Debt-Free Forever Gail Vaz-Oxlade (best ereader for epub TXT) 📖

• R3: Pays (or paid) in more than 60 days from payment due date, but not more than 90 days, or not more than three payments past due.

• R4: Pays (or paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due.

• R5: Account is at least 120 days overdue, but is not yet rated 9.

• R6: This rating does not exist.

• R7: Making regular payments through a special arrangement to settle debts.

• R8: Repossession (voluntary or involuntary return of merchandise).

• R9: Bad debt; placed for collection; moved without giving a new address; or bankruptcy.

While the R ratings let lenders see just how good or bad you’ve been with your credit from one month to the next, your credit score takes your history into account along with a number of other factors, and we’ll look at these in more detail in Chapter 12.

BANISH DIFFICULT DEBT

Getting Out from under a pay-Advance Loan

Whether you did it as an act of desperation or you were just dumber than a sack of hammers, your decision to go to a pay-advance loan store is costing you big-time. Do whatever it takes to get out.

The pay-advance loan biz has been growing by leaps and bounds. They say they’re providing a service: helping people who can’t find help anywhere else. Really? Well, if they’re so interested in “helping” people, then what’s with the fees, the outrageous interest rates, and the never-ending cycle?

Interest is charged from the day you take the loan until the loan, and all the fees, are repaid in full. I have worked with people who have been paying anywhere from 700% to 1,000% when all the fees are added in. Ouch!

Colleen and Jason ended up in a pay-advance store after a slew of unfortunate events. Colleen’s daughter, Lila, stepped on a broken piece of glass and had to be rushed to hospital. Colleen ended up taking five unpaid days off work, setting the couple back $830 that week. Lila also needed a prescription: $76. With no emergency fund and no savings, Jason decided that a pay-advance loan was the only way to make rent. He took a loan for $1,500. In one week, he would be required to repay $1,727.55. He figured he’d get an extra couple of shifts at work to come up with the $227.55 in interest and fees.

But a week later Jason blew a tire on his truck. He realized that if they repaid the $1,727.55, they would have no money for food, so Jason did the repayment and then took a new pay-advance, again borrowing $1,500 to get him to the end of the week. He worked an extra couple of shifts to cover the $227.55 in interest and fees, fully intending to pay the whole thing off.

Since Colleen thought Jason had paid off the pay-advance loan after the first week, she went ahead and used some of the “extra” money in the bank account to get Lila a couple of new things she needed. Colleen got her hair done too. When Jason went to do the pay-advance repayment they were short again. And there were no more overtime shifts at work for the month. Jason paid back the loan by taking yet another advance.

Three months later they were still in the pay-advance cycle, each week paying $227.55 in interest and fees to borrow the $1,500 they needed to keep them afloat.

If Colleen and Jason kept borrowing for the entire year, that pay-advance loan would cost them $11,832.60 in interest. Hey, if you don’t believe me, do the math yourself: $227.55 × 52 = $11,832.60. So, to use $1,500 of someone else’s money for a year, Jason and Colleen were on the hook for almost $12,000 in interest.

So what do you do if you’re in the cycle and are desperate to get out? You’re going to have to suck it up and either

• be short for a couple of weeks while you repay the loan and don’t borrow again, or

• find a way to make more money so you can get the life-sucking debt off your back.

There ain’t no other way, kids. You’ve just got to get serious about getting out of debt and do whatever it takes to break the desperate cycle of borrowing and then borrowing again to make up for the cash flow shortage caused by the outrageous interest and fees charged. It’ll be hard. It’ll hurt. But you’ll have learned an important lesson, and you won’t do that again.

Getting Out from Under Overdraft Protection

This is a product that has been badly named. It should be called Too Lazy to Keep Track Protection because that’s exactly what it is. It’s designed for people who don’t want to have to be bothered with making sure they have enough money before they go shopping. I’ve met hundreds of people who live in overdraft, while their banks giggle with glee.

Overdraft protection is usually sold to people when they open their accounts as a way to ensure that bounced cheques don’t ruin their credit ratings. When you try to spend money you don’t have in your account, the bank covers the withdrawal—be it a cheque, debit, or cash withdrawal—by the amount available in your overdraft protection agreement. The more overdraft protection you have, the more money you can unconsciously spend without having to worry about NSF charges and bounced payments.

Don’t confuse the kind of overdraft protection you buy, for which you sign an agreement, with what some banks call “bounce protection” or “courtesy overdraft protection,” which they offer to save you from the embarrassment or hassle of a returned cheque or a declined debit card transaction. Unlike regular overdraft, which charges a monthly fee and interest on the amount you’ve “borrowed” (the amount of your overdraft), the fee on “bounce protection” is levied regardless of the amount you go into overdraft for. It can be astronomical when you calculate it as a percentage of