Category Archives: Debt

Wanted: Access to Personal Credit Reports

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“Why is it that an individual cannot obtain information on his credit record in Jamaica? If you try to get the details from a company that carries out credit checks, you are informed that access to the information is only available to financial institutions such as banks, credit unions and mortgage houses.

“Therefore you could be making plans for your financial future, but there may be some little thing in your past that you might be unaware of, or which might be wrong, and you don’t have the ability to correct this information.”

Jamaicans are becoming increasingly credit happy. With buying sprees funded by payday loans, credit cards, and hire purchase plans, we really can get it if we really want it. However, as our credit appetite grows, lenders are becoming more cautious about the extra business.

Many consumers may not be aware that when they apply for a loan or credit card, their borrowing history is placed under a microscope. Past details about what they borrowed, and how well they paid it back may have been captured on a database by a credit investigating company. This information can be used to determine if they are successful in getting new loans or not. Continue reading Wanted: Access to Personal Credit Reports →

Beware of the Rule of 78s

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“I purchased a stove using a hire purchase plan over 24 months. I got a lump sum in a partner draw and decided to pay it off early. To my surprise, I had to pay more than I had expected to in order to clear off the loan before the scheduled date.

“I think this was very unfair, in fact, I think I should have been rewarded for paying my loan in full before the due date. Can you explain how this is possible?”

When borrowing money it’s very important for consumers to be very clear about all the terms of their loan contract. As we’ve discussed in previous columns, the method of calculating a loan can make a big difference in the amount of your total interest and the monthly payments due.

What many borrowers are not aware of is that some loans contain prepayment clauses that can end up costing you a pretty penny if you decide to pay up earlier than contracted. Continue reading Beware of the Rule of 78s →

Student Loan Lessons

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“Years ago I borrowed J$80,000 from the Students’ Loan Bureau. I had some difficulties paying back the loan as scheduled, but in all I have repaid about J$50,000. I’m trying to make a deal with the Bureau to clear my debt, but I don’t understand why my balance is in excess of J$120,000. There must be something wrong with their calculations!”

The Students’ Loan Bureau provides a revolving loan scheme which has given many persons the opportunity to improve their income earning potential by attaining higher education. However, despite the benefits that thousands have received, there are some persons who complain that the student loan has been more hassle than help to them.

I have heard comments like “I am just working to pay my student loan,” or “I would not encourage anyone to take a student loan.” The negative emotions are usually accompanied by a declaration that they don’t understand how the payments are calculated or why interest for students should be so high.

Even worse, the high level of loan delinquency indicates that some persons are taking advantage of the unsecured credit to get their higher education without feeling an obligation to repay. Continue reading Student Loan Lessons →

What a Difference a Loan Makes

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“I’m a little confused about the difference between loans that are paid back on the reducing balance and loans that say add-on. I’m comparing mortgages from different companies in order to buy a house, and I want to ensure that I get the best deal. Please advise me.”

It’s not an easy task for the average consumer to comprehend how loans are calculated. You could probably call four institutions and ask for the same quote and receive four different repayment amounts, depending on how they compute their loans.

When you are looking at loan options, it’s important to ensure you are comparing apples with apples. The true cost of a loan can include commitment fee charges and insurance costs, which would vary across the companies. Continue reading What a Difference a Loan Makes →

Breaking Free of Debt

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“After reading your article about bad debt last week, I realized that I’m trapped in a cycle of debt. I have been taking our loans over the past six years. Each time I clear off an old loan, I borrow even more money which typically is used to purchase some unnecessary household item. I now owe about three times what I did when I originally started borrowing. Please help me to break free of this debt!”

The current growth in consumer debt has its pros and cons. On one hand, it’s great for the economy, as profits of the lending agencies and retailers increase when people’s appetite for debt grows. However, on the other hand, there are more reports of consumers who are suffering under a debt burden that they find hard to bear.

As we have been discussing recently, there’s ‘good’ debt and ‘bad’ debt. Debts that are financially beneficial are those that can provide you with some monetary advantage in the future; while borrowing to sustain a lifestyle that’s beyond your means will definitely lead to financial challenges.

So if you’re stuck in a cycle of spending and debt, what can you do to break free? Follow the steps below to start your journey towards freedom from debt. Continue reading Breaking Free of Debt →

Bad Debt

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“I work in the payroll department of a large organization, and I pay out millions of dollars each month to different loan companies. I know that some of these lending agencies charge exorbitant interest rates. My concern is that many of the employees are taking home little and nothing from their pay cheques. How can we get them to realize the dangers of too much debt?”

Consumer debt is on the increase in Jamaica today. The rapid demand for debt could suggest that we’re not able to meet our needs from our income, so we’re forced to borrow to make ends meet. Or it could be an indicator that many people are not willing to defer their desires until they actually earn enough to fulfill them.

With a high appetite for debt comes a resultant growth in alternative lending agencies. ‘Rapid Financing’, ‘Same-Day Loans’, ‘Quick Advance’, declare the advertisements from agencies that offer a fast track loan service. Reports from traditional credit facilities also point to the increase in credit card usage and loan portfolios.

It seems that Jamaica is now ‘debt-crazy’.

Continue reading Bad Debt →

Can Debt Be Good?

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“My mother always told us never to borrow money for anything. She worked very hard and bought a small house for cash, and she never owed anyone. However, I’m finding it difficult to live debt-free in these times. Is all debt really bad, or are there any good reasons for borrowing money?”

In the olden days of Shakespeare, it may have been possible to declare “Neither a borrower nor a lender be,“ as he wrote in the play Hamlet. Even in your mother’s time it was probably also possible to acquire housing, transportation and an education without ever visiting a lending institution.

However, with today’s rising cost of living that hasn’t seen a matching increase in income, the average consumer is often left with little choice but to incur some form of debt.

But was your mother really right when she said ‘No debt’ is good? Or can debt actually be beneficial?

Continue reading Can Debt Be Good? →

Be Credit Card S.M.A.R.T.

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Last week we looked at how easy it was for consumers to accumulate credit card debt, and we provided some practical steps how to reduce this liability over time. While the words ‘credit card’ and ‘debt’ tend to run hand-in-hand, owning a credit card doesn’t have to be a negative thing.

A credit card is just a tool that can help you to manage your cash flow and bill payments. However, like any other tool, if it is handled incorrectly, it can hurt the user. To be successful with credit card usage, you have to learn how to be credit card S.M.A.R.T:

S- Start with your budget

Your credit card should always be used along with your budget guide, to ensure that you’re making purchases that you can really afford. Identify those expenses that can be paid with a credit card, and don’t charge more on your card than you would have paid if you were using cash. Continue reading Be Credit Card S.M.A.R.T. →

Credit Card Crisis

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“Help! I moved out of my parents’ house six months ago, and I’ve run up balances of over J$90,000 on three credit cards since then. I had to buy things for my apartment, and I think I went overboard. I can now only afford to pay a few thousand dollars every month on the cards, and seems like it’s taking forever to reduce the balances. What can I do?”

You’re not alone in your credit card crisis. News reports have indicated that credit card use in Jamaica has grown significantly in recent times. The resulting increase in credit card debt has left many customers feeling desperate for solutions to get rid this seemingly endless liability.

Credit cards are not necessarily bad- they can be an extremely convenient way to pay bills, or to provide funds in the case of a sudden emergency. However, a credit card can be like an out-of-control racehorse who has thrown its rider, if proper money management skills are not used along with this convenience. Continue reading Credit Card Crisis →

Debt Distress

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“I am engaged to be married to a great guy. Problem is, he doesn’t know that I’m up to my ears in debt. I was made redundant two years ago, and I had to max out three credit cards and take out two credit union loans to survive.

“Now that I’m working, my salary can barely pay the minimum required to pay off these debts. I’m too ashamed to tell my fiancé, as he may think I’m not financially stable and reconsider our wedding.”

Don’t be so hard on yourself. Being without a job for an extended period can send practically anyone into debt overdrive. Give thanks that you’re back into the world of a steady paycheck!

However, your past financial woes are not going to disappear by pretending that they never existed.

Continue reading Debt Distress →