Credit repair secrets



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HOW PAWN SHOPS WORK


A pawnbroker makes loans on personal property left as collateral. The property can be redeemed when the loan plus interest is repaid.

The interest rates for pawnshops, which may be regulated by state or local laws, may range from 5% to 6% a month. Loans can usually be renewed, but only if the interest for the original period has been paid.

Pawnbrokers will accept a variety of personal property as collateral. Usually, items that are small or of modest value (jewelry, clocks, computers, camcorders, silverware, etc.) Brokers won't lend more money than they think they can get if the pledged item is not redeemed and has to be sold.

When a pledged item is not redeemed, brokers are required to notify pawners that the loan period has expired and to give them a final opportunity to redeem their personal property before the broker has the right to sell the item. In some jurisdictions, brokers may keep all the money received from the sale of the unredeemed pledge. In other cases, the broker may only keep the original loan and any interest due, but must turn any excess over to the pawner.

In many states, pawnbrokers are required by law to file with the local police a daily list of items that have been pledged. They must report and give a description of the object along with serial number and other points of identification.

This gives the police an opportunity to check these pledge items against any list of reported stolen items. In somebody buys a stolen item from a pawnbroker, it must be returned, and the broker must refund the purchase price to the customer.

DEBT LIMIT. Installment debt should not exceed 10% of take-home pay. A debt ratio of 20% indicates trouble ahead. However, when computing for your debt ratio, you must not include mortgage payments in the amount of debt.

IMPROVE YOUR CREDIT BY PAYING BILLS LATER RATHER THAN SOONER


Every business will get to the point where suppliers will offer terms on bills, rather than requiring payment up front or on delivery. Their bills will probably be marked "2/10, net 30." This means you get a 2% discount if you pay within 10 days, and the bill is due within 30 days.

Many business owners will jump at the opportunity to save the 2% by paying early, and rightfully so. However, believe it or not, they can help their credit rating by paying at the end of 30 days.

How is this so? It's all a matter of your business' CREDIT HISTORY. All of the companies who offer you terms will be reporting your history to various credit bureaus. These bureaus are who gets consulted by banks when they decide whether or not to give you a loan.

By always taking advantage of the 2% discount, a business establishes a paying pattern. Thus, if you've been paying a company's bills in 5 days for the past year, this is what they will expect from forthcoming bills. Now, say one month has a tighter cash flow than normal, and you must take 20 days to pay that bill. This sends up a red flag for the billing company.

You normally pay in 5 days, why are you now paying in 20? Even though you paid the bill well within the deadline, you have given a sign that you had a cash flow problem. This uneven paying pattern can show up on your credit rating. Even though all your bills are paid on time, an uneven paying pattern can jeopardize your future chances for more and larger credit limits.

Now, if you always pay your bills on the 25th day of the due period, even when you can pay them early, that cash poor month won't look any different to the billing company. Most companies would rather grant terms to a company that always pays on the 25th day, than one that sometimes pays early, sometimes pays later, as this reflects an image of disorganization and uneven cash flow.

Also, always paying toward the end of the due period will aid your cash flow. If you pay your bills consistently, at the same time every month, you will not be surprised by a sudden cash shortage. For example, say you decide to pay a bill early one month. Then, the next week, your main supplier calls to tell you about a closeout deal he has that would double your profits.

Only problem is he can't offer terms, it has to be cash. Because you paid that bill early, you can't take advantage of the special deal. If you would have waited to pay it, your cash flow would have allowed the purchase, and the resulting higher profit margin would have yielded the cash to pay the bill.

So, you see, paying bills later, and not taking advantage of any early payment discounts, CAN work to your advantage. You need to consider your future plans and decide if saving 2% now is really worth it.

SIGNATURE LOANS


Here is another passport to success in taking advantage of a good deal or profitable transaction when it passes your way. "Signature loans are your key to the vault", and because they are based on your signature alone, they are also known as "Character Loans". No co-signer or collateral is involved in a real signature loan.

With pen in hand, based on your prior credit history and also your own experience with the bank, your signature can draw from $1,000.00 to $250,000.00. It all depends on your ability to pay the money back.

Once you get your first signature loan with a bank, walk in on the day it is due and pay it off with two cashier's checks or with two different stacks of money. The first check or money stack will be to cover the principal of the loan. Be sure to tell him how well you did for yourself as you hand over your payment. Tell him not to make any plans for the money as you may need to rent it again soon.

As you pay back the interest portion of the loan, remind the loan officer that your good performance and his smart decision to give you a loan in the first place was a profitable experience for the bank as well. Remind him that it's the rent paid on these loans that keeps the bank in business.

Now, let's suppose that your original loan was for $3,000.00. As you get up to leave the bank, turn to him and say, "Oh, by the way, I may want to rent $5,000.00 in a couple of weeks. Will you hold on to $5,000.00 for me?"

What you are doing is pre-qualifying for a $5,000.00 loan. You are saying, "Hey, Mr. Loan Officer, are you going to raise my next signature loan to $5,000.00 or is $3,000.00 the limit?" What can he say? You have just paid off the $3,000.00 loan, and the rent for the loan, and you have just reinforced the point that the rent, or interest, on the loan is what keeps the bank in business and pays his salary. If he answers with something like "We'll see.", sit back down at his desk and say, "You mean you're not sure? What seems to be the problem?"

It is very important at this point that you get some kind of answer from him in advance. It is very unlikely that a "Yes" will come forth, but a "sure" or "I suppose" will do. Do not leave the bank until he commits to the next loan. With each new loan, raise the dollar amount by $2,000.00 increments, until you have reached $10,000.00. At that point, you will be able to raise the amounts of future loans in $5,000.00 and $10,000.00 increments.

When shopping for aggressive banks, ask the loan officer you are dealing with if they are a "commissioned" loan officer. They are the most aggressive as they are paid a commission on all the loans they write. These people will be more eager to make you a loan.



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