Tag: debt consolidation

Don’t Get Caught in a Debt Collection Scam

by Advantage One, posted in Budgeting, Convenience, Credit, Lifestyle, Loans, Saving, Tips & Best Practices, Uncategorized

No one likes to be in debt. It’s a downward spiral that never seems to end, and it’s an expensive burden to carry, too. Unfortunately, scammers often exploit the feelings of helplessness and overwhelm to lure victims into their debt-collection scams. Let’s take a look at these scams and how to keep yourself from falling victim. 

How the scams play out

In a debt-collection scam, a scammer posing as a debt collector will call a victim and demand payment for an outstanding debt. The caller insists on a specific means of payment, usually a wire transfer or prepaid debit card. The scammer will sometimes threaten to tell the victims’ family members about the debt if it’s not paid up immediately. The alleged debt may be completely fabricated, or an actual debt the victim has that the scammer has learned about through social engineering or by hacking the victim’s private accounts. In either scenario, though, the caller is not a debt collector and represents only themselves. Of course, any money the scammer collects will go directly into their own pocket. 

Red flags

Here’s how to recognize a debt-collection scam:

  • The alleged debt collector demands immediate payment. A legitimate debt collector will always provide you with the option to dispute the debt and discuss payment arrangements. 
  • The caller insists on a specific means of payment. Scammers love having their victims cough up money through a payment method that cannot be undone, such as wire transfer or prepaid cards. 
  • The “debt collector” knows very few details about the debt. A genuine debt collector will have all the information on the debt and be able to answer any questions you may have. 
  • There is no contact information for the debt collection agency the caller allegedly represents. Ask for a phone number and street address for the agency. If none are forthcoming, it’s likely a scam. 

Protect yourself

Debt-collection scams can be difficult to spot, but with the right knowledge, you can protect yourself. Follow these tips to stay safe.

  • When called by an alleged debt collector, verify the debt. Request written validation of the debt, including detailed information about the creditor, the amount owed and the nature of the debt. Legitimate debt collectors should be able to provide this information.
  • Never share personal information with an unverified contact. If you’re asked to provide sensitive information by an unknown contact, it’s likely a scam.
  • Check for licensing and credentials. Debt collectors are often required to be licensed in the state where they operate. Research the collector’s credentials and licensing status through your state’s attorney general’s office or consumer protection agency.
  • Know your rights.  Familiarize yourself with your rights under the Fair Debt Collection Practices Act (FDCPA) and other relevant consumer protection laws. These laws outline the rules that legitimate debt collectors must follow when attempting to collect a debt. For example, they can only contact borrowers at reasonable hours, they cannot call them at their workplace, harass them about a debt using threats or violence, lie about money owed or falsify the name of the agency they represent, among other restrictions. 
  • Keep detailed records. Maintain thorough records of any communication you have with debt collectors, including dates, times, names and contact details. If you suspect a scam, these records can serve as evidence if you need to report the incident.
  • Request written communication. Ask the debt collector to communicate with you exclusively in writing. Legitimate collectors should be willing to provide written documentation of the debt and any payment arrangements.
  • Stay informed. It’s a good idea to check your credit report on a regular basis for any unfamiliar or fraudulent accounts. Monitoring your credit can help you quickly identify any unauthorized activities related to debt collection. It’s also advisable to keep up with the latest scams so you are better equipped to identify and avoid them. 

Debt collection scams can make the nightmare of debt even worse. Use the tips here to stay safe!

6 Steps to Crushing Debt

by Advantage One, posted in Budgeting, Credit, Debit, Lifestyle, Loans, Saving, Tips & Best Practices, Uncategorized

You and debt are so over. You’ve just about had it with those endless piles of credit card bills and those hideous numbers that never seem to get any lower. It’s time to kiss that debt goodbye!

Getting rid of high debt will take hard work, willpower and the determination to see it through until the end, but it is doable. Here, we’ve outlined six steps to help you start crushing debt today. 

Step 1: Choose your debt-crushing method

There are two approaches toward getting rid of debt: 

  • The snowball method, popularized by financial guru Dave Ramsey, involves paying off your debt with the smallest balance first and then moving to the next-smallest, until all debts have been paid off. 
  • The avalanche method involves getting rid of the debt that has the highest interest rate first and then moving on to the debt with the second-highest rate until all debts have been paid off. 

Each method has its advantages, with the snowball method placing a heavier emphasis on achieving results at a faster pace, which then motivates the debt-crusher to keep going, and the avalanche method, focusing more on actual numbers and generally saving the borrower money in overall interest paid on their debts. There’s no right approach, and you can choose whichever method appeals to you more.

Step 2: Maximize your payments

Credit card companies are out to make money, and they do this by making it easy to pay just the minimum payment each month, thus really paying only the interest without making progress on the actual principal, thereby trapping millions of consumers in a cycle of endless debt. Beat them at their game by maximizing your monthly payments. Free up some cash each month by trimming your spending in one budget category or consider freelancing for hire and channel those freed-up or newly earned funds toward the first debt on the list you created in Step 1. Don’t forget to continue making minimum payments toward your other debts each month!

Step 3: Consider a debt consolidation loan

If you’re bogged down by several high-interest debts and you find it difficult to manage them all, you may want to consider consolidating your debts into one low-interest loan. A personal loan from Advantage One Credit Union can provide you with the funds you need to pay off your credit card bills and leave you with a single, low-interest payment to make each month. Or, you can transfer your credit card balances to a single card with a low-interest or no-interest introductory period. Be aware, though, that you will likely get hit with high interest rates when the introductory period ends. 

Step 4: Build an emergency fund

As you work toward pulling yourself out of debt, it’s important to take preventative measures to ensure it won’t happen again. One of the best ways you can do this is by building an emergency fund. Ideally, this should hold enough funds to cover your living expenses for three to six months. Start small, squirrelling away whatever you can in a special savings account each month, and adding the occasional windfall, like a work bonus or tax return, to beef up your fund. 

Step 5: Reframe your money mindset

Sometimes, like when there’s a medical emergency or another unexpected and expensive life event, a consumer can get caught under a mountain of debt through no fault of their own. More often, though, there is a wrongful money mindset at play  leading the consumer directly into the debt trap. 

As you work on paying off your debts, take some time to determine what got you into this mess in the first place. Are you consistently spending above your means? Is there a way you can boost your salary or significantly cut down on expenses? Lifestyle changes won’t be easy, but living debt-free makes it all worthwhile. 

Step 6: Put away the plastic

Credit cards are an important component of financial health and the gateway to large, low-interest loans. However, when you’re working to free yourself from debt, it’s best to keep your cards out of sight and out of mind. You can set up a fixed monthly bill to charge one or more of your cards to keep them active, but only do this if you know you will pay off the charge in full before it’s due. Learning to pay your way using only cash and debit cards will also force you to be a more mindful spender. 

Kicking a pile of debt can take months, or even years, but there’s no life like a debt-free life. Best of luck on your journey toward financial freedom!

Your Turn: Have you kicked a significant amount of debt? Tell us how you did it in the comments. 

5 Ways to Trim Your Fixed Expenses

by Advantage One, posted in Budgeting

Monthly expense sheet with glasses and claculator on deskWhen trying to trim a monthly budget, most people don’t consider their fixed expenses. These recurring costs, which include mortgage payments, insurance premiums and subscription payments, are easy to budget and plan for since they generally remain constant throughout the year. While people tend to think there’s no way to lower fixed expenses, with a bit of effort and research, most of these costs can be reduced.

Here are five ways to trim your fixed expenses.

1. Consider a refinance
Mortgage payments take the biggest bite out of most monthly budgets. Fortunately, you can lower those payments by refinancing your mortgage to a lower interest rate. The refinance will cost you, but you can roll the closing costs and other fees into your refinance loan. Plus, the money you save each month should more than offset these costs. A refinance is an especially smart move to make in a falling-rates environment or if your credit has improved a lot since you originally opened your mortgage.

2. Lower your property taxes
Taxes may be inevitable, but they aren’t set in stone. You may be able to lower your property taxes by challenging your town’s assessment of your home. Each town will have its own guidelines to follow for this process, but ultimately you will agree to have your home reappraised in hopes of proving its value is less than the town’s assessment. This move can drastically lower your property tax bill; however, if you have made improvements to your home, it may be appraised at a higher value, which could raise your taxes.

3. Change your auto insurance policy
The Geico gecko and Progressive’s Flo, who love disrupting your favorite TV shows, actually have a point: You may be overpaying for your auto insurance policy.

If you’ve had the same policy for several years, speak to a company representative about lowering your monthly premiums. By highlighting your loyalty and having an excellent driving record, you may be able to get a lower quote. You can also consider increasing your deductible to net a lower monthly premium.

If your insurance company is not willing to work with you, it might be time to shop around for a provider that will. A few minutes on the phone can provide you with a significant monthly savings for a similar level of coverage. Once you have a lower quote in hand, you can choose to go back to your original provider and tell them you’re seriously considering a switch; they may change their mind about their previous lowest offer.

4. Consolidate your debts
If you’re carrying a number of outstanding debts, your minimum monthly payments can be a serious drain on your budget. Plus, thanks to the high interest rates you’re likely saddled with, you might be feeling like that debt is going nowhere.

Lucky for you, there is a way out. If you have multiple credit cards open, each with an outstanding balance, you might want to consider a balance transfer. This entails opening a new, no-interest credit card, and transferring all of your debts to this account. The no-interest period generally lasts up to 18 months. Going forward, you will only have one debt payment to make each month. Plus, the no-interest feature means you can make a serious dent in paying down that debt without half of your payment going toward interest.

Another way to consolidate debt is to take out a personal loan at Advantage One Credit Union. Our personal loans will allow you to pay off all of your credit card debt at once. You’ll only need to make a single, affordable monthly payment until your loan is paid off.

5. Cut out subscriptions you don’t need
Another fixed expense most people mindlessly pay each month are subscriptions. Take some time to review your monthly subscriptions and weed out those you don’t really need. Below, we’ve listed some of the most commonly underused monthly payments:

  • Gym membership
    Are you really getting your money’s worth out of your gym membership? It may be cheaper to just pay for the classes you attend instead of a full membership. Or, if you have a favorite workout machine at the gym, consider purchasing it to use at home for a one-time cost that lets you to drop your gym membership.
  • Cable
    Why are you still paying for cable when you can stream your shows for less through services like Netflix and Hulu? If you don’t want to cut out cable entirely, consider downgrading to a cheaper plan that drops some of the premium channels you don’t watch much.
  • Apps
    How many apps are you signed up for? You may not even remember signing up for an upgraded version of an app you rarely use. A quick perusal of your monthly checking account statement or credit card bill can help you determine how much these subscriptions are costing you. Drop the apps you’re not using for more wiggle room in your monthly budget.

Your fixed monthly expenses are actually not as “fixed” as you may have thought. By taking a careful look at some of these costs, you can free up more of your monthly income for the things that really matter.

Your Turn:
How have you lowered your fixed monthly expenses? Share your best tips with us in the comments.

Learn More:
debtroundup.com
experian.com
thesimpledollar.com