The payday lending industry is big business in some states, and it just so happens that Tennessee is one of them. The bipartisan committee working on the creation of the consumer agency has representatives from both parties, Republicans and Democrats, and one of the Republicans is Bob Corker. Corker is a Republican and payday lender political contributions to his campaign fund have been significant.

The implication, of course, is that Corker is being influenced by the payday lending industry, but Democrat Christopher Dodd agreed to the exemption also. Now Dodd finds himself in a position of having to justify his support for the exemption after making so many public remarks about the need for strong regulatory control to be given to the new consumer agency.

Dodd said he agreed to the exemption because committee negotiations had broken down. In an effort to break gridlock, Dodd reluctantly agreed to significantly reducing the amount of control the new consumer agency would have over the payday lenders.

Payday lenders come under a lot of criticism from consumer advocates who believe their practices are predatory in many cases. People agree to pay exorbitant fees and interest rates on small loans secured by an expected paycheck. The consumers using these lenders are usually low income or have bad credit. Consumer advocates believe the federal government needs to regulate the industry to prevent financially desperate consumers from being trapped into a debt cycle.

Under the revised terms of control written into the legislation, the new consumer protection agency would be able to write new rules for all financial businesses and not just banks. The agency could only enforce the rules against nonbank firms though after petitioning a body of regulators yet to be established. On the other hand, as it stands now, the consumer agency could enforce rules that involved banks.

Payday lending generates billions in revenue each year and employs as many as 77,000 people. A crackdown on their practices would negatively impact their revenue and that is why the industry has diligently lobbied against new regulatory control. But consumer advocates say that if the new consumer protection agency is not able to enforce new rules then business will be “as usual”.

The payday lending industry has been quite vocal about the fact that banks are resisting new regulation while payday lenders are attacked. Yet it was risky behavior on the part of banks that caused the collapse of the global economy. Payday lenders do not want to be singled out just so the federal policymakers can claim they are protecting consumers while banks are spared tighter regulation.

Of course, consumer advocates say the people who are being forgotten are the very ones who need the increased regulation. Payday lenders serve consumers who often lack financial savvy and frequently do not understand the terms of the agreements they are signing. The committee is continuing negotiations even as the lobbyists continue putting pressure on the committee to reduce the ability of the consumer protection agency to enforce rules.

Virginia’s state legislature decided to address the issue and has been working on a new bill that will set lending limits on car title loans. The Virginia Senate passed a measure in February and now the state House has followed suit in March. It is expected the Governor will sign the bill into law.

Virginia’s bill accomplishes two things: it creates an interest rate cap and limits loan terms. The new law creates a tiered interest rate schedule. For example, a 22 percent interest rate per month would be the maximum rate on a loan that is smaller than $700. For a loan greater than $1,400 the cap is 15 percent per month. In between $700 and $1,400 there is a tiered schedule of interest rates allowed to be applied based on the loan amount.

Other provisions of the bill include limiting the loan to one year and restricting eligible borrowers. The loan amount must be less than half of the car’s value. The law also prohibits interest from accruing on a loan once the car has been repossessed.

It is interesting to note that the interest rate limits still allow a lender to charge a triple digit interest rate over a period of a year. Some Virginia legislators do not believe the law goes far enough in establishing limits and see the new law as continuing to allow predatory lending though on a scaled back basis.

The final legislation represents a compromise between consumer advocates, lenders, and industry groups. Of course, not everyone is happy with the bill because some say it still allows high interest rates. Individual provisions in the bill strike a sour note with many. But like most laws, the legislation represents a compromise.

This legislation is reminiscent of restrictions placed on payday loans almost two years ago. There have been previous failed efforts to limit car title loan terms, but all previous proposals have failed. This bill is historic in that it not only limits loan terms but places a cap on interest rates.

Car title loans are often sought by the financially illiterate or people desperate for money who also have bad credit or no assets other than an auto. Many people do not understand the terms they are agreeing to when they take out a loan using their car as collateral. Once the loan becomes delinquent, the auto can be repossessed leaving the person with no transportation and a debt they are unable to pay. Though the new legislation still allows what some see as usury interest rates, it is hailed by Virginia consumer advocates and legitimate lenders as important legislation that addresses predatory lending practices.

What consumers did realize though is that requesting a mortgage modification, even if not in foreclosure, could negatively impact credit ratings. This has angered consumers trying to do the right thing and discovering they are penalized anyway for years to come. People in foreclosure are not surprised to find their credit rating lowered due to late payments. But even consumers who have not made any late payments are finding their credit scores lowered by asking for modifications to their current mortgages.

According to the logic of lenders and credit rating agencies, anyone asking for a modification is indicating they are having financial problems. The credit score can drop by as much as 100 points when a temporary mortgage modification agreement takes effect. It does not drop again when the temporary agreement becomes permanent. But consumers who apply for the loan modification program and are not approved will see more than 100 points drop off their credit score.

The drop in the credit score affects the ability to get credit for years. Housing counselors agree with consumers that the negative credit scoring is not fair. Homeowners were not told their credit ratings would be impacted before applying for the modifications. Consumer advocates believe consumers are being punished even though they are acting responsibly and trying to stave off mortgage defaults.

Lenders like to point out that the loss of credit points is much less under the modification program than it would be due to foreclosures. A foreclosure can cost 150 points or more, but that is really little consolation. Already feeling victimized by the banks, consumers now feel victimized by their own government.

Lenders believe that the credit point drop is justified because consumers asking for loan modifications are obviously in financial trouble. The lenders believe the lending market should be aware of the consumer’s true financial status. If the credit score was left unchanged, borrowers would still qualify for loans they cannot afford.

The Obama “Making Home Affordable” program has been an enormous disappointment. Meant to help a million homeowners, only 170,000 have actually found assistance as of February. Many of the applications are bogged down due to missing documentation and mortgage companies dragging the process down through delays. The Obama administration has tried to put pressure on lenders to speed up the process, but to date the efforts have been largely unsuccessful.

The discovery that credit scores can fall even when not in mortgage default was yet another blow to embattled consumers. The Treasury Department and the banks offer little advice other than to say that paying bills on time in the future will lead to higher credit scores.

How you handle this process will affect how much you pay so you might as well learn how to do it right. If you have all the money in the world then you can afford to be sloppy about the car buying and auto loan process. If not then you will want to keep reading to learn how to be smart about auto loans.

How Much Can You Afford?

This is a common question that many people neglect to answer before they begin the car buying process. Before you even start daydreaming about your new car you should know how much you can afford to pay. And once you know how much you can afford to pay then decide how much you want to pay.

Many people try to spend as much as they can within their budget when it might be a better idea to leave yourself some leeway. Figure out how much you can afford to spend then figure out how much you want to spend. Take your time deciding on an amount. You don’t want to deviate from it in the slightest later.

What Do You Want?

Again, you want to do your homework before you head out to look at cars. If you can decide exactly what kind of car you want before you start then clearly you can proceed with that knowledge but if you don’t then you should begin with knowing everything else. You should know what you want in a car before you start.

You should know everything that you want from gas mileage to car size to all the available extras that you want. This way when you actually begin car shopping you will not be swayed by extra options. Know that you want and stick to exactly that so you don’t end up paying for more than you need or want.

Be Smart When Making Your Auto Loan Decision

If you are not sure about buying a car then don’t buy it. If you change your mind you can always go back and but it later. Until you are sure, be willing to walk away.

Many people are intimidated by the car buying process and the auto loan process especially so they just go along with whatever is presented to them. If the terms and conditions on a loan are not what you want then keep looking. You may find a better auto loan or you may just get a better idea of what is available.

Or Just Get Pre-Approved

You don’t need to try to navigate the treacherous waters of getting an auto loan in the heat of the moment. You can take the time to find an auto loan with good terms and get pre-approved. And if you do get pre-approved then you can even use that pre-approval as a bargaining chip to see if a car dealer will offer you even better terms on a loan.

Now you know how to be smart about auto loans. Know what you can pay, what you want to pay, and exactly what you want. Then take your time so that you can get the right auto loan to fit the car that you choose based on these criteria.

With the recent widespread financial difficulties, bad credit has become more common. It has become difficult for many to keep up with bills and credit scores are taking some hits. Still, people need cars to get around so getting an auto loan with bad credit is becoming a more common concern.

Do You Have Bad Credit?

This question isn’t as easy for people to answer as you might think. Many people decide that they have good or bad credit without even knowing their exact credit score. Many people just assume that they have bad credit without reviewing their credit report and the same goes for those who insist that their credit is excellent.

What is a good credit score? Again, this is a difficult question for many to answer. You would think that with all the talk these days of the importance of maintaining a good credit score that people would know what one was or at least they would know the point at which a credit score has turned from good to bad. Still, this isn’t the case.

In general, a score of 680 or above makes it rather easy to find a decent auto loan. Any score below that means that a person should be working to bring it up. The cutoff point changes but this is a place to start. Know your credit and look into what various lending institutions are offering for people with your credit rating.

Using Collateral In Place Of Good Credit

If you do in fact have bad credit then all is not lost. One way to get around the credit question is by having collateral. Collateral can assist someone with bad credit when it comes to getting a loan.

Collateral, in some cases, can almost make a credit score irrelevant. Lenders just want to be assured that they will not lose money on their investment. Collateral shows that the value of the loan will be paid back one way or another.

Sometimes the car that is being purchased can be put up as collateral. It should be noted that this means that if the borrower fails to make payments that the lender will seize the car to cover the payments that are not being made. This option should only be used if an individual is certain that the payments can be made.

Putting up the car itself as collateral may sound like an ingenious idea but there are many other types of collateral that work just as well if not better in this situation. Homes, property deeds, and other valuables can be used as collateral to help an individual secure an auto loan. Any of these can be used as collateral and can be used in lieu of good credit to help someone get their hands on the auto loan that they need.

Getting an auto loan with bad credit has always been possible. It may be more difficult and more expensive but it can be done. By knowing if you fit into the bad credit category and then using collateral to secure a loan if you do, you can obtain an auto loan even if you have bad credit.

The first home modification program is called the Home Affordable Modification Program or HAMP. The program was intended to help consumers stay in their homes by preventing foreclosure. The program works by enabling consumers to restructure their mortgages in a way that payments can be reduced. That is the “affordable” component of the program.

Unfortunately the program has not worked as planned and many consumers remain in limbo wondering if they are going to lose their homes. Despite thousands of applications only a small percentage of homeowners have actually been able to permanently adjust their mortgages. Some people are still in a temporary status while others have simply seen their applications stuck in a backlog of mortgage company paperwork.

Now Bank of America has committed to the 2MP program in an effort to reassure consumers the lender wants to help people stay in their homes. The 2MP program actually adjusts second mortgages or equity lines of credit…thus the 2 in 2MP.

During the boom years before the recession lenders pushed consumers to accept equity loans that resulted in a house being 100% mortgaged. In some cases the equity loan led to the owner owing more than the house was worth. When the market crashed, homeowners found themselves with two mortgages and falling house prices.

The 2MP program offered by Bank of America modifies the second mortgage in conjunction with the HAMP program. Qualifying homeowners must complete the modification of their first mortgage and can then modify the second. The goal, of course, is to lower both payments so that together the amount is affordable.

Bank of America has been under fire from consumers for not processing loan modification applications in a timely manner. Some consumers have actually made claims of deceptive practices claiming that Bank of America ends up costing the homeowner money by failing to process applications in a timely manner while charging additional interest and fees.

That is one reason why Bank of America is publicly committing to both HAMP and 2MP. The bank is trying to improve public relations during a time when banking giants are under a lot of criticism for taking taxpayer funded bailouts and then not assisting homeowners facing foreclosure.

In some cases, reducing the first and second mortgages is still not going to be enough to enable a homeowner to avoid foreclosure. The two mortgages together must be affordable and it remains to be seen if that is possible. Many people in homes purchased before the recession bought homes they technically could not afford. Easy mortgages led to millions of consumers buying houses that were too expensive for their income. In those cases, there is not a mortgage modification program in the world that can help short of the government handing them money to pay down the mortgage balance.

Bad loans or loans in default seem to be leveling off which is good news for banks and consumers. Big banks like Wells Fargo and Bank of America can almost be heard breathing a collective sigh of relief as the rate of loan defaults slows down.

This is a situation though that has two facets. It is good that consumer loan defaults are slowing, but one of the reasons it is happening is because the credit markets are so tight that fewer loans are even being made. The flood of loan defaults last year including millions who had taken out loans they could not afford in the first place. Lenders pulled back credit availability last year which lowered the based used for default calculations.

In other words, people who could not afford loans and people who could were both punished by the credit crunch. Underwriting standards have been tightened making it more difficult to get a loan or a credit card. Now there are signs the bleeding is being staunched and the loan markets are stabilizing. It’s been a long time coming.

But the danger of rising loan default rates continuing is far from gone. Unemployment remains high and millions are expected to face foreclosure this year despite government loan modification programs. Consumer loan losses should peak in 2010, but will they? The answer to that question depends on how the economy does over the remaining eleven months in 2010.

Millions of people have either lost their jobs or are working fewer hours or for less pay. The slow recovery is hurting consumers’ ability to repay debts. Lending write-offs last year were staggering. There was $33.7 billion in loan write-offs and $6.5 billion in credit card defaults recorded in 2009.

The loan default business is big business any way you look at it.

It probably doesn’t hurt too many feelings that large lenders like Bank of America lost $2.2 billion overall in 2009, or that credit card companies wrote off a much as 10 percent of their portfolios due to bad debt in that same year. But the reality is that consumers should not wish losses onto banks because much of the loss comes on the backs of consumers.

A stronger economy is the only way consumer loan default rates will return to normal. Economists are hesitantly saying the U.S. will expand but at a slow pace during 2010. Consumers facing foreclosure but who still have full employment can take hope from the fact the government is making it easier for them to access the government backed home loan modification programs. And in the opinion of many debt counselors, the cancelling of many of the consumer credit cards is not a negative act.

Consumers have faced a paperwork nightmare with mortgage companies frequently losing documents. The hold ups in paperwork mean that only 66,500 homeowners have managed to get their mortgage payments permanently lowered. That represents 7 percent of the total number of applications – low by anyone’s standards.

There had been hope the Obama administration would step in and work with lenders to get the process speeded up. New rules were recently issued and now consumers are told that beginning June 1 they will have to prove income up front before any processing will begin. This is a change from current policy. Right now consumers can verbally tell the mortgage company what their income is with the understanding documentation must follow immediately after.

Instead, mortgage companies are saying they have not received income verification documents and that is one reason why so many applications are not being processed to completion. Consumers are saying that in many cases they send the documents and the mortgage companies are losing them forcing borrowers to resend them more than once.

The new rules require the borrower to provide two paycheck stubs as proof of income before paperwork processing begins. In exchange for the easier proof of income requirement, mortgage borrowers will have to give the IRS permission to provide recent tax returns to the lenders. This will help those who are unable to quickly find copies of necessary tax forms needed to qualify for a loan.

There are other regulations put into place too. Now lenders must acknowledge receipt of a loan modification request within 10 days. They only have 30 days, instead of months like now, to make a decision. Once the homeowner is given approval for the program, he or she must then make three months of new payments before the loan is permanently modified.

Unfortunately there are no penalties assessed against lenders who don’t follow the regulations. That means loan processors that take months to make a decision still will not be penalized. That leaves little incentive for lenders swamped with foreclosures and refinancing requests to cooperate.

The loan modification program was funded at $75 billion. The purpose of the program is to lower mortgage payments for consumers so they can afford to stay in their homes. It is hoped that the new rules concerning income verification will improve the loan modification program results. So far it has been a real disappointment to those who though it would help stem the flow of foreclosures.

The federal government has been at odds with the financial industry during the last recession on several fronts. The loan modification program has proven to be another situation where the best intentions of the government ran into a lending bureaucracy every bit as daunting as the one that supports the government itself.

This sounds elementary, but those who learn to adhere to this rule from day one never enter into debt. Of course, there are special circumstances but generally this is true. If you never spend money that you don’t have then you will not be likely to find yourself in trouble financially. This advice is perhaps more relevant now than ever.

The Beauty Of Only Spending Money You Have

If you start off with the clear rule of only spending money that you have then it will be hard for you to get into debt. This is not to say that you cannot have credit cards. It just means that you only put as much on your credit cards as you can pay off each month. If you cannot afford to pay it off then you put off any additional purchases until a month when you can. Or you could just forget those potential purchases entirely.

But some say that’s the beauty of credit cards. You can buy things you cannot afford and not worry about paying for them until later. What about not buying them and never having to worry about paying them off? Wouldn’t that be better than having more possessions or other luxuries that you don’t really need?

What About Necessities?

You’re not going to be able to pay everything off in a month. Cars and houses are two excellent examples of this. But these are necessary expenses and you can still be smart about them.

Choose a house and a car with monthly payments that you can easily afford. Do not make choices that will have you cutting it close each month because these will not be your only expenses in life. You want plenty of leeway for all those other pressing bills that come in regularly or unexpectedly. Make sure that you can pay all your bills off every month and make sure that you can do it with plenty of breathing room.

Does Anyone Really Do This?

This question is a popular rationalization. Many say that no one really pays off their credit cards every month. Even if this were true, the poor financial planning of the rest of the world is no excuse for you to do it too. Even if this is how everyone else does it, don’t you want to be better off financially than those who continue to amass ever greater amounts of debt each month?

There are many people who don’t buy anything they cannot afford. They are the ones who are not hit as hard when recessions hit. They already know that spending more than you make can land you in precarious financial situations and have made the choice to not end up in one of their own. If you want to be free from the debt that so many people carry then you have to do things differently.

If you are starting out then this is the only financial rule you will ever need. Don’t spend money that you don’t have. Adhere to this rule and prepare for a life full of financial smooth sailing.

So how do you lower your monthly car payments without paying a lot more in the long run? Is it even possible? The truth is that it is possible. Here are some ways to lower you monthly car payments without paying more in the end.

Try To Get Pre-Qualified For Your Auto Loan

What’s the big deal with getting pre-qualified for your auto loan? How is this different from just getting your auto loan later? In actuality, there is a big difference.

When you get pre-qualified for your auto loan you may end up with better loan options. Specifically, you may be able to secure a lower interest rate and reduced monthly payments. Getting pre-qualified for your auto loan will keep you from mistakenly going with whatever loan options the dealer presents to you because they may not be the best options available to you.

Think About A Home Equity Loan

Why would you use a home equity loan to buy a car? The answer is simple. Often times with a home equity loan you will be able to secure a loan with a lower interest rate than you would get with many auto loans. Also, by the very nature of a home equity loan, there is a chance that the interest that you pay on this type of loan may be tax deductible.

Make A Larger Down Payment

A large down payment helps to decrease the amount that you pay on a monthly basis. Often it is easier to come up with a large amount once than to be trying to keep up with large car payments on a monthly basis. It may have the added benefit of allowing you the option of a loan with a shorter term too. This will allow you to not only have lower car payments but you will not be making those payments for as long either.

Buy The Right Car

A cheaper car will have lower monthly payments. This is a rudimentary solution to the question of how to secure lower car payments. A car that is less expensive will have lower car payments so remember that. Instead of trying to whittle down payments on an expensive car you can just choose a less expensive car that naturally comes with lower payments.

Do The Math

To lower your monthly car payments without paying more when all is said and done you need to explore your options. Then you need to take the time to calculate exactly how much each of these options will cost you both on a monthly basis and what each of these options will cost you when you have paid off every last cent. If you want to make sure that you will not be paying more in the end then calculate exactly how much you will be paying in the end. It’s that simple.

Many people get lower monthly car payments but end up paying more in the long run. These ways to lower your car payments without paying more will allow you to escape this trap. Never pay less now to pay a lot more later.