Archives For Debt

When you have bad credit, securing a loan for any purpose is a challenge. The more inquiries you have into your credit report, the harder it will be to obtain the loan. It is ideal to try and clear up a few small accounts on your credit report before applying for a loan to aid your chances of approval. There are a few other options discussed below to help you get the funds you need quickly.

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What Are Your Financial Priorities?

Michelle —  September 17, 2012 — 1 Comment

Everyone has some sort of financial priority in their life.  Setting priorities can be very good for a person or a family. If you know what you are striving for, then you most likely will try a little harder and put more effort towards it.

Without priorities, then everything would be all over the place. How would a person even know where to start, where to end, when things are going run, etc.? How will individuals know when to celebrate completing a goal as well?

Maybe you want to eliminate all of your debt, give a higher percentage of your income to charity, go to school, pay off your house, retire early or just have financial freedom. Each person is different in how they value different things in their life, and their different financial priorities. One thing to keep in mind that even if financial priorities are similar, you shouldn’t always compare yourself to others. Different people complete their goals differently of course.

How to set financial priorities for yourself:

1. Decide what you value the most.

Make a list of what’s important to you. You probably have a very long list of things that you want to accomplish. What honestly cannot wait another second? Try to determine what should be done first and what can wait a little while.  You can sort through the rest of the financial things you need to do as well, and maybe you can contribute to the rest equally but put most of your might to your top priorities.

Think about your future and think about where you want to be and what you want to have done. This is the first step!

2. Let people join you.

If there are others, such as family and friends, who might have similar priorities as you, then let them join you. You and them can most likely push each other to achieve your similar goals. Talking about things out loud can also be helpful.

Also, sit down with your family to make sure that everyone is on the same page. If everyone agrees on the financial priority, it will make it much easier, and of course, much less arguments.

3. Make sure your goal or goals are possible and realistic.

Creating a goal of paying off all your debt in one year when you know it’s absolutely not possible, then it’s probably not a SMART goal. A smart goal is specific, measurable, achievable, rewarding and track-able.

If your goal is not possible, then you are most likely spending way too much time (and wasting time) on something that will not work out in the end. And then you are also sidetracking other goals that you should be working on as well.

4. Keep track and always adjust.

You should constantly be keeping track of your goals. Try to set maybe a certain time for when you will track how you are doing. Maybe daily (if you want to be very on track), weekly, monthly or some other amount of time.

This way, if something does happen to be OFF track, then you can try to adjust it. It’s of course much better than waiting to see how you’re doing a year later and figuring out that you are way off track what you wanted to be.

5. Be prepared for things that will throw you off track.

In the end, something will most likely come up. If something sidetracks your goal or priority for a little bit, don’t let it ruin everything. Realize that things will come up and not everything can be scheduled perfectly.

What are your priorities?

What’s on the back-burner for you now?

Many individuals have been stuck in this situation: your friend complains that they have no money, and then they either directly or indirectly ask you if you can lend them any money to help them out. Or maybe your friend or family member is just constantly complaining about their lack of money. So, what do you do? How do you know when or if you should lend money to someone?

Usually when you’re on the outside of the situation and someone is telling you this, your instant gut reaction is “NO! Don’t lend anyone money!”

However, when you’re on the spot and someone is asking you, then it’s much, much harder to decide. It is especially hard to say no when you know that the person truly needs the money and that you can actually help by lending them what you can.

Helping people out with their money situations isn’t always a horrible idea. Recently, someone drained my sister’s bank account.  Her bank said they would put all the money back since it was identity theft. However, it would take a couple of weeks. I lent my sister money for gas and everything else. I had faith that she would pay me back, so I was not worried.

Also recently, my friend bought a house at an auction. He wanted the house before it went to auction, and submitted a bid, but the bank said it was going to auction soon so they rejected it. He was able to secure that house at around $30,000 less than the bid he put in. But the catch was that he needed cash for this. His family all gathered money for him and he bought the house with cash. He now has a contract with them through the bank to pay them all back with a 4% interest rate.

In this case, his family is extremely trusting him with their money, but they have were smart with obtaining a lot of paperwork and also going through the bank as well to make sure that nothing would fall through.

However, there are times when you should say no also. If your gut instinct is that this is a horrible idea, then don’t do it! You don’t want to risk a relationship that you have over money.

Things to Do Before Lending Money

There are many things that you need to think about when you lend money:

1. Think. Think about all of the possible positives and negatives that could potentially happen from this lending situation. Also, give yourself time to think it over. There is no need to rush to the ATM as soon as your family or family member asks you for help.

You need to really think over and make sure that this is a good idea.

2. If you don’t get the money back, then what will happen? Are you willing to lose the relationship over money, or will you forgive and forget? This is tough because the person might continue to ask you to lend more money.

Also, there is the potential that it could create a rift in many relationships that you have. People might choose sides. Is this worth it?

3. Don’t lend what you can’t afford. You would think this would be an easy concept, but many lend much more than they can afford. There is the probability that the person won’t pay you back.

Would you be alright if they didn’t pay you back? Or are you financially dependent on getting the money back in a certain amount of time?

4. Discuss the terms of the arrangement and get it in writing. Yes, getting the arrangement and terms in writing might seem too formal and the person will think that you don’t trust them, but this is a smart idea. This will help everyone understand what is happening, and if anyone forgets what was agreed upon in the future, then you are able to look back on your agreement and terms.

5. Talk about it. Understand what the money is for. If you don’t agree with it right in the beginning, then you will want to say no now instead of bugging them about their money choices later when they are trying to pay you back. Talk about payment terms, interest rates, schedules, etc.

Have you ever lent money to a friend or family member? How did it go?

Choosing the most adequate credit card for your needs has never been an easy task, given the large number of options available and the difficulty understanding the exact terms and conditions of each product. In the current climate of economic uncertainty, making the right decision is more important than ever, so as to avoid getting into further financial difficulties.

To help consumers with that decision, we have listed the four main points to consider when choosing a credit card.

1- Consider your spending habits

This is a basic element to consider, as overlooking this point could result in being stuck with the wrong credit card. It is essential to have a clear idea of the amount of money that you will be charging to your credit card every month. Determining this point will prevent you from choosing a credit card that has the right level of spending limits.

2- Take into account your previous credit history

Having a less-than-perfect credit history does not mean you cannot have access to a credit card. In fact, there are cards specifically designed for consumers in these circumstances. If this is your case, choose a credit card with the lowest standard interest rate possible (although APR rates in these particular cards tend to stand at 30 – 40 per cent), or go for a “bottom-up card”, which allows you to gradually increase your credit limit.

Alternatively, consumers who already have an existing debt may benefit from 0 per cent credit card deals, which allow them to transfer balances from other cards at no extra cost.

3- Low APR rates are not always the best deal

Some consumers are attracted by cards that advertise a low standard interest rate. However, and depending on your individual situation, these cards may not be the best option. Consumers who are able to pay their balance in full every month will not benefit from low APR rates and should not choose a credit card solely on that basis. Additionally, beware of the expression “typical APR rates”, as this means that rates can be modified (and increased) depending on your particular circumstances.

4- What if you can’t pay?

Due to unexpected events, there is a possibility that you might be late paying your monthly balance or that you exceed your credit limit. Credit card providers charge a fee in these cases, so it is important to go for the provider with the lowest fees. Also, ensure that the advertised APR rate will not increase in the event of late payment.

There are thousands and thousands of people out there living lives of quiet, screaming desperation who work long, hard hours, at jobs they hate, to enable them to buy things they don’t need to impress people they don’t like.

- Nigel Marsh


Buying Things to Impress People

       The Christian Financial Alliance was created to help readers. The idea is this: Create a panel of biblical finance gurus – people who take seriously the call to teach the Bible accurately with grace and truth. Once a month, we post a question with a response from our panel to provide you with well-rounded, sound, biblical advice. For more on the Christian Financial Alliance (or to join our team) click here.

Name one spiritual reason to get out of debt.



       ”When you’re in debt it can become a barrier to your relationship with Christ. As Matthew 6:24 says, “No one can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money.” When you have a large amount of debt it can cause money to become your master, at the detriment of your walk with Christ.” – BibleMoneyMatters.com


       ”Because it’s wise to do so. Every time the Bible talks about debt, it does so as a warning or in a negative light – debt is never presented in a positive manner. The Bible’s wisdom says to avoid debt and the soundness of that advice has been proven time and time again.” – FreeMoneyFinance.com



       ”While debt itself is not evil, it can be a sign pointing to a deeper problem in our lives. The typical person in thousands of dollars of credit card debt gets there by being focused on consumerism and materialism rather than pursuing God’s kingdom first. (That’s not always the case, but it is very common.) So a good spiritual reason to get out of debt is to break that cycle of buy, buy, buy and free yourself from valuing your life based on your possessions. For many people, getting out of debt can be a first step to passionately pursuing God’s kingdom.” – ProvidentPlan.com


       ”Self-control is a fruit of the Spirit (Gal. 5:23). Avoiding and getting out of debt requires self-control (to say the least!). Therefore, I think we learn a lot about this fruit when we start steering away from debt.” – DollarsandDoctrine.com


       ”Debt can hinder our ability to hear God’s call on our life. We can have so many bills to pay that if God calls us to some type of work that pays less that what we’re currently making we may think we have a fuzzy connection. Living free from the bondage of debt frees us to hear and respond to whatever He calls us to.” – MattaboutMoney.com


       ”Wonderful opportunities to serve the Lord are jeopardized when debt obligations demand our constant attention. It’s awfully hard to purchase airline tickets and the supplies needed to go on a missions trip when monthly payments for the Visa and line of credit consume most or all of our income above the basic necessities. Imagine how great it would be to hear of a need for help and be able to pay cash – not only to visit that country to work – but to generously give to the individuals who stay there serving the Lord when we return home! Financial freedom from debt not only releases us from repayment bondage but it allows us to answer God’s calling when asked to serve Him.” – StewardshipWeekly.com


       For more on the Christian Financial Alliance (or to join our team) click here.


       Readers, what would your answer be? What’s a spiritual reason to get out of debt? What did you think of the responses? Share your thoughts in the comments below!

Is Renting Throwing Away Money?

Corey —  December 20, 2010 — 6 Comments

Rent or Buy - Your Choice!       I recently had a friend comment that renting is “throwing away money”. This is a common misconception because home ownership has been touted as the best path to building wealth and a great decision for everyone. But the truth is that renting isn’t really as bad as some would have you think. In fact, it can be the best choice for many people – it all depends on your situation.

       But specifically, I want to look at the idea that paying rent is just throwing away money. The unspoken assumption in that idea is that once you buy a home you’re no longer throwing away money. This simply isn’t true. Here are five ways you throw away money when you buy a home.

1. Mortgage Interest

       Assuming you get a mortgage when you buy a house, like most everybody does, you’re going to have mortgage payments to make. Part of those payments will go toward the principal (what you paid for the house minus your down payment) and part will go toward interest.

       The part of your mortgage payment that goes toward interest is just as much “throwing away money” as rent payments are. It’s money you’ll never get back and does nothing to improve your net worth. And on an average 30 year mortgage, it’s going to take you about 16 years before you’re paying more toward your principal than you are toward interest.

       Granted, this isn’t as big of an issue later in your mortgage and it doesn’t matter at all once it’s paid off. But don’t underestimate just how much money you’re going to be throwing away on mortgage interest – especially at the beginning.

       And while we’re on the topic of mortgage interest, let me just add that the mortgage interest tax deduction isn’t as good as you think

2. Homeowner’s Insurance

       Homeowner’s insurance can cost anywhere from about $600 a year to $1,200 a year or more. By comparison, my renter’s insurance policy costs about $110 per year and it’s some pretty good coverage. So you’re looking at an additional $500 to $1,100 or more in insurance premiums because you’re covering the entire value of the home. (Renter’s insurance is mostly just for liability and contents of the home.)

       Part of the money that’s “thrown away” in rent goes toward the insurance coverage the landlord buys for the home. So make sure you take this into account when comparing the difference between renting and owning.

3. Property Taxes

       Own a home? Be ready for your property taxes, which can be anywhere from 0.25% of the value of your home up to 3% or more. The national average was around 1% the last time I looked. So for a $150,000 to $200,000 home, you’re talking $1,500 to $2,000 a year in property taxes.

       Renters don’t pay separate property taxes on the home they’re renting. Those taxes come out of the rent they pay, but renters never see a separate bill for property taxes owed.

       And no, you can’t refuse to pay your property taxes. Do so and you can say goodbye to your home.

4. Home Maintenance and Repairs

       As a homeowner, you’re completely responsible for all maintenance and repairs on your home. These costs are going to vary quite a bit based on each situation, but I’d say a reasonable estimate would be about 1-2% of your home’s value each year. So for our $150,000 to $200,000 home, we’re talking about another $1,500 to $4,000 a year in costs. Maybe you could get away with less, but you’re looking at a minimum of $500 to $1,000 per year.

       Renters? Yeah, they don’t have to deal with these costs. They’re the responsibility of the landlord. And while you could have a landlord that doesn’t take care of the property, it’s pretty easy to move somewhere else. Which brings me to…

5. Higher Costs for Moving

       Moving tends to be much more of a hassle for homeowners than renters. It can take some time to sell a home – time you may or may not have before you need to move or start paying on your next mortgage. On top of that, you’ve got costs associated with selling that come out of your final price (commissions, inspections, and sometimes closing costs if you’re in a real hurry). Some of these costs can be reduced by doing it yourself (for sell by owner) but then you’re looking at more time and effort on your part (and you’ll still want to get a real estate attorney).

       Renters have it pretty easy here. Assuming you’re at the end of your lease, it’s no big deal to find another place and move. And if you’re not at the end of your lease, it’s probably going to cost you less to break the lease than it would cost a homeowner to sell their house.

Repeat after me: “Renting is not always throwing away money.”

       It should be clear that there are plenty of ways to throw away money if you own a home – enough ways to make it worse than renting. That’s the case for me, at least, and that’s why I plan to rent for quite a while longer. I’d need a phenomenal deal to make buying a better choice than renting at this point. And it may be the case for you as well. The least you could do is take some time to play with a rent vs. buy calculator and see how the numbers work out for you.

       I should add that I didn’t even discuss the fact that many people tend to overbuy when they become homeowners. And did I mention the desire to remodel, upgrade, paint, redecorate, landscape, and on and on and on? Home ownership isn’t quite the great financial asset many make it out to be.

(photo credit: Phil Sexton on Flickr)

This post was included in the Carnival of Personal Finance.

This post was included in the Festival of Frugality.