But left unchecked, debt can become dangerous. It’s easy to start falling behind on payments, accumulating late fees and interest as you go. Furthermore, certain kinds of debt carry a certain amount of risk from the get-go, like lines of credit with high interest rates, or auto loans for a vehicle that’s going to depreciate in value substantially the second you drive off the dealership lot. Suddenly, that tool you meant to use constructively becomes a weapon aimed directly at your financial well-being.

Here are six telltale signs your debt has gotten out of control, plus some solutions meant to help you get back on course.

Sign #1: You’ll “Figure It Out Next Month”

It’s very easy to put off dealing with debt for another day… week… month… and suddenly you’re much farther behind than you ever meant to be. If you’ve noticed yourself procrastinating, it’s time for a reality check. Commit to making time to sit down, go over your debts and come up with a strategy sooner rather than later.

Sign #2: You’ve Lied About/Hidden Your Debt

There are many reasons people feel hesitant to admit the reality of their debt to others. Carrying debt can feel embarrassing or shameful. Many Americans feel pressure to “keep up with the Joneses” too.

But if you find yourself directly lying to a loved one about the existence of debt or the amount you’re carrying, it’s a sign the situation has gone too far. This is especially true if you’re lying to a romantic partner, business partner or someone else affected by your finances.

Sign #3: You’re Missing Minimum Payments

Most lines of credit offer borrowers the option to repay a minimum amount each month, either a low flat fee or a small percentage of the total outstanding balance. The upside is that doing so will keep late fees at bay. The downside is that paying only the minimum does nothing to stop interest from building. If you’re consistently missing even this minimum requirement, it’s time to take action.

Sign #4: Credit Cards Are Your Emergency Fund

Emergencies are often unfair, but they happen to the best of us. Without a sufficient emergency fund tucked away, people fall back on credit cards to cover unexpected costs.

Does this sound like you? It’s a very common situation in America. Many people who eventually decided to try an elimination strategy like debt settlement describe falling thousands into debt after an unexpected life event like a divorce, death in the family, layoff, medical incident, etc. Dozens upon dozens of Freedom Debt Relief reviews cite having to put emergency expenses on credit as one contributing factor to overwhelming debt, which is why these consumers eventually decided to seek assistance through debt settlement.

Although we can’t stop these costly events from happening, we can do our best to prepare ahead of time and proactively get out of debt after the fact.

Sign #5: It’s Hard to Keep Your Debts Organized

Starting to lose track of how much you owe and to whom? This is a classic indicator you’re getting in over your head. Disorganization makes it all too easy for debts to slip through the cracks, worsening your financial woes.

A system for organization is a must, as is addressing debts as they come rather than letting the statements sit unopened until they’re past due. Staying in denial can be tempting, but it’ll only prolong the process.

Sign #6: Your Debt-to-Income Ratio Is High

Here’s how to find your debt-to-income ratio: Divide all your monthly debt payments by your gross monthly income. A high ratio makes you risky in the eyes of lenders; if your ratio exceeds 43 percent, you’ll have a tougher time getting a mortgage. Many experts recommend keeping your DTI below 36 percent. If you crunch the numbers and find that your DTI is high, it’s important to keep lowering your debts.

Has your debt gotten out of control? If any of these six signs apply to you, it’s time to explore your options for reducing and eliminating the amount you owe.

6 Telltale Signs Your Debt Has Gotten Out of Control is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Before jumping to a Formal Debt Agreement, take some time to ask yourself if you can’t find a middle ground and negotiate with your creditors to pay off your debts. The last thing you want is a legally binding agreement that lands your name on the National Personal Insolvency Index (NPII).

• The benefits of an Informal Debt Agreement
• The effects of a Formal Debt Agreement
• Financial Counselling to help you decide

The benefits of an Informal Debt Agreement

Informal Debt Agreements serve as a mutually beneficial agreement between the debtor and creditor. The debtor can request a change in the terms of the loan or extended line of credit, to alter anything from the interest paid on the loan, the minimum repayment amounts, the total payoff amount, or a waiver for temporary circumstances that prevent the debtor from being able to make a payment.

The advantage to taking this route with debt management is that the debtor doesn’t risk any negative impacts on his or her credit score. It allows the debtor to apply a new strategy with the intent to continue paying off debts. This new agreement provides debtors an opportunity to do it before a default or collections process ensues. Most importantly, the damage to the credit score won’t be near as lengthy and inhibitory as a Formal Debt Agreement, or personal insolvency.

Another key advantage to an Informal Debt Agreement is the debtor’s ability to get creative with how they negotiate paying down their debts in a more suitable fashion. There are so many ways to find a middle ground with a creditor and meet in the middle so debtors have a chance to salvage their credit scores, while creditors have the confidence they will recoup the money they leant.

The effects of a Formal Debt Agreement

Formal Debt Agreements serve as an alternative to filing for bankruptcy. A Formal Debt Agreement is also an arrangement made by you and your creditors for how to pay off your debts. The drawback is that you must meet certain qualifications in order to acquire one.

With a Formal Debt Agreement, you will have to stick to a particular budget for the entire term of the Agreement, and you must declare all assets and liabilities. They are placed on public record and will appear on your credit report. This could inhibit your chances of obtaining credit in the future. It will also impact any jobs that require credit checks as part of the licensing or hiring process.

Seek financial counselling to help you decide

Contact a debt counsellor if you have debt concerns and feel overwhelmed with how to get back on track. They’ll be able to assess your financial situation for free, and provide you with the skills to form- and stick to- a budget. They can also help you with your negotiations if you should choose an Informal Debt Agreement.

Why Informal Debt Agreements are Better than Formal Debt Agreements is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Student loans to get through college can only be taken out during the current school year. That can leave graduates with four more more separate loans to repay.

Managing multiple loans can be tricky, but there are a few things to know about them that can make it easier:

Know who your student loan servicer is

Student loans can come from a bank or the federal government, and the loans can be outsourced to a bank or servicing firm. Whoever your student loan servicer is, that’s who you’ll deal with if you have questions and where you’ll be sending payments to. It won’t necessarily be the same financial institution where you took out the original loan.

You might have multiple loan servicers if your financial aid package is made up of different types of loans and is a mix of federal and private loans.

Paying federal student loans

Federal loans can be spread among a few loan services that you’ll have to keep track of and make sure you don’t miss any payments to.

If you apply for income-driven repayment plans, you’ll need to contact each loan servicer. Each may have a different deadline for the paperwork, which requires an income certification each year.

To find out who is the loan servicer for your federal student loans, or the status of any federal loans you have, use the National Student Loan Data System to retrieve your loan information.

Private loans

Private loans don’t have income-driven repayment plans, but they may have other options such as deferment or forbearance so that you don’t default on the loan.

Whatever types of student loans you have, expect the loan servicer to keep you informed of loan terms, repayment options and if the loan servicer is being changed because the loan is sold to another servicing company. Your new loan servicer should also contact you.

Consolidating loans

If you don’t want to deal with multiple loan servicers, you can consolidate or refinance your loans.

Federal loans can be consolidated with a Direct Consolidation Loan that still allows you to have the flexible repayment plans that federal loans offer. Private student loans can be consolidated through a larger private loan to replace the other loans.

If you have a combination of federal and private loans, you may want to keep your federal loans because they offer smaller monthly minimum payments, giving you more money to pay off your private loans quicker.

If you want to consolidate or refinance your student loans, be sure to shop for the best loan at the lowest interest rate.

Dealing With Student Loans Through Multiple Loan Servicers is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

If you want to get a second mortgage so you can make renovations to your home, it can be difficult if you have poor credit. Still, there are mortgage refinance options out there.

A second mortgage can use a home’s equity as collateral for a second home loan, allowing up to 80 percent of a home’s value to be borrowed. However, getting a second mortgage through a home equity loan or line of credit can be difficult if you don’t a credit score of 680 or better.

While high home equity will make a second mortgage less risky and may compensate for poor credit, there are other mortgage refinance options. Here are a few:

Cash-out mortgage refinance

Instead of an additional loan on your home, your loan and the cash you need is refinanced into one loan with one loan payment.

Even if you have bad credit, a cash-out refi is less risky for the lender because it doesn’t involve a second loan. With a second mortgage, the second lender is second in line to get paid if a lien is ever put on the home.

Streamline refinance

Some government home loans offer what’s called a streamline refinance that offer a lower mortgage rate. FHA and VA home loans, for example, allow borrowers to refinance into a lower rate and payment without a credit check, income or employment verification, or property appraisal.

It also doesn’t matter if you how little home equity you have or if you’re underwater on your mortgage.

For borrowers with a VA loan or FHA mortgage in good standing, refinancing a loan through the federal government is so streamlined that it’s almost automatic. The underwriting process is simplified enough to allow a refinance to happen based largely on if you’ve stayed current on your mortgage payments.

HARP refinance

The Home Affordable Refinance Program, or HARP, was created in 2009 to help people who were underwater on their mortgage refinance into a lower rate. Without it, the fear was that people who owed more on their home than the home was worth would walk away from the loan and lose their home.

The federal program is set to expire at the end of 2018, though it may be extended.

Improve your credit score

If a poor credit score prevents you from getting a second mortgage, the simple solution is to improve your credit score. While not easy and usually not fast, here are the best ways to increase a credit score within a month or so to improve your chances for a mortgage refinance:

• Pay off your credit card balances.
• Pay your bills on time.
• Remove or pay off collection accounts.
• Get added as an authorized user.
• Don’t apply for new credit.
• Dispute negative accounts with the credit bureaus.

Mortgage Refinance Options if You Have Bad Credit is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Before you leave school, also make sure you know the answers to the following questions. Good news: We’re giving you them (or at least telling how to find them on your own).

1. What Kind of Loans Do I Have?

You either have private student loans or federal loans. You can look up your federal loans using the National Student Loan Data System (NLDS). You should have the paperwork from your lender or student loan servicer (private and federal) from when you took out the loan. Private loans generally come from traditional banking institutions, while federal loans are issued by the government. Common federal loans include Direct subsidized loans, Direct unsubsidized loans and Perkins loans.

2. Whom Do I Owe?

You can find this information in the resources referenced above. Your financial aid office should have information on file as well, since they receive the money. If you haven’t gone through student loan exit counseling at school, you need to before you graduate. They’ll explain whom to pay, and it’s the perfect time to ask any questions. Once you know who’s managing your loans, set up an online account to access all your information.

3. What Are My Repayment Options?

This depends on the type of loans you have. Private student loan repayment tends to follow a typical installment loan repayment structure, in which you make monthly payments for a fixed loan term. Federal student loans offer more options. The default play is called standard repayment: fixed monthly payments for 10 years. If you want a lower monthly payment when you start out, you can change your repayment plan at any time for free, though the change may not take effect immediately. If you want to enroll in an income-driven repayment plan, graduated repayment or extended repayment, be sure to request a new plan through your student loan servicer as soon as you can. You can learn more about student loan repayment options here.

4. How Much Are My Monthly Payments?

For loans with a set repayment term, the payment will be the same every month if you have a fixed-interest rate (as all federal loans do), or your monthly payment amount will change if you have a variable-interest rate (as some private loans do). Monthly payments through income-driven plans will depend on how much money you make. You should be able to get this information from your lender or servicer.

5. When’s My First Payment Due?

Federal student loans generally have a grace period of six months, meaning your first payment comes due six months after you graduate, leave school or drop below half-time enrollment. Some grace periods are nine months. If you have a private lender, you may not have a grace period — find out as soon as possible.

6. How Do I Pay?

You’ll start hearing from your lender or servicer soon if you haven’t already. Like most bills, you can go the old-school route of sending a check, or you can pay online. Keep in mind you don’t have to wait till your grace period ends to make a payment, and you can also enroll in automatic payments to make sure you don’t miss any. On that note: You don’t want to miss any student loan payments, because it will damage your credit, and your credit score plays a role in how much you pay for other credit products, as well as renting a home or buying a cellphone. You can keep tabs on how your student loans are affecting your credit by getting two free credit scores every month on Credit.com. If you’re thinking about getting a credit card after college, here are a few good options for new grads.

7. What’s My Interest Rate?

This should be in your loan paperwork and in your online account. Make sure you know if it’s a fixed- or variable-interest rate.

8. How Can I Make Repaying My Loans Easier?

If you have multiple federal student loans, which most borrowers do, you can consider consolidating them. With a federal Direct consolidation loan, you can qualify for certain loan forgiveness and loan repayment options (though you may not have to consolidate to qualify), and you’ll only have to make one monthly payment, rather than several to multiple servicers.

You could also consider refinancing multiple loans with a private lender, but know that you’ll be giving up many of the benefits that come with federal loans if you do this. There is no federal refinancing option. You can also enroll in automatic payments to make your life a little easier — just be sure to check that it goes through every month and that your bank account has enough money to cover the bill.

9. How Can I Make My Loans More Affordable?

Among the benefits previously noted, enrolling in automatic payments usually gets you a 0.25% discount on your interest rate. Private loan refinancing could also help you save money if you have good credit and can qualify for a lower interest rate. Additionally, changing your repayment plan to a longer term or an income-driven plan can lower your monthly payments.

There’s another way to look at loan affordability: long-term savings. For example, all the interest your loan accrued while you were in school will be added to the principal once your grace period expires, meaning you’ll have to pay interest on interest. You can avoid this by paying off the interest before your first loan payment comes due. You can also pay more than your minimum payment each month, which can help you pay off your loans early.

Student loans can be complicated, so reach out to your student loan servicer if you have questions. Conversely, if you’re having issues with your student loan servicer, you can file a complaint with the Consumer Financial Protection Bureau.

More from Credit.com

• The Best Balance Transfer Credit Cards of 2017
• The Best Low-Interest Credit Cards in America
• The Best Business Credit Cards of 2017

This article originally appeared on Credit.com.

9 Questions to Ask About Student Loans Before You Graduate is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

If you’re in debt, you may find yourself trying to balance bills, debt repayment, and miscellaneous expenses. A great way to start paying off your debt is to create a bare bones budget. This budget will show you how to live on less, and get your financial life back in order.

Go Through Your Current Budget

The first step to creating your bare bones budget is to evaluate your current budget. If you don’t have a budget, it’s time to create one. Go through your income and expenses from the last few months, and write everything down in categories. Once your current budget has been assessed, it’s time to determine your wants vs. needs.

Wants vs. Needs

Looking at your current budget, are there ways that you can cut back? A bare bones budget is exactly what it’s called…bare. It involves your needs only, with very little room for wants.

Could you be spending less on food? Could you live in a smaller or cheaper place? What about current bills? If you are trying to pay off debt a little faster, it’s best to cut bills like cable and phones until you can really afford them. There are other ways to enjoy TV for free, and you could always get a to-go phone.

Once you have your needs written down, if you are still struggling to make ends meet, it’s time to do some haggling. Find ways to slash your utility bills, drive your car less if possible, and negotiate with the companies you have to deal with. For items like health and life insurance, there are ways to cut down costs for most people, and you can do the same for bills like car insurance, electric bills, and more.

Don’t Forget Savings in a Bare Bones Budget

At this point, your bare bones budget is almost complete. If you have the room, add a spot just for savings. It doesn’t have to be a large amount of money every month, but choose a number that you would be comfortable with.

Even with a bare bones budget, it is important to save. If an emergency were to happen, instead of putting yourself in more debt, you could fall back on your emergency fund.

A great starting point is $20 a paycheck, but again, choose what works best for you. You can always adjust this amount later on.

Schedule Your Debt Payments

If you’re reading this, chances are that you want to have a bare bones budget so you can pay off your debt. Once your bare bones budget is complete, it’s time to schedule your debt payments.

You should know how much money you owe and what you’re paying for every month, so now it’s up to you on how you want to pay off your debt. There are many strategies for paying off debt faster, and with a bare bones budget, you will know what you can afford and pay.

At the very least, automatically schedule your debt payments. Not only will this give you some time back in your day, but you won’t have to worry about making sure all of your debts are paid every month.

Whenever you make more money from a side hustle or your job, add that money to your debt and continue to live from your bare bones budget. This will help you get out of debt faster, so you can enjoy your money later.

Allow For Small Indulgences (When You Can)

Having a bare bones budget can make you a little stir crazy if you are working so hard with no play. However, you can still allow for small indulgences while on your budget journey.

Try finding free hobbies that make you happy, or go out for a small treat (like ice cream) when you hit another debt payoff milestone. These activities will help keep you focused and make you feel less stuck.

The most important thing to remember when creating and implement your bare bones budget is that this won’t last forever. Eventually, all of your debt will be paid off, and you’ll be able to enjoy your life much more. A bare bones budget is a starting point, but it’s up to you to stick with it and get rid of your debt.

Creating A Bare Bones Budget When You’re in Debt is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Taxes

What Is a 1099-C?

“A 1099-C is a document sent by a bank when they have canceled a debt,” Craig W. Smalley, EA, founder and CEO of CWSEAPA, LLP and Tax Crisis Center, LLC, said. “For instance, if you have negotiated with your credit card company to pay them a lesser amount than you owe them, the difference would be reported on this form.”

Bruce McClary, the vice president of communications at the National Foundation for Credit Counseling, said this is an important reason to “be familiar with the tax consequences when considering debt settlement as an option. You don’t want to be blindsided by a costly IRS bill when you may already be struggling financially.”

Why Did I Get a 1099-C?

If you have had a canceled debt, expect to see a 1099-C arrive in your mail, as “the bank is required to send this form, because it is taxable income,” Smalley said.

According to the IRS, lenders file a 1099-C if you have $600 or more of debt that is canceled. Here are four common reasons that may be the case.

1. You settled a debt for less than what you originally owed and the creditor picked up the remaining balance (debt forgiveness).
2. You did not pay on a debt for at least three years, and there was no collection activity for the past year.
3. Your home was foreclosed and your deficiency (the difference of what was owed and the value of the home) was either forgiven or you haven’t paid it.
4. Your home was sold in a short sale, and you made a deal with your lender to pay less than what was due.

Still not sure why you received this form? Look for Box 6, which will give you a code explaining why the lender sent it. To decipher the code, you can reference Publication 4681 on the IRS website.

Do I Have to Fill Out a 1099-C If I Filed for Bankruptcy?

Just like with most things, there is an exception to the rule of all canceled debts requiring a 1099-C. Smalley said that “if a debt is canceled because of bankruptcy, you do not have to pay tax on it.” (Remember: Bankruptcy does have a major negative effect on your credit scores.)

Does That Mean My Debt Is Paid?

This depends on why you received the 1099-C in the first place. If it’s because you settled your debt, then yes, your debt is resolved. However, if it’s because you haven’t made any payments on a debt for three years and the debt collector hasn’t tried to collect recently (noted in Point Two above), then your debt is not in the clear and you may still owe.

What If I Get a 1099-C for a Debt I Paid?

“First and foremost, contact the issuer of the 1099-C and ask them to make the necessary corrections,” McClary said. “They will need to send you a corrected 1099-C in time for you to file taxes.”

McClary also noted that if this request doesn’t work, “the IRS has a dispute process you can use. This requires that you reach out to the IRS and let them know you wish to submit a complaint about an incorrectly issued 1099-C. They will provide you with Form 4598 that you will have to attach to your tax return, along with any additional documentation that supports your claim.”

File a 1099-C in the Tax Year I Receive One?

Smalley said that, yes, you do have to file a 1099-C in the tax year you receive one. You can visit the IRS website for more details on filling out a 1099-C and getting it filed.

Statue of Limitations on a 1099-C?

“There is no statute, as the form is to be issued in the year that the debt is canceled,” Smalley said. If this isn’t the case for the 1099-C you received, contact the issuer or the IRS immediately to find out the reason you were sent a 1099-C and to remedy any problems.

The Amount I Owe or Amount I’m Paying Taxes On?

“It is the amount that you are paying taxes on,” Smalley said. “However, if you are insolvent, meaning you have more liabilities than assets, certain cancelations would not be taxable. You have to fill out another form, and you have to make sure that you have evidence to support that you are insolvent.”

How Does a 1099-C Affect my Credit?

The 1099-C form itself won’t have a direct impact on your credit scores. However, whatever behavior lead you to receive the 1099-C likely will be affecting your credit. For example, say you didn’t pay your debt and it was sent to collections. Having an account in collections can have a negative effect on your credit. You can read this guide for more information about how 1099-Cs (and the financial choices that led you to receive one) can impact your credit.

More from Credit.com

• What Is an IRA?
• How to Dispute an Error on Your Credit Report

This article originally appeared on Credit.com.

What to Do With 1099-C, the Most Hated Tax Form is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

From bacon- and stationery-of-the-month clubs to gym memberships and credit monitoring services, automatically renewed subscriptions that may start out as a free trial can easily end up as automatic renewals that bleed your bank account.

You don’t notice your money slowly dripping away, and you could be forced to pay overdraft fees if your bank account balance drops to zero. Or you’re stuck with charges on a credit card bill that you rarely look at for services you don’t use.

The easiest solution is to monitor your bank and credit card statements, and to cancel subscriptions you no longer use. But that habit isn’t common among millennials, says David Callis, co-founder and CEO of Hiatus, a new app that cancels auto-renewed subscriptions for free.

“A lot of times people aren’t paying much attention to it,” Callis said in a phone interview about reviewing credit card bills.

The average consumer wastes more than $500 per year in subscriptions and services they don’t want because they forget or don’t get around to cancelling, according to Hiatus.

In a survey it did this year, the company found that almost two-thirds of consumers paid for unwanted subscriptions because they didn’t cancel the auto-renewal feature. It found that most people forgot about it, but 20 percent said it was too much of a hassle to cancel.

Hiatus isn’t the only company providing this service. A service called Trim also cancels subscriptions for free, though it charges $6 if it has to call or send a letter on your behalf.

How it works

After signing up for Hiatus, you provide it with your bank account and password to get into the account — such as a checking or credit card account — and it scans with read-only access where your money goes.

Before a subscription is about to be renewed, such as monthly subscription to Netflix or an annual fee paid to LinkedIn, the Hiatus app will alert you and ask if you want it to cancel the service. It also shows all of your subscriptions at once, and you can cancel an unwanted a service with a single tap.

For now, Callis is the only person at Hiatus making those cancellations for users. He’ll start by trying to cancel the service online. If that doesn’t work, he calls or emails the service and asks to have the user removed from the automatic subscription and that they be refunded.

Your password to the subscription site isn’t needed, though you may have to get on a quick call with Hiatus and the site you’re trying to leave so it can confirm your identity and that you want to leave.

Banks could send alerts on subscriptions

In theory, banks and auto-renew services should be offering this type of service as a way to provide good customer service, Callis says. But most don’t and rely on consumers’ forgetfulness to make money.

“We want consumers to be alerted before they make a purchase,” Callis says.

“We know that phone tree and we know how that business will try to screw you anyway they can.”

Hiatus’ insider knowledge of how to get through to customer service quickly helps it cancel a service faster than a customer would.

“We know that phone tree and we know how that business will try to screw you anyway they can,” he says.

But more than cancelling services, the main reason people come to Hiatus is to keep track of their subscriptions, he says. If nothing else, it’s a way to have a list of where your money is going at your fingertips instead of waiting for a bank statement at the end of the month.

Bill monitoring services and gym memberships are the most difficult subscriptions to cancel, Callis says. That shouldn’t be a surprise to anyone who has tried to get out of a health club membership.

“They will literally make you come in there and have all sorts of documents lined up,” he says of gyms.

Making life simpler

The site reminds me of Unroll.Me, one of my favorite apps. I use it daily in my work and personal emails to easily unsubscribe from unwanted emails that I signed up for months or years ago and forgot about. It’s a free service.

Instead of going to the site that I no longer want to get emails from and trying to figure out how to unsubscribe, Unroll.Me does it with one click from its website or app. I can also roll subscription emails into one email that I get from Unroll.Me each morning, or I can let the individual emails continue coming into my inbox.

If only there was such a service for door-to-door solicitors.

The High Cost of Forgetting Automatic Subscriptions is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Most of the money to be paid by Wells Fargo through the order by the Consumer Financial Protection Bureau goes to the CFPB with a $3.6 million penalty. The bank must provide $410,000 in relief to borrowers.

The federal agency found that the bank failed to provide important payment information to consumers, charged illegal fees, and failed to update inaccurate credit report information.

How Wells Fargo erred

The consent order includes a number of things Wells Fargo must do, starting with providing at least $410,000 to compensate consumers for illegal late fees.

To get their refund for such fees, students shouldn’t have to do anything. The refunds include payments for the bank failing to disclose its payment allocation practices across multiple loans in a borrower’s account, as well as for not informing consumers that they could instruct the bank to allocate payments in a different way.

Refunds will also happen for illegal fees that were charged because the bank didn’t combine partial payments made in the same billing cycle, and for fees improperly charged when borrowers made a payment on the last day of the grace period.

Misinformation on partial payments

As any borrower can do with a loan, a partial payment can be made — though they’ll likely have to pay a late fee. Still, a partial payment will help a borrower avoid some interest charges, and is better than no payment at all.

For students with multiple loans from a bank, a partial payment can satisfy at least one loan payment in an account, meaning they’d be late for other loans but not the one where the partial payment was made.

Wells Fargo’s billing statements made misrepresentations to borrowers that could have led to an increase in the cost of the loan, according to the CFPB.

It incorrectly told borrowers that paying less than the full amount due in a billing cycle wouldn’t satisfy any obligation on an account. In reality, partial payments on accounts with multiple loans may satisfy at least one loan payment in an account.

This information, the CFPB says, could have deterred borrowers from making partial payments that would have helped at least one of the loans in their account, allowing them to avoid some late fees or delinquency.

Illegal student loan late fees

Even for borrowers who made timely payments on their student loans, Wells Fargo charged certain consumers late fees, the CFPB says.

The bank charged illegal late fees to certain consumers who made payments on the last day of their grace periods, and to certain students who elected to pay their monthly amount due through multiple partial payments instead of one single payment.

Inaccurate credit reporting

The CFPB said that Wells Fargo also didn’t update and correct inaccurate, negative information reported to credit reporting companies about borrowers who made partial payments or overpayments.

Such errors could damage a consumer’s ability to access credit or make borrowing more expensive.

What Wells Fargo must do

The CFPB ordered several steps that Wells Fargo must take to deal with its illegal student loan servicing practices.

Along with paying a fine and refunding consumers, it must allocate partial payments in a way that satisfies the amount due for as many of the loans as possible, unless the borrower directs otherwise. This can help reduce the number of delinquent loans in an account, as wells as the number of late fees.

Federal student loan servicers are already under a similar and new federal policy guidance to handle partial payments.

The bank is also required to improve its billing statements so that disclosures are made to explain how the bank allocates payments and how borrowers can direct payments to any of the loans in their student loan account.

Wells Fargo is also required to remove any negative student loan information that has been inaccurately or incompletely provided to a consumer reporting company.

Widespread student loan problems

Last year the CFPB issued a report about widespread servicing failures reported by student loan borrowers, adding to the problems that one in four student loan borrowers have by being in default or struggling to pay their loans.

Student loans make up the nation’s second largest consumer debt market, with 40 million federal and private student loan borrowers who collectively owe about $1.3 trillion.

Wells Fargo is a private lender, doing business in student loans as Educational Financial Services. It originates and services private student loans to 1.3 million customers in all 50 states.

Last year the CFPB found that more than 8 million borrowers are in default on more than $110 billion in student loans, which the CFPB says may be driven by breakdowns in student loan servicing.

Private student loans account for $100 billion of all outstanding student loans. While that’s a small portion of the market, the consumer agency found that they are generally used by borrowers with high levels of debt who also have federal loans.

What to Do if You Got Illegal Student Loan Service from Wells Fargo is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

A popular reaction to this sort of scenario is to see whether someone like MoneyBoat might be able to provide a short-term loan. The question that you should ask about this quick-cash solution, is whether it is the right course of action for you in particular?

Understanding the benefits of a short-term loan

The most obvious benefit of taking out a short-term loan, is the ability to get your hands on the cash you need within a matter of few hours in some cases.

Once your application has been approved and the terms of your loan agreed, it is often the case that the lender will arrange to make a faster payment to your bank account on the same day that your loan is approved.

Some lenders who provide these short-term loans will agree to let someone who does not have a good credit rating to borrow a small amount of money, but the interest rate will reflect this level of risk.

If you need cash in a hurry and perhaps don’t have too many options to borrow from other sources, a short-term loan can be a viable solution, provided you understand the need to repay the money on time and within a short space of time.

Cost of borrowing

Short-term loans are very much a “does what it says on the tin” sort of product.

It is a product that is designed to provide a source of funds to borrowers who need the money in a hurry and don’t have many other options to consider. The most obvious point to keep in the forefront of your mind when you are considering an application for a loan, is the cost.

If you were to apply for a conventional loan that was to be repaid over a 24 month period for example, you would expect to find a rate that was above the bank base rate by a reasonable margin, but nowhere near as expensive when compared to a short-term loan.

That is the point. A short-term loan is meant to be repaid quickly and the interest rate you are being charged reflects the risk to the lender and the urgency of your need for funds.

Repair your credit score

There is another aspect of short-term borrowing that is worth mentioning, as it can make a difference to your borrowing options in the future.

If your credit score is a bit damaged for whatever reason, a short-term loan does potentially give you the opportunity to demonstrate your ability to repay a debt on time, which should give a boost to your credit score.

Lenders are understandably wary of anyone who applies for a loan that has a history of late or non-payment on their file. By using a short-term loan responsibly and repaying the amount borrowed in a timely manner, there is a chance that lenders will view you more favourably in the future.

Considering your options

As with any form of borrowing, it is always wise to consider all of your available options before making your final decision.

A short-term loan can be viewed as an emergency funding option, especially when you need the money in a hurry, but it still makes a lot of sense to at least take a moment to take stock of your financial situation and consider what borrowing options are available to you and how viable they are in the circumstances.

Every form of borrowing has a cost attached to it, so if you have the option and the time to maybe sell a few unwanted items to raise the cash you need or do some extra paid work for example, these would obviously be good alternatives, as you will be able to raise the money you need without incurring any borrowing charges.

If you decide that a short-term loan is the right option for you, make sure that you have the means to repay the loan on the agreed date. Some of the bad press attached to some loan products is associated with additional fees for late and non-payment of the amount due, which then escalates the size of the loan and makes matters worse.

Provided you use a short-term loan prudently and keep to your agreed payments, it may well be that it is a viable option to meet your immediate financial needs.

Nicholas Krauspe is the Head of Operations at MoneyBoat.co.uk, a London based alternative finance company providing unsecured consumer credit to residents of the UK. Nicholas has over 10 years of operations and management experience in the consumer finance sector.

Quick Cash: Is a Short-Term Loan Right for You? is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.