Avoid only making minimum payments on your credit card

We all value the importance of good credit.  However, sometimes we overestimate our spending power.  

The credit card is all too convenient sometimes and at the end of the month you realize you've come up a bit short.

• You'll be paying an inordinate amount of interest. Credit cards can charge upwards of 15% interest. Considering you can borrow for as low as prime plus a half, which at this time is around 3.5% that's a considerable difference.

• Not being able to pay off your credit cards means you're likely also carrying a high debt to income ratio.  This is also frowned upon when evaluating your credit score.  Yes, you're meeting your minimum financial responsibilities, but lending institutions look at your payment patterns to determine if you are a risk to them. Financial institutions look at payment history when lending large sums of money for things such as mortgages or car loans if you simply have too much debt and can't possibly make the payments you may be declined.

In order to keep your credit in good stead, you’ll want to pay the minimum payment.  That's responsible spending it will prevent you from getting into trouble with your credit rating.  

Keep in mind if you only make the minimum payment each month, you'll suffer two ways.

Learn to budget effectively

Buying the latest electronic gadget such as a smart phone can be awfully enticing. However, it's sometimes prudent to step back from the situation and ask yourself, is this something I absolutely have to have or can I put it off for a few months while I take care of the balance on my current credit card(s).  

It's a great feeling to transfer the money over to your Visa and see that balance at zero. It means you're free and clear and ready to make purchases based on need, not desire.  An interesting exercise is to take an amount, say 1000.00 and calculate how much interest you pay based on 15% per month, over the course of a year. Total it up, and imagine what you could have purchased with that money.

Careful of the Minimum Payment Trap

Making minimum payments essentially translates into very expensive debt relief. It should not be depended on as a realistic part of your financial strategy. At some point, the card company may even hike interest rates or change their terms and you’ll have no choice but to abide by them. You may want to consider consolidating your debt into your mortgage or getting a consolidated loan at a much lower rate. You’ll either want to cut up your credit cards or practice serious control in their usage.

There are resources we have that will help you organize your finances.  For instance, we have a budget worksheet that is free and at your fingertips.  

Find it, and other tips at www.prudentfinancial.net/resources/resources.php

The effects a payday loan store may have on your community

Most people may think that payday loan stores have only been around for the last 10 years or so. This is because of the boom with these storefronts opening up across the country. Payday loan stores are everywhere, at every corner you turn. With the industry continuing to boom many residents in areas nearby are becoming worrisome of the effect that a store will have to their community.

Residents are not happy that these stores are opening up in their neighbourhood for the following reasons:

Not aesthetically pleasing - Residents will complain that a payday loan store is an eye sore and is not aesthetically pleasing for the neighbourhood. Most people don’t want a tattoo parlour or pawn shop in the area because of the stigma attached to it. A payday loan store is no different in their eyes.

Increase neighbourhood crime – They are concerned that these financial institutions will increase neighbourhood crime. The companies who provide the service and some of the consumers who use the service understand the need for a payday loan for those hard working Canadians who are facing financial hardship with a bad credit score. With that said, it’s hard to ignore that these locations do attract the wrong people to the neighbourhood.

How it affects other businesses in the area – Many will argue that having a cafe or small restaurant next to a payday lender will drive their business away because flashing neon signs stating “Quick cash” doesn’t exactly scream relaxed atmosphere.

The value of their property decreases – If you have several of these stores in your area, the value of your home can decrease. It may also be a lot harder to rent a property or sell a home because as a buyer you will look at all elements and will factor in the area as being a low income neighbourhood.

The impact it will have on families in the community – For customers in need of a quick loan for emergencies, it may be a convenient resource HOWEVER all these loans come with extremely high interest rates and fees and these vulnerable families can easily become trapped in the payday loan spiral causing more hardship than just financial hardship.

Not only can individuals pay a high price from these types of lenders but an entire community, the very community that has struggled to reduce crime can also.

There are alternatives to borrow money for people with bad credit histories. There are lenders, like Prudent Financial Services, that will not only lend you money with a low interest rate but will also help to increase your credit score by reporting all your payments to Equifax.

For more valuable information, please visit http://www.prudentcreditrepair.com/

Getting sucked into the Payday loan spiral

You hear and see the payday loan advertisements everywhere. At every corner and all over the internet you will see” Borrow $500 in 15 minutes, no credit check required!” Sounds convenient and easy right? In reality, it really is that easy HOWEVER it’s easier to get sucked into the payday loan spiral.

The Problem

The problem with a payday loan is that you’ll become trapped in a web that’s impossible to escape. With a payday loan you are borrowing against a future pay. The interest rate is extremely high so when 2 weeks roll around and you can only afford to pay off the interest, you carry the loan forward and then the next pay turns into the next pay and before you know it, you’re not paying off the loan and wasting ALOT of money on interest.

What To Remember

You must remember that a payday loan company is disguised as a beneficial route for you but they are happiest when you’re paying them a good chunk of money on interest rather than paying off your loan. This is how they survive. You must also keep in mind that if and when you default in payments, it will be reported to the credit bureau and your credit score will be tarnished.

What Are My Options

You should avoid taking out any more payday loans, seek other alternative lenders that offer a better interest rate. More traditional lenders will even help rebuild your credit by reporting all payments to the credit bureau.

Since 1984, Prudent Financial Services has been specializing in repairing credit with open, affordable, same day loans to discharged and undischarged bankrupts, people whose proposal is almost paid off, or people with paid off debt who still have bad credit scores.

Save your money, your credit rating and your financial health. For more valuable tips and information, visit our facebook page at www.facebook.com/prudentfinancial

Think smart. Think Prudent.