Affichage des articles dont le libellé est Money. Afficher tous les articles
Affichage des articles dont le libellé est Money. Afficher tous les articles

Borrowing money

""If you get a loan or buy something on credit you are using someone else's money and you have to pay a fee.
It's much cheaper to save up your own money to buy things, instead of going into debt. But if you do need to borrow, here is some information to help you understand and manage your loans and credit cards.

Different types of credit

""You are borrowing money if you sign up for:
  • Book up
  • Credit cards
  • Store cards
  • Car loans, personal loans or home loans
  • Interest-free deals
  • Bank overdrafts
  • Payday loans or cash advances

Loans and interest rates

LoanSharkVideoVideo: The loan shark

Find out what happens to Aunty and the loan shark.
Available in English and Pitjantjatara language
This story was made by isee-ilearn.com ©. For more stories visitwww.italklibrary.com/

When you borrow money you have to pay interest – a 'fee' for the use of the money borrowed. It's usually a percentage of the amount of money you borrow.
Always check the rate of interest you will be charged. The higher the interest, the more money you will have to pay back. Also find out if the interest is charged monthly, quarterly or yearly because this can make a big difference to how much you owe.

Case study: Jess gets a better deal

Jess borrows $600 for a year, at an interest rate of 10%. The interest is charged at the end of the year. Dan borrows $600 for a year at an interest rate of 5%. The interest is charged per month. Dan thought he got a better deal but after a year, Jess only has to pay back $660 ($600 plus $60 in interest). On the other hand, Dan has to pay $1,078 ($600 plus $478 in interest).

Use our personal loan calculator to find out how much you will be charged when you borrow money.


Payday loans

A payday loan is a short-term loan that you repay on the date of your next pay. These loans are very expensive. They charge high interest rates (sometimes 48%) and high fees.

Case study: Paul gets a payday loan

Paul needed to borrow $200 until his next pay. He got a payday loan and was charged $40 in fees. Paul couldn't pay the loan back when he got his pay and was charged 40% interest. A week later, when Paul got paid again, he had to pay back $320 – the loan and the interest. Paul should have tried to find other ways to borrow money rather than using a payday loan.

Back To TopCredit cards

""Credit cards let you buy things now and pay for them later. They can be very expensive with high fees and charges.
Here are some tips on using your credit card:
  • Pay the full amount you owe every month.  If you don't pay your credit card balance in full each month, it will take you a long time to pay off the total and you will pay a lot of extra interest.
  • Don't get cash out of your account using your credit card.  You will have to pay more in fees. Even if you pay the full amount back within the month, you still have to pay extra for withdrawing the cash.
  • Use our credit card calculator. See how your debt can grow. 
  • Read your credit card statements carefully. If you have been charged incorrectly contact your bank or credit union immediately. For more information see make a complaint.
  • Be careful with store cards. Before signing up to one of these credit cards, find out how much the fees and charges are. They can be much more expensive than other credit cards.

Case study: Gary paid off his credit card in 10 years

Gary signed up to a credit card offer he received in the mail. He went straight to the shops and bought a fridge for $1,000. A month later, Gary got the bill in the mail. The monthly minimum repayment was only $20, so that's all he paid. Gary was still paying for the fridge almost 10 years later. In that time, he had paid an extra $500 in interest.
For more information see credit cards.

Back To TopInterest-free deals

Big stores also sometimes offer interest-free deals for things like computers, electrical appliances and whitegoods. These deals might not be as cheap as they seem.
Tips for using interest-free deals:
  • Check the fees. Interest-free does not mean cost fee, you will still have to pay ongoing fees.
  • Pay off the deal before the interest-free period ends. If you don't you will be charged a very high amount of interest

Case study: Jenni buys a TV interest-free

Jenni bought a TV for $500, with a 12-month interest-free period. She was charged $20 a month in fees during the interest-free period. At the end of the interest-free period, Jenni had not paid off the TV and so she was charged 30% interest. In the end, the TV cost Jenni $900 (the actual cost, fees and interest).
For more information see interest-free deals.

It's cheaper to save your own money than to borrow. But if you do borrow check your budget to make sure you can afford the repayments. For more information listen to our audio segments on banks, loans and credit cards.
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The 7 Dumbest Ways to Borrow Money


Borrowing money is risky business. Sure, if you’re a combination of smart and lucky, the transaction may go smoothly and help you out of a bind. But seek help in the wrong place you could be living the ultimate financial nightmare: the never-ending loan.
Which lenders should be considered a last resort?

1. Payday loans
Payday loans are small short-term loans backed by your paycheck. Here’s how they work: You apply for a payday loan, listing your next two or three pay dates on the application. After getting approved, you write a postdated check for the loan amount plus interest and fees. On your next payday, the lender collects the balance due, or you can choose to “rollover” your loan until your next payday.
Payday loans appeal to people because they seem fast and easy. Most payday lenders don’t consider your credit history, so people with bad credit can still get approved as long as they have a source of income. And many lenders will give you the cash in just a few days, or hours in some cases.
But these loans come with a catch – high interest rates and fees. For example, Credit.com’s list of payday loan laws by state lists the maximum interest rate lenders can charge. Check out some of these terms:
  • Alabama – 17.5 percent
  • Colorado – 20 percent of the first $300, 7.5 percent for the remainder
  • Louisiana – 16.75 percent
These interest rates may not appear excessive – they seem similar to credit card rates. But credit cards quote the amount you’ll pay over a year, while payday lenders collect their interest in as little as a week. Annualize rates like those above and you’re paying triple-digit interest. Florida law, for example, allows only 10 percent interest, plus a $5 fee for loans from seven to 31 days. Do that for a year and you could be paying nearly 400 percent.
Therein lies the danger of the “rollover.” Many lenders allow customers to extend their loan to the next payday if they pay the fee plus any accrued interest. Since they’re not reducing principal, it’s easy to become trapped.

2. Pawnshops
Pawnshops lend you money by holding your stuff as collateral. But as far as rates go, they’re not much different from payday lenders. Loans are typically 30 to 90 days, and rates and storage fees can be 10 to 20 percent per month. If you can’t pay the loan when it’s due, the shop can sell your collateral, which is generally worth a lot more than the loan amount.
Despite the popularity of pawn-based reality shows, these places are no place to borrow money – or sell your stuff, for that matter. If you need to borrow money, there are much cheaper ways to do it. If you need to sell stuff, you’re better off cutting out the middleman and using a site like eBay or Craigslist.

3. Cash advances from credit cards
While cash advances from credit cards beat payday loans and pawnshops, they’re no bargain.
You can borrow up to your credit limit and get the money instantly, either by swiping your credit card in an ATM and entering your PIN, or by using one of those blank cash advance checks the credit card company sends in the mail.
Banks can charge up to 25 percent annual interest on cash advances, along with fees from 3 to 5 percent of the amount borrowed. In addition, unlike regular credit card purchases, you won’t get a grace period. The interest clock starts ticking on day one.

4. Buy-here-pay-here car dealerships
Every day I pass a shady-looking car dealership in my neighborhood. Their sign screams “No one is refused!” Every day a salesman stands outside holding up a different ad, like “Bad credit approved” or “Get a car for no money down!” Last week, the sign read, “Trade your old gold for a car!” This is an example of a buy-here-pay-here car dealership. They’re everywhere – according to the Center for Responsible Lending, more than two million cars were sold this way in 2010.
These dealerships often begin the sales process by looking not at cars, but your income and credit. Only when they learn what you can afford are you shown cars. Sign on the dotted line and you could be paying average annual interest rates of 24 percent. As Stacy said in the video above, that’s three to four times the rate of typical used-car loans. And that’s not all: The Center for Responsible Lending says 30 percent of these cars are repossessed and resold, and according to CNNMoney, some of these dealers repossess cars when the borrower is one day late.
In short, many of these lots aren’t really in the business of selling cars – they’re in the business of collecting interest. Lots of it.

5. Title loans
Like pawnshop loans and payday loans, title loans are small, short-term loans. The difference is these are backed by your vehicle. Since you’re putting up collateral, most lenders won’t consider your credit history. It seems appealing until you realize you’re handing over the title to your car for a loan that comes with extremely high interest. For example, The Los Angeles Times reported one lender in California charges an annual interest rate of up to 125 percent.

6. Direct deposit advance
Believe it or not, many banks now offer what amounts to payday loans. Your bank advances you a portion of your paycheck (for a fee) and then withdraws the money automatically the next time you get paid.
Direct deposit advances are a quick way to get cash, but as with payday loans, they can cause major financial troubles. First, you’ll pay a fee. For example:
  • USBank – $2.00 for every $20.00 borrowed
  • Wells Fargo – $1.50 for every $20.00 borrowed
  • Regions – $1.00 for every $10.00 borrowed
According to the Center for Responsible Lending, the average bank direct deposit advance carries an annual interest rate of 365 percent. As with payday loans, those living paycheck to paycheck can easily run out of money before the next payday and be tempted to take out another advance, putting them in an endless debt cycle.

7. Friends and family
Borrowing money from someone you know is tempting. After all, most family members wouldn’t charge you interest or take your car if you don’t pay them back. The problem? You’re risking your relationship if the deal goes bad. As Addison H. Hallock once said, “Before borrowing money from a friend, decide which you need more.”
The bottom line? Borrow money from any of these lenders, and your small problem today might become a huge problem tomorrow. Instead, consider building up an emergency fund to handle unexpected events. For tips on how to get started, check out:
  • Want to Get Richer? Here’s Step 1
  • 30 Tips to Spend Less and Save More
  • 25 Simple Ways to Save an Extra $1,000

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