This faith and finance podcast is underwritten in part by Christian Credit Counselors. If you're struggling with credit card debt but don't know where to start, our trusted partner Christian Credit Counselors offers a debt management program that can get you out of credit card debt 80% faster while honoring your debt in full. Contact them to get out of debt today at ChristianCreditCounselors.org. George Washington once said, there is no practice more dangerous than that of borrowing money.
Hi, I'm Rob West, our nation's first president, a man who faced danger many times on the battlefield, thought borrowing was more dangerous. Today we'll talk with Howard Dayton about five very dangerous ways of borrowing that you should avoid. Then it's on to your calls at 800-525-7000.
That's 800-525-7000. This is faith and finance, biblical wisdom for your financial journey. Well, we're delighted to have Howard Dayton with us again today. He's the founder of Compass Finances God's Way. He's the former host of this program and a great friend. Howard, welcome back.
Great to be with you, Rob. Howard, all right, today you've brought five types of loans we absolutely must avoid, so let's dive right in what's first on the list. Finance company loans, Rob, the interest rates are sky high and they charge huge fees and closing costs. Always pay attention to the difference between the interest rate and the annual percentage rate, the APR, which they charge, because that includes the fees and closing costs. In other words, what you're really paying.
Yeah, right. When banks say no, finance companies, unfortunately, will often say yes, but it'll cost you a lot more. All right, what is the second loan we need to avoid? Yeah, the second type of loan is the payday loan, which is really a form of legalized robbery. Payday loans are usually for a few hundred dollars secured by your paycheck and get this, Rob. The typical APR on payday loans is 390%. I mean, imagine borrowing $300 for two months and then owing almost $500.
Wow. Once you take out a payday loan, it's really, really hard to get out of this debt because the interest rate is so high, and they're called payday loans because every week you hand over your paycheck to the lender to pay off last week's loan, and then you have to borrow again. It's no wonder that Proverbs 22.7 tells us the borrower is slave to the lender. Oh, that's exactly right, and this third loan goes right along with it, doesn't it? It sure does, pawn shop loans. These are short-term loans based on the value of an item, which you forfeit if the loan isn't paid on time, and interest rates generally range from 5 to 25% per month. Many who take out a pawn shop loan never get back the property that they pawned. And fourth on the list would be auto title loans. These are usually 30-day loans secured by your car title, but high interest rates really aren't the biggest downside of a title loan.
Listen to this. If you fail to make the payment on time, the lender can repossess the car, and one consumer protection group called Title Loans legalized auto theft because you lose the car and the equity in the car no matter what the size of the loan. Oh, boy. Yeah, we need to avoid that at all costs. All right, what is the fifth and final type of loan to avoid? Yeah, Rob, this would be the tax refund loan. Millions of people, of course, look forward to April every year because they're getting a tax refund, but some are so cash strapped that they get a tax refund loan instead, and a lot of tax preparers offer this service for a small fee.
What they neglect to tell their clients is that the interest rate can run into the triple digits on an annualized basis, so please stay away from tax refund loans. Boy, that's really good information. Now, of course, the solution to all this is to go back to God's Word and to cultivate the right disciplines regarding managing God's money, and I know you have a brand new tool there at Compass Finances, God's Way to help with that, right?
We do. It's a six-week video called Navigating Your Finances, God's Way, Rob, and the topics include, of course, debt, saving, generosity, investment work, honesty, and much more, and we've designed it so that the video will work well in a variety of settings, including Sunday School, small groups, workshops, or even as a self-study. The good news, no training is required, and we're also offering a 10% discount all month long. Oh, wow. Folks, go take advantage of this brand new study.
It's called Navigating Your Finances, God's Way. Howard, where can they go to get more information? The best place is to our website, Rob. It's compassone.org.
That's compass, the number one, dot org. All right, Howard, always great to have you, my friend. We appreciate you stopping by. Thank you so much, Rob.
God bless you. Folks, we want you to be debt-free. We also want you to understand how to manage money God's way, and this study that Howard just mentioned, it's brand new, it's six weeks, and you can use it in a variety of formats. Check it out today, compassone.org. Howard Dayton's been with us today. He's the founder of Compass. Back with your questions just around the corner.
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How are you using God's resources? We're talking about it, and the lines are open to take your calls and questions. 800-525-7000 is the number to call. Let's begin today. We'll start in Philadelphia.
Hi, Ray. Thanks for calling. Go right ahead. So I was wondering, the proper way to tie, is that after taxes or before taxes?
Being that taxes are so high, 20-30% of your income is bottled up by the government. What is your opinion on that? Sure. Well, first of all, I appreciate the question. Obviously, your desire is to honor the Lord in your giving. When we look at New Testament giving, we know that it should be cheerful, it should be given freely, it should also be proportionate. And if in doing a proportionate gift, you want to apply the principle of the tithe from the Mosaic law, I think that's a great place to perhaps begin. It's systematic, it's a way to give on the increase. I think the key is to ensure that we're doing it with the right heart posture. And if we want to look at giving on the increase a tenth, we would say, what is my increase?
Well, your increase would be your first fruits or that which comes in off the top. And so I would say, if we're going to apply the principle of the tithe, we would give on the whole amount. And I think, you know, Dr. Burkett, the former host of this program would often say, tongue in cheek, well, depends on whether you want to be blessed, gross or net. And I think ultimately, you know, we're placing our trust and dependence in the Lord whenever we give. We don't want to do it out of an obligation or for compulsion. But at the same time, we want to do it freely as unto the Lord as an act of worship and our demonstration of trust in Him. And I think, as you said, you know, what we give is ultimately between us and the Lord. So, you know, that number is totally up to you.
But I think if we're going to apply the spirit of the principle of the tithe, it would in fact be on that gross amount, the first fruits before anything is taken out. Is that helpful? Thank you very much.
Yes, absolutely. Thank you very much for your explanation. I really appreciate that and everything that you do. Well, thank you, Ray.
That's very kind of you. Thanks for calling today. 800-525-7000. We've got a few lines open. Let's head to North Carolina. Chris, you'll be next on the program, sir. Go ahead. Mr.
Rob, I was curious. I recently had to leave my job of over 20 years due to disability. And I'm currently on SSDI and also have a source of income, which is a long-term disability insurance that I paid for. The question is, my 401k, when I rolled it over into a traditional IRA with the company, they told me that I can not make contributions to this account because I am not considered to have earned income.
That's right. So I'm just curious if there's a path that I can take for investment for retirement. And I know it's difficult. Some things I've looked up on the internet and things of that nature, but I'm not really sure which path I should go.
If you could just help me, I would appreciate it. Sure. Is there any way that you might be able to work in the future? Well, I'm legally blind and I have a progressive disease that just gets worse.
So I don't drive and I live in a pretty rural place. So the prospects are not great, no sir. Okay. And are you married, Chris, or single? I am married. Okay.
Yeah. So that would be one option is through a spousal IRA. You will in fact need to have earned income in order to contribute.
And the IRS defines earned income as wages, salaries, commissions, tips, bonuses, net income from self-employment, does not include disability, Social Security, interest income, things like that. So without that earned income, you are not going to be able to contribute. But I believe what may be able to happen, and I would check with your CPA on this, is you may be able to have your spouse contribute to an IRA, even if she is not working as long up to the limit. So that might be one way that you could go. You'd have to open a separate account, a separate IRA in her name, but that might be one option for you.
Unfortunately, I think the investing you're going to have to be able to do for retirement is really going to have to be either through a taxable account where you're just socking money away and investing it without getting that tax deferral, or you could use an insurance product like an annuity. But unfortunately, don't write off hand, you're going to have to have earned income. All right, I understand.
But here's the bottom line. The key is, as you have surplus, go ahead and sock that away and build it up. Obviously, we always would prefer to do it in a tax-deferred environment. That's just going to ensure that the taxes don't create a drag on the investment returns. But apart from having that option, you being able to just sock money away and get it growing for the future is still a possibility.
And I think the key is to keep your lifestyle at a minimum and save as you're able. But we appreciate you checking in with us. I'm so sorry to hear about your health condition. We'll ask the Lord to heal your body and give you the ability to contribute to that long-term savings. God bless you, Chris. Thanks for calling today. Quickly to Cleveland.
Edward, go ahead. I'm semi-retired. I'm still working about 20 hours a week. I'm debt-free except for a home equity loan that's on a variable rate. I have about $300,000 in my 401k, and I was wondering if you think, because my payments have gone up since the past few months or so, if I should just take that 401k and pay off that home equity loan. Yeah, how much do you owe on it?
About $18,000, $19,000. All right. And how much are you sending toward principal reduction every month beyond the interest?
Nothing. Okay. So right now you're just paying interest only? Correct.
All right. And do you have any surplus without coming out of the $300,000? I'm working part-time at my job about 20 hours a week. And is that just covering your bills without anything left over? No, I probably have money left over every month. What do you think, roughly? Probably $1,000 every month.
Okay. Yeah, I mean, maybe you split the difference. Maybe you take half of it and knock down and then just take $1,000 a month and really tighten your belt on your budget and try to come out of current cash flow. Let's try to limit the amount you're taking out every month just so you don't have the taxes on it and you can let that fully recover with the market. But I understand why you'd want to get it paid off.
So maybe we cut it in half. Edward, thanks for calling today. 800-525-7000 is the number to call. Again, 800-525-7000. We will head right back to the phones after the break, but want to be sure we give those folks enough time.
Let me tackle a quick email. This one says from Kathy, I'm struggling to get out from under credit card debt and was wondering if you can recommend a consolidation loan company. I got trapped in a cycle of debt when I became a single mom. I paid them off, but then my son got really sick.
Kathy, so sorry to hear about your son's situation. I don't recommend loan consolidation where you take out a new loan to replace the old debt. I realize it can perhaps make some sense to get that credit card interest rate down, but I don't think it's going to break the cycle. Instead, I'd use a debt management program. Our friends at ChristianCreditCounselors.org can help you get those interest rates down and help you pay that off on average 80% faster. Much more to come.
Stay with us. NMLS number 39179. For licensing information, please visit NMLSConsumerAccess.org. If the heavy burden of debt is robbing you of freedom and peace of mind, Christian Credit Counselors can help. We're a nationwide nonprofit credit counseling organization that has helped over 300,000 individuals in the last 27 years get out of credit card debt 80% faster while honoring that debt in full. To learn how Christian Credit Counselors can help you, visit ChristianCreditCounselors.org.
That's ChristianCreditCounselors.org or call 800-557-1985. We're back. I'm Rob West and this is Faith and Finance. Thanks for listening today. Thanks for taking the time. As we head into our calls and questions, I want to take a moment to ask you if you've downloaded the FaithFi app.
You can use it on your desktop or your mobile device. All right, let's head to the phones. By the way, if you have a question, just call 800-525-7000. That's 800-525-7000. We're going to head to West Palm Beach. JC, thank you for calling.
Go right ahead. Thank you, Rob. Thanks for taking the call. I do have the pleasure of supporting your ministry with my qualified charitable distributions. Oh, wow.
Thank you. When I've signed on lately to IRS.gov to check my iBond balances, I'm being switched over or being asked to log in using id.me and to create an account with id.me. It looks suspicious. Is it legitimate? It is legitimate. The IRS has partnered with id.me to provide identity verification for IRS applications. Individual taxpayers and tax professionals are being required to verify with id.me for a secure login. And then once you do and you prove your identity with id.me, you'll have to upload some documents and take a video selfie and fill out personal information. And then once that's complete, taxpayers then can access the IRS application for which they verified.
So it is legitimate and it is something the IRS has done to just strengthen their identity checks. Well, thank you. I listen to your show almost daily and I've not heard you cover this topic before, so maybe if you did, I missed it.
Thank you very much. One more quick question, if I may. Sure, J.C. With the interest rates at five percent or higher on a one year bank CD at the current rate of the iBond, would you recommend perhaps for more than a year cashing it in and converting over to the bank CD?
I would, yeah. You know, with the iBond rates falling, and I think they will continue to fall, we'll get the next published rate at the end of October, it'll continue to come down just because inflation has been dropping. And when it was up at nine point six, it was phenomenal.
And then it was still good at six point eight. But now in the fours and falling, it's going to be less attractive, similar to what it was before inflation went on that big upward trend to where we got to 40 year high inflation. So yeah, I think if you're beyond the one year mark, I'd probably go ahead and pull that out.
You know, the equivalent of using a high yield CD at five and a half or so would be a great option for you. Wonderful. Thank you very much for your ministry. Take care.
Yeah. Thank you, J.C. I appreciate that.
Very kind. We're taking your calls today. 800-525-7000. That's 800-525-7000. By the way, you don't have to call, just send an email. AskRobatFaithFi.com.
That's AskRobatFaith, the letters F-I dot com. To Michigan. Hi, Darcy.
Go ahead. Hi, I'm still in Ohio on 90. But anyway, I'm calling as a parish nurse.
One of the patients that I was put in touch with through, boy I need to get rid of that. Anyway, I'm trying to help a lady who is 47 with a 14 year old son who has ovarian cancer for the third time. She does have a fighting chance, but it's hard to know about the long term. She is managing and I've encouraged her to hold a job that she's doing very, very well at helping disabled adults, but it only pays $17 an hour. As a non-profit, it cannot pay more even though they have indicated they'd like to pay her more, but they're very good to her and very flexible with their schedule. So, I'm encouraging her to stay in that and she has no extra energy to take an extra job right now. She's doing double chemo.
I am offering... I'm encouraging her to consider me of giving her sort of a bridge loan. She's in a house that is way overpriced for her budget that she could sell and probably downsize to find a better place. She can't just live in an apartment because she has a very large dog for her 14 year old son and she feels that animal is important for sort of her psychic health right now. You know, she's trying to stay in the same school district and all that and keep things as positive. She does not know she actually has cancer. She's sort of hiding it from him, but anyway, because he's already lost his father.
They lost their husband and her mother and her father in about a seven month period at the beginning of COVID. I am very well... I've set up pretty well my ex-Vietnam husband. I'm losing you a little bit, Darcy. It may be because I know you're out on the road and so we're getting a little bit of distortion. Give me the question, if you will. Okay, two things. She found some debt recently from her husband. She's trying to find out if she's responsible for it right now. I'm encouraging her to pay off the house with my help. Be giving her a bridge loan, so to speak, to the next house where $20,000 would be repaid to me upon the sale of the house. $20,000 would be hers. I just give it to her because I have that extra funds right now.
I truly do. I am encouraging her to pay off the house rather than to do this small little debt type thing. The debts are maybe about, they're saying about $20, $25, but we're hoping it will be much less that she'll be responsible for this. Someone is helping her send out letters for her statement. And is your question whether it's okay for you to make her that gift? Is it okay?
In your humble opinion. Someone told me I was maybe interfering with God working directly with her. I would just say that I love your generous heart.
Sometimes the Lord uses other people to help those in need. So the fact that you kind of have your eyes open and seeing this need for somebody that is in your life on your path and you want to be of help to them, absolutely. You make that gift and I think that will be a real encouragement to her during this difficult season. As for the portion that you're going to consider alone, I would just say make sure that that's in writing just to make sure there's no unmet expectations or confusion about that. I think it would be wise to fill out a promissory note even if there's no interest being charged and that way you and your friend could sign it.
Everything would be spelled out there so there's no confusion about the term, the amount of the monthly payments if any, or what is due upon the sale of this property. Again, that's just to keep all the communication clear so there's not any damaged relationships if one person is under a different understanding than another. But obviously with the gift portion, you just make that gift and I'm confident that'll be a real blessing. So I would concur with you Darcy.
This is a wonderful idea and something that I think will be a real blessing to her. So thanks for calling today. We appreciate your call. Have safe travels.
Be careful out there on the road. Well, once again, our time went by way too fast, but tune in next time and we'll do it all over again. Before we go, I'd like to thank our incredible production team, Amy, Devin, Jim, Robert, Brandy, Rob, and Ben. Couldn't do it without them. Have a great rest of your day and I'll see you again next time for another edition of Faith and Finance. Faith and Finance is provided by Faith Buy and listeners like you.
