Being a Responsible Home Owner

1
Being a Responsible Home Owner Financial
Difficulties and High-Risk Loan Products
2
Objectives

• Determine How to Manage Financial Difficulties
• Identify High-Risk/High-Interest Loan Products

3
Managing Financial Difficulties

• Temporary Crisis
• Unexpected car repair
• Medical bill
• Long Term Crisis
• Loss of a job
• Loss of a spouse

4
Managing Financial Difficulties

• It is NOT recommended that the homeowner apply
  for other sources of debt to pay off current
  debt.
• Consider contacting a reputable consumer credit
  counseling agency and/or local housing nonprofit
  organization.

5
Managing Financial Difficulties

• Establish an emergency budget
• Pay bills secured by collateral and those that
  will lead to immediate action first
• House payment
• Car payment
• Utilities

6
Managing Financial Difficulties

• Household Necessities
• Housing Expenses
• Utilities
• Car Loans
• It is important you pay the bills that are most
  important to you NOT necessarily the loudest or
  most aggressive bill collectors.

7
Higher-Risk/Higher-Interest Loan Products

• If you are overextended financially, you may pay
  more for a loan.
• Borrowing from one source to pay off another
  source can be risky.
• Consolidating loans may look appealing, but can
  cause a major financial crisis.

8
Higher-Risk/Higher-Interest Loan Products

• Marketed to people in financial difficulty
• Offered at much higher cost
• Will loan to people who do not qualify
• Place customers at serious financial risk

9
Higher-Risk/Higher-Interest Loan Products

• Tax Refund Anticipation Loans
• Short-term cash advances against a customer's
  anticipated income tax refund.
• Offered at high interest rates
• From 40 - 700 APR
• Speed up the refund process by as little as one
  week

10
Higher-Risk/Higher-Interest Loan Products

• Overdraft Loans
• In exchange for covering account overdrafts up
  to a set dollar limit, banks charge bounced-check
  fees ranging from 20 to 35 for each
  transaction. You also can use your debit card to
  borrow against your limit.
• Offered at high interest rates
• Up to 1,000 interest.

11
Higher-Risk/Higher-Interest Loan Products

• Rent-to-Own
• These businesses charge a weekly or monthly rent
  for a stated period, after which the property is
  owned by the consumer.
• Do not have to report how much interest is
  charged.
• Typical Rent-to-Own Contract
• 2,400 over two years to purchase
• a 500 television

12
Higher-Risk/Higher-Interest Loan Products

• Credit Cards
• The credit card industry has identified its
  ideal customers as those who no longer pay off
  their balances, but instead grow increasingly
  indebted to their creditors by making low minimum
  monthly payments.
• Limit the number of credit cards you have.
• Set your own credit limit.
• Pay the bill in full each month.
• Read the fine print.

13
Higher-Risk/Higher-Interest Loan Products

• Payday Lending
• The practice of using a post-dated check or
  electronic checking account information as
  collateral for a short-term loan
• Designed to keep borrower in debt
• Consider starting a savings account and adding to
  it on a regular basis

14
Higher-Risk/Higher-Interest Loan Products

• Title Loans
• The consumers automobile is used as security
  for the loan.
• Usually 25 of the book value
• Very high APR rates
• 1,000 for 14 days
• 1,250 payback
• 659.71 APR

15
Higher-Risk/Higher-Interest Loan Products

• Finance Companies
• Institutions that make personal loans and, in
  some cases, real estate loans.
• Offer same loan products as local banks or credit
  unions with different interest rates and
  insurance options
• Less strict guidelines

16
Summary

• Determined How to Manage Financial Difficulties
• Identified High-Risk/High-Interest Loan Products