Running the Numbers
A great place to start in this process is figuring out how much money you would save buying a home in an all-cash payout versus with time-based loan payments. Compare the sticker price to the eventual price tag of your home if paid for with a 15- or 30-year fixed mortgage with a down payment of around 20%. You will save money on interest, but it’s a good idea to factor in the loss of the mortgage interest deduction when it comes to tax time. Also, consider what paying in cash will do to your savings — emergency, retirement and otherwise — in the short term.
If you truly have the money available immediately and it won’t put you in jeopardy of going into debt if an emergency were to come up, you will most likely save money by not paying interest on a loan. You will also avoid all of the paperwork that comes with securing a loan, pesky closing costs and the often-frustrating loan process.
Your credit history also will not come into play, which may be beneficial if you have a shaky credit past or have run into trouble before while still having considerable savings. (You can check your credit scores for free on Credit.com to see where you stand.) You will also have available equity in your home that you could likely tap in case you hit tough financial times. Furthermore, you can only lose the amount of money you have put in because you are not leveraged, meaning you do not need to get as concerned about market fluctuations.
Another benefit is mostly psychological — you actually own your house, giving you a sense of security and pride. Probably most importantly, you are a very attractive buyer to motivated sellers, giving you an edge over other buyers. The deal will be simpler and faster for both sides and buying in cash may even put you in a position you to get a better deal. After all, time is money.
How Much House Can You Afford?Before you consider buying a home, check out how much you can afford. Plus, see how changes in your finances will affect the result.
Find Out Now
Paying cash for your home likely means most of your savings or at least a lot of your money will be tied in one asset, leaving less money to invest in other, diversified assets. Also, real estate has a historically lower return on investment than stocks or bonds, meaning you could be losing out overall if other investments would have outperformed the interest on a mortgage.
Additionally, you are sacrificing liquidity, so it’s probably only a good idea to buy a house with cash only if you can afford it without emptying your emergency fund. A home can take months to sell, and borrowing against your home’s equity brings fees and borrowing limits into the equation. You further lose the financial leverage a mortgage provides because your payment is locked in and hopefully received a favorable interest rate. Lastly, you will not qualify for the tax deductions mortgage payers receive, which often total over $10,000 when itemized.
How you pay for your home is a very personal decision and paying in all cash will likely work for some people but not for others. This generally makes sense if the home’s price does not subtract a significant portion of your liquid assets and/or the interest rate you would pay on a mortgage is higher than what you could earn on other investments. It’s important to properly assess your financial situation and long-term investment strategies, the drawbacks as well as the benefits.
More on Mortgages amp; Homebuying:
- Why You Should Check Your Credit Before Buying a Home
- How to Get a Loan Fully Approved
- How to Search for Your Next Home
It seems that the Aston Martin Vulcan is the sort of car that can be defined by the celebratory racing burnout. You know, the kind of thing that pro drivers do at the end of the race, not the American stuff.
Yesterday, we showed you a teaser video from Aston and today we have Goodwoods footage. Instead of trying to set a fast lap, the Vulcans race driver decided to destroy his rear tires, much to the enjoyment of the crowd.
This 200mph starts the FoS festivities with a burnout and stops in front of the stands halfway through, so the people get to see the show.
Vulcan is an excellent name for rare Aston Martin. It makes us think of the legendary Avro Vulcan with its large delta wings and fantastic maneuverability. 24 examples of the Vulcan will be produced and sold to members of the public for the princely sum of pound;1.5 million ($2.3 or euro; million.
Being powered by a 7-liter V12 that churns out 800 horsepower, the Vulcan could be compared to the Ferrari 599XX race car, but Aston lets you take it home and put it in your garage. Way to go Brits!
Aston Martins most extreme car yet is designed with cues from the AM Racings family of Vantage race cars. However, it has unique LED headlights that are very thin and specially designed rear clusters.
Lets not forget what Aston Martin is going through right now. The 102-year-old company just secured funding for one of the biggest revamps in its history and a new model believed to be called the DB11 is being developed at the Nurburgring.
Were thrilled to see that among all this talk of SUVs and Mercedes turbocharged V8s, they still have time for an insane track machine.
SYDNEY Australias corporate regulator said it is taking legal action against iron ore explorer Padbury Mining Ltd after it announced a A$6 billion ($4.6 billion) funding deal for a port and rail project without the arrangements firmly in place.
Padbury, a small explorer, surprised markets in April 2014 when it said it secured funding from investors to build an iron ore port and rail line in Western Australia, a project that had been stuck on the drawing board for two decades.
The announcement triggered a spike in its shares but after several delays Padbury said the agreement had been scrapped.
Padbury later said it had left out key conditions in the funding arrangement because it believed it would be able to meet those conditions by the time the deal closed. Its shares have been suspended since December 2014.
It also later emerged that the companies it named as its financiers, Alliance Super Holdings Pty Ltd and Superkite Pty Ltd, were controlled by the same man, Roland Bleyer, a former hair clinic operator.
The Australian Securities and Investments Commission said in a statement it had begun civil proceedings in the Federal Court against Padbury, its managing director Gary Stokes and its chairman Terence Quinn, demanding financial penalties and orders banning them from managing companies.
The company breached continuous disclosure obligations by failing to disclose the conditions and the identity of its funding providers, and by failing to independently verify the capacity of its funding providers to provide money, it said.
(Reporting by Byron Kaye; Editing by Edwina Gibbs)
Republican presidential candidates are returning donations tied to a white supremacist group purportedly cited by Dylann Storm Roof, the man authorities have charged with killing nine people at a historic black church in Charleston, South Carolina.
The donations are one of several issues that have rose unexpectedly to the forefront of the presidential campaign since the attack. South Carolina Gov. NIkki Haley, a Republican, on Monday afternoon called for the removal of the Confederate battle flag from the state capitol grounds. While no Republican presidential contender has defended the flag, the field has been reluctant to take a clear position on its display, presumably wary of antagonizing Southern conservatives sympathetic to the symbol in an early primary state.
Sen. Ted Cruz (R-Texas) told The New York Times through a spokesman that he would “immediately refund” $8,500 in donations from Council of Conservative Citizens president Earl Holt III after the contribution came to light in a report by The Guardian published on Monday. In addition, a spokesman for Sen. Rand Paul (R-Ky.) said the campaign would donate $1,750 in contributions it had received from Holt to the Mother Emanuel AME Church, the site of last Wednesday’s massacre.
RELATED: Father’s Day in Charleston: ‘Holy City’ copes with horrific tragedy
Former Pennsylvania Sen. Rick Santorum also received a $1,500 donation from Holt, which Santorum said he will donate to the church.
“It was brought to my attention late Sunday evening that an individual who led a group cited by the murderer who terrorized the Emanuel AME Church in Charleston had given to one of my past political campaigns,” Santorum said in a statement Monday. “Rather than put more money back in the pockets of such an individual, my 2012 campaign committee will be donating the amount of his past donations to the Mother Emanuel Hope Fund to support the victims of this tragedy.”
Holt has given $65,000 to Republicans over the years, according to The Guardian.
Police are investigating a document posted online that may have been written by Roof, attributing the writer’s initial descent into violent white supremacist ideology to discovering lists of “brutal black on white murders” on the CCC’s website. The Missouri-based group, according to its statement of principles, “oppose all efforts to mix the races of mankind, to promote non-white races over the European-American people through so-called ‘affirmative action’ and similar measures, to destroy or denigrate the European-American heritage, including the heritage of the Southern people, and to force the integration of the races.”
In a statement on the CCC’s website, the group said it was “deeply saddened” by the shooting massacre.
The Southern Poverty Law Center, which tracks extremism, describes the CCC as a “white nationalist” group descended from organizations created in the 1950s to defend segregation from the ascendant civil rights movement.
This isn’t the first time the group has popped up as a story in mainstream politics, however. Then-Sen. Trent Lott (R-Miss.) resigned his position as majority leader in 2002 after his praise of Sen. Strom Thurmond’s (R-SC) segregationist presidential run prompted new scrutiny of his relationship with the CCC, which included speaking at one of their events.
THE total amount South African consumers owed creditors rose 1.4% to R1.6-trillion in the first quarter, data from the National Credit Regulator (NCR) showed on Thursday.
The mortgages debtors book increased R7.3bn, the secured credit debtors book rose by R5.8bn, while the unsecured credit debtors book fell by R2.3bn.
The decline in unsecured lending will be welcome news after warnings of a credit bubble.
Unsecured credit posted strong growth in SA until creditors tightened lending criteria in recent years.
However, Prof Carel van Aardt at the University of SA’s Bureau of Market Research said on Thursday that consumers who relied heavily on unsecured credit had found other ways of accessing loans.
Many consumers, particularly the heavily indebted, have moved on to short-term credit and informal forms of credit to finance consumption.
NCR data showed that the rate at which creditors rejected credit applications fell in line with a decline in the number of consumers who applied for credit.
NCR acting manager for statistics Ngoako Mabeba said this was not unusual in the first quarter of the year. The 11.4% drop in rejected applications is largely informed by the 10% drop in the number of consumers who applied for credit. There was basically less to reject, he said.
The number of credit applications received fell from 11.53-million in the fourth quarter to 10.39-million in the first quarter of this year.
Unsecured credit’s share of the total credit granted decreased from R18.7bn to R17.4bn, while mortgages’ share of total credit granted fell from R36.3bn to R31.7bn.
Data by NCR showed that the number of credit-active consumers rose by 264,000 to 23.11-million in the first three months of this year, and was up 1.4-million year on year.
NCR said credit-active consumers included incidental credit agreements, telecommunications and insurance, while credit agreements were limited to credit transactions entered into.
The total number of credit agreements entered into was 5-million – representing a 13% decline when compared with the previous quarter.
Banks accounted for a large share of the total value of credit granted, with the balance being shared by nonbank vehicle financiers, retailers and other credit providers.
Seasonal factors were blamed for the 8.6% decline in the total value of new credit granted to R107.5bn.
Q: One of your columns this month talked about a grandfather whose credit score droppedafter his grandson defaulted on a car loan. You gave him a few tips to helprestore his credit rating.
Our problems are a little worse. My wife and I have significant credit card debt (more than $40,000) and we have a few late payments in the last couple ofyears. Our credit scores are in the low 600s. Weve seen some ads (they seem to pop up on our email) that promise credit repair. One said they could raise our scores by 100 points in a month. The cost is $300.
Can these places really repair your credit?
A: Are there some outfits that can boost your credit score? Yes. Best case: They cant do anything for you that you cant do yourself. The most they can genuinely do is dispute erroneous information on your credit reports. You can do that at no charge by dealing directly with the credit bureaus and your creditors.
Worst case: They promise you miracles, such as removing all of the late payments and defaults and boosting your score by 50 or 100 points. They do nothing but take your money. Both the Consumer Financial Protection Bureau and Fair Isaac Corp., creator of the FICO score, warn consumers to steer clear of these credit repair scams.
However, if youre trying to increase your credit score modestly, there are some secrets that are legal and cost you nothing. Im going to devote the entire column today to this topic because I get asked about this frequently.
Before we run through some of these strategies, its important to stress that the best way to protect your credit score is to pay your bills on time. If you make payments late, that information likely will be on your credit record and no one can permanently remove accurate information from your file except the creditor.
As I mentioned in a recent column, payments dont get reported as late payments on your credit report until theyre 30 days late. That doesnt mean you wont get charged a late fee if a payment is so much as one day late. Another little tip: If youre juggling bills and trying to decide what to pay on time during a particular month, put a priority on credit cards (because they charge late fees immediately), then mortgages or auto or personal loans. Late payments on utilities or medical bills arent as harmful to your credit rating and the late fees are more modest.
The key is to make sure nothing goes to collection.
That said, here are some ways you can improve your credit rating if it needs a boost:
If you dont have a car or home loan youre currently paying, then use a credit card regularly and pay it off each month. By regularly, were talking every few months.
Many people, particularly older folks, brag that they pay cash for everything and never use credit cards. But if you dont have a recent payment history on anything, the credit models dont have much to use to tally your credit score. So youll have a thin file and possibly a lower score. Said another way, credit scores judge your ability to manage credit. If youre not managing any credit, your score will reflect that.
If you think you dont care because youre never taking out another loan, low credit scores can drive up premiums on homeowners and auto insurance.
Check your credit report for duplicate accounts, called tradelines.
Often times, the same credit card account can appear on your report two or three times if you get a new account number or if the card portfolio or bank gets sold.
Too many tradelines — either open or closed — can hurt you. If you have a lot, you can dispute them as duplicates.
The number of tradelines falls in the category of types of credit in use, which accounts for only 10 percent of your credit score. Reducing duplicate tradelines wouldnt help most people a lot, but could add a few points.
While youre looking for tradelines, look for other errors.
Each of the nationwide credit reporting companies — Equifax, Experian and TransUnion — is required by law to provide you with a free copy of your credit report once every 12 months if you ask.
The three share a toll-free phone line and website for requests. Go towww.annualcreditreport.comor call 1-877-322-8228.Or you can send your information to: Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281. Include your full name, mailing address, Social Security number, date of birth and previous mailing address if youve been at your current address for less than two years. Also indicate which companys report you want: Equifax, Experian or TransUnion, or all three.
SPLIT UP BALANCES:
If youre married and have credit card balances, split up the debt.
Say you have two cards with $5,000 balances. It looks on your credit report as you have $10,000 in debt and your spouse has $10,000, when you as a couple actually have only $10,000 total. This double-accounting brings down both of your scores.
To improve a couples scores, they could have one card in the husbands name and one in the wifes name and it would suddenly look as if each owed $5,000 less in credit card debt, and that would probably boost the scores for both of them.
PIGGYBACK ON ANOTHER ACCOUNT:
If you have a short credit history or have debt, get yourself added on as an authorized user or joint owner on an account of someone who has a good payment history and a low balance or none at all.
You dont need to have the actual card or use the account.
The best part: If the account is 10 years old, the entire 10-year history will transfer to your credit record.
Being a joint owner carries slightly more weight than being an authorized user, but theyre regarded mostly the same.
If you have credit card debt, consider putting it on an equity line or loan.
The credit scoring models view mortgages differently from credit cards. Balances on mortgages — first or second mortgages — dont really hurt your score. Credit card balances of $40,000 could devastate your score; a $40,000 home equity line wouldnt hurt you much at all.
Realize, though, that you could be putting your home at risk if you dont repay. And home-equity lines and loans are more difficult to get these days than before the housing crisis.
KEEP HIGH LIMITS:
Dont lower your limits on credit cards; lower limits hurt you even if you pay off the balance every month.
One of the most critical things that credit scoring looks at is the amount of credit youre using. The amount you owe counts for 35 percent of your score, and the proportion of credit youre using is part of that category.
This proportion is important regardless of whether you pay your balance in full each month.
Say you have a $3,000 credit limit and charge $2,000 that you plan to pay off in full the next month. You know youre going to pay that off and I know youre going to pay it off, but the credit scoring model doesnt. So it looks as if youre using 66 percent of your available credit, and thats not good.
You should aim to keep statement balances at 25 percent or less of available credit.
KEEP ACCOUNTS OPEN:
Dont close credit accounts, even if youre not using them. Not only do you want to keep your available credit thats not being used as high as possible, but you also want to maintain your oldest accounts on your files.
OPEN A NEW CARD:
If you have only one credit card or have high balances on a few, consider opening a new account that you use only once or twice a year and pay in full. Again, this will dilute your credit in use.
AVOID LOWER-TIER LENDERS
Dont use a finance company for an unsecured loan.
The credit scoring models will ding you a little for using companies like finance companies or rent-to-own stores. A loan from a bank or even purchases on a credit card for the same amount wont hit your score as much.
RESPECT YOUR BANK CARD:
Pay off balances on bank cards before paying off store cards.
Bank cards — MasterCard, Visa, Discover and American Express — carry more weight in credit scoring models than store cards like Macys and Kohls.
So if youre carrying a big balance, its less damaging to have it on the store card than on the bank card.
DILUTE BAD CREDIT:
If you have a shaky credit score, open a new card and use it. Having a positive current payment history will help dilute the bad stuff. Not make it go away, but dilute it. You may be surprised by how quickly your score improves if you have current information thats positive, as opposed to nothing new — just the bad stuff.
If you have a really low score, you might need to start with a secured credit card, instead of a traditional credit card. One good source for referrals to all sorts of cards is lowcards.com
If youre using one or two credit cards every few months for small purchases and paying them off entirely each time, your score should increase significantly in a year or two.
But if you apply for a card and get rejected, dont keep applying for others. This will hurt you. Go the secured routeinstead.
PAY OLD DEBTS WITH CAUTION:
If you have an old collection item, consider carefully whether you want to pay it off.
Say you have a credit card bill thats more than six years past due. Its already beyond the statute of limitations in Ohio and will fall off your credit report at seven years. Heres a link to the statute of limitations for credit card debt in every state:http://www.creditcards.com/credit-card-news/credit-card-state-statute-limitations-1282.php
But if you decide to pay the bill or get on a payment plan, that could start the seven-year clock running all over again. Its admirable to want to do the right thing by paying an old debt, but it could hurt your credit score more.
Companies buy old debts for pennies on the dollar and harass people to try to get them to pay. But if you pay it off, it will start the seven-year clock all over again as far as the default being on your credit file.Remember that any debt collector thatthreatens to sue you fora debt that is beyond the statute of limitations is violating theFair Debt Collection Practices Act.
If your conscious is tugging at you about an old debt, consider donating the money to a charity instead of paying off an old debt that cant hurt you anymore.
Murray is The Plain Dealers personal finance writer. Because of the volume of requests, she cannot help everyone who contacts her.
To reach her:email@example.com
On Facebook: MurrayMoneyMatters
On Twitter: @teresamurray
Previous columns online:cleveland.com/moneymatters
New Jersey could soon become the 12th state in the US to stop employers from using credit histories when determining whether or not to hire a job applicant.
Legislation sponsored by state Sen. Nia Gill (D-Montclair) was given the green light by the Senate Labor Committee on June 8, and now heads to the full Senate for consideration.
The measure would prohibit an employer from requiring a credit check on a current or prospective employee as a condition of employment, unless the employer is required to do so by law, or reasonably believes that an employee has engaged in a specific activity that is financial in nature and constitutes a violation of law.
Gill said the legislation is needed.
Its a practice that has become widespread, where if youre unemployed and you cant pay your bills on time, then when you go to apply for a job they will use the fact against you that you in fact have not been timely in the payment of your bills.
She suggested the situation is sort of like a vicious cycle that allows the discrimination against people because of their inability to pay their bills.
Gill said people who are struggling to find employment shouldnt be discriminated against in this manner, and deserve to be protected.
They should have a right to compete and a right to be able to seek employment, and have it based upon valid criteria, Gill said
The measure would not apply to all types of employment situations, especially if there are significant financial considerations involved in a particular job.
This is a balance between what the public can have, and what the business community also deserves Gill said.
Michael Egenton, senior vice president of the New Jersey State Chamber of Commerce, said the use of credit history has historically been an additional tool for employers in assessing potential job applicants.
Companies that conduct credit checks are doing their due diligence to ensure theyre not putting their business interests at risk, Egenton said. We believe the legislation as currently written will add to the cost of doing business in our state.
Egenton said the legislation could open the door to costly lawsuits toward employers, putting businesses at a competitive disadvantage.
Many employers dont even use credit checks, according to Egenton, so he feels legislation is not needed.
PoliticalNews.me – Jun 26,2015 – Deferred Action for Parents of Americans and Lawful Permanent Residents
WASHINGTON, DC US Senators Tom Udall and Martin Heinrich announced that counties across New Mexico will be receiving more than $34.5 million through the 2015 Payment in Lieu of Taxes (PILT) program. A full list of funding by county is included below.
PILT provides federal payments to local governments to help offset losses in property taxes because of nontaxable federal land within their boundaries, such as Bureau of Land Management land, national parks and forests, and military bases. Local governments use PILT funding to provide police, fire protection, emergency response, road maintenance and other crucial services to residents.
PILT payments are crucial for New Mexico counties, especially rural communities that depend on this funding for a significant percentage of their local budgets, Udall said. Unfortunately PILT payments are threatened year after year, but Im proud to have successfully secured funding for 2015 and plan to continue fighting for a long-term solution. Local communities deserve certainty, especially when it comes to paying for critical services like public safety, schools and roads.
Rural communities across New Mexico use PILT funds to provide better schools, maintain roads and bridges, and support thousands of local jobs, Heinrich said. I am pleased that we were successful in securing funding for this years payments, and I will continue to push for full, permanent PILT funding so our counties have the economic security they need to succeed.
After years of funding PILT inconsistently, Congress in 2008 fully and automatically funded PILT for five years. In a 2012 transportation bill, full funding was extended for another year, leaving the future beyond 2013 uncertain. Udall and Heinrich have successfully secured PILT funding every year since, and have continued to advocate for a long-term solution. Last December, Udall led a bipartisan coalition, including Heinrich, that successfully extended full funding for PILT into 2015.
According to the Department of the Interior, which administers the PILT program, annual PILT payments are calculated based on the number of acres of federal entitlement land within each county or jurisdiction and the population of that county or jurisdiction. The lands include the National Forest and National Park Systems, the areas managed by the Bureau of Land Management, those affected by the US Army Corps of Engineers and Bureau of Reclamation water resource development projects, and others.
New Mexico PILT Payments for FY 2015
BERNALILLO COUNTY – $184,182
CATRON COUNTY – $571,025
CHAVES COUNTY – $2,806,557
CIBOLA COUNTY – $1,661,376
COLFAX COUNTY – $144,623
DE BACA COUNTY – $99,319
DONA ANA COUNTY – $2,774,846
EDDY COUNTY – $3,111,014
GRANT COUNTY – $1,915,491
GUADALUPE COUNTY – $145,837
HARDING COUNTY – $109,446
HIDALGO COUNTY – $686,943
LEA COUNTY – $986,090
LINCOLN COUNTY – $1,562,805
LOS ALAMOS COUNTY – $78,643
LUNA COUNTY – $1,740,813
MCKINLEY COUNTY – $835,821
MORA COUNTY – $211,971
OTERO COUNTY COMMISSION – $2,859,462
QUAY COUNTY – $4,217
RIO ARRIBA COUNTY – $2,034,319
ROOSEVELT COUNTY – $25,252
SAN JUAN COUNTY – $2,014,292
SAN MIGUEL COUNTY
And if you gaze long enough into an abyss, the abyss will gaze back into you. Friedrich Nietzsche
It has to be some sort of karmic justice that within less than a week of me finally feeling positively inclined toward EZCORP (NASDAQ:EZPW), the company took a significant backward step in terms of corporate governance and shareholder confidence. That was only the start of the trouble, though, as the company has struggled amid a difficult pawn environment in the US and ongoing pressures on the payday lending industry.
The multiple management shakeups at EZCORP havent done wonders for investor confidence, but I cant argue with the overall direction that the company has laid out for getting itself back onto a better financial trajectory. Unfortunately, investors are still waiting to hear about fiscal second quarter earnings and the results of a review of the Grupo Finmart operations in Mexico – a review that has at least the potential to mark yet another troubled acquisition in EZCORPs history.
Valuation is an exercise in guesswork right now. I can say that low single-digit revenue growth from the FY 2014 starting point and the eventual attainment of double-digit FCF margins can support a fair value of $12 today even with a steep discount rate. Likewise, balance sheet-based metrics that attempt to value EZCORP on the basis of tangible book and/or future returns on equity support a valuation range between $9.50 to $11.
Ongoing Turmoil At The Top
I dont want to spend too much time on events that took place almost a year ago, but they do still influence my perception of this company today. I was more bullish on EZCORP a year ago in no small part because of announcements in May of 2014 that the company was going to create an independent governance committee and terminate its advisory agreement with Madison Park – an agreement that seemed to serve little purpose other than to funnel millions of dollars of fees to EZCORPs controlling shareholder for nothing worthwhile in return (the agreement was explained in part as being for services related to identifying Mamp;A candidates, but EZCORPs terrible Mamp;A track record hardly argues for a value-add there).
Only a few days after my last piece, that controlling shareholder removed the CEO and two other board members. The company then saw the appointment of an interim CEO (Mark Kuchenrither), the expansion of the board to seven members, and the confirmation of Kuchenrither as full-time CEO in August. In late December, the companys auditor Deloitte decided that it had had enough and declined to stand for re-appointment, leading EZCORP to go back to its prior auditor BDO.
With February of this year came additional management changes. Kuchenrither was removed as CEO, taken off the board, and named President and COO with an ostensible focus on Mexico and Canada. The executive chairman of the board, Stuart Grimshaw, was named CEO, and Lachlan Given was named executive chairman of the board. A new CFO was named in March of this year (Kuchenrither had been serving in that role) and last month (May of 2015) the company named board member and former CEO Joseph Rotunda President of North American Pawn. That was part of a wider array of changes that saw Carl Spiker named to the new Chief Risk Officer position, while Kuchenrither is leaving the direct management of the company to become a consultant and Eric Fosse, President of US Pawn, is leaving altogether.
A Simple Strategy Should Work
With revolving doors on all of the major C-suite offices at EZCORP, its hard to have a lot of confidence in the companys turnaround strategy. On the other hand, day-to-day life at the store level isnt directly tied to senior management (how many store-level employees ever talk to a corporate president or CEO?) and the companys overall back to its roots approach can likely proceed even with this turbulence.
EZCORP has discontinued its online lending in the UK and US, and has likewise put more focus on its pawn lending over its consumer lending. Given the increasing regulatory scrutiny, including very stringent rule proposals from the CFPB back in March, it makes sense for EZCORP to go this route. First Cash Financial (NASDAQ:FCFS) and Cash America (NYSE:CSH) had already taken steps to reduce their exposure to unsecured lending in the US, but it was still around 15% of EZCORPs business at the time.
EZCORP has been working to reduce the amount of pawn lending secured by jewelry and the company is also looking to improve inventory turns and customer service within the US stores. All told, management is looking to move away from a retailing focus to a lending focus, which makes sense in the context of pretty lackluster US same-store sales across the sector over the past year or so. A greater focus on return on invested capital (with a target of 15% laid out at the December 2014 Investor Day) should offer some comfort to investors, but the weak merchandise trends in the US pawn industry and the currency challenges in Mexico will likely make that a multiyear effort at best.
Flying Almost Blind With Meaningful Risks Remaining
Investors have yet to see the fiscal second quarter results, but management has released a lot of top-line figures. Core pawn revenue rose 2% in the US and Canada on the back of flat same-store sales, as same-store merchandise sales rose 1% and pawn loan balances declined 3%. Inventory turns are improving, but margins are suffering as the company pushes out aged inventory. US unsecured lending revenue declined 10% and loan balances were down 14%. Mexican pawn revenue rose in the quarter, with retail sales up 24% in constant currency and service charges up 15%.
Investors also need to take note of the potential risks of this review of the companys Grupo Finmart operations in Mexico. This business is a payroll advance lender that makes installment loans to government employees. The average loan term is 36 months and the average balance is about $1,500, many times larger than the typical pawn loan ticket in Mexico. While the risk of these loans is reduced by virtue of automatic payroll deductions, the average APRs are still pretty steep (around 80%).
All of that is fine as is and Grupo Finmart had been showing good growth, but there could be some issues with the businesss asset sales – Grupo Finmart has been selling loans to third parties, booking a gain on sales, and then recycling the capital into additional lending. Boiled down, it looks like the business basically pays a 3% fee to accelerate the cash flow from its lending activities and redirect it toward expanded lending. But the company is reviewing certain errors in a portion of the Grupo Finmart loan portfolio and I dont think it is possible to accurately forecast what the impact to prior reported earnings and shareholder equity will be.
Without up-to-date financials, theres even more guesswork to valuing EZCORP shares today. Taking FY 2014 results as the starting point, a long-term revenue growth rate in the mid-single digits and a low double-digit long-term FCF margin (consistent with past reported results) is enough to support a $12 fair value today even with a high discount rate. If future FCF margins are more on the order of 7% to 8%, the fair value falls to around $7 but I believe a mid-single digit revenue growth rate should prove to be fairly conservative.
Ive also attempted to value EZCORP on the basis of tangible book value and future returns on equity. The starting point for these calculations assumes no downward revisions in equity, but it only requires a return to double-digit ROEs at the end of five years to support a $9.50 fair value today. To offer some perspective, First Cash has generally reported ROEs ranging from the high teens to mid-20%s, while Cash America has generally been in the low-to-mid teens. EZCORP was consistently in the high teens before the underperformance of the last two to three years, so I dont believe that a 10% ROE target in 2019 is ambitious if there really is a worthwhile business here.
The Bottom Line
With all of the turnover in management and the lackluster performance in the US operations, Im not inclined to take the risk of buying EZCORP shares without seeing the results of this Grupo Finmart review. I do believe that management has identified some sensible and attainable goals for turning around the core operations, but it is likely to be a multiyear process and it wont be helped by the weak operating environment in the US I realize that waiting for further clarity on EZCORPs financials could come at the cost of maximizing the potential gains, but this hasnt been a company that has rewarded the benefit of the doubt recently and Im taking a safety first approach for now.
Now that you’re a postgrad, you’re taking the high road to a responsible, bright future. That means you’re not making decisions lightly when it comes to things like who you live with or where you work. So, why should choosing a credit card be any different?
Some credit card offers will be better for your financial life than others. Before you make a decision, you’ve got some research to do.
1. Building credit
2. Find out your credit score
3. What do you qualify for?
4. Compare, compare, compare
5. Best practices
Credit cards are the easiest way to build your credit history. Misusing your card is also the fastest way to ruin your score. Your credit history and score matter when you want to get a loan at a favorable rate. Your credit also influences your insurance premiums and whether you can get approved for an apartment or even a cellphone.
If you already have a credit card geared toward college students, you might want to consider a new card that offers higher limits or rewards better geared toward postgrad life. That doesn’t mean you should close the card you have now.
“I never recommend dropping a credit card, especially if you have a good history with it. Depending on when you got that first card you’ve built some history and history counts,” says Katie Ross, education and development manager at American Consumer Credit Counseling in Worcester, Massachusetts. “Check your report and your score, then instead of closing your first card, open up another one. What will happen is, if you’ve had a good credit history with that one, chances are you’re going to be able to get a good card with lower interest rates.”
Before you can get a new card, you first need to know what you’ll qualify for.
Find out your credit score
Your credit score is what determines your risk to a lender. The score ranges from 300 to 850, with a higher score being better. The FICO score is the most common credit-scoring model used. There are five main factors that go into your credit score that you should consider when you’re using your credit card:
- Payment history (35%): Do you pay your bills on time, or do you make late payments?
- Amounts owed (30%): Keeping your credit card balance low improves your score.
- Length of credit history (15%): How long have you been extended credit? This includes student loans.
- New credit (10%): How many accounts have you opened, and how recently? You don’t want to open too many accounts at once. Every time a lender looks into your credit history it dings your credit score.
- Types of credit used (10%): What kind of credit do you have? This includes anything from credit cards to student loans and car loans.
You can get your credit report for free once a year from each of the three major reporting agencies — Experian, Equifax and TransUnion. That means three times a year you can check up on your credit report. Although your report is free, your score generally isn’t. However, many big banks and certain credit card companies will offer score information for free.
What do you qualify for?
If you have a full-time job and enough credit history to get a standard credit card, then kudos! Proceed to the next section. If you don’t have any credit history or a poor score, you’ll need to take a different route. Consider these two options:
- Get a co-signer. You might be out of college, but you can always use some help from mom and dad. Your parents or another trusted person with a lengthy credit history can sign the credit card with you. This enables you to build up your own credit history. However, your credit actions are tied to your co-signer’s credit history, too, so proceed carefully.
- Try a secured credit card. A secured card is meant to help you build credit so you can qualify for an unsecured card. You make an initial deposit that is equal to your line of credit, then you borrow against the deposit and pay your bill on time every month to build credit over time. When you close out the account, you’ll get your deposit back.
Compare, compare, compare
When picking your first credit card, think first about what type of card you can get with your score, then consider your wants and needs. Compare these features:
- Annual fee. Getting a card with no annual fee is a must to start out, since you’re likely to have this account open for a long time.
- Sign-up bonus
- Rewards (travel miles, cash back, etc.)
- Grace period on interest. If you pay your balance on time and in full, you won’t have to worry about paying interest at all.
Also keep in mind the card’s annual percentage rate, or APR. This establishes the amount of interest you’ll pay each year. You won’t know the exact rate you’ll get ahead of time, since it depends on your credit. Typically, cards will have two or three rates, which will give you a general sense of the range you can expect. You also won’t know your minimum payment; it will typically be calculated based on a percentage of your balance.
The key to choosing any credit card is to read contracts, shop around and ask for advice, says David Wirth, a financial advisor at Savant Capital Management in Rockford, Illinois. He adds: “If you have an older sibling, talk to them. If not, talk to mom and dad. Bounce things off other people before you make a decision.” In addition to consulting some of the more fiscally savvy people in your life, double-check advice with trusted online resources or finance professionals.
Use NerdWallet’s credit card comparison tool to see how different cards measure up.
If possible, pay off your credit card in full each month. Sometimes this might not be possible, so for the sake of your credit score, try to keep your credit utilization ratio below 30% at all times. That’s the amount you owe on your card versus your total limit. Try to pay more than the minimum, including any interest that accrued since your last due date. It’s also crucial to pay your bill on time, every single month.
“Make sure you pay your interest. Every monthly bill has a minimum, but a lot of times it doesn’t cover the interest,” says Guy Baker, a financial advisor with Wealth Team Solutions in Irvine, California. “Your interest might add $47 to your bill and your minimum payment might be only $25. Your balance will go up each month and you’ll owe more money.”
Some experts advocate using your credit card like a debit card and swipe only if you have the money in your account. “The moment it shows up on your online account, pay it off immediately,” says Phil Schuman, director of financial literacy at Indiana University. “Only buy what you can afford to begin with.”
When you make the right moves with your credit card, you’ll be able to build a credit history that will help you qualify for loans down the line when you want them — like when you want to finance a car, purchase a home or start a business.
More from NerdWallet:
NerdWallet’s Top 10 Credit Card Deals of 2015
All You Need to Know About Credit Cards
What You Should Know About Money in Your 20s
Anna Helhoski is a staff writer at NerdWallet, a personal finance website. Email: firstname.lastname@example.org Twitter @AnnaHelhoski.
Photo via iStock.