Debt consolidation and lawsuit - the things you should know about

Debt consolidation and lawsuit – Things you should know about!

You can be sued for credit card debt if you don’t make the payments on time. Now, you can think about whether or not debt consolidation can help you if a creditor has filed a lawsuit against you. Before going to that topic, let’s discuss the process of debt consolidation in brief. It will help to discuss whether or not, consolidation can help you stop a credit card debt lawsuit, and if yes, then how.

What is debt consolidation?

Debt consolidation is a process through which you can consolidate your multiple bills into one single monthly payment. This method also helps to reduce interest rate but your outstanding debt amount remains the same. You can’t negotiate with your creditor about reducing the debt amount but you can make negotiation on the interest rate and how much you pay every month. In such a way, you can save a considerable amount while paying less interest.
There are 3 ways to consolidate your unsecured bills. You can choose one as per your suitability.

Check out: What happens when you don’t pay the credit card bills on time and what you can do

When does a lawsuit occur?

When you owe money to a credit card company or a creditor and you fall behind in making payments, your creditor can file a lawsuit against you. The lawsuit occurs when the creditor files a complaint with the court. The complaint comprises of the reason for filing a lawsuit and the demand of the creditor that includes repayment of the debt amount with interest.
You will receive a copy of the complaint with a summons from the creditor. The summons will let you know that you are being sued along with other information like when you should formally respond to it.
The creditor may file a lawsuit in the state civil court or federal court (if you owe money to the federal government).

How to respond to the lawsuit

You will be given 20 to 30 days to respond to the lawsuit. The response will be in the written form which is known as the “Answer”.
Sometimes it may be quite difficult for you to prepare a formal answer. That’s why it is recommended to get help from a reputable lawyer who will manage every step on behalf of you. The steps include deciding all your defenses, preparing a formal answer, and at last, presenting you in the court.
You’re in a great trouble when you have defaulted on your debts without any defenses. In such a situation, you should get professional help. A lawyer can help you find out any defenses or mark any violations against your creditor.

Can debt consolidation help you to stop a lawsuit?

Well, it can be a ‘yes’ or a ‘no’ at the same time.
Please continue reading to know why.

Opting for a consolidation program won’t really help you to stop the court proceedings once a lawsuit is already filed. So, a consolidation company will not be able to help you with this matter.
However, a settlement company might help you by opting for out of court settlement. What a settlement lawyer can do is convince your creditor(s) to accept a lower payoff amount against the outstanding due amount. Because if you file bankruptcy they won’t get anything. So, in most cases, they will accept a lower amount than getting nothing at all.

When you take out a consolidation loan and pay off your existing debts, all your existing dues are paid off altogether. So, the lawsuit will automatically stop.
However, while opting for this option, make sure you take out a loan lower than the sum total of your existing loan payments.

Transferring your balance to another credit card can also help you out, provided you have a card with a relatively lower rate of interest and sufficient credit limit. You can use that card to repay the existing balance on another card.

Opting for a new 0% or lower interest credit card might be difficult for you when you are already neck-deep in debt. However, it is not impossible. If you get one, it will help you to stop the lawsuit. But make sure you repay the outstanding amount within the low rate introductory period; otherwise, you’d have to pay the remaining amount at a much higher rate of interest.

Advice from debt consolidation company to handle the situation

Though there are fewer chances to strike off the case with the help of debt consolidation, you can handle credit card debt lawsuit by acting upon this advice:

1) Reply the calls:

You might get unlimited calls from your creditors and your instinct will say not to receive them. Here, you’ll make a mistake by ignoring their calls. Ignoring the problem is not the ultimate solution but it can make the situation more complicated. It is quite normal for your creditor to assume that you are avoiding payment. So, take their calls to understand the problem fully and take proper steps to resolve the issue.

2) Respond to the letters:

If your creditor sends you a letter, don’t get frightened but open it and respond to it immediately. Don’t think that without your presence, the case won’t go forward, rather it’ll set a strong allegation against you. In turn, you will be left with very limited options to stop the lawsuit and settle the debt.

3) Make an attempt to negotiate with your creditor:

When your creditor calls you or sends you a letter, don’t ignore it. Rather, make good use of it i.e., start negotiating with them. A lawsuit generally takes a lot of time and costs money as well. So, you’ll have a great opportunity to negotiate with your creditors, which will be beneficial for both you and your creditors.

4) Don’t accept liability blindly:

Before you accept the liability, check if there is any discrepancy like wrong debt amount, escalated interest rates with extra fees, and so on. So, when you talk to your creditors or receive their letters, check every detail they are telling you or they have mentioned in their letters. A thorough checking can help you to get out of this difficult situation by handling it tactfully. Remember, if you challenge the lawsuit, it’s not the same as denying that you haven’t taken out the amount ever. So, you can always challenge if there’s an issue.

5) Consult a lawyer:

If you can’t hire a lawyer, you can consult a lawyer, who can review your case and suggest you whether or not he/she will contest the case. If the lawyer refuses to do it, you won’t have to pay a cent. It may also happen that you don’t have to pay the full fees until you win the case. It is advisable you inquire these things before hiring a professional.

So, gather knowledge and decide what can be the best way to find a way out of your situation.

What happens if you don't pay credit card bills and what to do

What happens if you don’t pay credit card bills and what to do

So, one more month has passed and you couldn’t pay your credit card bills on time, not even the minimum payment.
You are not alone: as per the survey by wallethub, the average American households are in $8,788 credit card debt. Unfortunately, 62% of people have said that they would go into credit card debt due to their frivolous spending.
So, we can understand, thousands of people are not taking their credit card statements seriously. They are not even bothered to make the credit card minimum payment.
Shockingly, the wallet hub survey has also revealed that some people are even ignorant about the consequences of ignoring the credit card bill. They think that credit cards are free money!

So, today’s article is about the consequences of not paying the credit card bills on time. And, what to do if you can’t pay your credit card bills on time.

What are the consequences of not paying the credit card bills on time?

Ted Rossman, industry analyst at CreditCards.com has said that you will be in a tough financial situation if you don’t pay at least the minimum payments on time.

Here’s the real meaning of falling into “Tough financial situation”

You will be charged late fees

Once you cross your credit card bill’s due date, you will start incurring late fees. Unfortunately, the penalties will start adding up quickly and you will be in more debt. Every time you miss a due date, you will be charged a fee as a penalty.

Your accounts will be delinquent

If you cross the entire billing cycle without making a payment, your credit card issuer will report your account as 30 days past due to the credit bureaus. This will drop your credit score. The more payments you will miss, the worse your score will be. Your accounts will be delinquent.

You will start getting creditors’ call

If you again miss a billing cycle(60 days), then you will get calls from your creditors. If you still don’t pay your bills for 90 days, your available credit limit will drop by some points. You will also start incurring more interest on your debts.

Your accounts will be charged off by the issuer

If you still don’t make payments, the creditors will consider your accounts as a loss. They will report to the credit bureaus to consider the accounts as charged-off. When your account is charged-off, it means, you are unable to pay off debts, so you need to pay the tax on the canceled debts.

You can get collection calls

Once the creditors understand that you can’t pay off debts, they usually sell the accounts to the debt collectors to manage their loss. This will hurt your credit score severely as you will get collection accounts on your report. And, you will get collections calls, which can be a nightmare.

The creditor can file a judgment against you

The credit card issuer can also force you to pay the bills by taking legal action against you. The judgment will be recorded on your credit report and, it will affect your score negatively. Also, the court will ask you to repay the debts. If you can’t afford, then the court can sell your property to repay your debts.
So, this is why you shouldn’t ignore your credit card bill payments.

However, there are always some ways to get rid of your debts.

What to do if you can’t pay your credit card bills on time

Well, you may not be able to pay your credit card bills on time. But, you shouldn’t ignore the bill. There are some actions you can take to lessen the intensity of the situation.

Here you go:

1. Inform your credit card company about your financial hardship

If you think that you can’t pay your credit card bills on time, you should inform your credit card issuer regarding it. You can negotiate for an extended payment time by explaining a genuine financial hardship situation.
If you are a potential customer with a history of timely payments, your issuer can agree to your proposal. If your financial hardship is too intense, you can even request to waive off the late fees. However, you have to assure them about clearing all the payments by the next cycle.

2. Transfer your balance

If you can’t afford your credit card bills, you can transfer the high-interest balance to a low-interest card. Some credit card companies offer a balance transfer card at a very low introductory interest rate. You can transfer your credit card balances to this balance transfer card and pay back within the stipulated amount of time. It will help you to reduce the APR. However, you should repay the balance within the introductory period. Otherwise, the interest rate can increase.

3. Consolidate the bills into a personal loan

If you are unable to manage your credit card bills along with other monthly bills, then you can consolidate your bills. You just need to take out a loan to repay all the due bills. Now, you just need to manage the new loan properly. However, you should try to take out the new loan at a lower interest rate. If your credit score is good, you can get a loan at favorable terms and rate. Shop around to get a loan with a lower interest rate. Credit unions can help you to get such a loan.

So what do you learn from this article? The main point is that skipping a credit card bill can be dangerous for your financial health. You should try to pay the bills in full and within time since credit cards are not free money. It is one of the loans that you are taking out. Thus, you are liable to repay the bills. However, financial ups and downs can be there. So, you should manage that phase tactfully instead of ignoring the bills.
Remember, keeping a credit card is not enough; you should learn how to manage it. There is no doubt that credit cards are convenient tools to make necessary purchases. But you shouldn’t use these tools to buy things that you can’t afford in cash.
Hence, you should learn how to manage your credit cards before going to swipe them.

Not only money, you also need healthy habits to clear debts!

Not only money, you also need healthy habits to clear debts!

What do you mean by healthy habits?

Eating healthy, doing exercises, staying away from all sorts of addictions, drinking enough water every day, minimal screen time on computer and mobile devices, and so on, will be the answers coming from everyone.
And, all are totally correct.
Debts are a big time side-effect of a bad lifestyle, fuelled with unhealthy habits. This is what makes it important to discuss lifestyle issues first, when you are addressing debt problems.
Here we will be going through a few of the healthy habits that we all need to showcase so as to stay away or get out of debts.

But, first,

which debts indicate that you have a bad lifestyle?

Straightaway, having too much of consumer debts are a sure shot indication. These are also called unsecured debts, and they are best known for the high-interest rate factor attached to them.
Examples of these debts are credit cards, payday loans, misused personal loans, and all.
These debts are bad debts, and you feed them with a little help from your bad lifestyle and unhealthy habits.
Are you a victim of credit card payment cycle? Like, each month you spend more with your cards, than the payments you make on them?
Then your lifestyle needs some mending.
Again, payday loans are another red alert, that your spending and borrowing habits are going the wrong way. The loans have the highest interest rates among all debts. And, if you can’t return back the loaned amount by the next payday, then you are in muck.
Now, as of personal loans, it is a very complicated situation to determine, whether or not it’s harmful or helpful.
If the personal loan is for some serious business you are about to implement, which has a potential return in the future, then this debt is not at all bad or unhealthy for you.
But, if the loan amount was just wasted due to some wrong decisions of yours, then this is a big deal, as personal loans are of big amounts even if the interest rates are low.
Guess, you can figure out, which debts are accumulated due to bad lifestyle and habits. So, let’s get wiser and fix the habits then.

What changes in lifestyle and habits should you bring, so as to be debt free?

  • Keep a check on the unethical spending:

    When talking of spending, the only thing that comes to mind is, what’s a bad spend, and what’s a good spend.
    Everytime we purchase something, or make a transaction, we make at-least some level of brainstorming, so as to see, will this spend be anything worthful!
    But, there are some, who buy whatever their heart wants. Here is the biggest mistake.
    We need to understand, that every transaction done, should have some benefits or return, except only a mere materialistic pleasure.
    This is where, ethical spending habits come into play.
    Purchasing an insurance policy having costly premiums, is not equivalent to purchasing costly household accessories, installing smart lights or applications, getting custom room designs, or buying an XBox, or making in-game microtransactions!
    These are all money getting wasted. This is what we call unethical spending.
    Having no control over spending will lead you to money wasteland! Even, a weekly spending fix done at malls and complexes, is just another example.
    A master advice: Buy all you need, and only stare at what you want!

  • Learn the best way to use credit cards:

    You can actually merge point 1 with this one!
    Credit cards just entice you to do more unethical spending. It acts nothing less than an instigation.
    Whenever we log into our credit card accounts, we blow out with happiness by seeing at the available credit limit. Many just ignore looking at the ‘balance used’, so as to avoid sheer anxiety and feeling low.
    But, it is the only thing that matters. How much money you have used up. The available credit limit is nothing but a hoax. It can be increased and decreased anytime.
    The best way to use a credit card, is to never use it. Or use it only in times of dire emergency. Like landing on the hospital bed after a hit and run, with nothing but your cell phone and credit card in pocket!
    You getting the hang of it?!
    That’s it! You’re a GEM!!!

  • Eating healthy, doing exercise and drinking plenty of water will also keep away debts.

    Sounds fantastic.
    Doing exercise, having healthy eating habits, drinking enough water and staying away from addictions, are your keys to a debt free life.
    Don’t believe it? Consider medication costs, and hospital bills for a minute! What’s the price?
    The amount of money a person spends on a serious checkup and hospitalization, can get you a nice small secondary residence. No jokes at all!
    The cost of medicine in our country is considered to be the highest. People actually travel to other countries for medical checkups and treatment!
    And, believe it or not unpaid medical debt, is another big issue, that you really should avoid falling into!

  • Always work with a professional debt relief company, when having too much of debts in collections:

    Debt with creditor is something else. And, debts in collections are another tale!
    If such debts are bothering you, then you should take help of a debt relief company, to eradicate these debts.
    You can obviously dig your own way out, but it’s better if another person brings a shovel and starts digging with you.
    Now, that’s what summed up this post in a whole I guess.
    Practice these few things we have just discussed, and I bet, debts can’t touch you!
    Never!

How debt consolidation is the best option to revive your financial life

Whether you are standing on the edge of bankruptcy or just trying to fix your finances, you can’t ignore the importance of debt consolidation. But how can debt consolidation help you to get a second chance of reviving your financial life? Let’s check out.

Before knowing the advantages of debt consolidation, let’s have a look at the categories of debt that can be consolidated or can’t be consolidated through a debt consolidation service.
Debts can be categorized into two main parts which may affect your financial life. They are as follows:

1. Secured debt

The debt will be considered as ‘secured’ when you have added one of your assets as collateral. If you take out a loan to buy an asset and the bank has a legal claim on that asset until you pay off the loan, then it is also considered as a secured debt.

If you are having a problem in making your payments on a secured loan or mortgage, your options are limited. You can’t keep the assets without paying back the debts in full. It is because the lender has the authority to take over and sell your property if the debt is not paid.
The most appropriate examples of secured debt are mortgage and car loan.

2. Unsecured debt

Unsecured debt is such debt that isn’t attached with an asset, like a car or home. The most common examples of unsecured debts are credit card bills, medical loan, personal loans, utility bills, etc. Unsecured debts may become a headache if you fall behind on payments. Though your lenders or creditors don’t have any direct claim on your assets and cannot repossess or foreclose your home, yet they can file lawsuits against you to the federal court.
Unsecured debts can be managed through different debt-relief options such as debt management, debt consolidation, and debt settlement to help you clear your debts relatively faster and for less money (in debt settlement option).

Now let us talk about how debt consolidation can give you another chance to revive your financial life.

Debt consolidation allows you to combine several debts, such as credit cards, loans, and store cards. You may consolidate these debts by using various debt payoff strategies like debt snowball, debt avalanche, debt Tsunami, balance transfer (for credit cards only), debt consolidation loan (personal loan, loan from relatives, home equity loan), etc. It’s a very common and practical approach to make your repayments easier. You may also track your money and get a clearer view about how much you have paid till date.

However, debt consolidation is not always a suitable option in all situations. It is important for you to consider whether or not consolidating your debts will be beneficial for you. You must also decide which method is best for you, as in your situation, a balance transfer method might be good rather than opting for a debt consolidation loan.

Here are some key benefits in which a debt consolidation method will help you to tackle your unsecured debts and give you a second chance to revive your financial life.

1. Provides single payment option

If you’ve more than one credit card or personal loan, you’ll understand how much complex it is to track different repayment dates. With every new debt, the process will become more complex. As a result, the process of tracking and fulfilling repayment obligations become too difficult to sync with your income and expenses.

Consolidating your debts into one single payment will give you the privilege to reduce all your existing repayment schedules. This way you can cut off the total number of monthly payments into an easier, consistent, one payment. Depending on the consolidation option you choose, you can reschedule your payment date as per your comfort.

2. Gives you easy repayment tenure

Through the debt consolidation option, you can take out a single loan and pay off all your existing unsecured debts. If you have multiple credit cards and credit accounts with huge balances on each of them, by taking out a debt consolidation loan, you can pay off these debts all at a time. Different loans have different deadlines to pay off. When you’re refinancing all those loans and credit cards into one, you are actually removing all the payment deadlines, just keeping one for the new loan.

So, you can easily make one payment every month toward your loan. This will allow you to target only one debt and get it paid off as soon as possible. Most importantly, if you are struggling with your monthly debt payments, you may ask your lender to set up an easy repayment option (with lower monthly payment or a longer time limit). This way you can lower your monthly payment and simply put all of your extra money into this single debt account.

The overall interest might be much expensive than you think, but it’ll give you a breathing space to cope up with your monthly budget.

3. Reduces the cost of debts

The cost of debts mainly denotes the fees and the high-interest rate. Through a balance transfer method, you can get rid of high-interest credit debts along with fees. On the other hand, a debt consolidation loan may also help you to save thousands as its interest rates are quite lower than credit card debts. This process is beneficial if you have multiple credit cards and unsecured loans.

If you are thinking about consolidating your debts through the balance transfer method or by taking out a debt consolidation loan, consider the amount of fees you may have to pay for the existing debts. You must also check whether or not your existing loans are about to mature. If you are about to pay them off completely, there’s no point to go for consolidation. It would be much productive if you can just focus on being current on your payments.

4. Reduces stress caused by debt

Will debt consolidation help you to reduce stress? The answer is a big YES.

Debt is one of the biggest and notorious factors that may cause severe stress in our life. After falling into a debt trap, you might be continuously thinking about debt. Too much worrying about your huge debts can create stress and block normal function in other areas of your life.

By consolidating your multiple debts, you can literally reduce your stress and achieve mental peace. You use a debt consolidation loan to pay off your existing debts, and get a big relief from the mental stress. Being a stress-free individual you can focus on important aspects of your life and avoid worrying about your debt.

5. Cures other health conditions

You can avoid stress by consolidating your debts. But do you know that debt consolidation will help you to cure your other health issues too? I guess not.
By successfully enrolling in a debt consolidation program and getting out of your debts may have great physiological benefits. Stress is connected to various deadly health conditions such as heart disease, obesity, high blood pressure, diabetes, Alzheimer’s disease, depression, gastrointestinal problems, asthma, and many more. So, if you choose to consolidate debts through a debt consolidation program, it’ll reduce your stress and make you feel better mentally and physically.

6. Sets an end-date for your debt

One of the most amazing benefits of eliminating your debts with debt consolidation method (practically with an unsecured personal loan) is its fixed end-date. It is built into the unsecured loan which you are taking out, which denotes you have a fixed goal to achieve by paying down your new debt.
By taking out a debt consolidation loan, you’ll be able to compress all your old debts, their late fees (if any), and other associated charges into a monthly payment with a fixed end-date. It’ll be easier for you to understand exactly how much you owe and how much time you have to pay that loan off. If you want to take out an unsecured personal loan to consolidate your debts, you should consider a loan with a short tenure; it might come with higher repayments, but it’ll charge you less interest overall.

7. Stops unwanted collection calls

Another great benefit of taking out a debt consolidation loan to consolidate your debt is that you can avoid abusive, harassing debt collection calls, once and for all.

You might have faced this situation earlier. Once you are in debt, and you are behind on your monthly debt payments, the creditors might turn your account over to a debt collector. Then a debt collection agency will start making your life into a living hell. They’ll start making multiple collection calls every day. These calls can be abusive, insulting, and even threatening. People usually can’t handle this stressful and annoying situation and most of the time they surrender to the collection agency.

So, when you take out a debt consolidation loan and pay off all the outstanding debts, you are also stopping these collection calls.

8. Helps you with your credit score

Can debt consolidation help credit score to improve? Yes, surely. The easiest way to analyze this fact is to consider yourself continuing with your current financial situation against taking out a debt consolidation loan.
In this situation, where you have multiple debts to repay but you’re not able to make the required payments, your credit score might get a hit.
On the other hand, if you opt for the debt consolidation option by taking out a consolidation loan, you can make payments to all of your unsecured debts. So, the only debt showing unpaid on your credit report would be the new consolidation loan. If you make the payment on time regularly, the outstanding balance of the consolidation loan would be consistently reduced. You can make additional payments on the loan if you want to. This may help you to improve your credit score, as being regular on your debt payments gives you a good payment history which comprises 35% of your score.
Apart from that, once your debt is paid off and updated as “Paid in full” in your credit reports, it’ll leave a positive effect on your credit score too. Moreover, it’ll also boost your credit score by reducing your total credit utilization (makes up 30% of your total credit score).

9. Reduces overall interest rate

Another important benefit of using a debt consolidation loan to consolidate your debts is that you can save a significant amount of money on interest. Most people who are suffering from debt problems have several credit cards with higher interest rates. Usually credit card interest rates are much higher than the other loan interest rates. By getting a debt consolidation loan, you will be able to get a cheaper interest rate and can save a decent amount on your monthly payment as well as over the life of the loan.

Can debt consolidation help with payday loans? Of course. You won’t believe, payday loan lenders also charge too much interest on their short term loans, practically 400% to 500%. So, debt consolidation is a very good option to get rid of those high-interest payday loans too.

So, if you are thinking about choosing a debt consolidation option for paying off your debts, you must consider above mentioned key benefits to select the best method. But don’t take out further credit before you pay off your existing debts.

What are the 7 most important money lessons to teach your kids?

The last Friday my 5-year-old kid asked me to buy a toy Optimus Prime truck. I answered him “I don’t have any money right now, so how about buying it later this weekend”. My son smiled at me and said “Never mind, get the money from the bank and buy it.”  I was really surprised and also perplexed.

I truly realized that this is the best time when my kid needs to learn about money and where it comes from. It is my duty to teach my kids a few smart financial habits.

Parents also want to teach such lessons to their kids. But, they do not know how to start and from where. Here, I’ll inform you about the most important money lessons for your kids, and how you can help your kids to learn them.

Teaching money lessons to kids is not an easy job to do. You have to teach them with patience and logical explanation so that they can remember and adapt what they are being told. Now, let’s check out the lessons you should convey to your kids.

1. Money sources are limited

When kids watch the money coming out of the ATM machine, they actually don’t have the idea that money is a limited resource. They think whenever you go to an ATM machine, you’ll get as much money as you can desire. You have to work on this idea and explain to them that people have to work hard to make money. The ATM machine or bank can only give you the money that you keep in the bank account. So, you can’t have as much as you want; you can only get the money that is yours.

2. Budgeting is the key to success

Teach your kids about budgeting. The best way to do so is to give them some money and ask them to use it for their need. If they use all of the money to buy superhero figures and don’t separate enough money to spend on other things, you can point out the mistake they have done. Do not give them more money instantly. Ask your kids to do some work for you, and give them extra money as reward. Tell them to divide the given money into several categories, and then spend them to buy different things. This way they’ll learn budgeting and you can easily teach kids how to manage their money.

3. Keep patience while spending

Spending money is easy, but doing it wisely is quite tough. So, ask your kids to have patience when they have money. They should learn to have patience. They should wait for the right time when investing that money can get them a good return, as much as possible.

They should learn to control impulse buying habits. If they have money for shopping, ask them to create a budget before hitting the store. They should make a wish list about what to buy, where to buy, and when to buy. Sit down together with your kids and help them to make the wish list. Then help them rank the list by discussing what they really need right now. Set a price range for each item and compare prices between sellers from online and stores. Teach them the importance of using coupons, and help them to develop bargain skills. This way they’ll learn to plan before buying things and gradually save a lot from their fund.

4. Keep tracking your money

One of the most important money lessons for your kids is keeping track of their money. They should know where the money is going and how often you are spending in a month. As a parent, you surely have a clear idea about how much you spend each month for your kids (except food, clothing, and transportation cost), right? So, what you can do is to give that money to your kids and ask them to keep it. Now, whenever you need money for your kids, ask them to give you that amount hand-to-hand, and tell them to maintain a track with dates. They can use a computer or notebook to maintain the track of their money. In the end of the month, ask them to prepare a statement of their monthly expenses. You must also ask them to calculate the amount they have left in their fund. This way, gradually, they’ll learn to track their money. Within several months, this will become a habit and they’ll track each and every dollar they have to spend.

5. Investing is cool

Teach your kids about investing options that could give them some good return as interest, such as savings bonds and certificates of deposit. Compound interest is an amazing thing; so you should inform your kids about it as soon as possible. Find an online compound interest calculator and show them how it can be helpful to prepare for a bright financial future.

6. Sharing or giving is important

Once your kids start earning a little money on their own (return on their investment), don’t forget to teach them about sharing. Earning money is important, but using some of it  for a good cause is definitely a greater duty. Ask your kids to select a church, a charitable institution or a person who desperately need financial help. If your kids can willingly donate a portion of their allowances to some charity, make sure you encourage them to do so. Teach them about the importance of helping people, rather than just buying things. They must remember while giving money to the needful, every single penny counts.

7. Too much borrowing is bad

As soon as your kids turn 18, they might get chased by different credit offers. Personal loan offers, credit card offers, payday loan offers, and offers on student loans will be easily available to them when they will enter college. So, you should teach them to avoid these offers and avoid debts as much as possible.

This is one of the most important money lessons for your kids. If you still haven’t informed them about the harmful effects of debt, do it immediately. Especially, ask them to keep away from credit cards as much as possible. Using too much of credit cards can make them fall into debts. If they overspend too much and can’t pay off the due balances within due dates, they’ll become yet another credit card debt victim. As a result, their credit score may also get a big hit and they can’t recover from it easily.

As with so many things, what you do matters. Your kids may learn both good and bad things by following your footsteps. So, it’s your duty to do only good things in front of them. Follow some simple financial principals at home. Never lie about big money investments to your spouse. Always preach to your kids that money is not a thing that makes people happy. There are far more valuable things in your life like spending time with family, helping the poor, buying only things that you need – these are something that can make you happy.

What is an auto loan? Is it a good or bad debt?

What is an auto loan? In simple words, an auto loan or a car loan is a loan taken out to buy a vehicle. When you take out an auto loan, you are paying on the vehicle price plus the interest on the principal loan amount.

Check this article if you’re thinking should you get a car loan.

a. Can an auto loan be considered as good debt?

Let us find out why car loans can be considered good.

1. Ownership of automobiles can offer great financial gain

It is definitely a matter of great pride and happiness when you own a vehicle in which you can commute regularly to work. It expands your potential employment and earning capacity in the market. Not only that, but it can also help your family members in traveling to distant places.

2. Smart buying can reduce auto depreciation

If you buy a top-notch model, such as a luxury sedan or any luxurious model, the value of your automobile will depreciate much less than a new lower-end model. Be sensible in your action and thought by looking for solid deals instead of going for something shiny.

3. Good credit can get you a good rate

Make sure that you have strong credit that will help you fetch an auto loan with a lucrative interest rate, sometimes below 5%.

4. Ease of commutation in relatively smaller cities

As you may be aware that the commutation in certain parts of the country is difficult without your own vehicle. In such a situation, it is always better to take out an auto loan which comes at an affordable price and can give you an asset to use to work.

5. Personal satisfaction is granted

Owning a car is not just a matter of requirement but it is also about the passion you have for good automobiles. It gives you the thrill and the rush to go wherever you desire. Therefore, it is not wasteful spending. It enhances your prestige in society. What more? It makes commutation smooth and fascinating.

b. Are car loans bad?

There are several arguments which state that car loans can be hurtful to your financial cycle. Car loans can be bad, because:

1. Automobiles tend to depreciate quickly

When you think of borrowing money against an asset which can easily depreciate, you are simply wasting your hard-earned money. The asset, your vehicle, will lose its value as well as it’s quality over a period of time.

2. Automobile loans may have a high rate of interest

If your credit score is not good, then you may have to pay a higher rate of interest on the car loan. So, your monthly payment on the loan will also increase.

c. How to deal with an auto loan efficiently

Here is how you should manage an auto loan.

1. Manage your credit

Your credit is the decisive factor to ascertain whether or not you’ll be able to take out an auto loan at a suitable rate of interest. With a good credit score, you will be able to obtain the loan at a lower interest rate, which means overall you’ll have to pay less for the vehicle.

2. Check your credit reports and score

Always make it a habit of reviewing your credit report before you apply for auto loans or visit a dealer. As you can get a free credit report every year take advantage of that. Ensure that your credit report looks as good as it can. Review your reports and dispute errors if any, and get them rectified. Your lenders will base their lending decision on your credit report and score.

3. Figure out how much you can spend

It is not advisable to shop for cars before having a clear idea about how much you can spend. If you like a vehicle, first check out if it’s within your budget. If it’s not, don’t opt for that vehicle.  Some salesperson can befool you into believing that the car is affordable with fancy math and long-term loans. But, beware of such salespersons.

Conclusion

If you devote time in understanding the loan process, you would be better equipped to make healthy decisions about your auto loan. If required, you can talk to experienced people to decide which vehicle and which auto loan will suit you the best, that is, a vehicle that will require less maintenance and a loan that you’ll be able to manage efficiently.