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What is “Power of Attorney” and who should I give it to?
A power of attorney (POA) agreement is a written document that allows you to legally appoint a person or organization to manage your affairs if you are unavailable or become unable to do so. When you set-up a Power of Attorney agreement, you create a legal relationship in which you are the principal and the person you appoint acts as your agent.
Types of powers of attorney
There are several types of powers of attorney arrangements. Each one serves a different purpose and grants different levels of control over your decisions. Here are the three primary types of Powers of Attorney:
General Power of Attorney – broadly authorizes your agent to act on your behalf in your personal and financial affairs. It’s ideal if you will be out of the state or country and need someone to handle matters while you are gone, or if you are physically or mentally incapable of managing your affairs yourself.
Special Power of Attorney – allows you to specify more limited powers to you agent, like the ability to access your safety deposit box or to sell a home in your absence. This is often used when you cannot manage certain affairs due to other commitments or health reasons.
Healthcare Power of Attorney – legally authorizes your agent to make decisions about your medical care when you are unconscious, mentally incompetent, or otherwise unable to make decisions. It is not the same as a Living Will, however. A Living Will only allows you to communicate your wishes concerning life-sustaining procedures.
With additional text added to the document, any of the three types of power of attorney can be made durable. Durable means that the power of attorney will remain in effect, or go into effect, if you become mentally incompetent.
To whom do I give the power?
Choosing a person to serve as your agent for power of attorney shouldn’t be taken lightly. It’s an important decision. Whether you choose your parent, spouse, adult child, friend, business partner or attorney, trust is the key factor. Because this person will be acting on your behalf, it’s vital that you choose a trustworthy individual who will act in your best interests.
There are also other considerations, like location or proximity to you or how you’ve seen them handle their own finances and legal affairs. Are they organized and detail oriented? Could they manage or would they be willing to take on the additional responsibility?
Once you decide, be sure to have a conversation with your potential agent to discuss your wishes and the duties of the position, as well as the commitment you’re looking for. Once you’re both on the same page, you can rest easier knowing you’ve communicated your expectations.
Accurate records, regardless of trust
Because your agent is acting on your behalf, it is critical to keep accurate records of all the executed transactions and to provide you with updates. If for some reason you are unable to review them on a timely basis, be sure to assign the review to a third party.
Remember, you can revoke power of attorney at any time and for any reason. However, if you ever become weary of your agent’s trustworthiness or if a conflict of interest arises, you should terminate the agent’s authority immediately. Simply notify your agent and your financial institution in writing and ask for all copies of your power of attorney to be returned.
6 reasons why you should avoid Payday Lending
Short on cash this week? A payday loan might seem to be the perfect short-term solution. After all, it takes only minutes to apply for a small loan, the approval turnaround is quick, and the money can be deposited into your checking account within 24 hours. Ideally, you’ll pay it off with your next paycheck and get back on track.
It sounds like a great plan, but in reality, payday loans are made by predatory lenders who offer high-interest, high-risk loans to borrowers who need quick cash to cover short-term expenses. They’re notorious for kicking off a cycle of spiraling debt and are rarely the answer to a financial crisis.
Here are some important reasons you should avoid payday loans at all costs:
1. Interest rates are astronomical
If you financed your home or your car at 400% interest, would you think it was a fair rate? According to the Consumer Financial Protection Bureau, it’s not uncommon for annualized interest rates on payday loans to reach a few hundred percent. Borrowers should be prepared to repay 100% or more of the loan amount in interest and fees.
2. Hidden fees are excessive
There’s typically a $15 per $100 fixed fee charged for each payday loan. However, there are also additional fees that can add up quickly. Loan rollover and renewal fees, late payment fees, returned check fees, and debit card fees are the most common. Simply checking your balance on a pre-paid debit card or calling customer service could incur an additional fee.
3. Loan rollovers are costly
The large majority of people who apply for payday loans are unable to repay their loan within the typical 14-day repayment period. Unfortunately, that means they’ll have to rollover their loan to the next term…and so on and so on. Tack on the high compounded interest and fees and the debt becomes increasingly unmanageable and overwhelming, leaving almost no way of breaking the cycle.
4. You trade one financial problem for another
A payday loan may help you repair your car, buy groceries, pay your rent, but it doesn’t solve the long-term problem. The particular bill may be paid, but you’ve traded one debtor for another, and you’re still spending beyond your means.
5. It hurts your credit rating
A payday loan, even repaid on time, is not a plus on any credit report. In fact, lenders may even hesitate to lend money to borrowers of payday loans because it may be an indication of the inability to effectively manage their finances.
6. There are other options available
If you need a short-term loan, consider your other options. Borrow money from family or friends or your local credit union. Even a credit card, although not ideal, has a lower interest rate than a payday loan. As long as you pay it off within the month, or at least as quickly as possible, it could be a viable option. Can’t pay a creditor? Why not work out a payment plan over the next few weeks or months? Do you have some jewelry, sports equipment, or other items you could sell to raise money? Can you ask for an advance on pay from your employer?
In the long run, you’ll see that a payday loan is the least wise financial decision you can make. Although solving your immediate cash flow need is a priority, it’s also critical take a step back and take a look at your overall financial health, as well as your budgeting and spending habits.