Latest news with #consumerdebt
Yahoo
6 hours ago
- Business
- Yahoo
An ETF for the Buy Now, Pay Later Market
If an ETF focused on the buy now, pay later market, could investors borrow via PayPal to acquire shares? The answer is probably not. But there is a forthcoming exchange-traded fund, seeking the Securities and Exchange Commission's approval, that would invest in short-term consumer debt issuers. While there are funds on the market with exposure to the likes of PayPal and Affirm, ones concentrated on the BNPL business are hard to find. The VegaShares Buy Now, Pay Later ETF would seek out financial-industry securities based on assessments of issuers' competitive positions, risk management, leverage, and price relative to peers, according to the initial prospectus filed earlier this month. The ETF may have to answer at least two questions, said Todd Sohn, ETF strategist at Strategas. One of which is whether the timing is right: is the launch coming at an advantageous time in the economic cycle? The other, he said, 'is anyone going to want to buy this in bulk, particularly in the competitive ETF space?' READ ALSO: The Rise of the Buffer ETF and RFG's Bluemonte Jumps Into ETFs The BNPL business comes with some baggage and a pretty big stigma. While it makes money, it's hard to argue that it operates in the best interest of consumers. The services have grown in popularity over a decade in the US, particularly among people who are the least financially equipped to borrow, according to a paper last month by economists at the Federal Reserve Bank of Kansas City. 'Although BNPL services may help some consumers manage financial constraints by breaking down purchases into smaller installments and providing access to interest-free credit, the smaller, interest-free installments may also lead some consumers to perceive purchases as more affordable than they really are, increasing the risk of overspending, debt accumulation, and even default,' authors Fumiko Hayashi and Aditi Routh wrote. High percentages of people who have used BNPL services have not fared well, data from a recent Motley Fool study show: Nearly a quarter, 24%, of such borrowers were late on payments last year, up from 18% in 2023. Fifty-eight percent borrowed for purchases they otherwise couldn't afford, and 40% said they regretted using buy now, pay later after understanding the full costs. Paying the Price: Still, it's a market that is drawing investors. Prudential's PGIM unit is buying up as much as $500 million in consumer debt from Affirm over three years, according to a report in The Wall Street Journal. The prospectus for the VegaShares Buy Now, Pay Later ETF did not yet identify the fund's advisor, and the law firm representing it did not comment, citing company policy. Ultimately, the market will determine whether there's room for such an ETF, and a challenge will be getting assets that are sticky, Sohn said. 'Those stocks … seem to come with a stigma. It's almost like preying on unaware consumers.' This post first appeared on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
9 hours ago
- Business
- Bloomberg
Jefferson Capital Rises 27% After Bottom-Priced $150 Million IPO
Jefferson Capital Inc. shares rose as much as 27% in its public debut after the company and some of its backers raised $150 million in an initial public offering. Shares in the buyer of charged-off consumer debt traded at around $18 each as of 11:02 a.m. on Thursday in New York, versus an IPO price of $15 apiece. The company and investors including private equity firm JC Flowers & Co. sold about 10 million shares at the bottom of the marketed range.
Reuters
10 hours ago
- Business
- Reuters
Debt collector Jefferson Capital valued at $1.2 billion in strong Nasdaq debut
June 26 (Reuters) - Shares of Jefferson Capital (JCAP.O), opens new tab rose 26.7% in their Nasdaq debut on Thursday, valuing the consumer debt collector at $1.2 billion. Jefferson's shares opened at $19 apiece, above its offer price of $15 per share. The Minneapolis, Minnesota-based company and some existing investors raised $150 million by selling 10 million shares in the IPO. The U.S. IPO market has recovered in recent weeks after President Donald Trump's shifting trade policies rattled investors and froze new listings earlier this year. Jefferson's debut mirrors the strong first-day performances last week of cancer diagnostic firm Caris Life (CAI.O), opens new tab and Slide Insurance (SLDE.O), opens new tab.
Yahoo
23-05-2025
- Automotive
- Yahoo
Refinancing an auto loan to pay off other debt: Helpful trick or a harmful risk?
Cash-out auto loan refinancing — ideally with a lower rate and without prolonging your repayment — could help you consolidate and pay off other debt or bills. This strategy could be useful if you've improved your credit since you last borrowed and have sufficient equity in your vehicle. However, refinancing a loan for a depreciating asset means you could increase the cost of your repayment and risk owing more than your vehicle is worth. Run the numbers before proceeding to see if refinancing helps you accomplish debt repayment goals without taking on too much risk. If you're an auto loan-holder, you might be accustomed to pre-approved refinancing offers landing in your email inbox, or even your actual mailbox. They're often from a bank or credit union that houses your checking or savings accounts and tracks your credit score. They know you well, and they promise to refinance your auto loan to a lower rate. Given today's macroeconomics — rising levels of consumer debt, the potential reversal of inflation and, thanks to tariffs, whispers of a recession — you listen to their pitch. Perhaps you even wonder whether you could refinance your auto loan to pay off other debt at a decreased cost. After all, auto loan rates generally trend far lower than other consumer loan APRs. Product Term (years) Average interest rate* Auto loan (new car) 5 8.04% Personal loan 2 11.66% Credit card n/a 21.37% *From commercial banks in February 2025, according to the Federal Reserve Like with cash-out mortgage refinancing, cash-back auto loan refinancing means borrowing from the equity you've established in your vehicle to pay off your original auto loan plus other obligations. 'In the data that we're seeing, an average refinance is saving a consumer about $60 a month in their monthly payment — and that can certainly help cover other bills,' says Experian head of automotive insights Melinda Zabritski. 'But I think it's also important… to take more than just the monthly payment savings into consideration.' Let's say you originally borrowed the average auto loan in January 2023, according to Experian figures: $40,484 to be repaid over six years with a 7.16 percent interest rate. Let's also assume you've been plodding along in repayment for 28 months (through April 2025) and have built up about $13,000 in equity. Original loan Current loan Loan amount $40,484 $27,291 Repayment term 72 months 44 months Now, you're considering some refinance offers that would help you consolidate and clear $10,000 in credit card debt (with an average interest rate north of 21 percent). Current auto loan Credit card debt Refinancing Offer 1 Refinancing Offer 2 Amount $27,291 $10,000 $37,291 $37,291 Repayment term 44 months Revolving 48 months 72 months Interest rate 7.16% 21% 5% 7% Monthly payment $693 As much as you can $859 $636 Total interest cost $3,909 Eek $3,931 $8,485 Total repayment cost $31,200 Who knows? $41,222 $45,776 Calculations via our free-to-use loan payment calculator If you're truly struggling to catch up on credit card debt, it might seem like a no-brainer to grab Offer 1 (for the shorter term) or Offer 2 (for the lower monthly payment). After all, you'd probably rather pay off that debt at 5 percent or 7 percent interest as opposed to 21 percent-plus. But keep in mind that it's not so straightforward to determine whether cash-back auto refinancing is the right strategy. You must also account for the interest costs associated with lengthening your loan term. Consider that… Offer 1 would lengthen your loan term by four months. But thanks to the lower interest rate and higher monthly payment ($166 higher, in fact), it would only increase your overall interest costs by $22 (as compared to your current auto loan). Offer 2 would add 28 months to your existing auto loan term. And the lengthier repayment would up your overall interest expense by $4,554. Still, it might be a fit if you prefer the lower monthly payment ($57 lower, in fact, than your current auto loan). If these hypothetical offers still sound appealing, be aware — there are additional layers to unfurl. Cash-out (or cash-back) auto loan refinancing is only really helpful if you own enough of your vehicle. That's because it's your equity that allows you to borrow more and redirect the funds to your other debt. In the example above, we assumed our hypothetical borrower had paid off about 33 percent. The more equity you have, the better off you'll be (in every respect). For the sake of argument, let's say you're intrigued by offer 2 (above). If you went this route, though, you may very likely owe more than your wheels are worth. Progress made on your original auto loan Refinancing Offer 2 Total repayment Amount $13,193 $37,291 $50,484 Repayment term 28 months 72 months 90 months Total interest cost $3,909 $8,485 $12,394 Total repayment cost $17,102 $45,776 $62,878 That might not be a problem if you plan to keep your vehicle and are confident — at least as confident as you can be — that it's in good working condition and won't fall apart tomorrow. But if you're considering selling or trading in your vehicle in the foreseeable future, refinancing to a larger loan amount would make it difficult. Just because you're comfortable with the prospect of being underwater on a refinanced auto loan doesn't mean your lender will be. In fact, they'll typically limit how much you can borrow to the vehicle's market value. For our example, refinancing offer 2 might only be feasible if your vehicle is worth at least (or ideally more than) your desired loan amount. Estimate your vehicle's worth using resources like Edmunds and Kelley Blue Book. If your credit has improved since you last borrowed, you could be in a position to nab a lower auto loan refinance rate than your current APR. Otherwise, a higher rate would eat into your potential savings from consolidating other debt. Related: Three automotive financing experts discuss tariffs, rates, and other trends 'We would anticipate that when and if rates come down, I would certainly expect to see more [refinancing] occur,' says Experian's Zabritski, 'because obviously, going from a 12 percent rate to a 10 percent rate is going to make a difference.' Let's continue to assume you're intrigued by refinancing offer 2. You'd have to ask yourself whether you'd pay less interest by consolidating your credit card debt or keeping it separate. You can consult your budget and a credit card payoff calculator to find out. If you consolidate debt with refinance Offer 2… If you stick with your original auto loan… If you stick with your credit card debt… Total interest cost $12,394 $9,436 More or less than $2,958? Sometimes you have to choose which debt to pay off first. That's because paying off multiple debt accounts simultaneously is easier said than done. Cash-back auto loan refinancing is one way to do it, but it's far from the perfect solution for everyone. Consider other debt repayment strategies to help zero in on the best plan for your situation. Sign in to access your portfolio
CBS News
21-05-2025
- Business
- CBS News
Freedom Debt Relief review: Everything to know
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Freedom Debt Relief could help you break free from your debt problems, but there are a few things to know first. Getty Images Based in San Mateo, California, Freedom Debt Relief was founded in 2002 with a mission to help Americans who have become overwhelmed by their unsecured debt. Launched during a time of rising consumer debt, the company pioneered debt settlement services that would later become industry standards. Since that time, Freedom Debt Relief has grown to become one of the largest debt settlement companies in the nation. Freedom Debt Relief claims to have resolved over $20 billion in consumer debt for more than 1 million clients across the country since its inception. Over the last two decades, Freedom Debt Relief has expanded its footprint and established itself as an industry leader in debt negotiation. The company is also a founding member of the American Fair Credit Council (AFCC), which established ethical guidelines for the debt settlement industry. Understanding this background can provide important context for evaluating whether their services might be appropriate for your situation. But what else should you know about Freedom Debt Relief before deciding whether what this company offers makes sense for your needs? Below, we'll detail everything to know now. Find out how Freedom Debt Relief could help you here. Freedom Debt Relief: Everything to know Freedom Debt Relief operates on a straightforward premise: They negotiate with your creditors to try and reduce your total debt amount in exchange for lump-sum settlement payments. This process typically involves the following steps: Free debt evaluation : You start with a complimentary consultation to assess your financial situation and determine if you qualify for the program : You start with a complimentary consultation to assess your financial situation and determine if you Dedicated account setup : If you enroll, you'll stop making payments to your creditors and instead deposit funds into a dedicated, FDIC-insured account that you control. : If you enroll, you'll stop making payments to your creditors and instead deposit funds into a dedicated, FDIC-insured account that you control. Negotiation : As your account balance grows, Freedom Debt Relief's team negotiates with your creditors to settle your debts for a reduced amount : As your account balance grows, Freedom Debt Relief's team negotiates with your creditors to Approval and payment: Once a settlement is reached, you'll be notified to approve the offer. Upon your approval, the agreed-upon amount is paid to the creditor from your dedicated account. Enrollment process The enrollment process begins with a free consultation, which is typically conducted over the phone. During this initial conversation, a Freedom Debt Relief representative evaluates your financial situation, explains how the program works and determines whether you're a good candidate for debt settlement. They will also help you determine an affordable monthly deposit amount based on your debt load and financial situation. If you decide to proceed, you'll sign a service agreement and establish a dedicated FDIC-insured account with a third-party financial institution. This account, while opened in your name and under your control, is specifically designated for accumulating funds that will eventually be used for settlement payments. Chat with a debt relief expert about the options available to you today. Eligibility criteria Freedom Debt Relief generally works with specific types of debt and financial situations. To qualify for their program, you typically need: At least $7,500 in unsecured debt (though some clients report being accepted with slightly less) Demonstrable financial hardship that makes it difficult to repay debts in full Regular income that's sufficient to make monthly program deposits Primarily unsecured debts such as credit cards, personal loans or medical bills, as the program cannot help with secured debts like mortgages and auto loans, federal student loans, tax debts or court-ordered obligations like child support Negotiation phase Once you've accumulated sufficient funds in your dedicated account, Freedom Debt Relief begins approaching your creditors with settlement offers. When a creditor accepts a settlement offer, Freedom Debt Relief presents the proposal to you for approval before finalizing any agreement. Upon your approval, funds are disbursed from your dedicated account to satisfy the agreement. This process repeats for each enrolled debt until all accounts are resolved. Costs and fees Freedom Debt Relief's fee structure is performance-based, meaning you only pay when debts are successfully settled. However, these fees are significant, typically ranging from 15% to 25% of the total debt enrolled in the program. For example, if you enroll $20,000 in debt and Freedom Debt Relief negotiates settlements totaling $10,000 (a 50% reduction), you would still pay between $3,000 and $5,000 in service fees based on your original debt amount. These fees are not collected upfront but are incorporated into your monthly program deposits and deducted as each debt is settled. There is also a one-time fee of $9.95 to set up the dedicated savings account and a monthly fee of $9.95 that covers account servicing. Program timeline The Freedom Debt Relief program typically spans 24 to 48 months, with the exact duration depending on several factors, including: The total amount of enrolled debt How much you can afford to deposit monthly Creditors' willingness to negotiate The strategic timing of settlement offers Most clients see their first settlement within four to six months after enrollment, and the company generally aims to settle all enrolled debts within 36 months. However, some programs may conclude sooner or extend longer. Freedom Debt Relief pros and cons There are a few potential upsides and possible downsides to consider before enrolling in a debt settlement program with Freedom Debt Relief. Potential benefits The program can substantially reduce your total debt obligation, often by 30% to 50% before fees. Having professional negotiators handle creditor communications can improve the chances of a successful settlement. Enrolled debts are often resolved within two to four years, which is much faster than making the minimum payments. It offers an alternative to bankruptcy Potential drawbacks There could be severe damage to your credit score as your accounts become delinquent, get charged off and are ultimately settled for less than the full balance. These negative marks can remain on your credit report for up to seven years. The program also involves considerable costs, with a significant portion of your monthly program deposits going toward fees. Creditors may choose to sue Company ratings Freedom Debt Relief receives positive reviews overall across consumer platforms. On Trustpilot, the company has over 46,000 reviews and maintains a rating of 4.6 out of 5.0. The Better Business Bureau gives Freedom Debt Relief an A+ rating. The bottom line Freedom Debt Relief offers a potential solution for those who are struggling with their unsecured debt and want to avoid bankruptcy. The company has an established track record of successful negotiations and has helped hundreds of thousands of clients reduce their debt burdens over the past two decades. However, debt settlement through Freedom Debt Relief comes with significant trade-offs, so before enrolling, carefully consider whether this company and its programs fit your needs. If you decide Freedom Debt Relief is right for your situation, thoroughly read all agreements, understand exactly how fees are calculated and maintain realistic expectations about the timeline and outcomes. And, remember that debt settlement should be viewed as a serious financial intervention, not a quick fix, to help regain control when other options have been exhausted.
