THE TROUBLE WITH DEBT CONSOLIDATION LOANS Research Reveals Ads Don't Disclose Total Costs, Lead to Risky Behaviors

 TROUBLE WITH DEBT CONSOLIDATION LOANS Research Reveals Ads Don't Disclose Total Costs, Lead to Risky Behaviors

Contact: Paul Golden 303-224-3514, pdg@nefe.org

DENVER—Seventy-five percent of Americans have debt, and 51 percent are worried about the balance they owe, finds a new poll from the National Endowment for Financial Education (NEFE). The online poll, commissioned by NEFE and conducted by Harris Interactive in December 2011 among 2,525 adults ages 18 and older, demonstrates the overall debt burden people across the country are carrying(1). And although some debt-laden Americans might continue with their current strategies to pay down debt in 2012, others may be feeling the crush of holiday credit card statements and multiple debts or struggling to keep up with their current monthly loan payments.

For cash-strapped consumers, debt consolidation loans might seem like a quick fix to solve their money woes. But they will want to tread carefully, as new NEFE-supported research reveals ads for these loans do not give consumers a full picture of the total costs, and furthermore, these loans may cause consumers to make their financial situations even worse.

“The advertising for debt consolidation loans often fails to mention the downsides of these types of loans,” says Ted Beck, president and CEO of NEFE. “In presenting debt consolidation as an option, much of the focus is placed on the ‘lower’ amount of monthly payments, without regard to impacts like total interest paid. We encourage consumers to enter any financial decision with their eyes wide open.”  Read the full report here

About the National Endowment for Financial Education (NEFE) NEFE is a nonprofit foundation that inspires empowered financial decision making for individuals and families through every stage of life. For more information, visit www.nefe.org

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 4 Tips for Understanding Debt Consolidation Loans

1. Weigh the downsides. Longer loan terms may decrease your monthly payments, but they increase the total amount of interest you will pay over the life of the loan. In addition, you might incur hidden fees and penalties.

2. Know the seller. Lenders are not obligated to give you the best rate for which you qualify, so shop around and look carefully at the terms. Also, just because he or she is willing to sell you a loan doesn’t mean you can afford it.

3. Avoid the slippery slope. Don’t fall into the trap of increasing the amount of a debt consolidation loan to finance additional purchases. You will unnecessarily increase your monthly payment and boost your overall debt.

4. Establish a plan. The best way to get out of debt is to create a financial plan and stick with it and to live within your means.

 5 Questions to Ask a Debt Consolidation Loan Lender

1. Is there a fee to apply for this loan?

2. What are the interest rate, term, monthly payments and total amount of interest paid?

3. What collateral is required for this loan? What fees or paperwork is required for the collateral?

4. Is there a pre-payment penalty?

5. How does your firm make money on this loan? 

Courtesy of National Endowment for Financial Education (NEFE)

The Importance of Teaching Children to Save

Background:
According to a National Financial Capacity Survey by FINRA in December 2009, the financial landscape in the United States has changed significantly over the past decade.

• Retirement: Shift from pension plans to participant savings 401 (k) type plans
• More complex financial products: mortgages, savings and investing products
• Greater choices in financial products means greater complexity of choices
• In addition, the price tag for many components of the American dream - including purchasing a home or funding a child's college education - has risen since the 1980s and 1990s. Especially with respect to college tuition costs, that trend promises to continue.

Against this backdrop, the consequences of not having the necessary skills to make sound financial decisions become ever more severe. This is particularly true in times of economic instability, when resources may be more limited and negative financial events, such as the loss of a job or a sharp decline in income, more frequent.

Survey Results:

1. Making Ends Meet. Nearly half of survey repondents reported facing difficulties in covering monthly expenses and paying bills.
2. Planning Ahead. The majority of Americans do not have "rainy day" funds set aside for unanticipated financial emergencies and similarly do not plan for predictable life events, such as their children's college education or their own retirement.
3. Managing Financial Products. More than one in five Americans reported engaging in non-bank, alternative borrowing methods (such as payday loans, advances on tax refunds or pawn shops). And few appear to be knowledgeable about the financial products they own.
4. Financial Knowledge and Decision Making. While many American adults believed they were adept at dealing with day-to-day financial matters, they nevertheless engaged in financial behaviors that generated expenses and fees and exhibited financial products or shopped around before making financial decisions.

Current Statistics:

• Personal Savings Rates remain around 4% nationally as consumers face ever-increasing costs.
• Unemployment: Virginia average Dec. 2011 - 6.1%; while many Virginia communities exceed 15% unemployment rates, courtesy Virginia Employment Commission.
• 50% of renters in Virginia are cost burdened and 36% of Virginia households live in liquid asset poverty without adequate emergency funds. In addition 52% of Virginia consumers have subprime credit, courtesy CFED Assets and Opportunity Scorecard- Virginia 2012

Reversing these negative trends will largely be dependent on Americans abililty to control spending, reduce debt and increase savings. Increasing public awareness about the need for savings is essential to family security.

Savings Campaign:
America Saves is a public awareness campaign of Consumer Federation of America. This campaign is created to inspire Americans to change their financial behaviors to increase savings and reduce dependence on debt.

Virginia Saves is a campaign to help Virginians to prepare for their futures by increasing their allocations to savings. This campaign is not designed to sell products but to increase financial knowledge.

Like most public awareness campaigns, children tend to be early adopters and can be great influencers of family behavior. This piggy pageant is designed to educate children about the need for savings while engaging them in a fun creative activity.

To learn more about the benefits of saivngs and ways to begin savings:
http://www.americasavesweek.org/ or www.virginiasaves.org  

Virginia Saves Piggy Bank Pageant

Virginia Saves Piggy Bank Pageant                         February 2012

Teachers and Adult Youth Program Leaders:

Inspire your group or class to create savings goals and develop the habit of regular savings for their future by engaging youth in building their own bank.

Local Pageant Guidelines for groups and schools–create your own theme:

·       One entry per child

·         Piggy bank must be created or decorated by child (with

minimal parental assistance) & must be able to hold coins.

·         Bank cannot be larger than 14 inches tall and 14 inches wide

·         Be creative! Use any theme or animal you want! It doesn’t

have to be a pig. Promote recycling by using old plastic containers

or other containers or add stickers or buttons to purchased banks.

·         Any entries displaying offensive art or language will

automatically be disqualified and not be displayed and will not

be eligible for prizes.

·         Hold a Piggy Bank Pageant in your group, class or school.

·         Choose a winner(s).

·         Photograph Winning Piggy Banks and submit registration form to Virginia Saves by 3/31/2012.

Virginia Saves 2012 Pageant Rules

·         The winner(s) of your group or class will be eligible for the state contest.

·         Entries will be judged by partners, advisory board members, and staff of Virginia Community Capital. 

·         Send an email with a fully completed registration form and electronic photo of winning bank to virginiasaves@gmail.com on or before March 31, 2012 to be eligible for prizes.

·         Contest entries will be on display at VirginiaSaves’ Facebook page.

·         Winning entries will be notified by April 30, 2012. Winners agree to promotional/ community news at Virginia Saves website/Facebook sites or press releases.

Questions:

·         Virginia Saves Contact: Teresa Walker, c/o Virginia Community Capital at:  virginiasaves@gmail.com, twalker@vccva.org , or via phone at 540-260-3126.

Virginia Saves is a campaign to help Virginians to prepare for their futures by increasing their allocations to savings. This campaign is not designed to sell products but to increase financial knowledge.

Like most public awareness campaigns, children tend to be early adopters and can be great influencers of family behavior. This piggy pageant is designed to educate children about the need for savings while engaging them in a fun creative activity.

To learn more about the benefits of savings and ways to begin savings:

http://www.americasavesweek.org/ or www.virginiasaves.org

Tax Access

Tax Access... A tool to help make your VITA site more accessible to people with disabilities

What is Tax Access?
The Tax Access project is designed to provide a "Safe Place" where Volunteer Income Tax Assistance (VITA) site coordinators and volunteers can ask questions and find resources on how to serve people with disabilities more effectively. The Tax Access project focuses on disability issues related to VITA services including facility access, program accessibility, and customer service.

Please read the fact sheet for more information on how to access this valuable resource!

Annual Savings Survey Reveals Continuing Decline in Family Finaces But Also a Successful Savings Strategy

Hundreds of National and Local Organizations Join 6th Annual America Saves Week to Encourage and Assist Personal Saving

Washington, DC -- The fifth annual national survey assessing household saving revealed that, despite hopeful macroeconomic signs, an increasing number of Americans are having difficulty saving to meet goals ranging from meeting emergencies to affording retirement. Over the past three years, the number who spend less than their income and save the difference, are building home equity, have adequate emergency savings, and think they are saving enough for retirement has declined. However, the survey also revealed that having a savings plan has beneficial financial effects, even for lower-income families.

For more on this click here.

Courtesy of America Saves, Consumer Federation of America, and American Savings Education Council