Separating the Wheat from the Chaff: Debunking 4 Popular Myths about Installment Loans

If you have an idea what a car loan, mortgage, personal loan and even the much-loathed student loan is, then you already know about installment loans!

With this loan type, you borrow a particular amount of money, agree on the repayment schedule with the lender and finally start servicing it back on a regular schedule. Incredibly, for every amount repaid, the balance reduces, which, of course, is a good thing since it doesn’t earn interest as time goes.

Easier than breathing, right? 

 But owing to the glamor around this loan, worrywarts spread false information, perhaps to entice the unsuspecting to take a short term installment loan from them. One will tell you that by diligently repaying your student loan, your credit score will dramatically shoot up. Another one will be all over, convincing you that you cancel that credit card and BOOM, your score increases.

The two are not the only myth about installment loans, apparently. As you are about to discover, there are countless half-truths and urban myths surrounding this type of loan. And the sad thing is, seems everyone thinks they are true.

Let’s look at the four most popular myths about installment loans:

  1. When it comes to mortgage loans, they’ll say you can’t be in debt and still buy a home

 There are much more bizarre installment loan myths, but this one is perhaps the most prevalent. And I’ll agree a debt can affect your ability to own a home. But it CANNOT impede you from buying one!

If this were the case then all these souls walking up and down before us, hiding their student loan debts or servicing car loan payments, would have been jailed long ago. Or probably they would not be looking rich. See, the bottom-line that mortgage lenders look at is the size of debt vis-à-vis the cadre of one’s entire income, what’s generally known as debt-to-income ratio.

  1. They’ll tell you to meet the STRICTLY 20% down payment

This canon was scrapped a while ago, making it convenient for anyone to own a car or a home via an installment loan. Some would require as little as 6% of even a mere 3.5%, especially the popular FHA loans. Others like the Veteran’s Administration incredibly don’t need any down payment at all. Just remember that with a bigger down payment, you increase your chances of getting the loan.

  1. They’ll tell you to always carry a credit card balance

Just because you have a student loan and you’re desperate to increase your credit limit doesn’t mean you believe this lie. Don’t starve so that some few bucks can “keep your card active” when doing so is utter stupidity. Instead, “use credit to build credit” if you know what that means.

Simply put, apply the credit utilization concept of 30% or less. Remember, by keeping a smaller credit balance, your credit utilization ratio automatically reduces, something that subsequently boosts your credit score. Use the card and pay off the debt promptly, period!

  1. Once you have a negative entry as a result of that installment loan, it will take 7 years to erase it! 

If you’ve never encountered this lie, then you haven’t traveled these roads. The truth here is, any negative entry can be erased before the seven years are over. There are various ways of doing it, including writing to them with explanations. You dispute with facts and that red sign is cleared!

Changes You Can Expect From the Trump Tax Reform

Changes You Can Expect From the Trump Tax Reform

Virtually every year, tax laws and guidelines change. While that is a given, even more change can be expected when a new administration takes over with a different political ideology from its predecessor. This can affect the way funds are collected and redistributed which, in turn, can affect what you will pay to the IRS or get back for a refund. Beginning in 2019, you may notice changes from trump tax reform enacted in 2017.

Impact on Average Taxpayers

The main takeaway from the new tax policies is that average taxpayers will likely only see minimal overall benefits regardless of the changes if any unless you are the top 1% of households who will likely see benefits within the next several years. With tax brackets redefined, if you compare your projected rates from even a year ago, you can see that not only is there an increased range for each bracket, but the percentages for each level have also been reduced. While this may seem like it may translate to higher gains, that is not necessarily the case. For example, since itemized deductions and personal exemptions are no longer applicable, any gains from tax bracket updates will be less noticeable when it boils down to the overall dollar amount. This may be similar to what small business will experience.

Deductions

Another significant difference is the changes in deduction terms. Some of these include:

  • Numerous miscellaneous deductions from previous tax year eliminated
  • Itemized deductions only accepted for those living in disaster areas designated by the president, and for members of the armed forces
  • All personal exemptions have been eliminated
  • Standard deduction has almost doubled
  • No more deductions or reporting of alimony
  • Increase in child tax credit, and a new $500 credit for qualifying adult dependents
  • Estate tax exemption doubled
  • The threshold for medical expenses decreased to 7.5% from 10%
  • Deductions for state and local taxes now capped at $10,000

 

Impact on Businesses

On the flip side, if you are the owner of a larger business, the new tax plan is likely in your favor. With political leanings traditionally in favor of businesses, it’s no surprise that the tax reform is good news for those who fall in this category. For example, the corporate alternative minimum tax will no longer apply, and instead of a sliding scale used in previous years, corporate tax income is now a flat rate of 21% compared to 35%.

 

Another Notable Change

Those with education accounts will see some changes. The new tax plan allows for more flexibility in some types of student loans. For example, the discharged student loan debt due to disability or death is will not be categorized and taxed as income anymore. Also, 529 plans can now cover educational expenses for primary school as well instead of just higher education.

 

Check for Yourself

To get a better understanding of what numbers to expect, there are a variety of resources that can help you to do that even before sitting down to officially calculate your taxes. Whether you are doing your taxes yourself or enlisting the help of an accounting professional, it can be helpful to get a few estimates before your final submission. Consider online calculators that factor in these new changes if you are tackling your taxes on your own. Or, before submitting to a professional, free-to-low cost accounting software can give you figures that you can use to cross-check with your accountant.

Get Rid of Your Holiday Financial Hangover for Good

 

The holidays are supposed to be a time of joy and cheer. But for some people, they can turn into a financial nightmare.

Debt is a very real effect of the holiday season Almost 30 percent of people carry holiday debt with them for the entire year. For many, this is an endless cycle of paying too much, then trying to play catch up until the next season. It’s time to break free of this and get rid of your holiday financial hangover for good.

Create a Firm Budget

You’re going to have trouble over the holidays if you don’t create a budget for yourself. The holiday season is a time for giving. But if you go too far overboard, you’re only going to be giving yourself a headache. People who need to take on debt over the holidays on average acquire over $1,000 of it!

You need to put together a budget before you start spending any money. Include everything—from gifts to your gas costs. Keeping tabs on how much you’re spending over the holidays will inspire you to limit yourself.

Use Cash for Most Things

It’s typically easier to use a credit card or cashless app when you’re buying something in the store. This is especially true if you’re already juggling multiple bags and need to be watching children as well. But it’s easy to lose track of your spending when you use electronic payments. Sticking to cash will force you to adhere to your budget, as you’ll know exactly when you’ve reached your spending limit.

Don’t Buy for Adults

Talk to some of the other adults who you’ll be spending time with over the holidays. It’s likely that they’ll be perfectly okay with skipping the whole gift-giving process. This will save everyone a lot of money and time. If they’re anything like you, they’ll also want to avoid the financial hangover that comes after the holidays.

Negotiate Your Debt

People who have substantial issues with debt might want to consider working with an outside organization. Debt negotiation is one of the best ways to get your finances back on track after spending too much. Freedom Debt Relief is one of the top players in the debt relief. Think of it like a detox for your finances. Check out some Freedom Debt Relief reviews on Consumer Affairs to see how they’ve helped other people get their debt under control.

Find Alternatives to Gift Giving

While it’s nice to get a well-intentioned gift from the ones you love, it’s usually more rewarding to spend your time in less material ways. Consider how your friends and family might be able to do things other than spending money on each other. This might mean baking cookies together, going out to see holiday lights, or creating a new tradition altogether.

Don’t Dine Out While Shopping

It’s much more expensive to dine out than it is to prepare your meals at home. This is especially true at the mall—where food prices are inflated even more than usual. You’ll be tempted to buy coffee or food while you’re out shopping. But resisting this urge will make you feel a lot better after the holidays.

Deals Aren’t Always Good

Many people see the word “deal” and immediately feel compelled to buy something. This is exactly what retailers want from you. They’re creating deals because they know it’ll get consumers to spend more money. Sometimes deals can work in your favor; but don’t let them get the best of you. You should never buy something simply because it’s on sale. Only make purchases that you would go through with regardless of whether it’s currently marked down.

Sell Things You Don’t Need

Many folks associate the holidays with acquiring more things. But you might actually be better off getting rid of them. Selling items you don’t use or need any more is the perfect way to lessen your holiday financial hangover. Not only will this put you in a better place with money, you’ll have more room for things that you actually want in your life.

A lot of people get financially overwhelmed by the holidays. People tend to spend too much money—especially on gifts for loved ones. Use some of these ideas to get rid of your financial holiday hangover forever.