In the early years of the Milennium the economy was so buoyant. Few people worried about their spending because if they owned real estate it was rising in value year on year. Others saw that credit card companies were presenting them with ever increasing credit limits if they were approaching the current one. 0% balance transfers were widespread so no one was too concerned if they were overspending. Complacency abounded both in the financial sector and society as a whole.
Those days are long gone; they were brought to an abrupt end when the Collateralized Debt Obligation (CDO) Crisis caused such problems on Wall Street and ultimately worldwide. The years of recession saw widespread misery, austerity amongst ordinary people who had had few financial problems previously. Things would never be the same again and as the recession ended many households had a serious repair job to do. They often had debt and no obvious way to get out of it. Their friendly local bank was rarely friendly any more.
The lucky ones were those that had either retained their jobs, and hence regular monthly income, and later those who found jobs once again and could therefore look at how best to improve their financial circumstances.
The repair job can take time. The first prerequisite is income but that is just the beginning. That income needs to meet all regular bills as well as any other financial commitments that might be employed to successfully achieve the improvements. One obvious thing is to cut out waste which comes in many forms; unnecessary spending, uncompetitive utility supplies and paying too much interest unnecessarily when there are better products in today’s market.
Cutting out waste does not equate to austerity. It does not make sense to pay too much for utilities and insurance if there are better deals on offer. Equally it does not make sense to be paying a high rate of interest on credit card balances each month when there are consolidation loans at a much more competitive rate even for those people with a poor credit score due to previous defaults that then appear on their credit history. Debt does involve expense but it should be as low as possible.
The Dangers of Credit Cards
Credit card companies are going for growth once more but cards really should only be used for convenience. If someone cannot really afford to buy a product and cannot pay the full amount back at the end of the month they should forget the purchase until they can afford it. The danger is that taking out a consolidation loan to pay off balances in full results in a line of credit becoming available once again. The last thing anyone should do is to spend once more and build up another balance after taking on term realistic quick loans to get rid of the last one.
Anyone who thinks that it is too good to be true that there are lenders with a sympathetic ear to those in financial difficulty especially after the years of turmoil should pause for a moment and do their own research. The Internet has become the most powerful marketing tool at the disposal of business and that includes those in the financial sector. Lenders operating exclusively online have all seemed to adopt the principle of affordability. If an applicant is realistic and the information he or she can provide can back up that principle of affordability then in almost every case an applicant will get approval, and the funds will be released almost immediately.
While those with a poor credit score may pay a little higher interest rate than the norm, that rate will be far, far cheaper than anything a credit card company will offer.
The financial environment is clearly different than it was a decade ago. It requires people to have more self-discipline and many have learnt that by necessity; the experiences they have suffered between then and now. The lesson will do no one any harm for the future because everyone should be aiming to stabilize their finances, create an emergency fund and provide properly for retirement. Online lenders are an important piece in the jigsaw.
This was a guest post.