrued credit card debt will also negatively affect a parent’s credit report as well as their children’s. The risks involved in co-signing credit card bills give parents more of an incentive to talk to their offspring about responsible spending habits and credit monitoring.

The Federal Trade Commission has announced that April is Financial Literacy Month, which will make free training available to consumers of all ages regarding credit monitoring, credit scores, and an overall understanding of credit. Encouraging students to attend credit seminars and courses may help put parents at ease about co-signing student credit cards.

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Consumers Will Soon Have to Decide on Opt-In Overdraft Services

April 27, 2010, by FreeScore

New provisions under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 will present consumers with a choice: to opt in or not to opt in.

Opting-in will allow individuals to spend over their debit or credit card limit in return for paying an overdraft fee, which lately has been around $35. If a consumer doesn’t choose this option, any transactions that overextend his or her credit will be denied.

The decision has already been made for debit cardholders. A Federal Reserve Board rule issued in February will prevent consumers from enrolling in overdraft protection without their consent, while Bank of America recently unveiled an overdraft protection program aimed at those with checking accounts.

These rules will be effective this summer, meaning that consumers will soon have to choose whether to opt in. A recent report by Florida-based newspaper The Ledger pointed to high overdraft fees — which are often larger than the original transaction — as a reason to avoid this option.

“Banks argue that overdraft isn’t credit. They say it’s a service. Fine, but there are plenty of other cheaper services available to keep from being overdrawn in the first place,” the report said.

Some of these services include e-mail alerts and allowing one’s checking account to tap into their savings.

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Americans Give Themselves Poor Grades for Financial Insight

April 26, 2010, by FreeScore

consumer financesA  survey by the National Foundation for Credit Counseling reveals that Americans lack confidence in their own personal financial knowledge. More than 77 million participants who were asked to grade themselves on their personal finance knowledge gave themselves a C, D, or F, according the survey results.

“Although the survey did show some improvements in consumer behavior as it relates to personal finance, there are still serious deficiencies which impact consumers’ ability to properly manage their money, particularly during an economic crisis,” NFCC spokeswoman Gail Cunningham said.

The survey showed that 75 million Americans don’t allocate a percentage of their earnings to retirement, which may jeopardize their financial stability if they’re in debt. More than 30 percent of participants admitted that they don’t have a savings account, which forces them to rely on credit cards and loans in the event of an emergency.

An alarming 28 percent of participants admitted to not paying their bills on time, which results in a lower credit score and, consequently, higher interest rates on loans. The recession has made it very difficult for consumers to secure a loan with a damaged credit report or high amounts of debt, which reinforces the need to engage in responsible spending habits.

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Credit CARD Act Gives Card Issuers More Leeway than Intended

April 23, 2010, by FreeScore

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act established new stipulations for providing credit to consumers under 21 years of age, but the new guidelines fail to implement income standards, allowing credit card issuers to find loopholes in the new legislation, according to the New Jersey Star-Ledger.

Credit CARD ActNew protections prohibit credit card issuers from extending credit to those under 21 unless they offer proof of income or have a co-signer. Credit card issuers haven’t developed a standard income-level requirement, and there are no tools in place to prove a consistent source of earnings, reports the Star-Ledger. Without the ability to accurately prove income, there may be confusion among lenders about whether a co-signer is required to help secure a credit card.

Prior to issuing a new line of credit or increasing credit limits, credit issuers are required to prove that a consumer is in a financial position that would allow him or her to repay any credit debt. To date, no procedures on proving a consumer’s ability to repay debts have been drafted, according to the Star-Ledger.

With millions of Americans facing large amounts of debt, the Credit CARD Act is intended to shield consumers from unfair lending practices, while placing additional safeguards on how credit is issued.

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Spend Your Tax Refund Wisely

April 20, 2010, by FreeScore

tax refundsAlthough the economy is beginning to show signs of life, the effects of the recession have many Americans eagerly awaiting their tax returns.

A new poll conducted by Bankrate.com shows that 28 percent of Americans intend to put their refund into a savings account or investment. Greg McBride, senior financial analyst for Bankrate.com, advises consumers on how to invest their tax refunds if they’re planning to buy real estate.

Taxpayers who are planning on purchasing real estate or making a down payment on a residence within five years should look into investing their refund in a CD, suggests McBride.

For a short five-year range, investors should look for “low or no-risk investments, where you have access to the money at the point when you need it,” says McBride.

Others intending to invest in their retirement should look into increasing their 401(k) plan deferral, advises Mickey Cargile, certified financial planner and managing partner of WNB Private Client Services and Cargile Investments.

“Say you get a $1,000 refund. You can have an extra $1,000 withheld from your salary and put the $1,000 in the bank to compensate for that,” Cargile tells Bankrate.com.

Most importantly, Cargile recommends that taxpayers focus on debt reduction first and address their long-term goals later.

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New Program May Help Unemployed Modify Their Loans

April 19, 2010, by FreeScore

mortgage loan modificationsBorrowers struggling to stay current on their mortgage may receive debt help from a new proposal by the Mortgage Bankers Association.

The proposal would allow homeowners who recently lost their job to apply for a nine-month forbearance. This would give them time to search for new employment before applying for a loan modification under the Obama administration’s Home Affordable Modification Program (HAMP). Their income and employment status would be reviewed every three months under the program.

“Recent statistics show that the average unemployed U.S. worker stays unemployed for between six and seven months,” John Courson, MBA president and CEO, said. “That is a long time for a borrower with a dramatic drop in income to stay current on their mortgage.”

During the forbearance period, borrowers would be required to apply for unemployment benefits and to make payments equivalent to 31 percent of household income, unless such a percentage is less than $300. After applying for a HAMP loan modification, borrowers would endure a three-month trial period, after which the loan may be permanently modified.

HAMP was designed as part of the Treasury’s Home Affordability and Stability Plan to help Americans who have fallen behind on their mortgage payments avoid foreclosure by refinancing their loans under more-favorable rates.

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A Poor Credit Score Isn’t Always a Dealbreaker

April 16, 2010, by FreeScore

credit scoresSecuring a home or car loan these days can be difficult enough even if you don’t have poor credit history. Unfortunately, many Americans saw their credit scores plummet as a result of the recession and the ensuing rise in unemployment figures, as well as the bursting of the real estate bubble.

However, options do exist for consumers who’d like to purchase a home or car despite poor credit scores. Increasing the down payment on a home or car can compensate for a poor credit score and instill confidence in the lender that payments will be made on time, reports Bankrate.com.

If you’ve seen your credit score fall for reasons unrelated to unpaid credit cards, such as a medical emergency or sudden family crisis, you can also add a note to your credit report that details the cause of your credit-score plunge.

“You can attach a 100-word explanation to your credit file that goes out with each credit inquiry, and some lenders might take that into consideration,” National Foundation of Credit Counseling spokeswoman Gail Cunningham, told Bankrate.com.

Asking a close friend or family member to co-sign a loan may also increase your chances of securing the funds to purchase a vehicle or a home, reports Bankrate.com.

Over time, consistent, timely payments will help improve your credit history and ensure that negative credit information is removed from your credit report after seven years, reports Housinghelpnow.org.

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