What I really like about personal finance is that there are no straight forward answers. Each financial product has its pros and cons. While several people debate the usage of payday loans I think that sometimes, it could be a good *temporary* solution.

In order to have a clearer point of view on Payday Loans, I thought of reviewing their pros and cons. While you can get your money in no time, there are little bit more to know before you apply for a guaranteed payday loan:

Pros of Payday Loans:

Getting your money quickly

Obviously, the biggest advantage of applying for a payday loan is to get your money faster than your pay check. Most companies are able to give you access to your money within 24 hours. When you are in the need of money, this is quite useful.

Gives you a break to find a better financing option

As I previously mentioned, payday loans can give you a quick option to access to money. This will give you additional time to find a better financing option (maybe try a 0% apr balance transfer credit card or a consolidation loan?).

Skip late fees

If you are about to pay fees because you are late on your bills, applying for a payday loan can be a good solution. Sometimes, the late fees are higher than the payday loan fees. Therefore, you would *save* money in your transactions.

No need to supply excessive amount of documents

Payday loans companies try to keep it as simple as possible. Therefore, you don’t have to fill a ton of paperwork to access your money.

Cons of Payday Loans:

It is expensive

Interest rate and late payment fees on such loans are exorbitant. If you apply for a payday loan, you better have a plan to pay it back before you get the money. If not, you may regret your decision when you look at how much it has cost you .

Not using the money for the right purpose

Some people use this option to get money quickly but don’t think about the long term consequences. This is not free money, this is money taken from your future pay check. Therefore, if you don’t use it as a temporary financing tool, you will definitely end-up into bigger financial problems.

Loan cap

Depending on where you live and the size of your pay check, you can have a loan cap that goes from $300 to $1500. Therefore, if you need additional funding, you are better off looking at other financing options.

This post was provided by Online Cash Advance

Consumer credit counseling has become very common these days and you don’t have to wait for your debts to pile up to get advice from a credit counselor. Even if you are apprehending that your finances may take a backseat in near future, you can take help of a credit counselor.

Credit counseling-get your finances back on tracks

In consumer credit counseling, the debt counselor evaluates your overall financial situation. You can either attend a session in person or get help over the telephone or the net. A certified credit counselor evaluates your financial situation by reviewing your income, your debts and expenses. By assessing your financial condition, the credit counselor will recommend a debt help program that will suit your current financial stature best. It may be a debt consolidation program or a debt settlement program. Credit counseling is also a part of the debt management program or DMP. The new federal bankruptcy laws had made it mandatory for an individual intending to file bankruptcy to attend a credit counseling session at least 6 months prior to filing bankruptcy.

How does it help you?

A credit counselor will help you out in the following ways-

*Provide guidance in working out a budget so that you can manage your money effectively.

*A credit counselor will negotiate with your creditors so that your late fees are eliminated; your loan tenure is increased.

*They also help you by requesting creditors to lower the rate of interest.

In addition to suggesting appropriate methods to get out of debt, a credit counselor will also help you to get back your finances on tracks. You are also taught to manage your finances and debts more effectively in future should you face financial difficulties again.

A credit counseling session may take about an hour. However, it depends on your financial situation and the time varies from person to person depending on the requirement.

When you hire the services of a credit counseling agency, make sure that you are choosing the right agency. Reports suggest that the Better Business Bureau (BBB) has received a number of complaints against 3rd party debt counselors. Since last year the complaints have increased by 20%.

Credit counselors- beware of fraudsters

The consumer credit counseling complaints lodged with BBB are of 3 types-

*Some of the consumers complained that a company offering debt elimination promised to get debtors out of debt within a very short time span. However, debtors continued receiving threatening debt collection calls and when enquired, they found that debts had piled up even more.

*When you are being offered debt settlement or debt reduction program by a credit counselor, the credit counseling agency claims that they will work on your behalf and work out a solution. Complaints registered with the BBB stated that debtors stopped dealing with creditors once they were assured that the credit counseling agency will take the onus. However, in reality the agency had actually fled with the consumer’s money.

*When a company is offering debt consolidation, the company treats all your debts as a single account. There are several companies who charge exorbitant interest rates and fees and by the time you are debt free, you will have paid more than the original debt amount.

Consumer credit counseling has a positive side too and if you hit upon a good credit counselor, your finances can be back on tracks in no time.

Author’s Bio: Anthony Marx is one of the financial writers associated with the CreditMagic Community. With his in-depth knowledge and vast experience, he has laid a profound impact through writing and advising on all credit issues and has presented useful tips on credit repair, etc.. His remarkable guidance and support has improved the community into a global hub for the credit related situations. He is highly appreciated by the forum moderators and other authors of our community.

Whoa, this is a huge statement in this Monday morning! What am I thinking; attacking of the most popular personal finance guru; Dave Ramsey? Who am I to critic his way to pay off debts? Well, I’m simply a guy that don’t think the same way

While surfing Dave Ramsey website and listening to his Ramsey Radio Show, I found the “myths of personal finance” (this is at the bottom of his website). This is where Dave Ramsey provides a group of myths about personal finance and how things should be done according to the “Ramsey way of paying off debts and managing personal finance”.

While I agree with most of his advices, I got somewhat confused about the following myth and his answers about it:

Myth: “You should pay high interest debt first”

Dave Ramsey’s answer: “You should pay the smallest debt first in order to create a momentum”.

Then, he mentioned that, according to his own experience, most people can’t pay off their debts because they don’t have the right mindset and not because they don’t have enough cash flow.

I somewhat agree with this statement as you really need to get out of debts before you can actually pay a dime on your credit card efficiently. The very first thing to do in this situation is to write down a plan of action and keep track of it.

Where I disagree with Dave Ramsey is that you can build momentum by looking at how much interest you save every month by focusing on the highest interest rate debt! If you have a credit card of $10,000 at 15%, you are better off paying is and forget about your $1,000 small credit card at 8%. If you see the 10K debt as a huge mountain you can’t climb, Dave Ramsey suggests that you forget about the mountain and that you start with the small hill (1K debt).

I think you are better off calculating how much you would pay in interest over your 10K debts if you take a year to pay off your small debt. You would probably save roughly $100 of interest every year by paying down your 10K debt. That’s probably an extra monthly payment for free! I don’t know about you, but that motivates me to pay off my highest interest debt first… sorry Mr. Ramsey

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So you have 3 credit cards totaling $8,500, a student loan of $3,400 and a line of credit showing a $7,600 balance. You just can’t keep up with all those bills and tend to forget to make your payment on time. You are also paying a very high interest charges on your credit cards and you are trying to find a way to get through this mess.

The logic decision should be to apply for a consolidation loan. You would pay off all you existing debts, reduce your interest charges and have a single payment to make every month. Even better, you may pay a smaller payment if you take a longer amortization.

But does the fact of consolidating your debts can affect your credit score?

The short answer is no but you need to look further before filling out the loan application. In fact, your first consolidation won’t do much on your credit history and banks have good chance to be favourable (if you show decent ratio, a good credit bureau and a positive net worth). Only the inquiry to the credit reporting agencies will drop momentarily your Beacon score. A loan request would usually cost you 1 to 5 points so it is definitely not the end of the world.

However, if you are doing your second or third consolidation loan, banks might be more cautious and dig a little further. Then again, it won’t affect your credit score, but the fact that you keep asking to consolidate your debt will show your creditor that you are unable to manage your money properly.

If you are about to consolidate your debts, the important thing is to not wait until you miss payments on your credit cards. This would definitely decrease your beacon score and increase your chances of being decline for a loan application.

This is exactly the same thing if you have maxed out credit. When you see that you can keep up with the payments, don’t wait and consolidate right away. Maxed out credit cards show financial institutions that you can’t manage revolving credit and chances are that you will fill your credit cards the morning after the bank paid them off of the consolidation loan.

To summarize this post, we would say that consolidating your debts must be done as soon as possible in order to avoid delinquency and therefore bad credit marks. Requesting a loan to pay off your debts will not affect your beacon score, but your previous credit behaviours will.

We noticed this situation several times: we have an individual who had $10,000 on his credit cards, they are all maxed out but he still pays the minimum payment on time. He is now starting to have a hard time paying them off and goes to the bank for a personal loan in order to consolidate his debts.

Unfortunately for him, the bank turns down his credit application. There is a logic problem: if he is able to make payments at a 18% interest rate, how come would he not be able make a payment on a personal loan at 9%?

Negative Net Worth

Making payments on time is surely a good thing to do, however, this is not the only criterion used by banks. If you have a negative net worth (more debts/financial obligations than assets), they might be reluctant to consolidate all your debts and take the risk on their side. A negative net worth shows that you are technically bankrupt. If your creditors were to claim their dues, you would not be able to pay them off and would be forced to declare bankruptcy.

Late payments in the past

You might be on time right now but there is a strong possibility that you missed a few payments in the past since you have so many credit cards and such high balance to pay off. Late payments are another sign that you might encounter difficulties meeting your financial obligation in the future.

Maxed out credit

If all your credit cards show maxed out credit this is another sign that you are having problem managing your revolving credit. Therefore, your credit score will drop and banks will not lend you anymore money. The problem is that banks often work with trends and statistics. Their experience in credit showed them that people with maxed out credit cards will continue their spending habits after their consolidation. They will then show more maxed out credit cards two years after they did a consolidation loan.

In order to get a personal loan to consolidate your debt, you must show good credit management abilities. Most people ask for a consolidation loan when they can’t afford to pay their credit cards. Don’t wait that long, apply now while you still have a good credit bureau.

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