These are products which can seriously damage your financial wealth. In some cases, the products can be OK if used carefully. But, often the principle seems to be merely taking advantage of the unwary consumer. Some of these products are blatantly bad value; but, others have their charges cleverly hidden.
1. Credit Cards if paying interest
If you pay your balance off every month, credit cards can be beneficial and helpful. However, if you start accumulating debt, the interest payments can become a real burden making it difficult to ever pay off the original debt. The interest burden is magnified because you will start paying interest on the interest charges. Many credit cards make it easy to only pay a small monthly payment. But, in paying only a minimum the debt burden can easily escalate.
2. Pay Day Loans
Who would want to take a loan with an annual interest payment of 2,317%? Pay Day Loans work by making short term loans of a few days, at a certain fixed cost. However, this often disguises the fact that it is basically a loan with an excessively high interest rate. If you make a habit of paying interest rates of over %2,000 it only increases the likelihood that you will need more loans in the future. A pay day loan may be better than defaulting on another loan repayment, or borrowing from a loan shark. But, they should be seen as a last resort with the cost fully appreciated by the potential borrower.
3. Loan payment Insurance
In the UK and US, investigations found that banks have been guilty of misselling insurance for loans (PPI). Basically, you pay a monthly premium to protect your loan repayments in case of illness. Often this kind of insurance works out very expensive; the insurance can cost up to 50% of the loan. (It makes the interest rate on the loan look extortionate) Furthermore it was revealed that banks kept up to 80% of the money paid in. Many people who took out the extra insurance were also not aware that the loan does not require insurance to be taken out; many borrowers were under the impression that the insurance was essential for the loan.
4. The Balloon Mortgage
Never has one financial product done so much to undermine an economy. A balloon mortgage is a term to describe a mortgage product with an attractive 1 year interest rate, which then shoots up to a much higher interest rate after the first year. ead all the small print and if you have a relative that is not financially illiterate offer to help advise before they commit to products like this.
5. Renting Electric Goods rather than buying
It may be tempting to rent a widescreen TV at a monthly price you can afford. But, within a few months the cost will be similar to buying it outright. However, with renting you are left with nothing – only the prospect of never ending monthly payments. If you can be patient and save the money for a few months, you will give yourself a chance to buy it outright. If you are desperate to have a widescreen TV, it would make more sense to buy it on a standard loan than rent. However, it is better to try and save to avoid paying any interest.
Find out More At: MortgageGuideUK
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Tags: Credit Card, financial, Insurance, loan, Mortgage, Pay Day Loan, Product
May 21st, 2009 at 9:27 pm
Reputable payday lenders want customers to use payday advances wisely. The service’s goal is to be a solution for those who need low-dollar, short-term credit. A payday loan may not be the best choice in every situation.
Also, compare the fees of consumers’ short-term credit options: $100 payday advance = $15 fee; overdraft protection = $29; late fee on a credit card bill = $37; $100 off-shore internet payday loan = $25 fee; bounced check and NSF/Merchant fee = $55. (Source: http://www.cfsa.net/cost_comparison.html)
June 2nd, 2009 at 5:51 pm
da best. Keep it going! Thank you