APR? HECM? KNOW YOUR FINANCING

March 15th, 2012

Perhaps no segment of our economy is more confusing to the normal, everyday consumer than  financial services.  Whether it’s the lingo, such as APR, HECM, LTV, etc., the laws, or the tricky fine print, many of us don’t have a clear understanding of what we’re getting into when applying for credit or loans, which makes us prey to unscrupulous lenders and misleading advertising

“Get a loan – regardless of bad credit history!”

“Need a credit card – no income, no problem!”

The ads – whether in the form of pre-approved credit offers, e-mail solicitations, classifieds listings (such as those found on Craigslist or in the local Thrifty Nickel publication), late-night TV commercials, or daytime radio spots – are enticing, especially if you’re cash-strapped and struggling to pay bills.  Though many lenders are legitimate, keep in mind that there are also many shady operations in the financial services area and you can’t always depend on the promises made in the ads.

How to Protect Yourself

  • Read the fine print.  It may disclose onerous conditions on your loan, such as hundreds of dollars of additional fees that will be deducted from your bank account before your credit card or loan is approved.
  • Shop around and compare APRs (not just the interest rate) to ensure you get the best deal.  The lower the APR, the better.  There are user-friendly resources on the web, such as bankrate.com, that will allow you to compare financial services companies and their offerings.
  • Remember that wiring money is the same as spending cash – once it’s out the door, it’s gone.  If a financial service company you contact asks you to pay or wire money, especially to an individual, is a huge red flag that you are dealing with a scammer.  One of the most common fraudulent schemes involves having to pay an upfront “fee” or “security deposit” to get a loan or a credit card.  However, once you wire the money, you never hear from them again.
  • Do a background check on any lender you’re dealing with – especially an unsolicited telemarketer.  See if they are registered to do business in your state, and find out if there have been any complaints filed by consumers by contacting your state’s financial or banking regulators or the state’s Attorney General’s office.
  • Remember: Any company doing business by phone cannot, by law, ask for an upfront fee before giving you access to a loan or credit card.
  • Don’t give your Social Security number, credit card number, or other personal identification information over the phone or through the Internet to a company you don’t know.  Find out why they need it and how they will be using it or risk being a victim of identity theft.

Read more about Credit & Loans so that you can protect yourself and your credit history from permanent damage.

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Annual percentage rate; the amount of interest charged to a credit card, loan or mortgage account balances annually.

Loan To Value ratio. What mortgage lenders use to determine how risky a borrower is. The higher the number, the riskier the loan, and the higher the interest will be on that loan.

A magical piece of plastic made by banks that is sent to your home (normally accompanied with countless pages of fine print disclosures) that allows you to buy virtually anything

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