If you have trouble managing your debt on your own, you’re not alone. Many people go to a debt consolidation company to help deal with creditors and lower their debt payments. Before you hire a company, make sure you get some information to help you choose.
Look at the company’s reputation. Check with the Better Business Bureau (www.bbb.org) to find out if other consumers have made complaints against the company. Several unresolved complaints against a company is a sign that they don’t follow through on their promises to customers. No matter how much you may want to go with a company, it’s best to move on when their BBB standing isn’t acceptable.
Make sure the company offers different services. A good debt consolidation company will do more than combine your debt payments; it will also give you sound money management advice. Look for a company that will help you learn to budget and stay out of debt as well as work with your creditors to reduce your debt.
Choose a company with reasonable prices. Debt consolidation companies should charge reasonable fees for the services they provide. They also should be upfront about the fee. If a company hides details about the cost of their services, be suspicious. Ask about having your fee waived or reduced if you will have a hard time paying it.
Watch out for scams. Unless you have a lot of money, debt management will not be a quick fix. Stay away from debt consolidation companies that offer those “too good to be true” solutions to your debt. Expect to send affordable monthly payments for two to five years to get your debt paid off. Anything other than that is a watch-out.
A lot of debt consolidation companies take advantage of vulnerable consumers. Take your time and look for a good company to keep from becoming the victim of a scam.
Monday, December 29, 2008
The Trouble With Mortgage Loan Modification
In some cases, mortgage loan modification only postpones the inevitable. Rather than helping you afford your mortgage payments, a modification can put your monthly loan payments out of reach and leading you to foreclosure anyway.
What Is Loan Modification?
Once you’ve become 2-4 months behind on your mortgage, you likely qualify for mortgage loan modification with your lender. If you’re approved for loan modification, your lender freezes your interest rate for a period of time to keep it from continuing to adjust upward. Then, your delinquent payments are added into your loan balance and your payments are recalculated. The loan is reset and you’re no longer behind. You continue to pay your loan off at the new terms.
How Can Loan Modification Hurt?
In some cases, interest rates don’t decrease with a modified loan, meaning your monthly payments would remain the same. However, once your delinquent amount is added back into the loan and your payments are recalculated, you end up with a higher monthly payment. You ward off foreclosure in the near future, but unless you increase your income, your mortgage payments remain unaffordable.
Choosing a Good Modification
Don’t make a loan modification decision based on desperation. Before you agree to a loan modification, make sure you understand how it will impact your monthly payments. If your payments are going to go up, ask your lender about other options.
Negotiate a lower interest rate as part of your modification terms. Unless your interest rate goes down, your monthly mortgage payments will remain the same or even increase. Sure, you avoid foreclosure for a little while, but without lower payments, the risk remains. You can also ask your lender to waive some of the late fees charged on your missed payments.
Get foreclosure-prevention counseling from a local consumer credit counseling. Advocates can sometimes help you negotiate better terms with your mortgage lender.
What Is Loan Modification?
Once you’ve become 2-4 months behind on your mortgage, you likely qualify for mortgage loan modification with your lender. If you’re approved for loan modification, your lender freezes your interest rate for a period of time to keep it from continuing to adjust upward. Then, your delinquent payments are added into your loan balance and your payments are recalculated. The loan is reset and you’re no longer behind. You continue to pay your loan off at the new terms.
How Can Loan Modification Hurt?
In some cases, interest rates don’t decrease with a modified loan, meaning your monthly payments would remain the same. However, once your delinquent amount is added back into the loan and your payments are recalculated, you end up with a higher monthly payment. You ward off foreclosure in the near future, but unless you increase your income, your mortgage payments remain unaffordable.
Choosing a Good Modification
Don’t make a loan modification decision based on desperation. Before you agree to a loan modification, make sure you understand how it will impact your monthly payments. If your payments are going to go up, ask your lender about other options.
Negotiate a lower interest rate as part of your modification terms. Unless your interest rate goes down, your monthly mortgage payments will remain the same or even increase. Sure, you avoid foreclosure for a little while, but without lower payments, the risk remains. You can also ask your lender to waive some of the late fees charged on your missed payments.
Get foreclosure-prevention counseling from a local consumer credit counseling. Advocates can sometimes help you negotiate better terms with your mortgage lender.
Is a Credit Card Cash Advance a Good Idea?
When you’re strapped for cash and still have some available credit on one of your credit cards, a credit card cash advance is one way to temporarily make ends meet. Considering the cost of a cash advance, you might question whether it’s such a good idea?
A cash advance fee is one of the costs of a credit card cash advance. Cash advance fees can be a percentage of your advance – typically between 1% and 4% of the amount you take out. Or, the fee could be a flat rate. Some credit cards use a combination of the two to come up with your cash advance fee. For example, you might pay $15 or 4% of the cash advance, whichever is greater.
When you use an ATM to take out a cash advance on your credit card, you’ll also pay an ATM fee to the bank who owns the machine.
The highest costs of all are the finance charges that are applied to cash advance balances. Different types of credit card balances typically have different interest rates. You might have one interest rate for purchases, another for balance transfers, and yet another for cash advances. Of all the interest rates, cash advance rates are the highest. This means you’ll have the highest finance charges on your cash advance.
Unlike purchases, you don’t get a grace period for cash advances, so interest starts accruing the day you take it out. You’ll pay interest on a cash advance even if you pay off the balance when your statement comes. Until you pay off the cash advance in full, your balance accrues monthly interest, making it harder to repay.
The way credit card companies apply payments to your credit card could mean your cash advance balance increases rather than decreases. When you have multiple types of balances on your credit card, your issuer probably applies your payment to the lowest interest rate balance first. Meanwhile, the highest interest rate balance (your cash advance) isn’t credited any payment at all until it’s the only balance you’re carrying.
If you want to take out a cash advance on your credit card, make sure you understand the cost. Use a credit card that currently has a $0 balance to keep your cash advance from growing out of control.
A cash advance fee is one of the costs of a credit card cash advance. Cash advance fees can be a percentage of your advance – typically between 1% and 4% of the amount you take out. Or, the fee could be a flat rate. Some credit cards use a combination of the two to come up with your cash advance fee. For example, you might pay $15 or 4% of the cash advance, whichever is greater.
When you use an ATM to take out a cash advance on your credit card, you’ll also pay an ATM fee to the bank who owns the machine.
The highest costs of all are the finance charges that are applied to cash advance balances. Different types of credit card balances typically have different interest rates. You might have one interest rate for purchases, another for balance transfers, and yet another for cash advances. Of all the interest rates, cash advance rates are the highest. This means you’ll have the highest finance charges on your cash advance.
Unlike purchases, you don’t get a grace period for cash advances, so interest starts accruing the day you take it out. You’ll pay interest on a cash advance even if you pay off the balance when your statement comes. Until you pay off the cash advance in full, your balance accrues monthly interest, making it harder to repay.
The way credit card companies apply payments to your credit card could mean your cash advance balance increases rather than decreases. When you have multiple types of balances on your credit card, your issuer probably applies your payment to the lowest interest rate balance first. Meanwhile, the highest interest rate balance (your cash advance) isn’t credited any payment at all until it’s the only balance you’re carrying.
If you want to take out a cash advance on your credit card, make sure you understand the cost. Use a credit card that currently has a $0 balance to keep your cash advance from growing out of control.
Keep Your Credit Cards Active
Credit card issuers are on a rampage – cutting credit limits, increasing interest rates, and closing inactive credit card accounts. Though you don’t have much control over rising interest rates and decreased credit limits, you can keep your credit cards open by using them every once in awhile.
Why are creditors closing inactive cards?
Credit card companies don’t make any money on accounts that aren’t used. In fact, it costs them money. During this credit crisis, it’s risky for credit card companies to have unused credit cards on their books, because it’s hard to predict what you’re going to do with the credit card. You could decide to max out the card one day and never pay back the balance. In this case, it’s cheaper for the credit card company to just let you go.
Why should I care?
Having a credit card closed could lower your credit score. First, part of your credit score calculation considers the age of your credit – an older credit history is better. If your oldest credit card gets closed, it won’t be factored into your credit score. Your credit will seem younger, and your credit score will drop.
Another part of your credit score measures your level of debt by comparing your total balances to your total credit limits. The higher your credit card balances in relation to your credit limits, the lower your credit score will be. Having a credit card closed raises your ratio of balances to credit limits – your credit utilization – and lowers your credit score.
What can I do?
If your credit card has recently been closed, call your credit card issuer and request to have your account reopened. It helps if you’ve been a long-time, timely-paying customer.
Keep your credit card open by using it periodically and paying the balance off when the billing statement comes. By doing this, you’re letting your credit card know that you still appreciate and use the credit card.
Why are creditors closing inactive cards?
Credit card companies don’t make any money on accounts that aren’t used. In fact, it costs them money. During this credit crisis, it’s risky for credit card companies to have unused credit cards on their books, because it’s hard to predict what you’re going to do with the credit card. You could decide to max out the card one day and never pay back the balance. In this case, it’s cheaper for the credit card company to just let you go.
Why should I care?
Having a credit card closed could lower your credit score. First, part of your credit score calculation considers the age of your credit – an older credit history is better. If your oldest credit card gets closed, it won’t be factored into your credit score. Your credit will seem younger, and your credit score will drop.
Another part of your credit score measures your level of debt by comparing your total balances to your total credit limits. The higher your credit card balances in relation to your credit limits, the lower your credit score will be. Having a credit card closed raises your ratio of balances to credit limits – your credit utilization – and lowers your credit score.
What can I do?
If your credit card has recently been closed, call your credit card issuer and request to have your account reopened. It helps if you’ve been a long-time, timely-paying customer.
Keep your credit card open by using it periodically and paying the balance off when the billing statement comes. By doing this, you’re letting your credit card know that you still appreciate and use the credit card.
3 Things to Check On Your Credit Report
Your credit report is one of the most important documents of your life. It’s like your financial permanent record. Nearly everything you do with money follows you around on your credit report for future creditors and lenders to see and judge you by. You should look at your credit report at least once a year to make sure everything’s being recorded correctly. Here are three things you should check when you review your credit report.
It’s your report. Check the name, current and previous addresses, and current and previous employers. Confirm that the correct names are associated with your social security number. Married women may see their maiden names on their credit reports. But, if you’re a Jr. or Sr., make sure the correct one appears on your report.
The accounts are yours. Look through each account to be sure it’s yours. Mistakes have been known to happen, putting the wrong credit card accounts on the wrong credit reports. If you find an account that doesn’t belong to you, dispute it with the credit bureaus. If you find multiple inaccurate accounts, you may have been a victim of identity theft. In that case, you should file a fraud alert with the credit bureaus.
Your payment history is correct. Each account lists the number of delinquencies you have in your payment history. For example, one of your accounts might say “30 days late, one time” or “charged-off.” Delinquent payment history is negative and can only be reported for seven years. If the late payments are inaccurate or the reporting time limit has passed, you can dispute the information with the credit bureau.
When you order your credit report, it will have instructions on disputing negative information. Make sure you send your dispute in writing and save a copy for yourself. Expect to receive a response from the credit bureau within 30-45 days.
It’s your report. Check the name, current and previous addresses, and current and previous employers. Confirm that the correct names are associated with your social security number. Married women may see their maiden names on their credit reports. But, if you’re a Jr. or Sr., make sure the correct one appears on your report.
The accounts are yours. Look through each account to be sure it’s yours. Mistakes have been known to happen, putting the wrong credit card accounts on the wrong credit reports. If you find an account that doesn’t belong to you, dispute it with the credit bureaus. If you find multiple inaccurate accounts, you may have been a victim of identity theft. In that case, you should file a fraud alert with the credit bureaus.
Your payment history is correct. Each account lists the number of delinquencies you have in your payment history. For example, one of your accounts might say “30 days late, one time” or “charged-off.” Delinquent payment history is negative and can only be reported for seven years. If the late payments are inaccurate or the reporting time limit has passed, you can dispute the information with the credit bureau.
When you order your credit report, it will have instructions on disputing negative information. Make sure you send your dispute in writing and save a copy for yourself. Expect to receive a response from the credit bureau within 30-45 days.
Friday, December 19, 2008
Mortgage Rates Fall: Should You Refinance?
After Feds cut interest rates to below 1% on December 16th, mortgage rates fell to the lowest point since 1976. Many homeowners rushed to refinance their mortgages effectively lowering their monthly payments by hundreds of dollars. Should a mortgage refinance be in your future?
The Cost of a Mortgage Refinance
The biggest thing standing between you and a new mortgage is the cost. Remember the fees you paid when you closed on your home, those are the same fees you’ll pay when you refinance your mortgage. So, refinancing your mortgage will cost thousands of dollars – 3% to 6% of your loan amount, according to National City Mortgage, headquartered in Miamisburg, Ohio.
Whether the cost outweighs the benefit depends on how much you save each month on your mortgage payments and how long you plan to stay in your house. For example, if you pay $2,500 in fees to refinance your mortgage and lower your monthly payment by $200, it will take you just more than a year to break even. It only makes sense to refinance your mortgage if you plan to stay in your home longer than the time to break even. If you’re in it for the long haul, refinancing your mortgage is definitely something you can consider.
Who Can Refinance Their Mortgage?
For more information on refinancing, please click here.
While mortgage refinancing is perhaps just as attractive, it’s not as easy as it was during the height of the credit boom. First, refinancing options are far more limited with only 15-year and 30-year fixed-rate mortgages available. It makes sense though, since most homeowners want to refinance their way out of the unpredictable adjustable rate mortgages that played a major role in the current economic crisis.
Not only are there fewer choices of loans for refinancing, qualification is also more difficult. Borrowers need to have 10%-20% equity in their homes or a down payment of that amount.
As always credit history plays a major role in qualifying for a mortgage refinance. Borrowers should have good-to-excellent credit scores to get the best rates on a new loan. Subprime refinance loans are rare, perhaps even impossible.
Watch Out for Prepayment Penalties
If your current mortgage has a prepayment penalty, it could cost you more to get out of your current mortgage and into a new one. Work with your lender to negotiate an elimination of the penalty.
The Cost of a Mortgage Refinance
The biggest thing standing between you and a new mortgage is the cost. Remember the fees you paid when you closed on your home, those are the same fees you’ll pay when you refinance your mortgage. So, refinancing your mortgage will cost thousands of dollars – 3% to 6% of your loan amount, according to National City Mortgage, headquartered in Miamisburg, Ohio.
Whether the cost outweighs the benefit depends on how much you save each month on your mortgage payments and how long you plan to stay in your house. For example, if you pay $2,500 in fees to refinance your mortgage and lower your monthly payment by $200, it will take you just more than a year to break even. It only makes sense to refinance your mortgage if you plan to stay in your home longer than the time to break even. If you’re in it for the long haul, refinancing your mortgage is definitely something you can consider.
Who Can Refinance Their Mortgage?
For more information on refinancing, please click here.
While mortgage refinancing is perhaps just as attractive, it’s not as easy as it was during the height of the credit boom. First, refinancing options are far more limited with only 15-year and 30-year fixed-rate mortgages available. It makes sense though, since most homeowners want to refinance their way out of the unpredictable adjustable rate mortgages that played a major role in the current economic crisis.
Not only are there fewer choices of loans for refinancing, qualification is also more difficult. Borrowers need to have 10%-20% equity in their homes or a down payment of that amount.
As always credit history plays a major role in qualifying for a mortgage refinance. Borrowers should have good-to-excellent credit scores to get the best rates on a new loan. Subprime refinance loans are rare, perhaps even impossible.
Watch Out for Prepayment Penalties
If your current mortgage has a prepayment penalty, it could cost you more to get out of your current mortgage and into a new one. Work with your lender to negotiate an elimination of the penalty.
Year-End Credit Report Review
By federal law, you’re able to receive a free annual credit report from each of the three credit bureaus – Equifax, Experian, and TransUnion. If you haven’t looked at your credit report all year, now’s a good time to order it. You can start the year off on the right credit foot.
The credit report won’t come to you automatically. Instead, you can check your free annual credit report at www.annualcreditreport.com without a credit card and without signing up for any kind of subscription service. Your credit reports will be available for download the same day you order them.
Once you get your credit report, you should review it thoroughly to make sure all the information included is accurate.
Make sure all the accounts that are being reported actually belong to you. Transposed social security numbers and other identity mix-ups can put someone else’s account on your credit report. You can have those removed. If you believe you’ve been a victim of identity theft, you should take extra steps to correct the situation.
Make sure each account’s payment history is accurately reported. Payment history has the biggest impact on your credit score. Inaccurately reported late payments will undeservedly cost credit score points.
Make sure the current balances and credit limits are correct. Your level of debt is the other big player in your credit score. As your balances get closer to your credit limit, your credit score starts to drop. Inaccurately reported credit card balances and limits could have the same effect.
You can have errors removed from your credit report by writing to the credit bureaus and providing proof of the errors.
The credit report won’t come to you automatically. Instead, you can check your free annual credit report at www.annualcreditreport.com without a credit card and without signing up for any kind of subscription service. Your credit reports will be available for download the same day you order them.
Once you get your credit report, you should review it thoroughly to make sure all the information included is accurate.
Make sure all the accounts that are being reported actually belong to you. Transposed social security numbers and other identity mix-ups can put someone else’s account on your credit report. You can have those removed. If you believe you’ve been a victim of identity theft, you should take extra steps to correct the situation.
Make sure each account’s payment history is accurately reported. Payment history has the biggest impact on your credit score. Inaccurately reported late payments will undeservedly cost credit score points.
Make sure the current balances and credit limits are correct. Your level of debt is the other big player in your credit score. As your balances get closer to your credit limit, your credit score starts to drop. Inaccurately reported credit card balances and limits could have the same effect.
You can have errors removed from your credit report by writing to the credit bureaus and providing proof of the errors.
Major Changes to Credit Card Rules
To apply for a credit card, click here.
The Federal Reserve voted on December 18 to approve rules that would reform several unfair practices within the credit card industry. Some of the rules include:
· No interest rate increases during the first year of opening an account, unless the interest rate increase was disclosed when you opened the account. You can enjoy your interest rate for a full 12 months without having your credit card issuer increase your interest rate. The exception is when the lender told you your rate would increase when you opened your account. For example, you knowingly signed up for a credit card with a 6-month promotional rate.
· No interest rate charges on pre-existing credit card balances. If your interest rate increases, you can continue to pay your current balance at the lower interest rate. Only charges made after the interest rate increase will have the new interest rate.
· Credit card issuers must give a 45-day notice before increasing your interest rate. This is a drastic change over the current 15-day advance notice time period. The 45-day advanced-noticed includes penalty rate increases.
· Your minimum payment can be increased if you don’t make the minimum payment within 30 days of the due date.
· No more double billing cycle finance charges in which credit card issuers calculate your finance charge using an average of the current and previous month’s average daily balances. Under this method, you would end up paying interest on balances you’d already paid.
· Subprime credit cards can no longer charge fees that exceed 50% of the credit limit. Furthermore, the fees charged when the credit card is first opened can’t exceed 25% of the credit limit. Other fees must be spread evenly over a minimum of 5 billing cycles.
Although the rules make strides in protecting consumers from unscrupulous credit card issuers and their expensive practices, they won’t take effect until January 1, 2010. That gives credit card issuers plenty of time to wreak havoc on consumers.
The Federal Reserve voted on December 18 to approve rules that would reform several unfair practices within the credit card industry. Some of the rules include:
· No interest rate increases during the first year of opening an account, unless the interest rate increase was disclosed when you opened the account. You can enjoy your interest rate for a full 12 months without having your credit card issuer increase your interest rate. The exception is when the lender told you your rate would increase when you opened your account. For example, you knowingly signed up for a credit card with a 6-month promotional rate.
· No interest rate charges on pre-existing credit card balances. If your interest rate increases, you can continue to pay your current balance at the lower interest rate. Only charges made after the interest rate increase will have the new interest rate.
· Credit card issuers must give a 45-day notice before increasing your interest rate. This is a drastic change over the current 15-day advance notice time period. The 45-day advanced-noticed includes penalty rate increases.
· Your minimum payment can be increased if you don’t make the minimum payment within 30 days of the due date.
· No more double billing cycle finance charges in which credit card issuers calculate your finance charge using an average of the current and previous month’s average daily balances. Under this method, you would end up paying interest on balances you’d already paid.
· Subprime credit cards can no longer charge fees that exceed 50% of the credit limit. Furthermore, the fees charged when the credit card is first opened can’t exceed 25% of the credit limit. Other fees must be spread evenly over a minimum of 5 billing cycles.
Although the rules make strides in protecting consumers from unscrupulous credit card issuers and their expensive practices, they won’t take effect until January 1, 2010. That gives credit card issuers plenty of time to wreak havoc on consumers.
Long Loan Shopping Could Hurt Your Credit Score
It’s a good idea to shop around for a loan to make sure you get the best terms and even better the lowest interest rate. But, loan shopping could hurt your credit score.
An inquiry is placed on your credit report each time a lender checks your credit history to qualify you for a loan. Your credit report is a compilation of most of your credit and loan accounts and is the key factor used to determine your credit score. Credit inquiries count for 10% of your overall credit score. Each additional inquiry can knock your credit score down a few points, affecting your ability to qualify for another loan.
The model for the FICO score – the most well-known and widely-used credit score – helps protect you from the impact of rate shopping for mortgage and auto loans. The scoring model essentially ignores inquiries made within a 30-day window while you’re rate shopping. So, if you find a loan during that time, your lenders never know you’ve been putting in loan applications all over town. Even after the 30-day “grace period” is up, all the inquiries you’ve made are treated as just one inquiry when your credit score is updated.
The FICO score calculation has been updated a few times over the years, so the length of the grace period depends which credit score calculator your lender’s using. One model has a 14-day grace period, another uses 30-days, and the newest model uses a 45-day time span.
It’s important to note that the loan-shopping grace period for credit report inquiries only applies to mortgage and auto loans. If you’re shopping for another kind of loan, you don’t get the convenience of hidden inquiries. When you’re on the market for a personal or student loan, your best bet is to find a loan within a few days before the credit report inquiry makes it to your credit report. Otherwise, your credit score will feel the full brunt of your rate shopping. Then again, inquiries only count for 10% of your overall score, so they couldn’t hurt that much, could they?
An inquiry is placed on your credit report each time a lender checks your credit history to qualify you for a loan. Your credit report is a compilation of most of your credit and loan accounts and is the key factor used to determine your credit score. Credit inquiries count for 10% of your overall credit score. Each additional inquiry can knock your credit score down a few points, affecting your ability to qualify for another loan.
The model for the FICO score – the most well-known and widely-used credit score – helps protect you from the impact of rate shopping for mortgage and auto loans. The scoring model essentially ignores inquiries made within a 30-day window while you’re rate shopping. So, if you find a loan during that time, your lenders never know you’ve been putting in loan applications all over town. Even after the 30-day “grace period” is up, all the inquiries you’ve made are treated as just one inquiry when your credit score is updated.
The FICO score calculation has been updated a few times over the years, so the length of the grace period depends which credit score calculator your lender’s using. One model has a 14-day grace period, another uses 30-days, and the newest model uses a 45-day time span.
It’s important to note that the loan-shopping grace period for credit report inquiries only applies to mortgage and auto loans. If you’re shopping for another kind of loan, you don’t get the convenience of hidden inquiries. When you’re on the market for a personal or student loan, your best bet is to find a loan within a few days before the credit report inquiry makes it to your credit report. Otherwise, your credit score will feel the full brunt of your rate shopping. Then again, inquiries only count for 10% of your overall score, so they couldn’t hurt that much, could they?
Few Days Left To Lower Your 2008 Tax Bill
As the year comes to a close, you may be looking for ways to reduce your taxable income to keep from handing more of your hard-earned dollars to the IRS next April.
Start by reviewing your year-to-date income for 2008, along with your expenses, and deductions. You can use an online tax preparation service like TurboTax.com to enter your information and gauge your potential tax liability. If it seems like you’re going to owe some taxes next year, you have a few more days left to do something about it.
To learn more about understanding your income taxes, please click here.
Defer your income. For most people, the year you receive income is the year you count it in your taxes. If additional income will put you in a higher tax bracket or make you owe taxes, you may want to defer that extra income until January 1.
Pay some medical bills. You can deduct all medical expenses that exceed 7.5% of your adjusted gross income. Add up the medical bills you’ve paid for the year and if they’re above or near the threshold, find some extra medical bills to pay. Prescriptions, eye glasses, and hospital services are included.
Pay January’s health insurance premium. Self-employed taxpayers can deduct 100% of the health insurance premiums paid during 2008. You can pay your health insurance premium for January and take that deduction for next year’s taxes.
Contribute to your 401(k). In 2008, you can contribute up to $15,500 to your 401(k). Contributions to your 401(k) are taken from your pre-tax dollars, so you can reduce your taxable income by maxing out your 401(k) contribution. If you’re younger than 49, you can also contribute $5,000 to an IRA ($6,000 for those 50 and older).
Make an extra mortgage payment. Mortgage interest paid is tax-deductible, so not only will an extra payment put you one step closer to having the mortgage paid off, it will also help out on your taxes. Watch out for prepayment penalties.
For more ways to reduce your tax bill, consult with a professional tax preparer, an accountant, or a tax attorney.
Start by reviewing your year-to-date income for 2008, along with your expenses, and deductions. You can use an online tax preparation service like TurboTax.com to enter your information and gauge your potential tax liability. If it seems like you’re going to owe some taxes next year, you have a few more days left to do something about it.
To learn more about understanding your income taxes, please click here.
Defer your income. For most people, the year you receive income is the year you count it in your taxes. If additional income will put you in a higher tax bracket or make you owe taxes, you may want to defer that extra income until January 1.
Pay some medical bills. You can deduct all medical expenses that exceed 7.5% of your adjusted gross income. Add up the medical bills you’ve paid for the year and if they’re above or near the threshold, find some extra medical bills to pay. Prescriptions, eye glasses, and hospital services are included.
Pay January’s health insurance premium. Self-employed taxpayers can deduct 100% of the health insurance premiums paid during 2008. You can pay your health insurance premium for January and take that deduction for next year’s taxes.
Contribute to your 401(k). In 2008, you can contribute up to $15,500 to your 401(k). Contributions to your 401(k) are taken from your pre-tax dollars, so you can reduce your taxable income by maxing out your 401(k) contribution. If you’re younger than 49, you can also contribute $5,000 to an IRA ($6,000 for those 50 and older).
Make an extra mortgage payment. Mortgage interest paid is tax-deductible, so not only will an extra payment put you one step closer to having the mortgage paid off, it will also help out on your taxes. Watch out for prepayment penalties.
For more ways to reduce your tax bill, consult with a professional tax preparer, an accountant, or a tax attorney.
Monday, December 15, 2008
Resist Store Credit Card Offers
Retail store representatives unfailingly try to get you to sign up for their retail-branded credit cards. “You can save 15% off your purchase today by signing up for our credit card.” They get incentives for each person who signs up for a credit card. So, saving you 15% is agenda-pushing at its best.
Given that store credit card interest rates are in the 20% range, you don’t really save 15% on your purchase unless you pay your balance in full when the first statement comes in the mail. And how many of us actually do that? You can get much better interest rates on non-retail-branded credit cards that you can use in multiple places.
Another reason you should say “no” to store credit cards, it’s never good to sign up for a credit card on impulse. Instead, you should shop around for a credit card based on your spending habits – not the stores where you shop. Even annoying credit card mail offers send you the interest rate and fees for the credit card. Store credit cards don’t give you that luxury. They expect you to open up a new credit card without giving you any information about the card, for $15 off your purchase.
Then, consider the impact of a new credit card on your credit score. First, your credit score takes a hit when you make the application for credit. An inquiry is placed on your credit report and influences your credit score for 12 months. The inquiry doesn’t fall off your credit report until 24 months have passed.
Store credit cards typically dole out credit like there’s a credit famine. You can count on having a low credit limit. Your credit utilization will increase which will cause your credit score to drop a little more.
The list of cons for a store credit card outweigh the pros. Don’t let an offer to save you a few bucks cloud your judgment.
Given that store credit card interest rates are in the 20% range, you don’t really save 15% on your purchase unless you pay your balance in full when the first statement comes in the mail. And how many of us actually do that? You can get much better interest rates on non-retail-branded credit cards that you can use in multiple places.
Another reason you should say “no” to store credit cards, it’s never good to sign up for a credit card on impulse. Instead, you should shop around for a credit card based on your spending habits – not the stores where you shop. Even annoying credit card mail offers send you the interest rate and fees for the credit card. Store credit cards don’t give you that luxury. They expect you to open up a new credit card without giving you any information about the card, for $15 off your purchase.
Then, consider the impact of a new credit card on your credit score. First, your credit score takes a hit when you make the application for credit. An inquiry is placed on your credit report and influences your credit score for 12 months. The inquiry doesn’t fall off your credit report until 24 months have passed.
Store credit cards typically dole out credit like there’s a credit famine. You can count on having a low credit limit. Your credit utilization will increase which will cause your credit score to drop a little more.
The list of cons for a store credit card outweigh the pros. Don’t let an offer to save you a few bucks cloud your judgment.
No Bailout for the Big Three
Whether it was a good decision or not remains to be seen, but the Big Three automakers – Chrysler, Ford, and GM – won’t be getting the $14 billion loan they requested from the federal government. The bailout deal failed in the Senate with a 52-35 vote, but needed at least 60 votes to move to the next stage of the voting process.
While Ford executives have said they could possibly withstand the crisis, at least for a few more months, neither GM nor Chrysler is expected to withstand. Both companies are expected to go bankrupt in the coming months.
A bankruptcy for GM and Chrysler doesn’t mean the giant automakers will cease to exist, but there will be some major changes in the way the companies do business. First, as the companies restructure their businesses under bankruptcy, they could cut their operations leading to massive layoffs. Then, there would be many dealership closings from those who specialize in GM and Chrysler. That means a further reduction in the workforce and a reduction in the revenue for the cities and states where those dealerships operate.
Car buyers would likely have fewer brands to choose from when they’re shopping from GM and Chrysler brands as the company get rid of some of their bottom performers. GMC, Pontiac, Buick, Saab, Saturn, Hummer, Volvo, and Dodge are on the chopping blog, according to CNNMoney.com.
If you already have a Big Three vehicle, you might wonder whether your warranty is still covered. Since a warranty is a contract offered by the car manufacturer, it’ll still be valid. Of course, the hard part will be finding a dealership to do warranty repairs given that many are expected to close.
Leases are contracts too and you can’t get out of one just because the dealership closed down. If your dealership is closing, find out what to do with your vehicle when the lease ends.
On the bright side, you can expect to see some competition in the form of incentives. So, look for a good deal if you’re on the market for a new car in the coming year.
Looking for a car loan? Click here.
While Ford executives have said they could possibly withstand the crisis, at least for a few more months, neither GM nor Chrysler is expected to withstand. Both companies are expected to go bankrupt in the coming months.
A bankruptcy for GM and Chrysler doesn’t mean the giant automakers will cease to exist, but there will be some major changes in the way the companies do business. First, as the companies restructure their businesses under bankruptcy, they could cut their operations leading to massive layoffs. Then, there would be many dealership closings from those who specialize in GM and Chrysler. That means a further reduction in the workforce and a reduction in the revenue for the cities and states where those dealerships operate.
Car buyers would likely have fewer brands to choose from when they’re shopping from GM and Chrysler brands as the company get rid of some of their bottom performers. GMC, Pontiac, Buick, Saab, Saturn, Hummer, Volvo, and Dodge are on the chopping blog, according to CNNMoney.com.
If you already have a Big Three vehicle, you might wonder whether your warranty is still covered. Since a warranty is a contract offered by the car manufacturer, it’ll still be valid. Of course, the hard part will be finding a dealership to do warranty repairs given that many are expected to close.
Leases are contracts too and you can’t get out of one just because the dealership closed down. If your dealership is closing, find out what to do with your vehicle when the lease ends.
On the bright side, you can expect to see some competition in the form of incentives. So, look for a good deal if you’re on the market for a new car in the coming year.
Looking for a car loan? Click here.
Thursday, December 11, 2008
The Debt Collection Business is Booming
When you don’t pay your bills, they don’t go away, they get worse. Your creditors, lenders, and even service providers pass your unpaid bills off to debt collectors who spend their days (and nights) trying to get you to pay. Debt collectors often are very aggressive in getting you to pay your debts. They have no problem with emptying your wallet as long as they get paid.
What many consumers don’t realize is that debt collectors have rules to follow when they’re trying to collect a debt from you. The federal law known as the Federal Debt Collection Practices Act provides the guidelines debt collectors are required to follow when they’re dealing with consumers.
Phone CallsDebt collectors can only call you from 8 in the morning until 9 at night based on your local time. They’re not allowed to harass you over the phone or call you repeatedly. If your employer doesn’t want you to receive calls from debt collectors at work, debt collectors can’t call you there. Debt collectors aren’t allowed to tell most other people about your debt. When they’re leaving a message for you, they can’t say anything that indicates they’re collecting a debt. You can stop a debt collector from calling you completely by sending them a letter that says you no longer wish to receive phone calls from them.
Collection TacticsDon’t be intimidated by debt collectors. It’s their job to intimidate you. It’s how they get paid. They may ask you questions about your income. They may quote information from your credit report about other bills you’re paying, but it’s illegal for debt collectors to make certain threats against you. For example, they can’t threaten to have you arrested, take your social security income, or to harm you or your property. Debt collectors aren’t allowed to use profanity or obscene language. They can’t make threats they don’t intend to follow through on just to scare you into paying.
Paying CollectionsBefore you pay a debt collection, make sure it’s your debt. Collectors have to validate your debt if you send a written request within the first 30 days of contact. Once you’ve confirmed it’s your debt, then use your budget to decide if and when you can afford to pay off the debt.
If you need assistance with managing your debts, click here.
What many consumers don’t realize is that debt collectors have rules to follow when they’re trying to collect a debt from you. The federal law known as the Federal Debt Collection Practices Act provides the guidelines debt collectors are required to follow when they’re dealing with consumers.
Phone CallsDebt collectors can only call you from 8 in the morning until 9 at night based on your local time. They’re not allowed to harass you over the phone or call you repeatedly. If your employer doesn’t want you to receive calls from debt collectors at work, debt collectors can’t call you there. Debt collectors aren’t allowed to tell most other people about your debt. When they’re leaving a message for you, they can’t say anything that indicates they’re collecting a debt. You can stop a debt collector from calling you completely by sending them a letter that says you no longer wish to receive phone calls from them.
Collection TacticsDon’t be intimidated by debt collectors. It’s their job to intimidate you. It’s how they get paid. They may ask you questions about your income. They may quote information from your credit report about other bills you’re paying, but it’s illegal for debt collectors to make certain threats against you. For example, they can’t threaten to have you arrested, take your social security income, or to harm you or your property. Debt collectors aren’t allowed to use profanity or obscene language. They can’t make threats they don’t intend to follow through on just to scare you into paying.
Paying CollectionsBefore you pay a debt collection, make sure it’s your debt. Collectors have to validate your debt if you send a written request within the first 30 days of contact. Once you’ve confirmed it’s your debt, then use your budget to decide if and when you can afford to pay off the debt.
If you need assistance with managing your debts, click here.
How to Avoid Overdraft Charges
Debit cards and online banking have it easier to spend money and they’ve also made it easier to overdraft your bank account. Back in the days of cash and checks, you could easily figure out your bank account balance and how much you were able to spend. All you had to do was track your balance in your checkbook register. Add up the amount of checks you’d written and subtract it from your last known balance. Viola!
After you’ve swiped your check card several times throughout the day, paid some bills online, and withdrawn cash from the ATM, keeping up with your account balance is hard. Then, factor in way charges hit your account at different times and convenience becomes an ingredient in a recipe for disaster.
Many banks won’t stop you from using your check card when it could overdraft your account. In fact, some purposely process your transactions in a way that makes you overdraft. You can count on paying that fee for every item that posts to your negative balance. If you leave your account overdrawn for too long and you’ll start incurring daily fees for the negative balance.
Overdrafts weren’t always handled this way. A few years ago, banks would just reverse transaction and charge you a non-sufficient funds fee. After that, the merchant could present the transaction for payment a second time. If you still didn’t have the funds, you’d get hit with another non-sufficient funds fee. On top of all that, you’d have to pay the merchant directly for the transaction plus a returned check fee. You could end up paying $90 on a $10 transaction.
You can avoid overdraft fees by keeping up with your account balance and the purchases you make. Link your checking account to a savings account or line of credit that will fund any charges that exceed your balance. If you’ve already incurred some overdraft charges, talk to your bank’s customer service to find out if you can have them refunded.
After you’ve swiped your check card several times throughout the day, paid some bills online, and withdrawn cash from the ATM, keeping up with your account balance is hard. Then, factor in way charges hit your account at different times and convenience becomes an ingredient in a recipe for disaster.
Many banks won’t stop you from using your check card when it could overdraft your account. In fact, some purposely process your transactions in a way that makes you overdraft. You can count on paying that fee for every item that posts to your negative balance. If you leave your account overdrawn for too long and you’ll start incurring daily fees for the negative balance.
Overdrafts weren’t always handled this way. A few years ago, banks would just reverse transaction and charge you a non-sufficient funds fee. After that, the merchant could present the transaction for payment a second time. If you still didn’t have the funds, you’d get hit with another non-sufficient funds fee. On top of all that, you’d have to pay the merchant directly for the transaction plus a returned check fee. You could end up paying $90 on a $10 transaction.
You can avoid overdraft fees by keeping up with your account balance and the purchases you make. Link your checking account to a savings account or line of credit that will fund any charges that exceed your balance. If you’ve already incurred some overdraft charges, talk to your bank’s customer service to find out if you can have them refunded.
Hope for the Best, But Prepare for a Layoff Anyway
In this job market, it’s hope for the best, prepare for the worst. Companies are reporting layoffs daily. Unfortunately, job security isn’t at its peak right now. You should always plan for the unexpected, no matter how unlikely you think it might be, and that includes a layoff.
Update your resume. Make sure you’ve updated your resume to reflect your latest duties and accomplishments. If you wait until after you’ve left your job, you forget to add something important. Having your resume updated gives you one less thing to worry about as you search for a new job.
Network. Connect with friends and relatives who work in other companies. It’ll be easier to ask someone for a job favor if you’ve recently been in contact with them than if you haven’t spoken to them in years. Always look for opportunities to talk to new people. You never know who’s going to help you get into your next job.
Build an emergency fund. You can’t predict how long you’ll be looking for a new job. In the meantime, you’ll need some money to live on. An emergency fund will help you pay the bills until you get a new job. Put enough money in your emergency fund to pay three to six months of living expenses.
Pay off some debt. If you can get rid of some credit card debt while you’re still gainfully employed, you’ll have fewer bills to worry about if you lose your job. Build your emergency fund first, though. You can always float on minimum credit card payments until you’re able to pay first.
Get to know your unemployment laws. In the event of a layoff, new legislation could allow you to receive up to half your income for 39 weeks. Check with your state’s unemployment agency to find out more about the unemployment laws where you live.
A layoff is most painful when you’re unprepared for it. Take a few steps to stabilize your financial life and a layoff won’t hurt so badly.
To learn how to manage your debt, click here.
Update your resume. Make sure you’ve updated your resume to reflect your latest duties and accomplishments. If you wait until after you’ve left your job, you forget to add something important. Having your resume updated gives you one less thing to worry about as you search for a new job.
Network. Connect with friends and relatives who work in other companies. It’ll be easier to ask someone for a job favor if you’ve recently been in contact with them than if you haven’t spoken to them in years. Always look for opportunities to talk to new people. You never know who’s going to help you get into your next job.
Build an emergency fund. You can’t predict how long you’ll be looking for a new job. In the meantime, you’ll need some money to live on. An emergency fund will help you pay the bills until you get a new job. Put enough money in your emergency fund to pay three to six months of living expenses.
Pay off some debt. If you can get rid of some credit card debt while you’re still gainfully employed, you’ll have fewer bills to worry about if you lose your job. Build your emergency fund first, though. You can always float on minimum credit card payments until you’re able to pay first.
Get to know your unemployment laws. In the event of a layoff, new legislation could allow you to receive up to half your income for 39 weeks. Check with your state’s unemployment agency to find out more about the unemployment laws where you live.
A layoff is most painful when you’re unprepared for it. Take a few steps to stabilize your financial life and a layoff won’t hurt so badly.
To learn how to manage your debt, click here.
Friday, December 5, 2008
You Could Pay Taxes on Settled Debts
Debt settlement offers relief on one end, but it may come back to bite you on the other end. The IRS (Internal Revenue Service), the agency responsible for tax collection and tax law enforcement, requires businesses to report any cancelled debts over $600. Not only does the business report the debt cancellation to the IRS, it’s also required to send you notification of the reported cancellation. The business gets a tax break that could be funded by you.
You’re required to report cancelled debts on you income tax return. Reporting the debt increases your taxable income and could potentially put you in another tax bracket, especially if you were teetering on the edge of brackets to begin with. That means you could end up owing Uncle Sam if you didn’t have enough money withheld to cover the increased tax responsibility. If you’re getting a refund, your check would end up being less.
Debt cancellation counts whether the business forgave the entire debt or just part of the debt (like with debt settlement). It doesn’t matter whether you used a debt settlement firm or whether you negotiated the debt yourself, a cancellation is a cancellation.
To learn more about debt settlement, click here.
If the debt was cancelled due to a bankruptcy discharge or because you were insolvent, you won’t have to pay taxes on it. Insolvency occurs when your liabilities (debt) are more than your assets.
If you receive a 1099-C Cancellation of Debt form from one of your ex-creditors or lenders consult with your accountant or tax preparer to find out whether you’ll have to include the cancelled debt on your tax return and how the debt cancellation will affect your tax liability.
If you would like to learn more about bankruptcy, click here.
You’re required to report cancelled debts on you income tax return. Reporting the debt increases your taxable income and could potentially put you in another tax bracket, especially if you were teetering on the edge of brackets to begin with. That means you could end up owing Uncle Sam if you didn’t have enough money withheld to cover the increased tax responsibility. If you’re getting a refund, your check would end up being less.
Debt cancellation counts whether the business forgave the entire debt or just part of the debt (like with debt settlement). It doesn’t matter whether you used a debt settlement firm or whether you negotiated the debt yourself, a cancellation is a cancellation.
To learn more about debt settlement, click here.
If the debt was cancelled due to a bankruptcy discharge or because you were insolvent, you won’t have to pay taxes on it. Insolvency occurs when your liabilities (debt) are more than your assets.
If you receive a 1099-C Cancellation of Debt form from one of your ex-creditors or lenders consult with your accountant or tax preparer to find out whether you’ll have to include the cancelled debt on your tax return and how the debt cancellation will affect your tax liability.
If you would like to learn more about bankruptcy, click here.
Pulling From Retirement Should Be the Very Last Resort
Times are tough, sure enough, but if you’re pulling from your retirement now, what are you going to live on when you’re 65? With the uncertain future of social security benefits, retirement savings could be the only income we have in the coming years. That’s why it’s so important keep retirement funds untouchable.
A recent survey by Bank of America shows that 18% of respondents took an early withdrawal from their retirement funds because of the economic crisis. Of those that pulled from their funds, 25% withdrew money for credit card bills, 22% for mortgage payments, and 22% because of a job loss.
There’s another reason that to leave retirement savings alone – early withdrawal penalties. If you withdraw money from your retirement before you’re allowed, the withdrawal is taxed and subject to a 10% early withdrawal penalty. If the withdrawal comes from a SIMPLE IRA that you opened within the past two years, the penalty is 25%.
The early retirement withdrawal penalty and shortage of retirement funds aren’t worth it, especially when you have other options.
Do you have access to savings, non-retirement investments, or an emergency fund? Withdrawing money from any of these places is better than taking money out of your retirement.
Do you have valuable assets you can sell? Before you pull money from retirement, try selling some high-valued assets like jewelry or a vehicle. The profit may very well be enough to get you through the tough times leaving your retirement savings intact.
If you’ve recently been laid off through no fault of your own, you may be entitled to unemployment benefits from the government. A new law may allow you to receive up to 39 weeks of unemployment. Your state’s unemployment agency will be able to tell you whether you qualify for unemployment, the amount you’ll be able to receive, and how long you’ll receive the benefit.
If you are behind on your mortgage payments, click here.
A recent survey by Bank of America shows that 18% of respondents took an early withdrawal from their retirement funds because of the economic crisis. Of those that pulled from their funds, 25% withdrew money for credit card bills, 22% for mortgage payments, and 22% because of a job loss.
There’s another reason that to leave retirement savings alone – early withdrawal penalties. If you withdraw money from your retirement before you’re allowed, the withdrawal is taxed and subject to a 10% early withdrawal penalty. If the withdrawal comes from a SIMPLE IRA that you opened within the past two years, the penalty is 25%.
The early retirement withdrawal penalty and shortage of retirement funds aren’t worth it, especially when you have other options.
Do you have access to savings, non-retirement investments, or an emergency fund? Withdrawing money from any of these places is better than taking money out of your retirement.
Do you have valuable assets you can sell? Before you pull money from retirement, try selling some high-valued assets like jewelry or a vehicle. The profit may very well be enough to get you through the tough times leaving your retirement savings intact.
If you’ve recently been laid off through no fault of your own, you may be entitled to unemployment benefits from the government. A new law may allow you to receive up to 39 weeks of unemployment. Your state’s unemployment agency will be able to tell you whether you qualify for unemployment, the amount you’ll be able to receive, and how long you’ll receive the benefit.
If you are behind on your mortgage payments, click here.
Getting a Good Loan Rate
These days getting approved for a loan is hard. Getting approved and getting a good interest rate is even harder. But, it’s not impossible.
If you want to get a good interest rate on a loan, the most important thing to have is a good credit score. Without a solid credit history, you can forget the competitive interest rates. These days, lenders are looking for credit scores of 720 or higher to give loan applicants a good rate. So before you fill out a loan application, check your credit score. That way, you’ll know whether you’re ok to apply for a loan, or if you need to do some work on your score.
For those who need some credit score work, one of the quickest ways to see a boost in your score is to dispute inaccurate items from your credit report. If your credit score is below 720, check your credit report to make sure there are no errors. If you do find a mistake, dispute it with all three credit bureaus to make sure your complete credit history is correct.
To look at all three of your credit reports, click here.
The other thing you’ll need to get a good interest rate is a verifiable income. The days of stated-income loans are long gone. With a stated-income loan, the lender would “take your word for it” so to speak in exchange for a higher interest rate. You got the loan without the trouble of proving your income. The bank got extra money. Everyone was happy. It doesn’t quite work like that. You need to be able to prove your income with recent paystubs, bank statements, and income tax returns. Some self-employed individuals who take large businesses deductions might have trouble even getting approved for a loan, much less get a good interest rate, even with good credit scores.
Finally, you’ll need to reduce your debt. Lenders want to see your debt-to-income ratio below 36%, even after you’ve taken on the new loan. You can calculate your debt-to-income ratio by dividing your total monthly income by your total monthly debt payments.
If you want to get a good interest rate on a loan, the most important thing to have is a good credit score. Without a solid credit history, you can forget the competitive interest rates. These days, lenders are looking for credit scores of 720 or higher to give loan applicants a good rate. So before you fill out a loan application, check your credit score. That way, you’ll know whether you’re ok to apply for a loan, or if you need to do some work on your score.
For those who need some credit score work, one of the quickest ways to see a boost in your score is to dispute inaccurate items from your credit report. If your credit score is below 720, check your credit report to make sure there are no errors. If you do find a mistake, dispute it with all three credit bureaus to make sure your complete credit history is correct.
To look at all three of your credit reports, click here.
The other thing you’ll need to get a good interest rate is a verifiable income. The days of stated-income loans are long gone. With a stated-income loan, the lender would “take your word for it” so to speak in exchange for a higher interest rate. You got the loan without the trouble of proving your income. The bank got extra money. Everyone was happy. It doesn’t quite work like that. You need to be able to prove your income with recent paystubs, bank statements, and income tax returns. Some self-employed individuals who take large businesses deductions might have trouble even getting approved for a loan, much less get a good interest rate, even with good credit scores.
Finally, you’ll need to reduce your debt. Lenders want to see your debt-to-income ratio below 36%, even after you’ve taken on the new loan. You can calculate your debt-to-income ratio by dividing your total monthly income by your total monthly debt payments.
The Bailout List
Under the Emergency Economic Stabilization Act of 2008, more commonly known as the $700 bailout, the government promised to loan money to the nation’s banks to prevent Wall Street from completely crashing. The funds would be released in two $350 phases.
So far $161.5 billion has been given to banks. Another $108.5 billion has been applied for.
Who’s Got the Money?
So far, we know that AIG has been given some of the bailout money. Other banks include:
· Citigroup - $45 billion
· AIG - $40 billion
· JPMorgan Chase - $25 billion
· Wells Fargo - $25 billion
· Bank of America - $15 billion
· Goldman Sachs - $10 billion
· Merrill Lynch - $10 billion
· Morgan Stanley - $10 billion
· U.S. Bancorp - $6.6 billion
· Capital One - $3.5 billion
· Regions Financial - $3.5 billion
· SunTrust - $3.5 billion
Several smaller, more local banks have also received money. See a complete list of bailed-out banks at the New York Times.
Will consumers get a bailout?
The Federal Reserve announced a program that would assist banks in meeting consumer and small business needs. The Term Asset-Backed Securities Loan Facility would help banks issue consumer and small business loans including student loans, auto loans, credit card loans, and SBA loans. The Federal Reserve Bank of New York plans to lend $200 billion to this effort. Another $20 billion will come from the $700 billion bailout.
So far $161.5 billion has been given to banks. Another $108.5 billion has been applied for.
Who’s Got the Money?
So far, we know that AIG has been given some of the bailout money. Other banks include:
· Citigroup - $45 billion
· AIG - $40 billion
· JPMorgan Chase - $25 billion
· Wells Fargo - $25 billion
· Bank of America - $15 billion
· Goldman Sachs - $10 billion
· Merrill Lynch - $10 billion
· Morgan Stanley - $10 billion
· U.S. Bancorp - $6.6 billion
· Capital One - $3.5 billion
· Regions Financial - $3.5 billion
· SunTrust - $3.5 billion
Several smaller, more local banks have also received money. See a complete list of bailed-out banks at the New York Times.
Will consumers get a bailout?
The Federal Reserve announced a program that would assist banks in meeting consumer and small business needs. The Term Asset-Backed Securities Loan Facility would help banks issue consumer and small business loans including student loans, auto loans, credit card loans, and SBA loans. The Federal Reserve Bank of New York plans to lend $200 billion to this effort. Another $20 billion will come from the $700 billion bailout.
How to Get Through the Recession
Though the government avoided saying the “r” word for months, it’s been officially announced that the United States has been in a recession since December 2007.
Your job could be at risk. Cutting jobs are one of the ways companies keep down their operating costs. The country has already reached its highest level of unemployment since 1996 and more companies announce massive layoffs. You never know if your job is next so it’s a good idea so have an emergency fund of three to six months of living expenses to hold you until your next job.
It could be hard finding a job after a layoff. The overall number of jobs has decreased and that makes it hard to find a job once you’re unemployed. Use your emergency fund wisely and take advantage of your state’s unemployment insurance.
Update your resume now. If you get laid off, you’ll be able to start looking for a new job immediately. Take advantage of any skills training your current job offers. The more skills you have the more attractive you will be to future employers.
Keep your credit card debt under control. Though you may be tempted to rely on credit cards or loans to help you get through the recession, it’s better to keep your debt level low. That way, in the unfortunate event of a job loss, your debt bills will be lower.
Lock in your mortgage interest rate. Part of the recession was caused by increased mortgage payments on adjustable rate mortgages. As mortgage payments increased, consumers had less money to spend on consumable goods. Work with your lender to modify your loan with a fixed interest rate. Or, try to refinance your mortgage into a fixed-rate mortgage. Though your payments might be higher than they are currently, you never have to worry about them increasing.
Your job could be at risk. Cutting jobs are one of the ways companies keep down their operating costs. The country has already reached its highest level of unemployment since 1996 and more companies announce massive layoffs. You never know if your job is next so it’s a good idea so have an emergency fund of three to six months of living expenses to hold you until your next job.
It could be hard finding a job after a layoff. The overall number of jobs has decreased and that makes it hard to find a job once you’re unemployed. Use your emergency fund wisely and take advantage of your state’s unemployment insurance.
Update your resume now. If you get laid off, you’ll be able to start looking for a new job immediately. Take advantage of any skills training your current job offers. The more skills you have the more attractive you will be to future employers.
Keep your credit card debt under control. Though you may be tempted to rely on credit cards or loans to help you get through the recession, it’s better to keep your debt level low. That way, in the unfortunate event of a job loss, your debt bills will be lower.
Lock in your mortgage interest rate. Part of the recession was caused by increased mortgage payments on adjustable rate mortgages. As mortgage payments increased, consumers had less money to spend on consumable goods. Work with your lender to modify your loan with a fixed interest rate. Or, try to refinance your mortgage into a fixed-rate mortgage. Though your payments might be higher than they are currently, you never have to worry about them increasing.
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