Cheap Living Tips

Running behind your auto loan can bring on major hassles in a variety of venues. As most of us rely on our vehicle to get us to work which makes it necessary to make sure you have enough money set aside to make the payments and if your budget shows that this is placing too much of a strain on your finances then it may be time to look for a less costly vehicle.

A lender is well within their legal rights if they take possession of your vehicle when you have missed payments and they do not need to get a judgement before doing this. When this happens the repossession will be noted on your credit records and will remain there for the next seven and a half years so this is one area of your spending where you will need to make the appropriate decisions in advance of anything happening.

Finance companies auction off your car after taking possession of it in order to get back part of what is owed.

However, they often can’t recover the full balance. If the vehicle is sold for less than the amount still owing on it, plus the costs involved in repossession and selling the vehicle, then you will be liable to repay that deficit to the finance company.

In the end you not only lose you means of transportation but get added debts piled upon you.

If you are struggling to make the payments it is better to contact the finance company in advance of any action to see whether you can refinance the vehicle over a longer period where the repayments will be a little less and more manageable. They might also give you the opportunity to pay off any outstanding debt by coming to a suitable arrangement. This could give you enough time to sell the vehicle paying off the loan and finding something that is more suitable for your current financial position.

Photo supplied by zixyer’s photostream

In previous articles we have discussed that one of the primary goals in striving for a frugal life style is to get debt free.  This can present a real challenge in our current economic system as it is often impossible to accomplish many of our day to day activities using cash.  Purchasing items online or over the phone, paying our utility bills by phone, or sending money to family members in need can often only be accomplished with the use of a credit card or at the very least a bank account number.

So what is a person to do if they can’t afford to keep a minimum balance in a check account to avoid fees or can’t seem to keep from over drafting their account when they have a checking account and run the risk of burying themselves in overdraft fees?

Some folks are opting to purchase prepaid cards.  In fact, some states and employers are issuing these prepaid cards in lieu of checks to recipients or employees who do not have a bank account in which to receive a direct deposit.

Others, who either have chosen to avoid credit cards entirely or are unable to get a credit card are turning to the prepaid credit cards as a solution.  However, this choice should be made with care for there our pitfalls associated with many of these prepaid card offers.

Do Your Homework

All prepaid cards are not created equal and many have activation fees and monthly charges associated with them that will end up costing you plenty.

Read the fine print before you purchase a card and know exactly what it will cost you.  You are likely to get a lower cost card from a bank but Walmart has lowered their fees recently to be more competitive.

In a recent study on prepaid credit cards, Consumer Reports found that the costs associated with these cards can vary widely.  In his video (below) Stacy Johnson of Money Talks News, recaps this report and notes the following differences:

• Of the 18 cards reviewed 17 of the 18 had activation fees ranging anywhere from $3 to $99.
• 15 of the 18 had monthly fees of $3 to $10
• All 18 charge a fee to get money via an ATM, $1.50 – $2.50 per use
• 17 of the 18 charge $.50-$1.00 to run a balance inquiry and this includes calling customer service for the info

Prepaid Credit Cards Are Not Always an Effective Means of Rebuilding Credit Standing

Although prepaid cards are readily available to anyone who has the cash to deposit on them, there is a misconception that using just any card will help you rebuild your credit rating.  Johnson notes that most of the companies who issue these cards to not report their transactions any credit reporting agencies and those that do, do not report to the top three, Experian, EquiFax and TranUnion.  If your transactions are not being recorded with these companies they will not do anything for your credit standing.

If you are looking to use a prepaid card to rebuild your credit standing, talk directly to a credit union or bank and ask about getting a prepaid card specifically for this purpose.  Some agencies will let you start out with a prepaid card and transfer to a regular credit card automatically after you have established a regular deposit and use history.

If your purpose for purchasing a prepaid card to use for added security when making online purchases, shop around and read the fine print.  Don’t go into any transaction blind.  Know what your costs are going to be upfront.  If you choose wisely, a prepaid credit card may be a good choice for your needs.

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