Are You Facing a Problem With a Creditor?

March 21, 2017

From 2008-2011, I volunteered my time to work at various community events to help people navigate the Great Recession. It didn’t take long before I started to hear story after story of people feeling trapped by various financial products, such as loans with questionable terms and credit cards with due dates that were like moving targets, one miss and your interest rates jumped. At that time, the best I could offer was complaining to the creditor or better business bureau. Today, when people feel that a creditor has treated them unfairly, they can turn to the Consumer Financial Protection Bureau for help.

The Consumer Financial Protection Bureau (CFPB) was birthed from the financial crisis in 2008 under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The CFPB is unique in that it is the first government agency exclusively focused on protecting you from unfair and unlawful financial practices. One of the major features of the CFPB is the ability to get a third party involved in a dispute you may have with a creditor. If you have an issue with a creditor and feel like you are hitting a brick wall, you can take the following steps.

1. Submit Your Story: If you are angry but do not feel your issue warrants a formal complaint, consider submitting your story. Your story is published but does not include any sensitive information. This can serve as a warning to others that are thinking of using the same financial product and/or service.

2. Submit a Complaint: If you have an issue and feel like you are getting nowhere, consider filing a complaint. Once your complaint is submitted, you get an email along with updates as to the status of your complaint. Your complaint is then forwarded to the creditor in question and the creditor has 15 days to reply. You will be able to review the company’s response and you will have 60 days to provide feedback to the CPFB.

The CPFB has handled over 1 million complaints with 97% of the complaints getting a timely response. The CPFB enforcement has resulted in billions of dollars in compensation for consumers. So if you are facing a problem with a creditor, you now have an advocate that can help you.

 

You Got Your Financial Aid Packages – Now What?

March 07, 2017

I was recently talking to a friend at a party about college. Her daughter is a senior and will soon be going off to college. Her daughter was accepted to four different schools, all with varying financial aid packages, and her daughter’s first choice did not offer the largest package so she was considering her second choice. I told my friend to consider doing the following:

1. Review all of the financial aid packages to determine which package is the best vs. the largest. Consider how much of your need is being met along with how your need is being met. Is the largest package with the most loans really better than the smaller package with more grants and a small out-of-pocket expense? Luckily, the CPFB web site has a tool that can help you compare the financial aid packages of up to three schools.

2. Your financial aid award package is not written in stone. My friend recently filed for divorce so her reported income on the financial aid form is vastly different from her upcoming income. I encouraged her to contact the potential college financial aid offices and appeal the award. She can do this in writing and I also encouraged her to ask for a follow-up appointment.

If your financial situation has or will change, consider appealing. Most colleges have a formal appeal process. Contact the college for more details.

3. Use the best award packages to leverage a better financial aid award package from the desired school. Since my friend’s daughter was accepted to multiple colleges and she was going to appeal all of the packages anyway, I told her to use the best packages to get a higher award package from her first choice school.

Review the award packages and what they mean for your family carefully. Consider appealing if you feel you have a case based on a changing financial need or if you can leverage multiple offers. As you go through the process of picking a school, remember the old adage, “You don’t get, what you don’t ask for.”

How to Save Money on Your Next Auto Loan

February 28, 2017

My first car was what we call in the south a “hooptie.” I paid about $1,500 dollars for it. The car was a multiple array of rust-created colors and the air conditioning did not work, which was a joy during the hot southern summer. As a new car owner, there were a lot of car rules I ignored, such as regular car maintenance. As a result, I soon found myself on the side of a road with a locked engine due to no oil.

This made me rethink my ideas on car maintenance, but it also put me in a position where I needed a new car. With no experience or common sense, I walked into a nearby dealer, told him the payment that made the most sense to me and trusted him to find the car that matched my payment. To his credit, he stuck to my budget and helped me find a halfway decent car. The payments were in my budget and I was happy so I drove off and did not think anything of it.

Recently, I found the auto loan paperwork from that car and almost choked when I read the document. Had I known what to look for and asked when I was getting the auto loan, I could had saved myself thousands of dollars. If you are shopping for an auto loan consider doing the following.

1. Establish rules around how much of a car you can actually afford. Although I considered the payment, I did not take the actual cost of repairs under consideration.  A great rule of thumb to use when budgeting for a car is the 20/4/10. This rules involves putting at least 20% down towards a car loan, financing a vehicle for no more than 4 years and keeping your total monthly vehicle expenses to less than 10% of your gross monthly income. (Monthly expenses includes insurance and gas.)

2. Pull up your credit report using websites like Annual Credit Report.com or use websites like Credit Karma or CreditSesame.com to gauge your credit score. The last thing you need is a surprise on your credit report as you talk to your potential auto lender.

3. Research your auto loan options through banks, credit unions and non-bank auto finance companies to find the best option for you. Consider getting pre-approval and using the CFPB’s Auto Loan Shopping Worksheet to compare your loans. Going into a dealership with a pre-approved loan gives you bargaining power.

4. Understand what’s in your auto loan contract. Find out if there is a pre-payment penalty if you pay off your loan early. Fees such as processing fees, dealer preparation fees and delivery charges may be negotiable. Even your interest rate may be negotiable. It never hurts to ask.

As you shop for a loan, consider printing the CPFB’s Auto Loan Shopping Worksheet and using it as a guide to shopping for loans. Also, read your contract carefully and constantly ask for discounts. Doing these few things can help you save potentially thousands on your auto loan.

What is APR and Why Should You Care?

September 21, 2016

Ever wondered what promotional ads for loans mean when they talk about APR and more importantly, why you should care? Well, you should care and the answer comes from Teig Stanley, one of my brilliant CFP® colleagues who has perhaps the most diverse career experience on our team. He started his career as a child actor, has lived all over the world, and most relevant to this post, he was involved in the mortgage industry before we were lucky enough to hire him to the Financial Finesse Planner Team. Here’s what he has to say:

First of all, APR stands for “annual percentage rate.” It is the actual annual cost of any loan, including mortgages, car loans and even credit cards, expressed as a percentage of the total loan amount, including interest AND fees. It must be disclosed in nearly all consumer credit transactions according to Consumer Finance Protection Bureau regulations.

For example: If you took out a five-year $1,000 loan with no interest or fees, you’d simply divide the total loan amount by five years to arrive at a payment of $200 a year. Since there is no interest or fees, the APR is 0%. Let’s imagine that the loan has a simple interest rate of 5% but no fees. Each year, you would pay $200 (principle) plus 5% of the loan balance ($50 the first year, $40 the second year, $30 the third, etc.) That 5% is a cost for you, so in this case, the APR would be 5%.

Now let’s say there was a one-time $100 fee for the loan (sometimes called an origination fee). That would make the APR 7% – higher than the interest rate because it is taking the total cost into account. Finally, imagine that the interest is compounded. In the first year, you not only owe $200 in principle, $100 in fees, and $50 in interest, but you also owe 5% on the $50 in interest that has accrued during the year (an additional $2.50). While this amount is small, it does add to the APR, making it 7.0024%.

Confused? Don’t worry. Any bank that is offering a loan must disclose the APR so they already do this math for you.

But it’s important to pay attention to the APR because if you are expecting a simple interest loan (no fees or compound interest), you can actually confirm that by checking the APR. It should match the interest rate. If it doesn’t, that’s a red flag that something is wrong. In most cases, the APR for a loan is going to be higher than the interest rate because of fees and compound interest.

So one way to compare two loans with the same interest rate would be to compare the APR on those loans. A higher APR for one indicates that the fees or compounding would cost you more over time. It’s quite common for lenders to advertise super-low interest rates to get you hooked, only to have you discover that that they will make up for the lower interest rate with fees. Checking the APR allows you to spot these tactics and avoid paying more than you would with a higher rate but no fees.

If you have other pressing questions that we can answer on the blog, send me an email, and I’ll do my best to help. Did you know you can sign up to receive my blog posts every week, delivered straight to your inbox? Just head over to our blog main page, enter your email address and select which topics or bloggers’ posts you’d like to receive. Obviously, I suggest at least “Posts from Kelley.” Thanks for reading!

 

Why I’m Thanking Google and the CFPB

May 20, 2016

It’s a regular part of my day to talk to people who are struggling with debt. Some people facing what they consider a crisis level of debt will occasionally make a hasty decision, one that they find helpful in the moment but later regret, and take out a short term loan.  These “payday loans” are available to borrowers with less than stellar credit scores and are readily available in nearly every community in the country, but they are often pretty terrible financial tools.  The interest rates, when looked at as an annualized rate (because rarely are they paid off in the required time, so they continually roll over into new short term loans with the interest continuing to accrue at a high rate), rank up there with the loan sharks in old gangster movies. As a result, the Consumer Financial Protection Bureau is working toward getting this payday loan industry regulated and reigned in a bit.

It was refreshing for me to read this article about Google banning payday loan ads on their search engine. The last few people I talked to who had payday loans found their payday lender online after searching for ways to get out of debt. If they used Google to search for ways to reduce/eliminate debt on a semi-frequent basis, payday lenders could show up on their computer screen and look like a way to reduce a short term pressure. Sure, it adds longer term pressure but in that moment of temporary weakness, the short term pressure release seems like a perfectly rational idea. Now, people who search for short term loans or ways to get out of debt will not see payday lenders showing up on their laptop with the promise of solving a problem (by creating a bigger one!).

I’m pleased with Google’s new approach to payday lending, and I’d love to see that industry shrink as more and more people learn more about how to manage their personal financial lives and master the basics. The “basics” as I see it are: spend less than you make, save a portion of each paycheck, build a comfortable reserve fund and avoid high interest debt. Those who do that will be able to avoid the perils associated with these loans.

For anyone considering a payday loan…DON’T! We’d be more than happy to help you consider other alternatives. Ask us a question on our Facebook page, send us a Tweet or mail us a letter with your situation and we’d be more than happy to help you find a better alternatives. The CFPB and Google are taking action on an issue that we have been helping people address for many years, and I, for one, am happy to see the progress.

 

It’s Time For Changes to Payday Loans

March 06, 2015

In what is a positive development for many Americans, not to mention society at large, there are some changes coming to the world of payday loans. The CFPB (Consumer Financial Protection Bureau) is rolling out some new regulations for the short-term loan industry that can only be viewed as a good thing by the borrowers. (Maybe not so much for the owners of the lending companies, though.)  Continue reading “It’s Time For Changes to Payday Loans”

Cyber-Thieves Strike Again: What To Do If You Are a Victim

September 17, 2014

Well, it’s happened again. Another national retailer has had its payment systems hacked. This and similar cyber attacks against corporations appear to be on the rise so as a consumer you will want to be especially diligent in watching your accounts for unauthorized use. The Consumer Financial Protection Bureau (CFPB) offers four steps you should take when you suspect that your debit or credit card information has been compromised: Continue reading “Cyber-Thieves Strike Again: What To Do If You Are a Victim”

Worst Thing Ever

August 22, 2014

Occasionally, I’ll be in a conversation with a group of people and will throw out a random phrase and everyone has to give a quick response to it.  Recently, the phrase I threw out to the group at happy hour was “Worst Thing Ever.” One of my friends, without hesitation, blurted out “New York Yankees fans!” As the group was made up of lifelong Baltimore Orioles fans, we all agreed that Yankees fans can be obnoxious but they aren’t the worst thing ever…close, but not quite. Continue reading “Worst Thing Ever”

4 Ways The CFPB Can Help You With Financial Issues

May 20, 2014

Are you dealing with a challenging financial issue? Whether it’s a decision you need to make or a mess you need to get out of, the Consumer Financial Protection Bureau (CFPB) exists to help. Its mission is “To make markets for consumer financial products and services work for Americans – whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.” How can the CFPB help you? Continue reading “4 Ways The CFPB Can Help You With Financial Issues”