1. Consumer Actions Managing Money Project Be careful where you get credit Not all credit is good credit

2. Managing Money Project www.managing-money.org Not all credit is good credit Some loans are predatory Designed to prolong the debt Make the most money off the borrower Some loan offers are scams Be cautious of any loan offer in which you are asked to pay money up front

3. Managing Money Project www.managing-money.org Where can you get credit? Credit is available from many sources Not everyone can qualify for all loans It pays to get all the facts before you borrow Loans are legal contracts Read all the fine print If you are deceived, contracts may be void

4. Managing Money Project www.managing-money.org Banks Banks make secured and unsecured loans When you take out a secured loan You must guarantee the loan by putting up some personal property such as a car or your home Unsecured loans Usually for smaller amounts of money Made to people with excellent credit

5. Managing Money Project www.managing-money.org Credit Unions You must be a member of the credit union in order to get a loan Credit unions offer secured and unsecured loans Often have lower interest rates on loans than banks Can you belong to a credit union? Ask at work, your church or your union Check to see at www.cuna.org

6. Managing Money Project www.managing-money.org Credit Cards Credit cards are issued by banks and credit unions Use them to buy items or services You can receive cash advances but these are an expensive way to get cash All cards have a credit limit Charge more than your limit and youll be charged a fee If you dont pay your cards balance off each month by the due date, you are charged interest If you are late with a payment, you will be charged a late fee up to $39 Your interest rate might jump, too

7. Managing Money Project www.managing-money.org Low Limit Credit Cards Some companies issue low credit limit cards to people with poor credit Credit limits are $500 or less Very aggressive fees on low limit cards Easy to exceed limit Companies issue more than one low limit card per customer

8. Managing Money Project www.managing-money.org Unsecured Credit Cards Offered to people with poor credit High upfront fees and other costs Fees appear on first billing statement Low credit limits Fees eat up your credit limit

9. Managing Money Project www.managing-money.org Charge Cards Charge cards, like credit cards, allow you to charge purchases You must pay your bill in full each month, which avoids interest payments and helps you manage spending Unlike credit cards, you cant carry a balance on a charge card

10. Managing Money Project www.managing-money.org Retail Charge Accounts Some businesses such as hardware companies or other local stores allow you to buy goods on credit You must apply for these accounts You sign for purchases The store sends you a bill each month You must pay immediately If you do not pay the bill in full, an interest charge is added

11. Managing Money Project www.managing-money.org Finance Companies Finance companies lend to people who are high credit risks The rates tend to be much higher than bank loans Many finance companies offer auto and home equity loans Used car loans can be especially high priced You must pay off the loan even if the car can no longer be driven

12. Managing Money Project www.managing-money.org Installment Plans Many stores allow you to buy things on time, such as household appliances You make a down payment and then pay the balance plus interest on a monthly basis Zero percent interest offers Pay the entire balance off within promotional period If any of the balance remains after the promotional period ends, youll be hit with retroactive interest on entire balance If you fail to make a payment the store can repossess the item

13. Managing Money Project www.managing-money.org Rent-to-Own Stores These stores have new and used household items that you can rent by the week or month or that you own after making a set number of payments You agree to make weekly payments for as long as you want the item You have the option to buy the product if you make all the required weekly payments, usually for a year or more This is a very expensive way to buy things A $200 TV can end up costing well over $1,000 If you dont pay, the store will take the item back and you will lose all the money youve paid

14. Managing Money Project www.managing-money.org Illegal Lenders Some lenders (loan sharks) operate outside the law They charge very high interest rates These lenders often use threats of violence to get people to pay

15. Managing Money Project www.managing-money.org Money Shops Companies offer quick money to people in desperate circumstances These often are very bad deals Some loans offered by walk-in, storefront lenders have interest rates of above 20% High late fees drastically increase the amount you owe if you miss even one payment

16. Managing Money Project www.managing-money.org Payday Loans Check cashers offer to make short-term loans or cash advances secured by personal checks or your next direct deposited benefits check or paycheck The price of such loans is very high Check cashers are making payday loans at effective annual interest rates of well above 250% People who dont pay can be pursued under bad check laws

17. Managing Money Project www.managing-money.org Pawnshops Accept personal property, such as jewelry, electronics, cameras, musical equipment or guns, as collateral for loans based on the value of the goods Most pawnshops will lend you less than half an items resale value You have several months to repay the loan and are charged very high interest rates until you do so Many pawnshops also charge storage costs and insurance fees If you do not repay the loan, or if you default on interest payments, the pawnshop can keep and sell your things

18. Managing Money Project www.managing-money.org Car Title Pawn A twist on the pawnshop, these companies ask you to sign over the title to your car as security for a loan representing only a fraction of its value Interest payments and fees quickly add up, making it hard or impossible to repay the debt If you default, the company takes your car and sells it You could lose a car worth tens of thousands on a loan of a few hundred dollars

19. Managing Money Project www.managing-money.org Debt Consolidation Loans to pay off your creditors Charge very high interest rates and fees

20. Managing Money Project www.managing-money.org Home Equity Loans Banks and other reputable companies allow you to borrow money against your homes equity Your equity is the estimated value of your house minus the amount you still owe Your homes value is the guarantee that you will repay the loan Unscrupulous lenders might give you a loan they know you cant repay just so they can take your home If you are unable to make the payments, you can lose your home

21. Managing Money Project www.managing-money.org Tax Refund Loans Loans are made based on federal and state tax withholding on your W-2 form Why pay to borrow your own money? Electronic filing means you can get your refund in 8-10 days Free tax assistance available Interest rates on these short-term loans can be very high40% at the low end and 200%-plus on the high end Now companies are making loans based on your pay stubsbefore you even get your W-2

22. Consumer Actions Managing Money Project About the project Managing Money was founded using a cy pres award from the Griego v. Rent-a-Center class action settlement. © 2007

23. Consumer Actions Managing Money Project Consumer Action www.consumer-action.org 221 Main St., Suite 480 San Francisco, CA 94105 Phone: 415-777-9635 E-mail: info@consumer-action.org