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From Payday Loans to Installment Loans

In an attempt to stay ahead of legislation's latest efforts to thwart the payday loan industry and its predatory lending practices, payday loan stores have once again outsmarted the system that has been trying to shut them down for years.

In the past, payday loan companies thrived on taking advantage of people who have fallen on hard times and find themselves living paycheck to paycheck just trying to survive life's day to day challenges.

In the traditional cat and mouse fashion, a law was passed in an attempt to shut down payday loans forever, but as usual, legislation was a day late and a dollar short. The payday loan companies were tipped off of the forthcoming changes with enough time to plan a counter-attack.

As a result of the pending changes, payday loan companies introduced the casual shift from payday loans to the installment loan. Installment loans allow lenders to offer long term loans at basically the same rates which over time, ends up costing borrowers up to 5X more over the length of the loan.

This is bad news for people who live life on the financial edge because once you get into the installment loan system and spend the initial loan amount, now you are forced to enter into another year-long agreement with another lender the same as people did with payday loans.

The major difference is that there are no more 30 day loans. Installment loans are usually 12-month contracts and although you can pay it in advance, most people will not have the ability to do so. As an experiment, I took out a 12-month installment loan and despite paying it off in only 3 months, the accrued interest was through the roof and I did not find that the juice was worth the squeeze.

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Firestone Credit: For easy credit approvals

If you are looking for a nice card to have in case you run into unexpected car problems and don't keep a stash of cash lying around, I highly recommend the Firestone Complete Auto Care credit card that is financed by Credit First National Association (CFNA).

The Firestone credit card comes with a few perks right out of the box. For instance, there is no annual fee which is always nice but what's even better is that if you spend at least $299 on a purchase of new tires or auto repairs, you instantly qualify for no interest financing for six months.

Failure to pay off your balance within that time frame will result in you being charged the entire interest amount that would have accrued over the six months. When I purchased my tires I had good intentions but unfortunately, I was unable to pay my balance down in time to reap the zero interest benefits.

Another nice thing about the Firestone card is that you are not bound to using it strictly at Firestone stores. Your card is also accepted at any Bridgestone or Tires Plus repair facilities. Just call them first to make sure that they are still accepting Firestone cards for payment just to be sure.

The best thing about Firestone is that they offer very easy credit approvals. They say that a credit score around 600 will generally lead to approval but when I got my card over six years ago my credit score was nowhere near 600 so I know there is some flexibility there.

My initial credit limit was $800 which increased to $1200, then $2400 and after recently paying off several credit cards, my limit was just increased to $3200. The current APR at the time of this article is 22.8 percent which is not bad but you should be aware that it could change at any time. Apply for Firestone Credit.

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Should you answer debt collector calls?

I have a lot of experience with this so just hear me out. Most people will tell you that you should not duck your head in the sand and that you should stand up and face the music. Just pick up the phone, make arrangements and pay what you owe. You made the bill...pay the bill. I'm not most people.

Now, I'm not telling you that you should not pay what you owe. You should most definitely pay your bills unless you have the mental fortitude to deal with the onslaught of debt collector calls and harassment that will be headed your way the moment you decide to stop answering calls.

Stay with me for a moment. There is a method to the madness. It's all situational. By situational, I mean that whether you pay your past-due debt should depend on a couple of factors. One of which is how close are you to the statute of limitations for the state in which you incurred the debt?

If the debt is due to fall off 5 years from now and you are trying to rebuild your credit, then I suggest that you answer the call and try to work out a "reasonable" and viable settlement that works for both parties involved but never let yourself be raked over the coals by paying more than the original amount of the debt. That's just crazy.

However, if on the other hand, you are near the statute of limitations for debt collection which is roughly 7 years and 90 days, and the debt is due to fall off of your credit report organically, then I would ignore all debt collector calls. They are well aware that your debt is about to become non-collectable and they want to talk you into making a payment before it's too late.

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Can any credit score be fixed?

Credit scores vary in range from 300-850. In the past, I have personally seen scores in the low 400’s which is pretty bad. Having said that, any credit score can be fixed. Even if your score is in the low 300’s, you can improve it over time, but let me be clear…It will take you at least a couple of years and that’s with extreme discipline unless you hire professional help. It’s already a slow process and there’s just too much work to do.

Here are the necessary steps to improve your credit score:

Hire a credit repair company - With a credit score between 300-500, there is no need to go at it alone by attempting self credit repair. You are long past that point. I recommend “The Credit People” and have blogged about them in the past due to how effective they were in repairing my own credit. Their complete service is $419 if you pay in advance, while the industry average is $1200 a year.

Pay off any remaining debts - “The Credit People” do excellent work, but no company will guarantee 100% removal, so just assume that you will need to do your part in cleaning up any residual debts. You should first initiate a “Pay for Delete” (PFD) agreement in which you offer to pay the creditor a lesser amount of what is actually owed, in exchange for the removal of the debt from your credit report. I offer a free sample PFD letter on my blog that is available upon request.

Make all future payments on time - Even though you’ve hired professional help, you must still do your part by keeping up with all future payments and make a commitment to never be late again. This is a very important step for obvious reasons, but the biggest being that creditors place a heavier weight on how you’ve paid your debts lately, rather than how you’ve paid them in the past. This strategy will put you in a better position to apply for new credit in the future.

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Are collection agents trained to be rude?

I don’t believe for one moment that collection agents are trained to be rude. What I do believe is that they get paid on commission. The more they collect, the more they get paid…so they are extremely motivated.

Having said that, I certainly wouldn’t group all debt collectors as one and the same. There are good and bad employees in every occupation and the debt collection industry is no exception.

I have certainly had my fair share of dealings with the rudest of rude and the meanest of mean but I never let them aggravate me to the point where they caused me to lose control.

When dealing with debt collectors, one should acknowledge the fact that they have a job to do and are just trying to make an honest living, but you should never allow yourself to be verbally abused or threatened by one.

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