Splitting Investment and Personal Line of Credit: Benefits of Separate Credit Account for Private and Investment Use

A line of credit is simply a banking mechanism in which a bank customer has a loan amount pre-approved up to a specified amount. The line of credit can be set up to operate like a bank account.

Two Main Uses for a Line of Credit Account

One of the main reasons for establishing a line of credit is for carrying out investment activities. For example, an investor may want to invest in shares on the stock market over a certain period. With a secure source of funds available, the astute investor can take advantage of the investment opportunities when they arise.

A line of credit can also be convenient for personal use. Having a pre-approved source of funds available can iron out those sudden and unexpected requirements for cash. These can be paid on the credit card to earn reward points then paid off via the personal line of credit.

A personal line of credit can also be useful in managing funds for paying off a home mortgage.

Taxation Implications on Line of Credit Accounts

From an Australian taxation point of view, the interest allocation needs to be separated. That is, the Australian Tax Office needs to be able to clearly see that the interest being claimed as a tax deduction for investment can be proven that it is a direct result from earning an income.
If the interest on the cost for the purchase of a new boat are mixed up in the interest used for purchasing a share portfolio, the Australian Tax Office will be looking for a clear accounting process to show the two different interest allocations.

In many situations this can be extremely difficult as investment earnings may be coming both into the account and out of the account to purchase more income earning assets. And personal money may also be flowing in and out of the line of credit account.

If the Australian Tax Office can’t see the difference clearly, then they may reject the claim for the deductions of the interest using for income earning. This could be a significant amount of money.

In some situations, the taxpayer may have to repay previous year’s tax, or even a fine if the Australian Tax Office rules that the deduction claims for the interest on the income earning assets were not clearly allocated.

Splitting a Line of Credit

The simplest and easiest way to manage this situation is to establish two line of credit accounts when setting up this arrangement. One will be used solely for investment, while the other will be used exclusively for personal use.

There may be a slight cost involved in the extra line of credit account, but it may be well worth the extra cost to have the flexibility of the personal line of credit. And by having the two line of credit accounts, those valuable investment interest deductions will be protected.

When is a Doorstep Loan Right For You? Financial Difficulties, Bad Credit, Low Income, Loans for Unemployed

Doorstep loans for unemployed people, low income families and individuals with bad credit have become a 3 billion pound business. A recent Equifax survey found that 32% of people with a bad credit rating had taken out a doorstep loan to help with money problems.

Doorstep loans are usually available for between £50 and £500 to help people with short term financial difficulties and personal debt problems. They are always taken out over a short term due to the high APR charged by doorstep lenders.

Are Doorstep Loans for Unemployed and Low Income Families a Good Idea?

Low income families tend to struggle with financial difficulties because they don’t have the disposable income to cope in an emergency. A doorstep loan for unemployed or disabled people may seem like a good idea, but the high APR can create problems further down-the-line for those borrowing money.

The market-leading doorstep lender, Provident, charges up to 365% APR on doorstep loans. Low income families borrowing money over 31 weeks and making repayments in £10 multiples will pay back up to £310 on doorstep loans. Fall behind with payments and the interest and charges will quickly build-up, creating further financial difficulties and even higher personal debt.

Debt Problems and Financial Difficulties

Unless someone seeking to borrow money has only short term financial difficulties, a doorstep loan isn’t a sensible move. If struggling to make ends-meet now, what is the chance of being able to do so the week after? Unless a personal situation is set to change, going to a doorstep lender could make matters worse.

Doorstep Loans and Bad Credit Ratings

Having a bad credit rating happens when a borrower has either missed or made late payments. This serves to exclude bad credit customers from mainstream lending products. Whilst most people would use their credit card or bank overdraft, this isn’t always available to those with bad credit.

Doorstep loans provide bad credit customers with an opportunity to borrow money at a high APR of up to 365%. This can help with short term financial difficulties, such as paying the mortgage, rent or a utility bill. It isn’t sensible for people with a bad credit rating to take out a doorstep loan to pay for luxury items.

A doorstep loan isn’t a suitable source of long term borrowing due to the high APR of up to 365%. However, they do provide a more cost-effective means of borrowing money than Payday loans. Loans for unemployed, disabled people and low income families should be avoided for non-emergency situations in all circumstances.

Eliminate Personal Debt and High Interest Credit Cards

Credit cards can be easy to obtain for many borrowers and when credit cards are used for purchases it is easy for debt to become insurmountable for the card holder. There are a number of ways to decrease overall debt and get finances back under control.

It is Possible to Negotiate With Credit Card Companies

Credit card companies do not want to risk that a borrower is going to declare bankruptcy because if a credit card holder does this, the company will lose out on the entire credit card balance. Ask for a lower percentage rate on the credit card loan to accrue interest on the outstanding balance at a lower rate.

If the credit card company won’t adjust the high interest rate, close the account. When the account is closed, interest continues to accrue but the account will no longer be active and no new purchases can be made.

Debts With the Highest Percentage Rates Should be Paid First

Think of the total amount of debt accrued as one big loan and it will be easier to accept that the higher the interest rate of a particular credit card or debt, the quicker it should be paid off. Some borrowers pay a little each month on every loan or debt accrued and this only keeps the borrower in debt.

Pay any extra money each month on the highest percentage rate debt first and pay minimum payments only on all other debts. When the high rate debt is paid off first, the overall percentage rate of the entire amount owed decreases more rapidly.

Do Not Use High Rate Credit Cards and Close the Accounts

Debt will never go away if credit cards continue to be used. To get rid of debt one must stop creating debt. One credit card can be saved for emergencies, but it is imprtant to remember that a new outfit is not such an emergency. Only use credit if absolutely necessary if you are working on a debt reduction plan.

Use No Interest Credit Cards to Transfer Balances

Credit cards with a no interest introductory period are perfect for borrowers who are working hard on a debt reduction plan. When no interest credit cards are obtained, transfer as much possible of the highest interest credit card balances. If a high interest credit card is now paid, close the account and move on to the next highest interest credit card balance.

Putting balances onto a no interest card removes the high interest from the balance that is transferred from an existing high interest loan and allows the borrower to focus payments onto other high interest loans. A no interest credit card immediately reduces the total percentage rate of the entire debt amount and makes the overall debt more manageable.

Debt Consolidation Loans: A Simple Solution to Financial Problems

While financial problems are often seen as something that should not be attacked “creatively,” the most effective solution for dealing with large debts is remarkably different from simply paying them off one by one. While direct payments are considered by many to be the simplest way to manage financial problems, they can leave anyone paying at increased rates, managing multiple arrears at once, and struggling for time to actually earn the money required to pay them back.

The problem is perception. For many people, financial problems mean limited options. When they owe money, it means a real effort to pay it back as quickly and directly as possible. This behavior runs on both financial ignorance and age-old biases.

The smartest, and simplest, way to solve financial problems full of arrears is not to attack it directly, but to service it using a debt consolidation loan. This simple process means paying off multiple financial obligations using one larger loan, typically a low-interest consolidation loan from a major bank or program. By focusing on paying back one larger loan over time, people pay back at a lower interest rate, in smaller portions and over a longer time period.

This solution has two major benefits. The first, most obviously, is the dramatically decreased interest rates that people are subjected to. Credit cards are notorious for incredibly high interest rates, and a debt consolidation loan offers a way to avoid these ridiculous payments. With interest rates at record lows, taking out a consolidation loan to pay off credit card arrears puts anyone in a very powerful position.

Secondly, this strategy allows people to pay off financial obligations over a longer period of time. While paying off credit card bills over the long-term is typically a poor strategy — interest builds up and bills can increase dramatically — using a debt consolidation loan to do so is often a very good idea. With lower interest rates, the extra time allowed to pay off financial obligations means increased spending power in the meantime, less financial worries and stress, and a much simpler, semi-automated payment system.

Taking on a debt consolidation loan can also be a positive strategy for anyone’s credit rating. While missing several credit card payments can prove absolutely disastrous for their credit rating, using a consolidation loan to pay off financial obligations leaves them with positive events on their credit reports. For those who are facing bad credit, this strategy could be the push their ratings need in order for them to qualify for potential future financing.

All in all, while financial illiteracy often leads people down the most direct road for solving financial problems, the side streets can and will prove much more fruitful. By exploring debt consolidation loans for credit card bills, car payments or home financing, people can save themselves lots of time and significant amounts of money. Not to mention the stress of juggling multiple arrears at once.

Credit Restoration Should Be Taught in Schools

Credit restoration has become as important as any life skill to get by in today’s world. To keep a good and well kept credit report, you need to know how the system works and how to keep your credit score high.

While growing up you are taught that their are certain things in your life you need to monitor and learn or you could get into a heap of trouble. Like for instance car maintenance. This would include yearly safety inspections, oil changes, and tire rotations. If we don’t do these things, the care will eventually become undrivable and illegal to drive. This is just one example of something that needs to be kept up or it will eventually come back to bite you. I could give many examples from taxes to cooking, but I think you get the idea.

The thing is, credit restoration is a relatively new concept. When your parents were growing up, they didn’t have to worry about it, so thus they didn’t teach it to you. Things have changed over the last 100 years though and just like your grandparents didn’t worry about safety inspections, your parents didn’t worry about restoring their credit.

Times have changed for a number of reasons. Here are a few things that your parents didn’t have to worry about, but you do.

  • Identity Theft – This is the fastest growing crime in the world. It is also one the hardest to find the criminals responsibly. Identity thieves can be robbing you and you don’t even know it, unless you are monitoring your credit. Living in the age of technology, you cannot afford to not be aware of your credit report’s status.
  • Credit Reporting Errors – The 3 major credit bureaus have a lot of clients, including everyone in the United States. This can cause a lot of mistakes. According to studies, 79% of all credit reports have errors and 25% of those are serious enough to effect your credit negatively. With so many people with similar names, accounts, and histories, you need to be make sure that your credit report is being reported correctly.
  • Fair Credit Reporting Act – The Federal Trade Commission has noticed the problem that these 2 above items can cause and they did something about it. They created the Fair Credit Reporting Act (FCRA) to help the consumer. This law allows any consumer to ask to have their accounts verified but the credit bureaus with the original creditors. This is an important step in restoring your credit.

As you can see, credit restoration has become an important part of our financial lives. So whether you like to do the work yourself or hire an expert to do it for you, it is important that it is a priority in your life.

The leaders in credit restoration have removed thousands of negative items off of their client’s credit reports and I’m sure they could help you too.