Assuming the world economy will not get much better throughout the year personal bankruptcies will probably hit an all-time record. Why? Because installment credit will be easier to get and, as always, the lures will be particularly appealing to the low-skilled worker who is layoff-prone and who has only the most meagre financial resources behind him. If you need to do so, you should seek help from the best bankruptcy attorney san diego. But it’s wise to avoid bankruptcy, to begin with.
And how can you avoid being one of this miserable number? Surely one way is by knowing the most obvious credit pitfalls and taking the most elementary steps to avoid them. To illustrate, beware of the followings:
- The blank installment sales contract: NEVER, NEVER sign a contract which has not been completely filled out or which contains blank spaces which have not been thoroughly xxx’d out.
- Avoid the contract in which the seller keeps title to a whole list of items you are buying on credit until all payments have been completed (for instance, a 14-piece set of furniture). A single delinquent payment could permit the seller to repossess the entire set even though you have paid all but a few dollars of the total.
- The racketeering door-to-door salesman who intrigues you into signing an installment sales contract for goods which arc never delivered, sells the contract to a small loan company to which you then have an ironclad obligation to repay-and disappears. To protect yourself, make this salesman show you his credentials, check them out with the Better Business Bureau or Chamber of Commerce if you have any doubt about his honesty. Keep a note of his car license number – just in case.
- “Loan consolidation” for a fat sum or “debt pooling” in which the debt adjuster charges you fee merely for distributing a sum of your money among your various creditor each week or each month. Simple debt consolidation for a profit is outlawed in many state.
- The balloon contract which provides for a final payment which is considerably larger than the previous monthly payments. If you are not aware of this and are not prepared to meet the final payment, your purchase may be repossessed before you can produce the money. Or you may be compelled to refinance at disastrously disadvantageous terms to you. Balloon payments are illegal in some states today because they are widely used to trick you into buying – at low initial monthly costs – things or services you cannot afford.
- An acceleration clause; in this case, default in one single payment makes all other payments due at once. If you are unable to pay the total balance, your purchases could be carted away for resale and you still may not be absolved of all future liability.
- Wage assignment! This allows the seller to collect part or all of your paycheck if you are delinquent on a payment. This gets into the whole sick area of wage garnishment under which your creditor may oblige your employer to withhold all or part of your wages until your debt is repaid and which may irritate your boss to the point of firing you.
- Obscure Provisions in your credit contract which stipulate you must buy extra items you may not want. These clauses are frequently, buried in the contract so you don’t realize they are there until after you have signed.
- No rate quoted – but just a simple ad that an item may be bought for, say, $5 down and $5 a month – without stating how many payments are required. This is illegal under the Truth In Lending Act, but it still flourishes- and obviously a schedule of $5 and $5, whatever the totals for a long, long time, can imply fantastically steep interest rates.
- Exorbitant extra charges and “processing fees”, adding substantially to your borrowing costs. A lender might list such chargers separately to deceive you with seemingly very low loan rates. This is only a sampling of the credit traps into which you can so innocently and so easily fall. Just being able to identify them, however, will be tremendous protection for you.