The Blessing and Curse of Seller Assisted Financing

Imagine some of the common things a person might do if they were strapped for cash, or had fallen on some misfortune and now had bad credit. They might spend less, get on a better budget, or even focus on getting rid of bad debt. All of these things would be good to do, under those circumstances. What about making major purchases, such as for a car, appliances, or even a home? What does the cash or credit strapped consumer do , when these things become necessary?

There is a bustling market out there, in the present economy, for purchasing items with what is known as “creative financing”. This is where  some means other than just paying with cash or credit is put into place. A very common example is Rent-A-Center, where numerous semi-expensive items like computers, appliances, or electronics can be leased, with the intent to purchase them over a longer period of time.

Vehicles can also be purchased with creative terms, especially when one works directly with the seller. It also, coincidentally enough, works with homes too. Properties are financed by sellers, or leased with the option to buy, on a daily basis, and this can be a perceived godsend to many consumers who might not be able to purchase through traditional channels. Is there a catch to this, because it sounds pretty good, right?

I don’t know that I would go so far as to say these options for purchasing have “catches”, but you do need to know how they compare to just paying for something up front, before you just dive in. If you are leasing or “renting to own” , you should expect that the total cost of whatever it is you’re buying will be greater than if you just paid for it. There is a cost associated with creative financing, and you need to assess whether it’s better to a) pay more to have what you want or need now, or b) wait until you can better afford the same items, and pay less for them at the time.

If you are looking to purchase a home using creative terms, just remember that many agreements allowing you to do this are intended to be short-term. If you ignore your need to build your credit, save money, get rid of debt, or otherwise make yourself a more creditworthy buyer, the proces ccould backfire later. These creative techniques serve one primary purpose…they buy you some time to get your finances in order. Make sure you take full advantage of this, so that the long-term benefits to you are as good as those you see right now.

Authorized Use on Credit Cards- A Risk Reward Scenario

I am often asked about the benefits of being an authorized user on another credit account. I wanted to address exactly what this means, since there have been many changes in the credit world recently, and some that impact this issue. First, let’s make a few definitions. An authorized user on a credit line is a person designated by the account holder to have access to the funds in the line of credit. For example, granny has a credit line of $10,000 that she really doesn’t use for anything, but she’s had it open for several years. She could elect to have one of her grandkids set up as an authorized user, allowing them to use the account just as she could.

The upside for the authorized user is that they gain access to a credit line and credit history that may be an improvement over their own. This may help an authorized user to build, enhance, or season their credit rating without needing to apply for credit of their own. Becoming an authorized user is not the same thing as two people who apply for a joint account. In that case, both people who receive access to a line of credit apply for the credit line and are established users from the moment the account is opened.

Now, to be fair, once an authorized user relationship is established, the liability for the credit line is very similar to that for a joint account. If one user accumulates debt on a credit line, both users are equally responsible for paying the debt and both of their credit reports can be affected by late or delinquent payments. With authorized users, the usual scenario that one might envision is the authorized user being the one who racks up the debt, leaving the original account holder in a bind. This, while it does happen, is not always the case.

Some authorized users are surprised to find that an account to which they have access (but that actually isn’t theirs) leaves them open to collections if the account goes delinquent. Maybe granny charged some items and found herself unable to pay for them later. The authorized user is just as liable for the debt as granny, at least in the eyes of the creditor.

These kinds of things are those you need to be aware of if you a) are an authorized user on an account, b) are approached by someone who wishes to become an authorized user on your account, or c) if you’re just curoious what this terminology refers to. Because of the general tightening of the credit industry, far fewer new credit accounts allow for authorized users, so this will likely only be relevant with accounts that have been open for at least a year or two. When you become a student of credit and your personal finances, the truth can help set you free.

Good Business Ideas Lead to Business Credit and Capital

A survey of small business owners would show that their biggest challenges are common things like management, finding quality help, and even business funding. A much smaller number of business owners would really question whether or not their actual business concept was any good. Why? Entrepreneurs, as a group, tend to think their ideas for a business are good, sometimes to a fault. Think of it as like an employee who remains devoted to his or her employer, even if they aren’t sure the company is heading in the right direction.

In the case of small business, the price of loyalty to a bad concept is not just being laid off. It could mean sacrificing months or years of time, effort and money to a venture that may not have ever had a chance to succeed in the first place. This is the importance of a good idea in small business and why entrepreneurs need to pay very close attention to the ideas they wish to pursue.

A primary difference between an untested business idea and one that can stand up to the rigors of market competition is how well the idea has been compared to competitive products or services. Answers to the following questions will help you determine if your business idea is tested or untested.

• What is the primary competition for the product or service?
• How does your product or service compare to the competition?
• How can you position or market your product as being better or different?
• What specifically will make your customers want to buy from you?
• How much time will it take to get your product or service out there and ready to make money?

One of the main focus areas of this site is to provide information and resources for how to optimize credit and raise capital for a variety of purposes, both for personal reasons and for business. In the case of small business, a bad (or at least improperly tested) idea may not only threaten the credit rating of a business owner, but also may not stand up to the scrutiny of the funding sources who might provide capital for the business. If business is something you are passionate about, remember that just because you love your idea, it does not always mean others will too.

Think about how someone who might grant you either credit or business funding would see your idea and develop your business as if you had to sell your idea to the skeptics of the world each and every day. When an idea can survive this kind of testing, it likely can survive in the tough modern economy, and be able to attract funding too.

Credit Management