Credit unions and other lenders saw sharp increases in credit card balances from April to May, another sign that consumer spending is rebounding after the pandemic.
The Fed’s G-19 consumer credit report released Thursday showed credit unions held $ 60.6 billion in credit card debt in May. The total is still down 0.9% from the previous year and 7.1% from the month before the February 2020 pandemic. However, it increased 3.4% from April to May. , the first month-to-month gain since December 2020 and the strongest. monthly gain since December 2019.
Historically, May is the third most important month for credit card spending after the vacation months of November and December. Balances typically increase 1% from April to May, based on averages of Fed data from 2010 to 2019.
Sales generally drop from January to March and start to increase in April.
But after COVID-19 was declared a pandemic on March 11, 2020, historical patterns dissolved as the country entered a recession with few precedents. As savings rates skyrocketed, credit card balances fell sharply.
Credit unions’ gains in credit card balances in May were also better than those of other lenders, allowing credit unions to improve their share. They held 6.5% of U.S. credit card debt in May, up from 6.4% in April 2021 and May 2020.
Banks held $ 836.9 billion in credit card debt, down 2.2% from a year ago and 11.5% from February 2020. However, it was up 2% , 1% from April to May. The banks’ share was 89.8% in May, compared to 89.8% in April and 89.7% in May 2020.
The Fed report coupled with CUNA’s monthly credit union estimates report released this month also shows that credit unions held $ 52.1 billion in unsecured consumer loans in May, up by 6.3% compared to May 2020 but down by 2.2% compared to April. These numbers are being influenced by Paycheck Protection Program (PPP) loans, which began in April 2020, as the NCUA requires their value to be reported in this category. They will disappear from the books because the SBA forgives them, as expected.
However, CUNA found other signs of improving members’ financial health in May:
Credit unions held a total of $ 392.8 billion in auto loans as of May 31, up 1.2% from April to May, their strongest performance since May 2018, when growth was 1.8 %.
Savings fell 0.5% from April to May, the first drop since December 2019 in the pre-COVID-19 era. Members feverishly started saving after COVID-19 was declared a pandemic in March 2020, which economists say is usually a signal of a recession.
Improved lending combined with lower savings allowed the loan-to-savings ratio to drop from 68.6% in April to 69.5% in May, the first month-over-month improvement since November 2020.
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Applicants with the lowest credit score (or scores that fall within the range of poor credit scores) generally have difficulty qualifying for mortgages, personal loans, and auto loans without a co-signer. The lowest FICO score and VantageScore that a person can have for the most common versions of these credit scoring models is 300.
Below, we’ll discuss the impact of a low score on your finances and show you how you can improve your score.
What Creates a Low Credit Score?
There are several negative factors that can cause you to have a bad credit score, including:
Minimal credit history. If you don’t have a long credit history, your score could be below average. As of October 2020, those 18 to 23 – the age group most likely to have minimal credit histories – had the lowest average credit scores, according to an Experian report.
High use of credit. Your credit utilization rate measures the percentage of credit you use compared to your available credit. Because it makes up 30% of your credit score, overusing your available credit can lower your credit score.
Late payments. If you don’t pay your bills on time and they are 30 days past due, your creditor can report the late payment to one of the three major credit bureaus: Experian, Transunion, or Equifax. Your payment history represents 35% of your credit score, so making payments on time is essential.
Collections. When you default on a credit obligation, your original creditor may sell your debt to a debt collector or collection agency. Once your debt is sent to collections, it is usually reported to the credit bureaus. A collection can cause your credit score to drop significantly, and you may have to wait up to seven years for it to be removed from your report.
Bankruptcy. If your credit report mentions bankruptcy, it can negatively impact your credit score for up to 10 years. How long it stays on your credit report depends on whether you have filed for Chapter 13 (up to seven years) or Chapter 7 (up to 10 years) bankruptcy.
Risks of having the lowest possible credit score
If your credit rating is low, it can hurt your finances in a number of ways, including:
Potential loan refusals. When you have a bad credit rating, you probably won’t meet a lender’s minimum credit rating requirements. This means that your loan will likely be refused unless you apply with a co-signer.
Higher down payment and security deposit requirements. Some lenders will charge you a higher down payment if you don’t meet their credit score requirements. For example, if you have a score below 580, you will need to make a 10% down payment instead of the standard 3% for a Federal Housing Administration (FHA) loan. Additionally, a landlord may ask you for a higher security deposit when you rent an apartment.
Higher interest rates. If you are approved for a loan, a lender will likely charge you a higher interest rate to offset the increased risk. This can dramatically increase your borrowing costs, reducing the amount of money you need to spend on other financial goals.
Higher fees. In addition to higher interest rates, you can pay more fees when taking out a loan, such as origination fees.
How to improve your credit
If you want to increase your chances of qualifying for loans and get a lower interest rate, follow these four steps to improve your credit score.
1. Build a credit history
If you have a minimal credit history, you can create credit by taking out a secured credit loan or credit card. Both options require you to make a security deposit – you will get the deposit back after you pay off the loan or cancel the credit card.
Alternatively, you can ask someone who has excellent credit and a long credit history to add you as an authorized user on their credit card. Since the length of your credit history is 15% of your credit score, your score may improve if the credit card company reports the information on your credit report.
2. Pay your bills on time
The most important credit score factor is payment history – it accounts for 35% of your credit score. If you make a late payment or your debt ends up being collected, this negative information can stay on your credit report for up to seven years. Paying all of your bills on time can help prevent damage to your credit score.
3. Pay off the debt
The amount of debt you owe is 30% of your credit score. Paying off your debt can lower your credit utilization rate and improve your score. You can use snowball or debt avalanche repayment methods to achieve this goal.
The debt snowball method involves spending the most money on your smallest debt while paying the minimum balance on your remaining debt. With the Debt Avalanche method, you invest the most money in your debt at the highest interest rate while paying the minimum balance on your remaining debt.
4. Examine your credit reports
Monitor your credit reports at least once a year for errors. Any incorrect or inaccurate negative information could damage your credit score. To correct an error listed on your report, dispute it with each credit bureau that lists it.
You can view your three credit reports for free by visiting AnnualCreditReport.com. Due to Covid-19, you can view your credit reports every week until April 20, 2022.
Common credit score ranges
Although credit score ranges vary, the two most common credit score models for FICO and VantageScore have ratings ranging from 300 to 850. The lower your score on each model, the harder it will be to qualify. for funding. For FICO, the lowest credit score range is 300 to 579; the lowest credit score range for VantageScore is 300 to 499.
When you have the lowest credit score or even a score that is in the lowest score range, you risk being denied credit or paying higher interest rates and fees. You will likely pay thousands of dollars more than a borrower with good credit in your lifetime. However, the good news is this: your credit score is not permanent. You increase your chances of qualifying and save money on fees by taking some of the steps mentioned here to improve your credit.
President Biden recently signed a Congressional Review Act resolution repealing the “real lender” rule promulgated by the Office of the Comptroller of the Currency (OCC). He explained how the action would prevent loan sharks and online lenders from using partnerships with banks to bypass state interest rate caps.
But it would be a huge surprise for regulators at the country’s federal and state banks to know that the banks are partnering with loan sharks.
Political hyperbole aside, the ongoing battle (it has been going on since at least the 1970s) over the jurisdiction of state usury ceilings and the scope of federal preemption is quite complex and is critical to availability and credit allocation. The President and Congress probably think they were helping consumers. But as so often happens when popular slogans are translated into vigorous economic policies, they could not have been more confused as to who would be hurt and who would be helped by this action.
Last September, I wrote about two major Colorado usury cases involving loan deals between banks and fintech companies. In these cases, out-of-state banks were charging their home state rates to residents of Colorado under federal law. Colorado was allowed to opt out of this law, but it did not. For example, loans that slightly exceeded Colorado’s 21% annual percentage rate (APR) usury limit were created and then sold to non-bank fintech companies under partnership arrangements.
The parties settled the state lawsuit, and the OCC and FDIC adopted “valid-once-done” rules. And the OCC enacted its “true lender” rule to reaffirm that under federal law a bank outside the state could use its home state’s APR (Annual Percentage Rate) and that the subsequent sale of such a loan would not affect its validity. .
No one likes high interest rates, and everyone is critical of interest rate gauges. So, it is natural to think that government usage rates are a good thing. But the question is much more nuanced than that.
Small loans are essential for borrowers with bad credit histories, and like in the Colorado cases, we’re not talking about situations where the APRs exceed 36%. If recent actions by the President and Congress had focused on lending agencies that take advantage of the poorest borrowers and charge outrageous fees and interest rates (some hit triple digits), this could be universally applauded. But that is not what is happening here.
By repealing the “real lender” rule, Congress and the President have once again injected a level of uncertainty into the consumer loan markets, creating financial and legal friction in the plumbing of the economy. Ultimately, these frictions increase the cost of credit and reduce the amount of credit available to borrowers who are at the greatest risk of default. As attractive, popular, and politically expedient as interest rate caps may seem, when deployed without reliance on facts, they are often a painful remedy for those who need access to credit the most.
Numerous studies have shown that interest rate restrictions can reduce the availability of credit by up to 20% and, naturally, cause resources to shift away from compromised credit, as credit choices shrink and competition increases. on the market decreases. This is because basic business models lead to sound loans.
If a lender has to charge an APR of 25% to make small consumer loans securely and profitably to borrowers with lesser credit histories, and state law says they can only charge an APR of 21%, it is unlikely that he will grant this loan. Frankly, he shouldn’t if he wants to avoid being criticized by his regulator. This is a basic reality that supporters of usury laws ignore. The option of forcing lenders to provide loans to consumers with lower credit scores that cannot be made securely or cost effectively is not always feasible. The lender may be required to simply walk away from the table.
In addition, small loans often needed by borrowers of lesser means are subject to economies of scale that often increase the APR – the rate that must be disclosed. The APR is not the interest rate. But it is the APR that must be disclosed. For example, since an APR by law must include all fee charged in addition to the interest rate, a six-month loan of $ 500 at an interest rate of 10% produces an APR of 44% if an administrative and processing fee of only $ 50 is charged. A loan of $ 50,000 with the same terms would have an APR of 10.4%.
We know that high interest rates are a burden on low income borrowers with lower credit histories. If Congress wants to subsidize borrowers, it must do so directly. Distorting and confusing credit models and lending markets is not the way to foster a stable economy. No less authoritative than the Federal Reserve Bank of Chicago has declared that “[u]Security laws can only be successful in keeping interest rates below market levels at the cost of reducing the supply of credit to borrowers.
We live in a world where cyberspace has erased borders and borders, and where 90% of consumers are online and thus benefit from a greater choice of financial products and services. A Colorado consumer can access credit anywhere in the country and possibly the world based solely on the amount of time they spend on it, the nature of their credit needs, and their credit history. Laws embedded in state borders are becoming less relevant every day.
There are many good ways to manage the availability of credit, including public / private efforts to increase consumers’ financial literacy and availability of credit. We must avoid simplistic and clunky tools that increase the chances that people will seek illegitimate sources of credit on life-threatening terms.
Thomas P. Vartanian is the author of “200 Years of American Financial Panic: Crashes, Recessions, Depressions, and the Technology That Will Change Everything”. Previously, he was a senior banking regulator in two federal agencies, a private practitioner for four decades, and an academic. He was an expert witness in the recent Colorado cases mentioned in the article.
Most college graduates aren’t ready to resume federal student loan payments, according to a recent survey. Here are three ways it can be easier after the forbearance ends. (iStock)
Federal student loans are abstained until September 30, 2021, and unless President Joe Biden’s administration takes further action, millions of borrowers will have to resume their payments on October 1. But the vast majority of college graduates are not ready to resume federal student loan payments, says one survey of over 23,000 student borrowers led by Student Debt Crisis, an advocacy group.
Senate Democrats have called on Biden to write off up to $ 50,000 in student loan debt per borrower by executive order, but Biden himself has questioned such robust student loan cancellation measures. Just over half of those polled (52%) are optimistic about their student loan situation with President Biden in power, according to the survey.
BIDEN’S BUDGET EXCLUDES STUDENT LOAN FORGIVENESS, SO WHAT SHOULD YOU DO WITH COLLEGE DEBT?
Nine in 10 federal student loan borrowers won’t be ready to resume payments on October 1, and about two-thirds (65%) won’t be ready until September 2022 or later. If you are among the majority of borrowers who are unsure of what to do with their student loans, read on to learn more about your options for making it easier to resume your payments, such as income-oriented repayment plans, abstention in case of economic and student difficulties. loan refinancing.
Private student loan rates are near their historic lows, which means now is a good time to refinance your private student loans if you are looking to save money. Visit Credible to compare the rates of several lenders and see if refinancing is right for you.
WITH STUDENT LOAN REFINANCING RATES NEAR LOWEST RECORDS, HERE’S HOW TO CALCULATE YOUR SAVINGS
What to do with your student loans before payments resume
No one knows if the student loan cancellation measures will be successful, and with student loan payments resuming in October, it’s time to start thinking about making payments again. In the meantime, borrowers have a few options to consider:
Join an income-based repayment plan: Federal student loans offer an income-based repayment, which fixes your monthly payment based on your income. You can claim a refund based on income on the website of the Ministry of Education.
Refinance your private student loans at a lower rate: The moratorium on student loan repayments only applies to federal student loans, but many borrowers also have private loans. Refinancing your private student loans can help you lower your monthly payments or pay off your debt faster.
If you are considering refinancing your private loans, be sure to compare the offers of several lenders on Credible to ensure you are getting the lowest possible rate for your situation. It will not impact your credit score.
STUDENT LOAN RATES WERE NEW LOWEST RECORDS – HOW TO KNOW IF YOU SHOULD REFINANCE
Student loan borrowers relied on federal forbearance moratorium
Given that 90% of student loan borrowers are not ready by the end of the student loan forbearance period, it’s no surprise that many of them were dependent on COVID-19 emergency relief. Three-quarters of those polled said the payment break was critical to their financial well-being.
“The pause in my student loan payments allowed me to catch up on my car payments, so it was not picked up,” a respondent from New York said. “It allowed me to reduce my large balance on medical bills. It allayed my worries that I didn’t have enough money to meet my family’s basic needs.”
Student loan repayments are a big debt when trying to budget for living expenses. Almost a third of borrowers surveyed said more than 25% of their income will go to student loans if payments resume.
If you have private student loans in addition to your federal student loans, there’s never been a better time to refinance. Borrowers who refinanced for a shorter loan term on Credible saved $ 17,344 over the life of their loans. Find out the interest rate on your private student loan and compare the rates in the table below to see if refinancing is right for you.
STUDENT LOAN REFINANCING RATES FALL AGAIN TO RECEIVE LOW: HOW TO FIND YOUR RATE
Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.
Last month, Prime Minister Tan Sri Muhyiddin Yassin announced a six-month moratorium on the repayment of bank loans for all Malaysians. The relief program is similar to what was offered in the first round of the movement control order last year, and those in need of assistance can submit their requests starting today.
Previously, financial institutions continued to provide targeted repayment assistance to people affected by Covid-19 and movement control orders. However, under the new Pemulih plan, the the moratorium is accessible to all from segment B40 to T20, including micro-entrepreneurs.
RHB has updated its Covid-19 Help and Assistance Measures page, so let’s explore the options available to you through its Repayment Assistance (RA) program, with a focus on loans automobiles.
The bank offers three options to customers, including one six-month installment deferral, a 50% reduction in monthly payments for six months, or one customized reduction of monthly payments by loan extension.
It’s up to you to choose the option that best suits you, and you can submit your application through the prepared form. Electronic form. You can also contact RHB on 03-2776 3111 or email ([email protected]), but check ahead to make sure your preferred branch is open or if there is a review of business hours. opening.
It is important to remember that the the moratorium is not a loan exemptionso you don’t get six months of “free payments”. Instead, your payments are deferred but accompanied by a six-month loan term extension accordingly – this will also see the the total interest paid being higher due to the extension of the mandate.
RHB did not provide a sample scenario of how its deferral will work in terms of numbers, but it is similar to the CIMB example, which you can check out. The interest will vary depending on your loan amount, the remaining term and the agreed interest rate, so check with RHB for details before making a decision.
RHB also did not provide an example of reducing your monthly payment by 50% for six months. However, as there is no extension of the loan term and the monthly payment remains the same after the six-month 50% reduction, the outstanding balance is due at the end of the loan term, in a single payment. Basically the accumulated 50% that has not been paid for six months must be paid at the end of the loan.
While there are no examples for the first two options mentioned, RHB has provided one that pertains to personalized monthly payment reductions by loan extension. This option essentially allows you to Reduce your monthly payment by increasing the duration of your loan, although you will need to discuss with the bank what amount and terms are right for you.
In RHB’s scenario, there is a nine-year car loan of RM 100,000 at an interest rate of 4.29%, with six years remaining. The amount remaining at this point is RM80,452 and the borrower pays RM118 per month.
Opt for a RM 1,042 lower monthly payment with a six-month extension, the total payout is RM81,270.68, which is a difference of RM818.68. The bank offers extensions up to two years, and as you can see in the example, the monthly payment decreases significantly with a longer extension, but at the expense of increasing the total payment. As RHB says, “we recommend that you compare short-term benefits to long-term costs. “
Click to enlarge
Unlike targeted aid, there is no need to prove a pay cut or job loss, and no documents are required. All borrowers need to do is request the moratorium from the bank, and sign an amended loan agreement.
Approval is automatic for individual borrowers, and approvals should be made within five days if you are qualified. In the meantime, for companies, it is subject to review by the bank and not automatic. Also, accept the loan break will not affect the status and CCRIS rating of an individual, so there is no need to worry.
Again, contact RHB by phone or email (list above) for more details on their RA program, or visit any HLB agency near you.
Here is the list of other banks that have released details of their loan moratorium options:
The National Bank of Ukraine in the center of Kiev. (REUTERS / Valentyn Ogirenko)
The last eighteen months of pandemic disruption has been a time of transition for the whole world that has also brought rapid changes in financial ecosystems. The Ukrainian banking sector is now adjusting to this new reality, as is the entire Ukrainian business community.
Undoubtedly, the main factor determining the future development of Ukraine is the path towards further European integration. Ukraine chose this path in 2014 when it signed an association agreement with the EU.
Among other things, this Association Agreement provides for the implementation of EU regulations on the Ukrainian financial market. This process is long and difficult, but we remain committed to moving forward, no matter how many obstacles we encounter.
Integration into the EU is at the heart of the updated strategy of the National Bank of Ukraine until 2025, which identifies three priorities and 12 strategic objectives.
The first priority is the promotion of economic recovery and development, which includes initiatives aimed at maintaining macro-financial stability, restoring lending to the economy and developing the financial services market as well as the capital market infrastructure. .
Priority number two is the development of digital finance as an engine for the further digitization of the Ukrainian economy. We will continue to promote an innovative and cashless economy, increase financial inclusion and ensure that the financial sector is protected from cyber attacks.
The third priority is institutional development and operational excellence, which involves strengthening the institutional capacity and independence of the NBU, implementing the digital transformation of the central bank and promoting green policies at the support for sustainable development.
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One of the key foundations of sustainable development is macro-financial stability, which lays the foundation for all other changes identified in the NBU strategy. To ensure this stability, we commit to keeping inflation within its target range of one percentage point above or below 5% over the medium term.
Inflation recently exceeded its target range, reaching 9.5% in May 2021. What is behind this increase? This reflects the fact that the Ukrainian economy is recovering.
It’s good news. However, this recovery has accelerated the growth of consumer prices, both in Ukraine and among the country’s main trading partners. Rising global food and energy prices, the recovery of the global economy, the effects of poorer harvests, and continued growth in consumer demand through higher wages are all driving up prices. .
To counter this trend, we raised our key rate from 6% to 7.5%. Central banks still face a trade-off between restrictive monetary policy and economic development. On the one hand, raising the key rate slows down inflation, but on the other hand, it increases the cost of credit. The priority today is to control inflation. It is important to understand that if inflation got out of hand, cheap loans would no longer be available, as banks always include inflation in their interest rates.
We expect that over the next few months, inflation will start to decline and reach 8% by the end of the year. In the first half of 2022, it will fall within its target range. This will ensure that the interest rates on the loans are low in the long run.
Another good news is that the banking sector has remained strong. In the first quarter of 2021, 66 of the 73 creditworthy Ukrainian banks were profitable, while others suffered losses of only 0.1 billion UAH. Meanwhile, hryvnia deposits increased for the second year in a row. This is proof that public confidence in the Ukrainian banking system and in the national currency is currently high.
Banks are gradually accumulating resources that can be used for loans. In the first 5 months of 2021, the business loan portfolio increased by 1.3% to reach UAH 747.2 billion (USD 27.2 billion as of June 1).
In order to strengthen the role of the Ukrainian banking sector in financing the national economy, the share of public banks should be reduced. In the EU, for example, public banks rarely play a key role in the financial sector. This is why we are supporting the government in its plan to reduce the market share of these banks from the current level of more than 50% to 25% by 2025.
Work towards this goal is already underway. The International Finance Corporation (IFC) and Ukrgasbank recently signed an agreement with the possibility of further converting loans into authorized capital of the bank. The EBRD and Oschadbank are in talks to reach a similar deal, while PrivatBank has also included privatization in its strategy.
The key to the success of the privatization of Ukrainian state-owned banks is to reduce the ratio of non-performing loans. In accordance with the new NBU strategy, the NPL ratio of the banking system will fall to 10% by 2025. We are gradually progressing towards this target. As of May 1, NPL’s overall ratio was 39.6%, compared to 41% at the start of the year.
In order to avoid the accumulation of new NPLs, we requested the creation of a specialized financial court. This would help save the Ukrainian financial market from the current quagmire of court hearings.
Last year Ukrainian courts dealt with 563,000 lawsuits, of which 138,000 were financial disputes. The disputes with the borrowers concerned a debt of UAH 144 billion. In 2020, the number of cases pending judgment for more than a year increased by 31.6%, leaving almost one in five cases pending. The establishment of a specialized financial court will considerably improve the situation in terms of reimbursement discipline.
A key priority of the NBU that has the potential to transform the landscape of the Ukrainian banking sector is green finance. Financial markets can play a key role in mitigating the negative effects of climate change. Some European central banks already provide a favorable environment for green bonds. Ukraine is not left out and is currently considering launching a green bond market.
We have all the assets to lead the way in the region in terms of sustainable development. In recent months, the central bank of Ukraine has joined the World Bank’s Sustainable Banking Network (SBN) and the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), which brings together dozens of central banks, including the Bank of England and the Deutsche Federal Bank.
The NGFS aims to strengthen green finance and develop recommendations on the role of central banks in combating climate change, while membership in SBN commits Ukraine to improve the management of ESG (environmental, social and corporate governance) and promote increased capital flows to activities with a positive climate impact.
Climate investments have enormous potential. IFC estimates this potential at 23 trillion USD in emerging markets for the period up to 2030. Funds raised in this market will be channeled towards the implementation of national projects covering renewable energies, energy efficiency and other environmental initiatives.
An important step in this direction was the signing in April 2021 of a cooperation agreement between the NBU and the IFC, which is part of the World Bank Group. The roadmap for sustainable financing, which is a key element of this agreement, presents the planned actions of the NBU and summarizes the main changes that the regulator intends to make in the near future.
Kyrylo Shevchenko is the Governor of the National Bank of Ukraine.
The opinions expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff or its supporters.
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With federal COVID-19 protections set to expire soon, you may be looking for an easy way to reduce your monthly spending. Refinancing your loans can save you money each month without having to change your spending habits. (iStock)
The coronavirus pandemic has dealt an unforeseen blow to many industries, leaving Americans without jobs and wages. The federal government has launched a number of financial assistance programs, such as increasing unemployment benefits and stimulus checks, as well as suspending evictions during the pandemic. But as the economy returns to its pre-pandemic state, those protections are about to expire.
The CDC extended the moratorium on evictions, giving tenants until July 31, 2021 to get their finances back on track. And about half of the states cut the extra $ 300 unemployment benefit before the Sept. 6 expiration date, hoping to motivate people to re-enter the workforce.
Yet many consumers are still behind on rent and struggle to make ends meet as we recover from the impact of COVID-19. If you want to get your household expenses back on track, you’re probably looking for ways to cut your expenses.
There are many ways to cut expenses without having to sacrifice necessities like utility bills or food costs. You may be able to save hundreds of dollars each month by:
Pay off your credit card debt
Refinance your private student loans
Find cheaper insurance
You can search for a range of financial products such as loans and insurance in Credible’s online marketplace. It can help you significantly reduce your monthly expenses so that you can become financially stable again.
HOW TO BUILD AN EMERGENCY FUND?
1. Pay off your credit card debt at a lower interest rate
Credit cards carry noticeably high interest rates, but millions of Americans still have month-to-month credit card debt. The average American household owes $ 6,270 in credit card debt, according to the Federal Reserve’s most recent survey of consumer finances. This translates into hundreds of dollars in credit card payments that destroy monthly budgets.
When you make the minimum monthly payments on your credit card, it can feel like you’re throwing money on debt without seeing it go down. But it is possible to establish a tangible debt repayment plan, and even lower your monthly payments, by refinancing your credit card debt with a personal loan.
The average interest rate for personal loans is 9.46%, compared to 15.91% for interest-bearing credit accounts, according to the Fed. Because they offer lower interest rates and longer repayment terms, personal loans can help you lower your credit card payments and make room in your budget for other expenses. Let’s take an example, assuming the average Fed interest rates:
If you make the minimum payment of about $ 250 on a credit card debt worth $ 6,270, it will take you over 11 years to pay off that debt.
If you refinance a 10-year personal loan, you can reduce your payment to $ 81 and reduce your debt repayment schedule by one year.
This can free up $ 169 in your budget, which you may be able to spend on past due rent or other expenses. Use a personal loan calculator to see your new payment.
9 OF THE BEST DEBT CONSOLIDATION LOANS
2. Refinance your private student loans to reduce your monthly payments
Student loan rates hit record highs in June 2021, which means there’s never been a better time to look for a lower rate on your private loans.
A lower interest rate can help you lower your monthly loan payments, save money on interest over time, or pay off debt faster.
This is especially true for borrowers who took out student loans several years ago when the rates were much higher. Average interest rates were 7.64% in 2018, according to data from Credible. By refinancing your student loans at a better interest rate, you could save hundreds of dollars each month, giving you more leeway in your budget.
Keep in mind that it is not recommended that you refinance your federal student loans right now, as you will lose protections like the student loan forbearance moratorium.
Credible’s Student Loan Refinance Calculator shows you how much you can save on your monthly payment.
5 SECURE WAYS TO REPAY DEBT IN 2021
3. Look for insurance with a lower monthly premium
One last way to make room in your monthly budget is to look for cheaper insurance. You can save up to 30% on your insurance premium if you combine your home and auto plans, for example. Also consider changing your level of coverage to lower your monthly insurance premium, keeping in mind that less coverage means you could face higher expenses in an emergency.
Shop around for auto, home and life insurance plans on Credible. This allows you to compare premiums without affecting your credit, so that you can see if you are able to save money on that monthly expense.
THIS IS THE BEST WAY TO REDUCE YOUR AUTOMOTIVE INSURANCE COSTS
Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.
Small savings plans not only offer higher interest rates for long-term investments, but they’re also useful if you want to commit them to fundraising in an emergency.
An investor can only pledge the following two products to contract a loan.
Kisan Vikas Patra
At present, the product offers interest rates of 6.9%. The amount invested doubles in 10 years and four months, which is also the current maturity period. An investor can invest as little as ₹1,000. There is no maximum investment limit in Kisan Vikas Patra (KVP).
National Savings Certificate
It is a five-year term product that offers an interest rate of 6.8%. Like KVP, the minimum investment amount is ₹1,000, and there is no limit on the maximum investment amount. All ₹1,000 invested goes to ₹1,389.49 after five years.
According to the Bank of Baroda website, a borrower can get up to 85% loan of the face value of these two products if the remaining maturity period is less than three years.
If the residual maturity is more than three years, a borrower can get a loan of up to 80% of the face value. An individual can also pledge these securities for ease of overdrafting. The interest rates charged by the bank are the highest of the following:
One-year MCLR (7.35%) + strategic premium + 3.5% or 0.5% compared to the NSC / KVP rate.
According to the State Bank of India website, the bank charges an interest rate of around 11.9% for a loan on these products.
An investor can only promise these products to specified institutions, including banks, non-bank financial corporations, public and private corporations, government corporations, local authorities, as well as the president of the country and the governor of a State.
(Do you have personal finance questions? Send them to [email protected] and get answers from industry experts)
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Small and medium-sized enterprises (SMEs) can continue to access credit to build their capacity through the expansion of two programs, Finance Minister Lawrence Wong said yesterday.
The Temporary Bridge Loan Program and Enhanced Business Financing – Commercial Loan Program will be extended for an additional six months from October 1 to March 31 of next year. They were previously extended last October for the period from April 1 to September 30.
“For many SMEs, access to credit is an essential lifeline to get them out of this crisis … Although economic conditions have improved, this access to credit remains essential for our SMEs,” said Mr. Wong in a ministerial statement on measures to support businesses and workers affected by the latest measures related to Covid-19.
The Temporary Bridging Loan Program aims to help local businesses manage their immediate cash flow needs, while the Enhanced Corporate Finance Program – Commercial Loan covers the business needs of businesses in areas such as inventory and finance financing. stocks.
The government has supported more than $ 22 billion in loans to more than 25,000 companies through Enterprise Singapore (ESG) financing programs since the start of last year, Wong said, adding that 99% of beneficiaries were SMEs.
About half were in wholesaling, construction and manufacturing, with other sectors such as services and retail also supported, ESG said in a statement.
The parameters of both regimes remain unchanged, including the government’s 70 percent risk share.
The Monetary Authority of Singapore (MAS) will also, accordingly, extend the Singapore Dollar MAS Facility for Singapore Business Lending, which provides lower cost financing to banks and finance companies to support their business loans. local.
The facility will continue to provide Singapore dollar financing at an interest rate of 0.1% per annum for a term of two years to eligible financial institutions to support loans made under the Temporary Bridge Loan Program and the Program. corporate finance – SME working capital loan, which finances operational cash flow requirements, from Oct. 1 to March 31 of next year, MAS said yesterday.
He added that the facility had disbursed $ 13.3 billion since its inception in April last year.
Mr Wong said in his statement: “The way we have provided support during this cycle, as well as our ongoing support programs over the years, reflect our tax approach to supporting Singaporeans and businesses in Singapore. . “
The government ensured a fair tax system for all even before the pandemic, he said.
Total income tax receipts – both corporate and personal – as a percentage of gross domestic product are around 6%, about half of the Organization for Economic Co-operation and Development average by 12%, he said.
“For individuals, we operate a progressive system of transfers that provides more assistance to those who need it most … the 20 percent of households poorest by income, for example, receive about $ 4 in benefits. for every tax dollar they contribute, “he said.
Mr Wong said Singapore has a competitive tax regime for businesses, especially SMEs, as they are the backbone of the economy.
He added that a global movement to change corporate tax rules will only affect a select group of global businesses, not small businesses. “So our SMEs in Singapore can continue to benefit from low taxes.”
Singapore’s SMEs – companies with annual sales of up to $ 100 million – make up more than 95 percent of businesses operating here, but contribute less than a third of the country’s tax revenue.
More than half of these businesses do not pay corporate tax.
Besides taxes, the government recognizes that SMEs are concerned about costs such as rental, labor and utilities, Wong said. “We don’t directly offset these costs under normal circumstances, but rather offer a wide range of programs to help them improve their productivity and develop new capabilities. “
About 70 percent of government business grant disbursements from 2015 to 2019 went to SMEs.
“In times of crisis, we recognize that low-income households and SMEs face greater challenges, and that is why we have designed our interventions to benefit them the most,” Wong said.
About two-thirds of the $ 26.7 billion paid to date under the employment support program has gone to SMEs, as has 90% of the benefits of the corporate income tax abatement. of the assessment year 2020.
RIZAL COMMERCIAL Banking Corp. (RCBC) seeks to create an end-to-end platform that will simplify loan processing for small and medium enterprises (SMEs).
This platform will include features such as online application, loan processing and account management, where customers will be able to pay loans and benefit from the bank’s products and solutions, he said on Monday in a statement. communicated.
In 2019, RCBC used data analytics and cloud-based technology to simplify the processing of its loans. These initiatives have enabled the bank to offer personalized solutions and faster loan disbursement for its corporate clients.
“One of the biggest challenges for SMEs is access to Fifunding. Being able to reduce turnaround time will help them signiFiCantly, ”RCBC First Senior Vice-President and SME Group Head Ma. Said Angela V. Tinio.
RCBC said its manual end-to-end process has so far been simplified by 50%. Meanwhile, its automatic credit investigation turnaround time has been reduced to four hours due to the integrated system between the bank’s sales cloud and third-party offices. Thanks to the streamlining of the credit check process, the turnaround time has been reduced to eight days.
In addition to boosting technology, Tinio said they have also provided training for their relationship managers to better perform their duties with their clients remotely.
President and CEO of RCBC OffiCer Eugene S. Acevedo said the bank is looking to expand its digital presence and move away from traditional banking transactions as more and more customers increasingly prefer to do them online.
The Yuchengco-led bank’s net income fell 31.55% to 1.58 billion pesos in the first quarter, from 2.308 billion pesos a year earlier due to trade losses and weaker currency gains.
RCBC shares closed at P21 each on Monday, down P1.20 or 5.41% from Friday Fiend. – LWTN