Are your Credit Cards still manageable, Are these short term loans helping you?

CONSUMERS weren’t shy about spending this holiday season, as the latest consumer credit report reveals a nearly 10 percent increase in overall consumer debt. According to the Federal Reserve, consumer borrowing surged in November by $20.4 billion raising the consumer debt total to $2.48 trillion. Financial experts at Consolidated Credit advise consumers to reexamine spending habits.

With more consumers turning to credit for purchases, revolving debt showed an 8.5 percent increase. credit card debt accounts for almost all of revolving debt, which rose by $5.6 billion to $798.3 billion. This was the largest percentage jump since March 2008.

We might be feeling better about the economy, in reality inflation is growing higher. Now more than ever families need to work at saving and paying off any outstanding debts. We are spending too much and spending like crazy again! This is concerning as the bills begin to roll in, consumers may find themselves unable to pay them off.

The Consumer Financial Protection Bureau has ordered a review of rules on short-term loans. Three customers say companies lured them into a trap of quick cash and affordable payment terms.

These Quick Cash or Payday loan companies focus on the needy, often operating out of strip malls or corner stores. Interest can be 300%, plus fees. Borrowers often hand over post-dated checks which are cashed if they do not repay on time.

Unless you have assets or a property to turn your equity to cash to pay off these debts, you will end up rolling that debt over and incur higher fees.

Short Term loan are easy to get but hard to pay back, usually when you are desperately in need and not thinking right, these loan sharking method of lending is the fastest way to get money. Unless you completely thought out how you will be paying the debt off or knowingly have money coming into to pay it off, you will end up owing much more after said and done.

An alternative if you can afford to wait for a few years before your credit gets back to par is the option of debt consolidation. You have to be careful because there are a lot of debt consolidators that are fly-by-night companies. Look for one that has a good standing and has been in the business for a long time. Fully understand the process and fees involved before jumping into it. Fees are high but could be worth it if you have a high debt, remember your credit might be ruined while you are on a payment plan. Mostly importantly if you start it, finish the process.

Better yet, if you own a property and has ample equity, use it to pay off your debts, refinance now while rates are so cheap.

Seniors Financial Advisor thinks that one explanation for Americans’ willingness to take on more debt could be the relative improvement of the economy over the past year, when the workforce added 2.2 million jobs over the course of the year. For consumers with extra money in their wallets, taking on more debt in anticipation of a bonus or a raise may not seem so risky. But that could be a big mistake.

We’ve already forgotten 2008 and 2009, and now we’re projecting into the indefinite future and we’re spending based on as if it had already happened. Our default setting is optimistic, and maybe overly optimistic.

If consumers aren’t on steady financial ground, it could put Americans at greater risk if the economy doesn’t improve at a fast enough rate. And it doesn’t help that Americans are not very good savers. Americans have made some progress on debt repayment… but (savings) continues to be the Achilles heel of financial security. And it was never a strong point to begin with.

I feel that if we are all wondering what will be the cause of another financial recession, political turmoil? I think it might be related to consumer debts, credit card loans, student loans etc. We can’t live paycheck to paycheck just clearing our minimum payments on our debts, sooner than later it will catch up with us and we won’t be able to pay it.

Thanks for your inquiries and comments, please call Ken Go of 1st Innovative Financial at 562-508- 7048 or write to BRE01021223 NMLS238636.