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Credit Abuse Resistance Education
             Part II
Presentation Overview
 Your Credit Rating Matters
 Predatory Lending Traps:
      3 yr Car Loans
      Car Title Loans
      Pay Day Loans
      Rent to Own
      Pawn Shops
 Rental Agreement and
 Identity Theft
 Student Loans
 Practical Budgeting Tips
 Questions??/Evaluations
 Your Credit Rating Matters
  Consequences of Credit
Make it            Higher insurance
 impossible to       rates
 complete degree    Denial of a lease
Denial of          Denial of student
 employment          loans
Denial of credit   Emotional stress
Higher interest
Predatory Lending
Traps - Loans to Avoid
 More Than 3 Year Car Loans
 Car Title Loans

 Pay Day Loans

 Rent to Own Contracts

 Pawn Shops
CAR LOANS – Avoid more
than 3 yr car loans
   More than 3 year car loans are marketed to reduce
    monthly payments.

   However, the longer the term, the more you pay
    for interest.

   Example: $25,000 loan @ 6.5% for 6 years instead
    of 3 years more than doubles the interest paid 
    $5,240 as opposed to $2,576.

   Example: Consider the cost of a home mortgage
    for 30 years vs. 50 years? Concept still applies.
What are “Upside Down”
Car Loans?
   Unless a substantial down payment is made, the
    loan may be “upside down” from day one (the
    average car loses 20% of its value in the first year
    and much of that occurs when it is driven off the

   An “upside down” loan is not fully covered by
    insurance, which generally covers only the car’s

   “Gap insurance” can be obtained for the difference,
    but that adds to the monthly payment.
Downside to “Upside down” Car Loans

   It’s harder to sell or trade a car with an “upside
    down” loan.

   Some dealers will roll the shortfall into a new car
    loan, but that compounds the problem – the new
    loan is even more “upside down”!

   If there is a default, the lender will repossess the
    car but the borrower will be liable for the difference
    between the sales price and the debt amount.
Smart Tips on Car Loans
   Think in terms of price, not monthly payments.

   Make a down payment of at least 20%.

   Take out the shortest loan you can afford. Cars lose value
    and more likely need repairs as they age.

   Don’t take out a loan for longer than you intend to keep the

   Shop around and do your homework before buying. Used car
    shopping? Have a mechanic look at it. Investigate the
    history or prior ownership. Does it have a “salvage” title?
More Tips on Car Loans

   Spend no more than 20% of your disposable income on car

   Make extra payments on your loan whenever you can – you
    build equity and reduce the total interest paid over the life of
    the loan.

   Sell your used car yourself. You will get more than its trade-
    in value.

   If you get into an upside down loan, keep the car until its
    value equals the loan amount.
Car Title Loans = Betting
Your Car’s Title.
   Car Title loans are secured by your car’s title. If you fail to
    make the loan payment – just one – the lender can repossess
    the vehicle.

   Marketed as small emergency loans. In Oregon, the loan is
    made for a period of 60 days with a single payment payback.

   The Lender determines how much you can borrow based on
    the value of the property.

   Other Title Loans in Oregon include: Titles to recreational
    vehicles, boats or a mobile home.
Title Loans in Oregon –
At What Cost?
   In Oregon, the rate of interest on a new or renewed title loan
    can be as high as 36% per annum, excluding the origination
    fee for a new loan. ORS 725.615(1)(a).

   Title Lenders can also charge 1 origination fee of $10 per
    $100 of the loan amount or $30, whichever is less, during the
    term of a new title loan, including all renewals of the loan.
    ORS 725.615(1)(b).

     – Example: You borrow $5000 @ 36% interest per annum. At the
       end of 60 days, what will it cost to get your car title back?

     – Calculation: $5000 (loan amount) + $300 (interest @ 36% per
       annum = $150/month x 2) + $30 (origination fee) = $5,330
What are Pay Day Loans?

   Marketed as short term loans. Typically for initial 2 weeks –
    until next pay check – and range from $100 to $500 but
    could be more.

   In Oregon, they are defined as made for a period of 60 days
    or less or for which the lender may demand repayment within
    60 days.

   Example: Borrower gives post-dated check for the desired
    amount or electronic repayment agreement provided by or on
    behalf of the borrower to the lender to be held until next pay
    check. On payday, borrower takes the cash to the lender and
    get his/her check back. If borrower doesn’t show up with
    cash, the lender can cash the check.
Costly Consequences of
Pay Day Loans in Oregon
   In Oregon, the interest rate can be as high as 36% per annum,
    excluding the origination fee for a new loan. ORS 725.622(1)(a).

   In Oregon, lenders can charge one origination fee of $10 per $100 of
    the loan amount or $30, whichever is less, during the term of a new
    title loan, including all renewals of the loan. ORS 725.622(1)(b).

   New Legislation in Oregon: Lenders are prohibited from renewing an
    existing pay day loan more than 2 times, and cannot make a new
    pay day loan to a consumer within 7 days of the day that a previous
    pay day loan expires.

   Beware: In some States, the lender can hold the loan for another
    pay period but the borrower pays a second fee and the loan rolls
    over. The typical rollover fee is $50. NOTE: $50 every two weeks
    equates to annual interest rate of 433%!
     Rent to Own Contracts
   Marketed as a risk-free way to acquire
    furniture and appliances. Because RTOs are
    not styled as loans, APRs may not be

   Average imputed APR is 100% based upon
    the sales prices offered by the RTO stores.
    If retail prices are used, the imputed APR
    can increase to 200% or more!
Advice re “Rent to Own”
Contracts – Don’t!
   Total cash to purchase an item from an RTO store
    may be 2 to 5 times more than from a retail store!

   Many items are not clearly marked as “new” or

   Save your money until you can afford to pay cash.
    At the end of 18 months, you will have the furniture
    and appliances and much more money.

   Question: What about long term car leases?
              Pawn Shops

   Pawn shops usually carry terms of 1 to 4 months
    and are secured by the piece of property.

   In Oregon, all loans are for a period of 60 days
    unless otherwise agreed by the pawnbroker and the
    customer. However, a pledge may be redeemed
    and the loan repaid at any time before the loan
    period expires. ORS 726.400(1).

   Interest rates vary State to State from 2% to 25%
    per month!
Can’t Pay -What Happens?

   The collateral is sold if the interest or loan amount
    isn’t paid by a specified period.

   What if you lose the pawn ticket? In Oregon, the
    holder of the pawn ticket may be presumed to be
    the person entitled to redeem the pledge.

   The pawnbroker must deliver the property to the
    person presenting the pawn ticket upon payment of
    principal and interest due on the pledge loan. ORS
Rental Agreements, Co-Tenants
and Your Credit History

   Landlords typically run a credit report on all
    prospective tenants before entering into a rental
    agreement or contract.

   Read and understand the entire contract before
    signing it.

   Renter’s insurance provides protection against
    accidental loss or theft and is inexpensive to buy.
Problems That Could
Effect Your Credit History
   Question #1: Your roommate does not pay his/her share of
    the rent on time. What should you do to protect your credit

   Question #2: You and a roommate signed a 1 year lease on
    June 1, 2008. Your rent is due on the 1st of every month.
    However, your roommate moves out on November 1, 2008,
    before your rental agreement expires. What should you do to
    protect your credit history?

   Question #3: Suppose your grandmother is also a co-signer
    on your lease with you and your roommate, but she doesn’t
    live with you. Will either of the above situations effect her
    credit history?
   The Identity Theft and Assumption Deterrence Act makes
    identity theft a federal crime. Violations are investigated by
    federal law enforcement agencies, including the U.S. Secret
    Service, the FBI, the U.S. Postal Inspection Service, and the
    Social Security Administration’s office of the Inspector
    General. Federal identity theft cases are prosecuted by the
    U.S. Department of Justice.

   It occurs when your personal information (“PI”) is stolen
    and used without your knowledge to commit fraud or other
    crimes. Your name, SSN, credit card number, cellular
    telephone electronic serial number, or any other piece of
    information that may be used alone or in conjunction with
    other information to identify a specific individual is
    considered a “means of identification”.

   Identity theft can cost you time and money, and it can
    destroy your credit and ruin your good name.
The 3 “Ds”of Identity Theft Protection

   DETER: Deter identity thieves by safeguarding your

    –   Don’t give out your PI on the phone, through the mail, or internet unless
        you initiated the contact and know who you’re dealing with. Never click
        on links sent in unsolicited e-mails.

    –   Don’t use an obvious password. Protect your computer with up-to-date
        firewalls, anti-spyware, and anti-virus software.

    –   Only carry ID, credit and debit cards that you need. Don’t carry your SSN
        card. Secure your SSN card and PI in your home, especially if you have
        roommates, employ outside help, or are having work done in your home.

    –   Mail and trash: Deposit your outgoing mail in post office collection boxes
        or at the local post office rather than an unsecured mailbox. Shred
        financial and personal documents before you discard them.
Protect Yourself Against Identity Theft –
the 3 “Ds”of Identity theft Protection

   DETECT: Detect suspicious activity by routinely
    monitoring your financial accounts and billing

    – Be alert to signs that require immediate attention.

    – Examples: Mail or bills that do not arrive as expected.
      Unexpected credit cards or account statements. Denial of credit
      for no apparent reason. Calls or letters about purchases that you
      did not make.

    – Inspect your credit card statements and credit reports carefully.
      Look for suspicious activity, accounts you didn’t open, debts you
      can’t explain, and inquiries from companies you haven’t
Protect Yourself Against Identity Theft –
the 3 “Ds”of Identity theft Protection

   DEFEND: Defend against identity theft
    as soon as you suspect a problem.
    – Place a “Fraud Alert” with the 3 nationwide
      consumer reporting companies - Equifax, Experian,
      TransUnion. The alert can help stop someone from
      opening accounts in your name.

    – Close credit cards and bank accounts immediately.
      When you open new accounts, place passwords on
      them. Avoid using your mother’s maiden name,
      your birth date, the last 4 digits of your SSN, your
      phone number or a series of consecutive numbers.
More re Lost or Stolen Personal
Information – What To Do?
   Driver’s license/other government issued ID: Contact
    the agency that issued the license or other ID
    document. Follow their procedures to cancel and get a
    replacement. Ask the agency to flag your file so no
    one else can get a license or ID from them in your

   File a police report with law enforcement to help you
    with creditors who may want proof of the crime.

   Report your complaint to the Federal Trade
    Commission. Your report helps law enforcement
    officials across the country in their investigation.
    Online:; Phone: 1-877-ID-THEFT
Student Loans
   Start researching what is available early.

   Scholarships? Grants? Loans?

   If I need a student loan, how much should I

   Public vs. Private lending? Is there a difference?
Living On Your Own
  Where to Start?

Step 1: When you prepare your budget,
consider what you don’t have to spend
money on because your family is paying
for it.

   Examples living at home:
     – Your favorite food/snacks/beverages are always in the kitchen.
     – Aspirin is in the medicine cabinet.
     – Laundry soap is always in the laundry room and you don’t need
       quarters to use the washer and dryer.
     – Dish soap and paper towels are near the kitchen sink.
     – Soap, toothpaste and toilet paper is stocked up in the bathroom.

   What “needs” will you need to pay for if you live on your
     – Rent, utilities, phone, food, insurance, clothing, gas, parking,
       clothing, tuition, school books and supplies, insurance for your
       car, rental, and health.
Step 2: Are your actual or projected
expenses “needs” or “wants”? If not,
where can you make adjustments?

   If you have to, you might be able to reduce some
    of the expenses that are not truly “needs”.

   Examples:
    – Buy generic brands vs. name brands.
    – Buy school text books at a used book store vs. new at the
      campus bookstore.
    – Shop around for the best buy or discount.
    – Look for and save with coupons.
    – Buying in bulk with a friend may save money.
Step 3: Budgeting means setting a limit
on how much per week you will spend
on certain items
   Tips to stretch your budget:

   Compare: Eating in the dorm cafeteria or learning to cook
    and eating at home with a little left-over for tomorrow’s lunch
    or snack vs. eating out and buying lattes 2 or 3 times a day
    ($15-$30 a day).

   Compare: Bus pass, public transportation, bicycle, walking, or
    car pool vs. paying daily expenses for a car (i.e., gas, parking,
    car insurance).

   Compare: Go to a discount afternoon matinee or rent a
    movie vs. going to a movie theatre for a new movie on Friday
Additional Tips on
   Avoid using your credit card except for an
    emergency, and then only if you can pay
    the balance off at the end of the month.

   Avoid ATM fees by using machines that are
    tied to your bank or are otherwise free.

   Avoid impulse buying on the internet.

   Have savings for emergencies.

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