Too good to be true
Monday, June 16, 2008
It is rare that I stay up late. It is even more rare that I watch TV late into the night, but not long ago I was overwhelmed by the bad financial “advice” that is on late-night television. Here are few of the ads I saw:
• Payday loans — these ads appeal to the working guy or gal who is a “little short” before payday. The company will “tide you over” with a small advance against your next paycheck. Usually the loans are $300 or so. The loans last for a few weeks or maybe a month. The rub comes from the interest rate. The rates often with exceed 15 percent and it may be higher.
I recognize that there are major risks for these lenders, but these rates are high.
You may think that few people use these payday loans. According to a study done by the University of North Carolina, there are more than 14,000 payday loan locations in the U. S. Their loan volume is estimated to be between $8 and $14 billion per year. That’s a lot of money and should be the loan of last resort.
The profile of the borrower is not your class A, high income, yuppie wage earner. Of course not. It is the blue collar workers who live from one paycheck to the next. They have no savings or reserves and the slightest hiccup in the expenses makes them come up short.
• Credit cleanup — there is nothing wrong with cleaning up one’s credit. A good credit rating helps in many ways. However, most of the so-called credit cleanup firms are nothing more that “fee for service” outfits who charge a fee for doing something you could do on your own.
They call the creditor and attempt to negotiate a reduced payment or better terms. Some of them, reportedly, work for the very credit card companies with which they say they can help negotiate better terms.
This is a major rip-off of folks who are down on their financial luck anyway.
A 2006 Georgetown University study reported borrowers who received counseling are much more likely to file for bankruptcy within two years of counseling. Don’t succumb to the hype. Get proactive yourself. You can work on your own credit problems without a fee by contacting every creditor and trying to work things out.
• Legal settlement offers — one of the most annoying ads has people screaming at their audience saying, “It’s my money and I want it now.” These firms are attempting to get folks who negotiated a settlement or annuity payout from a lawsuit or court judgment. I agree that some of the settlements I have seen are not a great deal for the receiver, but you or your attorney made the deal.
If you want to cash out your future payment, these firms will certainly do it at a huge reduction in the value of your future income. A 30 to 50 percent reduction is not uncommon.
Of course, there may be a good reason to sell off part or all of the income, but just be ready to pay for it. This is the reason most lottery winners take a lump sum rather than the lifetime income.
Source : http://www.napavalleyregister.com
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