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What to Consider when Paying Off an Installment Loan with a Credit Card

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You have an installment loan, like a personal loan or a car loan, and you get an enticing credit card offer in the mail. Should you transfer your installment loan to a credit card with a low, promotional or fixed rate? This depends on a number of factors:

• Can you pay off the loan without prepayment penalties?

You will need to study the terms of your installment loan before transferring the balance over to a credit card, as you could end up paying a large, prepayment penalty, which could negate any benefits you may receive from a credit card. It is best to contact the lender to see what type of which you have. In particular, ask them for a payout amount. Once you have that amount, multiply the number of payments remaining on the loan by the loan payment each month to see if the payoff amount is lower than the total payments. If not, you can assume the lender will charge you for the total interest amount and it may not make sense financially to transfer the loan to a credit card.

• Do the benefits of the credit card make good financial sense?

You may be tempted to take advantage of a zero-percent balance transfer, must you must look further into the offer. Credit card companies draw customers in with tempting, zero-percent offers but, in reality, this rate is merely a promotional rate and will only last for a short period of time – usually 12 months or less. If you can pay off the loan during this promotional time, then you will likely make out on promotional rate; however, if you can’t, it is important to look at the card’s default rate, the rate that will come into play once the promotional rate has ended. In addition, pay close attention to balance transfer fees, which can be as much as five percent of the transferred balance.

In short, you must do the math when it comes to transferring an installment loan to a credit card.

Welcome in the New Year with a New Attitude on Spending

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We all begin talking about “trimming the fat” when the New Year rolls around, but perhaps you can begin thinking about “trimming the fat” in terms of your finances. Make this the year you establish a healthy relationship with your finances and begin to really understand the benefits and satisfaction that come along with handling your money and your budget well. Here’s how to make 2011 the year you finally break yourself if all those poor financial habits and decisions:

• Make a realistic budget – We all make budgets, but how realistic are they, really? Instead of making a budget that you know in your heart and your head just isn’t going to translate well into real life, take everything into consideration so that you have a better chance of pulling it off. For example, if your budget leaves no room for discretionary spending, and you have nothing left over at the end of the month for a birthday present or a new outfit, then you’re bound for disaster. Instead, pad the budget for living and take it from there!
• Examine your needs versus your wants – One of the ways we get muddled in terms of finances is because many of us have blurred the liens between wants and needs. Let’s get one thing straight: your morning latte is not a need! Does that mean you should deny your latte cravings? Perhaps not; but it may mean that your once-a-day latte run can be cut down to a three-day-a-week run.
• Consider repayment terms and consider consolidating – Take a look at your current credit card bills and installment loans and pay close attention to the repayment terms. You may be better off consolidating all of those bills onto a fixed, low-interest-rate credit card as to simplify your monthly bill payments. Putting all those bills onto one card may facilitate the process of paying bills and may make it easier to look at the “big picture” when it comes to paying down your bills.
• Reexamine your current credit cards – Don’t forget about your credit cards and make sure they are still working for you in terms of interest rate, rewards and other terms and conditions.

When Should you Consider Alternate Payment Options?

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Credit cards are a luxury that many of us enjoy. They help get us out of financial binds and emergencies; they provide us with an easy method of paying for everything from groceries to vacations; and they allow us to earn cash back and rewards on everyday purchases.

However, you may want to think twice about using your credit card in the following circumstances:

• If you’re close to your credit limit – One of the factors that credit reporting agencies consider when determining your credit score is the amount of available credit. Therefore, if you charge to the limit on your credit cards your available credit is diminished, which therefore lowers your credit score. It is always best to avoid carrying a balance of more than 30 percent of your credit limit to keep your credit score intact.
• When you receive notice that the interest rate on your credit card will increase – The new CARD Act requires creditors to give customers a 45-day notice on rate increases; however, your rate may actually increase just 14 days after you receive the notice. Instead of spending on your card, take this time to negotiate a lower rate with your credit card company or find another card with a more competitive rate.
• If you know you can’t realistically pay off the balance in a reasonable amount of time – The best case scenario, of course, is being able to pay your credit card balance in full when the statement arrives. However, if you have a game plan in place to pay off the credit card balance over the course of a few months then it is probably okay to use your credit card. The trouble comes when you begin making purchases without having a plan in place to pay them off. Think twice before making a purchase and ask yourself if you can realistically pay off the purchases in a reasonable time frame.
• When you are purchasing something from an unknown website – To play it safe, it is always best to stick to purchasing online items from trusted websites. It just doesn’t pay to risk your identity and credit card information paying for a purchase from a website of which are you unsure.

Debt Consolidation Methods to Consider

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You may have given debt consolidation a consideration as a way to make your debts easier to manage and your monthly bills lower. If bills are piling up and you are making multiple bill payments each month, debt consolidation may be a practical answer. Debt consolidation can mean lower, monthly bills, fewer bills to pay, and a plan of action for paying back those bills. In short, debt consolidation can mean a whole lot less stress and trouble on your part when it comes to your monthly bills and debts.

There are several things to consider when looking into debt consolidation:

• Balance Transfer Credit Cards – Balance transfers are the most common ways to consolidate your debt, and are usually limited to individuals with good credit. Balance transfers usually involve moving all of your credit card debt onto another credit card with a lower interest rate. There are many creditors that offer balance transfer options so you may have quite a few choices for balance transfer if you have good credit.

There are a few things to keep in mind when using a balance transfer offer through a credit card: the interest rate; the length of the promotional rate; and the balance transfer fee. Remember that all balance transfer offers are not created equal, so look closely at the card’s terms and conditions before signing onto a balance transfer offer.

• Debt Settlement – Debt settlement may be ideal for individuals with poor credit, or for individuals who are simply drowning in credit card debt. Debt settlement, provided it’s handled by a competent company, may be a good alternative to bankruptcy. It is important to thoroughly check out the debt settlement company you choose before signing on, as there have been countless incidences of not-too-trustworthy companies.
• Debt Consolidation – Debt consolidation may include taking out personal loans that have fixed, payment terms and time frame. There are some disadvantages to this, though, as personal loans can come with higher interest rates.  There are some types of debt consolidation loans that are designed for individuals with poor credit, as well, although, like debt settlement, it is important to closely look into the company you want to work with.

Do You Have Your Credit Cards Under Control?

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Most credit card customers assume they have a good grasp on their credit card spending and budgeting, but in reality very few of us do. You have likely heard of many people saddled in thousands and thousands of dollars of credit card debt say that they don’t know how it happened. Unfortunately, this is an all-too-common occurrence. To prevent yourself from heading down the same path to credit card despair, consider asking yourself the following questions:

• Do I purchase things on impulse? Is your credit card a green light for your spending? Many individuals will purchase things with their credit cards that they normally would have never used their cash to purchase. In other words, a credit card is often very tempting when it comes to spending, so it is wise to reflect upon your recent purchases to determine if you have a habit of purchasing items on impulse with your credit card.
• Do you have a budget? If you have no idea what is going in or going out in terms of finances then you could be setting yourself up for disaster when it comes to your budget and your credit cards. Make a point of determining your monthly income and your monthly expenses. This will give you a clear picture of how much exactly you can afford to spend each month on your credit cards. In other words, determine your disposable income and don’t spend any more than that – even if you have a credit card in your wallet.
• Do you study your credit card statements? If you are opening your credit cards and paying only the minimum balance then you could be in denial about your credit card spending and your credit card balances. Take the time to open your credit card statement each month and examine your spending habits from the previous month. More often than not, simply being aware of your spending habits may thwart you from overspending.

Easy Steps for Transferring your Credit Card Balances

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If you’re overwhelmed by too many credit cards and sick and tired of paying high interest rates on some of those cards, it may be time to considering transferring those higher-rate credit card balances to just one card with a competitive, fixed rate. And luckily it’s pretty easy to do. Here’s how:

• Check out the offers you receive in the mail to see which one is best for you. Take into consideration the introductory interest rate, the interest rate once the introductory period has ended and the length of the introductory period. Don’t assume all balance transfer offers are the same. They differ quite a bit from card to card, so take the time to compare offers.
• Don’t just read what the creditor wants you to read. Instead, read the fine print. The credit card’s terms and conditions should be read and understood before you accept a credit card offer, so take the time to read and reread the fine print before taking the next balance transfer offer that comes your way.
• Don’t always assume the lower introductory rate is the best value. Instead, take all factors into consideration, including the length of the introductory rate, the rate once the intro rate has ended and the balance transfer fee. You may need to pull out the calculator to determine how much money you will save, what you will pay in balance transfer fees based on the amount transferred, and any other related fees.
• Once you have decided upon the credit card to complete your balance transfer, save yourself time by applying online. Don’t forget to gather your other credit card accounts that you want to transfer so you can be prepared to transfer the balances once you have been approved. Make sure you have all of the information necessary to handle these transfers, including the account numbers and your current balances.
• Some credit card balance transfers can take a couple weeks to happen, so if you have a credit card payment due soon, don’t neglect it, as you could risk late payment fees if your balance transfer doesn’t happen before the due date.

How to Regain Control of your Finances

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Perhaps the best time to discuss getting a grip on your finances is before the holiday madness begins. And, often, the best way to really examine your spending is by looking at your credit card spending.

Many consumers overspend on credit cards because, well, it’s easy to do. Armed with just a card, you can step into a store and purchase things you normally would not purchase if you had to give up the cash in your pocket to do so. Credit card spending often makes us more careless and irresponsible when it comes to shopping, and therefore puts many of us in a precarious situation of too much debt and not enough income.

You can control your spending, though, even if you are currently spending more than you are making each month. However, in order to regain control, you must be able to identify- and rectify – the source of the problem.

Here’s what you need to do before you make another credit card purchase:

• Contact your creditors and ask for a copy of your credit card statements from the last six months. Once you have the statements in front of you, take the time to really examine them. What are your weaknesses? Do you spend more at a certain retailer? Can you pinpoint what you seem to be spending the most on each month?
• Stop spending until you have recognized the problem. Unless you fully understand why you are spending and what you are spending on, you cannot begin to fix the problem and gain control of your finances. Make a pact with yourself to cease spending on anything but the necessities until you have pinpointed the problem.
• If you feel like you may have a spending problem, get help immediately. Contact a non-profit credit counseling service and seek help for your spending problems. Remember: ignoring the problem won’t make it go away.
• Eliminate the source of the problem. If you overspend each time you shop at a certain retailer, promise yourself that you will not take a credit card with you the next time you visit that particular retailer. Then, reflect on your purchases at that retailer once you no longer use a credit card. Are your purchases different? Are they any less? Are you more inclined to think twice before making a purchase?

Golden Rules for Debt Management

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Debt management shouldn’t be a confusing subject yet, for many of us, we make it more complicated than it has to be. The goal is quite simple, actually: don’t spend more than you make.

Sure, this sounds like a no-brainer. And, if this were the only thing we had to worry about, there would be very few problems. Unfortunately, however, debt management is not that simple.

With that said, there are a few, golden rules of debt management that we could all benefit from sticking to:

• Many of us don’t want to face the mounting credit card bills in the corner, so we do our best to ignore them. This, however, is only a temporary fix, at best. The best solution is to take a deep breath and assess your debt situation. The basic fact is that ignoring them won’t make them go away. Realization and acknowledgment of our debts is, by far, the best way to get a handle on our debts.
• The next golden rule of debt management is to simply stop spending so much. Sure, this is easier said than done, but the fact of the matter is that most of simply don’t pay attention to our spending habits. This act, of course, is easy to do, considering that many of our purchases end up on credit cards, where we often forget about them. Pay close attention to your spending habits and gather all receipts together so that you can review your purchases on a weekly basis.
• If spending has become a problem for you, don’t wait to get help and change things. Your debt problems don’t have to be your problems alone. There are many resources available that can help you understand why your spending is out of control and can help you make the necessary changes so that you won’t be burdened by debt. A good source for debt management assistance is non-profit credit counseling agencies. Before choosing a credit counseling agency, however, check their credentials and background to make sure they are reputable and trustworthy.

Credit Card Cash Advances: Resist the Temptation

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Cash advances may seem like a great idea at the time, but they may end up being your worst enemy when it comes to your credit card balance.

Cash advances on credit cards typically work like this: you need cash so you use your credit like you would an ATM card and withdraw money at any ATM machine. Sounds pretty simple, right?

Well, the process of obtaining a cash advance is the easy part. It’s the fees and interest rate that comes along with it that may end up causing you problems.

Let’s talk about why it may in your best interest to avoid cash advances:

• If you use the cash advance feature on your credit card, expect to pay a fee. In fact, every major credit card charges a fee for cash advances. You can expect the fee to range from $10 and up. Some credit cards charge a percentage of the cash advance amount, which can also be significant.
• If you have a great rate on your credit card, don’t expect the cash advance option to carry the same, competitive interest rate. In fact, you can expect to pay double – even triple – the amount in interest than you would on purchases and balance transfers. Some credit cards charge as much as 24 percent for a cash advance!
• Unlike purchases, where you can avoid interest charges by paying your balance off in full when your statement arrives, the interest on a cash advance begins to accumulate the day you take the cash advance. To put it into perspective, if you took a cash advance for $1000 at the beginning of your billing cycle, you could end up with more than $70 in interest charges by the time your bill arrives.
• Consider that if you pay just the minimum payment on your credit card with an interest rate of 24 percent for a cash advance, you could, in theory, only pay the cost of the interest each month, thereby leaving you with an untouched balance.  Sounds scary, right? This fact alone may be enough to make you run for the hills before you take out a cash advance!

Should you Use your Home’s Equity to Pay off your Credit Cards?

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If you find yourself knee-deep in credit card debt and you have an adequate amount of equity in your home, you may have considered using that equity to pay down your debt and assume a lower interest rate with a longer repayment period.

Because so many Americans have assumed too much debt over the years, many of them are anxious to erase the debt. Because of this, many people have turned to the equity in their homes as a way to satisfy their credit card debt, consolidate their bills and assume a lower, monthly payment.

Some homeowners have taken out home equity loans to pay off their debts, while others have chosen cash-out refinancing. Whatever you choose, however, is all the same when it comes to using your home’s equity to pay off debt.

Consider your Options

For some homeowners, this may be a smart, financial move. For others, however, this is not the case. Some financial advisors warn consumers about using the equity in their homes to pay off credit card debt, as this changes the debt from unsecured to secured. In other words, because credit card debt is an unsecured debt, creditors cannot take your home or any other assets away from you if you fail to pay. However, if you transfer your credit card debt into a home equity loan and you fail to pay on that loan, the bank can repossess your home to satisfy the debt.

So the question is: should you risk losing your home to pay off your credit card bills?

Consider your Financial Situation

If you have ever found yourself in a situation where you have been unable to pay your bills, then taking out additional debt in the form of a home equity loan probably isn’t in your best interest. Instead, if you are struggling to pay bills, you should probably seek the help of a nonprofit debt settlement company instead of taking out another loan.

In the end, if you are considering taking out a home equity loan, keep in mind that your personal financial situation may be far different from your neighbor’s financial situation. Therefore, always weigh both the positive and negative aspects of any large financial transaction, especially when it concerns your home.