Do Friends and Family Want to Borrow Money? Here’s How to Handle It

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If your friends or relatives ask to borrow money, here are a few pieces of advice on handling the sensitive discussion.

Lend Only What You Can Afford To Lose

J.D. Roth, founder of Get Rich Slowly, writes on Time.com that when you lend money to family or friends, you might never see it again. You could adopt the attitude that the money is a gift, and if the person pays it back, it’s a gift to you. Never put your family in financial jeopardy by cleaning out your bank accounts to bail out a relative or friend.

Look For Other Sources Of Money

Personal finance guru Dave Ramsey says 57 percent of people in a money-etiquette survey indicated they’d had or seen a relationship ruined because one friend or family member didn’t pay back the other. If your relative hit you up because he knows you’re good with money, offer to help him find other sources of cash. He might have liquid assets he can cash in, or he might qualify for a short-term payday loan.

Define Your Personal Loan Terms

If someone asks to borrow money, you have a right to ask what it’s for. There’s a difference between someone borrowing to cover a one-time shortage and someone borrowing because their monthly expenses exceed their income. A one-time personal loan is not going to solve the latter’s problems. Suze Orman says to treat the loan as a business deal and clearly spell out the terms. Put it in writing, if you need to. NOLO.com has a free promissory note template that will help you make the loan official.

Get Your Spouse’s Consent

Gerri Detweiler writes in Credit.com blog that bad blood created by money issues can last many years and run very deep. If the borrower fails to pay you back, how will that affect your relationship? Are you willing to risk the relationship to help out this friend or relative? Detweiler shares the story of a father who recorded a lien against his daughter’s car in case she failed to repay a loan. If she defaulted, he had a legal right to repossess the car. The more official you make the loan and the more clear you are on the terms, the more likely your spouse will feel better about loaning money. According to CashNetUSA, many divorces are a result of financial disagreements. Make sure you are your partner are on the same page before you lend out any mutual money.

The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.

 

 

 

 

Yes, You Can Rebuild Your Credit – Here’s How

 

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Roughly 47 percent of employers pull credit reports before hiring new employees, according to the Society for Human Resource Management. It’s not uncommon for employers to rescind an offer or decline making one after seeing a poor credit score. Some speculate employers fear such employees are financially irresponsible or prone to suspicious behavior. Poor credit can also prohibit you from getting a credit card, getting a low interest rate on a home loan or securing an auto loan.

So how can you restore your credit to good standing? Banks and big financial institutions make building credit quickly seem like a complex mystery. But all credit building really boils down to is borrowing money and paying it back on time. The hard part is finding credit-building opportunities, especially for those with poor credit scores and mounting debt. Here’s some help:

Use Your Rent

Sites like Experian and TransUnion will include rent data on your credit report. Unfortunately, you can’t just log in and report that information yourself. Instead, your landlord can use an agency like RentReporters to report the data for a small fee. But small and independent landlords may not opt to do this for you and are under no obligation to do so. But there’s another option. Pay your rent through WiliamPaid.com for a small fee and the activity will show up on your credit score.

Get a Credit-Builder Loan

Scout around for a local credit union offering credit-builder loans of up to $1,500. Credit unions typically offer lower interest rates to their customers and are easier to secure loans through than traditional big banks. Customers put the money loaned into a savings account to accrue interest and make regular payments on the loan until it’s paid off. After the loan term ends, collect the interest or reinvest.

If you can’t take out a credit-builder loan, reevaluate your spending and income potential. Those receiving regular annuity payments may get a few hundred dollars a month, which in turn gets spent on bills, groceries and a social life. Your money may serve you better if you sell annuity payments for a lump sum of cash now, and then you apply that money toward a credit-builder loan, a secured credit card or any outstanding debt you have.

Get a Secured Credit Card

Unlike traditional consumer credit cards, a secured credit card requires cash collateral upfront. If you add $400 to the card, that’s exactly how much you can spend, unless the creditor extends a line of credit for good payment activity. Secured credit cards usually carry annual fees and offer less flexibility than traditional cards.

Experts suggest charging 10 percent or less of the amount on a secured card each month to further boost your score. The ratio of debt verses what’s left on your card can inch up points on your score. But this also works in reverse. If you have a $400 secured credit card and charge $390 on it, the high ratio of debt verses your credit line can actually deduct points from your score. But within a year of responsible use, you should see your credit score improve enough to apply for other traditional credit cards with higher limits.

Peter Galvin is a retired financial planner who has enjoyed writing and spending time with his three children since his retirement in ’09. 

The Economy’s Up! So Why’s the Market Now Tanking?

Unemployment figures are down – by some estimates, we will have regained all the 7.9 million jobs lost during the recession by next spring. GDP numbers, too, are up; the economy grew at a sharp 3.6% pace in the third quarter, faster than even most experts had anticipated. So why has the stock market lost over 2% of its value this week? Shouldn’t this good economic news be boosting stocks (and our 401ks)?

Opposites day

In these market conditions, up is down and down is the new up. Since the Fed began pumping money into the economy to fight the recession via a process known as quantitative easing (QE for short), markets have been accustomed to the extra support. But now that the economy seems to be on the mend, it’s likely the Fed will soon begin unwinding QE, and markets are scared of going without the extra boost. So in a bit of a twist, good economic news is now sending stocks down, while disappointing numbers can send the market on a tear.

Is it really so scary?

There’s an ongoing economic debate about the underlying health of the economy. Once QE is gone, will it falter and dive into recession again? Are the good GDP and unemployment numbers inflated due to QE? Are stocks now overvalued?

True, the market has been on a tear since its 2009 lows, but its growth has been typical of post-recession market increases. Company profits, too, have been growing at a healthy clip, up 39% from their recession lows, and most stock valuations do not seem to imply a bubble – yet.

Plus, Janet Yellen, the incoming successor to current Fed chief, Ben Bernanke, is committed to using the Fed’s available tools for boosting employment. That means QE is likely to continue at least through next spring or summer, and that any unwinding will be gradual and measured.

But is it enough?

Still, valid questions remain regarding the market’s reaction, and as the famed investment manager, Bill Gross of PIMCO notes, it really could go either way — but not as abruptly as you might think. He argues that an unwinding will probably be gradual, as would be a market reaction.

So, does that mean you should get out? Sadly, I (like everyone else) don’t have a crystal ball, but indications are that a full-out collapse is unlikely. There’s too much momentum in the underlying economy, a few more safeguards in our economic system now than there were in 2008, robust corporate profits, and a Fed determined to avoid it. That doesn’t mean we won’t experience declines — perhaps even sustained – but simply that barring hysteria or other unforeseen events, any declines will probably be more muted. And if you believe that the economy is healthy enough to withstand the removal of QE, there’s even an argument for continued growth.

Unless you’re an active trader (which we don’t recommend), this is all a moot argument, however. Someone invested for the long-term is unfazed by market gyrations. Just remember: If you’d pulled all your money from the market in 2008, you would have never experiences the dramatic 160%+ gains since. Staying the course on a strategy of index funds with some diversification based in your risk tolerance remains our recommended approach, no matter which way the stock market winds blow.

Holiday Credit Advice From The Money Coach

 

We spoke recently with NYT best-selling author & personal finance expert, Lynnette Khalfani-Cox about the proper use of credit cards during the holiday season. Check out this video for her tips and advice on the best credit card rewards for the holidays, managing your credit score, and other ways to maximize your credit bang for the buck.

 

 

 

 

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