HERE ARE THE TOP 6 LOANS TO AVOID

• Payday Loans – They are small loans against your payroll check that are meant to paid back within two weeks. The typical loan size is about $300 to $500, and the fee is typically $15 per $100 borrowed, and there’s no interest. As collateral, the borrower typically writes a personal check for the total amount owed to the lender, to be cashed after two weeks, or signs over electronic access to his or her bank account. (These places often use illegal tactics to discourage people from bouncing checks like telling them they'll be placed in jail.) What often happens is that the borrower can't scrape together the money to pay off the loan within two weeks and ends up renewing it. To renew a payday loan, you pay the fee to the lender and re-borrow the money. So if you owe $300, you pay $45 and continue to owe that $300. This is what I call “Payday Loan Hell,” and if you’re stuck there and you want out, come see me for the solution.
• Car Title Loans - Car title loans are very similar to payday loans. They are advertised as modest short-term loans, in which the lender takes as collateral the borrower's car. Unlike the average payday loan, though, car title loans can be as high as several thousand dollars and are often based on what your car is worth. Car title loans typically have to be paid back after one month, although the specific terms can vary; some lenders structure the loan to be repaid in several installments, over a longer period of time. Either way, most borrowers end up renewing these loans. (Renewal works the same was as with payday loans: You pay the fees and continue owing the original amount.) The problem is, you risk losing your car if you don't pay back the loan or renew it. If you want to protect your car, then stay away from car title loans.
• Cash Advances - When you're in a cash crunch, your credit card can conveniently help out with some quick cash at any ATM. But these cash advances also come with a very steep price tag. In addition to the interest you'll be charged, say 22%, cash advances also carry pretty steep fees, ranging between 2% and 5% of the amount borrowed. Even if you plan to pay off the cash advance as quickly as possible, remember that most credit cards apportion your monthly payments to the balance that carries the lowest interest rate. If your APR on purchases is lower than that for cash advances, which is typically the case, then your monthly payments will simply go toward your purchases balance, while the cash advance will continue to grow. If you do take a cash advance, choose a credit card that's paid off and don't use it until you pay the cash advance off.
• Overdraft Loans - Virtually anyone with a checking account these days has what most banks advertise as "courtesy overdraft protection," which allows you to draw money from an ATM or use your debit card in stores, even if your account balance is $0. That comes in exchange for a seemingly small fee of $35 on average.
  So if you're low on cash, you could in a pinch have your friendly bank help out, right? Think again. Because overdraft is automatic, you could get hit with that $35 fee any time you use your debit card or write a check, which could be several times a day. If you are using this “overdraft courtesy” as a loan, it would be much better for you to go on a cash basis.
• 401(k) Loans - If you have a 401(k) plan at work, chances are you can borrow as much as half of your savings balance, for any reason you like. Just because it’s available, does not mean that it’s advisable for you to get one. Remember, we all get one day older everyday. If you tap into your retirement while you’re still able to work, then what are you going to have left when you get to be of retirement age? The problem is worse for people borrowing from their retirement just to keep up with the minimum payments on their debts. That’s a complete waste of money because you will have little or no retirement savings and you will owe just as much.
• Home Equity Loans Just To Pay Bills – You can get a loan against the equity in your home, and repay it over 10 to 30 years. The problem with this type of loan is not the loan itself. Instead, the people that have home equity that they can borrow against are people that are typically older. The reason that they have home equity is because they paid off their home. They’re having trouble paying credit cards and they are attracted to the idea of lower monthly payments on their debt if they consolidate their bills using a home equity loan. They get the loan and things seem fine, until there is either a job loss or a health change that results in lower household income. People in that situation find themselves missing mortgage payments and property tax payments, either of which can trigger a foreclosure. Perhaps I just see the worst-case-scenarios, but I strongly advise that someone 50 and older should not be tapping into their home equity because it is NOT likely that their income is going to remain stable for the 10 to 30 years that they are going to have the home equity loan.
  

 

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