Most of us are concerned about our physical health, sore joints, bad back, and general heart conditions, but you can’t forget about your financial health. To maximize your financial health it’s important to know how Lenders make decisions when determining if you’re fit for a loan or lump sum.
Here are the top 8 factors that are taken into account the most.
- Payment history – Do you pay your bills on time or are you constantly late or in default?
- Current debt – Do you have too much debt, can you take on more?
- Collections – Have you defaulted on your obligations and now a collection agency is handling the issue of collecting a debt?
- Public records - Have you had any bankruptcies or liens? Sold structured settlement payments in the past?
- Types of credit – What kind of accounts have you signed up for? (credit card, auto loans, mortgage, etc.)
- Credit history – Have you established a credit history and how long is it?
- Recent activity – Have you been actively seeking a loan or lump sum, how many new credit inquiries have you had?
- Credit score – What is your credit score? Your credit or FICO score can range from 300-850
These factors are all important and are often used by lending institutions when considering your application.
Your FICO credit score is important to your overall financial picture. The higher the score the more likely a lender will feel you are likely to pay them back and not default. It tells lenders how you’ve managed your accounts in the past and whether they should have any concerns. You are entitled to a free credit report once a year from the credit reporting agencies, you can obtain a copy by visiting www.annualcreditreport.com
To achieve peak fitness for your financial health, be mindful to:
- Pay your bills on time. Nothing hurts your credit score the most than late payments, being reported to collection agencies and bankruptcies.
- Get your free annual credit score. Like a visit to the doctor check your credit periodically, if there are any mistakes or red flags notify the credit agencies immediately.
- Control your debts. Don’t run up your credit card, it’s easy to swipe it and forget it, review your activity weekly and stop using it if you are getting close to the max
- Build your credit history. Start to build up a credit rapport responsibly. Begin having some bills put in your name and pay them on time every time. If you get a credit card pay more than the minimum every month and use it sparingly.
- Avoid too many inquiries. Every inquiry on your credit report is recorded, lenders may often be leery if you’ve had to many inquiries in a short period of time indicating you are taking on too much debt
Get financially healthy. Here are some tools to help you out
Feeling uneasy about your money situation? You’re not alone. Many people feel exactly the same way. Sometimes it helps to get the advice of a financial expert to explain all your options and help you determine the best course of action. This is also true when you sell your structured settlement annuity payments. While selling the rights to your future payments isn’t for everyone, having a professional available to review your options can aid you in your decision.
When you’re looking to sell all or part of your future payments in order to fulfill financial obligations the decision isn’t one that should not be taken lightly. The value of your money and the extent of your need to receive your funds ahead of the scheduled payments are primary factors. Sometimes it makes more sense to take your payments in a cash lump sum rather than borrowing money at a high interest rate.
Avoiding foreclosure and paying off debt are just a few examples of why you may need to get your payments ahead of schedule. Life changes and having a lump sum of cash can help you get through tough times. Since you can’t always plan for the unexpected, it’s always best to know your options.
There is more than one way to get cash from a structured settlement or annuity. For instance, it isn’t necessary to sell all of your structured settlement or annuity payments. In many instances your immediate financial needs may not require that you to do so. Selling part of your future payments could be more than enough to pay unexpected bills while continuing to receive your scheduled payments.
Again, it can be difficult to navigate through all of your potential options on your own. It is important to research what the possibilities are and seek the help from someone in the know. Rescue Capital, a firm that buys structured settlements and annuities, can clear up the confusion and cut through any potential red tape that you might encounter at sale time. The money that you were awarded in your settlement is legally yours so shouldn’t you use it in a way that works for you?
Call Rescue Capital 866.688.3532 today to learn more and to receive your free no-obligation quote.
Once again payday loans are a trending news topic. Just in the past five days, Pennsylvania and Delaware have introduced legislation to regulate the practice while payday loans from banks are now part of a FDIC probe. Two tribal nations in Oklahoma were cited in a FTC complaint and payday loan lead generation website MoneyMutual.com has also come into fire for its auctioning practices. While some groups and individuals feel that there is a need for these types of businesses, there is a need to protect consumers from themselves as well as predatory, deceptive or fraudulent lenders.
The PA house voted to approve an industry backed bill to regulate short-term lending. The bill, which hasn’t been approved by the PA State Senate, would require short-term lenders to obtain state licenses and limit borrowers to a 25% max of their gross monthly income or $1,000, whichever is less. Lenders could charge only 12.5% interest plus a $5 fee for each loan. For example, a $300 loan would cost $42.50 if it was repaid at the end of two weeks. However, consumer groups argue that the interest and fees would equal to 369% when calculated as an APR. PA currently has a maximum APR of 24% that can be charged by licensed lenders. [i]
One short-term lender stated that a 24% APR on a $100 loan is not economically feasible because only $.92 cents would be generated by the end of 2 weeks. If one person defaults, it requires 108 successful loans to recover the lost principal.[ii]
State lawmakers in Delaware have taken a different approach. Under House Bill 289, borrowers would be limited to 5 payday loans in any 12 month period including loan rollovers and refinancing. In addition, they could only borrow $1,000 or less and the state would establish a database to track the number of loans a person has taken. The Bill was established in order to prevent the number of defaults within the state. Currently there are 70 licenses lenders with approximately 200 locations throughout the state. The bill is waiting for the signature of Gov. Jack Markell.[iii]
Detractors of both bills believe that these restrictions will force individuals to go out of state or online where there are fewer restrictions. Currently 13 states prohibit payday loans, while another 21 state prohibit rollovers. Only 13 states have statewide databases that track these short-term loans.[iv]
Bank Payday Loans
In response to a February petition signed by consumer rights advocates, the FDIC announced it will investigate payday loans from banks. According to the petition, several banks including Wells Fargo were called out for their lending practices. In addition, the petition cites Fiserv’s lending software, which promises to increase fee income, as a contributor to the problem.
The Federal Trade Commission (FTC) complaint states that two American Indian tribes in Oklahoma are allegedly operation payday loan companies that add hidden fees, violate lending laws and threaten customers will false arrest for defaulting. In the complaint, the tribes are citing tribal immunity but the FTC states that tribal affiliation does not exempt them from federal law, in this case the Truth in Lending Act. On a $300 loan borrowers were told they would pay $90 in interest. But the lender automatically renewed the loan at the end of two weeks resulting in fees of $975. The FTC stated that they have received 7,500 complaints about the defendants over the past 5 years.[v]
You may have seen their commercials on TV featuring former talk show host Montel Williams as their pitchman, but Money Mutual isn’t actually a lender. They are a lead generation website that auctions off prospects’ information to the highest bidder. Sometimes it is a legitimate lender but other times it could be a fraudster who has enough information to make unauthorized withdrawals from unsuspecting consumers’ accounts. While the company claims to take “extraordinary” steps to protect their information, others might disagree. The Director of the Consumer Financial Protection Bureau is reviewing how the sites treat data and the FTC has received numerous consumer complaints about the firm.[vi]
The parent company of Money Mutual doesn’t believe that government regulation of the industry is necessary because the industry is policing itself. Consumer advocates believe that it is a huge risk to consumers. In one case, information collected by an unnamed lead generation website was used by call centers in India to badger consumers into paying debts they didn’t owe.[vii]
Thoughts and considerations
Payday loans are a tricky business. Some individuals believe that people without access to traditional forms of credit have a legitimate need for these services. Consumer advocates believe these types of products prey on the poor and cause them to become deeper in debt. The industry believes it doesn’t need government regulation but at the same time current regulation has caused individuals to seek riskier internet based alternatives. So in those instances is the regulation really helping?
One of the biggest issues is the lack of authority over the tribal nations; the government needs to get that issue under control. But there needs to be a balance. Obviously states will have a hard time finding legitimate lenders if the interest rate caps are so low that the lenders won’t make money. Consumers need access to cash in a hurry but they also need to some sort of regulation that will prevent them from financial disaster. While it is difficult to regulate the Internet, there needs to be a way of protecting users from fraud and harassment.
If you look at other industries such as structured settlement factoring, government regulation has helped the consumer. While not logistically possible for payday loans, each structured settlement factoring transaction requires court approval to determine if the sale is in the best interest of the seller. Perhaps a nationwide database used by lenders to limit the number of transactions an individual could take in a 12-month period we could prevent some issues. A cap in the loan amount could also help. There also needs to be uniform laws nationwide regarding this type of lending that applies to online as well as offline lenders.
Did you know that 9-10 lottery winners are broke within 5 years? It’s not surprising since most people are ill-equipped to handle the windfall of instant money. While structured settlement annuitants and lottery winners who opt for the annuity have better protection against unwise spending, bad investments, con-men and trustee mismanagement there are some safe guards that should be taken if you ever come into money.
Former dot-com millionaires, financial gurus and lottery experts have a great amount of advice on how to preserve your money including:
- Shhh, don’t say a word: Don’t update your Facebook status and call everyone you know telling them the good news. There was one case of a gentleman who bragged about receiving a legal settlement only to have his house robbed. You will have enough strangers, long lost family members and charities coming out of the woodwork soon enough so try to keep it a secret.
- Don’t change your lifestyle: One expert suggest that you do not change anything about your lifestyle for 1 year. I know that seems really tough to do especially if you’re living on your buddy’s couch but let the money sink in and don’t make foolish purchases.
- Get help: Hire a lawyer, accountant/tax expert and financial planner to help you make decisions regarding the money. Make sure you get a least 3 names and they are a member of the following organizations--National Association of Personal Financial Advisors, the Financial Planning Association, and the Certified Financial Planner Board of Standards. The American Institute of Certified Public Accountants has a list of CPAs who've earned the Personal Financial Specialist designation. The Securities and Exchange Commission (SEC) also has an area on their site to check financial firms and planners.
- Tax time: Depending on where you live, where you got the money from (lottery versus lawsuit) and how you’re receiving the payments there will be host of tax issues to consider. Get with a tax expert to discuss all of the implications before you do anything with the money. Don’t be like those few “celebrities” that didn’t pay their taxes and ended up in jail.
- No friends: Don’t lend money to old friends and don’t make new friends. Stay away from people in general because they will want to borrow from you or have an investment for you. Many times these new friends are scammers.
- No investing: Sit on your money and do not make any investments like buying artwork, businesses or stocks. Again see rule number 2.
- The 2% rule: If you can’t resist a major deal do not put more than 2% of your money into it. This way if this great deal doesn’t pan out you’re preserving your wealth.
- Watch your spending: If and when you make a few purchases keep it reasonable. Don’t buy a million dollar mansion or brand new cars for the entire family. Know where all your money goes, any fees associated with your purchases and other costs.
- Protect your identity: If it is possible protect your identity. Change your phone number, avoid appearing in articles and don’t make public donations. If you can, form a trust instead of using your name and always keep a watchful eye on your credit report.
- Stay healthy: Stress can kill you and no matter how much money you have it means nothing if you don’t have your health.