Pay Down My Debt

Introducing FICO 9: What This Means for You

Tuesday, August 12, 2014


Yesterday, FICO announced that it will be releasing FICO Score 9.  If you have unpaid medical bills or other collection items, this change will impact you.

What is FICO?

FICO is the most widely used credit score in the country. 90 percent of all credit decisions (mortgages, cards, credit cards, personal loans and more) use the FICO score in some way.

So, when FICO makes a change to its score, we should listen. This score has a big impact, because lenders use it and others (like CreditKarma) are trying to approximate it.

What are they changing?

This change is huge for people with unpaid medical bills and other collection items.

Unpaid medical bills

According to Experian, 64.3 million Americans have a medical collection record on their bureau. In the current world, this can significantly harm their credit score.

If you have an unpaid medical bill, it can be reported to a credit bureau in two ways:

  • The medical service provider can report to the bureau, or
  • A third party debt collection agency that has purchased the debt, or has been contracted to collect the debt, can report it

99.4 percent of cases have been reported by collection agencies. So, if your doctor is calling you to pay – it probably hasn’t been reported to an agency. But, once a collection agency starts calling you, you probably have a negative item on your credit bureau.

The purpose of a credit score is to help lenders understand the likelihood of someone being responsible and paying back on time. There has been a widespread belief that people have been unfairly punished for medical bills. In fact, the CFPB has proven that people have been unfairly punished, in a May 2014 report.

With the new score, FICO is agreeing with the CFPB. Medical collections will now be differentiated from non-medical collections. And people will be “punished less” for medical collections. This makes sense, for three reasons:

  1. The medical system is complex, and many people have been hit with small medical collections that they didn’t even realize they owed. For example, with a small co-pay that ended up with a collection agency.
  2. Historically, many responsible people could not get insurance because they had a pre-existing condition. And, when medical disaster struck, they had no way to pay the medical bills. They tried to be responsible, but couldn’t.
  3. Even with insurance, multiple emergencies in a family can lead to large deductible payments. Doctors and hospitals can quickly turn over bills to collection agencies, resulting in a negative remark on the credit bureau. Even people who are just paying back their medical bills, responsibly, over time can be punished.

This is a big win for the CFPB. Hats off. A government agency has done the math for the industry, and the industry has agreed. This should result in better access to credit, and lower rates on existing credit – once (and if) the changes are accepted by the industry.

Paid Collection Accounts will now be bypassed

Beyond medical bills, many other types of debt can end up on your credit bureau. For example, failure to pay your utility bill, your phone bill, your overdraft or any other type of debt can result in your account being sold to a collection agency. And the agency will usually report the collection account on your bureau. Having these accounts can seriously harm your score.

But, the older the collection item, the less impact it has on your score. I have regularly met people who felt confused. They have recovered and now had money. Should they pay back that five-year-old collection item, or just let it age. They wanted to pay it back, but would receive advice from some people not to do so. Why? Because activity on a collection item could make it appear more recent.

This change removes all ambiguity. If you pay back your collection items, your score will benefit. This is the way it should be.

When will I see the impact

Unfortunately it will take a while. FICO sells its credit score to banks. Whenever a new score is introduced, a bank has to decide whether or not to upgrade. In order to make this decision, they need to do a lot of analysis.

First, they will perform a “retro” analysis. This means they will look at the past few years of their portfolio history, and they will estimate how the portfolio would have performed if the new score was used.

They will then need to build strategies, which includes the cutoff (above what score will they approve accounts), the pricing and the extra rules that they want to build. In my experience, this takes 12 to 18 months (there are so many committees that need to approve this!).

Banks are very eager to “swap in” new customers. So, if previously rejected customers can now be approved, banks will be keen to proceed.

They are less keen to charge people lower interest rates. So, the CFPB needs to watch the banks closely. If people are truly lower risk, they should pay lower prices. But, banks are not eager to reduce pricing.

In Conclusion 

We fully support the changes. Medical bills are being severely punished. And people should not be afraid to pay off collection accounts.

We are realistic: it will be a while before we feel the impact.

And we are rightly skeptical: banks will be happy to approve more people and give more credit. They will be less excited to reduce interest rates.

Got questions? Get in touch via TwitterFacebook, email or let us know in the comment section below!

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Building Credit , Pay Down My Debt

Handling Your Credit Score After Divorce

Friday, March 27, 2015

Divorce Decree

Divorce can wreak havoc on your life both emotionally and financially. To move forward in a position of power, start with a focus on credit. A good credit score is an essential tool for rebuilding your independence, financial and otherwise. A strong history of responsible credit use will make the process of moving on easier when it comes time to purchasing a new home or submitting a rental application or applying for new insurance.

Unfortunately, divorce often leaves individual credit in a sorry state. For example, if your ex was responsible for paying your joint bills and made a habit of missing payments or submitting them past due, you too will be a victim of the credit consequences. If you never had your own credit accounts or were not listed on joint accounts, you could also be in a bind with no credit history to qualify for future credit independently of your spouse.

Take Inventory 

Regardless of where you think you stand credit-wise, pull a copy of your credit reports from each of the three credit bureaus (Experian, Equifax, and TransUnion) at By federal law, you are entitled to a free copy of each report on an annual basis. Carefully review all information on each report for accuracy. If you spot any mistakes, fill out the dispute form for the appropriate credit bureau to have them corrected ASAP. Follow up until all errors have been resolved.

Regularly keeping tabs on your credit score can be helpful. We keep an extensive list of places to find your credit score for free. Once you have a clear picture of your credit laid out in front of you, you can begin the process of moving forward.

Make a Plan For Joint Debts

Both parties are liable for total amounts of debt on all joint accounts. Work with your ex to decide on how those debts will be handled. If you are struggling to come to a resolution, call the issuer and put a freeze on the account until you agree on who owes what. Keep making minimum payments though so your score doesn’t suffer.

Refinance, balance transfers, and consolidation are all options for restructuring your debts so they end up in the proper person’s name. In the meantime, keep those minimum payments going. Even if the judge declared your spouse responsible, as long as you’re still listed on the account, missed payments can adversely affect your credit.

While you undoubtedly want to break free of your former spouse entirely, old credit accounts in good standing actually help your credit score. Closing a joint account could wipe out a whole lot of valuable credit history. Call the bank and see if they’ll let you change from a joint account to an individual account. The bank may not go for it, but it’s certainly worth asking. If it’s a no go, go ahead and close those joint accounts so that you don’t become liable for any new debt your former spouse racks up post-divorce. If you fail to separate yourself financially, your ex’s actions – or non-actions – can continue affecting your credit score long after the divorce papers are finalized. 

Build Your Own Credit

Open up new accounts in your name and get a credit card that belongs to you and you alone. If you don’t have much credit history or your score is in a sad state, you may have difficulty qualifying for traditional, unsecured credit. In which case, you can work to build up your credit history with a secured credit card.

A secured credit card is easier to get because a cash deposit you put down serves as collateral. Typically, the deposit you put down is the amount the lender gives you as a credit limit. Make sure to choose a secured card that reports your activity to the credit bureaus so you get credit for all your use.

Prove your credit worthiness by using your secured credit card responsibly – making all payments on time and in full. While secured credit cards are useful tools in building and rebuilding credit, they can come with fees. The sooner you can rebuild and switch to a regular, unsecured credit card, the better.

[Check out secured cards options here.]

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Reassess Your Financial Reality

Paying your bills on time and in full is the most important part of rebuilding your credit history. In order to do that successfully, you’ll need to keep your expenses low enough and your income high enough to meet your monthly financial needs.

Another factor that influences to your credit is utilization ratio. Try not to rack up a balance of more than 30 percent of your total available credit. This will help in boosting your score while maintaining clear parameters on your spending.

Be honest with yourself about your financial realities post-divorce and scale your budget to live within your new means. Only use your card to buy what you would be willing to pay for an item in cash.

Adjusting to your post-divorce means as you rebuild your credit will allow you to build a new independent life that is sustainable, happy, and thriving.

You don’t have to deal with debt alone. Download our free guide and set up a FREE consultation call.

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College Students and Recent Grads , Pay Down My Debt

Skipping a Student Loan Payment

Thursday, March 26, 2015

mortar board cash

Have you hit a temporary rough patch with your finances? Are you worried you won’t be able to afford to make your student loan payment this month?

Instead of putting yourself at risk for being late, it might be worth it to look into skipping a student loan payment.

Yes, you read that right – this is a legitimate option that some private lenders provide, but there are a few things you need to consider. Skipping a payment still comes with consequences, though they’re not as bad as being late and falling behind on a payment.

Here are the circumstances under which it makes sense to skip a student loan payment, and the various programs lenders have.

When Should You Skip a Student Loan Payment?

The first thing to know: most of these “skips” are one or two time deals for the year. You shouldn’t considering skipping a student loan payment if you don’t think your financial situation will improve within the next month. Instead, you should contact your lender and ask them if there are other payment options available to you.

Skipping a student loan payment is for those who are temporarily unable to afford the payment. Perhaps your car needed a major repair, and you don’t have enough money in your bank to cover your payment until later in the month. Or maybe you’re in-between pay periods if you just started a new job.

Whatever the case may be, you don’t want to make a habit out of this. You can’t take advantage of these programs, so it’s important not to become dependent on the option.

Skipping a payment isn’t completely free, either. Some lenders require you to pay a fee to do it. The fee is much less than what your student loan payment is (most are around $25), but it’s still something to be aware of.

Additionally, some lenders have strict requirements. In most cases, if you’re not in good standing (or if you’ve been late on payments before), you’re not going to be eligible for this option. Some lenders require that a number of payments have been made previously, so if you just started paying your loan back, this option might not work.

Skipping a payment is mainly for those who have had their payments under control and are experiencing a temporary financial setback.

Are There Consequences to Skipping a Student Loan Payment?

If you’re wondering whether or not your credit will be affected, you should call your lender and find out. Some applications let you know that your credit won’t be affected, and others don’t mention it. The main thing they’re looking for is being current and in good standing on your loan.

Keep in mind interest will continue to accrue on your loan during this time. You should calculate whether it’s worth the fee + the interest that will accrue. If the difference between your payment and that calculation isn’t much, try to come up with the money any way you can.

In addition, some of the following lenders try to entice borrowers to skip a payment because they have “better things to do with their money,” such as spend it on gifts or a vacation. That’s not financially sound. You should be responsible for your student loan payments. If you have the money, use it toward your loans, not something outside of your budget. It’s not worth the interest that will accrue.

Lenders Who Let You Skip a Payment

Not all lenders have this option available, but we’re highlighting a few that do. In most cases, credit unions are leading the way by providing this option to their customers, but this isn’t an exhaustive list by any means.

Earnest: You’re eligible to skip a student loan payment with Earnest if you’ve made 6 months of on-time payments. You can only skip one payment every 12 months. They do warn that the principal and interest from the payment you skip will be spread out across your remaining payments, and will result in increased monthly payments. They don’t mention any fees associated with skipping a payment.

Maryland Credit Union: There is a $25 processing fee if you apply to skip a payment. You must have made 3 consecutive months of payments to be eligible, and your loan must be in good standing, with payments current. Ultimately, the credit union must approve you, so you’re not guaranteed to be able to skip. You can only skip one payment per calendar year.

Education Credit Union: There’s a $25 participation fee when you skip a payment, and you must have made one full payment on your loan to be eligible. You have to plan ahead here, as you need to send in the form 10 days before your payment is due. They note that the skip request is not guaranteed as the underwriting department has to review it. They do allow 2 payments to be skipped per year, but not in consecutive months.

Eastman Credit Union: A $25 processing fee is charged to skip a payment. For student loans in particular, you must be making principal and interest payments, not just interest-only payments. Your loan must also be current and in good standing, and must also have been current in the past 6 months. You can only skip one payment per year. They warn that interest will continue to accrue, which will extend the term of the loan.

As you can see, all of these lenders have different guidelines and eligibility requirements. It’s a good reminder to always read the fine print on any forms you’re signing. Don’t assume anything is guaranteed, and have a contingency plan in place in case your request is denied.

What If I Have a Different Lender?

The option to skip a payment is very popular with credit unions and other types of loans, so more lenders may start offering it in the future.

It’s always worth giving your lender a call and asking if this is something they can do for you. Many lenders know how much of a burden student loan debt is, and they’re willing to work with borrowers under the right circumstances.

Always be honest and polite when calling, and explain your situation. If you’ve had a good record with them thus far, that will work in your favor. At the very least, your lender may be able to change your due date, or offer you another course of action.

After Skipping a Payment

Once you get your financial footing back, we strongly recommend paying extra on your student loans, if you can. You want to make up for the interest that accrued. In many cases, the term of your loan may have been extended. You should do what you can to reverse the impact skipping a payment had on your loans.

If it wasn’t clear before – this is a one-time deal, and your payments will resume the following month. Be prepared!

Proceed With Caution

The option to skip one student loan payment is a good one to use in an emergency situation. Remember, this option is only available to you, at most, for 2 months out of the year. Make sure you really need to use it before paying a fee or having your loan term extended. This should be considered a last resort if you truly don’t have the money to pay, not because you have the money and want to use it on something else.

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Pay Down My Debt

A Debt Free Plan: Pay Off $27,000 In Two Years

Tuesday, March 24, 2015

Senior Couple Talking To Financial Advisor At Home

Last week, the MagnifyMoney team was in Atlanta, Georgia. We regularly take our Debt Free Guide for a spin (you can download it here), helping people build their plans. You can learn from their stories, and take inspiration from their progress.

Last week we helped Diana (her name has been changed, because debt is still a taboo topic in this country. We hope that changes eventually). Here is her situation:

  • Fully retired. She receives two monthly pension checks (both from very stable companies) and Social Security. The total net income is $4,000 per month.
  • She has a mortgage. Her home is $20k underwater. She has a great interest rate of 3.75%. Her monthly mortgage payment is $1,500.
  • She has a car. It is worth $16k. The balance is $10k, and the monthly payment is $600.
  • She has $27,000 of credit card debt. She is only making the minimum monthly payments, and the average interest rate is 20%. That makes her monthly payment about $720, of which $450 goes towards interest.
  • She has no other debt. But she feels completely broke and worries that bankruptcy will be rapidly approaching.
  • She has no cash in the bank, and no emergency fund or savings.
  • Diana has a 660 credit score. Although she has a lot of debt, she has never missed a payment. The score dropped below 700 because of the absolute level of debt.

In our Debt Guide, we always follow a 3-Step Process. That is:

  1. How Bad Is It?
  2. Establish A Plan
  3. Future-Proof Yourself

How Bad Is It?

To determine the best plan, we look at three things:

  1. Do you spend less than you earn each month?
  2. How much debt do you have relative to your income?
  3. What is your credit score?

1. Diana is spending more than she earns each month. To figure out the problem, we first looked at her fixed monthly expenses (home + auto) as a percentage of her monthly income. Her fixed costs = $2,100 per month. Her income is $4,000. That means her fixed costs are 53% of her income. Warning: once you are above 50%, it is time to stop and re-assess.

Before moving forward, we need to solve the fixed expense problem. After speaking with Diana, we came up with the following solution:

  • Diana has a basement apartment that can be rented out for $600 a month. Although Diana is not looking forward to being a landlord again, she will do it for the next 24 months, and then her peaceful life can return.
  • Diana will sell the car. With the $6,000, she will buy a cheap car. It is easy to find a car for $6,000 that will last two years. I referred her to TrueCar to find the right option. That will save $600 per month.

Between these two actions, Diana will save a massive $1,200 per month (although there will be some tax liability on the rental income).

2. Diana’s total credit card debt is $27,000. Her net take-home pay is $48,000 per year, which is about $60 before taxes. Her total debt is 45% of her income. Once that number gets above 50%, it can become almost impossible to get out of debt. If she continued to add to the debt, she would go bankrupt. But we started talking just in time.

3. Diana has a good credit score. If her score was above 700, she would have a ton of options. But, at 660, she still has some very good options available.

Based upon her situation, we had a plan: Transfer & Attack, using a Personal Loan as the weapon.

Establish A Plan

We knew that Diana would have an extra $1,200 a month because of her home and her car.

We made a list of her debt, from the highest interest rate to the lowest. Some of the debt had outrageous interest rates, close to 30%. Some of the debt had very good interest rates, close to 8% from credit unions.

With a score of 660, we used the MagnifyMoney Personal Loan tool to find a way to cut the interest rate on the debt, and take years off repayment. She applied to a number of lenders, and ultimately was approved for a loan of $15,000 from LendingClub*, with an APR of 18%. We were able to pay off all of the debt that had an interest rate higher than 18% with the loan proceeds. The entire process took fewer than 15 minutes. The loan has a 3 year term, and will save her more than $1,000 in interest.

Once the transfer was complete, we agreed her payment plan:

  • The first $2,400 from her car and home (two months) would be put in a savings account as an emergency fund. She selected her savings account from our Savings Account marketplace.
  • The rest of the savings would be put towards the high APR debt first. She would pay only the minimum due on everything but the highest APR debt. And all extra money from the car and house would go towards that debt.
  • In just a little over two years, her debt should be completely paid off.

Future Proofing Her Life

We talked about a few important lessons.

First, you should never borrow what the bank says you can afford. Instead, borrow much less and leave plenty of cash for life. In two years, she can buy a nicer car. But she will never have a car payment that big again. And, if she wants a nicer car, she will wait longer and save for it.

Second, store credit cards are an obscenely expensive temptation. Although traditional advice is to keep credit cards open, we decided to cut up those store cards. And she promised to never use them again.

Finally, Diana was very honest with herself. She has a very hard time dealing with temptation. So, she will be going on a strict cash diet. No credit cards for her! As cards are paid off, she will cut them up. She will only keep one credit card open at the end of the 24 months and will use that for making her cell phone payment – keeping it out of her purse.

Although technically it would be better to keep more cards open, Diana is honest with herself and just doesn’t trust herself with credit. Gamblers shouldn’t move to Vegas, and shopping addicts should’t fill their wallet with credit cards.

She looked visibly relieved at the end of our session. She had a plan. And we will keep in touch with Diana to see how she is doing. Diana was on the brink. If she continued spending, she would have ended up in bankruptcy. We are thrilled that we could help her.

If you would like to have a free 30 minute session with someone from our team, you can schedule an appointment here. We can help you build a plan to be debt free forever. Once you commit yourself, it can happen a lot faster than you imagine.

*We receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.  

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Life Events , Pay Down My Debt

Why You Can’t Afford a 3% Down Payment Mortgage

Friday, March 20, 2015

Purchase agreement for house

The closer I get to thirty, the more I fantasize of the trappings associated with the stereotypical “American Dream”- the husband, the 2.6 children, and the house with the white picket fence. My late 20s wanderlust is still alive and well, but the idea of putting my roots down and calling my own place home is becoming increasingly attractive. I find myself perusing the New York Times real estate section or Zillow at least once a week, identifying the features of my dream home.

My financial reality however, dictates that my dream home will in fact remain a dream for quite some time – not just my dream home, any home. The cost of a down payment is prohibitively expensive- even modest living quarters go for around half a million in my neighborhoods of choice. With a twenty percent down payment, that’s an upfront investment of 100k- not to mention taxes, closing costs, etc. Even if I could afford the mortgage and monthly maintenance fees, the down payment remains a major barrier to home ownership.

Lenders Fannie May and Freddie Mac have recognized this barrier for low-income and first-time homebuyers and have put in place programs to open up lending by reducing the upfront investment required. The mortgage giants have announced that they will back mortgages with down payments as little as three percent of the home’s price. The programs are for fixed-rate loans for first-time homebuyers and those looking to refinance their primary residence- they come with several conditions.

  • Borrowers must buy Private Mortgage Insurance.
  • Borrowers must have a credit score of at least 620.
  • Borrowers must provide documentation of income, assets, and job status.
  • Borrowers must receive home ownership counseling.

Fannie Mae and Freddie Mac aren’t the first lenders to adopt this kind of program. The Federal Housing Administration also issues mortgages with down payments as low as 3.5 percent. At that rate, my hypothetical 500k home down payment goes from a prohibitive 100k to a totally reasonable 17.5k.

While all of this sounds like great news for buyers like myself who’d like to own but don’t have the cash for a large up front investment, there are reason to be wary.

  • Small down payments can leave borrowers at more risk of owing more on their mortgage than the property is worth should home values in the market decline. Sound familiar?
  • Borrowers will likely incur higher costs over the life of the loan from higher interest rates and mortgage insurance.

A 3% down payment mortgage (or any other low down payment mortgage) is more likely to default than one with a large down payment- that means more risk for lenders and translates into higher costs for borrowers. The Private Mortgage Insurance (PMI) that comes with these low down payment loans protects lenders when borrowers default on their mortgages- but it’s not the lenders who pay for it, it’s you, the borrower.

Mortgage insurance premiums typically range from $250 to $1,200 per year. The programs from Fannie Mae and Freddie Mac require you to continue paying that premium until you gain 20 percent equity in your home – with a three percent down payment, that could take years.

To put it into perspective, if a couple owning a $250,000 home were to take the $208 per month they were spending on PMI and invest it in a mutual fund that earned an 8 percent annual compounded rate of return, that money would grow to $37,707 in 10 years. Money that goes to PMI doesn’t grow or help build equity – once it’s gone it’s gone.

You can avoid paying PMI by not taking on low down payment loans. Yes, there’s a larger upfront investment required, but over the life of the loan, the total costs are far fewer with a large initial deposit. It’s not just PMI either. Putting down such a small amount usually means a paying a higher interest rate in general. Over the course of a 15- or 30-year mortgage, that can mean paying thousands of additional dollars.

Even fractions of percentage point tacked onto an interest rate can raise overall costs significantly. For instance, a $200,000 30-year fixed-rate mortgage with an interest rate of 7 percent would cost you $1,330.60 per month – $279,017.80 in interest over the life of the loan. At 7.5 percent interest, the monthly payment on that same loan would be $1,398.43, coming to a total of $303,434.45 paid in interest over the life of the loan. That’s an extra $25,000 for half a percentage point. Putting more down gives you more leverage to negotiate a better interest rate with lenders- don’t discount the difference of a fraction of a percentage point.

Less money down doesn’t mean you’re getting a good deal. It might mean an easier time coming up with a down payment, but with PMI and higher interest, that temporary ease can cost you far more than it’s worth over the long haul, not to mention the increased risk of getting stuck with an underwater mortgage.

While I can certainly afford a 3% down payment mortgage today, I can’t afford the higher cost implications over the next thirty years. Instead I’ll continue paying my cost effective rent while I save up the twenty percent down payment for my “American Dream” home.

Our FREE debt guide can help you dig out of debt and put more money towards a home. 




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Pay Down My Debt

3 Stories of Real People Who Overcame Debt

Thursday, March 19, 2015

Cat in Grenada

I’ve been a personal finance blogger for almost 5 years now, and because of that, I often hear success stories when people conquer their debt and organize their finances. It always gets me excited when I hear from friends who have decided to embrace financial responsibility and get on the right track. It just goes to show that no matter how bad your debt is, there’s always a way to conquer it once and for all.

1. My $6,000 of Debt

My debt is one of the reasons I’m a full time blogger today. I moved out of the country to Grenada a few years ago (although I’ve since moved back) and when I moved I had no job prospects and $6,000 of credit card debt. Since I had trouble finding a job because I was a foreigner, the only way I could pay my credit card bill was working online.

So, I got my first writing job for $10 a post solely to pay that bill, and slowly but surely I added clients. I was able to pay off that $6,000 in 18 months just from the income I made writing online.

The best part as that when I got on the plane to come back to the United States three years after I moved abroad, I was completely credit card debt free and also self-employed.

My debt came from overspending and stupidity in my early 20’s but it’s also the one thing that led me to start a career I love.

2. Kayla: My Shopaholic Friend

My husband’s best friends and roommates in college were actually fraternal twins, a brother and sister. Kenneth and his twin sister, Kayla, were totally different when it came to money. Kenneth was a chronic saver. He counted every single penny. Kayla had a huge personality, loved shopping, and especially loved name brands.

promo-balancetransfer-halfAfter college, they both worked a variety of jobs, and we kept in touch with both of them. About three years ago, Kayla e-mailed me and said she was inspired by my blog and wanted to get out of debt. She had started the process by using balance transfers to move her credit card debt to 0% interest rates one-by-one until she could get the payments under control.

She was a hard worker who worked in real estate. Every time she made a big sale, Kayla applied the extra money to her debt. What started out as $30,000+ worth of debt on credit cards, student loans, and a beautiful Mercedes is now at $0.

It took her three years to do it, but it’s one of my favorite stories ever because it was such a big turnaround. I always reference Kayla when I talk about loving name brand items and still being able to be debt free. Even if you’re someone who likes to shop, you can be financially responsible about it. Budgeting is everything!

3. Ann: $30,000 in Student Loans

My best friend in the world for the last ten years, Ann, went to an expensive private school for college. She got a small scholarship but between the room and board and the rest of her tuition, she had over $30,000 in student loan debt when she graduated.

Ann is excellent with her money and very frugal. In fact, one of the reasons we get along so well is that a day of fun for both of us is just strolling through a flea market or antiques sale. Needless to say, she has been on track to pay off her student loans, but health problems and an inability to find a high paying job made the process challenging.

With a degree in political science, she tried out a few different careers from working in doctor’s offices to working for a travel company. She excelled everywhere she went and was always given raises. Still, in the rural area where she lived, she had trouble clearing more than $30,000 a year.

What she did to make a huge dent in her debt was live with her parents for very minimal rent and drive her old car that she’d had since high school for as long as possible. She is turning 29 this year and just moved into her first apartment by herself.

I praised her for this endlessly because instead of jumping into an apartment she couldn’t afford, she really took her time to make sure she would be able to make her student loan payments. It’s been five years since she graduated from college, and she’s been able to pay down 75 percent of her student loans. She is side hustling, blogging and is doing extremely well.

She filled her new apartment with some awesome Craigslist and flea market finds and she has a true sense of independence since she’s been able to accomplish all of this on her own with her own paychecks.

Her story shows that it’s really not about how much you make every year but how you actually decide to spend it. She should be debt free in less than five years, far better than the 30 years most people take to pay off their student loans.

Working hard but still struggling to pay down your debt? Try our FREE dig out of debt guide.


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Pay Down My Debt

Is Your Husband Committing Financial Infidelity?

Monday, March 16, 2015

couple arguing_lg

I have been married for nearly two and half years to my husband. In relation to our finances, we consider ourselves on the same page in terms of spending, saving and our financial objectives. We have a mix of joint and separate accounts as we are both self-employed and we also have joint and separate assets and credit cards.

The reality is that despite our propensity to consistently share financial information, the opportunity for my husband to commit financial infidelity exists, if I’m not paying close enough attention.

Married couples are heavily invested in the notion of trusting one another on all levels, including money. The problem typically occurs when a husband decides to take advantage of his spouse who isn’t involved, interested or aware of the details of the family finances. The results can be absolutely devastating once the lies, hidden expenses, additional debt or siphoning of income are uncovered.

To prevent yourself from becoming the next statistic of financial infidelity, you need to be concerned about what is happening with your money. Having your spouse in the role of the family CFO isn’t a bad thing, but you should insist on having at minimum, monthly meetings to review financial transactions.

Avoid being financially blindsided by being proactive about the following warning signs that may reveal if your husband has money secrets.

Transferring of Joint Assets

You notice on a joint bank statement that a large chunk of the funds were withdrawn. When you do question your husband, he answers that he opened a new “joint” account to earn more interest. You accept his response without further questioning.

Alert! Some husbands will move money from a joint account into an account solely in their name and purposely avoid telling their spouse. This is fraudulent and deceitful behavior, pure and simple. Confirm his story by asking him to provide details of the new account opening.

Cash back from Debit Purchases

You may send your husband to run errands for you at the store and he asks for cash back from the cashier. Given a spouse who doesn’t monitor the bank accounts often, it’s a clever way for a husband to slowly reduce the bank account balance and the wife is none the wiser.

Ask for and review purchase receipts to ensure that this isn’t happening to you. A similar result can occur with unmonitored credit card cash advances.

Redirecting the Mail

When bank, credit card or other financial statements that are usually mailed to your home or sent to an established e-mail address no longer arrive, it’s time to start asking questions. Contact the financial institutions to verify where the statements are being sent and request copies of the statements for review.

Refused Credit

A wife may find out about their husband’s potential secret debt when they apply for a new credit line together. If you are refused for additional credit due to what may be contained in your husband’s credit report and if the new creditor cannot provide you the information, ensure that your husband requests his credit report and provides you with a copy.

Increase in Spending

Are you receiving clothing, jewelry and other gifts that you normally wouldn’t expect from your husband? At face value it may be an endearing gesture of love on his part but it could also mean that he is using more of the family income than he should be.

Worse yet, he may be financing the purchases via a new credit card that you have no knowledge about. The double whammy is discovering that the excess spending is being showered on someone else.

Password Changes/Data Corruption

When attempting to obtain information on your accounts, if you come across a roadblock due to a known password that was created or changed without your knowledge or consent, you have to question the reason for it.

Another way for a husband to hide his financial misdeeds is to claim that the data contained in financial spreadsheets or budgeting software has been corrupted or “lost”.

Financial Secrecy

If you were to ask your husband questions pertaining to the finances and he gets defensive, accusatory or dismisses your concerns, it is more than likely that something is amiss.

Instead of withdrawing from a potential confrontation with your spouse, communicate that it is your right to be financially informed and that you are seeking the truth no matter how bad it may be.

Become a Financial Team

The above is not an exhaustive list of red-flags but it will get you thinking about how easy it is for a spouse to act inappropriately with money. The key to minimizing the possibility of financial marital secrets is to be an equal partner with your husband in managing your finances.

You may not have a deep interest in the day to day expenses yet your money and your marriage is at greater risk if you do not practice joint ownership of the family finances.

Working hard to pay down debt? Try our FREE dig out of debt guide.




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Pay Down My Debt

How Much Money Is the Debt Snowball Method Costing You?

Friday, March 13, 2015

Depressed man slumped on the desk with his hands holding credit card and currency

When it comes to debt repayment strategies, the debt snowball method gets a lot of press.

This is the approach where you order all of your debts by balance and prioritize your lowest balance debt first. Once that’s paid off, you prioritize the next lowest balance, and so on.

It’s an approach that was popularized by Dave Ramsey and these days it seems to be the go-to strategy for most people in debt.

And the truth is that it’s a great way to pay off your debt. Paying off those lower balance loans can be motivating, and the simple fact is that the debt snowball method has gotten a lot of people out of debt.

But the other truth is that it might be costing you money.

There’s another approach that can not only get you out of debt sooner, but leave you with more money in your pocket.

It’s called the debt avalanche and it prioritizes your high-interest debts first. And in this post, we’ll look at an example to see just how much money it might be able to save you.

Let’s Meet our Example Couple

Pete and Lisa are a young married couple and are very much in love. They share everything. Stories about their days. Toothpaste. A love for all things Vin Diesel.

Oh, and their debt. They share that too. And they would like to get rid of it as soon as possible.

Here’s what they owe:

  • Car loan: $5,000 balance at 3% interest, with a $71.87 minimum payment
  • Student loans: $10,000 balance at 6.8% interest, with a $115.08 minimum payment
  • Credit card: $15,000 balance at 13% interest, with a $312.50 minimum payment

So what’s the best way for them to attack this debt? Let’s compare a few different approaches and see which one will save them the most money.

For each option, I’m going to use this Debt Snowball Calculator to calculate the time to payoff and total interest paid.

Option 1: Paying the Minimums

The default option is to simply keep making those minimum payments. If they just do that, here’s what it would look like for them:

  • Time to debt-free: 10 years (121 months)
  • Total interest paid: $10,596

That’s a long time! But they know they can do better, so the real question is which accelerated payment method is right for them.

Option 2: Debt Snowball

Pete and Lisa are serious about tackling their debt, so they’ve cut some unnecessary expenses out of their life, automated their budget as much as possible, and now they have $200 extra to put towards their debts each month.

Not only that, but with each debt they pay off they’re going to take the money they were putting towards that debt and start putting it towards the next one. In other words, they’re making moves!

So the real question is how to prioritize those extra payments: lowest balance first or highest interest rate first?

Let’s look at how they would fare with the debt snowball approach first. With this strategy, that extra $200 is going to their lowest balance debt first (the auto loan), then the next lowest (the student loans), and finally to their highest balance debt (the credit card).

Here are the results:

  • Time to debt-free:5 years (54 months)
  • Total interest paid: $7,514
  • Savings over minimum payments: $3,082

Not only were they able to shave over five years off their debt repayment plan, but they were able to save themselves $3,802 in the process. Pretty sweet!

Obviously the debt snowball approach is better than simply paying the minimums, especially if you can tack on an extra monthly payment. But is it the best approach?

Option 3: Debt Avalanche

This time, we’ll assume that Pete and Lisa are approaching things in exactly the same way, except that now they’re prioritizing their debts with the highest interest rates.

This is the debt avalanche approach, and it has them putting their extra money first towards their credit card, then towards their student loans, and finally towards their auto loan.

How does that work out for them?

  • Time to debt-free:3 years (51 months)
  • Total interest paid: $5,672
  • Savings over minimum payments: $4,925
  • Savings over debt snowball: $1,843

Compared to the debt snowball approach, it gets them debt-free 3 months sooner (pretty cool) AND saves them $1,843 (very cool!).

How much money can you save?

Before you jump head first into your own debt snowball, I would encourage you to run the numbers for yourself and see if you should go with the avalanche method.

You never know how much you could save.

Download our Debt Free Forever Guide! It’s FREE and will help get you back on track.


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Pay Down My Debt

Choose Your Own Adventure to Maximize Your Tax Refund

Tuesday, March 10, 2015

Tax return check

Tax return season is here. You have over a month left to file (don’t miss that April 15th deadline!), but almost 59 million diligent Americans have already filed their taxes. With an average refund of $3,120, it’s easy to start daydreaming of beach vacations, ditching your clunker car, finally putting that pool in the backyard or upgrading your wardrobe. Before you stumble down the rabbit hole of what your tax return could buy, consider how the money you’re getting back from Uncle Sam could resolve existing financial issues.

Below, we’ve laid out common scenarios and how best to handle them. You can read the entire article or pick your own adventure by clicking to your situation.

You’re Paying Down Credit Card Debt and Have a 700+ Credit Score

Credit card debt is painful. It usually comes with interest rates north of 15% and can take years to pay down because so much of your monthly payment is going to interest alone. When you suddenly come into hundreds or thousands of dollars, it’s an opportunity to make a big dent in your credit card debt.

promo-balancetransfer-halfBefore you haphazardly throw a lump sum at your credit card debt, you should think through the best repayment strategy.

Make a list of all your credit card debt and the associated APRs. You want to attack the debt with highest APR first. This is when a good credit score comes in handy. High credit scores usually mean you qualify for balance transfer offers.

With a balance transfer you can move your debt from a high interest rate to 0%. Then you can put your lump sum payment towards just the principal balance and knock out your debt not only faster and with less interest paid! Even with paying a fee to complete the balance transfer, this strategy could save you thousands of dollars.

[See how much the APR on your credit card is really costing you.]

Top Balance Transfer Offers

Chase Slate

  • Duration: 15 months
  • Interest Rate: 0%
  • Fee: 0%

Santander Sphere Visa Signature Credit Card

  • Duration: 24 months
  • Interest Rate: 0%
  • Fee: 4%

Platinum Preferred MasterCard by American Heritage FCU

  • Duration: 24 months
  • Interest Rate: 2.99%
  • Fee: $0
  • Anyone can join American Heritage Federal Credit Union by showing support for Kids-N-Hope at no charge and depositing $15 in a share savings account and maintaining that as a minimum balance.

You’re Paying Down Consumer Debt and Have a 660+ Credit Score

Not everyone is eligible for balance transfers, but personal loans often offer opportunities to reduce interest rates, even if your credit score is below 700. You could potentially consolidate all your credit card debt or other debt into one loan with a lower interest rate.

Keep in mind, the lower your credit score the higher your interest rate.

You can fill out an application for the personal loan providers below and each one will do a soft pull of your credit report to offer you an interest rate. A soft pull means your credit score won’t be harmed. Once you take the loan, your credit score will take a bit of a hit because you’ve established a new line of credit.

It’s important for you to know your interest rate ahead of time to make sure it makes financial sense to take out the personal loan. If your credit cards are at 18% but you only can get a personal loan at 20%, it probably doesn’t make sense to make the switch. Instead, work on improving your credit score and then applying for a balance transfer.

Top Personal Loan Offers


MagnifyMoney is currently running an exclusive offer with SoFi. Apply and get approved for a personal loan and you’ll receive $100 cash back. You need a 700+ credit score to be eligible.

  • Maximum Loan: $100,000
  • Minimum Credit Score: 700
  • Duration: 84 months
  • APR: 5.50% – 8.99%
  • College education required


  • Maximum Loan: $25,000
  • Minimum Credit Score: 660
  • Duration: 36 months
  • APR: 6.00% – 16.00%


Currently, Payoff loans can only be used to refinance credit card debt. Do not apply for Payoff you need a loan for any other reason.

  • Maximum Loan: $25,000
  • Minimum Credit Score: 660
  • Duration: 60 months
  • APR: 10.00% – 22.00%


  • Maximum Loan: $35,000
  • Minimum Credit Score: 660
  • Duration: 60 months
  • APR: 6.44% – 28.45%

Lending Club*

  • Maximum Loan: $25,000
  • Minimum Credit Score: 660
  • Duration: 60 months
  • APR: 6.48% – 29.99%


  • Maximum Loan: $35,000
  • Minimum Credit Score: 660
  • Duration: 60 months
  • APR: 6.63% – 36.00%


Your Credit Score Needs Improvement

Dealing with a credit score in the low 600s or below? Focus on improving your score. It won’t happen overnight, but you can start to rebuild by:

  • Paying your credit card bills on time (at least the minimum but preferably more)
  • Dropping your utilization to 20% or less (spend less than 20% of your total available credit on credit cards)
  • Be pumping in good information by responsibly using existing credit
  • Consider getting a secured card to establish or rebuild your credit history
  • Determine how best to handle items with collections agencies
  • Applying for a store card may help: it sounds counter-intuitive, but if you have a score high enough to get a store credit card (usually in the mid-600s) this will increase your available credit which automatically reduces your utilization if you don’t up your spending. Just lock the credit card away and unsubscribe to tempting emails about sales and deals.

[Explore our Building Credit section for additional tips.]

You’re Dealing with Student Loan Debt

Student loans come with a tax deduction. While no one likes owing money, at least Uncle Sam gives the indebted a little bit of a break at tax time. The student loan interest deduction is for those carrying student loans with a modified adjusted gross income of less than $80,000 (filing separately) or $160,000 (filing jointly). You can reduce your taxable income by up to $2,500.

So, if you took advantage of this tax deduction to increase your tax return, put it to good use.

The best strategy is to apply your refund in a lump sum towards your debt with the highest interest rate. However, if you have a private student loan, you may want to knock that one out first. Private student loans don’t receive the same benefits as Federal student loans, including: forgiveness programs and many don’t have forbearance options if you’re unable to pay.

Make sure you tell your lender the lump sum should be going towards your principal balance not your monthly payment. If you pay ahead it may show as $0 due on your next statement. Don’t let this confuse you into not paying. Keep paying at least your monthly amount to get ahead of interest owed.

Good to Know: The Federal Government can seize your tax return and put it towards your student loans if you’re in default. You should also double check if there is a pre-payment penalty on any of your student loans meaning if you pay them off early you’ll be charged a set amount.

You Have Less than $1,000 in an Emergency Fund

It can be tempting to put all your extra money towards paying off debt. Don’t. You need to have a buffer in an emergency fund savings account. This money should be held separately from your checking account so you aren’t tempted to spend it on daily purchases or debt repayment.

Putting $1,000 away in savings can keep you from digging deeper into debt when the unexpected happens. Think Murphy’s Law: What can go wrong, will go wrong. Without a savings buffer a home repair will pop up, a car part will malfunction, a medical emergency will arise and you’ll end up putting the charge on a credit card or overdrawing an account.

Once you’re debt free, you should try to have at least six months worth of income saved up in case of a job loss or unforeseen event that could leave you scrambling for cash.

Your savings should be housed in an account earning more than 0.01% (the average from the big banks).

Savings Account with High Interest Rates

You Have Extra Money After Paying Off Debt and Saving for Emergencies

Perhaps you’re one of the fortunate individuals to knock out debt this year and fully fund an emergency savings account. What financial priorities should be handled next?


Using this year’s tax return to get a tax break for next year is always a smart play. Dump your return into a Traditional IRA to lower your taxable income in 2015. If you don’t need the tax break now and prefer to take it in retirement, put your money into a Roth IRA. Be sure you aren’t over contributing to your retirement plan. Check in with the IRS guidelines before putting your money into an IRA.

College Savings

Got kids? Put your tax refund away for their futures. You can save in a 529 Plan, which affords the opportunity to grow money tax free and make eligible withdrawals tax free at the federal level and often state too. The money has to be used for higher education expenses or you’ll face penalties. 

Live a Little

You’re debt free, ready for emergencies and eyeing that tax return hungrily. It’s okay to splurge. If you can afford to make a purchase you’ve been considering and it won’t send you reeling into debt or sucked into a hole of overspending, it’s okay. Money shouldn’t always be hoarded away.

Get Help By Downloading Our FREE Guide to Ditching Debt Forever!



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College Students and Recent Grads , Life Events , Pay Down My Debt

Do You Need to Buy a Home by 30?

Tuesday, March 10, 2015

Purchase agreement for house

About once a month, someone walks up my driveway and rings the doorbell. Sometimes it’s a representative from some sort of home repair company that’s fixing up the house down the street, telling all the neighbors that they might also want to consider updating this or that. Other times it’s a realtor passing out business cards. Occasionally it’s kids from local schools selling stuff for a fundraiser.

No matter who it is, though — from fellow Gen Yer installing the neighbor’s new windows to some sort of salesperson blatantly ignoring the community’s “no soliciting sign” — when I open the door I’m usually greeted with the same question:

“Hi there! Is there a parent at home I can speak with?”

I’m 25. I’ve held a college degree and maintained an actual, grown-up career for four years now. I run a business. I’ve opened multiple retirement accounts. I do all sorts of grown-up stuff. And still: are your parents at home?

Annoying, although I get it. I do look young — especially considering that I also happen to own the door that people knock on.

Jumping into Home Ownership as Soon as Possible

I was 22 and one year out of college when I bought my first house. Yes, I was in a hurry and for good reason: the housing market finally found the bottom but was slowly recovering.

Buying early meant the potential to get in at the bottom – and then selling at the top (or at least, considerably higher than what it cost me to get into the market). In other words, I was looking at making an investment. That’s the biggest reason I bought a home and why I encourage other millennials to think about doing the same before they enter their 30s.

As it turns out, buying my house ended up as a good investment. Three years after closing on that first home I’m about to close on it again, but as the seller this time. It was on the market for about 10 days and sold for $40,000 more than the price I paid.

In my experience, home ownership has been a positive thing. It enabled me to leverage my assets in order to grow wealth.

Buying a house won’t be right for everyone. But I urge you to consider home ownership, in some form or fashion, by age 30. Real estate can be an amazing tool to boost your wealth when you’re young if the right situation presents itself.

Advantages of Home Ownership

One of the biggest current advantages of home ownership: crazy-low interest rates. Our parents paid 10% in interest on their home loans when they bought their first houses back in the 70s and 80s. Today, millennials with good credit scores can secure interest rates as low as 3.5%.

This is a wonderful opportunity if you know you want to stay in a particular area for the next few years. This allows you to leverage your assets – in this case, cash for a down payment – to finance a larger asset for an extremely low fee. (The interest rate on the mortgage is the fee you pay for borrowing the money.)

This allows you to maintain a place to live while freeing up the rest of the cash you earn each month for investments that will more than make up for the cost of the interest on the loan. Here’s what taking out a mortgage to finance a home purchase allowed me to do in my early twenties, with my low income:

  • Provided me with a place to live for less than the cost of renting a home or an apartment in the same area.
  • Allowed me to possess a large asset for a relatively low cost.
  • Freed up cash flow: I could take money left over after living expenses were paid each month and invest it in the market to continue to grow wealth. (The interest rate on my first mortgage was 3.7%. I earned about 18% on the cash I invested in the stock market over the last year.)
  • Gave me an opportunity to continue leveraging assets to grow wealth: I put $16,500 cash down on my first home and I’m walking away from the sale of that house with about $45,000 in cash. That’s what’s left from the sale after paying off the mortgage and paying the realtor’s commissions.

There are other major benefits of homeownership. Homeowners who sell their properties and make a profit get an enormous tax break; if you’ve owned and lived in a house for at least two out of the last five years you receive a capital gains tax exemption. You can also write off mortgage interest on your taxes each year.

Under the right circumstances, buying a home can allow millennials to accelerate the rate at which they build wealth. Of course, there are cons to buying a house too. It’s important that you think about these and understand how they can impact you before starting a home search. Here are some of the most common cons for Gen Y:

  • More debt may be the last thing someone with tens of thousands of dollars worth of student debt wants to take on. A mortgage becomes an added financial obligation that may just be too much.
  • Real estate is costly to buy and sell. Closing costs and realtor commissions alone can be tens of thousands of dollars when all is said and done. Understand what the costs will be before you look into buying a home or securing a mortgage.
  • In normal markets, you need to hold on to your property for 5 to 7 years before seeing a return on your investment. There are exceptions to this, but it’s a good general rule of thumb to keep in mind.
  • You’re the only person responsible for maintaining your home and making repairs.
  • Property taxes can increase, making cost of ownership more expensive than you planned on when you bought.

When It Makes Sense to Buy a Home

I believe buying a home in your 20s can pay off if the conditions are right. It helps to start in a low cost-of-living area, where both real estate prices and annual property taxes are relatively inexpensive when compared to other regions. The South and Midwest may provide 20-somethings with the best financial shot at home ownership.

Before buying, you should check out the local rental market. Selling real estate isn’t always easy, it’s never cheap, and it might be a long process. If the rental market in the area is strong, becoming a landlord is a smart backup plan should you ever want to relocate to a new city, travel full-time, or ease the financial burden of carrying a mortgage. There’s also the option of buying a home with the sole purpose of renting it out to tenants.

And of course, you want to consider the housing market in general. If you’re local to the area, it will be easier for you to spot and correctly identify trends and changes. You may see potential in a nearby neighborhood before real estate prices reflect increasing popularity.

Do your research and due diligence. It makes sense to consider buying a home if you can reasonably assume the value of the home will steadily rise over the next few years. And it only makes sense if you can actually afford the home you want to purchase.

Your housing expenses should not exceed about 30% of your income. Ideally, they should be less. Think long and hard about getting into a house generating monthly expenses that will cost you more than 30% of what you make monthly.

Do You Need to Buy a Home?

Let’s face it: you need someplace to live and call home. Does it need to be a home you own? No, it’s not necessary.

But it is an option that more Gen Yers should consider as they pay down student loan debts and start investing money to build wealth. If you’re interested in homeownership at a young age, approach the situation from a purely financial standpoint and leave your emotions at the door.

Most people can’t afford their dream home in their 20s, and that’s okay. Consider resale value and rental opportunities when you consider buying a home before 30 to make sure it’s a smart choice. If the numbers don’t work out in your favor, keep looking.

The only time you “need” to buy a home by 30 if it fits within your financial game plan. Do your research, ensure your costs are manageable, and have a backup plan.

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Pay Down My Debt

How to Use Your Tax Refund to Get Out of Debt

Monday, March 9, 2015


Some individuals, including myself, are not thrilled about filing their income taxes each year because they typically end up owing the government. However for millions of Americans, the result of income tax filing will be in their favor.

The IRS reported on February 26 that for the current tax-filing season, the average refund is $3,120 and it had already issued over $125 billion in tax refunds.

Side-stepping the common argument that a tax refund is essentially money that you inadvertently loaned to the government, the more important concern is how best to utilize this surplus of cash.

While splurging on a new spring wardrobe or taking an all-inclusive vacation sounds fun, if you have debt, especially consumer debt, then it’s a good idea to put the brakes on the carefree spending options.

Instead, invest in your financial health and pay down debt by using your tax refund in the following ways.

Crush Your Credit Card Balance

You likely know how much you owe, but do you know how much interest you’re being charged?

If you don’t know your credit card’s interest rate, then take a look at your most recent statement. The average interest rate is near 15% and it’s even higher for retailer credit cards such as Macy’s or Home Depot. By paying off high interest debt like credit cards, you are getting an immediate return on savings of the interest expense.

It’s frustrating to pay off a $5K credit card balance when making only the monthly minimum payments but if you were to reduce the balance with a $2500 refund in one fell swoop, you will have shaved over a year off your debt repayment schedule.

Even better, you could utilize a balance transfer to drop your interest rate to 0% and then your entire refund could go towards paying off the principal debt. You could dig out of debt months or years faster and save hundreds to thousands of dollars. A card like Chase Slate offers no fee and a 0% interest rate for 15 months.


Get a Head Start on Your Student Loans

You may not have any credit card debt but you do have student loans piling up alongside with your stress levels.

Although student loan interest rates are not nearly as high as those of credit cards, the current rate for the 2014-2015 school year for the undergraduate Stafford loan is 4.66%.

At the latter rate, it would cost you $1,264.55 in interest for a $5,000 loan over a ten year repayment period. Apply your mathematical sense to lessen the amount of interest and pay your student loan sooner thanks to a lump sum payment like a tax refund.

Deal With Debt in Collections

Whether it’s due to poor financial decisions or a life crisis such as a job loss or medical event, you may have a past due account that has been sold by the creditor to a collections agency.

If you can truly not afford to repay the debt in full, try negotiating a settlement amount with the collections’ company that can be covered in part or whole with the proceeds of your refund.

[7 Things You Need to Know If You Have Debt in Collections]

Once you have a signed agreement in place, you will have avoided the possibility of a lawsuit and begun the process of repairing your credit history, even though the settlement could appear on your credit report for seven years. Also note that the unpaid amount not included in the settlement will be reported to the IRS and federal income tax may be owed as a result.

Honor Personal Debts

I didn’t like owing creditors when I was working to pay off my consumer debt but owing a parent or friend money would be a debt I’d want to pay off as fast as humanly possible.

These types of personal loans typically tend to attach little to no interest rates but they can be fraught with emotional strings. Circumstances can change wherein the lender, aka the bank of Mom & Dad, were initially in the position to lend you the cash but are now in need of the funds. This may cause a strain on the relationship if the debt remains unpaid.

Being able to pay down a personal loan in part or in full with your tax refund can provide a source of fiscal and psychological relief not only for yourself but for the person you care for that funded the loan.

Save a Little

A tax refund can also be used to pay down debt and create an emergency savings fund. Emergency funds can prevent you from sinking deeper into debt in the future when something goes wrong with the car or an unexpected medical expense pops up. Putting $500 or $1,000 away in a savings account provides a helpful debt buffer.

Using your tax refund to pay down debt may not elicit the same level of excitement as treating yourself to some wants, yet you are wisely positioning yourself to reap financial benefits in the short and long term.



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Balance Transfer , Best of , Pay Down My Debt

7 Best 0% APR Credit Card Offers – March 2015

Thursday, March 5, 2015

There are a lot of 0% APR credit card deals in your mailbox and online, but most of them slap you with a 3 to 4% fee just to make a transfer, and that can seriously eat into your savings.

At MagnifyMoney we like to find deals no one else is showing, and we’ve searched hundreds of balance transfer credit card offers to find the banks and credit unions that ANYONE CAN JOIN which offer great 0% interest credit card deals AND no balance transfer fees. We’ve hand-picked them here.

If one 0% APR credit card doesn’t give you a big enough credit line you can try another bank or credit union for the rest of your debt. With several no fee options it’s not hard to avoid transfer fees even if you have a large balance to deal with.

1. Chase Slate Card – 0% APR for 15 months, NO FEE

151_card.151_card.Slate_From_ChaseThis deal is easy to find – Chase is one of the biggest banks and makes this credit card deal well known. So it’s worth a shot to see how big of a credit line you get. If it’s not enough, move on to the other options below that are also no fee, but a little bit shorter in length.

Go to site

2. Alliant Credit Union Credit Cards – 0% APR for 12 months, NO FEE

logo_alliantAlliant is an easy credit union to work with because you don’t have to be a member to apply and find out if you qualify for the 0% APR deal.

Just choose ‘not a member’ when you apply and if you are approved you’ll then be able to become a member of the credit union to finish opening your account.

Anyone can become a member of Alliant by making a $10 donation to Foster Care to Success.

If your credit isn’t great, you might not get a 0% rate, so make sure you double check the rate you receive before opening the account.

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3. Fort Knox Federal Credit Union – 0% APR for 12 months, NO FEE

fortknoxAnyone can join Fort Knox Federal Credit union, and until March 31, their Visa Platinum Card is offering 0% for 12 months with no balance transfer fee. You just need to pay $5 to join the American Consumer Council / Kentucky and you’re eligible to open an account.

The card also offer 5% cash back on gas purchases, but don’t use this card for new purchases, as they’ll be hit with the full normal interest rate. The deal is only for balance transfers, and you can transfer up to $25,000 if your credit limit allows.

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4. First Tennessee Bank Credit Card – 0% APR for 12 months, NO FEE

275_card.275_card.Platinum_Premier_VisaIf you want to apply online for this deal, you’ll need to live in a state where First Tennessee has a branch though. Those states are: Tennessee, Florida, Georgia, Mississippi, North Carolina, and South Carolina.

You need to have an existing First Tennessee account to apply online, but if you don’t have one, you can print out an application and mail it into their office to get a decision. You’ll find a link to the paper application when the online form asks you whether you have an account or not.

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5. Logix Credit Union Credit Card – 0% APR for 12 months , NO FEE

If you live in AZ, CA, DC, MA, MD, ME, NH, NV, or VA you can join Logix Credit Union and apply for this deal.

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6. Aspire Credit Union Credit Card – 0% APR for 6 months , NO FEE

AspireYou don’t have to be a member to apply and get a decision from Aspire. Once you do, Aspire is easy to join – just check that you want to join the American Consumer Council (free) while filling out your membership application online.

Make sure you apply for the regular ‘Platinum’ card, and not the ‘Platinum Rewards’ card, which doesn’t offer the introductory deal.

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7. Elements Financial Credit Card – 0% APR for 6 months, NO FEE

To become a member and apply, you’ll just need to join TruDirection, a financial literacy organization. It costs just $5 and you can join as part of the application process.elfcu

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Are these the best deals for you?

If you can pay off your debt within the 0% period, then yes, a no fee 0% balance transfer credit card is your absolute best bet. And if you can’t, you can hope that other 0% deals will be around to switch again.

But if you’re unsure, you might want to consider…

  • A deal that has a longer period before the rate goes up. In that case, a balance transfer fee could be worth it to lock in a 0% rate for longer.
  • Or, a card with a rate a little above 0% that could lock you into a low rate even longer.

The good news is we can figure it out for you.

Our handy, free balance transfer tool lets you input how much debt you have, and how much of a monthly payment you can afford. It will run the numbers to show you which offers will save you the most for the longest period of time.


The savings from just one balance transfer can be substantial.

Let’s say you have $5,000 in credit card debt, you’re paying 18% in interest, and can afford to pay $200 a month on it. Here’s what you can save with a 0% deal:

  • 18%: It will take 32 months to pay off, with $1,312 in interest paid.
  • 0% for 12 months: You’ll pay it off in 28 months, with just $502 in interest, saving you $810 in cash. That even assumes your rate goes back up to 18% after 12 months!

But your rate doesn’t have to go up after 12 months. If you pay everything on time and maintain good credit, there’s a great chance you’ll be able to shop around and find another bank willing to offer you 0% interest again, letting you pay it off even faster.

Before you do any balance transfer though, make sure you follow these 6 golden rules of balance transfer success:

  • Never use the card for spending. You are only ready to do a balance transfer once you’ve gotten your budget in order and are no longer spending more than you earn. This card should never be used for new purchases, as it’s possible you’ll get charged a higher rate on those purchases.
  • Have a plan for the end of the promotional period. Make sure you set a reminder on your phone calendar about a month or so before your promotional period ends so you can shop around for a low rate from another bank.
  • Don’t try to transfer debt between two cards of the same bank. It won’t work. Balance transfer deals are meant to ‘steal’ your balance from a competing bank, not lower your rate from the same bank. So if you have a Chase Freedom with a high rate, don’t apply for another Chase card like a Chase Slate and expect you can transfer the balance. Apply for one from another bank.
  • Get that transfer done within 60 days. Otherwise your promotional deal may expire unused.
  • Never use a card at an ATM. You should never use the card for spending, and getting cash is incredibly expensive. Just don’t do it with this or any credit card.
  • Always pay on time. If you pay more than 30 days late your credit will be hurt, your rate may go up, and you may find it harder to find good deals in the future. Only do balance transfers if you’re ready to pay at least the minimum due on time, every time.



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Pay Down My Debt

5 Steps to Help Your Parents Get Out of Debt

Wednesday, March 4, 2015

Senior Couple Talking To Financial Advisor At Home

Does it hurt to watch your parents make one bad financial decision after another? Do you often find yourself wishing that you could do something to open their eyes to the situation they’re in?

If so, you’re not alone. I’ve been there several times. My parents have been struggling with consumer debt my entire life.

While I’m grateful that I was able to learn from the mistakes they made early on, that doesn’t mean I want to stand by and watch them repeat those mistakes!

After a few years of talking with them about financial matters, they’ve finally asked me to help them get their finances in order so that they can pay off their debt once and for all.

I want to tell the story of how it happened, because I’m happy to help my parents dig themselves out of the hole they’ve been in for years, and I know there are others out there who would like to do the same.

While these methods might not work for everyone (personal finance is personal), I think many can benefit from the same steps.

If you want to give your parents a hand when it comes to dealing with debt, here are 5 steps you can take.

First, a Word of Warning

While you may want to help your parents (or even friends and loved ones) with their financial situation, you might have to accept that it’s not possible.

Why? You can only help those that are ready and willing to be helped.

I’ve learned this the hard way as the years have gone on and I’ve become more enthusiastic about personal finance. It’s the old saying – you can lead a horse to water, but you can’t make it drink.

I don’t agree that money should be taboo, but you can’t force someone to budget, to track their spending, or to consider the ramifications their purchases will have months down the road.

Your eyes may be open to what’s going on, but your parents may be burying their heads in the sand because they can’t face the reality of the situation.

Those who have already had their “aha!” moment when it comes to their finances are typically more willing to accept help.

I know it might hurt to step away and keep your mouth closed, but you have to pick your battles. Some aren’t worth trying to fight, especially when the other side isn’t aware there’s a problem.

Step 1: Lead by Example

That’s why my first suggestion is to simply lead by example. I love talking about personal finance, but sometimes talking isn’t effective.

I’ve been tracking my spending for years, and I created a budget when I first moved out on my own. I’ve always been open with my parents about my finances, and I spoke with them regarding any financial decisions I made, as well as asked for their input.

As a result, they’ve always known me to be on top of my finances. They saw first-hand how powerful tracking spending was because I did it.

I admit, I nudged them along a few times, mentioning that since budgeting had been working out well for me, they might want to try it.

Eventually, it worked – my parents got so sick of their debt, they wanted to take action, and the first person they turned to was me.

While my parents did pay extra toward their debt when they could, they didn’t do it in a consistent or effective way, so the first step was getting their statements together to create a debt payoff plan.

Step 2: Gather Financial Information Necessary to Create a Plan

My parents have about 5 creditors they owe, so this step was crucial in being able to create a debt payoff plan. If you or your parents don’t know the particulars of their debt, then you can’t help them.

I recommend getting all their recent statements together and listing all the debt they have. I’m a huge fan of spreadsheets, so I took their information and listed it out accordingly:

Creditor, Balance Owed, Minimum Payment, Interest Rate, Due Date

By doing this, you can easily sort debts by any category you choose, which can be helpful when deciding how to prioritize them.

Also, while going through these statements, my mom noticed she had rewards points on one of their cards. She was able to redeem the points as a statement credit, and knocked out $400 of that particular debt!

It goes to show you it’s worth going through statements to make sure you’re not missing anything like that. My mom was excited they started their “real” debt payoff journey with a bang, and as most of us know, emotions are a huge factor when paying down debt.

However, having all of this information in front of you can be overwhelming, and people don’t always know what to do afterward. Help your parents prioritize their debt and create a plan by telling them what choices they have, without being judgmental.

I explained that the avalanche method (paying off debt according to highest interest) is the mathematical approach which will save them more, but I also understood my parents had been carrying their debt around for years. If going with the snowball method (paying the smallest debts off first and using the psychological momentum to drive you forward) helped them, I was all for it.

promo-balancetransfer-halfIn the end, we decided on a mix, but the important thing was they had a list of their debt that they could easily reference and update at any time. Their total wasn’t a mystery anymore, and I think that was empowering.

Additional steps to take during this stage: if the interest rates on your parents’ debt is unbearable, have them call their creditors to see if they can work with them. If they’ve paid on time and have been customers for a while, their creditors may be willing to help.

You can also look into 0% balance transfer offers for them – just make sure they’ll be able to pay back their debt in full before the 0% rate period expires or teach them how to roll it over to another offer.

Step 3: Get Spending Under Control

If your parents are in consumer debt like mine are, they might have some spending problems that need to be addressed.

This can be a sensitive topic to discuss, but if your parents are aware that their debt is an issue, then hopefully they realize some changes are in order when it comes to how they use credit.

I’m thankful my parents realized long ago they couldn’t continue to use credit like they had. They cut up most of their cards, kept a few in case of emergencies and online purchases, and that was it. They were already fairly dedicated to lessening their expenses and getting their spending under control.

However, when I asked my mom how much they were spending on certain things (she primarily handles the finances), she couldn’t give me any numbers. Mental accounting doesn’t work for most people, so I challenged her to track their spending in hopes that it would give them a little reality check.

I set them up with a simple spreadsheet similar to the one I use to budget and track spending (but if your parents are good with technology, try using Mint!). Since they use cash 99% of the time, I told my mom to keep all of their receipts and to record transactions the day they happened so she wouldn’t get behind.

The basic premise for the budget I use looks like this:

Category, Actual Spending, Budgeted Spending, Leftover

I’m happy to report it’s been a few months since they started, and my mom has diligently updated the spreadsheet. She’s very happy she started tracking their spending!

Just a few days ago she commented that she was close to being over-budget on food. Before having a budget, that thought wouldn’t have entered her mind, but because she was updating it, she was conscious of what they had spent.

Additionally, my parents live on a fixed-income as they’re retired (aside from the fact my mom has a part-time retail job). Sticking to a budget ensures they’re not spending more than what they have coming in, which is crucial.

Step 4: Putting It All Together

Okay, now that your parents have created a plan to tackle their debt, and hopefully have their spending under control (or are aware of any issues), you need to put all of these steps together.

I understand that not everyone is going to be able to do this, but I told my parents whenever they have money leftover at the end of the month, they need to put it toward the debt they’re focusing on. This also motivates them to spend less, because they want there to be a positive number in the “leftover” box.

If your parents are open to it, go through their spending line-by-line to see if there are any leaks that can be plugged. Just try to do it in the nicest way possible, and don’t cast judgment.

One method that may work better than simply telling them to cut spending is showing them exactly what their habits are costing them. If your parents are spending $133 a month on their cellphone bill, that adds up to almost $1,600 a year! That’s a decent chunk of change that could be going toward debt.

You can also suggest they try giving things up temporarily, such as dining out, going to the movies, or any other costly activities they partake in on a regular basis.

Lastly, help them figure out what their values are so they can start spending on things that really matter and cut the excess out.

Step 5: Saving and Earning More

Depending on your parents’ situation, it’s worth mentioning the possibility of earning more. My mom likes to keep busy, so she took a job in retirement for that purpose.

However, the added bonus is that her entire paycheck can go straight to their debt, because they’re already living within their means, and their regular living expenses are covered by their fixed income.

The last thing most people want to do in retirement is work, but that’s the reality a surprising amount of baby boomers are facing these days.

If your parents aren’t thrilled at the idea of working retail, see if they can make money from hobbies or their past professions.

My parents live in a 55+ community and know a handful of people that make money on the side from things like woodworking, haircutting, knitting, and teaching classes.

Lastly, I do need to mention the importance of having savings, especially if your parents are close to or in retirement.

The primary reason my parents still have debt today is because they lacked the savings to cover expensive home repairs in the past. Any time something went wrong, they would charge it, and so the cycle continued.

They were finally able to create a savings cushion by selling their house and moving to a lower-cost-of-living area. I know that’s a bit extreme, but the area they wanted to retire to happened to be much cheaper – so much so, they were able to buy a house outright and still have money left in the bank from the sale of their old home.

If your parents are still stuck living paycheck-to-paycheck, though, then make sure you emphasize the importance of saving. Having an emergency fund will give them peace of mind, which is worth it, especially if they’re living on a fixed income.

It Isn’t Simple, But It’s Worth It

Helping your parents get out of debt isn’t easy, especially if they’re not willing to hear you out. Be patient, understanding, and lead by example. Don’t try to force your financial beliefs on others – they’ll come around when they want to.

Once they do, then you can start helping them get on the right track by setting them up with a spending plan and a debt payoff plan that works for them. They’ll be thanking you soon enough, and you’ll feel better knowing their financial situation is improving.

Download our Debt Free Forever Guide! It’s FREE and will help get you back on track.




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Pay Down My Debt

7 Financial Startups That Want You to Get Out of Debt

Monday, March 2, 2015

Geeting advice on future investments

There has been a wave of new financial startups in recent years. From incredible investing apps to innovative money software, it seems like the sky is the limit when it comes to what entrepreneurs can create in terms of financial services.

Of course, some of my favorite financial startups are the ones that directly help consumers get out of debt. Credit card debt is a massive problem in the United States. There is so little financial education about getting out of debt and with interest rates skyrocketing, uninformed consumers could be paying off their debt for a very, very long time. Fortunately, innovative financial startups have started to address how to help Americans ditch debt.

Ready for Zero

I currently use Ready for Zero to assess my student loan debt. What I like about Ready for Zero is that it syncs with your actual accounts so there’s no disconnect between the debt you think you have and the debt you actually haRFZve.

I entered in the user name and password for my federal student loans, and Ready for Zero showed me just how long it would take to pay those bad boys off by paying the minimum. Move the circles to the left or right to adjust the numbers and find out how much you will save in interest by paying above the minimum. Although I knew empirically that I needed to be paying above the minimum, Ready for Zero was a real wake up call for me and showed me that I really needed to get on track and put more efforts towards my loan payoff.


Payoff is an incredible financial services company that helps you payoff your credit card debt. Basically, it takes all your information and they offer you a consolidation loan so that instead of worrying about 9 different credit cards with varying interest rates, you can instead just pay one monthly fee.

The negatives of Payoff is that they are only for credit cards at this time so if you had several personal loans or several student loans, they can’t offer you a consolidation loan for those.

Payoff does a soft pull of your credit report to determine your loan rate. A soft pull means it won’t hurt your credit score to find out your loan rate. Payoff provides loans at rates between 11% APR and 22% APR. The rate you’re offered in prequalification is subject to change, but it gives a good sense about whether or not moving forward with Payoff would be right for you.

You also get to talk to a real person when you call Payoff, which can’t always be said of your credit card company’s customer service.

Level Money

I recently learned about Level. It’s similar to Mint, but with a cleaner interface. Level is a free app that helps you by integrating all of your bills, income, and other banking information and then calculates how much you can spend in a day. It also calculates how much extra cash you saved if you come in under budget so you can use that to pay off your debt at the end of the month. Basically, Level is the simplest and easiest form of budgeting if you’re new to the game and want to use budgeting as a tool to help pay down debt.


What I like about SoFi is that they issue loans for MBAs, personal loans, and mortgages. SoFi also offers refinancing and consolidation for existing federal and private student loan debt.

One of the interesting things about SoFi is that it offers a valuable network of entrepreneurs. If you borrow money for your MBA, it actually offers complimentary career coaching for SoFi members. The only downside is that it’s only available at specific universities. So, if you are thinking of going into debt for school, just know there are other options and customizable solutions to reduce the impact of that debt, ones that actually include career counseling like SoFi as opposed to a random bank or federal loan with minimal customer service.

[Read the full SoFi review here]


Vouch is perhaps one of the most intriguing startups on this list, because they are using a unique and pretty subjective method of determining your credit worthiness. As the name implies, your friends and family vouch for you. Vouch can ask your friends and family to agree to pay money towards your loan if you run into trouble paying it, but it isn’t required that someone who vouches for you is a guarantor. The more people who vouch for you and agree to help you if you run into money trouble, the lower your interest rate will be. By doing this Vouch is able to give you a better interest rate and spread out the risk for them as a company.

[Read the full Vouch review here]


I love Earnest because it’s another loan company taking much more into consideration than just your credit score. It’s refreshing to read about a company that wants to get to know its customers. After an extensive process reviewing your financial and work history, Earnest will offer you an interest rate for your personal loan based on your total picture. They even check out your LinkedIn profile as part of its process!

Earnest favors borrowers who don’t max out their credit card and who are well educated. Unfortunately their loans aren’t available in all 50 states, but they are growing. Right now, Earnest is offered in the following states: California, Colorado, Connecticut, Florida, Georgia, Illinois, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Tennessee, Texas, Utah, Washington, Washington D.C., and Wisconsin.

There no penalty for pre-paying, a major plus for those dedicated to digging out of debt fast. You don’t need a lengthy credit history. You just have to be a responsible person and be able to prove it. 

[Read the full Earnest review here]


Many millennials complain that they can’t find work they love or that they don’t earn money to make extra payments on their student loans. Gradible is changing all of that. It partners with different companies (like Craigslist or market research firms) to offer tasks its users can complete.

These tasks pay around minimum wage depending on how quickly you work and the money is applied directly to student loans. You can post things on Craigslist on behalf of companies, you can write articles for blogs, or you can simply “like” a few businesses on Facebook. There are countless tasks to choose from and you can work as much or as little as you like. The best part is that there is no agonizing over whether you should pay towards your student loans or something else because Gradible sends your payment directly to your student loan provider for you.

[Read the full Gradible review here]

Use These Tools to Earn Freedom

So, if you are currently in debt, whether it’s student loan debt like me or extensive credit card debt, there are so many tools to help you get out of it. Whether you consolidate your debt or just become more aware of the impact of your interest rate, use the companies above to help you meet your goals and get on the path to financial freedom.



*We receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.  

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Pay Down My Debt

Debt Guide: When to File Bankruptcy

Thursday, February 26, 2015

Screen Shot 2015-02-03 at 1.30.44 PM

Below is an excerpt from our Debt Free Forever Guide. Be sure to download the free guide to help dump debt for good.

For some people, bankruptcy may be an appropriate option. In a bankruptcy, you may be able to eliminate some or all of your debts. However, debt forgiveness does not come lightly. Chapter 7 (where all eligible debt is eliminated) stays on your record for 10 years. Chapter 13 stays on your report for 7 years. And, during that time (especially in the first 3-5 years), you may find it virtually impossible to apply for any new credit. And credit is not limited to mortgages and auto loans. It can even include pay-as-you- go mobile phone packages. If you work in the financial services sector, you may find that bankruptcy will make it impossible to get a job. So, this decision should not be taken lightly.

However, for some people, this may be the only option. I will give a few examples of people whom I have met, where bankruptcy made complete sense:

  • A hardworking man had a medical emergency. Unfortunately, he did not have medical insurance. The total bill was over $500,000. And his annual salary was $40,000. There was no chance that he would ever pay off that debt. Bankruptcy made perfect sense.
  • A married couple unfortunately did not plan for the future. They had no life insurance, no savings and credit card debt. The husband was a professional, and the wife stayed at home with the children. The husband died unexpectedly. Between the funeral, the credit card debt from before the marriage and the costs of the transition, the widow had over $75,000 of debt. She was able to get a secretarial job for $25,000. It made sense to eliminate the debt with bankruptcy.

The biggest reasons for bankruptcy are medical and divorce. We always try to work with people to help them prepare for the worst. Everyone should have medical insurance, even if that means paying for a high deductible (low premium) policy that at least insures against bankruptcy. If someone depends upon you (like the husband in the story above), term life insurance is necessity, and it doesn’t cost much. In medicine, it is always better to prevent (via a good diet and exercise) than to fix after something goes wrong. The same is true in financial matters. However, if you are now in the emergency room, a bankruptcy may be the right option.

What can a bankruptcy do for me?

A bankruptcy gives you the opportunity to eliminate a significant portion of your debt. The bank has to write off the debt, and is no longer able to collect on the debt.

In Chapter 7 bankruptcy, all of the eligible debt is eliminated. It takes about 3-6 months to have the bankruptcy discharged.

  • Most or all of your unsecured debt will be erased. Unsecured debt would include things like credit card debt, personal loan debt, medical bills, mobile phone bills and other debt.
  • Certain types of debt are usually excluded from bankruptcy. These include student loan debt, tax obligations, spousal support, child support and some other types of debt can not be eliminated.
  • Some of your property may have to be sold to pay off your debt. However, in most cases, your primary property is exempt.
  • For secured property (like an auto loan), you will be given a choice. You can continue to pay, you can have the property repossessed, or you can make a lump sum payment (at the replacement value).

If your problem is with credit card debt and/or medical debt, than Chapter 7 makes sense. All of that debt will be wiped out. You continue to pay (and keep) your mortgage and auto loan.

In a Chapter 13 Bankruptcy, you are not able to eliminate all of your debt. Instead, you will be forced to make regular monthly payments towards your debt before it is completely eliminated.

Chapter 7 or Chapter 13?

If given the choice, most people would choose Chapter 7. From a credit score perspective, they both have equal (negative) impact on your score. In fact, here is what FICO says:

The formula considers these two forms of bankruptcy as having the same level of severity and, for both types, uses the filing date to determine how long ago the bankruptcy took place. As with other negative credit information, the negative effect of a bankruptcy to one’s FICO score will diminish over time.

So, if you get the same penalty, but in one form of bankruptcy all of your debt is wiped out, and you still have to pay back some debt in the other form, then you would probably choose Chapter 7. And most people did, until the law was changed in 2005.

Note: there may be some instances when you will want to file Chapter 13 instead of Chapter 7. For example, if you are behind on your house payments and want to keep your house, Chapter 13 may make more sense. Why? In Chapter 13, you can put your past due mortgage payments into your repayment plan, and pay them back over time. In Chapter 7, your past due mortgage payments may be due right away.

However, in the majority of cases, Chapter 7 is more favorable to the borrower than Chapter 13.

There are now some “means tests” required to see if you can file for Chapter 7. Here are some very basic rules:

  • If your family income is below the median income of your state, you will probably be able to file Chapter 7. The income used is the average of your last 6 months income. You can find the median incomes here.
  • If your income is above the median, you may still be able to file bankruptcy. However, you will have to pass a means test. Your income and expenditures will be looked at, to see if you have the ability to make payments towards a payment plan over 5 years towards the accumulated debt.

In addition, if you tried to be clever, you will likely be caught. Any recent cash advances on your credit card, and any recent luxury purchases can be exempt from the bankruptcy completely.

It used to be very easy to file for Chapter 7 and have all of your unsecured debt eliminated. That is no longer the case. But, if you have low income, you can still proceed. And, if you have a very difficult situation, you can still find a path towards eliminating a significant portion of your debt.

How to Proceed

As part of the bankruptcy legislation, you need to meet with a non-profit debt counselor before you are allowed to file for bankruptcy. So, whether you are thinking about negotiating settlements or filing for ?bankruptcy, it makes sense to meet with a counselor. You can find a list of the approved agencies here.

For further reading on bankruptcy, we recommend this website (NOLO) – they have an excellent library of information.

In Summary

If you are in too deep, bankruptcy may be the only remaining viable option. I have met many people who filed bankruptcy, and went on to live very fulfilling and prosperous lives. Companies file bankruptcy all the time – and I believe that people should have the same legal protections that companies have.

You just need to be realistic about what bankruptcy can and cannot do. If you have student loans, tax liens, spousal support or child support – you will not be able to use this tool. You need to find a way to pay back your debt.

But, if you have been hit with a big medical bill, or your credit card debt is just too large relative to your income, bankruptcy could be the best option. It will be a very difficult 2 years. By Year 3, things will look a lot better. And, 7 years later, your score will reflect the person you have been in the last 7 years. A very good friend of mine had filed bankruptcy. He now has a home (purchased with a mortgage at a low rate). He has a car (purchased with a 0% car loan). And he has a rewards credit card (that he pays off in full every month). His score is high. It was a rough couple of years, but it made sense. Otherwise, he would have been making minimum payments for 30 years and still wouldn’t be out of debt.

Weigh your options carefully. Meet with a non-profit counselor. We are always available at MagnifyMoney to talk as well (just email us at

Good luck with your decision.

Download our Debt Free Forever Guide! It’s FREE and will help get you back on track.


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College Students and Recent Grads , Pay Down My Debt

10 Financial Moves to Make Before Paying Off Your Student Loans

Wednesday, February 25, 2015


If you’re like a lot of college graduates, you probably left school with at least a little bit of student loan debt. Starting life shackled to debt can feel overwhelming, so you might be chomping at the bit to pay it off as soon as possible.

And while paying off your debt is a fantastic goal, there are some other financial moves that will do more to help you build a secure financial foundation and work towards financial independence.

Before you start throwing all your extra money at your student loans, here are 10 financial moves you should make first.

1. Pay your minimums

The very first priority is paying all your bills on time, including the minimum payments on your student loans and other debts. However, it’s best for your wallet to pay your credit card bills in full each month.

This will not only keep the lights on and a roof over your head, but it will ensure that you build up a positive credit history, which will make it easier and less expensive to do things like buy a house and even find a job later on.

2. Get health insurance

You may feel young and indestructible, but the last thing you want is an enormous medical bill that ends up adding to your debt and making it even harder to reach those long-term goals.

Health insurance will protect you from that worst-case scenario. Hopefully you can get it through work, but if not the new insurance exchanges make this coverage available to everyone.

If you’re starting a family, check out these health insurance lessons learned from our contributor Cat, a new mom of twins.

3. Build some savings

Even if you have high-interest credit card debt, I think it’s a good idea to keep $1,000-2,000 in savings to help you handle all the little (and sometimes big) unexpected things life throws your way.

Car maintenance. Home repairs. Traveling to your best friend’s wedding. These are the kinds of expenses that can pop up unexpectedly and force you to resort to a credit card if you’re not ready for them.

The last thing you want to do is take on even more debt, and having a little bit of cash in a savings account will prevent that.

4. Write your wills (and other estate planning)

If you’re single, you can probably skip this step. But if you’re married, and DEFINITELY if you have kids, getting some basic estate planning in place is a good idea.

The biggest reason to have a will is to name the guardians for your children, which is a decision that would otherwise be left up to the state.

But even if you don’t have kids, a simple will allows you to make sure that your spouse would get your assets if you died, assuming that’s what you want. A lot of states would otherwise default to giving at least some of your assets to your parents.

Other basic documents to get done here are a durable power of attorney, healthcare proxy and living will. All of these things are fairly simple and can be done for a low cost.

5. Get term life insurance

Term life insurance is a great way to make sure that your family would always have the financial resources it needs, no matter what.

For working parents, life insurance would serve to replace your income while your family adjusts. And for stay-at-home parents, life insurance would help your family pay to replace all of the things you do, like childcare, cooking, cleaning, etc.

If you don’t have kids, you probably don’t need life insurance unless you’re married and have joint debt. For example, a couple with a mortgage that would be difficult for either spouse to afford on their own might want enough life insurance to pay off the mortgage or at least help with the payments.

For more detail on who needs life insurance and how to get it, here’s a good resource: Does the Average Millennial Need Life Insurance?

6. Get long-term disability insurance

Long-term disability insurance is one of the best protections you can buy, but for some reason it’s also one of the least talked about.

Basically, long-term disability insurance would provide a payment that replaced some portion of your income if health issues keep you out of work for an extended period of time. And since your future income is your single biggest financial asset as a young professional, protecting it is really a must.

7. Secure your 401(k) employer match

Paying off your student loans, or any other debt for that matter, earns a rate of return equal to the interest rate of the loan. For example, putting extra money towards a 6.8% would net you a 6.8% return on investment.

In most cases, that guaranteed return is a pretty good deal. But there’s one place where you can find an even better guaranteed return, and that’s your employer match.

Many employers offer a dollar-for-dollar match of your 401(k) contributions up to a certain point, which is a guaranteed 100% return on investment. But even if your employer only matches half of your contribution, that’s still a guaranteed 50% return.

Either way, it’s better than what you’ll get from even the highest interest rate debts.

8. Get liability insurance

Liability insurance protects you financially in case you accidentally injure someone or damage their property. It’s part of both your auto policy and your homeowners or renters policy, and you can also look into getting an umbrella policy for a little extra protection.

9. Pay off high-interest debt

If you have credit card debt or other loans with higher interest rates than your student loans, simple math again says that it’s a better idea to pay those off before putting extra money towards your lower-interest student loans. You will save more money by paying off those higher-interest loans first.

10. Find a balance

If you’ve handled everything above, first off give yourself a big pat on the back! You’ve built an incredibly strong financial foundation for yourself that gives you a lot of freedom to make some exciting choices going forward.

At this point, I would encourage you to find some balance between your financial goals. Paying off your student loans is a fantastic goal, but so are things like investing more for your future, building up a bigger emergency fund, and increasing your side income.

As you find yourself with extra money, think about spreading it around towards multiple goals. That will leave you with a well-rounded financial plan that gives you the best of all worlds.



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Pay Down My Debt

Debt Guide: What To Do When Your Debt Is With a Collection Agency

Tuesday, February 24, 2015

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Below is an excerpt from our Debt Free Forever Guide. Be sure to download the free guide to help dump debt for good.

Struggling to make payments on debt, but not delinquent yet? Then start here.
Delinquent on debt, but it’s still with the bank? Then start here.

It is important to understand how collection agencies work, and then you can understand how to negotiate with them.

Debt collection agencies, for the most past, are tiny compared to the big banks you were dealing with previously. Some of them are incredibly tiny, and you have to be careful. Although this is not the case with all of them, many debt collection agencies are extremely liberal with the law and will try to scare you and manipulate you into paying.

What to Know About Collection Agencies

  1. Debt collection agencies buy debt for pennies on the dollar. Imagine you have $100 of debt with Citibank. They try for 6 months to collect the debt. At month 6, they write off the debt (take a loss) and then sell the debt to a collection agency. The agency will likely only pay $1 to $2 for the debt. So, you may have originally owed Citibank $100, but the debt collection agency only paid $1 or $2 to get that contract. Although they have the legal right to collect the full $100, they are happy even if they collect much less. If they pay $1 for the debt, and then collect $2, they have doubled their money.
  2. Be careful giving your account information to a debt collection agency. They are famous for trying as often as possible to get money out of any account where they have account information. Even if you don’t authorize them, it can get very difficult to prove. It becomes your word versus their word. So there are specific ways that you should make a payment to a debt collection agency, which we describe in more detail below. ?So, now you know that the debt collection agency only paid pennies on the dollar. With that information, you can negotiate hard for a settlement.

What to Know When Negotiating

  • After 7 years (from going to the collection agency), the debt will no longer impact your credit score. They will still have the legal right to collect, but the statute of limitations will limit their ability to sue or garnish wages. So, if you are close to 7 years, you may not want to pay. You may just want to wait.
  • Negotiate hard on the phone. They will try to threaten you (and they are good at it). Tell them that you know your rights, and that you are not afraid to go to the CFPB if they don’t respect your rights and protections. You should be able to settle for at least 50% of the face value. You may even get a better deal. (For example, if you owed $5,000 than you can offer $2,500).

What To Do When You Reach an Agreement

  • You do not make any payment until you get confirmation of the settlement terms in writing
  • The debt collection agency writes that, upon payment of the settlement, the debt will be considered closed. They need to make it clear that this is a full and final settlement, and no further collection activity will take place. Warning: the forgiven debt may be subject to income tax. For example, in this case, the $2,500 that is forgiven will be taxable.
  • You should ask the debt collection agency to delete the collection item from the credit bureau. They may or may not do this – but it is certainly worth asking.
  • Once you agree the settlement amount, open a separate account to make the payment.

Remember: you never want to give the collection agency access to your core checking account. We recommend going to WalMart and opening a Bluebird. It is free, and comes with checks and online billpay. Only put into the account the amount that you agreed for the settlement, and then make the payment. You can close the account once the account is settled and complete.

Make sure you keep a paper trail of your settlement. If something goes wrong in the future, it is your PAPER against theirs.

If the collection agency tries to play dirty, or if another collection agency calls and tries to get money out of you, make sure you DO NOT AFFIRM THE DEBT. Tell them that you do not recognize the debt. You can then complain to the CFPB.

Disputing Collection Items That Aren’t Yours

If you see a collection item on your credit report that does not belong to you, it is easy to have it removed. You just need to protest online, at each of the 3 credit reporting agencies. You can dispute those records here:

Download our Debt Free Forever Guide! It’s FREE and will help get you back on track.




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Pay Down My Debt

Gradible: A Unique Way to Pay Down Student Loans

Tuesday, February 24, 2015

Students throwing graduation hats

Gradible is an alternative way to accelerate payments on your student loan debt. Three entrepreneurs who wanted to provide a new solution to the ballooning student loan debt problem that millions are facing today founded the company.

If you think it should be easier to pay off your student loans, you’re not alone, and that’s exactly why Gradible exists. The concept is simple – you get paid when you complete certain tasks on their platform, and the money goes straight to paying off your student loan debt.

It’s a great solution to the “earn more” side of the equation that many recent graduates struggle with.

In addition, Gradible is also an educational resource for recent graduates who want to be informed on the issue of student loans.

How Does Gradible Work?

Gradible is completely free and according to Gradible’s FAQ, it will stay free forever.

Screen Shot 2015-02-23 at 2.55.37 PMYou’re eligible to use the platform as long as you’re a U.S. citizen and have a loan (public or private) from a U.S. financial institution. You can be in any stage of your educational journey when you join – as long as you meet those two requirements.

Gradible offers flexible ways for college graduates to earn money toward their student loans. This money is referred to as LoanCreds, and 10 LoanCreds equals $1. A minimum of 100 LoanCreds ($10) can be redeemed at a time.

How Can You Earn LoanCreds?

Screen Shot 2015-02-23 at 2.39.22 PMYou can earn LoanCreds by completing various online tasks such as surveys, conducting Internet research, data entry, social media tasks, or writing. You also have the option of using coupons provided on the site, and you can earn credits by shopping through the retail portals on Gradible.

On their site, Gradible mentions that some of their top earners are getting $500 in LoanCreds to apply toward their loans a month. Think of how much faster you might be able to pay off your loans with even an extra $200 payment every month!

Also, friends and family who don’t have student loan debt (but are U.S. college graduates) can earn LoanCreds and put them toward other people’s student loans.

Where the Money Comes From

If you’re wondering how Gradible is able to provide LoanCreds, they have a business side to their company where they connect with brands that want their products to gain exposure via social media. These brands then provide them with a kickback for the marketing.

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Is it Worth the Work to Earn LoanCreds?

The great thing about Gradible is that it’s flexible. It’s a simple way to earn more during your spare time, as you can work on your own schedule. You only have to take on as much work as you want to complete.

If getting a second job or starting a side business seems too diffcult, then Gradible could be a good way to experiment with “working from home”. You won’t have to work with individual clients; everything is done on Gradible’s platform.

When you go to view available tasks, Gradible tells you what type of tasks need to be completed, the amount of LoanCreds you’ll receive for completing the task, and the estimated time it will take to complete.

When I registered for Gradible, I had three types of tasks available to complete. All of them were estimated to take less than 10 minutes. That’s not a large commitment at all, and these tasks awarded around 5 LoanCreds each.

Plus, due to the wide variety of ways to earn LoanCreds, you should be able to find something you’re proficient at. If taking surveys isn’t your thing, then use your Google skills and do internet research instead. Pick tasks you can easily complete so that the experience is enjoyable, as there’s no maximum to what you can earn.

At the end of the day, you need to figure out how badly you want your student loan debt gone. Remember that when you take longer to pay off your student loans, more interest accrues, meaning you’ll pay more over the life of your loans.

By dedicating a half hour to an hour (or more!) each day to tasks on Gradible, you can possibly earn $20 extra to put toward your student loans. That’s $140 extra a week!

Gradible as an Educational Resource

Gradible isn’t just a platform where you can earn LoanCreds to accelerate your student loan payments, it’s also an educational resource where you can learn about how to manage your student loan debt.

They offer free loan repayment consultations, which you should take advantage of if you’re unsure of how student loan debt works.

Their blog is also a great resource for recent graduates. Recent topics covered include the difference between consolidating and refinancing student loans, types of student loans, and deferment and forbearance.

From looking through their website, it seems as though they truly care about their users. The founders of Gradible realize that student loan debt is a great burden felt by many, and they want to do what they can to lessen it.

The Fine Print

There are a few things you should be aware of before moving forward with Gradible.

The process of redeeming LoanCreds can take up to 1-3 weeks, depending on your student loan servicer.

For that reason, Gradible strongly suggests not skipping out on making your normal monthly student loan payment. You should view this as bonus income, not as a replacement to your regular payments.

Gradible cannot be held responsible for late payments on student loans, and you definitely don’t want to take a chance on late payments.

Your earnings with Gradible are also subject to taxation as a 1099 independent contractor. If you’re familiar with freelancing, Gradible works like a client does. Your earnings aren’t taxed, and so the responsibility falls to you to pay taxes on it, as long as you’ve earned over $600. If this sounds confusing to you, Gradible assures users their support team is there to help if you have any questions.

Should I Sign Up?

You should at least give it a try. Again, the service is free, and you’re not obligated to complete any tasks you feel aren’t a good fit. In fact, if you look at the details of a task and decide you don’t want to complete it, there’s an “unassign” button you can hit to pass on the task.

You can stop participating on Gradible at any time, but try to earn at least 100 LoanCreds so you can cash out on your efforts.

If you’re a recent college graduate looking for an easy way to earn more money to put toward your student loan debt, then you should look into Gradible. What’s better than earning credits from home, on your own time?

Gradible is also a fantastic option for those that have a hard time putting extra toward their student loans because they tend to spend their savings. With Gradible, you’re forced to put your LoanCreds toward your student loans, as they require you to input your loan servicer’s information. LoanCreds go straight to them – not your bank account.

Bottom line: if you’re looking to accelerate your student loan payments and want to say good bye to your debt quickly, then we recommend looking into Gradible.

Share your methods to paying down your student loans in the comments or on Twitter @Magnify_Money.

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Life Events , Pay Down My Debt , Strategies to Save

5 Things Every New Mom Needs to Know About Money

Monday, February 23, 2015

New Mom_lg

When you become a mom for the first time, it’s overwhelming. Your entire world changes drastically. Suddenly you become a morning person, even if it’s not by choice. Your clothes fit differently, you’re exhausted, and you’re overcome with an intense instinct to protect your baby.

As part of that instinct, it really helps to be financially secure. When you’re worried about money or don’t know how you’ll be able to pay your credit card bills or your rent, it creates a stressful environment for your family. To add to that, you have to deal with outside pressure to buy certain things or give certain things to your baby, and if you can’t afford it, it can create a lot of mommy guilt. Mommy guilt can be avoided (or at least minimized) by embracing these five pieces of financial wisdom.

1. Build An Emergency Fund No Matter What

promo-savings-halfWith kids, emergencies happen. They fall, they tumble, and they get sick. They often require visits to the doctor. Sometimes it’s minor. Sometimes it’s not. If an emergency happens, it’s often the breaking point for many families. Most Americans live paycheck-to-paycheck, but if you can be one of the ones who doesn’t, you’ll feel so much more secure. I personally like to keep $5,000 liquidable in an emergency fund, but eventually I want to grow it to 6 months worth of expenses. Even if you start with just a $500 in a separate account, that will cover most issues. Just remember to fill it back up again if you empty the account.

2. Toys Won’t Make or Break Your Child

I struggle a lot when it comes to buying toys. I can count on one hand the amount of toys I’ve purchased for my children in almost one year, and most of them were recommended by their pediatrician to help with certain aspects of their development.

I have friends who have amazing houses full of every toy you can imagine, and when I visit, my stash of toys feels inadequate. Just the other day I walked through Buy Buy Baby to use a gift card, and I felt sad when I left because I saw so many toys my babies would like, but I didn’t buy them anything except what they needed (a baby gate and some snacks).

Sometimes I feel like a bad mom for not giving them what’s trendy, but when I see them happily throwing blocks in a pasta strainer from the kitchen, I realize they really don’t need much. Plus, unlike many babies, both of my kids have investment accounts that are actively growing. That’s more important than keeping up with the other moms.

3. You Are the Best Financial Teacher

Your child will learn many of his or her habits from you. Talking about money is no exception. When you buy something at the store, explain to your child how that transaction works. You can start this as early as possible, even if your children can’t talk yet. Your actions, the amount of times you buy things at the mall, the way you delay gratification, and whether or not you give in to your child’s wants in the future will all determine how they view money for the rest of their lives (no pressure!)

Many children blame their parents for their poor financial education and many people vow to handle their finances differently from their parents. It’s important to me to be the type of parent my children want to emulate. My husband and I believe that children can absorb information like this from an early age, so we plan to talk about investing, saving, and spending as often as possible to teach them good habits.

4. You Might Not Remember to Pay Your Bills

People talk about “Mommy Brain” all the time, which basically implies that you can’t remember anything anymore because you’re so exhausted and you have kids on the mind all the time now. I am definitely affected by this. I used to know when all my bills were due off the top of my head and I never used a calendar. Now, it’s a necessity, and I have to be reminded of tasks and due dates for bills quite a lot. I was even late on a credit card payment when my kids were very young, something completely unheard of for me. So, just know that even the most experienced personal finance experts have to make adjustments when adding a baby into a daily routine. Make lists, write things down, and most importantly, ask for help from your spouse or a family member if you feel overwhelmed.

5. Nothing Goes As Planned

You might plan to use a certain amount of diapers in a day to calculate your monthly costs, but inevitably you’ll need more. You might plan to breastfeed but be unable to continue after a few months. You might put you babies on formula from the start, but then they can develop an allergy and need to be put on a specialty formula. All of these unexpected events might cost more or less than you imagined, but they’re all unplanned. Essentially, you can’t predict how life is going to be when you’re a new mom. Just know that it will be different, crazy, beautiful, and more hectic than it was before. Still, if you can get your finances, your bills, and your emergency fund under control it will be one less thing you have to worry about so you can instead focus on your new baby.

Are you a new mom with money questions? Reach out to us on Twitter @Magnify_Money or via email at  

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Pay Down My Debt

What To Do When You’re Delinquent On Debt, But It’s Still With The Bank

Friday, February 20, 2015

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Below is an excerpt from our Debt Free Forever Guide. Be sure to download the free guide to help dump debt for good.

 Struggling to make payments on debt, but not delinquent yet? Then start here.
Debt already with a collections agency? Then start here.

You may reach a point in time where you have just accumulated too much debt relative to your income or your assets. When you can’t even afford to make the minimum due, you will end up struggling every month to make a payment where 90% (or more) of the payment will go to interest. At this rate, it will be 30 years (or more) before you are debt free. And, along the way, you will spend your working years giving interest to the bank, rather than paying down your debt and saving for retirement.

If this description sounds familiar, you may want to take action. And there are a few options:

  • You can try to negotiate settlements or forbearance directly with your creditors
  • You can visit a non-profit consumer credit counselor to get help negotiating settlements (or putting ?together a plan)
  • You can consider bankruptcy, depending upon the level of debt.

Your Credit Score Will Drop

In all of these cases, your credit score will be hit. There is no avoiding that fact: you have borrowed (or owe) money that you cannot afford to pay back. Your credit score measures how successfully you paid back your debt. So, by definition, your score will suffer. However, the sooner you take action, the sooner you will get your debt situation under control and the sooner your score will start to improve.

You may also be sued, and this could result in wage garnishment. If you are able to repay your debt, but choose not to, the law will catch up with you. Your wages would be garnished, and you probably would not be able to file for bankruptcy. So, it is important to proceed with these options only if you really are drowning in debt, and you don’t see any way of paying back this debt.

Before making this decision, it makes a lot of sense to sit down with a non-profit consumer credit counselor to review your options. You can find a counselor near you.

Be Aware This May Not Apply To Your Debt

All of the recommendations in this section apply to unsecured (credit card, personal loan) debt. None of this applies to student loans, unpaid taxes, and unpaid child support and alimony. All of that debt is treated differently under the law. (Put simply: you just can’t walk away from that debt). It also does not apply to any secured debt (mortgages, auto loans, etc.) because failure to repay can result in foreclosure or repossession. In other words, the creditor can take your home or your car if you stop paying. ?When you are drowning in debt, it is just as important to be aware of the things you shouldn’t do. Make sure you avoid:

  • Credit repair companies, who make bold promises and charge hefty fees. If you hear things like “we can remove bankruptcies, judgments, liens and bad loans from your credit file forever!” – beware. No one can remove a legitimate claim from a credit report, unless they resort to fraud, which is punishable in a court of law. In my career, I have punished such cases. And, if there is incorrect information, you can apply (online, in a matter of minutes, for free) to have that incorrect information removed. You do not need to pay a company to do this for you, and they will not get the promised results.
  • For-profit debt settlement companies. There are a ton of companies out there who are willing to take your money and negotiate on your behalf. The scenario typically works like this: you stop making payments to your credit card companies. Instead, you put the money into an account. As you become increasingly delinquent on your payments, the settlement company will try to negotiate with the companies to get a settlement. Once a settlement is achieved, they will make a lump sum payment, taking a fee for themselves. Stopping your payments, and starting to negotiate may be a good option. But paying 20% – 40% to a debt settlement company is just a waste of money. Banks and credit card companies will have certain settlements that they are willing to grant. The more money you pay to the debt settlement company, the longer it will take (and the more money it will take) for you to meet the settlement requirements of the bank. You can always do it yourself, or with a non-profit company.

You are delinquent on your debt, but it is still with your bank (and likely less than 180 days past due)

Once you stop making on-time payments, you are considered “delinquent.” And, once you are delinquent, banks and credit card companies will make a guess. Their guess: what is the likelihood that you will pay them back. The higher the likelihood, the less likely they will be to agree to a settlement.

The longer you go without paying, the higher the probability that you will not pay back the bank. You’ll receive a greater settlement if there is a higher probability you will not pay back the bank.

Although the policy of every lender varies, it is highly unlikely (given our experience) that you will see a wonderful offer during the first 30 – 60 days of delinquency. The good deals come much later. And, the best deals come after 180 days (6 months), when the bank has written off the debt and likely sold it to another collection agency.

So, your approach should be simple: know how much you can afford. Offer that amount to the bank or credit card company as a settlement. If they refuse to accept the offer, just continue to wait. Eventually, one of the collectors will likely accept your offer – it will just take a while.

While you are waiting, make sure you know your rights. The CFPB has a good section that helps you understand your rights.

If you are unable to reach an agreement with the bank or credit card company during the 6 months while the debt is collected internally, you will likely have much better luck when the debt is with a collections agency.

Download our Debt Free Forever Guide! It’s FREE and will help get you back on track.





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Pay Down My Debt

What to Know Before Getting Pre-Approved for a Mortgage

Friday, February 20, 2015

Purchase agreement for house

Thanks to coming of age right as the stock, housing, and job markets were coming crashing down, members of the millennial generation learned quite a few lessons about living within our means and using caution when feeling out serious financial situations.

While we may still have a few things to learn – like the importance of investing wisely rather than hoarding savings in cash – Gen Y has been hesitant to make the same mistakes from previous generations.

One major milestone millennials have largely held off on: buying a home. Gen Y hasn’t been the home-buying demographic many economists were hoping they’d be, and little wonder. A group of people already saddled with heavy student loan debt loads is unlikely to jump at the chance to sign up for a 30-year debt repayment obligation.

But that may be changing as more and more members of this generation reach their late 20s and early 30s. As more millennials start house hunting – and thinking about applying for a loan that may even eclipse their student loan debts – it’s important to understand what you need to know before getting pre-approved for a mortgage.

Speaking from Experience

Many of my fellow millennials have held off home ownership and prefer to rent their living space instead. I’m a bit of an outlier.

I bought my first home at 22. At 25, I’m in the process of selling that home for a profit and buying my second. (The main reason I’m in this position, person reading this in Chicago, NYC, or San Francisco, is because I chose to live in the American South. Real estate prices and property taxes are considerably lower here than other areas of the country.)

Going through the mortgage loan application process for the second time makes me want to share my experience and knowledge with other Gen Yers who may start to consider purchasing their first home in the next few years.

Get Ready Before Approaching a Lender

The best thing you can do to ensure a smooth loan application process from start to finish is to prepare yourself before you even get pre-approved. That means understanding what kind of real estate you can truly afford, what a lender will look for when you ask for pre-approval, and what you’ll need to provide once you find a home and secure a contract on the property.

What Can You Really Afford?

The most important thing to understand with mortgages is that a lender will almost always provide you a larger loan than you should reasonably accept. Despite the housing bubble that imploded starting in 2008, despite new federal laws introduced in 2014 intended to hold lenders more responsible for the loans the underwrote, the guidelines still allow most people to take out loans that are far larger than they should be.

I’ll give you a personal example. My current mortgage payment, which includes principle, interest, taxes, and insurance, is $1,013 per month. In looking for a new home, I wanted to make sure I stuck close to this number.

Putting down a 20% down payment meant my comfort zone ended at a purchase price of about $260,000 – because with 80% of that amount financed, my monthly payments would work out to be about $1,114.

But the lender’s online mortgage calculator, based on my income and my assets, told me I “could afford” a $600,000 house. Do you see the problem with online mortgage calculators?

You need to look at a few things to determine what you can truly afford before house hunting:

  • The list price of the home
  • The estimated property taxes on the home
  • Any monthly or annual dues, like HOA fees
  • How much cash you’ll put down on the home (in other words, how much of the purchase price you’ll finance)

While lenders will provide loans with various percentages of cash down on the purchase, in most cases putting down 20% is a smart move. The less you put down in cash on a property, the higher your monthly mortgage payment will be.

If you put down less than 20%, you’ll also tack on a private mortgage insurance charge (PMI) which will mean paying an extra $50 to $300 per month (depending on your down payment and the purchase price of the home).

What You Need to Provide to Get Pre-Approved

Once you understand what you can reasonably afford to repay on your loan each month, you need to check in on your income, assets, debts, and credit score. All of these factors impact your pre-approval and your loan process.

In short, a lender wants to determine your:

  • Debt to income ratio
  • Income and reasonable ability to repay a loan
  • Credit score

A lender will run a hard inquiry on your credit to pull your FICO score. This helps them determine how much of a risk you may be to default on the loan, and influences the interest rate the lender will offer you.

When you go through the pre-approval process, you need to know how much income, cash, and invested assets you have, and the source for each. (For example, you need to say you make $X amount per year at X Company. You also need to explain your employment status.)

You also need to report any debts or liabilities you have, which would include things like credit card payments, a car loan, or student loan debt.

Don’t even thinking about fudging the numbers here. Although the information you provide is good enough for the pre-approval process, you’ll have to verify every tidbit you gave the lender once you start your loan process.

Your finances – meaning your bank accounts, investment accounts, and other assets – will be closely scrutinized once you actually start the loan process. You’ll need to provide an explanation for any large or “suspicious” transactions, and in most cases you won’t be allowed to borrow cash (even from a friend or family member) for your down payment or to meet asset requirements.

Get Your Finances and Your Credit in Order 

That’s what you’ll need to provide for your pre-approval. But before you call up a lender and ask for that qualification, take a look at the state of your finances and your credit.

You want to ensure you can prove you’ve been gainfully employed for at least a few months; most lenders want to see 30 consecutive days worth of paystubs, and it’s always advantageous to have more. If you’ve had some trouble keeping a regular income or job, it might be best to hold off on the house search until your earnings are more stable.

You also want to take a look at your credit history and your credit score. Many credit cards, like the Discover It and Barclays World Arrival cards, provide you with your FICO score on each statement. Tools Quizzle or Credit Karma can give you an estimate so you have a good idea what your score looks like.

Discover FICO

If your score is on the low end, don’t panic. You may still be pre-approved and qualify for a loan, but you’ll pay a higher interest rate.

You can also take steps to help boost that credit score before you ask for pre-approval:

  • If you have any debt, ensure you’re making all payments in full and on time.
  • If you use a credit card, don’t let balances roll over. Again, pay in full and on time.
  • Don’t open new lines of credit immediately before asking for pre-approval – and don’t close old accounts, either.
  • Avoid making large purchases on credit cards, or using the maximum amount of credit available to you before paying off your card (even if you do pay that balance off in full and on time).

It may take a few months before your credit score starts working its way to higher numbers. Stick with these actions and stay consistent. You’ll be rewarded with a better score and a lower interest rate when you do ask for pre-approval – which means you’ll pay less over time in interest.

The Consumer Finance Protection Bureau (CFPB) offers an interactive tool to allow you to check mortgage rates based on credit score range. Based on research using the tool, 740 or higher is the ideal credit score in order to receive the lowest interest rates. If you drop below a 620, then it will become very difficult to qualify for a mortgage.

Let’s say you’re looking for a $200,000 home in North Carolina. You can afford a 20% down payment of $40,000 on a 30-year fixed mortgage.

Mortgage rates

You could save up to $12,305 by applying for a mortgage with a credit score of 740 or higher. The numbers above are also best case scenario mortgage rates for those with lower credit scores. Scores within the 680 – 699 range would be more likely to receive an APR of 4.125%, which would cost $119,158 over 30 years.

Find a Reputable Lender

You’ll also want to ensure you’re choosing a good, reputable lender. Mortgages make lenders money (from the interest you’re paying) so they have a vested interest in getting your business. Unfortunately, not all lenders are created equal. It pays to do your homework.

Ask a financial advisor, accountant, or attorney for a recommendation to get you started. You can also ask family and friends who originated their mortgage loan, and ask about the experience they had with that company.

Reputable lenders will provide you with a Good Faith Estimate and paperwork that explains the loan process, your rights and obligations, and “truth in lending.” You can be sure to see if you’re getting the lowest rates in your state by using the CFPB tool to check mortgage options. If you are struggling to find a low interest rate, look at Pentagon Federal Credit Union’s rates. Anyone can join this credit union and it often offers some of the lowest interest rates to eligible borrowers.

NC mortgage data

Image taken from CFPB

Bottom Line: Research and Ask Questions

Taking out a mortgage is a document- and time-intensive process. And you don’t need me to tell you that a hundred thousand dollar (or more) loan is a huge financial commitment.

The best thing you can do for yourself before even looking at a real estate listing is to ask questions, seek out answers, and do your research. If you don’t understand something, speak up.

Talk with financial professionals first, and speak with friends and family who already went through this process. And if the lender you want to work with can’t or won’t answer, look for another service provider to secure your loan.

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Pay Down My Debt

How To Deal With Harassing Debt Collectors

Thursday, February 19, 2015

Young couple calculating their domestic bills

For 3 years I barely picked up my phone when it rang. I was deep in debt with about $22,000 of credit card bills. Debt collectors were calling everyday. They had their methods. Typically, they used some sort of automated service to ring my phone. I knew it because if I picked up the phone, I would hear two clicks, then a person speaking. Sometimes I would get a call from the same number twice in a row. Once to check if I would pick up and a second one to leave a voicemail. I began to devise my own methods for dealing with the calls. I saved each number as it came in to a contact I created in my phone. ‘Blocked’ was the name I set for these calls. But no matter how I tried to avoid the calls, they kept coming.

Digging the Debt Hole

When I made that first credit card swipe I don’t think I knew how much it would affect my life. Living with credit card debt that I could not afford cost me a lot of stress, worry, and unnecessary cash.

I like to say when I was 18, I signed up for a credit card and I was given a free shirt and a shovel. Ok, maybe I’m exaggerating a little bit. Yes, I got a free t-shirt when I signed up for a credit card. The shovel? That is what I called each credit card I possessed. Every time I swiped the card I felt like I was digging my own grave of debt, and one day I’d be buried in that grave. At first, I was perfectly happy to spend the extra money. I shopped, I traveled, and I put a new stereo system in my car. I enjoyed the life that I always wanted to have. I felt rich. I had no idea that I would begin to hate the piece of plastic in my wallet.

One day I got a call from a particularly aggressive creditor. I had been avoiding most of the ‘blocked’ calls but for some reason, on this day I decided to pick up the phone. The phone call began like they all do, with a disclaimer that the call was an attempt to collect a debt. I carefully answered the questions and responded the only way I could.

“Yes, I understand that my debt is delinquent.”

“No, I don’t have any family members that can help.”

The Revelation

I was exhausted. I was tired of saying the same things over and over again. The woman on the phone became exhausted as well. She began to speak forcefully and told me that I should be ashamed of myself that I would not pay my debt.

At that point I hit rock bottom. I started crying on the phone, “I don’t have a job right now.” I felt the pity party coming on. I thought about the rocky economy, my inability to get a job, my choice of degree, and my choice to use credit.

I hung up phone and suddenly it hit me. Why was I crying over money? Why was I allowing myself to be emotionally wrecked over some inanimate object?

So I made a plan. I knew that I wanted to not only get rid of the debt, but also set myself up for success in the future. I also knew that I would never allow another creditor to influence my emotions. Yes, I had created the debt on my own but that doesn’t make me a bad person.

Are you dealing with aggressive debt collectors? Here are steps to take:

Answer the Phone

Don’t be afraid to pick up the phone. Speak frankly with the creditor and be prepared to negotiate. Collections agencies buy your debt for pennies on the dollar, so they are more than willing to negotiate so they at least get some money. Depending on your situation you may be able to get fee concessions or other perks by working with the creditor.

Know Your Rights

The Fair Debt Collection Practices Act (FDCPA) says debt collectors can’t harass, oppress, or abuse you or anyone else they contact. If harassment occurs, you can sue the debt collector for violations of the FDCPA. If you sue under the FDCPA and win, the debt collector must generally pay your attorney’s fees and may also have to pay you damages. If you don’t win, be sure you can afford the attorney’s fees.

Make a Plan

Make a plan to eliminate your debt. Shop around for balance transfer credit card options and create a budget. Set a goal date when you would like to have all of your debt paid. Evaluate all of your purchases and trim or eliminate unnecessary expenses.

I began to answer each call and speak frankly with my creditors about what I was able to do. I started working part time jobs and eventually I secured a full time job, which gave me the ability to pay all of my debts off within 3 years.

Are you dealing with debt in collections? Reach out to us at 



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Pay Down My Debt , Strategies to Save

Awkward Money Talks To Have With Your Partner

Wednesday, February 18, 2015

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After dating for two plus years and spending almost every night bouncing between each others’ apartments on the opposite ends of Manhattan, my boyfriend and I have decided that keeping track of multiple toothbrushes and pairs of pajamas has become an unbearable and unnecessary pain in the ass. As responsible 20-somethings, closer to 30 than we’d care to admit, the significant other and I are joining forces and finding an apartment together.

It’s not simply a matter of convenience, but rather, one of shared values, goals, and of course- love. Wanting to maintain all those shared ideals in our relationship, we’ve had our fair share of open, honest, and sometimes awkward conversations- many revolving around the ultimate taboo topic- money.

With financial problems continuing to be the number one predictor of divorce in this country, we’ve decided to tackle awkward money conversations head on before they become a divisive issue. From spending habits to earnings to thoughts on prenuptial agreements, there’s not much left to reveal about our respective financial outlooks. That’s not to say that it’s been easy or we agree on everything, but we’re not moving forward blindly, waiting for fiscal stress, resentment or problems that arise to be the catalyst for conversation.

Sure, awkward money talks might not be the most romantic date night conversation, but neither is divorce, or in our case, finding a new apartment in Manhattan.

The First Date

When the boyfriend first asked me out, I responded with a “yes”… as long as we kept it affordable. We ultimately settled on happy hour and $30 tickets to a Broadway show. Having revealed my frugality up front, every subsequent date was planned with creative budgeting in mind.

It might be awkward to talk budget when planning a first date, but even the mere mention of the word affordable (whether you’re paying or not) sets a precedent for honesty and openness around money from the start.


Over the course of our first few dates it became clear that the boyfriend and I had some very different ways of approaching our money. I was a saver. He was a spender. While our initial patterns of spending were different however, our shared visions of a financial future and openness to finding better ways of achieving it made our disparities a source of continuing conversation rather than a deal breaker.

Instead of getting defensive at my savings suggestions, the bf opened and fully funded a ROTH IRA by the end of the first year. And instead of allowing my limited earnings to restrict all our shared activities, I grew my income and found more flexibility to fund them. Our ongoing discussion of priorities revealed that we had more overlap than our differing savings and spending behaviors suggested; so we worked together to bring those into alignment.

Moving In 

After an unusually indulgent Sunday brunch, the boyfriend asked if I would move in with him. I instinctively responded with what I could afford to pay. With significantly disparate incomes, deciding how to share expenses can be tricky, especially as our lives become more intertwined. Rather than dictating the price range for the potential apartment or the appropriate split, I simply stated what I felt I could afford so that he could make some decisions for his part. If he wants a 50/50 split, we’ll look for apartments at double my budget. If he wants a little more luxury, he’ll have to pay the difference. We’re still navigating the move-in process, but we’re talking through it together with full disclosure of our respective expectations.

The Future

Should all go well in our new venture of cohabitation, we’ll have to broach yet another financial frontier- combined finances (not to be confused with shared expenses).

Should marriage look likely, we’ll talk shared bank accounts and collaborative money management. We’ll negotiate outstanding disparities in our financial behaviors to keep present spending in line with future goals, building a budget that suits our wants and needs both now and in the future. We’ll work to find the balance of autonomy within financial unity. And we’ll do it all before signing any legal documents.

This pragmatic, business-like approach to shared finances is misconstrued by many as cold and callous. To me however, spending and saving behavior is the ultimate reflection of a person’s ideals and values. Keeping the financial discussion open and honest throughout the course of an evolving relationship, however momentarily awkward, is to ensure that those ideals and values continue to align- not just the money, but everything it represents- convictions, goals, dreams, etc.

If all goes according to plan, not only will we have a strong financial foundation for our relationship, but a set precedent for the ongoing discussion of our finances- allowing us to grow stronger through our shared fiscal goals rather than becoming separated and estranged by financial stress, secrets, or resentment.

Have an awkward money talk topic to share? Send it to us via Twitter @Magnify_Money or email 



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Pay Down My Debt

What to do When You’re Struggling to Make Payments on Debt

Tuesday, February 17, 2015

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Below is an excerpt from our Debt Free Forever Guide. Be sure to download the free guide to help dump debt for good.

Is your debt already delinquent, but still with the bank? Then start here.

You are current on your debt, struggling to make payments. Ironically, this is the hardest situation. When you are making payments, the goal of the bank or credit card company is to keep you making those payments. They are very happy receiving the minimum due. By making the payments, you are demonstrating that you are capable and willing to pay. So, the banks are very keen that you keep doing it.

Having said that, you should still try to negotiate with them and see what they can offer. Just give your credit card company a call, and tell them that you are in financial difficulty and will no longer be able to make payments on time. Tell them that you won’t be able to make the payment next month, and you would like to see what forbearance options are available.

Most banks offer two types of forbearance programs:

  • You are having a temporary problem, so they look to reduce your payment for a temporary period of time. For example, you could pay interest only for a few months, and then have the payment increase once your temporary problem is over.
  • You have had a significant change in circumstance (e.g. death in the family and subsequent reduction in earning potential), and you need to have principal forgiven. ?Since you are reading this chapter, you most likely are suffering from the second (more serious) problem. However, banks are much more likely to give you solutions to the first problem, especially if you are current on your debt. ?When you are speaking to the bank, don’t accept a solution that only gives temporary relief. For example, if they offer interest-only payments for 3 months, reject that offer. You are looking for serious debt relief right now, not a temporary solution. ?Your chance of success is low. But you should always give the bank a chance. And, some credit unions may be even more generous, working with you in person. I am still old-fashioned. Even though the banks probably won’t treat you like an individual, it is worth trying. See if you can negotiate a settlement that works. ?If it doesn’t work, then you may want to consider that you stop paying. Once you become delinquent, you will have more options with your bank. And, the more delinquent you become, the greater the chance ?that you can reach a settlement.

First Warning

Once you stop making payments, you will seriously hurt your credit score. In fact, once you start down this path, it will be a few years before you will be able to borrow again, and it will be 7 years before this mess completely disappears from your credit report. But just think about this: if you barely afford to make the minimum payment, it will be at least 30 years before the debt disappears. If you stop paying, it will be 7 years until the debt completely disappears from your credit report.

Second Warning 

Once you stop making payments, expect the collections calls, letters, texts and emails to start coming. And they will come with incredible intensity. You should expect to hear from every creditor every day for at least 6 months. They will then sell that debt to a collection agency, which will start to contact you daily as well.

Third AND BIGGEST Warning 

Your wages could be garnished. That means your creditor could sue you, and money could be taken out of your salary automatically to make payments on your behalf. There is a federal limit on how much can be garnished (and this only applies to the unsecured debt that we mentioned, not student loans, alimony and other debt). At most, 25% of your disposable pay can be garnished. Disposable income is your gross salary minus most of your deductions, including federal income tax, social security, Medicare, state tax, health insurance premiums and any involuntary pension contribution. You can use this calculator to see exactly how much money you could have garnished from your wages.

It’s Better to Handle the Issue Now

This is not an easy path that you are walking down. You owe money, and you have decided not to pay all of it back (for various reasons). You can expect that the companies will try to get their money back. And, if you have money and are just trying a short cut, you can expect the courts to catch up with you. Wage garnishment is likely, if you are just refusing to pay.

But, if you can’t afford to get out of debt, the pain of the next few months may be worth it, because you will fix the problem in a few years, rather than living with this debt for the next 30+ years.

Download our Debt Free Forever Guide! It’s FREE and will help get you back on track.




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Pay Down My Debt , Strategies to Save

Busting The Myth: Breastfeeding is Not Free

Tuesday, February 17, 2015

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It’s time to unearth the long-held belief that breastfeeding is free. I hear this time and time again, and it’s just not true. If you are pregnant and creating a budget, do not put “$0” next to the “Feeding My Baby” category if you plan on breastfeeding. There are many costs associated with breastfeeding, and it’s important to be aware of them.

Breastfeeding is definitely less expensive than formula feeding. I know from personal experience because I’ve done both. I breastfed my twins for almost five months and then I switched them to 100% formula. They are almost 11 months old now, and the last few months were definitely more expensive than the first few. However, I still incurred costs while breastfeeding. Many mothers do. The reason is that there are so many products out there today that exist to help new mothers ease discomfort and make the experience better. Here are a few examples:

1. Nursing Tanks

I lived in nursing tanks for those five months, and when I was finished breastfeeding, I packaged them up and sent them to my sister so she didn’t have to incur the cost. I bought inexpensive nursing tanks for around $15-$20 at Target. By the time I was finished I had five of them. Breastfeeding can get a little messy, and you’re constantly changing your clothes because as a new mom, you just run around smelling like spit up and breast milk. Yes, it’s beautiful let me tell you. Having five of these shirts was helpful because I could do laundry less frequently. It was a pain to get caught wearing anything else! Sure you can breastfeed without them, but it’s easier with them.

2. Breastfeeding Pillow

When your babies are really small, it helps to have a breastfeeding pillow. I had one that was made especially for twins so that I could place one baby on each side of me. These pillows can cost up to $50.00. You can use the pillows from your bed and prop them all around, but for me, they didn’t work quite as well. I tried everything I could before succumbing to using the twin breastfeeding pillow. Once your babies get bigger and you get more comfortable with breastfeeding, you can sort of prop them up any way that works, but in those early days, it helps to have a specific breastfeeding pillow to make your life easier. 

3. Breast Pump

Many breastfeeding mothers purchase breast pumps so that they can make extra milk and store it in their freezer. Many insurance policies now provide these, but since I had an international health insurance policy at the time, it did not cover it. I purchased a high-end breast pump that retails at $400.00. I could have purchased a cheap handheld one, but another twin mom encouraged me to get the best one. With twins, milk is even more sacred because you’re feeding two babies at once, and I wanted a breast pump that worked extremely well. Not everyone has to go this route. Some moms never pump at all. It really is a personal choice but for me, this was a big expense.

4. Pain Relief

I never really thought that I would have to talk about nipple shields in my blogging career, but here we are. There are a lot of different products that mothers use to ease the discomfort in early breastfeeding days. There are nipple shields, as mentioned, which can run around $10.00 a piece. I used a really nice, organic cream that worked extremely well but was very expensive at $15 for a small jar. There is also cream to help with stretch marks since your body changes a lot when you breastfeed. Really, there’s a product for just about everything for those early days.

Many people might also have to pay to visit their physician if they get a clogged duct or get an infection, which is all very common. This takes time and often requires a co-pay as well. Essentially, it can cost time and money to manage breastfeeding pain. Not every mother has pain, but if you do, it’s good to take the steps to remedy it. I personally did just about anything I could to make sure that I stuck with breastfeeding as long as possible, but I always asked a lot of questions and got a lot of support when I needed it.

5. Lactation Consultants

I was in the hospital for longer than most moms, so I was able to use the services of several in-house lactation consultants. However, when I moved to a different state, and I wanted some advice, I called a private lactation consultant who helped me immensely.

She took the time to speak with me on the phone for about an hour to answer some questions. She was so encouraging. She offered to come to my home and physically help me with any issues I was having. Her fee was $100 for an hour visit. I did not take her up on it, mostly because her phone call was all I needed to push me along to keep trying, but if I needed to, I would have taken her up on the offer.

Again, many insurance companies do include the services of lactation consultants, so you’ll want to check with your individual policy. If they don’t or if you like one in particular who is private, you will have to pay out of pocket for their help.

It May Be Cheaper, But Breastfeeding Isn’t Free

As evidenced, breastfeeding is quite a journey, and there are a huge variety of experiences from mothers who had zero issues to moms who really have to fight through the first few months to get it just right. Regardless of your experience, you will incur some costs along the way whether through clothing, products, equipment, or medical help. It is cheaper than formula feeding, but it is by no means free.

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Pay Down My Debt , Personal Loans

How to Shop and Apply For a Personal Loan

Monday, February 16, 2015

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Below is an excerpt from our Debt Free Forever Guide. Be sure to download the free guide to help dump debt for good.

In a complicated financial world, the personal loan stands out as a rare, simple product. You borrow a fixed amount of money, for a fixed period of time, at a fixed interest rate.

If we turn back the clock 60 years, the only real way to borrow was with a personal loan. However, banks quickly realized that they could make more money with credit cards, and they stopped issuing personal loans and started pushing credit cards.

There are a few reasons why banks like credit cards more than personal loans:

  • Interest rates on credit cards are much higher than on personal loans
  • People tend to spend more money on credit cards – the temptation of plastic is just too easy
  • There are more ways to charge people fees with a credit card. You have over limit fees, late fees, higher interest rates on cash advances, and more.
  • The minimum due on a credit card means that it can take nearly 30 years to pay off your debt, because you are only paying 1% of the balance every month (and that goes down over time). For personal loans, the longest loans are usually only 5 years.

So, you can see why a simple personal loan can be attractive. A balance transfer is almost always cheaper, but it is also almost always a bit more painful, a bit less transparent and a whole lot more tempting.

How to Shop for a Personal Loan

Applying for a personal loan will be different than applying for a credit card. Here are some things to remember:

  • Most personal loan companies are very small (and you probably have not heard about many of them). Each one of them has very specialized criteria for who they’ll accept.
  • At most lenders, you can see if you will be approved without hurting your credit score. They will use a “soft pull” to let you know if you are approved, how much you can borrow and the interest rate and fees associated with that approval.
  • You may need to provide verification of income, employment or other items on your application. Credit card companies will almost never ask for documentation: there is a high chance that personal loan companies will ask for documentation. The best place to start the personal loan application process is at the MagnifyMoney personal loan tool, which you can find here.You can input some of your personal information (credit score, loan amount and college degree), and you will see results like the list below:

PersonalLoan page

We highly recommend that you apply to more than one company, so that you can compare the interest rate that you receive.

Once you receive your customized list of potential personal loan companies, you can then click on “Go to Site.” Once there, you can answer just a few questions, and can see if you will be approved and for how much.

For each personal loan, you will want to keep track of:

  • The fee
  • The interest rate
  • The APR

These are the most important factors to compare when looking at personal loans. It will take you no more than 5 minutes to get pre-approved at each lender. It makes sense to compare 3- 5 companies, and then you can go with the lowest cost.

Make sure you compare the APR: the APR is a combination of the interest rate (which is paid each month) and the up-front fee (which is taken out of the loan proceeds at the beginning of the loan). The APR is the true cost of the loan, and you can compare the APR across all providers. However, (and this is important): the APR assumes that you will not pay off the loan early. If you do pay the loan early, you will not get a refund of the up-front fee. That means your effective APR would be higher if you pay off your loan early. Many personal loan companies say that they do not have a pre- payment penalty. While that is technically true, you will not receive a refund of your up-front fee.

How to Apply for a Personal Loan

Once you found the personal loan company that offers the lowest APR, you can go forward with a full application. When you do a full and formal application, you will have an inquiry on your credit report. That will result in a decrease in your score of about 10-20 points (on average).

Just because you were pre-approved, does not mean you will be formally approved when you apply. When you formally apply for the loan, you will be providing a lot of additional information that will be used for the credit model. However, chances are very good that you will be approved.

When you make a formal application, you may have to provide documentation to verify your income or employment. That could include pay stubs, tax returns or more. Be prepared to substantiate everything you say. If you don’t have good documentation, you could find this phase a bit challenging.

From applying for your loan to getting the loan funded can take a few weeks with the online lenders. Just make sure you pro-actively manage the documentation process and supply all required information, and answer any questions.

In most cases, the up-front fee is taken out of the loan proceeds. So, make sure you apply for enough to cover the fee. For example, if you need $5,000 and there is a 4% fee, then apply for $5,208. That way you can pay the 4% fee ($208), and still receive your $5,000 proceeds.

I heard about Peer-to-Peer lending. What does that mean? Should I worry about this?

Personal loan companies need to find money that they lend to you. Some of the personal loan providers are banks or credit unions, and they use deposits. Others, like Discover, issue bonds and borrow on the public markets.

There is a new type of lender (like Prosper* and LendingClub*) that directly matches investors with borrowers. Investors can put in just a few thousand dollars to get started. So, when you apply for a loan, a peer-to-peer lender will actually go out and try to get your loan funded. That takes time.

But you should not worry about the difference between the different types of lenders. At the end of the day, you have all of the same consumer protections regardless of where the money comes from.

Tricks and Traps to Avoid

A personal loan is a relatively simple contract, which means that there are not many ways for you to get into trouble. Here are the biggest traps that you need to avoid:

  • Insurance: at the end of the loan process, you may be offered add-on insurance products. They will typically sell products like life insurance (it will pay off the loan in the event of your death), unemployment insurance (it will make payments if you lose your job) and disability insurance. Although every insurance policy is different, the vast majority of the policies reviewed by MagnifyMoney are not worth it. If you need life insurance, you should shop for term life insurance, and make sure that you have enough coverage for everything you need, including your loan. If you need disability insurance, you should look for a policy that covers all of your needs, not just the loan. In all of those cases, you will get a better deal than a pressure sale at the end of a loan closing.
  • Early renewals: Remember that the up-front fee is non-refundable. So, although there is no pre-payment “penalty,” the fee does not go away. And, if a personal loan company tries to get you to renew the loan, they will likely charge you another non-refundable fee. Not only does this get you stuck in a debt trap, but it also makes the effective APR that you pay much higher than what you originally signed up for.
  • Pre-computed interest: Very few companies even offer this any longer. However, pre-computed interest is a different (and very old fashioned) way of calculating interest. If you do not pay off your loan early (you pay it to maturity), it does not matter. However, if you pay off your loan early, you will end up paying more interest.

If you say no to insurance, don’t renew your loan and pay it off according to the amortization schedule, then you have nothing to worry about. When you do that, the disclosed APR is the true cost of your loan. If you fall for the traps (insurance and frequent renewals), you will end up paying a lot more.

Download our Debt Free Forever Guide! It’s FREE and will help get you back on track.


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Balance Transfer , Pay Down My Debt

How to Complete and Make Payments on a Balance Transfer

Thursday, February 12, 2015

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Below is an excerpt from our Debt Free Forever Guide. Be sure to download the free guide to help dump debt for good.

Before you continue reading, be sure to check out How to Use a Balance Transfer to Attack Your Debt.

Complete the Balance Transfer

This is the easiest step! But you don’t start saving until you complete this step, so make sure you do it right way. In fact, if you wait too long you could lose the offer.

In order to complete the balance transfer, you will only need to have the credit card number of the credit card that currently has your debt. The bank that approved you for the balance transfer credit card will handle the balance transfer on your behalf.

There are two easy ways to complete the balance transfer:

  1. You can call the bank or credit union, and complete the transfer via telephone
  2. You can complete the balance transfer online. If you want to complete the transfer online, we have written a guide for some of the most popular banks. Here are the links:

Just remember:

  • Complete your balance transfer as soon as possible. Typically, if you don’t complete the transfer within 60 days of being approved, you will lose the deal. But, the promotional offer usually starts from the day you were approved, not the date of the transfer. So, the earlier you start the transfer, the more you can save.
  • The transfer may take up to 2 weeks. Make sure that you continue to make payments on your existing credit card until you have verification that the transfer has been completed. You want to ensure that you don’t pay any late fees or other penalty interest rates.


How to Make Your Payments

Once you have completed your balance transfers, you need to come up with a plan for how to make payments.

You may have heard of Dave Ramsey’s Debt Snowball. He tells people to pay off their smallest debt first, regardless of the APR. The reason for that method is psychological, not mathematical. A big part of paying off debt is staying focused, and by setting attainable goals (and celebrating them), you increase your chances of success. In addition, he does not want people to ever take out a balance transfer offer, because credit is evil, and you will only end up being tempted by debt.

We understand and respect that approach. And, if it works for you – go for it. However, it will end up costing you more money and more time. We believe that your goal should be to eliminate debt from the highest interest rate to the lowest interest rate.

Lets give you a very simple example. You have two credit cards:

2 credit cards

If you were following the Snowball method, you would tackle the $3,000 credit card first, despite the fact that the interest rate is lower. Lets assume you can afford to pay $300 per month ($3,600 per year) towards this debt.

If you followed the debt snowball (minimum due on Credit Card #2 and all other money towards Credit Card #1), than you would:

  • Have paid $1,702 of interest over the next 12 months
  • You would have a balance of $7,102 at the end of month 12. If you reversed that order, and put all of your extra money towards the higher interest rate credit card debt, then you would save about $25 of interest. Not a big deal. However, if you completed a balance transfer, and moved $9,000 to a balance transfer, you could save a lot of money.

For example: If the deal is 2.99% for 24 months, you would save $1,479 in the first 12 months and the balance at the end of Year 1 would be $5,556.

So, the single best way to accelerate your debt payoff is to transfer your debt to a lower interest rate credit card.

Just Remember:

A balance transfer can be a great to way to Transfer and Attack your debt. But, like most financial products, there are tricks and traps that you need to avoid. If you follow these tips, you will be able to save money without worrying.

  • Don’t spend on the credit cards. Your goal is to get out of debt. The credit card company is betting that you will be tempted by the credit limits and start spending again. You must avoid the temptation, and only use the card as a way to pay down debt quickly.
  • Pay on time, every month. If you pay late, you are giving the credit card companies the chance to start charging you a lot of money. Even if you are just a day late, you will be hit with a late fee. If you are 30 days late, your credit score will be hit (which can make everything in life more expensive). And, if you are 60 days late, you will lose your promotional interest rate, and could end up with an interest rate close to 30%.
  • Don’t close the credit cards once the balances are paid off. When you have a credit card that does not have a balance, you are showing discipline. It keeps your utilization low, and it keeps your long credit history. If your credit card has an annual fee, just give them a call and ask to do a product transfer to a credit card with no annual fee (but with the same account number).
  • Have a plan for the end of the promotional period. It would be great to be able to pay off all of your debt during the promotional period. And if your balance transfer deal is a “life of balance” offer, than you have nothing to worry about. However, if your promotional rate expires (and most do), you should have a plan for the remaining balance. The credit card company is counting on you being lazy. They expect you to keep the debt after the 0% offer goes away, and that you will start paying the much higher interest rate. Once the promotional period is over, you can transfer the remaining balance to another balance transfer offer.

When used properly, a balance transfer strategy can save you thousands and take years off your debt repayment. Don’t let theprice checker thumbnail myths or the what seems complex keep you from saving money. If you have any questions (or concerns), please don’t hesitate to email us at

In addition, if you want to receive an email every two weeks with the best balance transfer offers in the market, sign up for our email (which we called the Price Checker). We promise we won’t overwhelm you with mail – and it will just keep you up-to-date on the best offers. You can sign up here.

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Balance Transfer , Pay Down My Debt

How to Use a Balance Transfer to Attack Your Debt

Monday, February 9, 2015

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Below is an excerpt from our Debt Free Forever Guide. Be sure to download the free guide to help dump debt for good.

Using a balance transfer to attack can help slash your interest rates and save you time and money. You are eligible for a balance transfer if:

  • You have good credit. Your score is likely above 700.
  • You are not behind on any of your payments.
  • You have a debt burden well below 50%.
  • Your debt is well below 50% of your annual income

In this post, we’ll walk you through deciding if a balance transfer is right for you and how to pick one.

Make a List of Your Debt, from Highest to Lowest Interest Rate

In this exercise, you will need to make an inventory of your credit card debt. Your most recent billing statement will have all of the information required. On the list, you will need to include:

  • Your total statement balance. If you only made purchases on your credit card, you only need to include the statement balance. However, if you have taken out a cash advance or have a promotional (for example 0%) balance on the card, you should list each balance separately. The balance by each category is usually listed towards the end of the statement, under a section call “interest charges.” In the example below, you can see that each balance is listed separately:

BT image - interest

  • Your Annual Percentage Rate (APR): As you can see in the example above, there are very different interest rates depending upon whether you have a cash advance or a purchase. You will want to list each balance separately, with each APR listed separately.
  • The issuing bank: You will need to determine which bank issued your credit card. For most credit cards, it is obvious. However, for some store credit cards it is not always clear. Your statement will almost always identify the “issuing bank.” If you cannot determine which bank issued your credit card, just call customer service and ask them. Once you have all of this information gathered, you can complete the list of your balances, from highest to lowest interest rates. Below is an example:

BT example


As you can see in the example below, this individual has $10,000 of credit card debt. The interest rates range from 29% (the cash advance on Citi) to 0% (a promotional purchase offer from Chase).

The 16.65% is the blended interest rate, which we calculated. That means that the individual is paying an average of about 17% across all of the debt.

Use MagnifyMoney to find a balance transfer offer

Now that you have an inventory of your total debt, you can come up with a strategy for transferring that debt to a lower interest rate. Here at MagnifyMoney, we review thousands of offers, and update the best deals every day. You can visit

MagnifyMoney’s balance transfer table to find the best deals.

When you look to find a balance transfer, just remember:

  • If you have a balance at 0%, you should not transfer that balance until the end of the promotional period. If it is at 0%, keep it there.
  • You can only transfer debt to a different bank. So, you could never transfer Citibank debt to another Citibank credit card. In the example we had above, $2,000 of the $10,500 is already at 0%. So, we are looking to transfer $8,500 of debt to a lower interest rate. In order to use the balance transfer tool, you need to know how much you can actually afford to pay each month towards that debt. Let’s say that you can afford to pay $300 per month towards the $8,500 of debt. In summary, you are looking to transfer $8,500 of debt, at an average interest rate of 20% (remember, we excluded the debt you already have at 0%), and you can afford to pay $300 per month. We have input this information into the balance transfer tool, and here are the results:

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The results show a number of excellent options, which can help save you a lot of money. (We are only displaying the first 3 results – there are many more).

Here is how we present the results:

  • Savings: we rank the results based upon savings. The transfer deal that offers the most savings is at the top. This will tell you how much less interest you will pay during the balance transfer period, compared to your current situation.
  • Transparency Score: the more fine print a credit card has, the higher the chance that you can end up paying hidden fees or charges. We look at all the fine print, and grade cards based upon their simplicity. The best cards get an A, the worst cards get an F.
  • Offer Terms: we then show you the key features of the offer, which includes the balance transfer fee and the promotional interest rate (including how many months the promotional offer would last). The top 3 results are all from credit unions (FCU = Federal Credit Union). That means you would have to join the credit union, and then apply for the credit card. The fourth result, from Santander, does not require you to join a credit union. When you make a decision about which credit union or bank to select, you should consider:

Is the savings the most important element to you? If you are looking to save the most amount of money, regardless of any other element, than you would probably want to choose the first result.

  • Do you want to support local credit unions? The downside of a credit union is that you have to join first, and then apply for the credit card. This can take extra time. Some credit unions make it very easy, but others make it a bit more of a challenge. Do you only want to reward cards that have an A transparency score? At MagnifyMoney, our goal is to reward simpler, more transparent cards with fewer hidden fees. We hope that our transparency score becomes a part of your decision-making process.

Regardless of which card you choose, you will end up saving a lot of money. You can see that the Top 3 cards have savings ranging from $2,156 to $2,384. So – you know that you will be better off after a balance transfer.

What you need to understand about a balance transfer

  • Life of Balance deals: if you see an offer that lasts for the “life of the balance” that means the promotional offer expires once you pay off the balance, and not before. Those are great deals.
  • Just because one credit card company rejects you, doesn’t mean that they will all reject you. Every bank and credit union has its own unique underwriting criteria. We wish it was easier, but banks don’t like to share their approval criteria. In our experience, we have seen many people approved by one company but rejected by another – and the reason for the difference is not always clear. You are reading this section because you are likely to be accepted, but you are not guaranteed.
  • Every application will take about 10-20 points off your score. If you are not applying for an auto loan or a mortgage in the next year, you should not be afraid of applying to multiple credit card companies. Just keep applying until you have been able to move the majority of your credit card debt from high interest rates to low interest rates. We have helped a lot of people using balance transfers, and they rarely were able to get all of their debt transferred to one credit card. And many people are approved by one bank but rejected by another.
  • You will not always get the credit limit that you want. Even if you are approved, you may be approved for a credit limit that is much lower than you wanted/expected. That is OK. Remember – even a lower credit limit will still help you save money. If you are given a lower limit than you want, don’t be afraid to call the bank and ask them to reconsider your credit limit. That can often work. But, if it doesn’t, don’t be afraid to apply for a few other cards to transfer the debt.
  •  Fears about your credit score should not keep you from saving money. The purpose of a good credit score is to use it to save money. Remember, applying for new credit is only 10% of your credit score. Much more important is utilization and on-time payment behavior. So long as you keep your old credit cards open after you transfer the balance, you should expect to see an even better score than you have now in 6-12 months, because you will be paying off your debt more quickly and will have a lower credit utilization.

Once you decide which credit card makes the most sense for your needs, you just need to click on “Apply Now.” That will take you to the credit union or bank website, where you can complete the application process. If you ever feel stuck or confused, you can always call the bank directly to complete the application process.

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College Students and Recent Grads , Pay Down My Debt

A 529 Plan Help Parents (and Grandparents) Save for College

Thursday, February 5, 2015

Students throwing graduation hats

You may have heard talk recently about 529 plans and how they may no longer be a good place to put your college savings.

In the State of the Union address on January 20, Obama proposed eliminating some of the tax benefits associated with 529 plans. But he has since backtracked, and 529 plans are as alive and well as they have ever been.

It may still make a lot of sense for you to use a 529 plan, but first you need to understand how 529 plans work and how they can make it easier for you to save for your child’s college education.

How do 529 plans work?

529 plans are special investment accounts that make it easier to save for college by giving you some pretty big tax breaks. In fact, 529 plans work a lot like Roth IRAs, just for college instead of retirement.

Just like a Roth IRA, there’s no Federal tax deduction on the money you contribute (we’ll talk about state taxes in just a second). But the money grows tax-free while it’s inside the account, and if it’s withdrawn for qualified higher education expenses (read: college and beyond), it also comes out tax-free. Just like a Roth IRA!

But 529 plans have one more big potential tax benefit that Roth IRAs don’t have. Some states allow you to deduct your contributions for state income tax purposes if those contributions are to your home state’s plan. That deduction can make it even easier to save.

The benefits of 529 plans

The big benefit of using a 529 plan is the tax breaks. Other than a Coverdell ESA, which is also a great option, there’s no other account where you can get this kind of tax benefit for your college savings.

But there are some other benefits as well.

When you open a 529 plan, you’ll have to name a beneficiary, which is simply the child for whom you’re saving. But if that child doesn’t end up needing all of the money you’ve saved for college, you have the option of changing the beneficiary to another child, or even to yourself, your spouse, or eventually to a grandchild. That gives you some flexibility to use the money where it’s needed instead of having it go to waste.

There are also very few contribution limits with 529 plans. There are no income restrictions, so anyone can contribute and still get the same benefits. And you’re generally allowed to contribute up to $14,000 per child per year, with married couples allowed to contribute $28,000 per child per year. There are even special cases where you could contribute up to 5x that amount in a given year. A benefit the Obamas actually took advantage of in 2007 when the couple contributed $240,000 to a 529 plan for their daughter’s educations.

Finally, it’s worth noting that 529 plans are run by states, with each state having one or more plans. But you’re under no obligation to use your state’s plan. So if your state’s 529 plan comes with high fees and/or poor investment choices, you can simply choose another plan. The only time you would be obligated to go with your state’s plan is if you’re looking to get that state income tax deduction. Otherwise, you’re free to go with the best option.

The downsides of 529 plans

While there are some great reasons to use a 529 plan for your college savings, there are some downsides to be aware of too.

The biggest downside is the penalty you would face if you wanted to use the money inside your 529 plan for something other than education expenses. Withdrawing it for any other purpose would not only cause that money to be taxed, but to be hit with a 10% penalty.

There are some exceptions to that 10% penalty. If your child receives a scholarship, you can withdraw up to the amount of the scholarship without penalty. And there are exceptions for death or disability as well, but beyond that, your flexibility is limited.

And unlike a Coverdell ESA, money within a 529 plan can’t be used for K-12 expenses (without facing that withdrawal penalty). Only higher education expenses qualify for tax-free withdrawals.

Finally, your investment options within a 529 plan are limited, though that’s not always a bad thing. It’s kind of like a 401(k), but it’s the state choosing your investment options instead of your employer. And just like with 401(k)’s, some states make good choices and others make bad ones. The good news is that you’re not locked into any one state’s plan, so you can certainly shop around.

How do 529 plans affect financial aid?

Some parents are afraid to use a 529 plan because they’ve heard that it will hurt their eligibility for financial aid. And I’m here to tell you NOT to worry about that.

Here’s the deal: 5.64% of the money you have inside a 529 plan will be counted as part of your financial aid eligibility. Which means that 94.36% of it WON’T count. At all. And the truth is that any money you have outside of your house or retirement accounts will be counted in exactly the same way.

In other words, it’s much better to save ahead and have the money available than to not save and avoid that small ding towards financial aid. Especially when you consider that most financial aid comes in the form of loans anyways, which we all know isn’t exactly free money.

There is one catch to worry about with 529 plans and financial aid though, and it involves grandparents.

Grandparents can open a 529 for their grandchildren, but if they actually withdraw money to pay for that child’s college expenses that withdrawal will count as the child’s income for financial aid purposes. And since the child’s income is the factor that counts the most against financial aid eligibility, this can be a big issue.

There are a couple of ways for a grandparent to contribute to a 529 plan and avoid this issue:

  • Grandparents can contribute directly to a parent-owned 529 plan, instead of opening their own. The big downside with this tactic is that the money is then controlled by the parents, not the grandparents, which may or may not cause a family conflict.
  • Grandparents could simply wait until the child’s last year of school before they help with expenses. Without another financial aid application on the horizon, the consequences won’t make a difference.

Bottom line: 529 plans are still a great tool

If you’re ready to save money specifically for college, a 529 plan is still a great option.

The tax advantages make it easier to save without busting your budget, especially if your state gives you an income tax deduction.

And with the flexibility to choose any state’s plan, contribute almost as much as you want, and change beneficiaries at any time, you can make it work for you no matter what your situation.

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Building Credit , Pay Down My Debt

Decoding How FICO Determines Your Credit Score

Tuesday, February 3, 2015

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Below is an excerpt from our Debt Free Forever Guide. Be sure to download the free guide to help dump debt for good. 

There are a lot of myths out there about credit scoring –hopefully we can help you understand FICO scoring, so you can take action to build your score. There are five major components FICO uses to determine a credit score. Fortunately, understanding the secret sauce can help you build a strong score and healthy credit report. Both a 700+ score and healthy credit report will help keep the rest of your financial life cheaper by enabling you to get lower interest rates on loans and approved for top-tier financial products.

35%: Payment History

This is the single most important part of your credit score. Quite simply, this looks at how many on-time payments that you make. You will:

  • Get rewarded for on-time payments
  • Be punished for missed payments: Not all late payments are created equally. If you are fewer than 30 days late, your missed payment will likely not be reported to the bureau (although you still will be subject to late fees and potential risk-based re-pricing, which can be very expensive). Once you are 30 days late, you will be reported to the credit bureau. The longer you go without paying, the bigger the impact on your score, ie: 60 days late is worse than 30 days late. A single missed payment (of 30 days or more) can still have a big impact on your score. It can take anywhere from 60 to 110 points off your score.

If you don’t pay a medical bill or a cell phone bill, your account may be referred to a collection agency. Once it is with an agency, they can register that debt with the credit bureau, which can have a big negative impact on your score. Most negative information will stay on your credit bureau for 7 years. Positive information will stay on your credit bureau forever, so long as you keep the account open. If you close an account with positive information, then it will typically stay on your report for about 10 years, until that account completely disappears from your credit bureau and score. If you don’t use your credit card (and therefore no payment is due), your score will not improve. You have to use credit in order to get a good score.

However, there is a big myth that you have to borrow money and pay interest to get a good score. That is completely false! So long as you use your credit card (it can even be a small $1 charge) and then pay that statement balance in full, your score will benefit. You do not need to pay interest on a credit card to improve your score. Remember: your goal is to have as much positive information as possible, with very little negative information. That means you should be as focused on adding positive information to your credit report as you are at avoiding negative information.

30%: Amount Owed

This part of your credit score will look at how much debt you have. Your credit report uses your statement balance. So, even if you pay your credit card statement in full every month (never pay any interest), it would still show as debt on your credit report, because it uses your statement balance. This part of your score will look at a few elements:

  • The total amount of debt that you owe across all of your accounts. On your credit cards, the utilization ?If you have a lot of credit card debt, your score can be hit.
  • In addition to the total amount of debt that you have, your utilization is very important.

To calculate utilization, divide your statement balance (across all of your credit cards) by your available credit (across all of your credit cards). For example, if you have credit limits of $40,000 across 4 credit cards, and you have a total balance of $20,000 – then you have a utilization of 50%.

To have a good score, you will want your total utilization to be below 20%.

Why is utilization such an important concept? If you use every bit of credit made available to you, then it looks like you do not have self-restraint. Maxing out all of your credit cards is a big warning sign to lenders.

If you are able to restrain yourself and have a lot of available credit (that you do not use), then you are showing self-discipline.

It may sound strange (and, in fact, it is): but the key to having a good credit score is having a lot of available credit and not using it.


15%: Length of Credit History

This is the easiest part of the credit score to get right. So long as you don’t close accounts, every day this part of your score improves (because all of your accounts become one day older).

FICO will look at the age of your oldest account, as well as the average age of accounts.

10%: Types of Credit in Use

If you have experience with different types of credit (installment loans, revolving loans, credit cards, etc.) than you will get more points than if you don’t have a variety of experience.

The most important product is a credit card. If you have a credit card and manage it well, then you will be rewarded in this. Remember: there is no greater temptation than a credit card. If you are able to withstand the temptation of plastic, you get the most points.

10%: New Credit

If you open up a lot of new credit in a short period of time, you will be sending a warning signal to the credit bureau. But this part of the credit score has turned into a myth that scares a lot of people. They are afraid to shop for the best deals, because they are afraid of what shopping for credit would do to their credit scores.

The FICO score will look at credit inquiries from the last 12 months.

This factor is only 10% of your total score. And, there are a lot of myths. Lets break a few of them now:

  • Checking my own credit report will hurt my score: FALSE! If you check your own credit report at, it will not hurt your score
  • If I shop around for a good mortgage or auto loan rate, my score will get crushed: FALSE! Multiple inquiries for a mortgage or auto loan are usually treated as a single inquiry.
  • If I shop around for a balance transfer credit card, my score will get crushed: FALSE! If your score does decline, it probably will not decline by much. You can expect 10-20 points per credit application. But, remember: you apply for a balance transfer to help reduce your balance faster. When you open a new credit card and transfer your balance, then you will be able to:
    • Have a lower overall utilization, because you have new credit available (and of course you will not use it!)
    • Pay off your debt faster, because the interest rate is lower. At the end of 12 months, your score should be even higher than when you applied for the balance transfer or personal loan.

Quick Steps to Building and Keeping a Good Credit Score

  • Use your credit card every month, but keep your utilization well below 20%. In other words, never charge more than 20% of your available credit. You can reduce your utilization by (a) paying down your debt and (b) increasing the credit that you have available
  • Make your payments on time every month If you repeat these two things over time, you will eventually have a score above 700. However, if your score is below 700 and you want to improve it, you need to focus on:
  • Putting more positive information into the credit bureau
  • Getting your utilization below 20%
  • Dealing with the negative information

Download our Debt Free Forever Guide! It’s FREE and will help get you back on track.


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Pay Down My Debt

7 Ways to Control Your Spending and Expenses to Reduce Debt

Friday, January 30, 2015

Screen Shot 2015-02-03 at 1.30.44 PMDebt can invade your life in many different ways. It can sneak up on you: the result of spending $20 more than you can afford every day (which becomes more than $20,000 of debt in 3 years). It can appear all at once, after an emergency medical expense or a job loss. And it can surprise you in a terribly painful way, when you learn about a family member’s hidden, debt-fueled addiction.

If your expenses are more than your income, then you have an issue. Even if we find ways of getting your debt to cost less, you still need to fix the underlying issue. If you continue to spend more each month than you earn, your debt will continue to grow. So, you need to figure out how to:

  • Increase your recurring, regular monthly earnings and / or
  • Decrease your monthly expenses

Determining Where You Can Cut Expenses

Look through your list of everything else. Are there some obvious, painless things that you can cut? If at first you think now, try this exercise:

Fast forward to retirement. You are now 65 years old, and you have to choose a place to live. There are two options. You can buy the nice home on the beach in Florida, that is just seconds to the beach. Or, you can buy a studio apartment in a bad neighborhood with a view of the parking garage. How you spend everything else will determine where you live when you retire.

The more you save now, the more you have later. So, you just need to decide. You may not be willing to give up that daily $5 latte habit. Which turns into $1,825 a year and $54,750 over the course of 30 years before you want to retire. Just know that by having that daily $5 coffee fix, you are giving up a nicer place to live in retirement. Everything is a trade-off.

For some people, there just isn’t enough money, period. When you look through your “everything else” bucket of expenses, there aren’t many expenses, if any, that you can cut. If you cut expenses it means you don’t eat or you don’t travel to work. If that is the case, you have to find a way to increase your earnings or cut your fixed expenses. You should spend a decent amount of time looking to cut your fixed expenses.

How to Reduce Fixed Expenses


Can you refinance your mortgage? Take a look at PenFed, a credit union with very low interest rates, to see their current interest rates [click here]. As the time of this writing, a 30-year fixed mortgage at 0 points is 3.600%.

mortgage-penfedIt may be worth refinancing to reduce your monthly paying if your interest rate is a 4.600% or higher. In general, if your interest rate is a full 1% higher, it may make sense to refinance. If it is 2% higher, it almost definitely makes sense to refinance.

Warning: If you cannot afford your monthly mortgage payment, and you cannot increase your income, you may need to think about selling your home and finding a cheaper place to live. No one likes to admit defeat, but the longer you stay in a place you can’t afford, the more likely defeat becomes. Take a real long, hard look at the home and its maintenance costs. There should be no shame in moving to a cheaper location. Or, you move to a place with a lower cost of living where you can earn more. I have moved in order to make more money. Some people would rather stay put and cut their expenses. But you have to make a choice.


If you signed up for a lease that is just too expensive, there is good news. You have more flexibility than a homeowner. Find out what is required to break your lease, and start looking for something that you can afford. As a general rule, you should never be spending more than 30% of your take-home pay on rent. Ideally, you can spend even less. I don’t care what real estate agents or banks say you can afford. They are not thinking about your best interests; instead, they are thinking about their best interests. If your rent (or mortgage, for that matter) costs more than 30% of your net, take-home pay, you will likely find life difficult.


It is very difficult to get out of an automobile you can’t afford. Why? Because a car depreciates (usually by at least 30%) the minute you leave the car lot. If you financed the entire car, you can end up getting stuck in a car loan, and refinancing options are limited.

If you are upside down on your car (owe more than the car is worth), the only way out is to come up with the money to pay down the loan. Once your loan amount is just a bit below the possible sales price, you can sell and find a cheaper option. But, until then you can be stuck. That is a big warning: a high-pressure on a car lot can be a tremendous burden for years if you make the wrong decision.

If you have good credit and your loan balance is less than you car’s value, you can look to refinance. Credit unions have great deals in this space. If you don’t belong to a credit union, consider one of our favorites. They are easy to deal with, and they have incredibly low interest rates and none of the junk fees.

Auto Insurance

shop around and see if you can get cheaper car insurance. There are a lot of sites out there. We like TheZebra it can help you compare across lots of different companies.

Life Insurance

Too many people pay far too much money for insurance. If you are in a whole life insurance policy, you are almost certainly paying too much. The purpose of life insurance is to make sure that people who depend upon you can maintain their lifestyle if you die. Life insurance should not be a way to save for retirement, and it should not be a way to give your children an inheritance. That means term life insurance is almost always the best option.

Just as it sounds, term life insurance will only cover you for a specified period of time, whereas whole life covers you for your whole life (the name does make sense). So, in term life insurance, the insurance company may never pay a claim. In whole life, they definitely will pay a claim. As a result, term life insurance is much cheaper. You can speak with your local insurance agent to find a good term life policy.

Not convinced? Here’s an example:

Meet Bob. He is 35 years old and has a wife and two children. His wife left her job to be with the kids. So, there are three people who depend upon Bob. He wants to make sure that if he dies, his wife can stay in the house and take care of the kids. He makes $100,000. So, he buys a $1,000,000 30-year term life insurance policy (10x his income). If he dies before he is 65, his family will receive $1,000,000. At 65, the policy expires and he can get that policy for less than $100 per month. When Bob is 65, his kids are on their own and his retirement savings is available for retirement. By buying a term life policy instead of whole life, Bob is saving hundreds every month. 

How to Eliminate Needless Expenses

Recurring Expenses

It is so easy to sign up for something and forget about it. The first month (or year) is free, and then the bill starts. It gets charged to your credit card, and you don’t even mention it. Just cancel all of those recurring charges. You will be amazed at how quickly they add up.

If you don’t even know what you are paying, there is a really good tool called BillGuard. Just visit and it will look at your expenses to find recurring transactions. They can also help you cancel those transactions. It is worth taking a look.

Bank Accounts

People end up spending silly money on checking accounts, when they should be free. If you are spending monthly fees, overdraft fees or ATM fees, you should consider switching banks. At MagnifyMoney, we make it easy to find a checking account that is actually free. You can compare bank accounts by clicking here.


Address the Core Issue 

We had to spend a lot of time on the topic of spending money and budgeting. You just can’t spend more money than you make, because your debt will continue to increase. Any type of debt consolidation plan will not solve the core, underlying problem. I have seen far too many people move their debt from a high interest rate to a low interest rate, and think the problem has been solved. But, because their core-spending problem was not solved, they ended up in even more debt. Deal with your spending first, and then you can deal with your debt.

Download our Debt Free Forever Guide! It’s FREE and will help get you back on track.


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College Students and Recent Grads , Pay Down My Debt

19 Options to Refinance Student Loans – Get Your Lowest Rate

Friday, January 30, 2015

Mixed Race Young Female Agonizing Over Financial Calculations in Her Kitchen.

Updated: March 12, 2015

Are you tired of paying a high interest rate on your student loan debt? Are you looking for ways to refinance student loans at a lower interest rate, but don’t know where to turn?

There is good news: in recent years, the student loan refinancing market has started to come back. Not just with traditional banks, credit unions and finance companies, but even the addition of new businesses that specialize in refinancing student loan debt.

The loan approval rules vary by lender. However, all of the lenders will want:

  • Proof that you can afford your payments. That means you have a job with income that is sufficient to cover your student loan and all of your other expenses.
  • Proof that you are a responsible borrower, with a demonstrated record of on-time payments. For some lenders, that means that they use the traditional FICO, requiring a good score. For other lenders, they may just have some basic rules, like no missed payments, or a certain number of on-time payments required to prove that you are responsible.

If you are in financial difficulty and can’t afford your monthly payments, than a refinance is not the solution. Instead, you should look at options to avoid a default on student loan debt.

This is particularly important if you have Federal loans.

Don’t refinance Federal loans unless you are very comfortable with your ability to repay. Think hard about the chances you won’t be able to make payments for a few months. Once you refinance, you may lose flexible Federal payment options that can help you if you genuinely can’t afford the payments you have today. Check the Federal loan repayment estimator to make sure you see all the Federal options you have right now.

If you can afford your monthly payment, but you have been a sloppy payer, than you will likely need to demonstrate responsibility before applying for a refinance.

But, if you can afford your current monthly payment and have been responsible with those payments, then a refinance could be possible and help you pay the debt off sooner.

Is it worth it? 

Like any form of debt, your goal with a student loan should be to pay as low an interest rate as possible. Other than a mortgage, you will likely never have a debt as large as your student loan.

If you are able to reduce the interest rate by re-financing, then you should consider the transaction. However, make sure you include the following in any decision:

Is there an origination fee?

Many lenders have no fee, which is great news. If there is an origination fee, you need to make sure that it is worth paying. If you plan on paying off your loan very quickly, then you may not want to pay a fee. But, if you are going to be paying your loan for a long time, a fee may be worth paying.

Is the interest rate fixed or variable?

Variable interest rates will almost always be lower than fixed interest rates. But there is a reason: you end up taking all of the interest rate risk. We are currently at all-time low interest rates. So, we know that interest rates will go up, we just don’t know when.

This is a judgement call. Just remember, when rates go up, so do your payments. And, in a higher rate environment, you will not be able to refinance to a better option (because all rates will be going up).

We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period. If you think it will take you 20 years to pay off your loan, you don’t want to bet on the next 20 years of interest rates. But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk.

Places to Consider a Refinance

If you go to other sites they may claim to compare several student loan offers in one step. Just beware that they might only show you deals that pay them a referral fee, so you could miss out on lenders ready to give you better terms. Below is what we believe is the most comprehensive list of current student loan refinancing lenders.

You should take the time to shop around. FICO says there is little to no impact on your credit score for rate shopping as many providers as you’d like in a 30 day period. So set aside a day and apply to as many as you feel comfortable with to get a sense of who is ready to give you the best terms.

  • Alliant Credit Union: In order to qualify, you need to have a bachelor’s degree. The minimum credit score is 700, and you need two years of employment and a minimum income of $40,000. They offer variable interest rates, starting at 6%.
  • Cedar Education Lending: In order to qualify, you need to have graduated from an eligible school. They will look at your credit history, and you must have at least 12 months of demonstrated income. You or your cosigner must make at least $2,000 per month. Fixed rates start at 5.24% and variable rates start at LIBOR + 3.74%.
  • Charter One: (This company is owned by Citizens Bank) To get the best deal, you should have at least a bachelor’s degree. They will look at your credit history, and want to make sure that at least the last three payments on your student loans have been made on time. If you don’t have your degree, you need to have made the last 12 payments (principal and interest) on time. You must make at least $24,000 per year. They offer fixed rates starting at 4.74% and variable rates from 2.30%.
  • Citizens Bank: Under the Citizens brand, the qualification criteria and pricing is the same as Charter One (above).
  • CU Student Loans: You will need to have graduated from an eligible school in order to qualify. You need to make at least $2,000 per month, and they will review your credit history. Variable rates are available, starting at 3.72%
  • CommonBond: You need to have graduated from one of the graduate schools in their network, and have good credit history. Fixed and variable rates are available, with variable rates starting as low as 1.92% APR.
  • Credit Union Student Choice: This is a program offered by credit unions. The criteria vary by credit union, but you can easily find ways of joining the credit unions before finalizing the refinance.
  • Darien / Rowayton: They will refinance undergraduate, Parent PLUS and graduate loans including MBA, Law, Medical/Dental (Post Residency), Physician Assistant, Advanced Degree Nursing, Anesthetist, Pharmacist, Engineering, Computer Science and more degrees. Variable rates as low as 1.92% with a rate cap and 3.50% fixed.
  • Earnest. They will look at alternative criteria to try and approve you for a lower rate, like your employment history or bank account balances. Variable rates as low as 1.92%.
  • EdVest: They offer refinancing options for private loans used to finance attendance at a Title IV, degree-granting institution. If the loan balance is below $100,000 you need to make at least $30,000 a year. If your balance is above $100,000 you need to make at least $50,000. Fixed rates are available to residents of New Hampshire, and variable rates are available to everyone else – starting at 3.82%.
  • Education Success Loans: You must be out of school for at least 30 months, and you must have a degree. You also need a good credit score, with on-time payment behavior. Variable and fixed loan options are available, with rates starting at 4.99%.
  • Eastman Credit Union: They don’t share much of their criteria publicly. Fixed rates start at 6.5%.
  • IHelp: You need to have 2 years of good credit history, with a DTI (debt-to-income) of less than 45% and annual income of at least $24,000. Fixed rates are available, starting at 6.22%.
  • Mayo Employees Credit Union: You need at least $2,000 of monthly income and a good credit history. Variable rates are available, starting at 4.75%.
  • RISLA: You need at least a 680 credit score, and can find fixed interest rates starting at 3.99%.
  • SoFi: You must have a bachelor’s or graduate degree in order to apply, and you must have demonstrated on-time payment behavior. Both fixed and variable rates are available, with rates starting at 1.92% and fixed rates starting at 3.5%.
  • Upstart: You need to have a degree (or be graduating within 6 months). A minimum FICO of 640 is required. Fixed interest rates starting at 6.68%. The maximum loan is $25,000 and durations are shorter – this is more of a traditional personal loan than a long term student loan refinance.
  • UW Credit Union: $25,000 minimum income required, with at least 5 years of credit history and a good repayment record. Fixed and variable interest rates are available, with variable rates starting at 3.48% and fixed rates starting at 7.49%.
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 3.49% and fixed rates starting at 6.74%.

Don’t forget to follow us on Twitter @Magnify_Money and on Facebook.

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College Students and Recent Grads , Pay Down My Debt

It’s Possible to Pay Back Student Loans on a Low Salary

Monday, January 19, 2015

Depressed man slumped on the desk with his hands holding credit card and currency

Many recent college graduates are facing enormous student loan debt, and a salary that can barely begin to chip away at paying it all down. While great options to refinance are surfacing, sometimes all it takes is a bit of determination and prioritizing.

This isn’t just wishful thinking. Since graduating college in January 2012, I’ve prioritized paying off my student loans on a low salary, while still being content with my lifestyle and eating more than instant ramen. In fact, I’ve even squeezed in some extra payments out of my meager income.

Student loans are the only type of debt I have, so I’m able to focus on it 100%. These strategies might not work for everyone as we are all in different situations, but I hope you can learn something from my experience.

Debt is NOT Normal

The first step in paying back my student loans was realizing that student loan debt isn’t necessarily normal.

This realization didn’t hit me until about a year after I graduated, mostly because many of my friends and coworkers had student loan debt. It’s almost rare to meet someone who had the luxury of a debt-free college education.

As a result, I thought along the same lines as everyone else – student loan debt is normal, what’s the rush in paying it back?

It wasn’t until I was out on a walk one night that I had an epiphany. I would be spending the next 10 years of my life with this cloud of debt hanging over me. Ten years. That seemed like an awful long time, and my student loan payments were already holding me back in many ways.

When I returned from my walk, I calculated the total amount my loans would cost if I kept paying the minimum amount due. I couldn’t believe how much interest I was going to end up paying – $5,500! If I paid an extra $60 per month, I could shave $1,649 off of that.

I started searching for information on accelerating student loan payments, and stumbled across a few fantastic blogs where others were sharing their stories. Inspired, I decided I wanted to get rid of my student loan debt as soon as possible, and would pay extra on them every month until they were gone.

Lessons Learned: Student loan debt shouldn’t be dragged out. The longer you take to pay back your loans, the more you’ll end up paying, as interest is working against you. Pay more than the minimum amount owed whenever possible – even if it’s just a few more dollars. It’s important to get into the habit of paying more.

Adjust Your Lifestyle

When I graduated from college, the first job I had paid $12 an hour. Not the most amazing salary, but we all know how that story goes. It was a salaried position, meaning I had no opportunity for overtime.

Thankfully, I had the foresight to be somewhat smart about my college expenses, and in the end, I amassed $18,000 of student loan debt, with a minimum payment of $200 per month. That’s peanuts compared to the six-figures some have to face, but it still felt like a heavy burden on a smaller salary.

What did I do to afford making extra payments? I simply continued living frugally after graduating. “Keep living like a broke college student” is good advice. It might not be glamorous, but I preferred being able to save money every month.

I was also extremely thankful that my parents only wanted $100 a month for rent, and for the most part, I was able to keep my expenses extremely low.

I was mindful of any spending I did – I went through every transaction and asked myself if a purchase was necessary. I waited days, if not weeks, on making bigger purchases. Instant gratification wasn’t in my vocabulary.

I grew up knowing that money is precious and shouldn’t be spent frivolously. That mentality greatly helped me keep my spending in control. Realize that whenever you spend on something else, you’re distancing yourself from getting rid of your loans.

Lessons Learned: Keep your expenses low whenever possible. Choose the cheapest living situation you can safely live in, as rent is often one of the biggest expenses we face after graduating. Live frugally and question the necessity of your expenses.

Ruthlessly Prioritize Your Student Loans

I wanted to maximize my spending to be sure I was only purchasing things that truly mattered to me. By making my student loans a priority, everything else took a backseat, and I was forced to take a critical look at how much I was spending elsewhere.

I had been paying $92 a month for my cellphone. When I realized that amounted to $1,100 a year, I switched to a $25 a month plan with Republic Wireless. My phone was not worth that much to me. I wanted my debt to be gone worse than I wanted my iPhone. I ended up getting a Moto X, and it works perfectly fine.

I relocated to city with a lower cost of living area with my fiancé with the hope that our expenses would be even less than they were before. We saw a dramatic decrease in rent, car insurance, and gas.

Any time I go grocery shopping, I bring a list. I leaf through circulars for sales and I know the best prices for the items I routinely buy. I also know the difference between a “sale” and a good deal. This helps keep our food budget low.

As for hobbies, mine are simple. I enjoy reading, writing, and spending time with family and friends by playing board games or enjoying a home-cooked meal with them. There is tons of free entertainment around if you just look for it.

The important thing to note is that none of this feels like a sacrifice. I know my efforts have helped me save and pay down my student loan debt, and I never worry or stress about making payments. To me, that beats living paycheck-to-paycheck, constantly concerned with where I’m going to get the money to pay my bills.

While my student loan debt is on the lower end, my fiancé graduated with about $30,000 in student loans. He was still working a $9 an hour retail job when his grace period ended.

He made his payments work by taking the same actions I did. Our support system for each other helped keep us motivated. Anyway taking action to quickly pay down student loans should find a buddy or support system because your peers won’t always bee encouraging. It’s hard to stay focused when your friends want you to hang out at the bar every night, or go shopping, and don’t understand why you decline.

Choosing to pay off your student loan debt early can make you the odd one out, but I’d argue it’s worth being out of the red early on in life. Make sure the company you keep is supportive of your efforts.

Lastly, my fiancé and I both eventually received raises. Instead of succumbing to lifestyle inflation, we were excited to increase our student loan payments. We took advantage of working overtime, and any extra money goes straight toward our debt. That’s the power of prioritizing.

Lessons Learned: Time to get serious. How much do you want your student loan debt gone? If you truly want to become debt free, you’ll ruthlessly prioritize your loans so your financial decisions are based around your goal.

Have a Positive Attitude

The right attitude and mentality goes a long way with paying off debt. I don’t view my college education as a mistake. I know it can be difficult not to, especially when you graduate with a degree you’re not using the way you expected to, but there’s no sense in dwelling on the past.

Having a bad attitude can be dangerous: I’ve seen friends flat out ignore their student loan debt situation. They think if they stop paying, it will magically go away. This is not the case! Turn your unhappiness or dissatisfaction into motivation to rid yourself of the debt. Don’t ignore it, as that solves nothing.

Lessons Learned: There’s nothing to be gained from having a pessimistic outlook on your debt. Figure out what you can do today to ease the burden instead.

Alternative Solutions

As I mentioned in the beginning, refinancing options for student loans are on the rise, and there are other income-based repayment options available. If you find you truly can’t afford to pay back your student loans, there’s no shame in considering these options.

Be aware that some of them will extend the term of your loans, meaning you’ll be paying longer than 10 years, and subsequently, paying more overall.

I also need to mention the importance of earning more. Just because your primary job doesn’t pay well, doesn’t mean you have to be stuck with just that income. You can add onto your primary income in the form of a part-time job or online gig. Lots of millennials are freelancing on the side as a way to earn more, and if you find that easier than living on less, go for it!

Paying Off Student Loans on a Lower Salary is Possible

Overall, having a lower salary helped me to stay frugal after college. Even though student loan debt is still a thorn in my side, I’m grateful for the discipline and financial lessons that it has taught me. I don’t think I’d be managing my money as effectively if I had graduated debt free.

If you optimize your finances and ruthlessly prioritize paying off your student loans, you can succeed, even on a lower salary. Do what you can to better your financial situation, and remember that paying off your student loan debt will make a huge difference in your budget down the road.

Share your student loan struggles and questions with us on Twitter @Magnify_Money or via email ( 

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Pay Down My Debt , Strategies to Save

The Secret to Setting Financial Goals You’ll Actually Keep

Thursday, January 15, 2015

Geeting advice on future investments

With the start of a new year comes an intense focus on setting goals and resolutions. Everyone wants to kick things off with big ideas and dreams on how they’ll make this year their best year yet, or improve their lives in ways they’ve never been able to before.

There’s nothing wrong with setting big goals and going after them. Goals keep you on track and can help hold you accountable as you work on your personal finances. And there’s lots of advice out there that can help you set smart ones for your money: goals that are specific, measurable, actionable, realistic, and time-bound.

The Problem with Most Money Goals

But even the “smartest” goals can set you up for failure. Money experts and gurus may pen articles about what you should do or spew long monologues on their shows, but following their advice blindly can lead you absolutely nowhere. Their advice can helpful for generating ideas, but randomly selecting a goal off the list is a good way to ensure it’s forgotten before the end of February.

The problem with many financial goals is a lack of personalization. People hear an expert say to contribute to an emergency fund or dig out of debt quickly or contribute to an HAS/IRA/401(k) – but if the goal isn’t linked to a personal aspiration (like retiring at 45) or goal (taking an annual family trip abroad) it’s much easier to give up a few weeks or months in.

Choosing a milestone to reach that someone else set might mean you’re left with one that doesn’t mean much to you.

The Real Secret to Financial Goals That Stick 

If you want to actually keep your financial goals in 2015, you need to create ones that you care about. You need to understand why you’re working so hard over time to achieve a specific action.

Because that’s what makes the financial resolutions you set difficult to keep: they require lots of hard work over time, and you won’t see progress immediately. Many small actions over a long period of time are what get results, but it’s hard to stick it out when you can’t see the immediate payoff.

The real secret to financial goals that stick is determining what matters to you, and understanding why the continued work is worth it.

Figure out what your motivation is. Maybe you’re tired of paying $500 per month to various debts and you’re ready to use that money to save for your dream trip around the world. Repaying all your debt is the goal. The ability to travel is your motivation.

Or perhaps you want to reach financial independence at a certain age. Investing 50% or more of your income each month might be your goal. The motivation is knowing that you’ll be free from the obligation of earning a paycheck by age 35 or 40.

Don’t worry about what’s popular or what other people believe is a good goal. Only you can determine what financial goals you should work on, because only you know why you’re striving to achieve them.

Determine why. Discover your motivation. Use both to fuel you forward so you can actually keep your resolutions this year.

[Trying to eliminate debt in 2015? Then download our free debt guide!]


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Strategies for Maintaining Motivation 

If understanding your unique motivations is the secret to successful goal-setting for a financially better 2015, you also need to understand how to maintain that valuable motivation. And it’s not easy.

As Zig Ziglar said, “People often say that motivation doesn’t last. Well, neither does bathing – that’s why we recommend it daily.”

That’s what it takes to stay on track. You need to motivate yourself on a regular basis so you can keep the drive to take those thousands upon thousands of baby steps that will get you to financial success.

Here are some ideas to try:

Write It Down: Don’t just write down what it is you’re working to, but write down your “whys,” too. List the reasons that you’re taking action to make progress with your finances. Then place this list in a place where you can see it every day.

Try a Vision Board: You can also express your motivations by making them visual. If you want to take a trip, print out photos of the places you want to see for yourself. If you’re saving for a down payment on your dream home, draw the home you’d love to purchase. Get creative and express yourself freely.

Appreciate Every Step: Your motivation will be easier to maintain if you break your goal down into bite-sized pieces and enjoy each part of the process. Don’t forget to celebrate your progress and reward small victories along the way.

Don’t Fear Failure: If things don’t go according to plan, remember that there’s always a Plan B, and Plan C, and Plan D…. Failing once is not the end of the line, and you can’t fear mistakes or missteps. It’s okay if you get off track or if you mess up somewhere along the line. What’s important is that you learn to view these failures as learning experiences, and get right back to your goal as soon as possible.

Practice Positive Thinking: It may sound “new age”, but it does work. Positive thinking helps keep you open for new ideas, opportunities, and solutions. Motivation takes enough work to maintain on its own. Don’t make the process harder on yourself by allowing negative thoughts to distract you from what you’re trying to achieve.

Good luck on your New Year’s resolutions and don’t be afraid to reach out to the MagnifyMoney team for help. Find us on Twitter @Magnify_Money or via email (



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College Students and Recent Grads , Pay Down My Debt

You Need to Understand How Interest Impacts Your Student Loan Payments

Tuesday, January 13, 2015

mortar board cash

If you’re a recent college graduate who has never had any debt besides the student loans you graduated with, you might not fully understand how interest works when it comes to your loans.

How payments are applied can be a little confusing to someone who has never had to deal with it before.

If that’s the case for you, then you should read on, as we’re looking at how payments go toward the interest of your loans first, and explaining how you can reduce the interest you’re paying on your student loans.

This information can save you thousands of dollars over the life of your loan if you apply it correctly.

How Are Payments Applied to my Loans?

For most student loans, your payment is going to be applied to interest first, and then to principal. If you have any fees associated with your loans (such as a late fee), then your payment will go toward paying your fees first, then interest, and then principal.

If you’re repaying your loans under an Income-Based Repayment Plan, then your payment will be applied to interest first, then fees, and then the principal.

How Is Interest Calculated?

Interest accrues daily on your student loans, so if you check on your balance a few times throughout the week, you’ll see the amount owed increasing. Student loans use a formula of simplified daily interest, which means interest is only accrued on the principal balance.

Let’s take a look at this in action using an example. Feel free to follow along by plugging in your specific loan numbers.

This is the example we’ll be using: student loan balance of $8,000 at a 6% interest rate on a 10-year term, with a minimum payment of $88.82.

Forumla 1

To calculate your daily interest amount, use this formula: (Current Principal Balance x Interest Rate) / 365.25

Using our example: (8,000 x .06) / 365.25 = $1.314168377823409 in interest accrues daily.

Forumla 2

If you want the monthly interest amount, use this formula: (Daily Interest Amount x Number of Days in Month)

Using our example: $1.3141 x 30 = $39.42 in interest accrues monthly.

Forumla 3

Some student loan providers use the “interest rate factor” instead, which is essentially the same thing – the amount of interest that accrues on your loan.

To calculate the interest rate factor, divide the interest rate of your loan by 365.25.

Using our example: .06 / 365.25 = .0001642710472279261.

The formula for the monthly interest rate using the interest rate factor will yield the same results – (Number of Days Since Last Payment) x (Principal Outstanding Balance) x (Interest Rate Factor).

Using our example: 30 x 8,000 x .0001642710472279261= $39.42 in interest accruing monthly.


What you should take away from this is that of your $88.82 monthly payment, $39.42 is going toward interest. Ouch!

[Read more about how to handle student loans here.]

What Can I Do To Lower How Much Interest I’m Paying?

Seeing how much of your payments go toward interest can be painful. By paying extra toward your student loans, you can accelerate your debt payoff date and pay less overall.

This is because every time you make a payment over the minimum amount due, more of your payment is applied toward the principal balance. Remember, when the principal balance goes down, the amount of interest accrued does as well.

We know that a 6% interest rate on our $8,000 loan means $39.42 of interest accrues monthly. However, 6% interest on a $6,000 loan is $29.57. It makes quite a difference!

Let’s take our original example from above. If you simply pay $88.82 for the entire 10 years, you’ll have your loan paid off on time, but you’ll actually end up paying $10,657.97. That’s $2,657.97 more than you signed up for, due to interest!

If you add just $100 more onto your monthly payment so that you’re paying $188.82/month, your loan will be paid off in 4 years, and you’ll have saved $1,619 off your total bill (paying a total of $9,038.97).

Alternatively, if you can’t afford to pay more in one chunk, you can make extra payments when possible, such as paying $20/week, every week, toward your loans.

What Does It Mean When Interest Capitalizes?

It’s important to know what this term means – this is something you only have to be concerned about once, and only if you have unsubsidized loans.

Let’s quickly cover the difference between federally subsidized loans and unsubsidized loans. With federally subsidized loans, the government pays the interest for you while you’re in college. With federally unsubsidized loans, the interest starts accruing as soon as the loan is disbursed to you.

If you don’t make any payments to your unsubsidized loan while you’re in college, then all of the interest accrued while you attended will capitalize when your loan enters repayment status (right after your grace period ends).

If you’re still in college, it’s recommended that you at least try to cover the monthly interest payments while in school. It will save you more money down the road! If you’re in your grace period, there’s no harm in starting to pay early. Take advantage of being able to pay down your interest while you can.

Look At Your Payment Schedule

Most student loan servicers provide you with a payment schedule so that you can see how your loan will be paid off. This might help you visualize and understand exactly where your payments are going.

If you don’t see an option for this, try using a loan calculator.

Continue Paying, Even If You’re Paid Ahead

If you do start paying extra toward your student loans, you might notice that the status of your loans says “paid ahead”.

While that means you’re making great progress, it doesn’t mean you need to stop paying your loans. Interest is still accruing! If you take a break and don’t pay, your hard work will be eaten away by interest.

Read the Fine Print

When it comes to paying any loan back, you should be fully aware of the terms of the loan and how it functions. You’re responsible for paying your loans back according to the terms you agreed to.

It’s extremely important to know how your payments are being applied to your student loans. If you have a different type of student loan and aren’t sure how interest is being calculated (or how your payments are being applied) then call your student loan servicer. Many of them have helpful resources on their website that will help you understand how payments are applied, but it’s always worth giving them a call for clarification.

If you only take away two points, let it be these: when you make a payment toward your student loans, your money is going toward the interest on your loan first, and then on the principal. To reduce the amount of interest you pay over the life of your loan, make extra payments when possible.

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Pay Down My Debt

MagnifyMoney Launches Get Debt Free Campaign

Monday, January 12, 2015

Screen Shot 2015-02-03 at 1.30.44 PMDigging out of debt and getting a better grasp on finances is the second most common New Year’s resolution – coming in behind weight loss. Last week, MagnifyMoney launched our #getdebtfree campaign to help Americans drop their debt in 2015. To kick off our campaign, we debuted a free guide to becoming debt free forever.

Our 45-page guide offers information about:

  • How to slash your interest rates
  • How to boost your credit score
  • How to negotiate hard with creditors
  • How to become debt-free fast and forever
  • And simple, step-by-step instructions

We know digging out of debt can feel overwhelming and our guide can serve as a blue print to get the process started and help people keep their resolutions longer than the third week of January.

Download the free debt free forever guide here

In addition to launching our guide, co-founder Nick Clements took to the airwaves to share get debt free strategies. His segments are currently airing on local TV and radio stations around the country. If you’re struggling to get debt free, be sure to take five minutes to watch a segment and download the debt free guide.

On air photo

Don’t forget to share your #getdebtfree journey with us on Twitter @Magnify_Money and email to set up a free, 30 minute consultation to discuss how to reach your financial goals.



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Pay Down My Debt

Americans with Holiday Debt Added $986 on Average

Friday, January 9, 2015

Young couple calculating their domestic bills

The holidays over, and we are back to work.

But for many of us, the holidays linger in fresh debt that paid for holiday gifts and celebrations, with bills that will start hitting mailboxes in the coming weeks.

MagnifyMoney surveyed a national sample of 403 Americans who reported they added debt during the holidays via Survata and found:

Americans with holiday debt added $986 in debt on average.

Between gifts, hosting parties, family emergencies, and for some, fewer work hours, it’s easy for debt to add up if you don’t have savings on hand. While the $986 those surveyed added to their debt on average is a manageable amount, it can easily snowball.

At a 15% rate on a credit card making just the minimum $25 payment it would take 10 years to pay off, including nearly $400 in interest paid, almost doubling the cost of the holidays.

44% of debt holders report they are stressed out about it.


Credit cards were the most common form of debt.

52% of debt holders used a bank or credit union credit card to finance their holiday debt, while another 30% used store cards to finance, which often carry rates of 20% or more. 8% took a specific personal loan, which could yield a lower rate, while 6% relied on the worst of all – payday and title loans. Less than 5% used home equity lines of credit to finance purchases.

The payoff may take until next Christmas and beyond

Less than half of those surveyed think they can pay off their holiday debt in less than 5 months. 55% plan to take more than 5 months or just make the minimum payments,  which could extend the debt to 10 years or more.


Rates being paid are high

One third of respondents say they’re paying a rate of over 10% on their debt, with 20% of them paying more than 15%. And 14% of respondents don’t even know what rate they’re paying.

But most won’t bother to get a lower rate

Despite over half expecting to take 5 months or more to pay off the debt, just 22% plan to shop around to find a better rate with a different bank or loan.

Yet, 47% report a good credit score above 650 that may qualify for better rates than most existing credit cards and store cards offer.

The most cited reason for not wanting to shop around is not wanting to deal with another bank, noted by 28% of respondents.

A consumer with $1,000 in debt at a 15% rate making minimum payments would shave over a year off debt repayment by taking advantage of the longest 0% balance transfer deal on the market and save over $300 in interest payments.

What can be done?

MagnifyMoney has prepared a free 45 page Debt Free Forever Guide that you can download to prepare your action plan, tailored to whether your situation needs a quick transfer, or more significant repair and dealing with collections.

You’ll learn no-nonsense ways to get your rate lower, negotiate hard with creditors, and tackle your budget to find the fastest way to get debt free.

Survey results

Average new holiday debt   $986

Holiday debt funded by a….  

  • Credit card       52%
  • Store card        30%
  • Personal loan   8%
  • Payday / title loan  6%
  • Home equity    4%


When will you pay the debt off?        

  • 1 month           15%
  • 2 months         11%
  • 3 months         12%
  • 4 months         6%
  • 5 months+       28%
  • Only making minimum payments        27%

What is your credit score?      

  • Above 700       27%
  • 650-700           20%
  • 550-649           20%
  • Below 550       10%
  • Don’t know      25%

Will you shop around for a better rate with a different bank or loan? 

  • Yes      22%
  • No- Don’t want to deal with another bank       28%
  • No – Too many traps   17%
  • No – Rate is already low          10%
  • No – Don’t know enough about it        10%
  • No – Wouldn’t qualify 14%

How stressed are you about your holiday debt?        

  • Not stressed    56%
  • Stressed           44%

What rate are you paying on your debt?        

  • Less than 5%   35%
  • 5-9%   18%
  • 10-14%           13%
  • 15-19%           11%
  • 20% or more   9%
  • Don’t know      14%


MagnifyMoney surveyed 403 Americans who answered yes to the screening question “Did you add debt for holiday spending this year?”

The survey was conducted online January 2 – 4 2015 via Survata, using a nationally representative sample age 25-65.



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Pay Down My Debt , Strategies to Save

Get Yourself Financially Healthy in 2015

Tuesday, January 6, 2015

sick credit

Less than a week into the new year and undoubtedly people are already starting to falter on their resolutions. After three days of going to the gym, one day off turns into the rest of the year. Expensive software for learning a second language is already starting to see a fine layer of dust on top. And those who vowed to take control of their financial lives may have already stopped tracking their spending and slipped back into old habits.

It’s natural. New Year’s resolutions are made with gusto after a few flutes of champagne and the promise of a fresh slate in a yew year. But resolutions made without a plan will quickly be replaced by same old habits.

This year, we’d like to help you get on track financially. If the 2015 wants to get rid of credit card debt, get student loans under control, figure out how to harness credit card rewards, earn more interest on your savings, reduce bank fees, then we can help.

MagnifyMoney offers a variety of tools and calculators to help you find the answers to your questions, and we also use this blog expand on topics and offer you actionable advice.

Here are some articles to help you get started on the road to financial health:

Let us know your questions by Tweeting us @Magnify_Money or emailing us at



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Pay Down My Debt , Strategies to Save

Finally, The Actual Amount You Should Save For a Baby

Wednesday, December 31, 2014


When my husband and I decided to start a family, I approached the process like I do everything in my life, with careful planning and research. If I was going to bring a child into this world, I wanted to be prepared. I wanted to have a savings account in place, and I wanted to make sure not to go back into credit card debt after successfully pulling myself out of it.

The problem was that every time I asked someone how much money I should save for a baby, everyone had a different answer. Not only did they have different answers, their answers were on opposite ends of the spectrum.

The personal finance community had post after post about how children don’t need to cost that much money. To many of them, the idea of spending $245,000 raising one was preposterous. My mom told me you could never have enough money so don’t worry about an actual number. Many of my friends just seemed to wing it or put their expenses on a credit card to worry about later.

So, since no one seemed to be able to give me a number, I set out to find the number on my own.

Health Insurance

This was the most important cost that I considered, and it’s one I urge all potential new parents to carefully research. Adding our children to our health insurance plan cost an additional $2,000 per year, and the out of pocket max for our health insurance was $4,000.

I ended up being pregnant with multiples, which required far more exams, ultrasounds, and tests than the average single pregnancy. Not only did we hit our out of pocket max of $4,000 in addition to the $2,000 to add them to our policy, but we had countless other extra expenses related to their health in terms of prescriptions, gripe water, baby Tylenol and other various products that parents purchase to try to make their baby stop crying or feel better in general.

If parents want to prepare fully in this department, I would recommend having your health insurance deductible and out of pocket max ready to use in a savings account. If that is not possible try to save as much as you comfortably can.

In general, based on my own experience and that of friends and family, having $5,000 saved to prepare you for any and all possible medical issues as well as to pay to add your child to your health insurance policy would be a good start and would make you feel safe and prepared. Feel free to adjust this number up or down depending on your own situation.

The Nursery, Clothing, and Other Gear

Someone will likely throw you a baby shower for your first baby. At this baby shower, you will likely get most of the clothing, car seats, high chairs, and nursery items that you need. We went to IKEA and purchased about $400 worth of items, like bookshelves and picture frames to decorate the nursery. Some people can spend $1,000 on a designer crib, but we were cost conscious. I found my changing table for free on Craigslist, and our cribs were from Wal-Mart. I purchased most of their clothes second hand or at outlets for about $100, and they went through them faster than you can imagine.

Obviously you can spend as much or as little as you like here, but brand new babies really do not need that much. Most people don’t even put their babies in a crib until a few months in (even though we put ours in their cribs from day one.) Instead, they buy a bassinet and place it next to their beds. If you can let go of the idea of having the perfect designer nursery, you can really save.

Again, this is one category that is very flexible, but having $500 to take care of items in their nursery, clothes for their first few months, and items you did not get at your showers should be adequate if you save, get creative and accept hand-me-downs.

Diaper Gear

We opted to use cloth diapers, which will save us $2,000 with our twins. However, that’s a personal choice and again, most people will use disposable diapers. Sure, you’re going to get lots of diapers as gifts, and maybe your family members will buy them for you. However, if you want to save money for this just in case, you should also include the cost for wipes and various medicines and diaper creams to fight diaper rash if your baby gets it. Lots of people use coupons and score awesome deals to get diapers on sale so if you use some coupons and then factor in last minute exhausted runs to the store to buy them full price, $30 a month or $360 for the year is a good estimate for one baby.

Feeding Your Baby

Many people like to say that breastfeeding is free, but there are costs associated with it. I used Target gift cards I got from my shower to buy maternity tanks, maternity bras, creams, etc. to help make the process easier. I also bought a pump and storage containers for breast milk. Some people choose not to pump at all but I had to since my twins were in the NICU for two weeks unable to breastfeed. Again, you won’t know about these potential issues until they happen, so it’s important to save for them.

If your baby has trouble breastfeeding or you need to supplement or just want to feed them formula from the start, that’s a cost to factor in too. Some babies end up having health issues or milk allergies that require specialty and very expensive formula. Some health insurance plans cover this and some don’t. Again, you won’t know what your baby is going to do or how they will respond to milk or formula until you try it. I advise saving $1,000 for costs associated with the early days of feeing your baby, which would give you a great head start if you decide to formula feed and would be a cushion if you decide to breastfeed.

Child Care/Household Help

This is one category most people consider when they want to have a baby. Do an estimate of childcare in your part of the country and put it into a baby cost calculator to get the best idea of how much it will affect your budget. Consider that during the first few weeks, you’re going to be a walking zombie so it would be nice to have someone to take care of your dog, clean your house, or play with your older kids if you have them. This is going to vary for everyone but I would advise stay at home moms to still have someone in mind to come watch their baby if they need a break, even if it’s for two hours in the afternoon. Some people have family who will help them for free, and some people live across the country from their families like I do. Again, $1,000 in childcare savings to start would cover the first month or two of full time day care or a few months of part time care to help give you a cushion and ease your transition into parenthood.

The Grand Total

If you add up all of these categories, you get a good, safe number to save for a baby. Keep in mind this will not cover all of your expenses for the first year. This is just to help you get what you need and some of what you want before they arrive. This is also to help you with some of your childcare and medical bills so that the numbers aren’t so shocking when you encounter them.

Sure, you could always save more to feel comfortable and you could always save less and get by. However, just saving something especially if it’s the amount below will allow you to feel safe and ready to bring a child into this world. It will also help get you through the first few months, which are truly the toughest.

  • Healthcare: $5,000
  • The Nursery and Baby Gear: $500
  • Diaper Gear: $360
  • Feeding Your Baby: $1,000
  • Childcare and Other Help: $1,000

Grand Total = $7,860

We personally saved $10,000 for our twins, and I can tell you we used every single penny of it and more thus far in the first nine months of their lives. We’ve been as frugal as possible and we’ve saved ahead of time for the big items, but we definitely believe that children are expensive and that everyone should save money to be prepared to take care of them.

Don’t forget to follow us on Twitter @Magnify_Money and on Facebook.

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College Students and Recent Grads , Pay Down My Debt

Sample Goodwill Letter to Remove a Late Student Loan Payment from Your Credit Report

Monday, December 15, 2014

Businessman Holding Document At Desk

If you’ve pulled your credit report recently and discovered that there’s been a late payment reported concerning your student loans, you might be wondering what you can do to recover.

Late payments can be damaging to your credit, especially if you stop paying your loans for an extended period of time. We’ve already gone over the repercussions of delinquency and defaulting, but today, we’re going to take a look at another method of repairing your credit report.

What is a Goodwill Letter?

A “goodwill letter” is a simple way to repair your credit report and it can be used for both federal and private loans. The purpose of a goodwill letter is to restore your credit to good standing by having a lender or servicer erase a lateness on your credit report.

Typically, those that have experienced financial hardship due to unexpected circumstances have the most success with goodwill letters. They allow you to take responsibility for your actions and to ask (in a very nice way) if your student loan servicer can empathize with the situation that caused the lateness, and erase it from your report.

It can also be used when you think the late payment is an error – for example, if you were in deferment or forbearance during the time of the late payment, and weren’t required to make any payments during that time, or if you know you’ve never been late on a payment before.

What Makes a Convincing Goodwill Letter?

If you’ve been looking for a goodwill letter that will actually work, we have some tips on what you should include in your letter.

  1. An appreciative tone

It’s important that the entire tone of your letter read as thankful and conscientious. If you were actually late on your payments due to extenuating circumstances, you shouldn’t take an angry tone in your letter, since you were in the wrong.

  1. Take responsibility

You want to be convincing and honest. Take responsibility for the late payment, and explain why it happened. They need to be able to sympathize with you. Saying you just forgot isn’t going to win you any points.

  1. A good recent payment history

Besides sympathy, you want to gain their trust as far as continuing to make payments goes. If your lender sees payments being made on time before and after the period of financial hardship, they might be more willing to give you a break. When you have a pattern of late payments, it’s more difficult to convince them that you’re taking this seriously.

  1. Proof of any errors and relevant documents

If you’re writing about a mistake that occurred, still be friendly in tone, but back up the errors with documentation. You’ll need proof that what you’re saying is true. Unfortunately, errors are often made on credit reports, and it may have been a clerical error on behalf of your servicer. If you have any written correspondence with them, you’ll want to include it.

  1. Simple and to the point

The last thing to keep in mind is to craft a short and simple letter. Get straight to the point while telling your story. The people reviewing your letter don’t want to read an essay, and the easier you make their lives, the better.

A Sample Goodwill Letter

Below is a sample Goodwill Letter template for student loans:

To Whom It May Concern,

Thank you for taking the time out of your day to read this letter. I just pulled my credit report, and discovered that a late payment was reported on [date] for my account [loan account number].

During that time, my mother fell terminally ill, and I was the only one left to care for her. As such, I had to leave my job, and my savings went toward her healthcare expenses. I fell on very rough times after she passed away, and was unable to make my student loan payments.

I realize I made a mistake in falling behind, but up until that point, my payment history with you had been spotless. When I was able to gain employment once again, I quickly resumed paying my student loans, making them a priority.

I’m not proud of this black mark on my record, but it’s the only one I have, and I would be extremely grateful if you could honor this request to remove the lateness from my credit report. It would help me immensely in securing other lines of credit so that I can further improve my credit score.

If the lateness cannot be removed entirely, I would still be appreciative if you could make a goodwill adjustment.

Thank You.

If you’re writing a letter because the lateness on your credit report is inaccurate, then try this letter:

To Whom It May Concern,

Thank you for taking the time to read this letter. I recently pulled my credit report and found that [Loan servicer] reported a late payment regarding my account [loan account number].

I am requesting that this late payment be assessed for accuracy.

I believe this reporting is incorrect because [list the supporting facts you have]. I have included the documentation to prove that I made payments during this time / that my loans were in forbearance/deferment and didn’t require any payments.

Please investigate this matter, and if it is found to be inaccurate, remove the lateness from my credit report.

Thank You.

Make sure you delete the scenarios that don’t apply to you; you want to provide as many personal details as possible. You should also include your name, address, and phone number at the top of the letter, in case your loan servicer needs to reach you immediately.

Where to Send Your Goodwill Letter

Now that your letter is written, you have to send it! This can be done either by fax or by mail. Most student loan servicers have their contact information on their website, but you can also look on your billing statements to see if they specify a different address.

Additionally, you can try calling the credit bureau the lateness was reported to, and see if they can give you the contact information you need.

It’s important to mention that goodwill letters are not a means to immediate success. It often takes several attempts to correspond with servicers and lenders to get them to acknowledge that they received a letter from you.

Your best bet is to get a personal contact at the company that has the power to erase the late payment from your credit report.

If all else fails, try as many different communication methods as possible. Call, mail, fax, live chat (if your servicer offers it), and email them. Several people who have tried this method report that it’s possible to wear your servicer down with a decent amount of requests.

Addresses and Fax Numbers to Try

These addresses and fax numbers were found on the servicer websites directly. Again, it’s worth it to try and call your servicer to get the name of someone there that can help you.


Documents related to deferment, forbearance, repayment plans, or enrollment status changes:

Attn: Enrollment Processing

P.O. Box 82565

Lincoln, NE 68501-2565

Fax: 866-545-9196

My Great Lakes

Great Lakes

P.O. Box 7860

Madison, WI 53707-7860

Fax: 800-375-5288

Sallie Mae

Correspondence Address

Sallie Mae

P.O. Box 3319

Wilmington, DE 19804-4319

Fax: 855-756-0011

Documents to Include With Goodwill Letter

Don’t let your efforts go to waste by forgetting to include documentation with your letter. Here’s a quick checklist of what you should include:

  • The account number for your loan
  • Your name, address, phone number, and email
  • Statements showing proof that you paid (if you’re disputing a late payment)
  • Documentation showing that you’ve paid on time at all other points aside from when you experienced financial hardship
  • Identifying documentation so your servicer knows you sent the request
  • Not necessarily something to “include”, but if you’re mailing anything, you should send it by certified mail with a receipt requested, this way you’ll know if your letter made it.


If you’re interested in exploring goodwill letters further, and the results that others have had, check out these websites:

  • They cover disputes, what to do about them, and how to go about rectifying them here.
  • gov: If you have loans with a private lender, and your lender has reported you as late when you weren’t, you can file a complaint with the CFPB to see if they can help you.
  • myFico Forums: The forums on myFico are populated with helpful individuals that might be able to give you contact information for certain servicers. There are some people reporting success with goodwill letters, and they are willing to share the letter with others upon request.

It’s worth the time to write a goodwill letter

If you’ve discovered that a late payment has been reported on your credit, and it’s because you fell on hard times, or is inaccurate, it’s worth trying to get it erased. These dings on your credit are there to stay for 7-10 years. That’s a long time, especially if you’re young and hoping to buy a house or a car in the near future. It’s a battle worth fighting.

Get in touch with us on Twitter @Magnify_Money

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Pay Down My Debt

Stuck in a Payday Loan Trap? Here Are Ways Out

Wednesday, December 10, 2014

Debt collections_lg

It is all too easy to get stuck in a payday loan. In an emergency, you borrow $150, and only have to pay a $25 fee. You feel incredible relief that you are able to get the necessary cash so quickly. But two weeks pass by fast, and there is no way you can come up with the $150 to pay off the loan. So, you just pay another $25 to extend the loan. And then you keep paying and keep extending. And you never see your balance go down.

Fast forward 12 months, and you have paid $650 in fees, and your balance is still $150. How can this be legal? And how can you get out?

It is legal, and you are not alone. A recent study by the CFPB showed over 80% of people taking out payday loans are unable to pay off their loan when the 14 day term is up. Instead, they get trapped.

Fees, Not Interest (As if there is really a difference)

Payday lenders get away with this because they do not treat your loan as a loan. Rather, it is an advance, and you pay a fee, not interest.

If you borrowed $150 for six months at a 60% interest rate, your monthly payment would be about $30. In six months, you would have paid back $180 to borrow $150. This is still a shockingly high interest rate (60%), but the total cost is dramatically less. Why? Because how you borrowed was structured as a loan, and not an advance. A portion of every payment goes to paying down principal.

The biggest problem with payday loans is that they are basically interest only loans. Every time you make a payment, your balance does not go down. To use fancy language, there is no principal amortization.

A general rule: you never want to get into a situation where you are only paying interest. That is a sure bet way to get stuck in a debt spiral.

How to get out of a payday loan? 

If you are in a mess with a payday lender, you need to ask yourself a difficult question. Why did I end up with a payday lender? The way you answer that question will determine how you get out of the mess.

I have no credit history, no credit cards, no debt and no savings. And then an emergency came up, and I had nowhere to turn.

If that describes you, than you need to do three things:

  1. Build your credit score. The best way to do that is with a secured credit card. Make sure you make your payments on time every month, and that you never charge more than 20% of the available credit. After 6-12 months, you will see an incredible improvement in your score.
  2. Once you have a score above 600, visit your local credit union. They will usually have much cheaper ways for you to borrow. If your payday loan is not paid off already, you can even refinance it at your credit union with a personal loan.
  3. Once your score is above 700, look for even better deals. At a 700 credit score, you can get some of the best deals out there. Those could include low rate credit cards or low rate personal loans.

I just have far too much debt. I can barely afford to get through the month. Just paying the minimum due takes up more than half of my paycheck. And my total debt is more than half my annual income.

If that describes you, than you need to visit a non-profit consumer credit counselor.

Getting a payday loan was a very temporary way to get through the month. But you need to restructure your debt in order to truly fix the problem. That may mean negotiating with your existing creditors. Or, it could mean bankruptcy. A good credit counselor can help you come up with a plan. Make sure you avoid the for-profit counselors, by going to the National Foundation for Credit Counseling.

I don’t have a lot of debt, but it is building. I don’t have a great credit score, but it isn’t awful.

If this describes you, than you are on the brink. You really need to step back and do three things:

  1. Create a budget. If you are going into greater amounts of debt every month, than you need to figure out where your money is going, and how to cut it back. In the short term, that means cutting expenses dramatically. Cut out restaurants and unnecessary travel. In the medium term, you need to come to terms with your fixed costs. Maybe you need to move to a lower rent apartment, or sell your car and pay less each month in car payments.
  2. Focus on your credit score. You want to get a score above 700, and that means making sure you pay every card on time, and you need to work on bringing down those credit card balances.
  3. Find cheaper ways to borrow. Payday loans are some of the most expensive ways to borrow. Think about a local credit union. You can find one at this website: And, in addition to credit unions, you can also find low interest rate credit cards for that future emergency.

Remember that the best form of security is having a couple months of living expenses in an emergency fund as your first line of defense. And a low interest rate credit card (like the 9.99% PenFed Promise) is a great second line of defense. Emergencies happen, and you need to be prepared. The best way to never end up with a payday lender again is to make sure that you have two lines of defense set up.

Every little bit counts

In the meantime, make sure that you put something towards your payday loan every time you renew. Even a small amount can make a big difference. If you have a $150 loan, don’t just renew it. Find an extra $12.50 every two weeks. By doing that, you will make sure you are out of debt in six months. The payday loan company will make it easy to just renew – but make sure you add just a little bit extra to each payment to bring that balance down.

Don’t forget to follow us on Twitter @Magnify_Money and on Facebook.



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College Students and Recent Grads , Pay Down My Debt

How to Get Student Loan Modification and What Qualifies

Monday, December 1, 2014

Student Loan Mod_lg

If you’re one of the many people finding it difficult to pay back your private student loans, Wells Fargo recently released the promising news that they are moving forward on the private student loan modification pilot program they rolled out earlier this year.

What does this mean for borrowers? Two things:

First, it’s fantastic news for the industry in general. Private student loans have lagged behind, offering a limited number of options that are greatly dependent on your lender. In contrast, federal loans offer many benefits for borrowers such as deferment, forbearance, and a large selection of income-based repayment options.

The Consumer Financial Protection Bureau has been critical of bigger banks that haven’t been willing to extend repayment options to borrowers, and the banks have finally listened.

Second, this means that student loan payments are about to become more affordable for a select group of people. Let’s look at what loan modification programs can mean for borrowers.

Which Lenders Are Offering Student Loan Modifications?

Four big lenders are offering more flexible repayment options than they have before to lessen the burden on student loan borrowers.

Wells Fargo

Let’s look at Wells Fargo first. The bank’s recent announcement highlighted some significant changes they’re hoping to make.

The Wall Street Journal has reported that Wells Fargo is offering reduced interest rates as low as 1% to borrowers facing financial hardships. These reductions are temporary or permanent, depending on the situation you’re in (more on that below).

They’re also going to be offering extended repayment terms (by 5 years) come February 2015.

Wells Fargo wants to lower borrower payments to 10%-15% of their total income, and according to the bank, individuals in the pilot program lowered their monthly payment by as much as 31%.

This reduction in interest rate is extremely good news for those with private student loan debt, as the average interest rate on private loans is 10%-12%, much higher than federal loans. By slashing the interest rate, borrowers will pay less over the life of the loan as well. This is a better option as opposed to extending the repayment period, as that typically amounts to more paid with interest accounted for.


Discover also announced it plans on introducing a similar loan modification program early next year. The details have yet to be disclosed to the public, but they did start offering interest only payments earlier this year to borrowers who were less than 60 days late on their loans.

Discover has mentioned that they are planning on lowering interest rates, and will possibly waive balances for some borrowers that have been hit the hardest.

Discover has also already been making headway in offering more options for borrowers, which include reduced payments, deferment, forbearance, and payment extensions. Offering private student loan borrowers similar benefits that federal borrowers get to enjoy is a step in the right direction.

The great thing about this announcement is that other private lenders who offer flexible repayment options are being mentioned. If these lenders have been offering more repayment options, your lender might be as well.

Sallie Mae

Since 2009, Sallie Mae has been offering 1% interest rates, for sometimes up to two years, to borrowers that were delinquent on their loans.


Similarly, PNC lowered the interest rates of select borrowers to 0.6%, for as long as 18 months, earlier this year.

This goes to show that private lenders are becoming more and more willing to work with borrowers to give them some breathing room where student loans are concerned. But who can really benefit?

What Are the Qualifying Situations for Loan Modifications?

At this point, these loan modification programs are being targeted to two groups:

  • Those that are behind on payments by 30-119 days
  • Those that are anticipating a loss of income in the future, thereby making it difficult for them to afford the monthly payments

Borrowers who have defaulted on their loans will not qualify for a loan modification. A loan is typically considered to be in default after 120 days have passed with no payments made.

Borrowers in the second group that are anticipating loss of income due to medical reasons, a job loss, or a pay cut, may also apply for consideration. If your income can’t keep up with your payments, and you’ve done all you can to cut your expenses, it’s worth applying.

Wells Fargo currently requires proof of income to assess your situation. As the press release states, they are evaluating borrowers on a case-by-case basis, so don’t be deterred if someone you know has tried to apply and was turned down.

For now, the exact parameters of qualification aren’t available to the public, which is why calling your lender and speaking with them regarding your individual situation is important.

Credit checks are likely to be ordered, but this is mostly for the purpose of seeing what your overall financial situation looks like, including any other debts you may have. Lenders take more than just your score into consideration.

Based on your situation, you’ll either be given a temporary loan modification or a permanent one (if it doesn’t look like your situation will improve).

For other repayment options, such as Discover’s interest-only payments, proof of income typically isn’t required.

Bottom line: you need to be able to show that you’re experiencing financial hardship, and cannot afford your payments on the term you have now.

How is a Loan Modification Different from Forgiveness, Consolidation, or Refinancing?

It’s worth noting that loan modifications are different than forgiveness, consolidation, and refinancing.

Student loan forgiveness means that the entirety of your student loan balance is forgiven, or waived. It’s widely only available to those with federal student loans. Forgiveness is usually granted to those under special circumstances, such as volunteer work, working for a non-profit, working in the medical or law field, or being a teacher in the public sector.

[Read more about repayment plans and student loan forgiveness here.]

There are very few private lenders that offer forgiveness, and if they do offer it, it’s only under dire circumstances. For example, if a borrower dies, or is completely disabled, then their loan balance may be forgiven. For Discover to announce that they’re thinking of waiving loan balances is a huge step as far as private lenders go, but we don’t yet know what it will take to qualify.

A loan modification will not wipe out your student loans completely like forgiveness will.

Loan consolidation is useful for borrowers who are making payments to a number of different lenders, and are having trouble keeping track of it all. You can consolidate both federal and private student loans separately, but you can’t apply for a Direct Consolidation Loan with just private loans. You’d have to consolidate private loans through a private lender. When consolidating, you may be eligible for a longer repayment term, and a lower interest rate, but it’s dependent upon the loans you’re consolidating.

A loan modification means you’re adjusting the repayment terms on one of your loans. It doesn’t mean you’re combining all of your loans into one big loan, like consolidating your loans will do.

When refinancing a student loan, you’re hoping to get a lower interest rate, or a longer repayment term, to make your payments more affordable. Refinancing sounds similar to getting a loan modification, but the difference is that most lenders won’t refinance loans that are delinquent or default. The qualifications for refinancing are also much stricter.

With a loan modification, lenders are looking to work with you. If your credit isn’t the best, or if you’re delinquent (but not in default!), you still have a chance at working something out.

The Takeaway and What to Do

If you’re a borrower struggling to make payments and just squeaking by, or are already a little behind, you should reach out to your lender and ask them what options are available to you.

Bigger lenders such as the four that we mentioned aren’t going to reach out to you and tell you that you’re eligible for a loan modification. They don’t have time to sort through the millions of borrowers that have loans with them.

If you want your student loan payment situation to change, you must take action. The worst that can happen is your lender says no, and you’re back where you started. Don’t wait before it’s too late – as you should already know, having your loans default is the worst thing that you can let happen. Take advantage of the fact that private lenders are opening up their doors to struggling borrowers.

Don’t forget to follow us on Twitter @Magnify_Money and on Facebook.

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College Students and Recent Grads , Pay Down My Debt

Student Loans: Private, Federal, and Alternative Funding

Tuesday, November 25, 2014

mortar board cash

Student loans have become the bane of existence for millions of young professionals. According to Experian, 40 million Americans now have at least one outstanding student loan, up from 29 million in 2008. The average total balance on those loans has risen from $23,000 to $29,000.

Unfortunately, age 18, when high schoolers blindly excited by the prospect of attending their dream school start taking on those major financial commitments, is not the ideal time to be making life-altering financial decisions. These young adults have little understanding of basic personal finance, let alone the implications of the massive debt loads they’re signing on for. Even parents and professionals going back to school for advanced degrees are getting burned through the often-confusing process.

The Free Application For Federal Student Aid, or FAFSA as it’s better known, has more than 100 questions to determine aid eligibility, and a small error or accidental omission can result in being denied Federal funding altogether.

Private Student Loans vs. Federal Student Loans: What to Take Out

Despite the confusing application process however, Federal loans are the best resource for students looking to receive financial aid that they can actually manage. 

Federal student loans are those funded by the government. The interest rates on Federal loans are fixed, making it simple to anticipate and plan for payments come graduation. Private loans on the other hand are offered by banks and have variable interest rates that, generally speaking, far exceed the levels of Federal loans.

Interest rates on Stafford Federal loans are currently 4.66 percent for undergraduates and 6.21 percent for graduate students. Interest rates on student loans from private lender Wells Fargo, however, can range from 3.75-12.29. While paying 3.75 percent interest may sound tempting when compared to 6.21 percent, the private lender’s variable rate can just as soon rise to 12.29, well above the fixed Federal loan rate.

For the most part, private loans require cosigners and credit checks, whereas Federal loans typically don’t subscribe to either of those requirements.

Private students loans also require payments while students are still in school, whereas federal loans generally don’t require repayment until students graduate, leave school, or change their enrollment status to less than half-time.

Finally, Federal student loans are eligible for various programs like loan forgiveness and income based repayment. They can also be postponed in certain situations or retired if a student dies or becomes disabled. Private student loans offer much less flexibility, going so far as to go after the cosigner for the remaining balance if the student succumbs to a tragedy.

Suffice it to say that Federal student loans are by far the better option when funding education and should be maxed out before ever considering a private lender. Federal aid is awarded on a first-come, first-serve basis, so it’s imperative for students to fill out and submit their properly completed FAFSA as soon as possible. If Federal aid alone isn’t enough to cover the cost of education, switching to a more affordable school or program, or researching alternative funding options may be a better choice than resorting to private loans.

Alternative and Supplemental Funding

Too many students discount scholarships when figuring out their educational funding. Unlike loans, scholarships are financial gifts towards education that don’t carry interest and never need to be repaid. Students don’t have to have the best grades or the most need or the most unique talent to qualify either.

While National scholarships, like those awarded by the National Merit Scholarship Corporation and the Coca-Cola Scholars Foundation provide major funding, they also have extremely large competition pools. Looking for state, local, and college specific scholarships are great ways for students to increase their chances of being awarded free funding.

Students should make the most of their varied resources- from their college counselor to the local library to various websites that aggregate available scholarships based on background, interests, abilities, financial need, field of study, and other pertinent information- to see what scholarships best suit them.,, and are all great starting points for researching and pursuing supplemental scholarship funding.

Loan Repayment: Federal vs. Private

Late and missed payments on student loans can result in credit catastrophe. While Federal student loans aren’t considered in default until the borrower has missed payments for nine months, private loans have varying default windows, some kicking in after just one missed payment. Once default happens, the entire loan amount comes due and the collection agencies come calling. Ignoring either is bad news as student loans are almost impossible to discharge- even in bankruptcy.

If your required monthly payments are more than you can afford to pay, there are plenty of options to look into with your Federal loans- income based repayment, extended repayment plans, even temporary deferment of payment- to name a few. While private loans don’t offer the same flexibility in repayment, the consequences of defaulting are arguably less severe. When you default on a Federal student loan, the government can garnish your wages, social security benefits, and tax refunds. When you default on private student loans however, the lender can go after anyone who co-signed your loan, destroying their credit as well as yours.   If you can’t afford all of your payments, be they private and/or Federal, it’s much better to review your various consolidation and repayment options than to simply default and accept financial ruin.

Before deciding on or signing anything, students must understand the financial implications of their higher education decisions. If not, they may resort to drowning under the crushing weight of student loan debt for the rest of their lives.

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College Students and Recent Grads , Pay Down My Debt

Miss A Student Loan Payment? Where To Find Help And What Happens

Monday, November 24, 2014

Mixed Race Young Female Agonizing Over Financial Calculations in Her Kitchen.

If you’ve missed a student loan payment or are struggling to make payments, you’re not alone. According to the Department of Education, millions of loans are currently delinquent, with many more being sent to collections every day.

What happens when you can’t afford to make a payment, and subsequently miss the due date? If you have federal student loans, at first, you’ll be delinquent. Nine months after you miss a student loan payment, your loans will then enter into default status.

If you have private loans, there’s no “grace period” of delinquency; your loans are immediately in default the day after your payment was due.

While this might sound like bad news, there are ways to recover from delinquency and default. We’re covering what the consequences are, and what options you have to get your loans current again.

What Does Being Delinquent Mean and What Are the Consequences?

Do you remember that promissory note you had to sign every semester when taking out student loans? That note was a binding contract in which you promised to make timely payments on your student loans (among other things). By missing a payment, you are in direct violation of that contract.

The day after your payment is due, you are considered delinquent on your student loans. During your delinquency, your student loan servicer will attempt to get in touch with you in the first 15 days following a missed student loan payment.

Your credit score can also suffer if you don’t make any payments within a certain time. For example, My Great Lakes will report a lateness to the 3 major credit bureaus (Experian, Equifax and TransUnion) once an account is 60 days past due, but Nelnet will wait 90 days. Different servicers have different guidelines for this, so it’s best to call yours directly to ask them for the specifics.

Even if you become current on your loans, the delinquency can remain on your credit report for up to 7 years.

Additionally, you might incur late fees if you don’t make an effort to pay within a set time frame. Late fees vary by lender, and the amount of time passed before getting hit with a late fee also depends on the lender.

While being delinquent isn’t great, it’s not the end of the world. Simply making a payment will bring your loan into repayment again.

But what if you can’t afford that payment?

After nine months of missed payments, your loan will go into default. Nine months is a considerable amount of time to work with your student loan servicer in an attempt to lower your payments, and that’s exactly what you should do.

Steps You Can Take To Get Out of Delinquency

If you’re delinquent on your student loans, the absolute best thing you can do is to get on the phone with your student loan servicer and explain your situation to them. You want them on your side in this process, and most are willing to help you out. Many servicers have information and options on lowering payments directly on their website.

If you can afford to make any sort of payment, do so. This will show your loan servicer that you’re concerned and making every effort to rectify your delinquent status.

The worst thing you can do in this situation is to ignore what’s going on. You have 9 months in which to make things right before going into default, and you want to do everything in your power to make sure you don’t get reach that point.

When speaking with your loan servicer, ask them to review your payment options. Under certain circumstances, you may be eligible for deferment or forbearance. Both will excuse you from having to make any payments for a set amount of time. Interest doesn’t continue to accrue if your loans are in deferment, but it will accrue in forbearance. Typically, forbearance is easier to qualify for than deferment.

If you’re not eligible for either of these options, don’t lose hope. There are several different income-based repayment options out there, including Pay as You Earn, Income-Based Repayment and Income-Contingent Repayment, and your student loan servicer will point you toward the one that makes the most sense for you.

Your number one priority when your student loans are delinquent is to get them current as soon as possible so that they don’t go into default.

What Consequences Does Defaulting On Your Student Loans Have?

If you haven’t been able to make any payments toward your student loans in 9 months, and haven’t reached out to your servicer, then you will end up defaulting on your student loans.

There are serious consequences to defaulting:

  • Some loan holders will require your entire balance to be paid in full. This includes the principal and the interest.
  • You become ineligible for deferment, forbearance, or any repayment programs.
  • You become ineligible for further federal student aid.
  • Your wages can be garnished, plus your tax return can be held to repay your loans.
  • Your credit score will be damaged.
  • You might end up responsible for more than just your loan balance if there are late fees, collection fees, or court fees involved.

These all sound a little scary, don’t they? While defaulting on federal student loans shouldn’t be taken casually, there are ways to improve your situation.

Options for Getting Your Loans Out of Default

In order to get your loans out of default status, you have to make a plan. The unfortunate part is that you have significantly less options than you would in delinquency, and the options you do have require you to be able to make payments. is a great resource for those looking for more information on getting their loans out of default. The site is run by the Department of Education and highlights its Rehabilitation Program as an option for getting loans out of default.


Going through a rehabilitation program is your best chance at redemption. Upon successfully completing the program, all the negative consequences of defaulting will be reversed. That even includes the damage to your credit score (the default will be erased).

Successful completion involves making 9 monthly payments out of 10 months, so it’s important that you can make the payments according to the plan you’re given. You have to make the payments monthly; lump-sum payments or extra payments will not speed up the process.

A debt collector creates your repayment plan during rehabilitation. They’re supposed to work with you to create a manageable repayment plan, though some of them have wrongfully tried to get borrowers to pay back more than they can afford.

[3 Steps to Handle Being Mistreated by a Student Loan Servicer] has highlighted the importance of paying back only what you can reasonably afford, as a new system was put into place this past July. Under this system, the amount you must pay should coincide with what you would be paying under the Income Based Repayment formula. For “not new borrowers” this is generally 15 percent of your discretionary income, but never more than the 10-year Standard Repayment Plan amount. For “new borrowers”, it’s 10 percent of discretionary income.

New borrowers are defined by:

“… (1) no outstanding balance on a Direct Loan or FFEL program loan as of October 1, 2007 or has no outstanding balance on a Direct Loan or FFEL program loan when you obtain a new loan on or after October 1, 2007, and (2) received a disbursement of a Direct Subsidized Loan, Direct Unsubsidized Loan, or student Direct PLUS Loan on or after October 1, 2011, or received a Direct Consolidation Loan based on an application received on or after October 1, 2011. However, you are not considered a new borrower if the Direct Consolidation Loan you receive repays loans that would make you ineligible under part (1) of this definition.”

[Read more about repayment plans and student loan forgiveness here.]

Once you’ve gone through the rehabilitation program, a lender must purchase your loans in order for them to enter back into standard repayment status. Likewise, only after a lender has purchased your loans will the collection agency ask the credit bureaus to clear your credit report of the default.

Just note that you may only go through the rehabilitation program once. If your loans fall back into default, then you won’t be eligible for the program.

What About Defaulting on Private Student Loans?

Private student loans are a different beast. There’s no delinquency period associated with private loans; as soon as you miss a payment, your loans have defaulted.

Unfortunately, private loans don’t offer the same protection as federal loans do. Therefore, the repayment options associated with federal loans don’t apply for private loans.

Even worse, there aren’t any rehabilitation programs to go through for private loans, unless your lender offers such a program. It’s worth it to ask!

For instance, Discover will report your loan as late to credit bureaus during its monthly account audit, so there isn’t necessarily a time frame to consider. If you missed a payment that was due on the 10th, and their audit is on the 20th, it might take some time to be reported as late. At that time, your loan is also considered to be in default. The good news is that there are no fees associated with their loans, even late fees, which is reflected on their student loans page.

Wells Fargo reports a loan as late after 30 days have passed, and their standard late fee is $28, though this largely depends on the type of loan you have.

For Citizen’s Bank, private student loans are serviced through Firstmark. Their loans are reported as late after being 30 days past due (from the last business day of the month). The loan is considered defaulted after 120 days past due, and late fees (5% of the borrowed amount) are incurred after the loan is 15 days past due.

According to Sallie Mae, depending on the type of loan you have, you’re considered to have defaulted after 6 to 9 months of no payments.

Fortunately, there are some private lenders coming around to the fact that borrowers need help. Wells Fargo is one private lender willing to lend a hand. If you’re having trouble making payments, they offer additional repayment options, and they also have a new loan modification program which can lower your payments temporarily or permanently.

Sallie Mae offers borrowers interest-only payments on certain loans, and they also offer a graduated repayment option on their Smart Option Student Loan.

Discover also offers deferment options to those serving in the military, in public service jobs, or in a residency program.

All lenders encourage borrowers to call if they’re having trouble making payments under their current repayment terms. But you should work under the assumption that once you’re 30 days late it will show up on your credit report, which can stay there for seven years.

The Consumer Financial Protection Bureau has attempted to strip away some of the uncertainty and confusion surrounding student loans, but according to a recent report, the industry remains unchanged. More and more complaints are being received concerning private loans, as borrowers claim they don’t have enough information about the options they have.

The CFPB is encouraging borrowers to use a template that they have available for download to try and negotiate a repayment plan with their lenders. This should be done as soon as you miss a payment, as your private lender will sell your loan to a collection agency after enough time has passed without a payment. They will be more willing to help you than a collection agency will.

As a last resort, you may be able to get your private student loans discharged in bankruptcy. Private loans are slightly easier to get discharged than federal loans. If you’d like to read more about that process, has a comprehensive write-up on it.

Final Recap

You want to avoid defaulting on your student loans at all costs, so if you’re delinquent on your loans, get in touch with your loan servicer to figure out the best way to bring your account current. If you’ve already defaulted, check with your loan holder to see if you can enter into a rehabilitation program. If you have private student loans, contact your lender immediately to find out if you can negotiate more manageable repayment terms. These options are available to help you, and there is no shame in taking advantage of them.

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How to Get a Student Loan Forgiven

Thursday, November 20, 2014

Students throwing graduation hats

According to a recent CNBC article, 24% of millennials expect to receive forgiveness for their outstanding student loan debt balances. It’s a good thing, then, that the Consumer Financial Protection Bureau estimates that 25 percent of American workers could be eligible for student loan repayment forgiveness programs.

Here’s more good news: there are many ways of taking action to get a student loan forgiven. You can seek out programs that are career-based, meaning they provide aid for those in certain professions. Or you can look into plans based on your income level. Most of these are sponsored by the Federal government in one way or another (though some colleges do assist a select few of the students they graduate).

Those suffering the burden of student loans may qualify for one (or more) of the nine types of forgiveness programs listed below.

Public Service Student Loan Forgiveness

There are many programs available to help mitigate Federal student loan burdens — especially if you’re working in a public service position.

Specifically, employees of the government, non-profit organizations, and other public workers may qualify for the Public Service Loan Forgiveness (PSLF) program. You need to be employed full-time by a public service organization. You also are required to make 120 payments on your loans before being eligible for forgiveness.

Head to the bottom of page 8 of the program’s FAQ to find a detailed list of job descriptions that qualify. Note that as long as you’re employed by an eligible public service organization, you’re covered. In other words, you probably qualify as a teacher — and you may also qualify if you work in a public school as an administrative staff member.

Getting a Loan Forgiven Based on Income

Another way to get Federal student loans forgiven is to see if you qualify for an income-based program.

According to Sophia Bera, CFP and founder of Gen Y Planning, there are three income-driven programs:

  • Pay As You Earn Repayment Plan (PAYE Plan) – This plan is the newest option for those with student loan debt. It’s designed to help recent students entering the job market for the first time during the recession years, and provides an alternative to the Income-Based Repayment Plan and lower payments. The remaining balances will be forgiven after 20 years of qualifying payments and an interest subsidy. PAYE is only available for federal Direct Loans. Eligibility is often a result of student loans that are higher than a person’s annual discretionary income or makes up a significant portion of his or her annual income. So, $10,000 in student loans with a $60,000 annual salary would like make an individual ineligible for the plan. In addition, individuals are only eligible for the PAYE plan if:
    • He or she is new borrower as of Oct. 1, 2007,
    • Received a disbursement of a Direct Loan on or after Oct. 1, 2011.
  • Income-Based Repayment Plan (IBR Plan) – This is the original plan that was designed to help those who held student loan debt that equaled more than their annual income, or a “significant portion” of annual income. Eligibility includes demonstrating a partial financial hardship. Loans will be forgiven after 25 years of qualifying payments, five years longer than the PAYE plan. Like thee PAYE plan, this IBR also offers an interest subsidy.

Keep in mind: for both IBR and PAYE, your payments are based on your adjust gross income (AGI). If you file joint taxes with a spouse, then your AGI will include your spouse’s income and impact your payments. Read more about taxes and student loans here.

  • Income-Contingent Repayment Plan (ICR Plan) – This plan intends to help those who purposely chose low-income jobs but graduated with high levels of student loan debt. It provides another option for those who can’t qualify for either the Pay As You Earn Plan or the IBR Plan and is open to anyone with eligible federal student loans. Like with the IBR, the monthly payments are based on income and family size, however, the payments will likely be higher than those with IBR or PAYE. The ICR plan also forgives an outstanding balance after 25 years of qualifying payments. The debt discharged is treated as taxable income, so borrowers need to be prepared to pay taxes to the IRS.

While each of these programs has various stipulations, requirements, and limits, they all have one thing in common: they’re designed to help those with low incomes and excessive amounts of student loan debt.

They’re also a little different from the public service programs. While those in public service positions can have student loan debt forgiven after 10 years, these programs forgive loans after 20 or 25 years.

However, like the public service loan forgiveness program, these income-driven programs do require you to pay every payment on time – or you’ll be disqualified from the program. You also may need to pay taxes on the portion of your loans that are forgiven.

Use this calculator to see exactly what will happen with your payments and how much of your student loans may be forgiven.

Student Loan Forgiveness Programs for Professionals

Many student loan forgiveness programs are based on the career you choose after graduation. For those with professional degrees – think doctors, lawyers, and teachers – you have several options when it comes to shedding that student loan debt without paying it out-of-pocket and in full.

Doctors can look into the NIH Loan Repayment Program. This can help repay 25% of a doctor’s student loan balance per year with a $35,000 maximum. That’s limited to doctors conducting research and who meet certain eligibility requirements.

Lawyers can look into Equal Justice Works. This provides a list of law schools that offer loan repayment assistance programs. Afam Onyema graduated from Harvard University and Stanford Law School, and was able to decline corporate law job offers in order to establish a charitable organization thanks to repayment programs.

“I can afford to do this work only because of Stanford Law School’s uniquely generous Loan Repayment Assistance Program (LRAP),” explains Onyema. “The school is systematically paying off and forgiving 85% of my $150,000+ debt.”

Teachers can qualify for PSFL programs, they might also want to look into Teacher Loan Forgiveness. To get into this program, you need to teach at specifically designated elementary and secondary schools for five consecutive years to be eligible.

If you began teaching after 2004, you’re eligible for up to $5,000 in loan forgiveness if you were a “highly qualified” teacher, and you can receive up to $17,500 if you’re a “highly qualified” math or science teacher in a secondary school, or special education teacher.

Other Options

Don’t qualify for any of the above? Don’t despair yet. You have a few more options:

Volunteer programs: These qualify under public service student loan forgiveness: Options include working with AmeriCorps and serving 12 months or volunteering as part of their VISTA program, or joining the Peace Corps.

Enrolling in the military: Some branches of the US military offer student loan forgiveness programs. Stafford and Perkins loans are eligible (among others), and the Army and Navy will “repay the maximum allowed by law for non-prior service active duty enlistments.”

The Army will pay up to $20,000 for Reserve enlistments, and that includes the Army National Guard. If you’re interested in joining the Air Force, that branch can repay up to $10,000 for non-prior service, active duty enlistments.

Both the Air Force and the Navy require a minimum of four years of service. With the Army, the minimum service is three years, and the Army and Navy Reserves and Army and National Guard require six years.

The Pitfalls Associated with Getting a Student Loan Forgiven

If you’re having trouble making your student loan payments on time and in full, it’s worth your time to do some homework and research your options. Getting a student loan forgiven isn’t always the best answer or the only solution, and you need to proceed with caution.

Let’s be clear. “Forgiveness” doesn’t mean you sit back and let someone else take care of 100% of your loan. Nor does it mean getting to completely walk away from the financial responsibilities of borrowing that money in the first place.

You’ll first need to make sure you meet all the qualifications listed out in the fine print. As we’ve seen, that can mean fitting into very specific circumstances and stipulations. And short of drastic action like declaring bankruptcy – which is not the ideal solution – you may not qualify for any of the programs on student loan forgiveness out there.

In fact, even declaring bankruptcy doesn’t always work. According to Leslie Tayne, Esq. of Tayne Law Group, P.C., “Student loans are rarely dischargeable in bankruptcy and getting a student loan forgiven is a very particular process.”

“For Federal student loans, there is a way to get your loan forgiven,” she explains. “The public service forgiveness program may forgive the balance of your loans after 10 years working in a qualified public service job.

“Once your forgiveness is approved, you will not be required to make any more payments on the loan; however it is important to note that you may be subject to a 1099 by the IRS and thus have to pay taxes on the amount forgiven.” As Tayne notes, that could have an even worse affect on your finances.

Bera provided this example: “If you had $100,000 in Federal student loans and [use a forgiveness program], after 25 years of on-time payments the balance on your student loans might be $50,000. If the government forgives this amount, you’ll have to pay the tax on $50,000 of income in addition to your normal salary or wages for that year.”

If someone only makes $40,000 annually and suddenly his or her income increases to $90,000 in a given tax year, they’ll likely owe thousands of dollars to the government.

All this isn’t said to discourage you, but to make sure you’re in tune with the realities of the situation. If you have student loans and want to look into getting involved with a student loan forgiveness program, start by familiarizing yourself with what’s available to you and your situation. Once you’ve done a bit of research you can contact your loan provider to start taking action.

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College Students and Recent Grads , Pay Down My Debt

How to Handle Student Loans in 4 Easy Steps

Wednesday, November 19, 2014


When I was 18, I was so excited to start college. I carefully packed my clothes into a few different suitcases. I bought a mini fridge. I made sure I had a couple sets of extra long sheets. I contacted my roommate ahead of time. We found out we were in a really unique loft room in an all-girls dorm. It looked so cool, and I was really, really excited.

I was a complete and utter nerd in high school, and it paid off. I received a full-tuition scholarship to Tulane, in New Orleans. All my parents had to do was write a check for $5,000 or so, which covered room and board for the semester. Comparatively, a student who lives in the dorm at Tulane without a tuition scholarship will pay almost $50,000 a year for the privilege today. My parents were thrilled, and they wrote the check right when we arrived on campus and did orientation. 

Of course, a few hours later, my life changed forever.

Move in day at Tulane in 2005 was also the same day the city began evacuating for Hurricane Katrina. I was buying my first semester books in the bookstore with my dad when an announcement came over the loudspeaker. It was time for everyone to get out – really out. As in, leave the city.

Because I am from just outside of New Orleans, having my college plans messed up was actually the least of my family’s worries. A few days later, I found myself in a hotel room just outside of Baton Rouge. My childhood home had 8 feet of water. Tulane closed for the semester. But, most importantly, my parents’ business was completely disrupted, and they had major income losses in addition to the losses in our home.

My First Student Loan

I went to L.S.U. because Tulane closed, and I had to take out my first set of student loans. Everything so was incredibly uncertain at the time that my mom encouraged me to go take out loans.

My parents were busy dealing with the aftermath of the storm, and I had to figure the whole college/loans/new campus logistics out on my own. I don’t remember completing entrance counseling for my loans, although I know I did because they were subsidized federal loans.

I transferred schools again two years later to William and Mary. I never went back to Tulane, and I was still craving that small school atmosphere after two years at a large university that I never meant to go to in the first place.

In order to go to William and Mary as an out-of-state student, though, I had to come up with the cash. I received a generous grant due to our financial circumstances from the storm, my parents helped a little, and I took out the rest in federal loans. Again, I don’t remember doing entrance counseling.

Cat graduationIt wasn’t until I graduated that I learned how to check my credit score and find out how much I had taken out in loans in total. Luckily all my loans were federal loans and the majority was subsidized, which meant that I did not have to pay interest while I was in school.

You would think, though, that as someone who graduated early from one of the best colleges in the country (after transferring twice and experiencing a huge natural disaster) I would know how much money I took out. But I didn’t. Unfortunately, many other students and recent graduates are like me and unaware exactly how their student loans are structured and how repayment works.

Ultimately, I’m not upset that I took out student loans.

They were necessary in order to make my dreams come true. They were necessary to help me escape what had become a very sad situation in my home state. They were there for me when I needed to take one really expensive summer school class so that I could graduate a semester early. And, when I got a grant to do a fully paid for study abroad program, a student loan helped me buy plane tickets so I could see more of Europe while I was there. I don’t regret these decisions or experiences, but what I do regret is not understanding interest rates or the impact of student loans in general.

Learn From My Mistakes

If I had any advice to students going to college today and their parents, it would be as follows:

Step 1: Shop Around For Your Loan

Do not take the first loan that you’re offered. Please shop around. Just like any big investment, going to college deserves your full attention. If you have to fund it with loans, make sure you’re getting the best rates.

Private loans are historically worse for students because may of them require immediate payments, higher interest rates, more fees, and less flexible repayment terms.

Federal loans are the route most students take since those are the most widely accessible through colleges and universities. Although it seems like federal loans are the answer, don’t discount your local banks. If your parents have a good reputation with their local bank, they might be able to secure a lower interest rate than the federal government, but those instances are rare. It’s important to remember, though, that local banks will likely not be able to offer you deferred interest, so you will need to compare interest rates between these private loans and federal loans and weigh the pros and cons to find out the best plan of action for you.

In sum, shop around and know the difference between private and federal loans like the back of your hand. 

Step 2: Pay Attention to the Entrance Counseling

Entrance counseling is there for a reason. It’s typically automated with a quiz that you need to take online and pass to get your loans. The quiz asks questions to make sure you understand terms like deferment, repayment, interest accrual, and forbearance. Could it be better? Yes. Could it be more effective in helping students understand the risks? Yes. However, at a minimum it will explain the benefits and consequences of loans and what’s expected of you during your repayment. Remember, don’t complete entrance counseling until you fully understand everything about your loans. If you get to a section of entrance counseling that does not make sense, put in a call to your school’s financial aid office and ask them to explain the concept. If you don’t understand your interest rate, know your repayment period, or know what to do if you cannot make your payment in the future, ask your student loan counselor these questions.

Step 3: Take Out As Little As Possible

You might think that you’re going to college for engineering but most college students change their majors. In fact, the New York Times reported in 2012 that 80 percent of freshmen at Penn State were unsure about their major.

Maybe you’ll fall in love with acting even though you thought you wanted to go to medical school. Or, perhaps you’ll enjoy psychology and want to pursue being a social worker instead of becoming a business owner.

Either way, it’s important you only take out as much money as you need and work to subsidize other living costs of college, because you won’t know your ability to repay the loans until you start your career.

Just to give you an example, if you take out $26,000 in student loans, (which is about the national average for a four-year public university) at 6.8%, you would pay around $300.00 a month for 10 years to pay it off. You would also pay nearly $10,000 in interest! That $300 a month could be an incredible investment opportunity or a car payment. That $10,000 in interest could go towards a down payment on a house or a great emergency fund. So, before you take out anything extra, put your information in a loan calculator and find out how much money you’ll actually pay in the long run in interest charges. That should inspire you to take out as little as possible.

If all of this sounds daunting, don’t forget to regularly look for scholarships and find unique ones that apply to you. There are scholarships for just about everything whether you were a preemie as a baby or have German ancestry. To find unusual scholarships, click here.

Also, remember it’s okay to feel a little uncomfortable. College students are notorious for living on ramen noodles. Essentially, do whatever you can to take out the least amount of money possible. Your older self will thank you.

Step 4: Research Repayment Options

There are many careers that will offer you loan repayment assistance including teaching in underserved areas and joining the military. Make sure to take the time during your senior year to find places to work that will help you pay back you loans and know if they apply to private loans as well as federal. Sometimes you only have to sign a two or five-year contract to receive that benefit, and trust me, that seems like a long time but it will fly by.

Take Responsibility

Really, the most important takeaway is that you and only you can become educated about your student loans. The financial education system that is currently in place with respect to disseminating information to college students about the loan process is not as effective as it could be. Thus, it is up to you, the college student, to become an adult and start making adult decisions about your money.

Good luck. Remember, student loans can definitely help you follow your dreams like they did for me, but be wise about how much you take out.

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Pay Down My Debt

A Married Couple’s Tricky Dance between Taxes and Student Loans

Thursday, November 13, 2014

The Marriage Penalty

Married couples with student loans face a difficult decision at tax time. You can choose to file jointly, which often leads to a smaller tax bill. Or you can choose to file separately, which often leads to smaller student loan payments.

So which decision will save you the most money? Today we’re going to help you figure out the tricky dance between taxes and student loans.

The married couple’s dilemma

Married couples can choose to file their taxes in one of two ways. They can file jointly and have both of their incomes taxed together. Or they can file separately and have each spouse taxed individually on the income he or she earned.

Either one can be beneficial depending on the couple’s specific situation, but there are certain advantages to filing jointly:

  • The combined tax bracket is often lower (though not always),
  • You are allowed certain tax deductions, like the student loan interest deduction, that those filing separately aren’t,
  • You have easier access to certain tax credits, such as the child tax creditdependent care credit and certain education credits.

But there is a potential downside to filing jointly for those with student loans.

Income-driven repayment plans rely largely on (you guessed it!) your income to determine your minimum monthly payment. And since filing jointly will increase your reported income if your spouse is also earning money, your required student loan payment will often increase as well. In some cases, this can add up to a pretty significant cost difference.

Luckily, there are some tools that can help you run the numbers and figure out which tax filing status will save you the most money. Let’s take a look at an example to see how it works.

An example: Meet Joe and Sally

Here’s a simple example that shows how one filing status can save on taxes but cost more on student loans, and vice-versa:

  • Joe and Sally are married with no children.
  • They live in Florida (no state income tax).
  • Joe is making $35,000 per year and has $15,000 of student loan debt with a 6.8% interest rate.
  • Sally is making $75,000 per year and has $60,000 of student loan debt with a 6.8% interest rate.

First, we can estimate Joe and Sally’s tax bill filing jointly vs. filing separately. TurboTax has a tool that makes this pretty easy. Here’s what we get when we plug in their incomes:

  • Filing jointly, Joe and Sally would owe $14,364 in federal taxes.
  • Filing separately, they would owe $15,493.

So they would save just over $1,100 in federal taxes by filing jointly. But how would their student loan payments be affected?

We can use a student loan repayment estimator like the one provided by the office of Federal Student Aid to find out. Here’s what we get when we plug in their numbers and choose the Income-Based Repayment option (IBR):

  • Filing jointly, Joe’s minimum required monthly student loan payment would be $165 and Sally’s would be $661, for a total of $826 per month.
  • Filing separately, Joe’s minimum required monthly student loan payment would be $0 and Sally’s would be $258.

Over the course of a year, Joe and Sally could save $6,816 on their student loan payments by filing separately. Even with the extra taxes they would have to pay, filing separately would save them $5,687 more than filing jointly.

How can you figure out what’s best for your situation?

Every situation is different, and while the simple example above comes out in favor of filing separately, you will need to run your own numbers to figure out what is right for you. Here are some steps that can help you figure it out:

  1. Make a list of your student loans – Write down how much you owe, the interest rate being charged, and the type of each student loan you have. You can find your federal student loans in the NSLDS database and your private student loans by pulling your free credit report.
  2. Estimate your student loan repayment options – Use a student loan repayment estimator like the one provided by the office of Federal Student Aid to estimate your required payments when filing separately vs. filing jointly.
  3. Estimate your federal taxes – Use a tool like TurboTax’s Taxcaster or TaxBrain’s Tax Estimator to estimate your federal tax bill when filing separately vs. filing jointly.
  4. Estimate your state taxes – If you have state income taxes, don’t forget to factor those into your total cost as well.
  5. Be aware of longer term consequences – One route might lead to lower payments today but more interest paid over time. Another route might lead to more of your student loans being forgiven, which could have its own tax implications down the line. Keep those long-term consequences in mind as you make a decision.
  6. Consider steps to lower your AGI – Your eligibility for income-driven student loan repayment plans is dependent on your Adjusted Gross Income (AGI), which is essentially your total income minus certain deductions. You can lower this number, and potentially lower both your tax bill and your required student loan payment, by doing things like contributing to a 401(k) or Health Savings Account.
  7. Keep your bigger financial plan in mind – Remember that these decisions are just part of your overall financial plan. Keep your eyes on your big long-term goals and make your decision based on what helps you reach those goals fastest.

Wondering what to do with your tax return? Savings might be the best place for your new windfall! 


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College Students and Recent Grads , Pay Down My Debt

3 Steps to Handle Being Mistreated by a Student Loan Servicer

Tuesday, November 11, 2014

mortar board cash

A college diploma no longer promises a guaranteed path to success. A harsh reality that hits after the excitement of finally completing college dwindles down and the pressure to find a good paying job sets in. Deciding on whether or not you should embark on an extended vacation after four grueling years of study should be a no brainer, but the reality of student loan repayment quickly extinguishes any thoughts of lying on a beach.

Borrowers know that time is of the essence. The six-month grace period post-graduation is crucial in building a solid financial future. However, some borrowers aren’t able to find a job within that six-month time span, and if they do, their entry-level pay may barely cover living expenses. The last thing borrowers need in times of financial hardship is maltreatment by their student loan servicer. In fact, servicers are required by law to work with struggling borrowers, yet some do the complete opposite.

The alarming part of all this is that a majority of borrowers aren’t even aware of the fact that they’re being mistreated. In fact, in the midst of supervising for compliance with federal consumer financial laws, the Consumer Financial Protection Bureau (CFPB) found that one or more student loan servicers were:

  • Allocating payments to maximize late fees
  • Misrepresenting minimum payments
  • Charging illegal late fees
  • Failing to provide accurate tax information
  • Misleading consumers about bankruptcy protections
  • And abusing the ever-popular debt collection calls to consumers at illegal times.

If you believe that you’re a victim of mistreatment by your student loan servicer then you’ve already started the three-step process.

Step 1: Identify problems

You have successfully identified your issue and are ready to start the resolution process.

Step 2: Gather relevant evidence

Just saying that you have an issue isn’t enough; you need relevant proof to support your claims. Relevant evidence includes:

  • Promissory Notes that outline the any agreements made between you and your loan servicer
  • Bills
  • Canceled checks
  • Correspondence between you on your loan servicer via phone, email or snail mail

Step 3: Make Contact

Now that you’ve identified your problem and gathered relevant evidence to support your case, you can now contact your loan servicer. If you’re not sure who your loan servicer is, you can find out at Prior to making contact with your servicer keep the following tips in mind:

  • Take detailed notes of all conversations and be sure to follow up in writing so there is a physical record of what has been said and done.
  • Request a copy of your customer service history. Some loan servicers make available copies of the notes that customer service representatives make on their accounts.
  • When you speak with someone on the phone, take down the representative’s name, when the call took place, and what was said.
  • Save the originals of all receipts, bills, letters, and e-mails regarding your account. Be sure to provide copies of the originals if you are asked for them. Send letters via certified mail, with return receipt requested.
  • No matter how frustrating the situation, always be polite and courteous.
  • Request for a response at a reasonable times, and be sure to tell the customer service representative how you can be reached.

Problem not solved?

To be sure that you’ve done everything in your power to resolve your student loan problem take this self-resolution test.

For Federal Student loans: If after completing the self-resolution test you find that you are in need of further assistance, contact the Federal Student Aid Ombudsman Group to request a consultation. They will collect information about your case and offer assistance in identifying a suitable resolution.

For Private Student Loans: The Consumer Financial Protection Bureau recently started accepting student loan complaints. They will forward your issue to the company, provide you with a tracking number and keep you updated on the status of your complaint.

Need more help?

Although there is little recourse for private student loan issues, you can still get help with federal student loans through the Federal Student Aid’s Through this portal, you can get information on how much you owe on your defaulted federal student loans, your payment history, and options for resolving your issues. You can also access forms to request a hearing, review, or discharge of your debt, as well as forms to submit a complaint.

Ignoring your own debt won’t make it go away, so do yourself a favor and seek help as soon as possible.

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Pay Down My Debt

How to Make a Payment to a Collection Agency Without Getting Ripped Off

Tuesday, November 4, 2014

Debt collections_lg

So, you have reached an agreement with a debt collection agency, and you are now ready to make a payment. Before you give them your account number or write a check, make sure you protect yourself. Once a debt collection agency has your account number, they can (and sometimes do) use that information to take more money from your account. But with the right precautions, you can protect yourself.

You may be asking yourself: is this legal? Can a collection agency really just take money from your account, even if you don’t give them permission? Unfortunately, the debt collection industry is a dark and murky place. Agencies regularly try to blur the lines of legality, and their sole objective is to get as much of your money as possible. Although there are a few exceptions, most collection agencies are incredibly small and scrappy. When the New York Times did a story on the industry, they referred to it as a dark and lucrative world. If you really want a glimpse of the world inhabited by debt collectors, listen to the PlanetMoney podcast entitled Spreadsheets, Ex-cons and a Karate Studio: Life at the Bottom of the Debt Business. The title alone should give you a sense of the people running these agencies. Just because something isn’t legal doesn’t mean they won’t do it.

How to avoid being ripped off

Here are the ways you should never make a payment:

  1. Do not sign up for an electronic payment, which requires you to disclose your routing number and account number. By doing that, you give the agency access to your checking account. If they take more money than you agreed to, it will become your word versus their word. And, if you owe the debt and have the money, it could be difficult to defend yourself.
  2. Do not write a personal check. Your routing number and account number are written at the bottom of your checks, and a devious collector could use that information to extract funds from your account.
  3. Do not pay with your debit card. Again, this makes it easy for the agency to process payments electronically.

So, what should you do?

  1. Consider opening an account that is used solely for making payments to the collection agency. You should ensure that it is an account that charges no overdraft or NSF fees – so if a debt collection agency tries to take money that is not there, you will not have any issues. Our favorite account is Bluebird, by American Express. There is no minimum balance requirement, no monthly fee, no overdraft fees and you have free access to bill pay and checks. You can easily add money at your local Wal-Mart. With Bluebird, you can make sure that you only put money onto the account that you are willing to give to an agency. Bluebird is not the only free account, and you can find more on our checking account page.
  2. You can purchase a money order or a certified check. These payment methods will not reveal your account information.

Regardless of how you pay, make sure:

  1. You keep a paper trail of your payments. It will ultimately become your word against the collection agency, and the only proof is paperwork. So, make sure you have a file and store all of your history in it.
  2. If you make a settlement agreement with your agency, you get it in writing. The last thing you want is for them to come back and ask for more money.
  3. If you run into difficulties, immediately complain to the CFPB. Don’t wait. The agency deals with collection agency issues every day, and they can help you receive a speedy resolution.

Now, we are not saying that all collection agencies are evil or have the intent to break the law. We are just saying that there is an elevated risk, and you can easily defend yourself. If something bad happens, it can be very painful. At worst, a dubious collection agency cleans out your checking account. You may win the money back in the end, but being without cash can be very difficult. Avoid the risks by planning ahead when you make a payment to a collection agency.

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Pay Down My Debt

In Debt and Pregnant. Now What?

Tuesday, October 28, 2014


I got pregnant when my husband and I were nearly $300,000 in debt.

Although it sounds crazy, I did it on purpose (both accumulating debt and getting pregnant that is.)

I wish I could say I had a super fancy Bentley parked in my driveway to have something to show for that high number, but really it’s all in our brains (which have lately been fried due to intense sleep deprivation.) To clarify, what I mean to say is all of our debt is student loan debt.

Sometimes people will say that education debt is “good debt,” and if that’s the case then we have really, really good debt. Our $300,000 student loan debt includes two master’s degrees – one for each of us – and three years of my husband’s medical school tuition. Unfortunately for us, we’ll probably be tacking on another $50,000 to it before he graduates from medical school in 2016, bringing the total number up to $350,000 and possibly even $400,000 since it’s actively accruing interest (fun right?)

Of course, my husband and I don’t actually believe that student loan debt is good debt. For most people, student loan debt cannot be discharged in bankruptcy (although according to U.S. News, in rare cases it actually can.) So, that means most people will have to pay back every penny of their student loans even if they encounter significant hardships. Basically, not only is our $300,000 of student loan debt burdensome, it’s downright scary.

Yet, being in debt didn’t stop me from actively trying to get pregnant, and it shouldn’t stop you if you have the three traits below.

1. Financial Discipline

Even if you have significant debt, I believe it’s fine to make big life choices like buying a house or having a child as long as you have financial discipline. You need to be the type of person who is acutely aware of their debt, not someone who is too scared to look at the number. If you can face your debt head on and have the ability to stick to a detailed financial plan, you can definitely make room for some of life’s biggest changes liking bringing adorable, stinky babies into the world.

Financially disciplined people track spending, create budgets, understand their cash flow, and do not live paycheck to paycheck. Their student loan payments are just another line on their budget that they carefully pay attention to and try to tackle each and every month.

For some people, like Kirsten at Indebted Mom, biology plays a factor into the decision to have children as well. Although Kirsten has significant student loan debt like I do, she was not willing to risk the possibility of not being able to have children due to her age. “It would have been nice to pay off debt first, but if we’d waited to pay off all our student loans, I probably wouldn’t have been able to have children,” says Kirsten. In order to tackle her high student debt, Kirsten remains employed as an aerospace engineer and makes extra money on the side through online writing jobs.

2. Extreme Hustle

When my husband and I decided we wanted to start our family, we knew that we needed to create a large savings account for our baby. Between hospital costs, baby gear, and other necessities, we knew babies were expensive. Thinking of a worst case scenario where would have to reach our $4,000 out of pocket max for our health insurance policy, we decided to save $10,000, which would hopefully leave some money left over to start a college fund.

Of course, with my husband being a student, the only real way to create $10,000 out of thin air was for me to hustle. I was already bringing in extra money from online writing jobs, but I decided to double my efforts. I took on new clients, e-mailed people tirelessly asking if they had work, and spent many, many nights staying up until one or two o’clock in the morning doing extra work. Every time I got a PayPal deposit from one of my new clients, I moved it right over to my Smarty Pig high yield savings account for our future baby.

[You can see the latest high rate savings account deals here]

Of course, the joke was on us. I got pregnant just a few months later, and much to our surprise, we found out we were having twins. We used every penny of that $10,000 savings since both of our children spent time in the NICU. I was so glad I had that savings account; otherwise, we would probably be in credit card debt right now too.

Of course, if you are in debt, there is the obvious option to wait to have children or not have children at all. Many people, like Kali Hawlk of Common Sense Millennial, decided not to have children, saving them hundreds of thousands of dollars in child rearing expenses over the course of two decades. This is certainly something to consider if you are in significant debt and are not equipped with the income or the tools to successfully handle paying off your debt and raising children at the same time.

Kali explains that, “If you can’t take care of yourself financially, you aren’t prepared to adequately provide what a child deserves,” and I agree with her. Children don’t need every toy or baby gadget on the Earth to be happy, but they do need basic necessities like food and a roof over their heads, monthly bills that can come into jeopardy if you are unable to make regular payments on your debt.

3. Ability to Handle Adversity

As anyone will tell you when he or she is dealing with large amounts of debt, there’s no such thing as a nice, linear payoff schedule. Life happens, things come up, and often you have to make hard decisions about just how much debt you want to pay off each and every month.

For us, the biggest shock of course was finding out we were having two babies, not one. To me, at 26 years old, I felt like I could handle one baby. I felt like my income, the funds I saved, and my general life experience meant I could be a good mother to one baby. However, the day I found out there were two, I spent an hour sobbing in the shower that night. Simply put, I was terrified. I was scared of everything like losing one or both of them since the pregnancy automatically became high risk. I was also worried how I was going to afford both of them with my husband still in school, and of course, I had tons of vain thoughts about how my small frame was going to carry two kids as long as possible throughout the pregnancy.

But, like all the other times in my life when I handled unexpected events, I pulled myself together and continued to work on a plan. I knew that if I could just work a little bit harder, not only could I be self-employed but I could also cut out the significant childcare expenses that two children bring by staying home with them myself.

That, of course, is exactly what I did. My boy/girl twins are 7 months old now, and I have been self-employed for almost a year. It hasn’t been without its difficult moments, that’s for sure, but because of hard work, financial discipline, and planning, we’re still on track to pay down our debt and ensure our children have everything they need to grow up happily and healthily.

You Have Nine Months to Prepare

If you are in debt and pregnant, there’s nothing stopping you from using this time to get your finances organized and develop a plan. The best thing you can do is, of course, reduce your expenses and raise your income. Trust me, I know it’s challenging to ask for a raise or take on extra work when you’re hugely pregnant, exhausted, and have to pee all the time. I’ve been there. But, your children are worth it. Their safety and security is worth it.

Essentially, if I can do it, you can do it. Take the steps now to work on developing the three qualities I mentioned above: discipline, hustle, and handling adversity. Luckily for you, children bring immense joy and happiness, and you’ll find having them is the best decision you’ve ever made – with or without your debt.

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Pay Down My Debt

The Reality of Six-Figure Debt on an Actor’s Salary

Thursday, October 23, 2014


Stefanie acting_lg

By Stefanie O’Connell,

Freddy Arsenault is a Broadway actor with six figures of student loan debt, thanks to the MFA acting program at NYU’s Tisch School of the Arts. Among actors, Arsenault is one of the “lucky ones”. According to Actors Equity Association, the professional theatre actors union, fewer than 15 percent of due paying members are able to secure work in any given week and only 17,000 of 40,000 members work in a given year. Of those jobs, only a select few carry the prestige and paycheck of a Broadway show.

Even with his success though, Arsenault doesn’t have the luxury of sitting back and “living the dream”. In fact, to keep up with the cost of New York City living and his student loan payments, Arsenault also works as a real estate agent. By continually supplementing his acting income, Arsenault has been able to contribute $800 a month to his $165,000 student loan bill since graduating in 2008. Thanks to interest, however, his monthly contributions haven’t even made a dent in the amount he owes, which still stands at $165,000.

Arsenault’s story is a powerful reality check for actors, artists, freelancers, and young people everywhere who suffer from the misconception that all of their financial woes will dissolve when they “make it”. Even the “dream job” can’t serve as a panacea for fiscal hardship or erase the need for a well-constructed financial plan.

What Happens When You Don’t Pay Up?

A 2014 poll by American Theatre Magazine revealed that 17 percent of artists are paying nothing towards their student loan bills each month- perhaps operating under the flawed assumption that the big career opportunity, should it ever arrive, will serve as the answer to their five or six figure debt. Unfortunately, this policy of postponement and willful ignorance can prove quite damaging.

If you become delinquent on your loan repayment for more than 90 days, your lender(s) will report your tardiness to the credit bureaus, nose-diving your credit score by as much as 100 points. Letting that delinquency fester will only result in further consequences- like default. At that point your loans are likely to be turned over to a collections agency and your entire balance will become due immediately. If you thought $800 monthly payments were rough, try coming up with 80 grand on the spot!

Taking Back Control

Rather than dealing with debt collectors and struggling to raise five or six figures overnight to repay your student loans like some kind of Mafioso, confront your bills head on by putting a realistic plan in place.

Start by calling each lender and negotiating. Asking for reduced interest rates or lower monthly payments is a far better strategy than letting the bills stack up in the corner and keeping fingers crossed for overnight stardom and millions.

The trouble many artists run into in the construction of a debt repayment plan is finding an amount to contribute towards their debt that will actually fit within their budget. The American Theatre Magazine poll found that 67 percent of the 500 artists surveyed made less than $25,000 (if anything) from theatrical endeavors in 2013. Without a livable or reliable source of income, it’s a struggle for these artists just to get through the month, let alone make a dent in six-figure debt.

For these individuals, the Income Based Repayment program might provide a sustainable solution. The IBR program limits monthly payments to 15 percent of disposable income and extends the repayment term to 20 or 25 years. To qualify for the program, individuals must prove “partial financial hardship”, i.e. evidence that minimum payments on federal loans are more than 15 percent of their income each month- not a problem for most artists. After 20 to 25 years of making payments using the IBR program, any remaining debt is forgiven (though taxes must be paid on that amount).

Unfortunately, the IBR plan is only available for Federal loans and the extended pay back period means paying a lot more in interest over the life of the loan. Artists using IBR payments are likely to find that their contributions barely cover the interest each month and don’t even touch the principal. In other words, despite their payback efforts, the total amount owed will continue to increase each month.

Diversifying Income Streams

As an alternative, artists and other low wage earners might want to consider implementing Arsenault’s approach- diversifying income streams to make more money.

That doesn’t just mean “survival jobbing” as a waiter to get to the next paycheck. It means establishing a substantial and reliable stream of additional income to cover basic living expenses, make significant contributions to debt payoff, and save for future financial goals.

Of 7,093 theatre graduates surveyed by the Strategic National Arts Alumni Project between 2011 and 2013, 10 percent said they left the field because of debt and 26.9 percent left because of higher pay in other fields.

Committing to earning enough money to fund expenses, debt pay off, and savings breaks artists free of the short-term, stress inducing cycle of living paycheck to paycheck and gives them long-term financial sustainability- making “burnout” significantly less likely.

People go into the arts to do what they love, but the strain of student loan debt addressed with short-term, band-aid strategies can quickly turn that joy into depression and resentment. Tackling debt head on with a viable long-term strategy is not only empowering financially, but also freeing artistically in that it allows for the continued pursuit of passion.

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Pay Down My Debt

3 Ridiculously Simple Methods to Pay Off Debt

Tuesday, October 21, 2014

sick credit

By LaTisha Styles,

This year I finally paid off over $22,000 of credit card debt. It took a lot of discipline and sacrifice; more than I thought I had when I started my pay off debt journey. Whenever I see stories of debt payoff, I always wonder, “How did you accumulate that much debt?” You might be thinking the same. Here’s my story.

When I reached the age of 18, I headed off to college, like most high school graduates. It was the first time in a few years that I did not have a job. I started working at the age of 15, at McDonalds, then later at a local grocery store. However, when I went to college, I was under the impression that I could survive on my scholarships and the money my parents promised to send me each month.

I quickly learned that I wanted more. I wanted to be able to go out with my friends, spend money on clothing, and eat more than the three square meals that were offered at my college. As I was thinking about all of the ways I could make more money, I walked by a display table on campus with a stack of free t-shirts. I slowed, listening for the catch, and a representative quickly accosted me. She offered me a free t-shirt if I completed the credit card registration form. I had never owned a credit card before but I thought, “What do I have to lose?” So I signed up and took my free t-shirt.

A few weeks later, I received a credit card in the mail with a $750 limit. Woo hoo! I was shocked. I knew I would need a job to pay the bill so I walked to a local day care and applied for a job. With my experience, I was quickly employed part time as an after hours daycare attendant.

Each weekday I would go to classes and then to work, and each weekend I would go to the mall. At first I paid each bill in full. It was fun to feel like an adult, managing my own money properly. But after a few months, my shopping got out of hand and I started paying the minimum payment. Fast forward a few years, I had multiple credit cards, all close to the limit, and I was still only paying the minimum payment.

After an ugly phone call with a particularly aggressive creditor left me in tears, I decided to get out of debt and pay everything off. In the meantime, the economy began a downward spiral. I no longer had an income and I was having a hard time just making the minimum payments. I decided to turn to a credit counseling service that helped me set a three-year plan to pay off all of my debt.

While I used a credit counseling service, there may be another way for you to get out of debt. Here are three methods that you can use if you want to pay off your debt:

1) Go with a Credit Counseling Service

I was deep in debt and my credit score was shot after missing consecutive payments. The credit counseling service contacted my creditors, negotiated interest rates, and managed my monthly payments. For this, I paid them a small monthly fee. They negotiated the interest rate to zero percent on the majority of my cards. They also negotiated fee concessions and served as my contact for those creditors. I used a non-profit credit counseling service that was recommended to me by a friend. They had offices in my city and I was able to sit down with a counselor. However, it is important to research the firm before you begin to do business with them. A worthy credit counseling service will be transparent with you. Expect statements from them and monitor statements from your creditors. If you are looking for a reputable credit counseling service, check the reviews at the Better Business Bureau to determine the credibility of the business.

2) Use a Balance Transfer Card

If you have a strong credit score (typically 700 or higher) then why not try a balance transfer?

You can use MagnifyMoney’s balance transfer comparison tool to find the offers that suit you best. Look for upfront balance transfer fees and the details on monthly minimum payments.

Make sure to understand the difference between a 0% promotional offer, like the Chase Slate for 15 months and the PenFed Promise Visa for 48 months at 4.99% with no fee While Chase may seem like a better offer initially, it will likely require you to roll over your debt to another promotional offer at the end of 15 months, unless you can pay it all off before the end of month 15.

Sometimes, a creditor will approve and open a new card for you but only give you a small credit line; enough to cover a portion of your requested balance transfer.

If this happens, you can look to do multiple balance transfers. However, if you use this method, be sure you are determined to pay off your debt. There is no reason to have new cards if you continue to spend beyond your means. And don’t spend on the card you used to complete the balance transfer! In fact, go ahead and lock it away as soon as you complete the transfer so you aren’t even tempted.

Say you have $10,000 of debt with Discover at a 21% interest rate. You apply for the Chase Slate 0% balance transfer offer for 15 months with no fee. Chase approves you, but only for $4,000. You can first call Chase and request a higher line of credit to move the entire balance over. Chase may agree to only raise it by another $2,000 leaving you with $4,000 left at Discover.

Next, you can apply for another balance transfer offer like Santander Sphere Visa at 0% for 24 months with a 4% fee to move the entire debt to a zero percent or low interest rate promotional offer.

Remember to mark your calendar for the month before your promotional period ends. If you haven’t paid down your debt, then shop around for other balance transfer offers to keep the interest rates low and help you save time and money on your debt repayment.

Confused about how to actually complete the balance transfer process? Then read this step-by-step guide.

3) Borrow the Balance from a Peer

Peer-to-Peer lending is an additional way to raise money to pay off your debt. If you have a good to excellent credit score, you can apply and crowdsource your funds. You may have many different lenders willing to lend at different interest rates. But if your current interest rate is higher on your credit cards, and you can get a lower interest rate via a peer-to-peer lending platform like LendingClub* or Prosper*, then this choice may work for you. The payback terms are typically three years, but each loan is different and will depend on the individual lender. Rates are determined by the proprietary system developed by the lending platform and will vary.

You can compare different personal loan offers here.

Paying down debt is a journey but it doesn’t need to leave you feeling completely hopeless. Reach out for help and figure out the best way to get yourself back to being financially healthy.

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Pay Down My Debt

When to Cut Off Your Boomerang Kid

Tuesday, October 21, 2014


Ah, the Bank of Mom and Dad. An institution that usually requires no formal application, charges little to no interest and doesn’t care about your credit history. Unfortunately, giving out zero percent interest loans to children leaves far too many parents in a financial bind.

During a recent financial empowerment seminar, a woman in the audience asked our team if she should borrow from her IRA to help out her adult kids.

To side step a delicate question, I asked when she planned on retiring instead of her age.

“Maybe five years,” she responded.

“Then I wouldn’t recommend stealing from your retirement fund to support your kids,” I told her. “Just remind them, if you don’t have the money to support yourself in retirement, they’ll need to be supporting you.”

It may sound controversial, because parents want to help their children through all stages of life. Unfortunately, the support needs to move from financial to emotional for many American families.

As a team, we often encounter parents asking how they can support their adult children while saving, paying down debt and prepping for retirement.

For many families, they simply can’t do it all. In fact, they need to evaluate when to cut their kids off.


A child returning home after college, or not leaving at 18, is an incredibly common phenomenon. But that doesn’t mean it should occur without a discussion. Parents allowing a child back in the home need to sit down and have a serious conversation with each other and then their offspring.

“Communication has to be clear as to what financial support will be provided and for how long,” explains Shannon Ryan, CFP, author and founder of The Heavy Purse.

“In most cases I have seen, parents have allowed the children to become dependent.  When the parents become frustrated with the situation they loose site of the role they played to create this predicament.  It is more painful to sit down and make a plan at this point but that is what needs to be done” says Ryan.

Charge rent

Charging rent not only helps parents cover the increased cost of a boomerang kid, but it teaches little Johnny or Susie how to budget. Knowing rent will be due can also motivate a kid to get a job.

If parents don’t actually need the extra cash to help the family make it through the month, then charging rent can be a parental 401(k). Once it’s time for Johnny or Susie to move out, mom and dad can hand over all the rent as a nice little nest egg to get independent life started.

Rent too harsh? Insistent on some contributions

Once children are capable of getting their own full-time jobs, it’s time for them to begin breaking away from the nest. Parents looking to provide support may offer to allow a child to live at home rent free, but ask the child to only cover the extra groceries and increase cost in utilities bills.

If a child is struggling to find employment, insist he or she help with chores around the house, cook meals and contribute to the home running smoothly.

Try to help a child understand finding a job should be his or her full-time job. Days should be spent filling out applications and going on interviews, not binge watching TV and playing video games. A bachelor’s degree doesn’t mean you’re above working at Starbucks, Target or the local bookshop.

Don’t rob your retirement fund

Men and women nearing retirement shouldn’t feel obligated to rob their savings for the future in order to help an adult child get through a rough patch today.

“Cutting your children financially off can be an incredibly tricky situation and one I believe that should be generally handled on a case by case basis. With that being said, there comes a point where parents need to make sure not to hinder their own retirement plans to help their children,” says John Schmoll Jr, founder of

“That may seem harsh, but will only shortchange you in the end and likely not be the best long-term solution for your children. Instead, look for other ways you can help out your children that won’t require huge financial outlay on your part,” explains Schmoll.

Parents must remember children can take out student loans for college and personal loans or low APR credit cards for emergencies. They have the luxury of time to pay down debt. There are no loans for retirement.

Use their time at home as a financial bootcamp

Instead of just bailing your children out, consider their time at home an opportunity to provide teachable moments about how to handle their finances.

Take the time to assess your child’s situation

Of course there are always exceptions to the rules.

“In the rare case of disability or loss of job when the child is doing everything they can, I would support the parents stepping in if it does not cost them their retirement,” says Ryan. “If the parents are not in a financial place to help then maybe they can help their children find the resources or social programs that could.”

Sometimes, kids need a little bit longer to grow into their adult selves.

Holly Johnson, founder of Club Thrifty, reflects on her own journey to maturity.

“I actually moved out when I was 18 but moved back in from 19 to 22ish,” shares Johnson.  “My parents took me in during that especially hard time in my life and I’m eternally grateful.”

Johnson recalls how she took sometime to grow into her own, but her parents provided a road map by serving as strong role models and continuing to show her love and support.

“I hope to show my kids the same kind of patience if they are slow to grow up once they reach adulthood,” says Johnson.  “Because of my parent’s generosity, I am able to support them now when they need it.”

And sometimes an adult child needs to come after hitting a rough patch. Perhaps it’s job loss, divorce, or another monumental life circumstance, which forces a child in his or her 30s, 40s or 50s to return home. Just remember to have a conversation about expectations before a child of any age sets up camp at home for months or years.

There is no one size fits all advice

Each family needs to assess their own situation both financial and emotional. Parents, just try to find a way to help your child without permanently damaging your ability to retire. The solution may include going to a financial planner to help you navigate through impending financial issues.

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Pay Down My Debt

Avoid Debt by Not Having Children

Monday, October 20, 2014


By Kali Hawlk,

Every time someone asks, “so when are you having kids?” I have two reactions. First, I cringe. Second, I feel grateful that I’m a woman living in 2014 where having children feels more like an actual choice than it ever has before.

I’m one of those millennial women who has zero interest in adding children to my family. My husband and I are happy, fulfilled, and satisfied with life in a household that consists of the two of us and some four-legged family members. We don’t feel like anything is missing. Our family is perfect to us.

The Choice to Not Have Children

To those with children, or to those who one day want them, my general response to kids (“no thank you”) often comes across as hostile or aggressive toward their way of life. That’s not my intention in declining to participate, and I feel like this is important to try to explain.

Having children is simply not an experience that appeals to me in any capacity. There has never been a time in my life when I’ve thought, “maybe I’ll give that a try someday.” A mother is not a state of being I’ve ever identified with. That doesn’t mean I spend time questioning the choices of those who do identify with motherhood and are happy to acquire the title of parent.

Far from feeling negatively about children, I just don’t feel anything at all. I don’t spend time thinking about the issue one way or the other (until someone presses me about it and then makes assumptions about me, my relationship, and my quality of life based on my answers). And I don’t hate kids. I like or dislike children on the same basis I like or dislike adults: their individual personalities.

The only thing I hate is that to have or not have kids is even a debate. You either want them or you don’t, and the only opinion you should get worked up about is your own. Having children is an intensely personal decision, and it is not a choice that should be judged by others either way.

Now that we’ve clarified that I’m not some sort of kid-hating jerk who thinks everyone with kids is somehow wrong, let’s move on to the more controversial points of the post.

The Financial Issues with Having Children

Because I feel completely unemotional about the idea of having children, the only issue that captures my attention is the practical matters involved. However you may feel about kids and having them for yourself, no one can deny the financial facts: kids don’t come cheap.

The US Department of Agriculture recently released research that indicated raising a child to the age of 18 would cost the average American middle class family $245,000. That’s a quarter of a million dollars just to get a child to the legal start of adulthood; the figure doesn’t even touch higher education costs. And that’s the average, meaning many families are paying far more.

When I ran my own information to calculate the average cost of my family having kids, I nearly fell out of my chair. This calculator from Baby Center says I’ll spend a whopping $319,422 to raise a kid to the age of 18 and pay for that kid’s public college education.

This number is particularly painful to me as it is far, far more than the total gross income I’ve made since I graduated college at 21 and entered the full-time workforce. (I’m approaching my 25th birthday now, and if you feel that’s young for having kids, keep in mind I live in the South and know many people younger than I am with multiple children.)

Combine this financial responsibility with all of the other financial goals Gen Y is working towards, and something becomes immediately, painfully obvious: if you want to avoid debt and save more, skip the kids.

The Cost of Children Makes It Difficult for Average Families to Achieve Financial Success

The average American household’s median income is about $51,000 per year, pre-tax. Even assuming that was post tax, the average yearly cost of raising a child, about $13,000, takes up a quarter of annual income.

That doesn’t leave much room for achieving a number of financial goals that you must hit in order to achieve financial security and independence. It’s difficult to gather up enough money for a down payment on a home, build an emergency fund with three to six months’ worth of expenses at a minimum, contribute a little something to your retirement down the road — all after accounting for the cost of kids.

Note that I said difficult, and not impossible. Many families do manage it — but many more simply can’t because of the financial burden associated with children. It may be enough of a struggle to make it from paycheck to paycheck, let alone add cash to different savings buckets and investments for the future.

[Be sure your savings account is earning more than 0.01% in interest. Compare rates here.]

Without the financial drain of children, my husband and I were able to purchase a home, build up an emergency fund, create a separate savings fund for international travel (what we personally prioritize and find necessary for a fulfilling life), and invest nearly half of our income so we can achieve our financial goal of retiring early to pursue our passions full-time. Adding kids to the mix would have made our version of financial success impossible.

We were able to do all of the above on a comfortable yet firmly lower-middle-class income; we’re above the average of $51,000 but below six figures. We would have not only struggled to get on track for our financial goals, but would’ve flat-out struggled financially.

Just adding one kid-related expense would start straining the cash we have available in our current budget for discretionary spending (which does not include cash available for bills and savings). Daycare for one child in our area is more than the mortgage payment on our home. Adding more costs would mean slashing the amount we could put into savings, and the total cost of kids per month and year would drive us awfully close to not being able to save or invest anything at all.

Should just one thing go wrong, our previously debt-free lives would be completely disrupted. Without money going to savings to handle financial emergencies, we’d be pushed into debt and hard pressed to find a way to dig ourselves out.

Financial Losses Are More Than Just Expenses

Adding children to the mix in my personal situation would also hinder my ability to earn an income and financially contribute to my family. Although I know women who do an amazing job of working stressful jobs from home while caring for multiple children — and am endlessly impressed by their ability to do so — I wouldn’t be able to do the same.

My business is extremely important to me, and I value the freedom and energy I currently have to devote to growing and expanding it. I couldn’t even get passed a pregnancy without losing income: as someone who’s self-employed, I don’t receive employer benefits to cover a stretch of leave. If I don’t work, I don’t get paid.

Many other women are in the same camp as I am, and either unable or unwilling to give up their ability to earn money. Complicating the situation is the fact that the United States is one of the worst countries in the world for providing paid family leave. In fact, we rank right at the bottom of the list with countries like Liberia, Suriname, and Papua New Guinea.

Many companies aren’t obligated to provide paid maternity leave (much less paternity leave), which leaves many working women no choice but to go without an income in the weeks they must spend recovering and caring for a newborn.

Moms are still at an earning disadvantage even after those initial weeks and months. As Erin Lowry explains in a piece for AOL’s Daily Finance, “on the financial side, non-moms have the advantage” because they’re more likely to earn more than women with children. There shouldn’t be a debate around whether that’s fair; it’s obviously not. But it’s another financial strike against choosing to have children, especially when women already struggle to secure equal pay for equal work.

So in counting the financial downsides to children, we must consider not only the expenses but also the opportunity costs to women who value their ability to work and earn income.

Avoid Debt by Not Having Children

I have plenty of personal reasons for not being interested in having children. My husband and I are on the same page, and our goals and our plans just don’t account for kids.

I’m glad this is not a financial issue I need to account for. Without children, we’re financially successful and ahead of most of our peers. We’re on track to achieve all our biggest financial goals — and many of them, like financial independence, in less than 10 years.

Add kids to the mix, and things start going financially bad awfully quick. We’d go from saving and investing the majority of our income to living paycheck to paycheck hoping we never experience an unexpected financial need at best and struggling with growing piles of debt at worst.

Dealing with debt? Consider a personal loan or a balance transfer to slash interest rates.

The ugly financial picture isn’t the only reason we don’t want kids and won’t have them. But it’s a reality that other millennials need to think about and plan carefully for if they do want children. There’s never a “right” time for kids and I’ve been told by grouchy parents that advising others make sure the financial stars are in alignment before reproducing is not realistic.

But, if kids are a part of the long-term plan for you, I still believe it’s worth your time and effort to give the financial issues some thought. If you can’t take care of yourself financially, you aren’t prepared to adequately provide what a child deserves. Ensure you can meet your own basic needs first, then have an emergency fund and at least a little bit invested in retirement accounts for your future before taking on the financial responsibilities associated with having kids.

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Pay Down My Debt

5 Steps to Prepare for a Child While in Debt

Thursday, October 9, 2014

Young couple calculating their domestic bills

By Matt Becker,

Money was the thing I worried about most before our first son was born, and my work as a financial planner with other parents tells me that I’m not alone. There are a lot of new financial responsibilities that come with starting a family and it can be hard to figure out what needs to be done, how much it will cost, and how to prioritize it all.

If you have debt, all of those questions can be even scarier. Debt can feel suffocating, and many of the parents I work with want to get rid of it as fast as possible.

But while getting to debt-free is a fantastic and admirable goal, I usually encourage new parents to pump the brakes a little bit.

Before you go into full-on debt attack mode, there are a few steps you can take that will not only make it easier to pay off your debt, but will give your family more financial security in the meantime.

Step 1: Find some big wins

Freeing up room in your budget is almost always the first step towards reaching any of your financial goals. Whether you want to pay off debt or save for the future, you’re going to need some free cash in order to make it happen.

The quickest way to do this is to focus on what I like to call “big wins”. A big win is simply a one-time effort that reduces or eliminates a regular bill, saving you money month-after-month without requiring any ongoing effort.

Here are some examples of big wins:

  •  Negotiating your cable bill. Or maybe even cutting it completely.
  •  Finding a lower-cost cell phone plan (check out companies like Republic Wireless and Ting).
  •  Finding a bank that doesn’t charge you ridiculous fees, and maybe even pays a little  interest, such as Internet-only banks Bank of Internet or GE Capital.
  •  If you really want to go big, you could downsize your home or trade in your car for a less  expensive model. Those are the kinds of decisions that could save you hundreds of  thousands of dollars over your lifetime.

With just a few one-time efforts, you could find yourself with a couple hundred dollars extra per month. Then it’s time to put that money to work.

Step 2: Build a cushion

No matter what kind of debt you have and what the interest rates are, it can be a good idea to put at least a small amount of money into a savings account before going into full-on debt attack mode.

The reasoning is pretty simple: having a baby is going to change your life in a lot of ways, and the reality is that it will take you some time to adjust. In the meantime, there are going to be expenses you didn’t plan for and having a little bit of savings will allow you to handle them with cash instead of putting them on a credit card.

That simple habit of handling the unexpected with cash instead of debt is possibly the biggest key to not only getting out of debt, but staying out of debt. And it’s a big mindset change, so the sooner you can start, the better.

The easiest way to build your savings cushion is to take some of the money you’ve saved with your big wins and set up an automatic transfer that sends it from your checking account to a savings account on the same day every month. With that consistent progress, it won’t be long before you have $500 to 1,000 dollars saved up, which should be enough to handle most unexpected expenses that come your way.

Step 3: Protect yourself

One of the best things you can do for your growing family is ensure that they will have the financial resources they need no matter what happens to you. Generally this means getting two things in place: insurance and wills.

I have to admit, I love insurance. No, it’s not the most exciting topic in the world. But when it’s done right it’s the best way I know to protect my family financially from some of life’s worst-case scenarios.

Here are the big types of insurance to consider as you start your family: Health

  •  Life
  •  Disability
  •  Liability

Writing wills is one of the most morbid topics in all of personal finance, but for new parents it’s also one of the most important. More than anything else, a will allows you to name guardians for your children, ensuring that they will be in good hands no matter what.

Step 4: Test drive 

This is a tip I give to all expectant parents, whether they have debt or not, mostly because it can help make sure that having a baby doesn’t send you into even more debt.

A few months before the baby gets here, estimate how much the baby will cost you on a monthly basis (babycenter has a good tool for this) and start putting that amount into a savings account. This will do two big things for you:

It will let you practice living on your baby budget before you actually have to do it.

It will help you build up that savings cushion we talked about in Step 2.

The combination of practice and savings cushion will make the whole adjustment easier, less stressful, and less likely to lead to more debt.

Step 5: Attack that debt!

Finally! After all of that we’re finally ready to start attacking that debt!

With those other pieces in place, you can send extra money towards your debt without the prospect of one financial mishap messing up your progress. You have a little cushion, you have the worst-case scenarios handled, and you have some practice living on a tighter budget. Now you can crush that debt with confidence!

There are two schools of thought when it comes to which debts to pay off first.

One is called the “debt snowball” and encourages you to pay your debts in order of balance, with the lower balance debts being paid first. Proponents of this method say that the motivation of quickly paying off individual debts makes it more likely that you will keep going.

The other is called the “debt avalanche” and encourages you to pay your debts in order of interest rate, with the highest interest rates being paid first. This is the approach that will save you the most money, as long as you stick with it.

No matter which approach you take, make it automatic just like you did with your savings cushion. Putting those extra payments on auto-pay will make sure that you’re attacking that debt consistently month-after-month and getting to debt-free as fast as possible.

Did you have debt when you were starting your family? What did you do to make it easier?

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Pay Down My Debt

4 Biggest Debt Temptations and How to Avoid Them

Wednesday, October 8, 2014


By Kali Hawlk,

Trendy outfits. Stylish furniture. Fancy vacations. Latest and greatest tech tools and gadgets. New cars. Bigger homes. This list of things people want and can’t get enough of could go on and on — because the temptation to spend money we don’t have is everywhere in our consumer-driven society.

We’re tempted to buy ourselves a little happiness with a new shirt, a fun piece of decor for our living space, or a snazzy smartphone case (that we somehow see as better than the other three we own but don’t use).

We treat ourselves with expensive coffee drinks, over-complicated cocktails, and meals that someone else prepared. We work hard, so we deserve it.

We want to keep up with the Joneses, or at least our peers. We don’t like feeling left out and owning less can often feel like amounting to less.

The temptation to spend isn’t difficult to explain, but that doesn’t mean it’s justified or no big deal. Here’s the problem: spending temptations, when left unchecked, lead straight to debt temptations.

When a Little Extra Spending Turns into a Whole Lot of Debt

Will a $4 latte that you buy on occasion after a rough day at work put you in the poorhouse? Unlikely. The problem occurs when you consistently make the mistake of spending just a little too much money — a little too much more than you actually have in your checking account to cover. “A little extra spending” quickly evolves into a financial mess when you charge purchases to your credit card and don’t pay that balance off in full.

“Not paying attention to where your money is going is what leads people into debt,” explains Sam Farrington, founder of SoundMind Financial Planning and member of XY Planning Network. Failing to track your spending or keep a budget leaves you more susceptible to overspending and living above your means.

As the old adage goes, you can’t manage what you don’t measure. Measure your money so you know you’re living in your means and not spending more money than you actually have.

The Number One Debt Temptation

You’d think that saying “don’t spend more money that you have” would be one of the most intuitive personal finance fundamentals out there. But many people find this exceedingly difficult, thanks to the top debt temptation: credit.

Lines of credit — usually associated with credit cards when we talk about debt — enable you to literally spend more money that you have access to via cash (in something like a checking or savings account). “The reality is that the credit card temptation will become your biggest financial snare down the road once the balance becomes unmanageable,” says R. Joseph Ritter, Jr. CFP® of Zacchaeus Financial Counseling, Inc.

It’s incredibly easy to open a credit card account, charge a purchase on the card, and forget about it until about four months later when your balance is steadily accruing interest. And just like that, you’re in debt.

Debt Temptation Intensifies When Credit Card Companies Sweeten the Deal

Credit cards may serve as an even bigger temptation when they’re rewards credit cards. Users may feel like they’re getting an amazing deal by opening up credit cards to get discounts, free items, statement credits, and points for fun and exciting experiences like travel.

According to Dennis M. Breier, president at Fairwater Wealth Management, “one of the biggest debt temptations, especially for young professionals, is putting vacations or large purchases on credit cards in order to get the points.”

While things like travel hacking — which involves taking advantage of credit card signup bonuses to earn massive amounts of reward points to score free airfare and hotel stays — can be beneficial, the temptation to go beyond your normal, everyday spending chasing after those points can be too much for some.

That’s where savvy consumerism abruptly ends and financial trouble begins. It’s tempting to open — and use — more credit cards than you need. It’s justified because you got a free airline ticket, right? Not when you had to spend $3,000 you didn’t have to score a flight that retailed for $300.

“Many young people will book a trip or buy something expensive with their card to get rewards points because it sounds smart. However, they won’t immediately pay this debt back,” says Breier. The temptation to use the card to feel “rewarded” is strong, and it can quickly leave you with a mass of credit card debt if you don’t have a plan to manage and pay your balances in full and on time each month.

Debt Temptations Go Beyond Plastic

Credit cards aren’t the only kind debt temptation out there — although they may be the easiest to give in to. Other types of credit, like auto loans, lure many into financial situations they can’t afford to get out of.

“Two of the biggest temptations include relying on credit cards and buying a car,” says Ritter. “Although the monthly payment makes a new car seem affordable and the new car smell is tempting, in the long run you will spend a lot less money on cars by buying a car that is several years old.”

Mark and Lauren Greutman, money management experts at, agree and also suggest buying used. “New cars depreciate by 20 percent right after driving off the lot,” they explain. “If you want a new looking car, I suggest buying a two year old car that was previously leased. You will get that new car feeling, but without that hefty depreciation.”

Avoiding Debt Temptation by Using Credit Cards the Right Way

Buying a used car instead of a brand new one is a simple and easy fix when it comes to avoiding debt temptation in our vehicles. Figuring out how to use and manage credit cards properly, however, is a bigger challenge for many.

Michelle Black, author and credit expert at, believes that improper attitudes towards credit card usage serve as the biggest trigger to overwhelming debt. She suggests that, even though you may have a larger line of credit than you do cash balance in the bank, you need to think of your credit in the same way you would cash.

“Credit cards should be treated just like your bank account: if you don’t have the money to pay off the bill right that moment then you should not use your credit card to make the purchase,” explains Black. “Resolve to never revolve a credit card balance from month to month,” she advises consumers. “Your wallet and your credit scores will thank you.”

Black also wisely points out that just because credit cards can lead us into debt temptation, we shouldn’t label all credit cards as “bad.”

“The cash and carry crowd will lead you to believe that the only way to achieve true freedom from debt is to avoid credit cards all together,” she says. “However, that is not only bad advice it is also insulting. If you develop true financial discipline then it is no harder to avoid overspending on a credit card than it is to avoid overspending the funds in your bank account.”

This is where financial education and literacy become critical. Credit cards — and other financial products that allow us to borrow money for a period of time — can be useful tools when we understand how they work and how to use them to our advantage.

It’s important that we can identify our debt temptations. But it’s just as important to realize that we’re not fated to give in to them. With the right knowledge and information, we can make empowered financial decisions to avoid temptation while making the most of powerful financial tools available to us.



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Balance Transfer , Pay Down My Debt

The Fastest Way to Pay Off $10,000 in Credit Card Debt

Tuesday, September 16, 2014

Before you read on, click here to download our FREE guide to become debt free forever! 

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Let’s say you have $10,000 in credit card debt, and are stuck paying 18% interest on it.

You already know that putting as much spare cash as you can toward paying down your debt is the most important thing to do. But once you’ve done that, so what’s next?

Use your good credit to make banks compete and cut your rates

MagnifyMoney’s Paying Down Debt Guide has easy to follow tips on how to put banks to work for you and get your rates cut.

You could save $1,800 a year in interest and lower your monthly payments based on several of the rates available today.That means you could pay it off almost 20% faster.

Here’s how it works.

Step One: Use MagnifyMoney’s tools to find other banks ready to give you a lower card rate

MagnifyMoney keeps the most complete list of the longest and lowest rate deals available right now, including deals with no fees. Just answer a few questions about how your debt and much you can afford to pay, and you’ll get a personal list of the deals that will save you the most.

promo-balancetransfer-halfIt also has six tips to make sure you do a balance transfer safely. If you follow them you’ll save thousands on your debt by beating the banks at their game.

You might be scared of a balance transfer, but there is no faster way to cut your interest payments than taking advantage of the best 0% or low interest deals banks are offering.

Your own bank might not give you a lower rate, but there are lots of competing banks that may want to steal the business and give you a better rate.

The economy is getting better and they want new customers like you.

Thanks to recent laws, balance transfers aren’t as sneaky as they used to be, and friendlier for helping you cut your debt.

Step Two: Consider another balance transfer

Sometimes the first bank you deal with won’t give you a big enough credit line to handle all your credit card debt. Maybe you’ll get a $5,000 credit line for a 0% deal, but have $10,000 in debt. That’s okay. In that case, apply for the next best balance transfer deal you see. MagnifyMoney’s list of deals makes it easy to sort them.

Banks are okay with you shopping around for more than one deal.

If your credit is good (about 680 or above) you’re in the sweet spot to save big money on interest with a balance transfer.


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Step Three: Consider a personal loan

If you didn’t qualify for any balance transfer, that’s okay, you have other options to lower your rate.

Try the MagnifyMoney Personal Loan finder, with the most complete list of lenders ready to help consolidate your credit card debt.

You’ll find lots of new companies fighting to give you a lower rate on your debt. Personal loan rates are often about 10-20%, but can sometimes be as low as 5-6% if you have very good credit.

Moving from 18% interest on a credit card to 10% on a personal loan is a good deal for you. You’ll also get one set monthly payment, and pay off the whole thing in 3 to 5 years.

Sometimes this may mean a higher monthly payment than you’re used to, but you’re better off putting your cash toward a higher payment with a lower rate.

And you’ll get out of debt months or years faster by leaving more money to pay down the debt itself.

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Pay Down My Debt

How to Win the Debt Repayment Game

Wednesday, May 21, 2014


Debt: one of the most vulgar of four letter words. Okay, maybe your parents wouldn’t wash your mouth out with soap for uttering it, but here at MagnifyMoney it’s a word we hope is prefaced with “I used to have” or “I don’t have any.”

Except this isn’t the case for nearly half of Americans.

According to our recent survey, 42.4% of Americans carry credit card debt with the average amount being a startling $10,902. This equates to average payments of $408 per month towards credit card debt.

You’d think with those steep monthly payments, the debt would be paid off in about two years. Unfortunately, that isn’t how debt repayments work. Monthly payments end up being primarily put towards interest with just a tiny amount of the principle debt being chipped away. 75.7% of those surveyed were paying higher than 15% interest rates on their debt meaning it could take years to decades of making minimum payments for them to crawl out of the red.

Fortunately, there are ways to leverage your existing credit card debt to your advantage.

That’s right. You can use debt to make the banks fight over you. Just think about it as being on any reality TV show where contestants compete for love. Except you aren’t elbowing other indebted individuals in the face, the banks are brawling for you to give them a rose.

In financial terms, it’s called a balance transfer.

With a balance transfer, you move your debt from Bank A to get an offer from Bank B. Bank B might give you a 0% interest rate for 18 months, which means all your payments are paying down the principle debt you owe. This can not only take years off your repayment strategy, but save you hundreds to thousands of dollars.

Why does Bank B want your debt? Because they’re counting on you tripping up and falling into one of their traps, so you’ll end up paying interest. If you follow our rules and stay strategic, then you can beat them at their own game.

There is one caveat: you need excellent credit. If you have a credit score of 750 or above, then you can use our Balance Transfer tool to see which option is best fit for your debt. Remember: you can’t transfer debt from one card to another with the same financial institution. If your original debt is with Chase, then you’ll need to find another option for your balance transfer.

What if you don’t have excellent credit?

Balance transfers are often exclusively reserved for people with credit scores in the 700s. If you haven’t quite reached that level of financial health, you can still utilize a personal loan to borrow money or help refinance existing debt.

Personal loans have far less traps and temptations than borrowing on a credit card. They also provide fixed interest rates, which means you don’t have to worry about your interest rate suddenly getting hiked up like you do with a credit card.

You can go through the process of seeing if a personal loan is the right fit for you without a hard inquiry on your credit score (hard inquiries make your score drop a few points).

Explore your personal loan options here.

Dealing with a credit score below 600?

You can try applying for a personal loan with One Main if your score is at least 550, but you should focus on taking steps for increasing your credit score.

Never fear, we’ve laid out six simple steps for building credit here.

What happens after debt repayment?

Once you fight your way into the black, it’s important that you assess the behaviors that put you in the red to begin with. Sometimes extenuating circumstances, such as medical emergencies, suddenly flip our lives upside down. Other times, an innate need to keep up with the Jonses can push us to live outside of our means. Identifying your road to debt and learning how to stay out of the red can be just as important as the process of paying it down.

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