There are “payday lenders” who offer “payday loans.” They are not banks. They operate out of stores or over the internet. A payday loan means they give you a short term loan until your next paycheck. You write a personal check against your next paycheck OR give them permission to take the full amount of the loan plus the fee out of your bank account if your paycheck is direct deposited. These loans come with very, very high fees.
They are advertised as loans for emergencies but it is very hard to pay back the loan and the fees and still have money for bills. So, most people take out one loan after the other, and fall farther and farther behind. These loans are very dangerous to your finances and many are illegal.
It’s ok to use your credit if you can pay it off at your next bill. That can help build your credit score. But if you won’t be able to pay quickly, it is better to save money until you can pay the full price. Most businesses that offer financing or credit cards charge a high interest rate. This means that by the time you pay it off, you have paid a lot more than the purchase price.
Being in debt is confusing and depressing. But you can get help to make good choices. Call Lutheran Social Service of Minnesota for credit counseling services at (888) 577-2227. Or call the National Foundation for Credit Counseling at 1-(800) 431-8157.
Watch out for “credit repair” schemes that tell you to do things that are illegal, or charge you to do things that you can do for free.
Check cashing businesses are very expensive to use. Shop around for a bank or credit union with free or low cost checking and savings accounts. Many credit unions are open to anyone in the neighborhood and sometimes have better offers than banks do. You may want to start with a small savings account.
If you have a bank account, you can usually cash checks for free. You save money on check cashing fees, and you can improve your credit rating. If you get an ATM card, be sure to keep track of what you spend so you don’t spend more than is in the account. ATM fees can add up fast!! You may avoid these fees by using ATMs owned by your bank or credit union.
If you use checks, don’t write a check for more than you have in the account. The bank AND the person you wrote the check to can charge you fees. Fees can be $35 or more. These fees add up and can cause your next checks to bounce too. Writing a check for more than you have in your account can also be a crime.
When you finance a car loan with the dealer, the dealer often makes money on the loan. They may make more money if they give you the loan at a high interest rate. A local bank or credit union may give you a better rate. Shop around for the best price for the car like you are going to pay cash, then compare that to bank and dealer rates.
The pawn shop pays you much less than your goods are worth, and charges very high interest. If you have to sell something, sell it someplace else. Sell to neighbors and friends, put a sign up on local bulletin boards, or try online. When you have money again, you can buy a replacement.
Pay your bills on a budget plan – where you pay the same amount every month. If you do this, you won’t get big bills in the winter that you can’t pay. Turn off lights, TVs, computers and stereos when you are not using them.
If you have a landline give up extra services like call-waiting, caller-ID, and answering services. Shop around for the cheapest long- distance service or do without it and get calling cards for long distance. Shop around for a good price on calling cards, too.
Many people only have cell phones and no landlines. With a cell phone too, make sure you get all the information you need and compare services.
If you have a low income you may qualify for discounted or free landline or cell phone service. Go to www.lifelinesupport.org to see if you qualify and how to sign up. You can also call your local phone service provider and ask about lifeline service
Owning your home may save you money. But buying a home is a long term and complicated commitment. You need expert help to get a good loan and to make sure the house is in good shape and the price is right. If you don’t get help, you can lose your home and your money.
Talk to a homeowner counseling program in your area. They make sure you learn about any programs to help buy a home and tell you how to handle the financing. Find out what you need to do to get a home, and don’t buy until you are fully informed and ready.
Think about the little things you can do without. Little things add up to a lot. One can of pop a day can cost over $300 a year. Bring lunch from home instead of buying something.
Before you buy a more expensive item like a tool, an appliance or sporting goods, ask if you could borrow it from a friend or relative. Or think about if you can do without it until you have more money.
It helps to know exactly where your money goes. Keep all your receipts for a few weeks if you are not sure where you are spending it. Sort them by type of expense (food, gas, bills etc.). Add each group up to get an idea of where your money goes.
Fill out a budget sheet. A consumer or home ownership counselor can help you budget, or you can do it yourself with the monthly budget form attached.
Make sure your payroll withholding is right. Pay what you owe when you owe it to avoid penalties and interest and seizure of your income and property. If you can’t pay it all right now set up a payment plan with the IRS and/or state.
If you don’t agree with what the IRS says you owe, the Minnesota Legal Aid Tax Project may be able to help you for free. Call 612-334-5970.
Be wary of “tax fixer” advertisements offering miracle results because such services may not be operating according to law. They can charge a lot and may not give much help.