Installment Loans
An installment loan is a short term funding option. More and more Americans are looking to this option as traditional money lending models are quickly diminishing. This type of loan is increasingly popular because of its simple structure. To apply a consumer normally needs to be over 18 years of age, have steady employment and have an active bank account. The online application process is so simple. If approved, the applicant receives the amount of funds he or she qualifies for, directly to their bank account. It is paid back on their next payday.
The recession is not making financial planning easy. To pay off debt, many consumers have had to dip into their 401(k) savings, regular savings or find other ways of finding money. Credit cards are no longer a secure option to paying down debt, as many companies are drastically limiting their lending. Installment loans are popular because they are reliable, quick and short term.
The 401(k)
It’s customary to rely on a 401(k) for retirement. According to the Employee Benefit Research Institute, a recent survey showed that only 13% of 401(k)-savers believes they have enough for a comfortable retirement. This is down from the 2007 average of 27%. Most Americans today are planning on working well into their 70s, health permitting, and don’t see retirement as a standard 65 year old person’s right anymore.
There is a debate however because analysts say that the 401(k) was never meant to be a person’s primary source of retirement money. It was meant to supplement and give taxpayers an additional way to save for retirement, but not to be their entire retirement fund. The President is working on a 2010 401(k) update, making programs automatic. Meaning, if a consumer works for a company with a 401(k), they automatically would be enrolled, unless they specifically decide to opt out. Also, companies that don’t offer 401(k) options would have to still set aside funds for employees in individual retirement accounts.
The bottom line is that Americans have to save more money than they are able to. Unfortunately making this mandatory brings rise to many new issues of governmental control. As Salisbury of the Employee Benefit Research Institute said, “Mandating participation is a high hurdle,” citing how forcing people to save “pushes political buttons.”
Hidden 401(k) fees
The installment loan option is proving to be a wise one because of its short-term nature. In contrast, one hurdle to cross with any long-term investment is a long list of fees. According to a governmental accounting office “even one percentage point in excessive fees can bring down a 401(k)’s balance by about 20% over the course of a worker’s career.” President Obama’s cabinet is also working on a new transparency with 401(k) handling. All fees must be clearly defined and explained to investors when they initially signup for the investment. This may save consumers money, but does it answer their shortfall of money problem?
401(k) revamp
The 401(k) will be revamped. It will come along with more rules and regulations that benefit investors. But when will this change occur and when will the American people see true results? That has yet to be seen. Like most things in the recessionary economy, people are being forced to take on a wait-and-see attitude, and hope for the best in the meantime. Installment loans are an option many are seeing as reliable and necessary as the economy hopefully turns around.
Payday loans are certainly more reliable than cashing in a 401(k) before the access date – what you’ll pay in penalties will far eclipse the fees for said loans. That is, they are more reliable for short term expenses. What you have to pay for this week, rather than 20 years from now. You certainly can’t rely on payday loans for retirement, and you also can’t rely on social security for the same purpose.