Almost everyone has an opinion on finances, either from personal experiences or knowledge they want to share. The problem is everybody has different living situations and manages their money in their own way. So what advice should you take? Here are some poor financial suggestions and alternatives to consider instead.
Long-Term Renting
Does the landlord encourage you to stay at your expensive apartment and sign another year lease? Maybe you’re single or are overburdened with debt that won’t allow you to get a mortgage. If that’s the case, waiting another year or two won’t hurt if you’re using that time to save up and clean up your credit.
But home ownership is still often a better alternative, so work toward it if you can. Paying a landlord more each year is money that doesn’t go back into your pocket. Purchasing a home builds equity and can be a solid investment for the future.
Obtaining a Payday Loan
Getting sidetracked with car repairs and overdue medical bills can quickly take away from having money for immediate personal needs. One remedy people turn to when they need access to extra cash is a payday loan. This can be a financial disaster because these loans are often plagued with high interest, fees and lousy repayment terms. It may be better to avoid payday loans and seek another option, like a small loan through your local credit union, if you absolutely need the money.
Acquiring a Land Contract or ARM
Homebuyers with poor credit may choose mortgage terms on a land contract or adjustable rate mortgage (ARM). For a land contract, a large down payment is required, rates are high and some may include a balloon payment, or a substantially larger final bill, which can set homeowners up for a loss.
An ARM is also available for high-risk borrowers, but it’s often a bad idea, especially for those on a fixed income. Introductory terms may be low or reasonable, but as rates adjust, balances can skyrocket, making the monthly payment amount astronomical, and unreachable.
Filing for Bankruptcy
Maxed out credit cards, personal loans and extended loan terms can take their toll on your long-term finance — and start friends and family recommending bankruptcy as an option. At the end of the month, the minimum payments alone may exceed your budget. This results in late payments, and eventually default, and there you are — should you think about it?
To prevent creditors from attacking personal assets and levying bank accounts, filing bankruptcy looks like an easy out. It isn’t. It damages your credit score, and in some cases, you’ll still But for most, it isn’t. Better to repay some or all of your debt as you can. Consider debt consolidation first, leaving bankruptcy as a last resort.
Not Paying off Debt
If you’re feeling buried in debt, it can be tempting to stop paying revolving credit cards and old hospital bills. But this could result in a default judgment against you, and ruin your credit. With a signed judgment, creditors in most states can seize assets and garnish wages to satisfy the debt. So ignore that friend who says “they can’t do anything about it” and make some token payments as you’re able.
A $500 credit card defaulted on can easily turn into much more by the time fees and other charges are incurred. Contact your creditors right away to work out an arrangement. Consider a reputable credit counselor for help.
It’s alright to listen to financial suggestions but also do your own research. Making good financial choices means taking sound advice from professionals and making positive moves in the right direction. Avoid these bad bits of advice above, and you’ll be off to a good start.
