Need Money Help? Don’t Get Bamboozled
One of the worst financial decisions a person can make, is making a decision while under pressure. This is when people aren’t thinking rationally and will do anything to get some relief. The issue here is twofold as it’s normally just a band aid solution to buy more time and puts the person in further debt which just compounds the original problem.
Many Americans are doing it very tough, living pay check to pay check leaving them vulnerable to financial issues as one financial crisis can be catastrophic to the household budget. When financial problems do arise, things such as - vehicle repairs, household item repairs, tickets, etc… Many may look at payday loans or similar as a quick fix and solution to their problems.
The issue here is that these types of loans are extremely expensive with unbelievably high interest rates and fees. It gets even worst should you not be able to make your repayments on time. It really puts borrowers in a deeper cycle of toxic debt – and more financial pressure.
Below is a list of 6 financial products or services that you should be wary of. If you are under financial pressure and need help with bills or other financial issues, reach out to a free financial counsellor first.
Payday Loans: These are loans which generally prey on low income earners such as students, people with disabilities, seniors and those who simply don’t earn much. Many people turn to these lenders as they promise fast cash, same day approval, and bad credit being ok.
There are much better alternatives that many Americans don’t know about. Many banks and credit unions provide similar loan products that are flexible, easy to qualify for and much, much cheaper.
Rent-to-Buy: These types of arrangements are similar to payday loans as they come with an extremely high interest rate, which is often hidden or hard to find when signing up. Essentially, those who purchase item through these types of businesses, end up paying 2 to 3 times more than what the products are worth – even higher in some instances.
A better option is to either save up to purchase these items; buy a cheaper or used version of what you need.
Funeral Insurance: Seniors often worry about financial burdens that they may put on their family members when they pass. Insurance companies know this and feed on this type of worry and try to capitalize on it. In some instances, seniors who take on funeral insurance can end up paying thousands of dollars for the policy over the years whilst their family members may only receive a small portion of this money once they pass.
If considering funeral insurance, make sure you read the fine print of the contract and are fully aware on how the policy works.
Credit Repair Companies: Repairing your credit to improve your borrowing situation for future purchases like vehicles or a home seems logical. The issue is when you engage one of these companies and they charge enormous non-refundable fees and then get nothing done. You end up out of pocket with the same poor credit.
To add insult to injury, the service many of these companies provide are things you can do yourself. As an alternative to using a credit repair company, get a DIY kit and give it a go on your own – possibly ask for some assistance from a free financial counsellour if available.
It pretty much as simple as ordering your credit report (which is free) and going through it to make sure everything that is on it is accurate - Then contacting the different creditors to challenge and clear up any mistakes.
Paid Budgeting Services: Not all budgeting services are bad but it is important to pick them wisely. There are many free non-for-profit services which are excellent. It’s the paid budgeting services that you need to be weary of. Whilst some may be good value for money, many may sell you services which you could otherwise get for free from a range of web based services and apps, bank and credit union tools, along with free advice and tools from free financial counsellors and Community Action Agencies.
The key to budgeting services is to not be out of pocket if it can be helped.
Debt Management Plan (DMP) & Debt Settlement: It’s not that each of these debt relief options are negative, its more about making sure they are only used under the right circumstances. Agencies that provide these services earn a profit for assisting you so there is motive on their side to sell you into an arrangement.
Reputable companies will clearly outline all the pros and cons of these programs and why it may or may not be appropriate for you. Companies that glaze over the cons and just focus on the pros may not have your best interests in mind.
With anything that involves contracts, make sure you are fully aware of the terms, pros/cons and the consequences of not fulfilling the contract. When doing your due diligence, check for online reviews and get a second opinion through the assistance of a free financial counsellor or Community Action Agency.
The above outline services that should be carefully reviewed before engaging, especially if you are making a decision under severe financial stress. In the end, you need to do your own due diligence and make informed decisions – not scatter brained ones. There aren’t many people who will have your best interests at heart, that’s why it’s important that you understand what you are doing and get second options. It never hurts to shop around.
This is a very scary list. Bamboozled is exactly what these decisions will yield. When in need of a helping hand it’s easy to see how the bright lights of a payday lender or debt management company appears to be there to help. The high cost will outweigh the benefit over the next year.
Thanks for weighing in MoneyBaconGuy – the unfortunate thing is many people will still engage with these types of business due to financial pressures and lack of knowledge on alternative options.