Credit and Cost of Living.

You know that where you live matters when it comes to your disposable income. Cost of living makes a big difference in your budget. But can it also impact your credit? You might be surprised at how your cost of living might also matter when it comes to your credit. When you have a high cost of living, your income might not keep up with your expenses, and for many people that means debt. If your debt becomes unmanageable, that can, in turn, affect your credit.
                      

Borrowing to make ends meet

Do you live an area that requires you to borrow to make ends meet? If you are borrowing to make ends meet, that can eventually affect your credit. It’s going to depend on the cost structure of things, in terms of where you live, and your wants and desires.

If you live in a high rent district, it’s going to be far more difficult to buy a home or keep up with the expenses, if you’re on a fixed income. It’s easy to spend a large portion of your income just on day-to-day living expenses like housing costs, utilities, and transportation. 

In some cases, regular living expenses can be high enough that borrowing is part of how consumers make ends meet. You might think that you are just borrowing a little bit for now, but the reality is that if you can’t make ends meet this month, it’s going to be even harder next month when you have a debt payment as well as your regular expenses. Pretty soon, you find that you are just paying the minimum payments on your credit cards since it’s more affordable than paying off the balance — or even half the balance.

Over time, your balances rise. This impacts the credit utilization portion of your credit score, bringing your score lower. At some point, though, your balances and your minimum payments will reach a point at which you can no longer make the payments with ease, and you might start paying late, or even missing payments altogether. Since payment history is the biggest factor in determining your credit score, once you get to the point where you can no longer afford your debt payments on top of your living expenses, the damage to your score can be surprisingly swift.

Living in an area with a high cost of living means that you might have to compromise, looking for ways to reduce your expenses so that you don’t exceed your income. If you live where things are cheap, you may not have to compromise. Where you live changes the way you approach your finances. Your situation changes, either how you compromise on your wants and desires or your credit score. You choose how it’s going to go.

Applying for credit

The process of applying for credit is the same, no matter where you live. However, the cost of living in your area can impact the type of loans you qualify for, and the rates you receive. If your income doesn’t quite provide you with enough leeway when it comes to your cost of living, some lenders might disqualify you based on your income. You might be forced to apply for credit at lenders willing to take on more risk, but you will need to pay a higher interest rate. 

Additionally, if you have been borrowing to make ends meet, and you’ve already racked up debts that are impacting your credit score, it can make it harder to get approved. Where you live cannot so much change the way you apply for credit, but your need for it may vary if costs are higher.

In areas with a high cost of living, you might also have to limit what types of loans you choose to take on. High-cost areas tend to have very expensive homes. Buying might not make sense in these areas due to prohibitive costs. If you can’t truly afford to make home payments, risking your future credit to a foreclosure might not make sense. 

You might also decide to avoid buying a car in an area with a high cost of living. Several consumers living in major metropolitan areas that don’t bother with cars. Car loans are expensive, and cars come with maintenance and repair costs, as well as insurance costs. Taking public transportation costs less than owning a car in many major cities with high living costs. 

Choices you make about what types of credit you apply for can help you avoid getting in over your head with debt and ruining your credit in the long-term.

Manage your cost of living for the benefit of your credit 

Even if you live in an expensive place, you can find less expensive options or alternatives within that place. Some of the suggestions for reducing your cost of living in an expensive area include:

• Buy a certified used car rather than a new car
• Buy items off-season
• Use coupons
• Shop sales
• Buy used and at thrift shops
• Share living quarters when applicable

Managing your cost of living can help you avoid the need for debt to finance your lifestyle. If you can’t or won’t move to an area with a lower cost of living, you’ll have to make adjustments to your spending to avoid getting into a situation where your cost of living destroys your good credit. Generally speaking, do not finance things for daily living. You must plan ahead and be a smart consumer.

Source: Secondary

Credit card cautions. Must read!

Credit cards have become a lifeline for everyone in modern times. However, this much-sought after boon can be a real bane to your finances if not used with care. Are you facing problems while managing your credit card balances? If so, don’t regret over it – you’re in the same boat as other consumers. Use these simple tips to stop adding to your existing credit card debt and start regaining control of your finances.

Don’t keep more than 1 or at the most 2 credit cards

The more credit cards you have, the more you may be tempted to spend and the more difficult it will become to keep a track of how much you have spent and when the repayments are due. Do remember that credit cards are the most expensive types of loans available in the market, and whether you miss your payment deadlines due to an oversight or because you have inadequate funds, you will have to pay heavily. So, while credit cards are extremely handy pieces of plastic, ideally, they should be used as a temporary substitute for carrying cash, And, if that is the only motive you have when you carry a credit card, you will find that having one or at most two is quite sufficient.

Beware of reward points
The rewards you can earn from credit cards, while a nice perk, are worth far less than the extra interest you’ll accrue if you can’t pay off the money you spend to earn such bonuses. Spending on your card just to gather reward points may not be very healthy. You will soon realise that even though you have high reward points on your card, you will have to pay hefty bills, sometimes even on useless items made unnecessarily.

Don’t use credit card for everyday expenses
Besides inadequate circumstances, you should have your budget under control enough that you can at least pay for your monthly necessities with your monthly income. By keeping required purchases like groceries and utility bills off of your credit card, you\’ll be taking a major step in the right direction to getting your spending under control. Always draw up your budget for such purchases and use your credit cards within this limit.

Pay more than the minimum balance

It’s convenient to pay off the minimum monthly payment when you are under financial duress. Try to avoid it as not only will you never pay off your bill, but the interest rates that credit card companies charge will actually keep your bill growing every month. Instead, send as large of a payment as you can afford to. Where possible, reduce your spending in other areas to focus on paying off your credit card debt.

Avoid cash advances.

To meet urgent needs, drawing money from an ATM through your credit card is an easy way to combat cash shortage; but have you realised the impact it will cause on your finances? Not only is the interest rate charged on the advanced amount, but this also gets charged from day one itself.
Visit www.cibilconsultants.com

Source-secondary

Down payment for buying an affordable house

The major step in a person’s life is to buy a home. It is often considered to be a significant achievement, a good investment and a celebratory occasion. However, the experience can take a negative turn if the transaction is not handled efficiently, and one of the most important factors that could affect the process is the amount that should be allocated towards your down payment.

Selecting home based on down payment: If you are able to make a large down payment towards your home purchase, you should consider whether it is wise to do so vs. buying a cheaper house. A large down payment on your dream home could mean larger mortgage payments, while choosing to use that same amount towards a home that is less than what you might consider your dream home could mean smaller mortgage payments and more money available to use to cover other expenses.

Don’t forget other expenses
One of the biggest mistakes that homebuyers make is to overlook their other expenses when calculating how much disposable income they will need each month. You can avoid making such a mistake by ensuring that your budget is up to date and includes all of your monthly expenses, such as utilities, other loan repayments, any car payments and insurance, and property taxes that will be owed on your new home.

If you currently live in a rented property, some of the expenses for home repairs and incidentals such as repairing a pipe to mending a fence might have been handled by the owner of the property. This means you should consider setting up a rainy day fund for these items. If the availability of financial resources could be an issue, buying a cheaper home might be a better choice.

Other positives of a cheaper home
Buying a cheaper home has other benefits in addition to the possibility of a lower down payment. .Consider, too, that lowers monthly payments and more disposable income means being able to add more money to long term savings, such as your retirement nest egg and college funds. Finally, it could mean the difference between being able to stay in your home vs. going into foreclosure if your financial status takes a negative turn.

Visit www.cibilconsultants.com

Source-secondary

Own your dream home!

Buying a house or making an investment, more so in a city, is a challenging task. It involves a huge sum of money. When you have painstakingly found a house that broadly suits your budget and most of your other criteria, put down the token. Getting over-optimistic about external factors changing could rob you of the chance to purchase your dream home. Here are some precautions which you need to follow as you navigate the purchase of any real estate property.

Before you Shop for the deal

Examine record of your finances. Before switching lender or contacting a real estate agent or window shopping for a new home, figure out what you can spend. Know your credit card limits and review your usage to prevent a potential approval pitfall.

First proceed with financing. Attaining pre-approval for a loan will make the loan approval process and process of negotiation smoother from the start.

Switch lender for better benefits. Try to get a professional who is both familiar with the area you’re considering and its home values – and who is well versed in the laws, timelines and deadlines. It allows you to lower the risk of ruining the dream of purchasing your own house.

Over the process of negotiation

Reading the fine print. If there is one piece of expert advice we hear often for consumers, it’s that it is always good to read the fine print before taking the ultimate buying decision. Fine print often lays down the terms and conditions for what generally the large print promises. Get the clarity on the matter to avoid any troubles in the future.

Keep everything in written. If you negotiate any extras make sure that they’re documented in writing and that all parties sign off on the extras.

Disclose the hidden expenses. Due to these expenses the total cost of your product gets hiked by a considerable amount; definitely more than you have calculated earlier. It’s better to know about hidden costs as these vary from one financial entity in the market to another. So, read these carefully and then take your decision accordingly.

Bargain to gain a better deal. Every financial institution has its own interest rates and fees structure for customers which provide some scope for you to negotiate for a better deal. You can also leverage your past record to good use while negotiating as banks normally don’t want to lose out on old customers.

Conclusion

Don’t take your self-decision. While seeking advice on purchasing a house, it is best to consult an experienced financial advisor. It’s always better to counter-check the suggestions of your advisors with others. It can safeguard you from making expensive mistakes.
Visit: www.cibilconsultants.com
Source: Secondary

Paying home loan has beome easier! See how?

Buying a home is not merely a financial decision. It is an emotional decision too. Are you planning to shed the weight sooner rather than later of home loan? It may be prudent to do so as you become free of EMIs most important benefit of closing your home loan early is obvious – you become free of EMIs and heavy loan debt. It requires discipline and planning, but it brings you much closer to the proud day on which your bank hands you the ownership papers of your fully paid-up house. Have a look on the simple steps to prepay your loan easily and save money for the future ahead.

Just pay more

Start playing with mortgage calculators and see how adding a little payment to your principal here and there can shorten the length of your loan. If you pay a little more principal, you get a bonus. The lower your principal gets, the more every payment from then on is applied to principal, as less goes to cover interest expense. When you pay extra, make sure the extra is applied to the principal balance, not just set aside for the next payment. And before you make extra payments, read your contract and make sure you won’t have to pay prepayment penalties.

Consider your financial plan

With the financial safety net in place, it is time to build the corpus that you will need to close your home loan early. You should begin by taking a close look at all the ways in which you lose money each month. Evaluate the investments and the returns produce on them. Once you are assure that your investments are sufficient to take of financial security ahead. So, you can transfer the surplus to pay off your home loan debt.

Switch to partial payments

Many banks permit their customers to make partial payments of home loan in a year. If you are salaried, you can divert your salary hikes, yearly bonuses or incentives towards your repayments. Businessmen can similarly use any extra profits towards paying off the loan. Check if your bank will set up a biweekly payment plan. Some banks do it free; others charge. Ask the bank to credit extra payments toward principal so you save more on interest expense. Some banks set aside extra payments until the end of the year.

Cut down on unnecessary expenses

Want to pay off your home loan financial debt earlier as to lessen the financial burden every month. Try to cut your extra expenditures wherever possible and use that money to prepay your home loan, You may have to let go holidaying or some unnecessary purchases as they can backfire hugely. However, make sure that the cost attached to prepayment of home loan, if any, in the form of a penalty does not nullify the benefits.
Visit- www.cibilconsultants.com
Source Secondary

For youngsters: A guide to build Credit score

While learning the basics of money management should begin in high school (or earlier,possible), the four to six years AFTER they graduate from high school is the most important time financially.  This is the time young adults become savers or spenders.High schoolers have many opportunities to begin learning how to manage money.  They likely will have part-time jobs, and, therefore, the money to begin to spend and save.  Many teens also have vehicles and need to pay for gas and insurance.If they begin saving now, they’ll have the advantage over their peers in a few years when they have the cash to put a down payment on a house.  If they invest in a retirement fund, thanks to compound interest, they’ll likely be in a much better position than their peers 40 or 50 years down the road.

Besides learning to save, learning to manage credit is equally important.  If a young person isn’t responsible with credit, he’ll set up the cycle of being in debt and having less income to use for other goals and expenses.
Often, getting credit is difficult in the beginning, but it doesn’t have to be.  Here are some ways a recent high school student can begin to build credit:

1.  Piggyback on someone else’s credit.  If you’re financially responsible, your parents may consider adding you as a user on their credit card.  There are several caveats here.

Consider your parents’ credit record.  Make sure that your parents have good (or great) credit as their credit score can be passed on to you within a matter of months of being an authorized user.  This is great news if their credit score is 780, but horrible news if their credit score is 580.
No credit is better than assuming low credit.

Consider how old the credit card is.  You’ll also want to strategically choose which credit card to be added to.  The best choice is a credit card that has been opened for several years and has a low balance.  You’ll want to make sure that your parents have always paid it on time.
Make sure the credit card company reports to credit bureaus.  Lastly, make sure that the credit card you’ve chosen reports authorized users to the credit bureaus.  If it doesn’t, being an authorized user won’t help you at all because the three credit bureaus won’t know you’re authorized on the card and you still won’t have a credit score.

Be responsible.  If you’re added as an authorized user, you should respect your parents’ trust in you.  Be responsible with the privilege they’ve given you.  If you overcharge, they’ll have to pay.

2.  Open a secured credit card.  Another option is to open a secured credit card.  (Make sure to ask the company if they regularly report customers to the credit bureaus.)   With this type of credit card, you pay a small deposit, so the credit card company has collateral if you don’t make timely payments.  Your credit limit is usually about the amount of your deposit.

Once the card is opened, be sure to make a few purchases a month and to ALWAYS pay on time.  Try to keep the balance low.

After six to twelve months of paying regularly, the credit card company may turn your account into a regular credit account.  If they don’t, check your credit score.  You may have a good enough credit score at this time to open a credit card account with a different company.
Once you become an authorized user or open a secured credit card, you simply need to pay the bill on time and control your spending.  Within six months to a year, you should be able to open a regular credit card account and begin your credit history.

Source: Secondary

Restore your CIBIL score this way

Banks and credit card companies use credit scores to determine your credit worthiness and whether to qualify you for a loan. The higher credit score you have, the lower interest rates banks offer you and vice versa. Even some employers check your credit report before giving you the job and even landlords check before signing the lease. That is why, it is of utmost importance to have a good credit score.

Check errors:

Checking your credit score at regular intervals is one of the good financial habit. Most of the times the credit score dropping is cause of errors on the report. If you find errors, contact the bureau as soon as you can and go as per the procedure to rectify it.

Talk to the creditors:
If you are having financial problems, contact your creditors as soon as you can. They can help you with lower interest rates, and counsel you about balance transfers and debt consolidations.

Make your payments:
The hardest part- Try to make pay off all your debts and don’t accumulate any more debt. Turn to cash payments and cut down on your expenses till you pay off your debts.

Your credit score is your emergency financial tool for the future. If you don’t restore your credit it will keep going down and risk your chances of getting a loan in the future.

Source: Secondary

7 Ways When Credit Card Rewards Prove To Be Expensive !

Get bonus points, cash back, miles and more.How we love to redeem credit card rewards. Rewards are a good way to save some money while spending. However, the same rewards can prove expensive if we start spending to save. Spending to save? Yes, that indeed happens.Rewards can be very tempting and can lure card holders to spend money which they otherwise wouldn't have. What happens then? You end up spending more money than what the reward is worth! Such spending decisions taken under the influence of a reward temptation can be a bad idea for your wallet. Here are 7 situations when credit card rewards can backfire.

1)    Here redeem your rewards, but first open your wallet!

Rewards points accumulated can be redeemed as per the card company's policies. This typically includes spending at specified outlets, brands, miles or cash back. Once you know that you have accumulated the reward points there is an urge to redeem and benefit from it. This urge pushes us to think of ways to redeem which includes going in for purchases which are not required! Whether it's shopping for clothes, accessories, travel plans or dining out, decide to spend on these activities only if they were a part of your plan anyway. Planning to spend for redeeming rewards is not a good idea. 

2)    Chasing rewards?! They are watching you.

Often friends and family talk about the "amazing" credit card they have signed up for. Their stories of saving money, claiming air miles and access to exclusive lounges lure us into going and checking out what the deal was about. Not denying that it may be a good deal, but stop before you decide to sign up. Having a bunch of "amazing" credit cards, signed up primarily because they have good rewards scheme can prove detrimental for your CIBIL score. Banks can view you as a credit risk if you aren't organized while picking credit. Credit utilization and repaying on time is a task which requires a good tracking system. If your tracking system is not in place it is possible that you miss out on repaying or end up spending more than you intended to. Your wallet and CIBIL report, both will be affected as a result of the reward chase.

3)    Mind your score!

Reward credit cards have a higher rate of interest. If that is the choice you have made then redeeming the reward points will definitely be on the list. However, while availing rewards you may end up spending more money. The repayment of which, if missed can lead to paying a heavy interest rate. Moreover, these delayed payments can negatively impact the CIBIL score. Now the last thing you need after ending up spending more money is a drop in your CIBIL score!

4)    I don't need it but let me buy my reward!

Credit card offers can be generous deals. The best offers are generally up to 5% of the value spent as reward in some form or the other. Now if you are making a purchase with an eye on this offer, then you are in trouble. Spending 95% of the money on an unnecessary purchase is far from being wise about spending.  Availing the reward should be a bonus on the purchase and not a reason for the purchase.

5)    Did you see the fee?

Reward cards charge a considerable annual fee. While we sign up for the cards, enticed by the rewards, the annual fee is often ignored. It is important to evaluate the total worth of the rewards as against the annual fee applicable. Are the rewards another reason for you to spend more? Does redeeming the rewards means planning for unwanted purchases? Answer these questions for yourself to know if the credit card rewards are actually helping you save. If not, look out for options with lower or no annual fees and do away with unwanted temptation to spend more for redeeming reward points. 

6)    Watch out if you are shopping for more debt!

If you already have a credit card with a credit limit which is utilized regularly and timely repayments are being done then you are in the right zone. This approach will help you max out the benefits of using a credit card while positively keeping up your CIBIL score. Don't let greed take over and make you hunt for reward cards. While the immediate benefits like signing up bonuses and short term benefits like using a certain amount within a limited period of time in return for reward points may appear lucrative, it is a bad idea in the long run. You are actually taking on more debt even though you don't need it! We definitely don't need to find newer avenues to part ways with our hard earned money.

7)    Focus on your goals more than the rewards!

To stay out of trouble and sail smoothly it's important to stick to your personal financial goals. A part of this plan is sticking to budgets every month. Major expenses are planned and money is set aside for such expenses beforehand. Credit card rewards can prove distracting while you are trying to stay focused on planned spending. To avail rewards, we convince ourselves to get off the budget plan. Bad idea! The thrill of availing the reward not only takes us off the road leading to our financial goals but also drills a hole in our pocket. So remember, goals over rewards any day.

Credit cards when planned and used can indeed help us save and give us access to money when required. However, using cards to accumulate reward points and then planning ways to redeem them is not a great idea. Focus on your financial goals, plan your expenses and aim to save. Keep off those credit card reward carrots!

Keep an eye on your credit score along with using credit card because credit card can affect your score positively and negatively both.
visit www.cibilconsultants.com

source-secondary

What is credit counselling ?

When you are in debt, lots of advices are thrown your way to improve your credit score. So, how do you know what advice to follow and which advice would work.  People are always in a dilemma to follow what advice and what to do in such situations. This is where credit counselling comes in- to guide on the right path to become credit healthy.

 Credit counsellors are basically professionals i.e. certified credit counsellors showing you the right paths to clear your debts and get a good credit score. Credit counsellors analyse your total financial situation including your credit obligations, to carve out a plan to successfully pay off your debts.

Credit counselling can be a positive experience, only if you are completely committed to the process and determined to pay off all your debts and work towards a good credit score. The counsellor will only be able to help you if you are willing to get help. The first and most important of all is to do is find a trustworthy credit counsellor with whom you can share your financial situation comfortably. You need to be forthcoming about your financial situation, clearing stating what you owe and the paying off period for the debt you are given. You also need to be up front about your present incomes and expenses so that the counsellor knows how much money you can have available for the payments.

Credit counselling is not an action, only an advice. Credit counsellors won’t pay off your debts for you. They’ll only analyse your credit reports to chalk out a plan for you and advise you on how to pay off the debts. In the end, it will all come down to how well you follow that advice and plan and how determined you are to improve your credit score.

For credit counselling and related services visit www.cibilconsultants.com

Source: Secondary

How does defaulting affect your CIBIL Score?

A loan default is basically not making the required payments on your loan to the lender. A loan default is associated with a lot of financial problems. Even if you met all the conditions of the default, your credit score will drop and you will find it hard to get another loan in the future.

There can be many reasons why an individual may have done his payments, but when a certain time passes without you making the payment, it becomes a part of your credit history and would be included in determining your credit score. When this default is added to your credit history, it stays there for 7 years thereby affecting your credit score for a long time. Therefore, it is important that your avoid turning your late payments into defaults, to not hurt your credit score.

Default can occur with all types of loan. Default in loans like home loans, auto loans can have the lender take repossession of your home or vehicle. 

Default is not the same as deferment, in deferment the payment is postponed mutually after an agreement with the lender while in default there is no agreement that you will get your payments even in the future. Default indicates to the lender that there is far more and deeper problem in the individual’s finances.

If you cannot avoid a default, you can at least reduce the impact of it. The best way to reduce a default is to contact the creditor as soon as you can. If you are late with only a few payments, you can work out some way with your lender for a payment plan. You can also consider various options for refinancing. If you can before declaring on your default, you could sell your car or house on your own or repay the lender than going to a agent. This saves the lender time and money as it is more cost-effective way.

If your debt problems are much deeper than you thought, contact our credit repairing agency at www.cibilconsultants.com , which can help you restructure your payment plans.

Source: Secondary