Loans

Should You Get a Personal Loan? Tips to Find a Cheap Unsecured Loan

February 28, 2015
If you need money to meet basic expenses, fund your wedding or take a vacation, you’ve probably considered getting a personal loan – a loan where you don’t put up any collateral, such as your house or your car, that the lender can repossess if you default. Because the lender has no guarantee for the loan other than your own reputation, you’ll have a higher interest rate than you would with a collateralized loan.

Personal loans are rife with pitfalls. Used correctly, they can save a significant amount compared to payday loans, overdrafts and pawnshops. However, there are many unscrupulous lenders who may try to bleed you with fees and high interest rates. Here’s how to find the best personal loans without paying too much.

What’s my credit score?

Since you aren’t putting up any collateral, the loan terms will be based on your creditworthiness – your credit history, your income and what other debts you have. Be sure to check your credit history and score for any inaccuracies before applying.

Pro tip: If you don’t know your credit score, check it for free by signing up for a credit monitoring service and cancelling during the grace period.

If you have good credit, you can probably get a personal loan at a decent rate with your current bank. If you have less-than-perfect credit, don’t be tempted by “no credit check” offers. Payday lenders often charge exorbitant rates and can often be avoided.

Where should I get a personal loan?

You can get personal loans from any number of institutions:

  • Banks
  • Credit unions
  • Payday lenders
  • Peer-to-peer lenders
  • Credit building groups

Your best bet is probably your local credit union. Because they’re not-for-profit, they can charge lower rates than for-profit banks; federally chartered credit unions have limits on the rates they’re allowed to charge. Even if you have less-than-perfect credit, credit unions can help: many have payday loan alternative programs that provide loans at the lowest price to people who’d otherwise be denied.

Another good option is peer-to-peer lending groups like LendingClub and Prosper. While the rates might be a bit higher than those at credit unions, you may find it easier to qualify. Remember that these companies are for-profit, compared to not-for-profit credit unions. If you’re really in dire straights, consider a credit building nonprofit that will get your finances back on track. The Credit Builders Alliance can help you find a program in your state.

Pretty much all personal loans require income verification (such as a W2 or pay stub) and identification (such as a passport or driver’s license); some ask for bank statements or tax returns.

Finding the lowest rates

Here are a few tips to finding the best loan.

Compare your options. Is a personal loan cheaper than a low-interest credit card? If you have good credit and can pay off the loan in 12-18 months, you can probably get a credit card that has 0% interest on purchases for a year or longer. Take a look at credit unions, too, before going with banks.

If you have bad credit, find a co-signer. Having a co-signer with good credit allows you to piggyback off of their creditworthiness and potentially get better rates. However, use this option only if you trust the co-signer completely, as any mismanagement goes on your record as well as his.

Consider a secured loan instead. If you have a house, consider using it as collateral in order to get lower rates. A home equity loan or home equity line of credit can often be cheaper than a straight-up, unsecured personal loan. Keep in mind that using your home as collateral means that if you default, you could lose your home.

Pay off as much of your credit card balance as you can before you apply. The outstanding balance on your credit card – even if you pay it off at the end of the month and never pay interest – counts against you when a lender runs a credit check.

Borrower beware: What to watch out for with personal loans

Unsecured lending can attract unsavory players, but even with the squeaky-cleanest of lenders, it pays to keep an eye out for gotchas.

Prepayment penalties. When a lender tries to estimate how much money they’ll make off your loan, they usually assume that you’ll pay interest until a certain date. Paying off the loan too soon – and therefore limiting the interest you pay – screws up their calculations. In order to keep their numbers straight and pockets lined, some charge a fee for paying off the loan before a certain date. Such fees are called prepayment penalties or exit fees. Be sure to look for the words “no prepayment penalty” on your loan term when you apply.

“Optional assistance” and other fees. If you grant the lender permission to withdraw from your checking account, they might take out so-called “optional” feesthat you never heard of. The lender can automatically deduct them from your account, potentially causing your checking account balance to go negative.

Accidental overdrafts. Again, if you link your loan to your checking account for automatic payments, you might be in danger of an overdraft. Overdraft fees can run $35 a pop, and they can quickly add up. It’s harder to know that you have a low balance in your checking account if the lender deducts your payment behind the scenes. To avoid this, consider:

  • Opting out of automatic payments
  • Setting up a low balance alert with your bank
  • Signing up for a third-party service like Mint that offers low balance alerts

Scam artists. Though many lenders are honest and goodhearted, a look through literature will show that usury has been around since man walked upright. Payday loans, in particular, tend to attract the bottom of the humanity barrel. Before you sign up for any loan, particularly online, check out the Better Business Bureau and Federal Trade Commission to make sure the organization is legit.

H/T Source: NerdWallet, Inc.

Home Banking

How to Save Money Using Online Bill Pay

February 26, 2015

Many people use online banking to check their account balances or to transfer funds between accounts. But if you’re not using your online bank account to consolidate and pay your bills, you’re missing out on the best part!

How Does Online Bill Pay Work?

How online bill pay works is pretty simple: You enter a person or company you want to pay and the service sends your funds electronically or prints out a paper check and mails it to the payee. You can receive, view, and pay an unlimited number of bills for up to a year in advance of the due date on one web site. I’ll discuss more about the security of paying bills online in just a moment.

Most large companies—like lenders and insurers—are set up for electronic payments, so your funds can be received in a day or two when you use online bill pay. But if you’re like me, you also need to pay small companies or individuals who don’t accept electronic payments. That’s no problem because, as I mentioned, the bank’s bill pay service actually cuts a check, puts it in an envelope, and mails it to anyone in the United States for free! Since paper checks take 3 to 5 business days to arrive, the system prompts you to enter the day you want the check to be received so there’s enough time for processing and delivery.

How Online Bill Pay Saves Money

When you use your bank’s online bill pay, they cut a check, put it in an envelope, and mail it to anyone in the United States—for free!

I can’t say that using online bill pay makes paying bills fun, but it sure makes it easy! You never have to write a check again—you just click a few buttons instead. Plus, you save money by eliminating the expense of paper checks, envelopes, and stamps—not to mention the time that you save paying bills from one place online. Imagine spending just 10 or 15 minutes each week to pay bills instead of toiling away for hours.

Manage Your Money Using Online Bill Pay

In addition to paying bills, most bill pay services offer the following 5 features to help you stay organized and manage your money better:

  1. Aggregating e-bills: You can have electronic copies of your bills sent directly to your bill pay center instead of to your email inbox, which centralizes your information.
  2. Alerts: For each biller that you set up, you can create customized email alerts that inform you when a bill has arrived or remind you about the due date. That’s a handy way to make sure your bills are paid on time so you eliminate late fees and boost your credit score.
  3. History: At a glance, you can see all your pending online payments and the payment history for each biller in your system.
  4. Multiple accounts: You can choose to pay a bill from multiple accounts that you might have with the bank, like a checking or a money market deposit account.
  5. Automatic payments: For bills that you pay on a regular basis, you can automate them by setting up recurring payments. Just be sure that you have a good handle on your available funds so you don’t overdraft your account.

How to Get Started Using Online Bill Pay

If you’re ready to get started paying your bills online, the first step is to make sure that your bank or credit union offers it. If not, I recommend that you switch to a high-yield, FDIC-insured checking account that charges absolutely no fees and comes with free online bill pay. You can find one of these great bank or credit union accounts at sites like checkingfinder.com and depositaccounts.com. Once you’ve created your online banking account you can register for the bill pay service and get started.

To set up the companies and people you want to pay, you enter their name, mailing address, and your account number, if you have one. There’s no need to enter all your payees at once—simply enter each paper bill or e-bill as you receive it. Once you save this information in the system, all you have to enter is the amount to pay and the date you want the biller to receive your money.

Is Online Bill Pay Safe?

When I discuss any type of online money management, people always want to know if it’s really safe. It’s crucial to understand that most identity theft doesn’t occur due to computer hacking. In fact, most cybercrime happens when a thief steals your wallet, your trash, or reroutes your incoming mail without you knowing.

One of the best ways to protect yourself from identity theft is to stop sending and receiving paper documents through the mail that have your confidential information, like checks, bank statements, credit card statements, and bills. When you switch to e-bills and e-statements, you’re in control of your sensitive information and can password-protect your computer or mobile device.

Banks use the highest levels of security and guarantee protection against unauthorized transactions. Additionally, you can give yourself an added layer of protection by logging on to your bank’s web site using a secure Internet connection only. Never access your financial accounts from an open wireless network, like in a coffee shop or a library. By monitoring your account activity and setting up strong passwords that you change on a regular basis, you can reduce the likelihood of fraudulent activity.

Online bill pay can simplify your financial life by eliminating expenses, reducing the amount of paper you have to handle, and saving time—so you can spend it doing something you enjoy.

H/T Source: Quick & Dirty Tips

Home Banking

5 Mobile Banking Security Tips

February 25, 2015

Start the Countdown

It wasn’t that long ago that an account deposit or withdrawal required a visit to your bank to complete the transaction. Banking was inconvenient and time consuming. Today, we have lots of options when it comes to financial transactions. Mobile banking is an increasingly popular way to monitor and manage your money.

But how secure is mobile banking? Could a thief sniff out your bank account information digitally? Is it safe to make financial transactions using an app or text messaging, or by visiting a mobile Web site?

The good news is that mobile banking is somewhat secure just because there are so many variations of banking apps and methods in the market. A thief has no way of predicting which method a potential victim might use. If there were only one standardized method the story might be different. Even so, there are certain rules you should follow to make sure your banking information remains safe.

5. Don’t Follow Links

You may have heard the term phishing. Phishing refers to the practice of tricking someone into revealing private information. Fishing and phishing are similar concepts — there’s bait involved with both. With a phishing scheme, that bait might be as simple as a text message or e-mail. It may be as complex as a fake Web site designed to mimic your bank’s official site, which is called spoofing.

You should never follow a banking link sent to you in a text message or e-mail. These links could potentially lead you to a spoofed Web site. If you enter your information into such a site, you’ve just handed that data over to thieves. It’s always a good idea to navigate to a Web site directly. Enter your bank’s Web address into your phone and bookmark it. This will help you avoid bogus Web sites.

On a related note, you should never send your account information or password via text message or e-mail. It’s a common phishing scheme to send out bogus requests for such information. Don’t fall for it!

4. Avoid Banking While on Public Networks

Many mobile devices allow you to connect to different types of networks, including Wi-Fi networks. You might be tempted to check your balance or make some transfers while you grab a quick drink at a coffee shop. But before you log into your account, make sure you’re not connected to the public network.

Public connections aren’t very secure — most places that offer a public Wi-Fi hotspot warn users not to share sensitive information over the network. If you need to access your account information, you may want to switch to another network. If you’re using a smartphone or other cellular device, disabling the Wi-Fi and switching to a cellular network is a good solution. You never know who might be listening in over the public network.

3. Use Official Bank Apps When Possible

Many banks now offer official applications in smartphone and tablet app stores. In general, these apps tend to be more secure than sending information by SMS message or e-mail. Most banks go to great lengths to make sure any information sent across a network by an app is encrypted.

Make sure your bank sanctions the app before you download and install it. Most banks will include a section on their Web sites to let you know about the official app. Once you’ve verified the app is official, it shouldn’t be difficult to download and install to your device.

2. Be Careful of What You Download

While there aren’t as many examples of malware out in the mobile device market as there are on traditional PCs, the fact remains that mobile devices are just specialized computers. That means it’s possible for someone to design an app that could try to access your information. One way this could happen is if the app hides a keylogger.

A keylogger is a program that records — or logs — keystrokes. Every letter or number you enter into your phone could be recorded. If a hacker pairs a keylogger with some code that either sends off an e-mail or text message at certain times of the day, you might be sending all your keystrokes to someone anywhere on the globe.

For the moment, mobile devices are less prone to malware attacks than computers. But you should still be careful when downloading apps — not just your banking app, but all apps. Do a little research before you download that next widget or game to make sure the app developer has a good reputation. And if you’ve jailbroken an iPhone or you’ve sideloaded unapproved apps, be aware that your data could be vulnerable.

1. Keep Track of Your Mobile Device


Perhaps the biggest risk is also the reason why mobile banking is so popular — mobile devices are easy to carry around everywhere we go. They can contain everything from passwords to contact lists to our calendar appointments. Information like that can be dangerous if your mobile device falls into the wrong hands.

Apart from tethering all your gadgets to your body or scrapping all electronics and turning into a luddite, there are a few things you can do to minimize your risk. If your device has a digital locking mechanism you should use it. Some devices require you to trace a pattern or insert a PIN. While it might slow you down to have to enter a PIN each time you want to use your phone, that layer of security might be enough to keep a thief from accessing your bank account before you can report your phone as missing.

Don’t be scared off from using your mobile device to access your bank accounts. Just be sure to practice good, safe behaviors and keep track of your gadgets. With a little common sense and attention, mobile banking can be both convenient and secure.

H/T Source: HowStuffWorks

Loans

Tips for Getting the Best Rates on Secured Loans

February 13, 2015

If you are planning on applying for secured loans in the future, no doubt you will want to be sure that you can find the best rates possible. The rates that you get on your loan are very important and getting lower rates can save you a great deal of money over the life of your loan. The following are some great tips that can help you to get the best rates possible on your secured loan.

Clean up Your Credit

One tip that can help you get the best rates on secured loans is to clean up your credit. The rates that you pay on your loan are very dependent on your credit rating, and having a bad credit rating can cost you a great deal more in interest rates. If you take the time to work on your credit and make sure that you keep it in excellent shape, you will be able to get much better rates on your secured loans.

Offer Excellent Collateral

Another important tip to keep in mind when you are trying to get the best rates possible on secured loans is to offer excellent collateral for your loan. It is important that you have collateral that is actually worth more than the amount of money that you want to borrow. You want the lender to know that you are serious about the loan and that they will get their money back if you are not able to pay.

Compare Various Lenders

One of the best things that you can do to find the best possible rates on secured loans is to compare the rates of various lenders. The market for loans is very competitive, and you should never for the first loan that you find. Take the time to do your research and find out the rates that various companies have to offer. When you are comparing their rates, also make sure that you compare their terms as well. A little research on your part can help you find the best rates possible.

Analyse Your Needs

Lastly, you will need to analyse your needs before you try to take out a secured loan. The higher your loan is, the more you may end up paying in interest rates. Make sure that you only take out the amount of money that you actually need so you do not pay interest charges on money you are not really in need of. The smaller the amount is that you need to borrow, the easier it will be to get better interest rates for your loan.

These are just a few tips that can help you find the best rates possible on secured loans. Remember that the interest rate is important, and even getting a rate that is just a bit lower can save you a great deal of money. Use these tips and you will be able to find the best rates available on secured loans.

H/T Source: Streetdirectory.com

Auto Loan

Car Shopping: New Or Used?

January 30, 2015

It happens to everyone. The old clunker gasps its last smokey gasp at the side of the road, and you’re left to face a sickening reality – you need some new wheels.

The ads on television all scream in your ear, “New Car! New Car! New Car!” A shiny, clean new car does sound appealing, but you’ve also heard from your annoying know-it-all friend who says buying used is actually the smarter choice in the long run. It’s a tough decision to make. In this article we’ll explore the pros and cons of buying new and used vehicles to help pick the car that is right for you. (Leasing a new car is also an option; to learn more, read Pros And Cons of Leasing Vs. Buying A Vehicle.)

New, Glorious New
There’s just no denying the curb appeal of a brand new car, from that new-car smell to that shiny paint, the clean interior to the “ooohs” and “aahs” when your friends see it for the first time. In our consumer culture, a new car is an undeniable status symbol that lets everyone know you have arrived (often literally). Cosmetics aside, purchasing a new car also comes with a host of other positive attributes.

Positives
It’s new! Most new cars have good reliability records, and if anything does go wrong, it’s probably covered by the warranty. Buying new also means that you have no concerns about how the vehicle was treated before you bought it. (For related reading, see Extended Warranties: Should You Take The Bait?)

Many new cars also offer roadside assistance. This provides peace of mind and saves you the cost of paying for a roadside assistance program on your own, or for towing expenses to your home if you are stranded on the side of the highway.

New cars are also likely to offer the highest fuel efficiency standards and the latest safety features, such as side-curtain airbags and structural reinforcements. Many companies even offer financing programs with low or no interest rate, making it less expensive to finance a new car than a used car.

Negatives
Buying a new car is hard on the wallet. Not only do new cars cost more than used cars, but they depreciate in value more quickly too. A vehicle loses the most value in the first few years of ownership. It actually loses a huge chunk of value in its first few seconds off the lot. In other words, when you purchase a new car, you pay the retail price – the price a dealer charges for a new car. As soon as you’re off the lot, the car is worth wholesale price. This is the amount the dealer would be willing to pay if you turned around and tried to sell your car back.

Unfortunately, the difference between these two values can be massive. According to Blue Book, the manufacturer’s suggested retail price for a 2007 Ford Focus two-door hatchback is $14,335. The used-car private-party resale value for the exact same car is $11,995. That’s a loss of $2,340 for driving the car off the lot.

Buying a new car means that you are both incurring higher debt and losing value more quickly than if you had purchased a used car. New cars also come with higher insurance costs than used models, as replacement values are higher. (For more insight, read Shopping For Car Insurance.)

On a more philosophical level, buying a new car fosters a culture of conspicuous consumption, not a culture of frugality. Instead of making a practical transportation decision, you are buying into the culture of consumerism and its ongoing quest for the latest and greatest toys. Not only is this an expensive proposition, but it is likely that next year something even better will hit the market, making your costly purchase obsolete. (To learn more about conspicuous consumption, check out Stop Keeping Up With The Joneses – They’re Broke and Save Money The Scottish Way.)

Finally, new cars don’t stay new for long. In a day, a week, or a month, you’ll get your first scratch or nick. By the end of the first year, the floor will be stained, the doors will be dinged, and the thrill of having a new car will be long gone. Of course, the monthly payment will linger for many more years.

Used, Humble Used
While “pre-owned vehicles” (marketing jargon for used cars) lack the mystique of new cars, they sure are hard to beat when it comes to practical financial reality. Buying a late-model, low-mile vehicle can be a bargain hunter’s dream come true.

Positives
Buying used is an opportunity to get the best car for your money. You can often find a late-model used car priced at less than half the cost of a new one. Pre-certified dealer programs offer strong warranties, often including the remaining balance of the factory warranty, and the opportunity to purchase an extended warranty. For all practical purposes, low mileage, late-model used cars are basically new. If you trade your car in every few years the way many people do, you aren’t likely to notice the difference between a used vehicle and a new one because most modern cars will go 100,000 miles or more with few mechanical difficulties. Buying a car that has 40,000 miles on the odometer is likely to result in 60,000 or more miles of trouble-free driving. Some vehicles now offer drive-train warranties that cover the most expensive components of your drive train for 200,000 miles.

If you are low on cash and willing to take a chance, you can even get a car for just a few thousand dollars, and maybe even a few hundred. If you are handy with a wrench, buying a car that needs a little time and attention can dramatically reduce your acquisition cost. (If you’re the “fixer upper” type, check out some real estate investing tips in Fix It And Flip It: The Value Of Remodeling.)

Negatives
Despite the warranties, used cars still come with that unknown reliability stigma. Because you don’t know how the car was treated by the last owner or why it was traded in, there is always that fear of buying somebody else’s problem. Even if the car is perfectly sound, you will need to perform required maintenance sooner than on a new car. This maintenance includes things like radiator and transmission flushes, new breaks and new tires.

On a more practical level, it may be challenging to find a used vehicle that comes with the options and features that you want. You also have less recourse if you have purchased a lemon, as lemon laws often apply only to vehicles under a certain age and with less than a certain number of miles on the odometer.

New or Used?
The decision to purchase either a new or used vehicle should be based on a number of factors. You need to be comfortable with financing options, as well as the long-term implications for your personal financial situation. You need to feel safe, and you’ll need a vehicle that is reliable. Finally, you need make sure your new car meets your needs in terms of comfort features and amenities.

Buying a car is major financial decision. Aside from the purchase of a home, it often qualifies as one of the largest purchase many people make in a lifetime – so make sure to research and enjoy the ride!

H/T Source: Investopedia

Fraud Protection

Dealing with Identity Theft

January 26, 2015

If you receive a collection notice concerning an account that is unfamiliar to you, you should not ignore it.  Someone may have stolen your identity and used it to fraudulently obtain credit in your name.  This happened to me in 1998.

The scheme generally works as follows. Someone, likely part of a ring, gets ahold of your name and Social Security number.  Accounts are then opened in your name and Social Security number, but with a bogus address.  The accounts are opened in a different region of the country from the one in which you live.  The accounts are opened at high-end retailers, such as jewelers or purveyors of electronics, and quickly maxed out.  In the ensuing months, the retailers send statements to the bogus address, without response.  The retailers double-check your address, and find your true address.  Then their statements start arriving at your home.

Upon receiving a collection notice for an account that is unfamiliar to you, you should immediately contact the retailer and inquire about it.  If indeed the charges are not your’s, you should demand that the retailer disassociate you from the account, that it stop attempting to collect the account from you, and that it make no negative reference concerning you.  You should also go to annualcreditreport.com and  request a free copy of your credit report from each of the three national credit reporting agencies—Experian, Trans Union, and Equifax.

Upon receiving your credit reports, carefully examine them.  Report any inaccurate information to the credit reporting agency using its dispute procedure.  Upon receiving a dispute, the credit reporting agency must investigate it and notify you of the result within 45 days.  An investigation consists of contacting the source of the disputed information—a merchant—and inquiring whether the information is true.

If the source of defamatory information about you (false information that reflects badly upon you) confirms that the information is true, your remedy lies against the source.  You should have an attorney write to the source of the information and explain that the information is false, that it is defamatory, and that it is causing you to suffer damages.  Your attorney should demand that the source immediately—

(1) Contact each credit reporting agency and inform it of the false, defamatory nature of the information, and that the information must be forthwith deleted from your credit file.

(2) Contact each person to whom the credit reporting agency has sent a copy of your credit report containing the false, defamatory information and inform said person of the falsity of the information.

Your attorney should threaten to sue any source of defamatory information about you who refuses to expunge the information from your credit files. Such a lawsuit can sound in defamation and negligence, among other theories, and it can seek actual as well as punitive damages, and attorney fees and other costs of the action. The suit can be brought in Federal or State court.

You should also request that each credit reporting agency place a fraud alert in your credit file. This will tell the world that you have been the victim of identity theft, and that no one should extend credit in your name without first contacting you and confirming that the person using your name in indeed you.

You should not take the word of a source of a defamatory credit report concerning you that it has contacted the credit reporting agencies expunged the defamatory information from your credit files. You should pull another set of your credit reports from the credit reporting agencies and verify it yourself.

If the source of defamatory credit information about you refuses your demand to contact the credit reporting agencies and expunge the defamatory information from your credit files, you should sue the source. If there is more than one source, you may be able to sue all of them in a single action. If the credit reporting agencies have “investigated” your dispute, then under the Federal Fair Credit Reporting Act you have no cause of action against them—their legislative lobby is apparently too strong to allow such a cause of action.

Lawsuits against a merchant for having reported defamatory credit information about a consumer are usually settled for a monetary sum. The defendant merchant(s) should also be required to contact each person who has received the defamatory credit information concerning you and inform them of the falsity of the information.

If your case is not settled but goes to trial, and the jury finds for you on liability, then the jury may award you such actual damages as it finds you have proved, as well as attorney fees and other costs of the action.  If the jury finds the defendant’s(s’) to have been willful or malicious, it may also award punitive damages.

How did my case turn out?  When I began receiving statements at my house for accounts I had not opened, I requested copies of my credit reports from the credit reporting agencies.  The credit reports evinced that retail credit accounts opened by fraudulent use of my identity had been used to purchase $25,000 of furniture and electronics.  I wrote to the retailers informing them that the accounts were opened by fraudulent use of my identity, and demanding that they expunge the false, defamatory information about me from my credit files.  Most of them complied with my demand, but some of them did not.  I sued the retailers who had refused to retract their false, defamatory credit reports about me.  I sued them in one action in State court; alternatively, I could have sued them in Federal court.  Once the retailers had retained counsel (and paid some legal bills), they made a settlement overture.  I felt that $20,000 was a reasonable settlement amount.  As the defendants capitulated quickly, without a lot of fighting, I accepted $18,000 from them collectively to settle the case.

I also obtained a copy of the defendant merchants’ files for the fraudulent accounts.  The accounts were opened using my name and Social Security number, but a bogus address in the Dallas, Texas area (I live in Michigan).  One of the applications had a photo of the applicant.  The individual was dark-complexioned, apparently Hispanic (I am fair-complexioned and Irish).  I had the impression at the time that the ring had gotten my name and Social Security number from a credit application I had submitted to a national retailer.

I also had fraud alerts placed in my credit files.  I have not had a problem with identity theft since.

Merchants are well-advised to put in place procedures to verify the identity of credit applicants.  Such procedures should include contacting the credit reporting agencies and verifying the address given by an applicant.  And when a consumer contacts a merchant asserting that he or she did not make charges the merchant has ascribed to him or her, the merchant must promptly investigate and, if it is unable to prove that the consumer did in fact make the charges, contact credit reporting agencies and delete the charges from the consumer’s credit files.

H/T Source: Forbes

Insurance

6 Ways To Save On Insurance

January 23, 2015

 

Insurance allows consumers and businesses the ability to protect themselves and their possessions from the risk of loss. For a seemingly low annual payment, an insurance company will issue a policy on nearly any type of asset or item (or individual in the case of health insurance) and pool that risk of loss along with other policies it issues and collects premiums on.

The concept is simple, but there is a dizzying array of options to consider when taking out an insurance policy. And though the annual payment is usually a fraction of the cost to replace the item being insured, there are wide differences in the premiums across insurance providers. Below are six common sense and rather straightforward ways to save on any insurance.

1 – Shop Around

As with any type of shopping, do your homework to ensure that you found the best deal possible. When looking for new insurance, get at least three quotes and compare the differences. The internet also makes it easy to have insurers bid for your business by filling out just one application. This can also ensure that the same policy options are chosen and the comparisons are on an apples-to-apples basis. An independent insurance agent can also help you shop around, though they will earn a commission that may increase the cost of the insurance.

2 – Go Direct

Insurance agents can be extremely helpful in assisting with finding affordable insurance and identifying any discounts that can be earned, but they receive a commission for doing so. The commission is usually included in the cost of your insurance. There are insurers out there that go directly to consumers and cut out the insurance-agent middle man. Geico and Progressive insurance are two auto insurers that sell policies directly. Direct policies may not always be the cheapest, but they have a good chance of being the most affordable option, as commissions are no longer part of the equation.

3 – Raise Your Deductible

A higher deductible lowers the amount an insurer is liable for and therefore can lower insurance premiums. A common deductible amount is $250 but it can easily be raised to $500 or $1000 for nearly all types of insurance. Insurers can easily crunch the costs of an insurance policy with the different deductibles. The savings can be substantial. For example, raising the deductible to $1,000 from $250 can result in annual savings of 15% to 20%.

4 – Use a Single Insurer

Insurers usually offer discounts if you use them to cover your home, multiple cars, or separate jewelry or umbrella policy. Larger insurers usually offer multiple insurance lines so it can be your best bet. Insurers are willing to offer a discount because the fixed costs of maintaining your records and carrying out customer service are needed for the first policy and this makes additional policies less costly. It also increases the stickiness-factor, as it’s more difficult to switch all policies at once while maintaining the discount, and it’s also a time consuming process that consumers may not want to deal with.

5 – Avoid Claims

This point is easier said than done and it is the reason one needs insurance in the first place, but it basically boils down to avoiding smaller claims that are likely to raise your rates. In other words, pay for smaller claims out of monthly expenses if you can. As previously mentioned, raising the deductible also helps ensure that only larger claims are made. (For more, see Will Filing An Insurance Claim Raise Your Rates?)

6 – Pay for Insurance Less Often

Insurers usually offer the option to pay a monthly premium to cover insurance, but they usually charge extra for the convenience. Paying every six months or annually can be slightly less expensive, and though it requires discipline to save up each month to make the payments, it can save you money in the long run.

 

Conclusion

Again, the previous tips are a way to save on insurance in general. There are thousands of other ways to save on individual types of insurance. For instance, keeping a car in good working condition and a home with a fire extinguisher and alarm system can lower insurance costs as they lower the chances a claim will be made. Staying healthy is perhaps the best advice for keeping health insurance costs low. Overall, though, the above advice represents the simplest way to save on insurance.

H/T Source: Investopedia

Investments

7 Ways to Retire with $1 Million

January 19, 2015

 

Many workers will be able to accumulate $1 million over the course of their career if they save consistently beginning at a young age, invest prudently, and avoid withdrawing money early. It helps, of course, to sidestep fees, taxes, and penalties along the way whenever possible. Here’s what it takes to become a millionaire by retirement:

Start saving by age 25. It’s difficult to start saving for retirement when your entry-level salary barely covers your student-loan payments. But beginning to build a nest egg during your first job is the most painless way to become a millionaire by retirement. “The more time you have, the less you have to save each year since you have longer to accumulate,” says Kim Morton, a certified financial planner for Sensible Money in Scottsdale, Ariz. If you start saving for retirement at age 25, you only have to save about $4,830 annually to reach $1 million by age 65, assuming an annual return of 7 percent after fees. If you wait until age 40 to start saving, you’ll need to tuck away much more: $15,240 per year, assuming the same retirement age and annual return. Alternatively, you could start out saving slightly less and boost your savings rate as you receive raises and bonuses. “A 20-year-old may only be able to save $100 per month, but the exercise of saving $100 per month when you are 20 will make it easier for you to go to $200 a month when you are 25 or 30,” says William Valentine, a financial planner and founder of Valentine Ventures in Bend, Ore. “The act of saving is like developing a muscle, and if you start early with small amounts, you will build the saving muscle.”

Select low-cost investments. Fees incurred through your 401(k) plan will cut into your investment returns. A 401(k) contribution of about $7,795 per year over 35 years will get you to $1 million, assuming a 7 percent annual return and fees and expenses of 0.5 percent. However, if your fees are 1 percent higher (1.5 percent total), you will need to save $9,690 per year to become a millionaire over 35 years, or about $1,895 extra per year to make up for the higher fees. “If I have the choice of two mutual funds that have the same characteristics, but one has [an expense ratio] of 1.5 percent, but the other [charges] 0.5 percent, by using the fund with an expense ratio of 0.5 percent, it is like saying, ‘Here is your extra 1 percent of returns each year’,” says Morton. “Simply put, the less money you put in somebody else’s pocket when it comes to fees, taxes, and penalties, the more money you will have in yours.”

Get a match. A 401(k) match will help you become a millionaire significantly faster than you could on your own. If you get an annual $1,500 401(k) match from your employer, you can save $1 million by contributing just $5,475 annually to a 401(k) plan for 35 years, assuming a 7 percent annual return after fees, versus $6,975 annually without the match. But pay attention to your employer’s vesting schedule for the retirement plan. Until you are fully invested in the plan, you may not get to keep employer contributions to your retirement account. In some cases, you might need to remain with an employer for five or six years until you can keep your 401(k) match.

Mind retirement benefit gaps. Saving for retirement becomes much more difficult when people change jobs, get laid off, and take time out of the workforce. And when you get your next job, there may be a waiting period before you can join the 401(k) plan or get a 401(k) match. To keep your retirement plan on track, you might need to save in an IRA or a taxable investment account until you become eligible for a new retirement plan at work. “Try to save equally outside of work what you would do at work,” says Valentine. If that’s not possible, you might need to save extra in advance of or after a retirement savings break.

No early withdrawals. One of the biggest obstacles to reaching $1 million is taking money out of your 401(k) before retirement. Whenever you withdraw money from a 401(k) account, you will have to pay income tax on the amount withdrawn. Those who withdraw money before age 59½ are also generally charged a 10 percent early withdrawal penalty. For example, if you withdraw $10,000 from your 401(k) plan at age 40 and are in the 25-percent tax bracket, you will forfeit $3,500 of that amount in taxes and penalties. Your money will grow faster if you avoid the early withdrawal penalty and defer tax on your savings until retirement. Avoid cashing out your 401(k) when you change jobs by rolling the money into an IRA or your new employer’s 401(k) plan, or even leaving it in your old 401(k). An emergency fund outside of your retirement account will give you a financial cushion so that you don’t have to dip into your retirement savings for unexpected expenses.

Balance safety with growth. Unless you have significant investment expertise, your 401(k) portfolio probably won’t outperform the stock market every single year. Most people should aim to capture the average growth of the stock market. “Return does not mean trying to get some crazy 20 percent return each year because somebody told you that it’s possible,” says Morton. “Return means that there is going to be some type of average market return and that the longer you have your money invested, the closer you are going to get to that average return.” Once you start to accumulate a significant account balance, you need to protect it with a reasonable investment strategy that includes a mix of stocks, bonds, and cash that is appropriate for your risk tolerance.

Boost savings once your kids are independent. Once your children are finished with college and support themselves, you will have a newfound ability to tuck money away for retirement. “Usually people don’t have a lot of money when the children are in school. You usually find that the period of time in your 50s and your mid-60s is when you are really putting away a lot of money,” says Harold Anderson, a certified financial planner and president of Parkshore Wealth Management in Roseville, Calif. “I think if each member of a couple is putting $22,500 in a 401(k) and investing it in a reasonable manner, they could probably have a pretty good shot at getting close to a million.”

Auto Loan

Buying a Car – Should you buy new or used?

January 10, 2015

Buying a car can be expensive, so it’s important you get it right. One of the biggest decisions you need to make is whether to buy a new or used car. New cars are more expensive but are generally more reliable, whereas used cars are cheaper but might cost more to run.

Should you buy a new car?

Sitting in your own brand new car for the first time can be an exciting feeling. However you should think through the benefits and drawbacks of buying a new car before you decide whether it is right for you.

Benefits of a new car

A new car:

  • comes with a full manufacturer’s warranty, which will give you an easy way to have many faults repaired for free. These warranties are usually around three years long but can be as long as seven with some manufacturers
  • often comes with special offers such as interest-free finance
  • can be delivered to your exact specification

Drawbacks of a new car

There are disadvantages of buying a new car including:

  • it will be more expensive than a used version of the same model
  • the value of a new car drops significantly in the first year
  • new cars have to be ordered from the factory so you may have to wait for weeks or even months for your car to be delivered.

Should you buy a used car?

Buying a used car means you can save a lot of money. However, used cars are often more expensive to maintain and you run greater risks of being misled. You should think through the benefits and drawbacks of buying a used car before you decide whether it is right for you.

Benefits of a used car

There are advantages to buying a used car:

  • it will be cheaper than a brand new version of the same model
  • for the same money as a brand new car, you might be able to buy a better equipped or more powerful version of the model you want by opting for a used model
  • you won’t have to worry as much about it losing its value (depreciation). If you buy a car that is one year old, you will have missed out on the biggest fall in value that happens in the first 12 months
  • you can buy used cars privately as well as from dealers, giving you more options.

Drawbacks of a used car

There are drawbacks to buying a used car:

  • a used car may not come with a warranty, although you will still have rights as a consumer if it turns out to be faulty. You can also buy warranties from independent providers for a few hundred pounds
  • a used car may be more likely to develop problems from wear and tear or cost more to run and maintain
  • you may not be able to get any special offers on a used car
  • you can’t choose the specification of your car like you can with a new car
  • there is a greater risk that you might be misled in some way – people have been known to buy used cars that are still on hire purchase or have been stolen.

 

Fraud Protection

Tips for Preventing Identity Theft

January 9, 2015

Identity thieves steal your personal information to commit fraud. They can damage your credit status and cost you time and money restoring your good name. To reduce your risk of becoming a victim, follow the tips below:

  • Don’t carry your Social Security card in your wallet or write it on your checks. Only give out your SSN when absolutely necessary.
  • Protect your PIN. Never write a PIN on a credit/debit card or on a slip of paper kept in your wallet.
  • Watch out for “shoulder surfers”. Use your free hand to shield the keypad when using pay phones and ATMs.
  • Collect mail promptly. Ask the post office to put your mail on hold when you are away from home for more than a day or two.
  • Pay attention to your billing cycles. If bills or financial statements are late, contact the sender.
  • Keep your receipts. Ask for carbons and incorrect charge slips as well. Promptly compare receipts with account statements. Watch for unauthorized transactions.
  • Tear up or shred unwanted receipts, credit offers, account statements, expired cards, etc., to prevent dumpster divers getting your personal information.
  • Store personal information in a safe place at home and at work. Don’t leave it lying around.
  • Don’t respond to unsolicited requests for personal information in the mail, over the phone or online.
  • Install firewalls and virus-detection software on your home computer.
  • Check your credit report once a year. Check it more frequently if you suspect someone has gotten access to your account information.

How to Report Identity Theft

Your wallet contains some of your most important personal items, from hard-earned money to credit cards and driver’s license. For an identity thief, your wallet offers a treasure trove of personal information. If you suspect or become a victim of identity theft, follow these steps:

  • Report it to your financial institution. Call the phone number on your account statement or on the back of your credit or debit card.
  • Report the fraud to your local police immediately. Keep a copy of the police report, which will make it easier to prove your case to creditors and retailers.
  • Contact the credit-reporting bureaus and ask them to flag your account with a fraud alert, which asks merchants not to grant new credit without your approval.

If your identity has been stolen, you can use an ID Theft affidavit to report the theft to most of the parties involved. All three credit bureaus and many major creditors have agreed to accept the affidavit. You can download the ID theft affidavit or request a copy by calling toll-free 1-877-ID-THEFT (438-4338). You can also file a complaint with the Federal Trade Commission.

Use this helpful infographic (PDF) to help you remember the steps to take if your wallet or identity have been stolen.

Seniors and ID Theft

Seniors are vulnerable to identity theft. Here are some common schemes that ID thieves use to steal the identity of seniors.

  • Telemarketing. An ID thief may call, making fraudulent offers for products, benefits or medical services. The caller will require you to provide personal information, such as your social security number, birthday, or Medicare ID number.
  • Tax ID theft. Phony tax preparers steal your social security number and sell it to scammers. ID thieves may also read obituaries so that they can file a tax return in the deceased person’s name. This can be a problem for a surviving spouse, when he or she tries to file taxes later in the tax season. For more information contact the IRS’ Taxpayer Advocate Service at 1-877-275-8271.
  • Medical ID theft. In general, seniors have more contact with medical service providers that can take advantage of access to their insurance information to get medical services in your name or to issue fraudulent billing to you and your health insurer.
  • Nursing home and long-term care. Staff at these facilities have access to seniors’ personal information on file, as well as the potential misuse or theft of seniors’ finances (for example check books or bank statements in the senior’s room) . You can report this fraud to the long-term care ombudsman in your state at long-term care ombudsman.

Follow the steps listed in “Reporting Identity Theft” to report ID theft or report it to the U.S. Senate’s Special Committee on Aging’s Fraud Hotline at 1-855-303-9470.

H/T Source: USA.gov

Insurance

Insurance Basics: How to Save on Insurance

January 8, 2015

All insurance works pretty much the same way: You pay a premium (a set amount of money) to the insurance company, usually on some sort of schedule (monthly or yearly, for instance. In return, the company issues an insurance policy to you, which is a contract that gives you certain coverage, or financial protection. When you suffer an insured loss, you file a claim and the company pays you a benefit.

Insurance is meant to protect you against catastrophes, not day-to-day annoyances. You use insurance to guard against things that aren’t likely to happen, but which would cause financial hardship if they did occur.

Your goal should be to have just the right amount of insurance. If you have too much, you’re wasting money. For example, if you have a $50 deductible on your car insurance, you’ll probably end up paying the insurance company far more in premiums than they’ll ever pay you in benefits! Or, if you’re young, unmarried, and have tons of credit-card debt, life insurance usually isn’t a good place to put your cash.

On the other hand, if you’re a 40-year-old small-business owner and father of five, term life insurance could be an excellent way to hedge against the risk that you’ll die tomorrow. Or, if you’re a millionaire who likes to drive fast, increasing the limits on your automobile liability coverage could save your fortune if you get sued for the damage you cause when you plow into the back of a school bus.

How to Save on Insurance

The number one thing you can do to save money on insurance is to self-insure as much as possible. That is, set aside your own money to cover minor and moderate catastrophes, if possible. Try raising the deductibles on your auto and home insurance policies. Then take the difference between your old premiums and your new premiums and put it into a “self-insurance” online savings account every month. It won’t take long for you to have more than enough to cover the deductible.

You can also save by reviewing your coverage from time to time, and following these suggestions:

  • Read your policy. As with all legal contracts, it’s important that you read your policy so you know what’s covered and what isn’t. Pay attention to policy changes that come in the mail. If you have questions, ask. And make it a habit to review your policies every so often to be sure you understand them (and check whether anything has changed).
  • Don’t duplicate coverage. Know which policies provide which benefits. If you have a AAA membership, for example, you don’t need towing coverage on your car insurance. And if your credit card doubles the warranties on the things you buy, don’t pay for extended warranties. I try to go over my policies once a year to remind myself of my coverage. (I’m a forgetful guy!) I recommend you do the same.
  • Consolidate. Get all of your insurance from one provider. Insurance companies often give a discount if you have multiple policies with them. Plus, this saves you the hassle of having to pay more than one company.
  • File fewer claims. Don’t nickel-and-dime your insurance company. If you file claims for every little thing, they’ll raise your rates. Insurance is meant to cover unexpected large losses, not every ding your car gets from shopping carts.
Tip: To increase the odds of a satisfactory settlement when you file a claim, be sure to document your losses well. And it’s perfectly acceptable — good even! — to negotiate if you think the insurance company’s settlement offer isn’t fair (and their first offer almost never is). Be persistent.
  • Shop around. To find better rates, harness the power of the web. Visit the National Association of Insurance Commissioners and click the “states and jurisdictions” link to find your state’s insurance department. From there, you can find info about your state’s insurance laws and, in some cases, get quotes. You can also get quotes from multiple insurance carriers at sites like insurance.com, insure.com and even our insurance page at Get Rich Slowly.
  • Buy only what you need. Insurance agents are happy to sell you more coverage than your situation calls for. Do some research before you buy. Figure out how much and what kind of insurance you need, and don’t let the agent talk you into more.
  • Raise your deductible. The deductible is the amount you pay on a loss before the insurance company kicks in money. For example, if your car takes $400 in damage because you drive over a curb and you have a $250 deductible, you pay the first $250 and your insurance company pays the rest. It’s up to you where to set the deductible, but the lower your insurance deductible, the higher your premiums. Ask yourself how much you can afford to pay if something goes wrong; more specifically, how much is toomuch? Set your deductible just below “too much”.
  • Take care of the things you insure. One of the best forms of insurance is routine maintenance. A well-maintained car is less likely to have an accident due to mechanical failure. If you take care of your house, it’ll weather the ravages of time. And if you exercise and eat right, you’ll get cheaper life and health insurance.

These tips help you save on most types of insurance. Still, not all insurance advice can be generalized; each type of insurance has its quirks. Next week, we’ll look at specific ways to save on the most common type of insurance: auto insurance.

H/T Source: GetRichSlowly

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