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No on SB 5899: Payday loans don't solve crisis, they create one …

EDITORIAL


(March 13, 2015) – Remember two years ago, when the Republican-controlled Washington State Senate brought our state to the brink of a government shutdown?

The Senate had a list of ideological policy bills upon which they demanded House action before they would agree to an operating budget. After two overtime sessions, cooler heads finally prevailed and Gov. Jay Inslee signed a deal just hours before the budget cycle ended on July 1, prompting The (Everett) Herald to editorialize, “Ideology and partisanship, especially in the Senate, supplanted pragmatism.”

Good times… good times.

One of those 2013 ideological policy bills is back in 2015, and the more solidly Republican-controlled Senate just sent it to the House. It’s SB 5899, which would relax consumer protections against short-term high-interest payday loans that push low-income working families deeper and deeper into debt. The bill would replace the state’s limited payday loans with “installment loans” that would allow up to a year’s worth of interest and fees.

Washington’s current law limits payday loans to $700 per loan and no more than eight loans per year. Borrowers are charged a $95 fee and typically must pay it off in two weeks. Under SB 5899, a $700 loan would cost borrowers up to a total of $1,195 in principal, interest and fees if paid off in six months, and up to a total of $1,579 if it took a full year.

Organized labor and other advocates for low-income working families have joined anti-poverty and consumer groups in opposing SB 5899. Why? Because payday loans don’t solve a financial crisis, they create one. Borrowers often must take a second loan to pay off the first, and so on, leading to a spiral of debt that sucks them dry.

It also harms the economy.

A 2013 study by the Insight Center for Community Economic Development found that the national burden of repaying payday loans in 2011 led to $774 million in lost consumer spending, the loss of more than 14,000 jobs, and an increase in Chapter 13 bankruptcies. The study found that each dollar of interest paid to payday lenders subtracted $1.94 from the economy due to reduced household spending, while only adding $1.70 to payday lending establishments. It’s an anti-multiplier effect. For every dollar of interest paid in payday loan interest, the economy lost a quarter.

Remember last fall’s election, when voters were demanding greater access to short-term high-interest loans? Neither do we.

The 2015 legislative session was supposed to focus on last fall’s big campaign issues: funding basic education and transportation, addressing income inequality, and making sure our tax dollars (and tax incentives) are efficiently spent. How did promoting payday lending get in there again?

It began last fall, all right. But it didn’t come from the public, it came from Seattle-based payday lender MoneyTree.

Jim Brunner of The Seattle Times wrote an explosive story last week outing Moneytree as leading the full-court lobbying press to relax payday lending laws. He reports that the effort began last fall when the company and its executives, who traditionally direct their political contributions to Republicans, “sought to strengthen ties with Democrats, boosting donations to Democratic legislator campaigns in last fall’s elections, and quietly employing a well-connected Seattle public-affairs firm that includes the political fundraiser for Gov. Jay Inslee and other top Democrats.”

On Tuesday, a heroic effort was made by most of the Senate’s Democratic minority caucus to stop SB 5899 or amend it to lower the interest and fees payday lenders can charge. But those efforts were thwarted, and after a passionate debate that lasted more than two hours, the bill passed the Senate, 30-18, with Democratic Sens. Brian Hatfield, Steve Hobbs, Karen Keiser, Marko Liias, and Kevin Ranker joining all Republicans (except Sen. Kirk Pearson) in voting “yes.”

Now it heads over to the House, where its companion bill died without a floor vote after Wednesday’s cutoff deadline. The question is, given Moneytree’s… outreach… to Democrats, will it again die in their House? Will it again become embroiled in end-game budget negotiations to try to force its passage?

We hope not.

We agree with state Attorney General Bob Ferguson, who sent a letter to legislators opposing the bill, saying our state’s payday-lending system includes important safeguards for consumers “and does not need to be overhauled.”

We also agree with The (Tacoma) News Tribune, which wrote that payday lenders’ efforts to pass SB 5899 “have nothing to do with helping poor people and everything to do with their bottom line. Lawmakers should see this legislation for what it is and reject it. If it passes, Gov. Jay Inslee should veto it.”


The Stand is the news service of the Washington State Labor Council, AFL-CIO.

[…]

Payday Loans Are Bleeding American Workers Dry. Finally, the …

We’ve all seen the ads. “Need cash fast?” a speaker asks. “Have bad credit? You can get up to $1,000 within 24 hours.” The ad then directs you to a sketchy-sounding website, like 44cash.com, or a slightly-less-sketchy-sounding business, like PLS Loan Store. Most of us roll our eyes or go grab another beer when these commercials air. But 12 million people a year turn to payday lenders, who disguise the real cost of these loans. Borrowers often become saddled with unaffordable loans that have sky-high interest rates.

For years, states have tried to crack down on these deceptive business practices. Now, the Consumer Financial Protection Bureau (CFPB) is giving it a shot. On Monday, the New York Times reported that the CFPB will soon issue the first draft of new regulations on the $46 billion payday-lending industry. The rules are being designed to ensure borrowers have a better understanding of the real cost of payday loans and to promote a transparent and fair short-term lending market.

On the surface, payday loans sound like a good idea to many cash-strapped Americans. They offer a short-term loan—generally two weeks in length—for a fixed fee, with payment generally due on the borrower’s next payday. The average borrower takes out a $375 two-week loan with a fee of $55, according to the Pew Charitable Trust’s Safe Small-Dollar Loans Research Project which has put out multiple reports on payday lenders over the past few years. But payday lenders confuse borrowers in a couple of ways.

First, borrowers are rarely able to pay back their loans in two weeks. So they “roll over” the payday loan by paying just the $55 fee. Now, they don’t owe the $375 principal for another two weeks, but they’re hit with another $55 fee. That two-week, $375 loan with a $55 fee just effectively became a four-week, $375 loan with a $110 fee. If, after another two weeks, they still can’t repay the principal, then they will roll it over again for yet another $55 fee. You can see how quickly this can spiral out of control. What started as a two-week loan can last for months at a time—and the fees borrowers incur along the way end up dwarfing the principle. Pew found that the average borrower paid $520 in fees for the $375 loan, which was rolled over an average of eight times. In fact, using data from Oklahoma, Pew found that “more borrowers use at least 17 loans in a year than just one.”

Second, borrowers are often confused about the cost of the loan. The $55 fee—payday lenders often advertise a fee of $15 per $100 borrowed—sounds like a reasonable price for a quick infusion of cash, especially compared to a credit card with a 24-percent annual percentage rate (APR). But that’s actually an extremely high price. Consider the standard two-week, $375 loan with a $55 fee. If you were to roll that loan over for an entire year, you would pay $1,430 in fees ($55 times 26). That’s 3.81 times the original $375 loan—an APR of 381 percent.

Many borrowers, who badly need money to hold them over until their next paycheck, don’t think about when they’ll actually be able to pull it back or how many fees they’ll accumulate. “A lot of people who are taking out the loan focus on the idea that the payday loan is short-term or that it has a fixed $55 fee on average,” said Nick Bourke, the director of the Pew research project. “And they make their choice based on that.”

Lenders advertise the loans as a short-term fix—but their business model actually depends on borrowers accruing fees. That was the conclusion of a 2009 study by the Federal Reserve of Kansas City. Other research has backed up the study’s findings. “They don’t achieve profitability unless their average customer is in debt for months, not weeks,” said Bourke. That’s because payday lending is an inefficient business. Most lenders serve only 500 unique customers a year, Pew found. But they have high overhead costs like renting store space, maintaining working computers, and payroll. That means lenders have to make a significant profit on each borrower.

It’s also why banks and other large companies can offer short-term loans at better prices. Some banks are offering a product called a “deposit advance loan” which is nearly identical to a payday loan. But the fees on those loans are far smaller than traditional payday loans—around $7.50-$10 per $100 loan per two-week borrowing period compared with $15 per $100 loan per two-week period. Yet short-term borrowers are often unaware of these alternatives. In the end, they often opt for payday loans, which are much better advertised.

The CFPB can learn a lot about how to (and how not to) formulate its upcoming regulations from state efforts to crack down on payday lenders. Fourteen states and the District of Columbia have implemented restrictive rules, like setting an interest-rate cap at 36 percent APR, that have shutdown the payday-loan business almost entirely. Another eight states have created hybrid systems that impose some regulations on payday lenders, like requiring longer repayment periods or lower fees, but have not put them out of business. The remaining 28 states have few, if any, restrictions on payday lending:

The CFPB doesn’t have the power to set an interest rate cap nationally, so it won’t be able to stop payday lending altogether. But that probably shouldn’t be the Bureau’s goal anyways. For one, eliminating payday lending could have unintended consequences, such as by driving the lending into other unregulated markets. In some states, that seems to have already happened, with payday lenders registering as car title lenders, offering the same loans under a different name. Whether it would happen on a large scale is less clear. In states that have effectively outlawed payday lending, 95 percent of borrowers said they do not use payday loans elsewhere, whether from online payday lenders or other borrowers. “Part of the reason for that is people who get payday loans [are] pretty much mainstream consumers,” Bourke said. “They have a checking account. They have income, which is usually from employment. They’re attracted to the idea of doing business with a licensed lender in their community. And if the stores in the community go away, they’re not very disposed towards doing business with unlicensed lenders or some kind of loan shark.”

In addition, borrowers value payday lending. In Pew’s survey, 56 percent of borrowers said that the loan relieved stress compared to just 31 percent who said it was a source of stress. Forty-eight percent said payday loans helped borrowers, with 41 percent saying they hurt them. In other words, the short-term, high-cost lending market has value. But borrowers also feel that lenders take advantage of them and the vast majority want more regulation.

So what should that regulation look like? Bourke points to Colorado as an example. Lawmakers there capped the annual interest payment at 45 percent while allowing strict origination and maintenance fees. Even more importantly, Colorado requires lenders to allow borrowers to repay the loans over at least six months, with payments over time slowly reducing the principal. These reforms have been a major success. Average APR rates in Colorado fell from 319 percent to 129 percent and borrowers spent $41.9 million less in 2012 than in 2009, before the changes. That’s a 44 percent drop in payments. At the same time, the number of loans per borrower dropped by 71 percent, from 7.8 to 2.3.

The Colorado law did reduce the number of licensed locations by 53 percent, from 505 to 238. Yet, the number of individual consumers fell just 15 percent. Overall, that leads to an 81 percent increase in borrowers per store, making the industry far more efficient and allowing payday lenders to earn a profit even with lower interest rates and a longer repayment period.

Bourke proposes that the CFPB emulate Colorado’s law by requiring the lenders to allow borrowers to repay the loans over a longer period. But he also thinks the Bureau could improve upon the law by capping payments at 5 percent of borrower’s pretax income, known as an ability-to-repay standard. For example, a monthly payment should not exceed 5 percent of monthly, pretax income. Lenders should also be required to clearly disclose the terms of the loan, including the periodic payment due, the total cost of the loan (all fee and interest payments plus principal), and the effective APR.

The CFPB hasn’t announced the rules yet. But the Times report indicated that the Bureau is considering an ability-to-repay standard. The CFPB may also include car title lenders in the regulation with the hope of reducing payday lenders’ ability to circumvent the rules. However, instead of requiring longer payment periods, the agency may instead limit the number of times a lender could roll over a borrower’s loan. In other words, borrowers may only be able to roll over the loan three or four times a year, preventing them from repeatedly paying the fee.

If the Bureau opts for that rule, it could limit the effectiveness of the law. “That kind of tries to tackle a problem of repeat borrowing and long-term borrowing but that’s a symptom,” Bourke said. “That’s not really the core disease. The core disease is unaffordable payments.” In addition, it could prevent a transparent market from emerging, as payday lenders continue to take advantage of borrowers’ ignorance over these loans. “The market will remain in this mire,” Burke added, “where it’s dominated by a deceptive balloon payment product that makes it difficult for consumers to make good choices but also makes it difficult for better types of lenders to compete with the more fair and transparent product.” Ultimately, that’s in the CFPB’s hands.

[…]

Strapped for college cash? New ways to borrow

Private loans are often even higher. Many of the new products also target coding boot camps and other trade schools that aren’t accredited, and so not eligible for federal loans.

But nontraditional student loan models have been slow to catch on. “I remember easily half a dozen to a dozen companies that no longer exist because they weren’t able to make a go of it,” said Mark Kantrowitz, senior vice president at Edvisors.com. “Companies successful at this are no longer doing it.” For example, he said, peer-to-peer student lender Fynanz rebranded as LendKey last year, focusing on loans from the local and nonprofit financial institutions who were often investors under the old model.

Read MoreTo cut college costs, head abroad

Part of the difficulty is on the funding side. It’s not easy to gauge a student’s future earnings potential, let alone sell investors on that opportunity, said Jack Vonder Heide, president of Technology Briefing Centers. Pave’s new loans are a reimagining of its original income-share model, which let backers fund students in exchange for a portion of their post-graduation income rather than a set repayment amount. “We stopped issuing that product in April of this year because of the difficulty in scaling it from the investor side,” said co-founder Oren Bass.

Borrowers also tend to be less aware of the new offerings and more focused on established aid options. Often, rightly so. Current rates on federal subsidized and unsubsidized loans are 4.66 percent for all students, lower than the starting rates for start-ups’ best applicants. “It’s the rare student that is not able to get some aid from their college or the government,” said Vonder Heide. “They don’t really have to dig that deeply to find the money they need to make it work.”

Although Upstart offers loans for uses including paying for tuition and paying off outstanding student loans, since the company’s launch in May, much of the $20 million loaned out has been for other purposes, said Girouard. “The majority, frankly, is paying off credit card debt,” he said.

Read MoreBusiness schools are getting generous with aid

Students should exercise caution before signing on for loans from a start-up, said Kantrowitz. In most cases, it’s an avenue to explore only after traditional routes have been exhausted. “They are not a main way of paying for college,” he said. Fees can easily eat into savings, and some loans are variable rate—not a smart bet with interest rates expected to rise. Federal loans tend to be more flexible on repayment terms, especially if you run into financial trouble.

Sorry, borrowers, but even if the lending start-up goes under, you’ll still owe that outstanding balance. The start-ups have backup servicing companies in place. “There’s no way to make that debt magically disappear,” said Kantrowitz.

[…]

This Startup Will Give You a Loan — But There's a Twist

When the opportunity to buy an established hair salon fell into Hayley Groll’s lap in June, she quickly took stock of her financing options.

The veteran hairstylist was not approved by the online lender she initially contacted. Then she found Austin-based Able, which bills itself as a “collaborative lender.”

Within three weeks, Groll had a three-year, $105,000 loan, enough to buy Shag Salon and renew its 1,850-square-foot commercial lease for a decade. Even better was her interest rate of 9 percent.

The brainchild of Harvard MBAs Will Davis and Evan Baehr, Able offers business owners one- to three-year loans of $25,000 to $250,000 at 8 to 16 percent interest—but with a twist: Borrowers must raise the first 25 percent of the sum from friends and family.

“What we’re really doing is trying to find the people who are being missed by traditional banks and even nontraditional online lenders,” Davis says.

Able conducted a beta test prior to its official launch in June, tweaking the terms and procedures with each loan. The online lender has so far made 50 loans ranging from $5,000 to $150,000, mostly in the Austin area, but has received nearly $40 million in loan requests from ’treps nationwide. The plan, Davis says, is for the 14-person startup to begin financing some of those by year’s end.

How it works

To qualify for a loan, businesses must be at least 6 months old. Davis wouldn’t stipulate revenue requirements but says Able’s borrowers to date make $1 million or less annually.

After a business owner fills out an online application, Able uses its proprietary technology to assess the company’s bank accounts, cash flow and credit history—pretty standard stuff. What’s new is that Able’s algorithm also looks at a company’s social media following and reviews via Yelp, Facebook, Twitter and LinkedIn. Davis wouldn’t reveal how a business’s online footprint is weighted or what metrics help or hinder an applicant, but he claims that Able receives a more complete picture of a company’s creditworthiness than any bank can acquire.

“This is really innovative,” says Charles Green, managing director of the Small Business Finance Institute, a resource site for commercial lenders. “You talk to a commercial banker about Facebook, and they don’t even know what it is, except that their daughter has an account.”

Finding backers

Once Able gives the green light, borrowers need to line up at least three backers (friends, relatives, mentors, colleagues or customers) to collectively kick in 25 percent of the approved loan. Backers must contribute at least $1,000 each, and family cannot contribute more than half of the 25 percent. Hairstylist Groll received $30,000 in all from five backers, including three long-standing clients. (Able’s software automatically confirms that backers and borrowers are indeed acquainted.)

Depending how fast the borrower lines up backers, funding can arrive within two weeks of applying, “much quicker than traditional bank financing,” Davis says.

What it costs

In addition to APR rates, Able charges a loan origination fee of 3 percent, but there are no early-repayment or other fees. Borrowers choose whether they wish to repay the loan in one, two or three years, and Able’s platform handles repaying the backers directly.

While Able dictates the APR of its 75 percent loan contribution, the individual backers providing the other 25 percent are free to choose their own interest rates. Able takes their terms and blends everyone’s interest rates into one composite rate.

“In some cases,” Davis says, “some of the backers come in with a lower APR rate that reduces the overall interest rate of the loan itself.”

LoansFinance […]

Car Title Loan Requirements

A car title loan is a short-term loan in which the borrower’s car is used as collateral against the debt. Borrowers are typically consumers who do not qualify for other financing options.

If you live in a state that permits car title loans (see States That Allow Car Title Loans), here’s how getting one works. The borrower brings the vehicle and necessary paperwork to the lender. Although some title loan applications are available online, lenders still need to verify the condition of the vehicle – and the completeness of the paperwork – prior to releasing the funds. The lender keeps the title to the vehicle, places a lien on it, and gives the money to the borrower.

The loan limit is generally 25% to 50% of the car’s cash value (see Car Title Loan Limits). The borrower repays the loan, plus fees and interest, within the time period allowed (usually 30 days) and reclaims the title, lien-free.

Documents You Need

In order to obtain a car title loan, also called a pink slip loan, in most cases a borrower must own the vehicle outright; there may be no liens against the title. Lenders also require certain paperwork, including any or all of the following:

Original vehicle title showing sole ownership Government-issued identification matching the name on the title Utility bill or other proof of residency matching the name on the title Current vehicle registration Proof of vehicle insurance Recent paystubs or other proof of ability to repay the loan Names, phone numbers and addresses of at least two valid references Working copies of the vehicle’s keys

Some lenders also require a GPS tracking device to be attached to the car, in case the borrower defaults and the lender wins the right to repossess the car. Some of these devices are designed to permit the lender to disable the car remotely.

You do not need good credit to get a title loan. In fact, most title-loan lenders won’t check your credit at all, since the loan depends entirely on the resale value of the vehicle. Likewise, you do not need to be employed to qualify for a title loan.

Rates and Fees

Car title loans are considerably more expensive than traditional bank loans. Interest rates vary, but in states where the interest rate is not capped, it is generally set at 30% per month, or 360% annually. This means that a consumer who borrows $1,000 will need to repay $1,300 at the end of the 30 days to avoid going into default.

Most lenders charge a lien fee of at least $25 to $30. In states where title lending is not regulated, some lenders also charge origination fees, document fees, key fees, processing fees or other fees. The fees add up quickly, and can amount to an additional 20% to 25% premium (or more) on top of the loan and interest charges. Be sure to add up all the fees when figuring the total cost of the loan.

The Bottom Line

The best candidate for a car title loan is someone who owns a vehicle outright, understands the potentially high cost of the loan and has a reasonable expectation of having access to the cash to repay the loan before the repayment period expires. If there is no clear and realistic plan for paying off the loan, a car title loan can amount to selling the vehicle for half or less of its value.

Many title-loan borrowers renew their loans several times, making the financing much more expensive overall. So, again, the most critical consideration is ability to repay the loan on or before its due date. For more information, see Getting a Car Title Loan.

[…]

Before you tap your home for cash…

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NEW YORK (CNNMoney)

During the housing bust, many homeowners were cut off from a popular source of funds: their homes.

But as home prices recover, more people have been able to tap their home’s equity to pay for renovations, consolidate debts or help pay for other big ticket items.

Home equity lines of credit were up 27% during the year ended June 30, according to financial services company Experian and consulting firm Oliver Wyman. And more people are expected to follow suit.

But does that mean a home equity loan (HEL) or home equity line of credit (HELOC) is right for you? Here are five things you need to consider.

1. Rates

In recent years, mortgage rates have hovered near historic lows — with nearly 9 million borrowers getting 30-year fixed mortgages at or below 4%, according to CoreLogic.

Now rates are expected to rise.

“We may be in for a more volatile period,” said Keith Gumbinger, of HSH.com, a mortgage information firm. Coming to an end next month are several of the Federal Reserve’s efforts to keep rates low under its quantitative easing monetary policy, he noted.

So if you are one of the borrowers who locked in an ultra-low rate in the past few years, a home equity loan or HELOC could save you more money than refinancing the entire mortgage through a cash-out refinance.

Related: Best cities for Millennial buyers

If you refinance your loan now, you’re likely to pay a rate that is as much as a percentage point higher than your original loan. And you will be paying that rate on the entire loan balance.

“Somebody who has a 3.5% first mortgage is not going to do a cash-out refinance at 5.5% unless they absolutely have to,” said Greg McBride, senior financial analyst for BankRate.com.

While rates on home equity loans tend to be a couple of percentage points higher, you will only be paying that higher rate on a fraction of your total loan balance.

HELOCs tend to offer competitive rates, but they are often adjustable, meaning there is a risk they will rise. Again, you will only pay the higher rate on the amount of credit you’ve taken out.

2. Costs

The price you’ll pay upfront to get a home equity loan or HELOC is far cheaper than refinancing.

That’s because many lenders make you go through the full underwriting process when you refinance — and they charge all the fees that go along with that process, too.

How much do you know about mortgages?

You can expect to pay inspection and attorney review fees, for example, and you will have to get a new title search and insurance, which can typically cost $1,000 or more, depending on the size of your mortgage. In total, all of those upfront costs of refinancing can put you back two to three grand depending on the size of your loan.

Meanwhile, some lenders issue home equity loans or lines of credit with no upfront costs; borrowers pay for their application, appraisal and other fees by paying a higher interest rate.

3. Time

When you take out a home equity loan or HELOC, you keep making your payments on the same payment schedule.

When you refinance a loan, however, the clock resets.

Quiz: Are you a homebuying genius?

So even if you’ve paid 30 months on a 30-year loan and then refinance, when you make your first payment on the new loan it will be like starting at day one of the 30-year term.

However, if you opt to roll the 30-year loan into a 15-year one, that would then reduce the number of payments you make but increase the amount of your payments each month.

4. What the loan or line of credit is for

The best reason to take out a home equity loan is when it has some positive impact on your finances. Using it to pay for a renovation that adds value to your property, for example, or to pay for an advanced degree that can increase your earning power.

Of course, there are times when borrowing against your home doesn’t make sense.

It can be foolish to tap your home’s equity for nonessential spending, for example. Using home equity to buy a Mercedes, pay for a luxury vacation or make some other discretionary purchase can be a foolish move. The money will be gone and you will be paying off the debt for years to come.

Draining your home of equity can also put you on the road to foreclosure. Run into unexpected expenses and there’s one less source of funds to tap.

5.Tax benefits

Just like first mortgages, certain home equity loans and HELOCs are eligible for the home mortgage interest deduction. Borrowers can deduct up to $100,000 of interest paid on a mortgage’s principal.

That’s not always the case when you pursue a cash-out refinance.

First Published: October 7, 2014: 7:42 PM ET

[…]

5 things to consider before tapping your home for cash

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NEW YORK (CNNMoney)

During the housing bust, many homeowners were cut off from a popular source of funds: their homes.

But as home prices recover, more people have been able to tap their home’s equity to pay for renovations, consolidate debts or help pay for other big ticket items.

Home equity lines of credit were up 27% during the year ended June 30, according to financial services company Experian and consulting firm Oliver Wyman. And more people are expected to follow suit.

But does that mean a home equity loan (HEL) or home equity line of credit (HELOC) is right for you? Here are five things you need to consider.

1. Rates

In recent years, mortgage rates have hovered near historic lows — with nearly 9 million borrowers getting 30-year fixed mortgages at or below 4%, according to CoreLogic.

Now rates are expected to rise.

“We may be in for a more volatile period,” said Keith Gumbinger, of HSH.com, a mortgage information firm. Coming to an end next month are several of the Federal Reserve’s efforts to keep rates low under its quantitative easing monetary policy, he noted.

So if you are one of the borrowers who locked in an ultra-low rate in the past few years, a home equity loan or HELOC could save you more money than refinancing the entire mortgage through a cash-out refinance.

Related: Best cities for Millennial buyers

If you refinance your loan now, you’re likely to pay a rate that is as much as a percentage point higher than your original loan. And you will be paying that rate on the entire loan balance.

“Somebody who has a 3.5% first mortgage is not going to do a cash-out refinance at 5.5% unless they absolutely have to,” said Greg McBride, senior financial analyst for BankRate.com.

While rates on home equity loans tend to be a couple of percentage points higher, you will only be paying that higher rate on a fraction of your total loan balance.

HELOCs tend to offer competitive rates, but they are often adjustable, meaning there is a risk they will rise. Again, you will only pay the higher rate on the amount of credit you’ve taken out.

2. Costs

The price you’ll pay upfront to get a home equity loan or HELOC is far cheaper than refinancing.

That’s because many lenders make you go through the full underwriting process when you refinance — and they charge all the fees that go along with that process, too.

How much do you know about mortgages?

You can expect to pay inspection and attorney review fees, for example, and you will have to get a new title search and insurance, which can typically cost $1,000 or more, depending on the size of your mortgage. In total, all of those upfront costs of refinancing can put you back two to three grand depending on the size of your loan.

Meanwhile, some lenders issue home equity loans or lines of credit with no upfront costs; borrowers pay for their application, appraisal and other fees by paying a higher interest rate.

3. Time

When you take out a home equity loan or HELOC, you keep making your payments on the same payment schedule.

When you refinance a loan, however, the clock resets.

Quiz: Are you a homebuying genius?

So even if you’ve paid 30 months on a 30-year loan and then refinance, when you make your first payment on the new loan it will be like starting at day one of the 30-year term.

However, if you opt to roll the 30-year loan into a 15-year one, that would then reduce the number of payments you make but increase the amount of your payments each month.

4. What the loan or line of credit is for

The best reason to take out a home equity loan is when it has some positive impact on your finances. Using it to pay for a renovation that adds value to your property, for example, or to pay for an advanced degree that can increase your earning power.

Of course, there are times when borrowing against your home doesn’t make sense.

It can be foolish to tap your home’s equity for nonessential spending, for example. Using home equity to buy a Mercedes, pay for a luxury vacation or make some other discretionary purchase can be a foolish move. The money will be gone and you will be paying off the debt for years to come.

Draining your home of equity can also put you on the road to foreclosure. Run into unexpected expenses and there’s one less source of funds to tap.

5.Tax benefits

Just like first mortgages, certain home equity loans and HELOCs are eligible for the home mortgage interest deduction. Borrowers can deduct up to $100,000 of interest paid on a mortgage’s principal.

That’s not always the case when you pursue a cash-out refinance.

First Published: October 7, 2014: 7:42 PM ET

[…]

3 Helpful Tips to Pay Off Payday Loans Fast | Payday Loans Turbo …

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To Avoid Late Fees

At some point in life, you will need to borrow money for unexpected expenses, and maybe you will need more money than what you can raise from borrowing from friends or family member. When you obtain a payday loan to pay for an emergency such as paying mortgage loan and utilities you will need to repay your loan on the due date with your next paycheck. However, when your next paycheck is no longer an option, it is important that you know how to pay off payday loans to avoid late fees, wage garnishment or lawsuit.

Pay off Payday Loans

Here are some helpful tips to pay off payday loans:

1. Talk to the Lenders

When you cannot repay your loan back on the due date, it is best that you talk to the lenders to discuss available repayment options and reach an agreement that benefit both parties.

Take note, lenders often times will provide you with repayment options like rollover plan and installment plan. They do not discuss these options to clients when they apply for a loan, so you need to ask the lenders about repayment options available to you.

Rollover is when you are allowed to extend the original due date to another date for an additional fee of course. Installment plan, on the other hand, allows you to repay your loan on an installment basis. Usually lenders stop charging loan interest for installment plan, as the purpose of the plan is to pay off payday loans completely. However, the number of installment payment depends on the lender.

2. Pick The Right Repayment Plan

When choosing the repayment option, make sure you pick a payment plan that you can follow and achievable.

3. Stop Buying Nonessential Stuff

You can pay off payday loans when you stop buying unimportant items before your due date. When you stop buying nonessential stuff and just start saving money for a payday loan payment then you can pay off all your debts fast.

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City of El Paso May Place New Restrictions on Payday Loans

El Paso, Texas, is considering a zoning change that would restrict locations for new payday and auto title lenders. The change would not affect businesses already in operation.

If passed, credit-access businesses and pawn shops could not open within 1,000 feet of each other, 300 feet of residential districts, or 500 feet of any freeway. They would not be able to open in shopping centers or as part of another business, such as gas stations and grocery stores.

“The law is trying to get them away from low-income areas, schools and the freeway,” said city Rep. Claudia Ordaz. “I hope that municipalities in the county take the initiative to limit their presence out there as well.”

Earlier this year, El Paso became the fourth Texas city to pass an ordinance for payday lenders. The city limited payday loans to 20 percent of a borrower’s gross monthly income and restricted title loans to either 3 percent of income or 70 percent of the vehicle’s value. Borrowers also can only renew the loan three times.

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Payday Loans For Retired People-instantly Approved Cash …

Are you retired and living on pension? It might be difficult for you to meet your expenditures and desires within your pension. Here are payday loans for retired people to let you meet your financial crunches without any trouble and hassle. These loans are short term and temporary financial assistance that offer you instant money for letting you overcome your bad financial time right away. It is considerable loan option for retired people who need swift fiscal aid without any delay.

The assistance of payday loans for retired people is worthwhile loan aid to cure your unexpected medical bills, sudden car damage, education fee and so on. One can quickly access the desired loan money with the simplicity and speed of online application method. To grab the affordable deal, compare the loan quotes and negotiate with the lender. Application include filling a single application form with few required detailed and submit it to the lenders site. Grab the money right within least possible hours.

It does not matter if you are having several bad factors, loans for retired people are free from credit checking process. CCJ, arrears, defaults, bankruptcy, skipped payments, foreclosures and so on do not affect the approval of loan. There will be no credit verification and you do not have to face any discrimination at all. Borrowers with any type of credit scores whether bad or good can enjoy the aid of this loan deal with ease.

Approval can be given to those who will fulfill the desired eligibility criteria. The applicant should hold a valid and active checking account for direct online transaction. Also, he should be a permanent citizen of UK and should complete the age of eighteen years or more. Plus, he should have full time or part time employment with the earning of at least 1000 per month. Meeting these requirements will let you enjoy the hassle free loan deal without any delay.

As the name says, payday loans for retired people are small loan aid without any collateral demand. Thus, the application of this loan takes away all the hassle related to collateral assessment and time consuming paper work procedures.

In order to meet your financial commitments in the soonest possible time, this loan would be beneficial to apply with. Do not face the delays and messy loan processing as it can be quickly applied via online method without any faxing hassles.

This entry was posted in Finance and tagged , on July 22, 2014 by […]