When you think of big cities, Los Angeles, Chicago or New York likely come to mind. Salt Lake City â the capital of Utah â isn’t the most frequently talked about âbig city” in the country. That being said, it is up and coming and has a lot to offer those who are considering making the move.
While Utah is a predominantly conservative state with a strong religious culture, it offers a wide mix of neighborhoods. The charming neighborhoods scattered throughout the city are full of boutiques, small businesses and appealing restaurants that will make you want to eat out every meal.
Salt Lake City also has many schools â elementary through college and university â for people who are looking for a great education for their children or themselves. The city is also becoming more popular thanks to Silicon Slopes, the tech hub just south of the city center. The cost of living in Salt Lake City is relatively inexpensive when compared to larger cities, too.
There are always pros and cons when moving to a new city. Here are 10 things to know about living in Salt Lake City before you make your decision about moving to the Beehive State.
1. The weather can change quickly
Salt Lake City experiences all four seasons. People who live here often joke that the weather changes every 20 minutes. It can be freezing and snowing in the morning and then hot by noon. Some of the ski resorts have even been open on the Fourth of July! People can ski in the morning and spend the afternoon soaking by the pool.
Each season offers something truly fantastic for residents of Salt Lake. The winters are filled with crisp, white snow and brisk air. Fall is perfect for light jacket weather, and the changing leaves are spectacular in every canyon. Spring welcomes a much-needed break from the cold with perfect temperatures and beautiful blooming flowers. The summer comes all at once, hot and blistering making you long for the cold winter days. But no matter the season, S.L.C. is always beautiful.
2. It’s cheaper than other big cities
Compared to large, metro cities across the nation, the cost of living in Salt Lake is relatively inexpensive. The average rate for rent of a one-bedroom apartment dropped 11 percent between 2019 and 2020. Here’s a quick look at 2020 apartment costs in S.L.C.:
- Studio apartment: $1,129
- One-bedroom apartment: $1,245
- Two-bedroom apartment: $1,565
Other utilities and expenses, such as food, gas and groceries, are all reasonably priced in Salt Lake City, too.
3. It’s not all Mormon (but there is a lot)
To understand the culture of Salt Lake City and Utah, you have to know a little about its history. In the year 1847, a group of Mormon pioneers trekked to Utah pulling wagons and handcarts and settled in the valley. For the next several decades, many more wagons full of Mormons followed as they escaped religious persecution back East. Because of this, the majority of residents in Utah are Mormon or have a family history rooted to the LDS church.
That being said, there are still plenty of other religions in the state. Salt Lake City is an ever-changing place with hip, up-and-coming liberal areas, such as Sugar House and nearby resorts like Park City. The city has also recently been named one of the best places for millennials in the country.
Conservative or not, there’s a spot for you in Salt Lake City.
4. There’s a real food scene
Green Jell-O may be the first thing that comes to mind when you think about the food in Salt Lake City. However, Salt Lake City boasts a diverse restaurant scene. You can find anything from Mexican food to French bakeries to authentic Japanese food within a block from each other.
Restaurants like Sapa in downtown Salt Lake put a modern twist on Japanese favorites. If you’re in the mood for a cafÃ© where you can sit down, drink coffee and pretend you’re in Paris, try Eva’s Bakery located on Main Street in the heart of the city. Their pastries never disappoint. Or, try the nationally acclaimed Mexican restaurant Red Iguana.
Utah also has food that can’t be found anywhere else, such as fry sauce. The delicious blend of ketchup and mayo is the perfect fry accessory and will leave you wondering why you can’t find it elsewhere.
5. âThe best snow on earth”
When driving through S.L.C., you’ll probably stumble upon a license plate that reads âThe Best Snow on Earth.” That’s because, among other things, Utah is known for its incredible mountains and ski resorts. Every year, the mountains get an abundance of powdery snow. According to Ski Utah, the Utah Cottonwood Canyons are one of the snowiest places on earth. The weather and climate in Utah create the perfect powder that makes your skis glide down the mountain flawlessly.
One of the best things about skiing in Utah is that the resorts are all relatively close to Salt Lake City, and there are a lot to choose from. Places like Deer Valley Ski Resort bring in people from all over the world â this was one of the ski resorts that hosted the 2002 Winter Olympics.
Although this particular resort doesn’t allow snowboarders, there are plenty of other resorts that do, like Brighton. Ski season can last anywhere from November to late April and sometimes even longer. If you like outdoor activities in the winter, you’ll love living in Salt Lake City.
6. The mountains are also great in the summer
When people aren’t skiing the mountains, they’re hiking them as Salt Lake City is close to a lot of trails â give or take 30 minutes from the city center to the top of the canyon and trailheads. There are moderate trails, such as Neffs Canyon, that are dog friendly to more difficult trails like Mount Olympus. These trails make for a great way to spend your spring afternoon. Hike in the morning and watch the sunrise â or midday and take a second to enjoy the view.
7. The sports scene is underrated
Utah’s sports scene includes some professional teams, several minor league outfits and colleges to support. In the heart of downtown Salt Lake City is the Jazz â the state’s NBA team. Catch a game during the season and watch stars like Donovan Mitchell and Rudy Gobert in action.
If basketball isn’t your thing, check out a soccer match and cheer on Real Salt Lake. Other sports teams native to Utah are the baseball team, The Bees, and the hockey team, The Grizzlies. You can also check out a rivalry game between BYU and Utah during college football season. No matter your sport of choice, you can enjoy a hot dog and churro and cheer on your sports team.
8. Transportation and traffic isn’t that bad … usually
Traffic in Salt Lake is moderate. There are, of course, areas that see heavier traffic, especially if you’re heading southbound out of S.L.C., but on the whole, it’s not that bad. The streets in Salt Lake feel massive compared to other cities around the world. When Salt Lake was built, the roads had to be big enough that a wagon being pulled by ox could make a full U-turn. The city’s grid-like roads enable drivers to get around the city without confusion.
9. The air quality is surprisingly not great
One of the major cons of living in Salt Lake City is air quality. According to IQAir, S.L.C. has some of the worst air quality in the country. Part of the reason is its location in a valley that traps the pollution, making it difficult to cycle in new, clean air. Winter is the worst season for air pollution in the city, but the pollution fluctuates year-round.
10. The city is full of must-see places
Living in Salt Lake City gives you the advantage to see all that the state has to offer. In the winter, no matter your religious or spiritual beliefs, the Temple Square Christmas lights are a must-see. They bring to life the twinkle and magic that is the holiday season.
Park City is also a beautiful place to escape from the city during the winter. During the Sundance Film Festival, you might even spot a celebrity or 10. Southern Utah is also a must-visit. Utah has five national parks within a three- to four-hour drive from the city center â places like Zion, Bryce Canyon and Moab offer breathtaking views and scenery that just can’t be duplicated.
Living in Salt Lake City
There are so many pros to picking Salt Lake City as your place of residence. From all the outdoor activities to the diverse food scene, there’s something for everyone in Salt Lake City. You’ll enjoy the four seasons, the people and the opportunities that are present for everyone here.
Rent prices are based on a rolling weighted average from Apartment Guide and Rent.com’s multifamily rental property inventory of one-bedroom apartments. Data was pulled in November 2020 and goes back for one year. We use a weighted average formula that more accurately represents price availability for each individual unit type and reduces the influence of seasonality on rent prices in specific markets.
The rent information included in this article is used for illustrative purposes only. The data contained herein do not constitute financial advice or a pricing guarantee for any apartment.
The post 10 Things to Know About Living in Salt Lake City appeared first on Apartment Living Tips – Apartment Tips from ApartmentGuide.com.
A payday loan is a short-term loan with a high annual percentage rate. Also known as cash advance and check advance loans, payday loans are designed to cover you until payday and there are very few issues if you repay the loan in full before the payment date. Fail to do so, however, and you could be hit with severe penalties.
Lenders may ask the borrower to write a postdated check for the date of their next paycheck, only to hit them with rollover fees if that check bounces or they request an extension. Itâs this rollover that causes so many issues for borrowers and itâs the reason there have been some huge changes in this industry over the last decade or so.Â
How Do Payday Loans Work?
Payday lending seems like a simple, easy, and problem free process, but thatâs what the payday lender relies on.Â
The idea is quite simple. Imagine, for instance, that your car suddenly breaks down, payday is 10 days away, and you donât have a single cent to your name. The mechanic quotes you $300 for the fix, and because youâre already drowning in debt and have already sold everything valuable, your only option is payday lending.
The payday lender offers you the $300 for a small fee. They remind you that if you repay this small short-term cash sum on payday, you wonât incur many fees or any real issues. But a lot can happen in 10 days.Â
More bills can land in your mailbox, more expenses can arrive out of nowhere, and before you know it, all of your paycheck has been allocated for other expenses. The payday lender offers to rollover your loan for another month (another âpaydayâ) and because you donât have much choice, you agree.
But in doing so, youâve just been hit with more high fees, more compounding interest, and a sum that just seems to keep on growing. By the time your next payday arrives, youâre only able to afford a small repayment, and from that moment on youâre locked into a debt that doesnât seem to go anywhere.
Payday loans have been criticized for being predatory and itâs easy to see why. Banks and credit unions profit more from high-income individuals as they borrow and invest more money. A single high-income consumer can be worth more than a dozen consumers straddling the poverty line.
Payday lenders, however, target their services at low-income individuals. They offer small-dollar loans and seem to profit the most when payment dates are missed and interest rates compound, something that is infinitely more probable with low-income consumers.
Low-income consumers are also more likely to need a small cash boost every now and then and less likely to have the collateral needed for a low-interest title loan. According to official statistics, during the heyday of payday loans, most lenders were divorced renters struggling to make ends meet.
Nearly a tenth of consumers earning less than $15.000 have used payday loans, compared to fewer than 1% for those earning more than $100,000. Close to 70% of all payday loans are used for recurring expenses, such as utility bills and other debts, while 16% are used for emergency purchases.
Pros and Cons of Taking Out a Payday Loan
Regardless of what the lender or the commercial tells you, all forms of credit carry risk, and payday loans are no exception. In fact, it is one of the riskiest forms of credit available, dragging you into a cycle of debt that you may struggle to escape from. Issues aside, however, there are some benefits to these loans, and we need to look at the cons as well as the pros.
Pros: You Donât Need Good Credit
Payday loans donât require impeccable credit scores and many lenders wonât even check an applicantâs credit report. They can afford to do this because they charge high interest and fees, and this allows them to offset many of the costs associated with the increased liability and risk.
If youâre struggling to cover your bills and have just been hit with an unexpected expense, this can be a godsendâitâs a last resort option that could buy you some time until payday.
Pros: Itâs Quick
Payday loans give you money when you need it, something that many other loans and credit offers simply canât provide. If you need money right now, a payday lender can help; whereas another lender may require a few days to transfer that money or provide you with a suitable line of credit.
Some lenders provide 24/7 access to money, with online applications offering instant decisions and promising a money transfer within 24 hours.
Pro: They Require Very Little
A payday loan lender has a very short list of criteria for its applicants to meet. A traditional lender may request your Social Security Number, proof of ID, and a credit check, but the average payday lender will ask for none of these things.
Generally, you will be asked to prove that you are in employment, have a bank account, and are at least 18 years oldâthatâs it. You may also be required to submit proof that you are a US citizen.
Cons: High Risk of Defaulting
A study by the Center for Responsible Lending found that nearly half of all payday loans go into default within just 2 years. Thatâs a staggering statistic when you consider that the average default rate for personal loans and credit cards is between 1% and 4%.
It proves the point that many payday lender critics have been making for years: Payday loans are predatory and high-risk. The average credit or loan account is only provided after the applicant has undergone a strict underwriting process. The lender takes its time to check that the applicant is suitable, looking at their credit history, credit score, and more, and only giving them the credit/loan when they are confident it will be repaid.
This may seem like an unnecessary and frustrating process, but as the above statistics prove, itâs not just for the benefit of the lender as it also protects the consumer from a disastrous default.
Con: High Fees
High interest rates arenât the only reason payday lenders are considered predatory. Like all lenders, they charge fees for late payments. But unlike other lenders, these fees are astronomical and if youâre late by several weeks or months, those fees can be worth more than the initial balance.
A few years ago, a survey on payday lending discovered that the average borrower had accumulated $458 worth of fees, even though the median loan was nearly half that amount.
Cons: There are Better Options
If you have a respectable credit history or any kind of collateral, there are better options available. A bank or credit union can provide you with small short-term loans you can repay over many months without accumulating astronomical sums of interest.Â
The interest rates are much lower, the fees are more manageable, and unless your credit score is really poor, you should be offered more favorable terms than what you can get from a payday lender.
Even a credit card can offer you better terms. Generally speaking, a credit card has some of the highest interest rates of any unsecured debt, but it canât compare to a payday loan. It also has very little impact on your credit score and many credit card providers offer 0% on purchases for the first-few months.
Whatâs more, if things go wrong with a credit card, you have more options than you have with a payday loan, including a balance transfer credit card or a debt settlement program.
Why Do Payday Loans Charge So Much Interest?
If we were to take a cynical view, we could say that payday loans charge a lot simply because the lender can get away with charging a lot. After all, a payday loan lender targets the lowest-income individuals, the ones who need money the most and find themselves in desperate situations.
However, this doesnât paint a complete picture. In actual fact, it all comes down to risk and reward. A lender increases its interest rate when an applicant is at a greater risk of default.Â
The reason you can get low rates when you have a great credit score and high rates when you donât, is because the former group is more likely to pay on time and in full, whereas the latter group is more likely to default.
Lending is all about balancing the probabilities, and because a short-term loan is at serious risk of defaulting, the costs are very high.
Payday Loans and Your Credit Score
Your credit will only be affected if the lender reports to the credit bureaus. This is something that many consumers overlook, incorrectly assuming that every payment will result in a positive report and every missed payment in a negative one.Â
If the lender doesnât report to the main credit bureaus, there will be no changes to your report and the account will not even show. This is how many payday lenders operate. They rarely run credit checks, so your report wonât be hit with an inquiry, and they tend not to report on-time payments.
However, itâs a different story if you miss those payments. A lender can report missed payments and defaults and may also sell your account to a debt collector, at which point your credit score will take a hit.Â
If youâre concerned about how an application will impact your credit score, speak with the lender or read the terms and conditions before applying. And remember to always meet your payments on time to avoid any negative marks on your credit report and, more importantly, to ensure youâre not hit with additional fees.
Payday Loans vs Personal Loans
A personal loan is generally a much better option than a payday loan. These loans are designed to help you cover emergency expenses, pay for home improvements, launch businesses, and, in the case of debt consolidation loans, to clear your debt.Â
The interest rates are around 6% to 10% for lenders with respectable credit scores, and while they often charge an origination fee and late fees, they are generally much cheaper options. You can repay the loan at a time that suits you and tailor the payments to fit your monthly expenses, ensuring that they donât leave you short at the end of the month.
You can get a personal loan from a bank or a credit union; whenever you need the money, just compare, apply, and then wait for it to hit your account. The money paid by these loans is generally much higher than that offered by payday loans and you can stretch it out over a few years if needed.
What is an Unsecured Loan?
Personal and payday loans are both classed as unsecured loans, as the lender doesnât secure them against money or assets. Secured loans are typically secured against your home (mortgage, home equity loan) or your car (auto loan, title loan). They can also be secured against a cash deposit, as is the case with secured credit cards.
Although this may seem like a negative, considering a lender can repossess your asset if you fail to meet the payment terms, it actually provides many positives. For instance, a secured loan gives the lender more recourse if anything goes wrong, which means the underwriters donât need to account for a lot of risk. As a result, the lender is more likely to offer you a low interest rate.Â
Where cash advance loans and other small loans are concerned, there is generally no option for securing the loan. The lender wonât be interested, and neither should youâwhatâs the point of securing a $30,000 car against a $1,000 loan!?
New Payday Loan Regulations
Payday lenders are subject to very strict rules and regulations and this industry has undergone some serious changes in recent years. In some states, limits are imposed to prevent high interest rates; in others, payday lenders are banned from operating altogether.Â
The golden age of payday lending has passed, thereâs no doubt about that. In fact, many lenders left the US markets and took their business to countries like the UK, only for the UK authorities to impose many of the same restrictions after a few years of pandemonium. In the US, the industry thrived during the end of the 2000s and the beginning of the 2010s, but it has since been losing ground and the practice is illegal or highly restricted in many states.
Are Payday Loans Still Legal?
Payday loans are legal in 27 states, but many states have imposed strict rules and regulations governing everything from loan amounts to fees. The states where payday lenders are not allowed to operate are:
- New Jersey
- New York
- North Carolina
- West Virginia
It is still possible to apply for personal loans and title loans in these states, but high-interest, cash advance loans are out of the question, for the time being at least.
Debt Rollover Rules for Payday Lenders
One of the things that regulations cover is something known as Debt Rollover, whereby a consumer rolls their debt over into the next billing period, accruing fees and continuing to pay interest. The more rollovers there are, the greater the risk and the higher the detriment to the borrower.
Debt rollovers are at fault for many of the issues concerning payday loans. They create a cycle of persistent debt, as the borrower is forced to acquire additional debt to repay the payday loan debt.Â
In the following states, payday loans are legal but restricted to between 0 and 1 rollovers:
- New Hampshire
- New Mexico
- North Dakota
- Rhode Island
- South Carolina
- Washington D.C.
Other states tend to limit debt rollovers to 2, but there are some notable exceptions. In South Dakota and Delaware, as many as 4 are allowed, while the state of Missouri allows for 6. However, the borrower must reduce the principal of the loan by at least 5% during each successive rollover.
Are These Changes for the Best?
If youâre a payday lender, the aforementioned rules and regulations are definitely not a good thing. Payday lenders rely on persistent debt. They make money from the poorest percentage of the population as they are the ones most likely to get trapped in that cycle.
For responsible borrowers, however, they turn something potentially disastrous into something that could serve a purpose. Payday loans still carry a huge risk, especially if there is any chance that you wonât repay the loan in time, but the limits imposed on interest rates and rollovers reduces the astronomical costs.
In that sense, they are definitely for the best, but there are still risks and potential pitfalls, so be sure to keep these in mind before you apply for any short-term loans.
What is a Payday Loan? is a post from Pocket Your Dollars.
A 2015 study found that older adults lose more than $36 billion every year to financial scams. Unfortunately, con artists see the elderly population as an easy and vulnerable target.
The American Securities Administrators Associationâs President, Mike Rothman, explains that scammers take this approach because the current elderly population is one of the wealthiest weâve seen with such hefty retirement savings. Where the money goes, the con artists follow.
With so many scams targeting older adults, itâs essential to make yourself and your loved ones aware of the different types of cons. Here is a list of common financial scams that specifically target the elderly and how you can prevent them:
The Grandparent Scam
The grandparent scam is common because it appeals to older adultsâ emotions. Scammers get the phone number of a senior and they call pretending to be a grandchild. Making their lie seem more believable, the con artist will playfully ask the older adult to guess what grandchild is calling. Of course, the first reaction will most likely be for the senior to name a grandchild and then the scammer can easily play along, acting like they guessed right. Now the grandparent thinks they are talking to their grandchild.
The scam artist will then begin to confide in the grandparent, saying they are in a tough financial position and they need the grandparentâs help. Asking them to send money to a Western Union or MoneyGram, they plead for the grandparent not to tell anyone. If the grandparent complies and sends the money, the scammer will likely contact the senior again and ask for more money.
Avoid this scam:
- Never send money to anyone unless you have 100 percent proof that it is who you think it is. Scammers can find out quite a bit of information from social media and other methods, so donât think that just because they know a couple pieces of information about you and your family that it is legit.
- Verify that it is actually your grandchild on the phone by texting or calling the grandchildâs real phone number and verifying if it is him or her.
- Call the parent of the supposed grandchild and find out if the grandchild really is in trouble.
- Talk to your family members now and compile a list of questions only you and your family know the answers to. If a family emergency really does happen, you can ask the questions and know if it is your family member based on the answers.
âClaim Your Prize Now!â Sweepstakes Scam
The sweepstakes scam is when con artists contact the elderly either by phone or email and tell them they have won something, whether that be a sum of money or another type of prize. To claim the prize, scammers tell them they have to pay a fee. Once the senior agrees, scammers send a fake check in the mail. Before the check doesnât clear and seniors can realize it is a scam, they have already paid the âfee.â
Avoid this scam:
- Do not give out any financial information over the phone or email.
- Practice Internet safety by protecting your passwords, shopping on encrypted websites, and avoiding phony emails.
- Be skeptical of any message that says you have randomly won a prize and you must do something before you can claim it. Unless you specifically enter a contest, you most likely arenât going to randomly win a monetary prize.
Because of the Affordable Care Act that allows seniors over the age of 65 to qualify for Medicare, scam artists donât have to do much research about seniorsâ healthcare providers. This makes it simple for scammers to call, email, or even visit seniorsâ homes personally and claim to be a Medicare representative.
There are a variety of ways these con artists use this Medicare scam to target the elderly. One way is telling seniors they need a new Medicare card and to do so, they need to tell the âMedicare representativeâ what their Social Security number is. An additional way is they can tell seniors there is a fee they need to pay to continue their benefits.
Avoid this scam:
- Do not give out any information to someone you have not verified is from Medicare. Real Medicare employees should have your information on file so if you are skeptical, ask the person some questions to verify it is legitimate.
The âWoodchuckâ Scam
A common scam to target seniors who live alone is the âwoodchuckâ scam. Scam artists will claim to be contractors and will complete house projects if seniors agree to let them.
The scammers will gain seniorsâ trust and eventually come up with a variety of fake repairs that need to be done, such as a roof repair. This often results in seniors giving the fake contractors thousands of dollars.
Â Avoid this scam:
- Make sure the person doing your home repairs is a professional. Find out what company they work for and call and verify they are indeed a legitimate contractor.
Con artists are using senior homeownership to their benefit. The mortgage scam is when scammers offer a property assessment to seniors, telling them they can determine the value of their home. This scam has become increasing popular as housing confidence is hitting record highs and people are putting a large chunk of their income towards saving for new homes.
The scam artists make the process look legitimate by finding the homeâs information on the Internet and sending seniors an official letter detailing all of the found information. The scammers do this because it is an easy way to con seniors into paying a fee for the requested information.
Â Avoid this scam:
- Ensure the property assessment is legitimate by asking what company they work for and following up with the real company to verify.
Talk to Your Loved Ones
Older adults are often too embarrassed to tell authorities or a family member they have been scammed. Talk to the seniors in your life and let them know they can confide in you and let you know if they have been scammed. You can also have them read through this article and make themselves aware of the scams that could potentially target them in the future.
Check Your Credit Regularly
Check your credit regularly so you are aware of any suspicious activity with your accounts. You can check your credit for free on Credit.com and receive a free credit score updated every 14 days along with a credit report card, which is a summary of what is on your credit reports.
Get It Now
The post Financial Scams That Target the Elderly and How to Prevent Them appeared first on Credit.com.
If you own a home and are making monthly payments, you have probably read over the breakdown of your monthly mortgage charges once or twice. Your mortgage payment likely breaks out your monthly payment into three parts: principal, interest and funds that go to your escrow account. While you likely know that the principal is […]
The post Mortgage Escrow Account: Pros and Cons appeared first on The Simple Dollar.
Your minimum monthly payment is the lowest amount that you need to pay on your credit card balance. Any less could result in a derogatory mark, any more will clear more of the principal.Â
Your monthly payment is one of the most important aspects of your credit card debt and failure to understand this could seriously impact your credit score and leave marks on your credit report that remain for up to 7 years.
With that in mind, letâs take a closer look at how these payments operate and how you can quickly clear your credit card debt.
How Minimum Payments on a Credit Card are Calculated
The minimum payment is calculated as a percentage of the total balance at the end of the month. This percentage ranges from 2% to 5%, but it has been known to go lower.Â
As an example, if you have a $5,000 credit card balance and are required to pay 5% a month, then your monthly payment will be $250. However, this only covers the principal, which is the money that you borrowed. It does not cover the interest, which is where things get a little complicated and expensive.
What Influences Your Minimum Monthly Payment?
The reason credit card interest is so high is because it compounds. This means that if you have an annual percentage rate of 20% and a debt of $20,000, that debt will climb to $24,000, at which point the next billing cycle will commence and this time youâll be charged 20% on $24,000 and not $20,000.
However, credit card interest is calculated daily, not yearly. To arrive at your daily percentage rate, simply divide your interest rate by 365 (the number of days in a year) and then multiply this by your daily balance.
For example, if we stick with that 20% interest rate, then the daily rate will be 0.00054%. If we multiply this with the daily balance, we get an interest rate of $2.7 for the first day. Multiply this by 30, for the total days in a billing cycle, and itâs $81. Thatâs your total interest for the first month.
So, when we calculate the 2% minimum monthly payment, weâre calculating it against $5,081, not $5,000, which means we get a total of $101.62, reducing the balance to just $479.38.
In other words, you pay over $100, but reduce the balance by a little over $20 when you make that monthly payment. If penalty fees and interest rates are added to that, it will reduce in even smaller increments.
Pros and Cons of Only Paying the Minimum Payment on your Credit Card
As discussed above, itâs imperative that you make the minimum payment, avoiding any late payment charges or credit score reductions. However, if you only make those minimum payments every month then it will take a long time to clear your balance and you may struggle to keep your head above water.
The Benefits of Paying More Than the Minimum
Many borrowers struggle to pay more than the minimum not because they donât have the money, but because they fail to see the benefits. They focus on the short-term and not the long-term, seeing an extra $100 payment as a lost $100 in the present, as opposed to a saved $500 in the future.
However, if you can get over this mindset and start paying more than the minimum, you will do your future self a huge favor, helping with all of the following:
Shorten the Term and Lessen the Interest
Every extra dollar that you add to your minimum payment can help you get out of debt quicker than if you simply stick with the minimum. This is true for all debtsâa higher monthly payment means that more money goes towards the principal, which means there is less interest to compound.
Credit card debt is like a snowball gathering momentum as it rolls, and this is exacerbated every time you miss a payment and are hit with penalty fees. By paying more than the minimum, youâre taking a giant chunk out of that snowball and slowing its progression.
Youâll Improve Your Credit Utilization
Your credit utilization ratio is one of the most important parts of your credit report, counting for 30% of your total. This ratio takes your total available credit (such as a credit limit on a credit card) and then compares it to total debt (such as the balance on that credit card). The higher the number, the more of your credit has been used and the more your credit score will suffer.
Every time you pay more of your credit card balance, youâre reducing this score and significantly boosting your credit score.
Avoid Maxing Out Your Balance
Not only will a maxed-out credit card do some serious damage to your credit utilization score, but it can also have a direct impact on your credit score on the whole. Lenders donât want to see it and credit bureaus will punish you for it. If youâre still using the card and only paying the minimum, you may be stuck in a cycle of persistent debt, but by paying more and using it less, you can prevent that.
You May Get a Better Credit Limit
Credit card issuers monitor their customerâs activities very closely. If they clear their balances every month without issue, they are more inclined to increase their credit limit, offer them rewards, and generally provide them with good opportunities. If they are accumulating large amounts of credit card debt and only meeting their minimum payments, theyâll be less inclined to do any of those things.
It always helps to get on a creditorâs good side, because you never know when you will need that improve credit limit or access to that generous rewards scheme.
What Happens if you Only Make the Minimum Payment?
If you only pay the minimum, the debt will take a long time to clear and youâll repay huge sums of interest in that time. If we go back to the previous example and assume an APR of 20%, a balance of $5,000 and a minimum payment of 2%, you will repay over 400% in interest alone and it will take you decades to repay the debt.
Thankfully, very few credit card providers will actually let you pay such a small amount on such a substantial debt. But even if we increase the minimum payment to 5%, it still looks abysmal for the borrower. It would take them about 9 years to pay the balance, requiring $250 a month and paying close to $2,500 in interest.
Although itâs more realistic, this is still a poor option, especially when you consider the card will still be active and you may still be using it, which means that every time you make a repayment, youâre adding more debt and offsetting all your hard work.
Your credit score will not suffer if you only make the minimum payment. Providing you make it on time then you will build a respectable payment history, a stable credit report, and a credit score that is sure to impress lenders. However, it wonât look great for your finances as youâre giving yourself an expensive liability that will cripple your debt-to-income ratio and your credit utilization ratio for years to come.
Are There Any Advantages to Just Paying the Minimum?
The only advantage to paying just the minimum is that you will have more money in your pocket at the end of the month, which will allow you to make additional investments and purchases that would otherwise not be available to you. However, this is a pretty narrow-minded way of looking at it, because while you will have more cash in the long-term, it comes at the expense of many additional risks and obligations, not to mention thousands of dollarsâ worth of additional interest paid over the term.
What Happens if you Canât Pay the Minimum Payment?
If there is a late payment or a missed payment, your creditor may charge you a penalty fee or a penalty rate. If your payment is due for more than 30-days they may also report you to the credit bureaus, at which point a derogatory mark will appear on your credit report and your credit score will drop.
This can happen even with a single missed payment, which is why you should never simply skip a payment on the basis that youâll just double-up next time around.
Instead, contact your creditor, explain your situation, and see if there is anything they can do to help you. They may say no, but it doesnât hurt to ask, and, in most cases, they will offer you some kind of reprieve. After all, they want their money, and if they can increase their chances of getting paid by providing you with some leeway, theyâll often be more than happy to do it.
Some people believe that you can simply pay a few dollars and it will count as a minimum payment and not show on your credit report. This is a myth. Technically, any payment that doesnât meet the full minimum requirement can be classed as a late payment and can lead to fees and derogatory marks.
Resources to Lower Minimum Payments on a Credit Card
Itâs important to keep a close eye on your credit card statement and activity at all times. Monitor your spending, making sure it doesnât go overboard, and if you find yourself struggling to make payments at any time, checkout the following resources and options to get the help you need:
- Credit Counselors: Speak with a trained expert who has helped many individuals in a similar position. They will discuss your finances and your debts and will help you to find a solution.
- Debt Management: A debt management plan can help when youâre struggling to meet your debt obligations and have a huge debt-to-income ratio. They will provide assistance and help you swap multiple debts for a single consolidation loan.
- Debt Settlement: An option that works best for individuals with multiple debts and missed payments. Itâs one of the cheapest ways to clear personal loan and credit card debt, as well as other forms of unsecured debt.
- Debt Consolidation: Another consolidation loan option, this time with a long term, ensuring that you pay less per month but more over the term. This is a good option if youâre stuck in a tricky spot right now and need to reduce your outgoings.
In all the above cases, you can use the NMLS Consumer Access site to find a legitimate and reputable company or professional working within the financial sector. You can also use resources like the Better Business Bureau as well as the many guides, reviews, and help files right here on the Pocket Your Dollars website.
How to Reduce the Balance on a Credit Card Debt
One of the best ways to reduce your balance is to initiate a balance transfer. As the name suggests, this entails moving your balance from one card to another. Balance transfer cards entice you by offering a 0% APR on all transfers and this lasts for up to 18% with the best providers.Â
In that time, you wonât pay any interest on your balance, which means all your monthly payment will go towards the principal and you can reduce your debt in huge leaps as opposed to small steps.
These cards are not without their issues, however. You will need a good credit score to get a card that has a good APR and balance transfer offer. If you donât, and you fail to clear the balance during that introductory period, you may be paying more interest than you were before.
In most cases, though, these cards will be just what you need to ease the burden of mounting credit card debts and get back into the black. Take a look at our guide to the best balance transfer cards to learn more and discover how you can move your current balance to a card that has more preferable terms, in the short-term at least.
The Bottom Line: Clear that Balance
A minimum payment is the least amount you need to commit to a credit card balance. If credit card debt was a house party, the minimum payment would be the equivalent of showing up, saying your introductions, and then hiding in the corner for the rest of the night. If you really want to make an impact, you need to be proactive.
It doesnât have to be twice or thrice the size of your minimum payment. It doesnât have to be a consistent sum that you pay every month, but it does have to be something. Donât worry if itâs only 1% or 2% of the balance, because every additional payment helps. Just pay whatever you can afford, whenever you can afford it. A small amount of money today can save you a huge sum of money in the future.
Minimum Payments on a Credit Card is a post from Pocket Your Dollars.
Witthaya Prasongsin/Getty Images
When you apply for a mortgage or refinance an existing mortgage, you want to secure the lowest interest rate possible. Any opportunity a borrower can exploit to shave dollars off the cost is a big win.
This explains the allure of no-fee mortgages. These home loans and their promise of doing away with pesky fees always sound appealingâa lack of lender fees or closing costs is sweet music to a borrower’s ears.
However, they come with their own set of pros and cons.
No-fee mortgages have experienced a renaissance given the current economic climate, according to Ralph DiBugnara, president of Home Qualified. “No-fee programs are popular among those looking to refinance … [and] first-time home buyers [have] also increased as far as interest” goes.
Be prepared for a higher interest rate
But nothing is truly free, and this maxim applies to no-fee mortgages as well. They almost always carry a higher interest rate.
âOver time, paying more interest will be significantly more expensive than paying fees upfront,â says DiBugnara. âIf no-cost is the offer, the first question that should be asked is, âWhat is my rate if I pay the fees?ââ
Randall Yates, CEO of The Lenders Network, breaks down the math.
âClosing costs are typically 2% to 5% of the loan amount,â he explains. âOn a $200,000 loan, you can expect to pay approximately $7,500 in lender fees. Let’s say the interest rate is 4%, and a no-fee mortgage has a rate of 4.5%. [By securing a regular loan], you will save over $13,000 over the course of the loan.â
So while you’ll have saved $7,500 in the short term, over the long term you’ll wind up paying more due to a higher interest rate. Weigh it out with your financial situation.
Consider the life of the loan
And before you start calculating the money that you think you might save with a no-fee mortgage, consider your long-term financial strategy.
âNo-fee mortgage options should only be used when a short-term loan is absolutely necessary. I donât think itâs a good strategy for coping with COVID-19-related issues,â says Jack ChorosÂ of CPI Inflation Calculator.
A no-fee mortgage may be a smart tactic if you don’t plan to stay in one place for a long time or plan to refinance quickly.
âIf I am looking to move in a year or two, or think rates might be lower and I might refinance again, then I want to minimize my costs,â says Matt Hackett, operations manager at EquityNow. But “if I think I am going to be in the loan for 10 years, then I want to pay more upfront for a lower rate.â
What additional fees should you be prepared to pay?
As with any large purchase, whether itâs a car or computer, there’s no flat âthis is itâ price. Hidden costs always lurk in the fine print.
âMost of the time, the cost for credit reports, recording fees, and flood-service fee are not included in a no-fee promise, but they are minimal,â says DiBugnara. âAlso, the appraisal will always be paid by the consumer. They are considered a third-party vendor, and they have to be paid separately.â
âAll other costs such as property taxes, home appraisal, homeowners insurance, and private mortgage insurance will all still be paid by the borrower,â adds Yates.
Itâs important to ask what additional fees are required, as it varies from lender to lender, and state to state. The last thing you want is a huge surprise.
âDeposits that are required to set up your escrow account, such as flood insurance, homeowners insurance, and property taxes, are normally paid at closing,â says Jerry Elinger, mortgage production manager at Silverton Mortgage in Atlanta. âMost fees, however, will be able to be covered by rolling them into the cost of the loan or paying a higher interest rate.â
When does a no-fee mortgage make sense?
For borrowers who want to save cash right now, but donât mind paying more over a long time frame, a no-fee mortgage could be the right fit.
âIf your plan is long-term, it will almost always make more sense to pay the closing costs and take a lower rate,â says DiBugnara. âIf your plan is short-term, then no closing costs and paying more interest over a short period of time will be more cost-effective.â
The post What Is a No-Fee Mortgage? appeared first on Real Estate News & Insights | realtor.comÂ®.
Having a wallet full of plastic can be a big temptation to overspend, which can lead to missed payments and a decreasedÂ credit score. If too many credit cards have you busting your budget, this might be a goodÂ reason for credit card closure. On the flip side, closingÂ a credit card may hurt yourÂ credit score by messing with yourÂ credit history andÂ credit utilization rate.
Depending on your situation, there are reasons for credit card closure. Canceling a credit card isn’t a bad idea if you close accounts that cost more to maintain than they’re worth and do it in a way that won’t significantly hurt your score.
Why WouldÂ aÂ Credit Card Company Close YourÂ Account?
While you’re considering your reasonsÂ for credit card closure, your credit card issuer might be doing the same thing.Â AÂ credit card company has the right to cancel your card any time, and you may not get any warning it’s been canceled until it’s declined at the register.
AÂ credit card provider will close yourÂ accountÂ if you quit paying the minimum monthly amount due. Missing one or two payments may only freeze yourÂ account until you’re caught back up, but yourÂ account will probably be closed after six months of nonpayment. Credit card companies have many other reasonsÂ for credit card closure.
Common reasons that may promptÂ a credit card issuer to cancel yourÂ account include:
- Inactivity with a zeroÂ balance for several months
- A drop in yourÂ credit score, especially due toÂ late payments to other companies
- Eliminating the type of card you have and closing everyone’s accounts
- Going out of business because they’re no longer profitable
Do Closed Accounts Affect YourÂ Credit Score?
Closing anÂ account can affect yourÂ credit scoreÂ because it can change yourÂ credit history and utilizationÂ rate, which are two major factors used to calculate yourÂ credit score. YourÂ credit history is based on the amount of time all your credit card accounts have been open, so closing an olderÂ account can hurt.
YourÂ credit utilization is based on the amount of available credit you’re currently using, so closing anÂ account with a largeÂ credit limit and lowÂ balance can hurt even more. When deciding whether you shouldÂ close a credit cardÂ account, consider some reasons whyÂ credit card closure makes sense.
1. You’re Getting Divorced
If you’reÂ getting separated or divorcedÂ from a person who shares a jointÂ account with you, close theÂ account. Otherwise, you remain fully responsible for any bills your soon-to-be-ex might run up on the card. Even if your divorce decree says your former spouse will be responsible for the bill, you’re still on the hook as long as theÂ account remains open. The credit card issuer is only interested in collecting theÂ balance and will look to bothÂ accountholders forÂ payment.
2. You Don’t Want toÂ Pay the Fees
IfÂ yourÂ credit card company is charging an annualÂ fee that you don’t want toÂ pay, ask them to waive it. You can also ask them to waive a lateÂ fee if you’re accidentally late and you’re rarely late. If the credit card issuer won’t budge on a hefty annualÂ fee, it could be a goodÂ reason for credit card closure and taking your business where there’s no annualÂ fee.
3. The Card No Longer Makes Sense
Maybe you have a card you specifically opened to take advantage of frequent flyer miles because you traveled often for business. If your job no longer requires you to jet around the country or you move somewhere not serviced by the airline associated with thisÂ account, the card loses its appeal. Most airlineÂ rewards cardsÂ carry hefty annual fees after the first year, so it makes sense to close these accounts and switch to a card with a more usefulÂ rewards program.
4. The Card Has Been Used Fraudulently
Credit card fraudÂ is the bestÂ reason for credit card closure. Typically, the credit card issuer automatically closes yourÂ account and issues you a new card when your credit card has been lost or stolen. However, this isn’t always the case when your card is used in other potentially fraudulent ways, such as:
- You subscribed to a product or service online and, despite your best efforts to cancel the subscription, you keep getting hit with a monthlyÂ charge for something you no longer want.
- You provided your credit card number for the collection of monthly payments on a debt, but the company is taking larger payments than you agreed to make.
- You let your children use yourÂ account once for an emergency, and now, they use it every time another “emergency” occurs.
In these and similar situations, you may want to close yourÂ account. Otherwise, you risk having to fight to get future charges reversed.
5. You’re Done with Debt
You may have reached the point where you see no other way to get out of debtÂ than to cancel your credit cards. It’s best for yourÂ credit score to keepÂ a credit card or two open and justÂ pay theÂ balance in full each month, but this approach may not work for you. If you know you can’t resist the temptation of whipping out the plastic when you want something you can’t afford, it could be a goodÂ reason for credit card closure. However, before you make that decision, ask yourself two questions.
Is It Better to Close Unused Credit Cards?
Sometimes it can be better to close an unused credit card, especially if the card has a hefty annualÂ fee. When you don’t useÂ a credit card enough to outweigh the annualÂ fee and come out ahead on itsÂ rewards program, the card is costing youÂ money. It’s probably better to close anÂ account in this situation.
Is It Bad for Credit toÂ Close a Credit Card?
It can be bad for your credit toÂ close a credit card if the card your closing is one of your oldest credit accounts and/or has aÂ highÂ credit limit with a lowÂ balance. As previously mentioned, closing older accounts hurts your score by lowering the length of your credit andÂ payment history. Closing anÂ account can also hurt your credit by changing the amount of yourÂ revolvingÂ credit utilization.
How to Exit Gracefully
If you’ve decided that closingÂ a credit card account is the best course of action, try to minimize the damage to yourÂ credit score as much as possible.Â A credit card inÂ good standing offers a lot of positiveÂ credit history that stays on your credit reportsÂ longer if you keep it open.
Although closing theÂ account doesn’t make the card automatically disappear from your credit reports, you do lose the benefit of the available credit associated with thatÂ account. This changes yourÂ balance-to-available-credit ratio orÂ revolvingÂ credit utilization.
To understand theÂ credit utilization aspect of your credit reports, get a free credit report cardÂ from Credit.com. Calculate yourÂ balance-to-available-credit ratio by looking at your available credit compared to how much of this credit you’re using on individual cards and all your credit cards combined. When you’re using a significant portion of your available credit, you lose points when yourÂ credit score is calculated. Before closing anÂ account, keep these factors in mind.
1. Keep YourÂ Credit Utilization Ratio Low
An open credit line with a large limit and zeroÂ balance helps lower your overall revolving utilization, especially when you’re carrying balances on your other accounts. Keeping utilization at 10% is ideal, but you can still have a goodÂ credit score when using up to 25% of your available credit. Before closing anÂ account, calculate how it changes your overall utilization to ensure losing that available credit won’t hurt your score much.
2. Keep Accounts Open
If you have several old accounts, closing one won’t impact your score as much as it would if you only had a couple. Keeping as many of your older accounts open as possible is better for yourÂ credit score. If you have only one credit card, it’s seldom a good idea to close yourÂ account. About 10% of yourÂ credit scoreÂ is based on the different types of creditÂ you have.
3. Keep Oldest Accounts
Whenever possible, keep your oldest accounts open. Most scoring models consider the age of your accounts, including your oldest and newest accounts, and the average age of all your accounts. A seasonedÂ credit historyÂ helps keep your score healthy. A closedÂ account also eventually falls off your credit report, and you lose all the positive history associated with theÂ account.
After weighing the pros and cons, sometimes it just doesn’t make sense to keep hanging ontoÂ a credit card. Before you close thatÂ account, make sure yourÂ credit score won’t suffer too badly. Sign up for Credit.com’s Credit Report Card and receive the latest tips and advice from a team of credit andÂ money experts. You also benefit from a freeÂ credit score and action plan that helps you determine whether closingÂ a credit card account is right for your situation.
The post 5 Reasons for Credit Card Closure appeared first on Credit.com.
If youâre unable to pay back a large amount of debt, you might be interested in learning more about debt settlement. Debt settlement works to negotiate with your creditors to forgive all or part of your debt. Throughout this process, communication is usually done with written letters. Written letters work best to convey the clear and detailed terms you have for your creditor.
A debt settlement letter is a written proposal for you to offer a specific amount of money in exchange for forgiveness of your debt. These letters address why youâre unable to pay the debt, how much youâre willing to pay now, and what you would like from the creditors in return. Working through the proposal is how both parties determine the terms and agreements of the debt settlement exchange.
What Is Debt Settlement?
Debt settlement is the meticulous process of negotiating terms with your creditors, in hopes of them forgiving a portion of your debt. Those who look for debt settlement usually are doing so because they canât pay off all the debt theyâve accumulated. Instead, they offer a decent portion of the debt owed upfront in exchange for the account to close in full.
The following are the key steps in reaching a debt settlement:
- Decide if you want to work on your own or hire debt settlement professionals. Professionals can be of great help, but sometimes their fees can get quite expensive.
- Save up the amount of money you are proposing before even getting started. If the creditor accepts your proposal, youâll need to pay the agreed amount within a specified time frame.
- Write a debt settlement letter to your creditor. Explain your current situation and how much you can pay. Also, provide them with a clear description of what you expect in return, such as removal of missed payments or the account shown as paid in full on your report.
- Ask for a written confirmation after settling on an agreement. Request this before you send the payment, as it acts as an extra layer of liability coverage in the future.
- Send your payment. Keep in touch with your creditors until all terms and agreements are fulfilled.
What To Consider Before Sending a Debt Settlement Letter
Sending a debt settlement letter has the potential to do both harm and good. The extent to which you are affected depends on your current situation. Some people may not think that the benefits outweigh the negatives when settling debt. Others may be limited when it comes to other options and are more willing to take the risk.
Pros of Writing a Debt Settlement Letter
Sending out a debt settlement letter can be beneficial if youâre in financial hardship. Many people who canât afford to pay off their debt end up filing for bankruptcy. While settling is never a guarantee, it may put you in a better financial position. If the request is accepted, debt settlement amounts usually settle for around 50 to 80 percent of the total balance. Reaching out to your creditors and addressing the issue can also relieve some of the stress you feel to pay off your debt.
Cons of Writing a Debt Settlement Letter
As mentioned, debt settlement is never a guarantee. If thereâs no agreement made, you may end up owing more than you did originally due to missed payments and late fees. If you hire professionals, you may owe them various fees and payments.
Settling debt can often appear as a bad financial move and can negatively impact your credit health. Missed payments on the account may still appear in your report, even if you were negotiating your settlement during that time. Thereâs also a chance that your account shows up as a debt settlement on your credit report. This may cause other creditors to see you as an unreliable candidate in the future.
How To Write a Debt Settlement Proposal Letter
When writing a debt settlement letter, itâs important to be explicit and detailed. Treat the letter as a contract between you and your creditor. Include your personal information and account number for easy identification. Youâll need to outline the amount you can pay and what you expect in return. If you want to propose a good settlement offer, consider offering around 30 percent of what you owe. This can set the baseline for the negotiations your creditor will put forth.
In order to have your proposal approved, creditors must believe that youâre truly unable to pay off what you owe. This is why elaborating on the reason you canât pay off your debt can benefit you. Financial hardships can include serious injury, unexpected loss of work, and environmental disasters. Depending on your hardship, creditors may ask for documented proof. For instance, a serious injury may need proof from a doctor.
Below is a template to guide you when writing your letter:
[First & last name]
[Home or mailing address]
[Account number of which youâre looking to settle]
[Creditor or organization name]
Iâm writing this letter in regards to the amount of debt on the account number stated above. As a result of financial hardship, I am unable to pay back the amount in full. [Here, take the time to explain your hardship so the creditor has a better picture of whatâs going on].
I would like to propose an offer to settle this debt for [$ how much you will pay] as a final settlement. In return, I request [what you expect in return; ex: removing late payments on your credit report]. I would also like freedom from any liability associated with the debt of this account. I expect this to appear in my report by stating that the account is now paid in full.
If you are willing to accept this offer, please send me a signed and written agreement. Once I receive this, I will pay the agreed amount within [number of days they can expect your payment]. Please let me know by [a specified deadline].
What To Expect After Sending Your Letter
After sending your letter, you may be eager to see if your creditor approves or declines the request. For this reason, including a response date in your letter will help your chances of a prompt reply. As you wait, ensure you have the agreed amount of money saved up and ready to go if they accept your offer. It can also be a good idea to request confirmation that they have received your payment.
You may want to check and make sure the appropriate changes appear on your credit report and account. Debt settlement may relieve your debt, but it can also negatively impact your financial health. Debt settlement is usually reflected in your report for some time. Seeing this may make you appear as risky to future lenders.
Debt settlement may be worth your while if you find yourself struggling due to a hardship. When writing a letter, remember itâs very important to be careful with your words. A well thought out debt settlement letter can make all the difference when it comes to liability. This helps in ensuring that both parties uphold their part of the agreement.
Since it may negatively impact your credit score, you may feel nervous about settling your debt. You may fear creditors thinking youâre a poor candidate for future financial requests. Keep in mind that there are still many credit card and loan options out there for people who are working towards rebuilding their credit.
The post Understanding Debt Settlement Letters appeared first on MintLife Blog.