If you’re
looking for ways to stretch your paycheck, you don’t have to put
yourself
on a strict
money diet or create a complicated financial plan. These simple,
painless
strategies
help you make the most of your money.
1. Pay
yourself first.
The easiest and most effective
way to save is to take advantage
of direct
deposit and payroll deduction at UCU. With direct deposit, your
employer
sends your paycheck directly to your credit union account. You can
use payroll
deduction to designate an amount of money to be taken regularly
from your
paycheck to build up your savings or pay off a loan.
2. Cash in
on savings opportunities.
When you get a
raise, increase the amount
you save
through payroll deduction. When you pay off a loan, redirect your loan
payment into
savings. Save part of any bonus, refund, or unexpected cash you
receive.
This can become a habit that really pays off.
3. Cut the
cost of credit.
Look for smart ways to save
hundreds, even thousands,
of dollars
in interest payments. For example, when you take out a loan, make as
large a down payment as possible, and go with the shortest term you can
afford. Pay your credit card bill in full by the due date, or pay at
least as much as you can beyond the minimum. If interest rates fall,
consider refinancing your mortgage
or car loan.
If you can afford it, consider boosting your monthly mortgage payment or
making extra lump-sum payments to mortgage principal whenever possible.
4. Be a
credit union consumer.
Smart money shoppers
first look to UCU for good deals on financial services. Surveys show
that credit unions generally offer more favorable terms than elsewhere
on share savings accounts, loans, share draft/checking accounts, and
credit cards.
5. Don’t
overpay Uncle Sam.
While fat tax-refund checks
are fun to receive, they generally indicate you’re donating too much
money to the government each payday. Get a W-4 form from your employer
so you can better match the amount of taxes withheld from your paycheck
to the taxes you owe. Then use payroll deduction to save the money that
used to go to Uncle Sam.
The payday lending industry is booming, and the
Internet is contributing to its dramatic growth. What attracts many
online borrowers is a loan process that entails just a few keystrokes,
perhaps a fax, and no need to look someone in the eye and admit they’re
broke. In exchange for that convenience and anonymity, however, online
borrowers must take risks that storefront borrowers don’t.
Unlike a storefront payday loan, which normally requires a postdated
check, an online loan application asks for all the personal information
anyone would ever need to steal your identity. An online loan also
requires that you give permission for the lender to access your checking
account to deposit the loan and to withdraw fees and interest. Since it
is in the lender’s interest for borrowers to “flip” their loans as many
times as possible, many lenders make it difficult for customers to pay
off the loan and just keep dipping into their checking accounts to
collect renewal charges.
Perhaps the biggest danger of any payday loan is the “debt-spiral” it
triggers. According to the Consumer Federation of America and the Center
for Responsible Lending, payday loans aren’t the quick, one-time fix
that lenders label them. In fact, 99% of payday loans go to repeat
borrowers. At an annual interest rate of approximately 650 (accurate if
you are talking about internet loans; would use 400% if you mean all
payday loans)%, with most borrowers renewing their loans over and over
again, many consumers end up paying thousands in interest and fees to
keep a small loan of a few hundred dollars from becoming delinquent.
Consumer advocates agree that payday loans are among the very worst
options for borrowers, and insist that even many consumers with a
blemished credit history have alternatives.
To figure out what those options might be, contact a reputable nonprofit
consumer credit counseling service (http://www.nfcc.org).
In a typical session, a counselor will review your income, monthly
expenses, and debt. Based on the numbers and other factors, the
counselor will outline your options, which might include using other
types of financing, reducing living expenses, increasing income, making
special payment arrangements with creditors, or seeking legal advice.
You also can contact University Credit Union for help. We offer several
alternatives to Pay Day Loans, such as Overdraft Protection and
small-balance, short-term loans with super speedy approvals to get you
out of a jam.
The best way to avoid needing a payday loan is to save an emergency fund
now, before you find yourself in a financial bind. Set up an automatic
transfer of $50 each payday from your University Credit Union
checking/share draft account to your savings account and you won’t even
miss the money. Do it today, and the money will be there for you when
you need it.
If you’ve already taken out a payday loan and think you may be a victim
of predatory lending practices or fraud, visit the Center for
Responsible Lending Web site, which offers a tool to search for
information about consumer protection laws and contacts in your state (http://www.responsiblelending.org).
Bankruptcy, which was never an easy option—just got
harder under the Bankruptcy Abuse Prevention and Consumer Protection Act
of 2005.
Now debtors must qualify under a “means” test in order to file for
Chapter 7 bankruptcy relief, if they earn better than average wages. And
debtors are required to undergo two credit-counseling sessions—one
before they file a bankruptcy petition and another after filing.
These added requirements mean the cost of going bankrupt is going up
another $400 or more. Previously, attorney fees and court costs ran
$1,000 to $1,200, so add $400 to that.
Bankruptcy messes up a person’s financial life. It stays on the credit
report for up to 10 years. That makes it tough to get loans for a car or
home or even a credit card—and makes credit extremely expensive when you
do get it. Think of it this way---creditors know you can’t file again
for up to eight years so they can soak you with any rate they want.
It even can be tough to rent a nice apartment. Landlords check credit
ratings, as do prospective employers and insurers.
That’s why bankruptcy should be considered a last resort, says financial
counselor Connie Kilmark, Kilmark & Associates, Madison, Wis.
There are options to bankruptcy:
1) If you can pay off your debts within three years, do so;
2) If you can’t, contact creditors and explain your situation. Ask if
they will lower your interest rate and waive late fees; and
3) If creditors refuse to budge, find a nonprofit credit-counseling
service to work with you on a debt management plan. Their fees are
either free or very reasonable.
Two national associations can help you find a nonprofit agency: The
National Foundation for Credit Counseling (NFCC) (www.nfcc.org)
and the Association of Independent Consumer Credit Counseling Agencies (AICCCA)
(www.aiccca.org)
maintain lists of accredited member agencies.
NFCC offers an online Zip Code locator, or you can call 800-388-2227.
The AICCA provides state lists of its member agencies and has a
toll-free referral line at 800-450-1794.
One caution: Watch out for debt-settlement companies that masquerade as
repayment plans. “They’ll help you settle, but not before they help
themselves,” says Ken King, executive director of the Consumer Credit
Counseling Service in Sheboygan, Wis.
These firms offer to settle your debts for you. The catch is they charge
set-up fees of up to $1,500, plus monthly fees of $75 or more, King
explains. That means you pay them for several months before they have
enough money to start settling your debts.
And if they do get a creditor to settle for less than what’s owed, the
settlement firm gets 20% of that savings on top of its fees.
Your savings federally insured to at least $250,000 and backed by the full faith and credit of the United State Government. National Credit Union Administration, a U.S. Government Agency.
Branch:
846 Commonwealth Avenue - Boston, MA 02215
