Pay Down My Debt

Introducing FICO 9: What This Means for You

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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 info@magnifymoney.com or let us know in the comment section below!

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Balance Transfer, Pay Down My Debt, Reviews

Citi Diamond Preferred Balance Transfer Review

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A balance transfer is an excellent way to begin digging out of high-interest credit card debt, as long as you can use it responsibly. These deals should only be utilized if you’re going to be aggressively paying off existing debt and not charging new purchases to the card. Citi recent upped its deal in the balance transfer game, so we’re going to walk through what the card has to offer.

The Offer

The Citi Diamond Preferred balance transfer offer is zero percent interest for 21 months. It comes with a balance transfer fee of 3 percent (or $ 5 minimum).

Pros

  • No Annual Fee
  • 0% APR for 21 months: The long zero percent introductory APR period paired with no annual fee is by far the biggest selling point of the Citi Diamond Preferred card. Without the power of compounding interest working against you, getting your principal debt balance down becomes much more manageable.
  • The card also comes with Citi Identity Theft Solutions, which offers protection from fraud with zero liability on any unauthorized purchases.

Cons

  • Balance Transfer Fee: But before you discount this offer due to the fee, do the math. Often times you’ll still end up saving hundreds or thousands even with a balance transfer fee.
  • Limited Rewards Program: The additional perks associated with the Citi Diamond Preferred Card are limited. The primary purpose of the card however is to utilize the promotional intro rate to save on interest, not to cash in on extras.
  • Foreign Transaction Fee: Use your Citi Diamond Preferred Card outside the US and you’ll get hit with a hefty three percent fee on every purchase.

What Do I Need to Qualify?

First, you need to be rolling your existing credit card debt from a non-Citi card. This option is not eligible for people who already have debt with a Citibank credit card.

In general, people with credit scores of 700 or higher stand the best chance of being approved for a credit card. There are other factors that go into the decision-making process, so a 700 score or higher doesn’t guarantee you a spot. However, you can check to see if you’re pre-qualified for Citi cards to minimize your chance of rejection. You can do this without affecting your credit score by going to this site.

Who is it best for?

If you’re currently carrying debt on cards with high APRs or if your introductory zero percent rate is about to expire, the Citi Diamond Preferred card can provide a solution for extended interest free debt repayment.

Looking Out for the Fine Print 

  • 3 percent fee (or $5 minimum) on balance transfers
  • Balance transfers must be completed within 4 months of account opening to benefit from intro APR promo
  • 29.99 percent penalty APR
  • Late/ Returned Payment Fee: Up the $35
  • Cash Advance Rate: Up to 25.24%
  • Cash Advance Fee: 5% ($10 minimum)

Cardholders should note that late, missed, or returned payments, even in the introductory promotional period, can result in a penalty APR of up to 29.99 percent effective immediately. In other words, one payment error can cost you to lose the promotional rate and stick you with a high APR indefinitely.

This penalty policy is not unique to the Citi Diamond Preferred card. Late and missed payments should be avoided regardless of which credit tool you utilize as the consequences are expensive and cost you the entire benefit of the introductory promotional APR you signed up for in the first place. On top of all of that, late and returned payments are subject to fees of up to $35. Pay on time and in full to avoid those high costs.

The grace period on the Citi Diamond Preferred Card is 23 days – even after the promo APR expires; that means you have 23 days to pay down your balance to avoid accruing any interest. The only exceptions to the grace period are balances transfers performed after the first four months of account opening and cash advances, which begin accruing interest from the date of the transaction. The APR for cash advances is currently 25.24 percent.

In addition to higher APR, cash advances are subject to a fee of either $10 or 5 percent of the cash advance, whichever is greater. Balance transfer fees are $5 or 3 percent of each transfer, depending on which is greater; and foreign transaction fees come in at 3 percent of each purchase transaction (in US dollars).

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How it Compares to the Competition

While a 21-month promo period is appealing, a three percent balance transfer fee on a large amount of debt can present a significant cost. If you were to roll over $10,000, you’d pay a $300 fee. Keep in mind, if you left $10,000 on a card at a 15 percent and paid $300 a month, it would cost you $3,016 in interest alone and it would take 44 months to pay off.

Put $10,000 at a balance transfer card at 0 percent for 21 months with a 3 percent fee, and you’d only pay $614 in interest and fees. The debt would be paid off in 36 months.

[Use this tool to calculator your options.]

If paying a fee is still too much to stomach, the Chase Slate credit card offers a balance transfer with no fees. The zero percent introductory APR is only 15-months instead of the 21-months offered by Citi, but if you can commit to conquering your large debt in the shorter time frame, this alternative might prove a better option. You can always roll the remainder to Citi Diamond Preferred to finish off your debt repayment at zero percent.

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If you’re on the other end of the spectrum and would prefer a longer promo period, consider the Santander Sphere card. While the balance transfer fee is a higher 4 percent, the zero percent APR lasts for a full two years.

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Citi Diamond is Competitive, But Not the Best Offer

The Citi Diamond Preferred Card presents a low cost solution for those looking to pay down debt in a 21-month time frame. The rewards are limited and fees on foreign transactions and cash advances are less than ideal, but for the primary purpose of the card, paying down debt without crushing interest, the Citi Diamond Preferred card offers a good deal with a long, leisurely time frame.

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College Students and Recent Grads, Pay Down My Debt, Reviews

Education Success Loans Review

Students throwing graduation hats

The Student Loan Finance Corporation offers Education Success Loans for borrowers looking to refinance their student loans.

If you’ve been struggling to make payments according to the current terms of your student loans, or can’t keep up with how many lenders you’re paying, then refinancing could be a good option for you.

Education Success Loans sets itself apart by offering a different type of loan – a hybrid that starts with a fixed interest rate, and ends with a variable interest rate. Let’s take a look at all the details to see if this is a good option for you.

Refinance Terms Offered

With the Education Success Loan, you can refinance both federal and private student loans. The minimum is $5,000 ($15,001 in KY), and the maximum is $125,000 for undergraduates, and $200,000 for graduates and above.

Fixed rates begin at 4.99% and go up to 7.99% APR – this is with a 0.25% auto-payment deduction.

Education Success Loans offer a hybrid option of an initial fixed rate, and a variable rate after a certain amount of time has passed. All of its loans are offered on a repayment term of 25 years.

There are three loan options available. You can have a fixed rate for 1, 5, or 10 years, with variable rates going forward. That means you’re looking at paying a variable rate for 24, 20, or 15 years.

An example payment looks like this: If you borrowed $10,000 at a 5.24% APR on a 25 year repayment term, your monthly payment will be $59.87.

The Pros and Cons

The pro is the repayment period – 25 years is on par with what income-based repayment plans offer. Extending your repayment term is an easy way of lowering your monthly payment.

However, be aware it also causes you to pay more over the life of the loan due to how much in interest you’ll be paying.

The other negative that goes along with that is all three loan options switch over to a variable rate at some point. This means your payments will likely increase. You need to make sure you can either 1) pay off your loans before the variable rate kicks in, or 2) are earning more money at that point in time to cover the increased payment.

According to its FAQ, “Limited deferment options may be available,” but, “There is no repayment forbearance option available with this loan.” If you have federal loans, be aware that refinancing with private lenders will eliminate the benefits that federal loans offer (forbearance, income-based repayment options, forgiveness, etc.).

Another positive to consolidating your student loans means owing less money to lenders. Consolidating and owing one lender will simplify your student loans.

What You Need to Qualify

Education Success Loans list the following requirements:

  • You must be the legal age of majority of the state you reside in
  • You must be a U.S. citizen or permanent resident
  • You need a Bachelor’s degree or higher from an eligible Title IV school
  • Your debt-to-income ratio (including housing) should be between 40%-43%
  • You must earn $24,000 annually
  • You have to have been out of college for at least 30 months before applying.

Refinancing is not offered to those that reside in AZ, IA, IL, or WI.

If you need to have a co-borrower apply with you, they are accepted.

There’s a minimum credit score needed to apply, but it’s not available to the public. Education Success Loans will look at other factors such as your credit history and DTI. You shouldn’t have any minor issues with your credit (late payments) within the last two years.

Additionally, you may be able to consolidate loans that are currently in forbearance or deferment. However, Education Success Loans will go into repayment immediately, though, so if you can’t afford to pay right now, you should wait.

Application Process and Documents Needed to Apply

The application process is straightforward, and after applying, you can expect to hear back within 3-7 days.

While you can apply online, you can also apply via fax or by mail. The application is available for download here.

When you apply to refinance, Education Success Loans will conduct a hard inquiry on your credit.

It’s likely you’ll need to provide pay stubs or tax returns to verify your income, and if any additional documentation is needed, the customer care team will notify you.

Who Benefits the Most from Refinancing Student Loans with Education Success Loans?

Considering the standard repayment for student loans is 10 years, and the max you can have a fixed rate for is 10 years, those that can pay off their student loans within that time will benefit the most.

If your APR is greater than 7.99% (the starting point for the 10 year fixed rate option), then you’ll be able to save money by refinancing as well. Just make sure you can pay back your loans before the variable rate kicks in.

If you’re having difficulty making payments right now, and have federal loans, try looking into the income-based repayment options available. You can extend your repayment term and still keep benefits such as forbearance and deferment.

The Fine Print

There’s no prepayment penalty or origination fee with the Education Success Loans.

If your payment is 10 days past due, you’ll be charged a late fee of 5% of the unpaid amount or $25, whichever is less.

If your payment doesn’t go through and it’s returned, you’ll be charged a $30 returned check fee.

Should you default on your loan, up to 25% of the principal balance can be assessed for collection efforts depending on where you live.

Remember that rates are variable after 1, 5, or 10 years, depending on the loan option you choose. Education Success Loans states that variable rates can be adjusted quarterly on the first day of January, April, July, and October. The interest rate is capped at 15%..

For this reason, and no cosigner release option, Education Success Loans earned an F transparency score.

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Alternatives for Student Loan Refinancing

Not thrilled with the half fixed rate, half variable rate option? It’s not a common model when looking at student loan refinancing. It’s understandable to want a stable fixed rate so you can budget your payments accordingly.

SoFi* offers both fixed and variable rates. Its fixed rate APR range is 3.50% – 7.24%, and its variable rate APR range is 1.90% – 5.18%, both favorable and currently the best for student loan refinancing. It also offers a repayment term of 20 years.

If you need to refinance a larger amount, SoFi doesn’t have a cap on how much you can borrow, and it conducts a soft credit inquiry when you apply.

SoFi also offers Unemployment Protection, so if you fall on hard times and can’t make a payment, you might be eligible for forbearance. SoFi also helps borrowers with job placement.

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Another good option is CommonBond. It offers a hybrid loan option, but also offers fixed and variable rate loans. Its fixed rate APR range is 3.74% – 6.49%, its variable rate APR range is 1.93% – 4.98%, and its hybrid rate APR range is 3.99% – 5.64%. These rates are close to what SoFi offers, though the maximum you can refinance with CommonBond is $220,000.

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The repayment terms offered are the same as SoFi, though the hybrid option is only available on a 10 year repayment term. CommonBond also does a soft credit pull. The downside: only certain schools and programs are eligible under its refinancing program, though it is expanding.

Beware the Hybrid Loan Option

Take care when considering if a hybrid loan is going to improve your student loan situation. The low fixed interest rates look great, but keep in mind they can, and will, increase. We all hope to be more successful later on in life, but losing your job or changing careers and taking a pay cut can happen. Don’t put yourself in a situation you might regret a few years down the line.

There are other lenders who offer lower fixed rates if you have great credit, and it doesn’t hurt to apply, especially when those lenders are only conducting a soft credit pull. For lenders who conduct hard credit inquiries, be sure to shop around within a period of 30 days, as this won’t have as much of a negative impact on your credit score.

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Pay Down My Debt, Personal Loans, Reviews

Prosper Personal Loan Review

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Prosper is a peer-to-peer lending platform that offers a quick and convenient way to take out loans with fixed and low interest rates.

It takes minutes to fill out an application to check loan terms and rates. And once pre-approved, you create a loan listing that appears in the Prosper* marketplace. From there, peer lenders select loans to invest in. Then when you’re fully approved and your loan is funded, the money is transferred straight to your bank account.

How easy is this process? Here we’ll share with you the nitty gritty details of a Prosper loan including how to qualify and the terms and fees. Plus we’ll compare it to other personal loan options with pros and cons.

Prosper Loan Qualifications

To apply for a loan you must be a U.S. resident who lives in a state other than Iowa, Maine or North Dakota. In addition, according the Prosper Prospectus (on page 55) applicants should have the following:

  • A bank account and a Social Security number
  • A credit score of at least 640 on the FICO 08
  • No more than seven credit inquiries in the last six months
  • A steady source of income
  • A credit-to-debt ratio below 50%
  • At least three open credit accounts, which include credit cards, loans and other lines of credit.
  • No bankruptcies filed in the last year

Loan Details

Prosper currently offers fixed rate, unsecured personal loans from $2,000 to $35,000 with APR ranging from 6.68% to 35.97% and loan terms of 36 and 60 months.

The interest rate and amount you can borrow is determined by the Prosper Rating assigned to you at application. The Prosper Rating is a proprietary credit rating system Prosper created to maintain consistency while assessing loan applications.

The rating goes from AA to HR with AA being the highest. Applications with ratings on the higher end are approved for more money and lower interest rates. A breakdown of the loan terms and APR associated with each Prosper Rating is shown in the table below.

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Your Prosper Rating and credit score range are shown on your loan listing in the marketplace to help lenders consider the risk of your loan before investing. A loan listing stays active for 14 days. After 14 days, your loan must be at least 70% funded for you to receive money. If your loan listing doesn’t get the minimum amount of funding it’s cancelled and you must apply again.

The Inside Scoop on Fees

The main fee associated with a Prosper loan is the origination fee. How much you pay for origination depends on your Prosper Rating and the fee ranges from 1% to 5%. The fee is deducted from the loan before it’s deposited into your account, which means you should account for the fee when you state how much you need to borrow.

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The only other fees you may encounter while using Prosper are penalties for missed or returned payments. Failed payments incur a $15 charge. Late fees begin accumulating when payments are past 15 days late at either $15 or 5% of the unpaid installment amount, whichever one is greater.

Prosper Transparency Rating

We give Prosper a transparency rating of “A” because of its simple terms and minimal fine print. We also give it a high score because it allows you to check rates with a soft pull which won’t impact your credit score. Plus there are no fees required to borrow other than the origination fee and penalties for delinquency.

The Pros and Cons

We’ve given Prosper a top mark, but what are its pros and cons? Let’s dive into both the good and the bad of Prosper.

Pros

  • There’s no fee for paying early or making partial payments.
  • You can qualify for a Prosper loan with average credit.
  • It only takes a few minutes to check for rates.
  • Paying off a Prosper loan can reduce your interest for future Prosper loans.

Cons

  • You only have a short window of time to secure funding from peer investors.
  • The Prosper Rating is slightly ambiguous because it’s an internal metric, so it’s hard to predict your interest rate or origination fee before applying.
  • The origination fee can get expensive depending on your Prosper Rating.
  • Prosper APR is high compared to other personal loan lenders like SoFi and LendingClub.

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Prosper Against the Competition

How does Prosper stack up to two major personal loan contenders: LendingClub and SoFi?

As mentioned, Prosper will approve applicants with average credit scores below 700 (if other minimum requirements are met) which is comparable to LendingClub*. However, Prosper APR is higher than LendingClub which caps at 28.96%. Prosper APR caps at 35.97%.

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Out of all three personal loan options SoFi* has the absolute lowest APR range from 5.50% to 8.99%, but it also requires the highest credit score. Applicants with scores over 700 have the best shot at getting approved by SoFi.

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As far as fees, SoFi also has an edge over both Prosper and LendingClub. SoFi doesn’t have an origination fee and charges less for late fees. Prosper and LendingClub charge an origination fee of 1% to 5% and late fees at $15 or 5%, whichever one is greater. SoFi charges the lesser of $5 or 4% for late fees.

Who can benefit the most from a Prosper Loan?

People with average credit who want to refinance or take out a cash advance will benefit the most from a Prosper loan. A Prosper loan beats relying on high-interest variable credit cards or payday loans with obscene terms when you need to borrow cash. However, if you have the qualifications to borrow from SoFi, it’s clearly the best option out of all three lenders discussed here because it has the lowest fees and APR.

The great thing about Prosper and these other online lenders is the ability to check rates several times with a soft pull. So shop around for rates at each one thoroughly before making any decisions.

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College Students and Recent Grads, Pay Down My Debt, Reviews

CommonBond Grad Refinance Loan Review

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CommonBond was founded by three Wharton MBAs who felt the sting of student loans after they graduated. The founders decided to provide a better solution for graduates, as they thought the student loan system was broken and in need of reform. As a result, they strive to make the refinance (and borrowing) process as simple and straightforward for graduates as possible.

CommonBond began by servicing students from just one school, and has since expanded to service other schools and graduate programs. It continues to grow today.

As you might be able to tell by the name, CommonBond thinks of its community as family. There is a network of alumni and professionals within the community that want to help borrowers. This alone sets it apart from other lenders, as members often meet for events.

While these are all great things, we know you’re more interested in how CommonBond might be able to help you make your student loans more affordable. Let’s take a look at what terms and rates they offer, eligibility requirements, and how they compare against other lenders.

Refinance Terms Offered

CommonBond offers low variable and fixed rate loans. Variable rates range from 1.93% – 4.98% APR, and fixed rates range from 3.74% – 6.49% APR.

It even offers a hybrid loan option, with APRs ranging from 3.99% – 5.64%. Note that these rates take a 0.25% auto pay discount into consideration.

You can refinance up to $220,000, and variable and fixed rates have terms of 5, 10, 15, and 20 years.

The hybrid loan is only offered on a 10 year term – the first 5 years will have a fixed rate, and the 5 years after that will have a variable rate.

CommonBond has a great chart listing repayment examples based off of borrowing $10,000, which can be found on its rates and terms page.

To pull an example from that, if you borrow $10,000 at a fixed 4.74% APR on a 10 year term, your monthly payment will be $104.80. The total amount you will pay over the 10 year period will be $12,575.90.

The Pros and Cons

CommonBond offers competitive interest rates, but the downside is that its loans are fairly niche. As you’ll see below, CommonBond is currently only lending to graduates from specific schools and programs.

To be clear, “graduates” means students who hold a Masters degree or higher in the following fields: Accounting, Dental, Law, Nursing, Healthcare Administration, Finance, Engineering, Business, Medicine, Optometry, Pharmacy, Physician Assistant, Public Policy, Real Estate, and Veterinarian.

If you graduated with a Bachelors degree, then you’re not eligible for a loan with CommonBond.

One pro to consider is the hybrid loan option available. It might seem a little confusing at first – why would someone want a variable rate down the road?

If you’re confident you’ll be able to make extra payments on your loan and pay it off before the 5 years are up, you might be better off going with the hybrid option (if you can get a better interest rate on it).

This is because you’ll end up paying less over the life of the loan with a lower interest rate. If you were offered a 10 year loan with a fixed rate of 6.49% APR, and a hybrid loan with a beginning rate of 5.64%, the hybrid option would be the better deal if you’re intent on paying it off quickly.

What You Need to Qualify

CommonBond doesn’t list many eligibility requirements on its website, aside from the following:

If your school is not listed, CommonBond encourages potential borrowers to reach out via email. It recently received another round of funding, so schools and programs are expected to expand soon.

CommonBond doesn’t specify a minimum credit score needed, but based on the requirements of other lenders, we recommend having a score of 660+, though you should be aiming for 700+. The good news is CommonBond lets you apply with a cosigner in case your credit isn’t good enough.

Documents and Information Needed to Apply

CommonBond’s application process is very simple – it says it takes as little as 7 minutes to complete. Initially, you’ll be asked for basic information such as your name, address, and school.

Once you complete this part, CommonBond will perform a soft credit pull to estimate your rates and terms.

If you want to move forward with the rates and terms offered, you’ll be required to submit documentation and a hard credit inquiry will be conducted. CommonBond lists the following as required:

  • Pay stubs or tax returns (proof of employment)
  • Diploma or transcript (proof of graduation)
  • Student loan bank statement
  • ID, utility bills, lease agreement (proof of residency)

CommonBond also notes it can take up to 5 business days to verify documents submitted, so the loan doesn’t happen instantaneously.

Once your documents are approved, you electronically sign for the loan, and CommonBond will begin the process of paying off your previous lenders. It notes this can take up to two weeks from the time the loan is accepted.

Who Benefits the Most from Refinancing Student Loans with CommonBond?

Borrowers who are looking to refinance a large amount of student loan debt and who have graduated from the list of schools and programs CommonBond serves will benefit the most from refinancing with them.

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Keeping an Eye on the Fine Print

CommonBond does not have a prepayment penalty, and there are no origination fees nor application fees associated with refinancing.

As with other lenders, there is a late payment fee. This is 5% of the unpaid amount of the payment due, or $10, whichever is less.

If a payment fails to go through, you’ll be charged a $15 fee.

It’s also noted that failure to make payments may result in the loss of the 0.25% interest rate deduction from auto pay.

Transparency Score

Getting in touch with a representative is simple and there is a chat and call option right on the homepage. Some lenders have this hidden at the bottom, or they don’t offer a chat option at all.

CommonBond also lets borrowers know they can shop around within a 30 day period to lessen the impact on their credit.

It does not list its late fees on its website, unlike other lenders. However, after making a chat inquiry, the question was answered promptly.

CommonBond does offer a cosigner release and is ranked with a B transparency score.

Alternative Student Loan Refinancing Lenders

Most student loan refinance lenders aren’t as niche as CommonBond. If you hold a Bachelors degree or your school isn’t on its list, there are other options to explore.

One such option is SoFi. While it also has a list of approved schools, its loans are available to those without a Masters degree. It’s always worth taking a look to see if SoFi* has your school on its list even if CommonBond doesn’t.

The two lenders are very similar – CommonBond offers “CommonBridge,” a service that helps you find a new job in the event you lose yours. SoFi offers a similar service called Unemployment Protection.

SoFi’s variable rates are currently 1.90% – 5.18% APR, and its fixed rates are currently 3.50% – 7.24% APR, which is in line with what CommonBond is offering.

SoFi also doesn’t have a limit on how much you can refinance with them.

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 *referral link

Another lender to consider if you have less student loan debt (or a Bachelors degree) is Citizens Bank. You can refinance up to $90,000 with them ($130,000 with a graduate degree, or $170,000 with a professional degree).

Its variable rates are currently 2.82% – 7.46% APR, and its fixed rates are currently 5.24% – 9.39%, slightly higher, but still competitive.

citizens-bank

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Lastly, you could check out cuStudentLoans. It offers student loan refinancing through credit unions, but only offers variable rates. The maximum amount to refinance with an undergraduate degree is $125,000, and the maximum amount to refinance with a graduate degree is $175,000.

All three of these options provide forbearance in case of economic hardship and offer similar loan options (5, 10, 15 year terms).

CUStudentLoans (1)

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Don’t Forget to Shop Around

As CommonBond initially conducts a soft pull on your credit, you’re free to continue to shop around for the best rates if you’re not happy with the rates it can provide. As the lender states on its website, if you apply for loans within a 30 day period, your credit won’t be affected as much.

Since CommonBond does service a certain section of student loan borrowers, check out other options if you’re not eligible for a loan with them. There are many lenders out there who aren’t as strict with their eligibility requirements.

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College Students and Recent Grads, Pay Down My Debt, Reviews

cuStudentLoans Consolidation Review

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cuStudentLoans is a service provided by LendKey. The service allows you to consolidate your student loans through a network of credit unions. Credit unions are member-owned institutions that typically provide higher rates for saving and lower rates for lending. You will likely also be able to find better credit card interest rates, fewer fees, and accounts that require lower minimum balances.

CUStudentLoans (1)Because credit unions are member owned, the service provided directly benefits the members. However, in order to join a credit union and profit from the perks, you must be eligible to join. For example, the Credit Union of Georgia accepts members that reside in Cobb or Cherokee county, students or employees at educational institutions in those counties, or immediate family members of those primarily eligible. They also accept those associated with Cobb County realtors, a church in Cherokee county, and retired educators in Cobb County. If they had the best rates for loan but you were not eligible to become a member, then you are just out of luck.

However, cuStudentLoans aims to match credit union lenders with borrowers through the network of more than 150 not-for-profit credit unions.

In this review, we will share:

  • The pros of consolidating through cuStudent Loans
  • The cons of consolidating through cuStudent Loans
  • Who should consider consolidating
  • The potential LIBOR (London Interbank Offered Rate) surprise
  • Alternatives that you should consider

The Pros

cuStudentLoans offers a low rate of 2.92% APR for a max term of 15 years. This provides the borrower more time to repay the loans than the standard 10-year repayment offered on federal student loans.

There are no origination fees and you can consolidate a maximum of $175,000. cuStudentLoans does offer forbearance/hardship programs and interest only repayment as well. A forbearance program allows you to halt student loan payments for a period of time if you are experiencing a financial hardship. However, interest continues to accrue and once the forbearance ends, the interest is capitalized, or added to the principal balance.

Borrowers can choose two products, the cuScholar Private Student Loan and cuGrad Student Loan Refinancing. cuScholar allows you to borrow through not-for-profit credit unions with the Private Student Loan product with rates as low as 3.22% APR. The cuGrad Student Loan Refinancing product allows you to refinance or consolidate undergraduate and graduate private and federal student loans into one loan with one interest rate. Rates start as low as 2.92%.

The Cons

Choosing to consolidate federal loans with private loans will result in a loss of options provided with federal loans. For example, a loan consolidation with any outside lender prevents you from applying for an income based repayment and other repayment options.

Not all applicants will qualify for the lowest rate. Applicants with excellent credit scores will qualify for the lowest rates. The rate is variable and is calculated by adding a margin ranging from 2.99% to 7.9% to one month LIBOR. LIBOR is the London Interbank Offered Rate and is a benchmark rate that some of the world’s banks use to charge each other for short-term loans. Because LIBOR changes as the cost of borrowing changes for banks, it is often used in the calculation of floating rate loans. However, the rate is ultimately capped at 18%.

[How to Get a Student Loan Forgiven]

For Whom is cuStudent Loans Best?

If you have private student loan that you would like to consolidate and the loans have high interest rates, then this product may be for you. Assuming you owe $30,000 in student loans with a monthly payment of $324, and excellent credit, you could save an estimated $1,009 per year. This savings is simply the difference in monthly payments. The new payment of $239.90 will allow you to save $84.10 each month totaling $1,009 by the end of the year. With an added reduction in interest, you could potentially save even more over the life of the loan.

The ideal candidate for Student Loan Refinance has:

  • $7,500 – $125,000 in undergraduate student loan debt ($7,500 – $175,000 in graduate debt)
  • Applicants must have reliable gross monthly income of $2,000 to apply alone. To apply with a cosigner, applicants must have reliable gross monthly income and cosigners must have reliable gross monthly income of $2,000.
  • US Citizen or Permanent Resident

[The Consequences of Refinancing Federal Student Loans]

The Potential LIBOR Surprise

With LIBOR at record lows for the last few years, there is much speculation on when we can expect an increase. A loan with an interest rate based on LIBOR could present a nasty surprise if the rate jumps unexpectedly. A monthly payment that was previously manageable could double or triple with a rate jump. With the same $30,000 balance, a low 2.9% interest rate would mean a $288 monthly payment. However, if one month LIBOR increases and the loan rate jumps to the maximum 18%, the monthly estimated payment increases to $541; more than double the original payment.

CUStudentLoans (1)

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[Miss a Student Loan Payment? Where to Find Help and What Happens]

How cuStudentLoans Compares to Competitors

Both SoFi and Citizens Bank offer fixed rate loan products. cuStudentLoans only offers variable rate products. The lowest rate for both SoFi and Citizens Bank products are higher than the lowest rate offered by cuStudentLoans; however, the fixed rate is not subject to change.

SoFi* is an option for student loan refinancing and offers fixed rate options with low rates ranging from 3.5% to 7.24%. SoFi also offers 20-year terms with no maximum on the total loan amount. However, SoFi cannot provide loans to residents of certain states so you must check eligibility before applying. No application, origination or prepayment penalty fees.

SoFi logo

Apply Now*referral link

Citizens Bank offers a fixed rate education refinance loan with low rates ranging from 4.74% to 8.9%. However, the maximum loan is capped at $170k for graduate and $90k for undergraduate refinance. Citizens Bank offers 20-year terms and there are no prepayment penalties.

citizens-bank (1)

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So, Should You Consolidate?

If you want to consolidate your student loans and you have excellent credit, then consider cuStudentLoans as an option. However, the variable interest rate is a concern and could cause your monthly payment to jump at any time. And consolidating federal student loans could cause you to lose some of the benefits offered with federal loans. But keep in mind; consolidating your student loans can help you streamline your finances as you make one payment each month. Evaluate your loan type, federal or private, and determine if a loan consolidation with cuStudentLoans is right for your situation.

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Building Credit, Pay Down My Debt

Looking For A Credit Card With Bad Credit?

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If you have a bad credit score, it can be very difficult to get approved for a credit card or a loan. And even if you are approved, you will end up paying significantly higher interest rates. If you’re looking for a credit card with bad credit, this guide will help you understand:

  1. Do you really have bad credit?
  2. What is the best option to get approved now?
  3. Which companies should you avoid?
  4. How can you build your credit score so that you qualify for the best deals in the future?

1. Do You Really Have Bad Credit?

In order to be approved for a good credit card or loan offer, you typically need to have:

  • A 650 FICO score or higher: If you obtain your credit score from free sites like CreditKarma, you are receiving your VantageScore. The ranges on the VantageScore are similar to your FICO score and also give a good indication of your chance of being approved.
  • A debt-to-income ratio of less than 40% to 50%: That means all of your credit bureau debt (mortgage payment, auto payment, credit card payments and any other debt on your credit report) can not be more than 40% of your monthly paycheck (that’s *before* taxes get taken out).
  • A job: Most creditors want to see that you are employed, and that you have a minimum income. Freelance or contractor work will likely make it harder to be approved for a loan or debt refinancing.
  • No currently delinquent balances: It is possible to have a score above 650, but to be delinquent on a credit card (for example). Most lenders will not approve someone who is not up-to-date on all of their payments.

In general, if you meet those guidelines, you should qualify for the best offers (and don’t need to ready any further). You should be applying for the best cash back credit cards, the longest 0% balance transfers, and the cheapest personal loans.

If you do not have a job, your debt burden is already above 50%, or you are delinquent on loans today, you will likely find it very difficult to be approved by any reputable lenders regardless of your credit score. Payday lenders and title loan companies would make a deal with you, but you should avoid them at all cost. Payday and title loans are traps, and you will be lucky to pay less than 300% interest rates. If you can’t find other ways to increase your income, you really need to consider restructuring your debt, rather than borrowing more. We can walk you through that process in our free Debt Guide, and you can even set up a free 30 minute consultation to discuss your options with us.

If you have a good debt burden and a job, but your score is still below 650, you do have options. We will explain those options in the next section.

2. Cheapest Options For Obtaining Credit Now

Typically, the best option for people with scores below 650 is a personal loan. However, some credit unions offer credit cards that would also provide a good deal.

If Your Score is Between 620 – 650

PenFed Promise (Credit Card): PenFed is a credit union that anyone can join. For just a $15 donation to support the troops, you can become a member. PenFed have recently lowered its score cutoff on this credit card to 620. MagnifyMoney has awarded PenFed Promise an A+ transparency score because it has no late fees, no risk-based re-pricing, no penalty fees and no foreign exchange fees. In addition, you can transfer debt from existing high rate credit cards to PenFed Promise, and you would only pay 4.99% for the first 12 months.

132x81-Promise

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Other traditional credit card issuers: Lenders like Citibank are gradually reducing its score cutoffs towards the 620+ range. And Capital One has a long history of approving customers in this space. You can actually see if you are qualified for these credit cards without hurting your score via a Pre-qualification Tool.

LendingClub* (Personal Loan): LendingClub is an online lender that is offering very competitive interest rates to people with lower credit scores. The highest interest rate it offers is 29.99%, and if you apply online, you can find out your interest rate without hurting your credit score. According to LendingClub’s website, on average, people are seeing a 31% reduction in the interest rate on their credit cards.

LendingClub

Apply Now*referral link

Prosper* (Personal Loan): Prosper is also an online lender, very similar to LendingClub. It also allows you to apply and see if you would qualify without hurting your score.  Its interest rates go up to 35.97%, and it will often approve people that LendingClub would reject.

Prosper

Apply Now *referral link

Vouch* (Personal Loan): This is an online lending company that specializes in people with less-than-perfect credit. As the name implies, it is looking for people to “vouch” for you. That means you will have someone provide a guarantee to pay if you do not. However, they do not need to vouch for the full amount of the loan, and their vouch can start as little as $25. Vouch believes that just having someone willing and able to vouch for you is a sign of your creditworthiness. (Note: if you default on your loan, the person who provided the vouch would be responsible only for the amount that they “vouched.” If they did not pay that, they could receive a collection item on their credit report). In order to be approved, you need to meet Vouch’s credit criteria and get two vouches. Technically, Vouch will approve as low as 600. However, in conversations with the team, Vouch tends to approve most of its people in the mid-600 score range. This can be a great option for people with scores below 650 if you can find two people to vouch for you.

Vouch_logo2

Apply Now*referral link

Below 620, or You Were Rejected By Everyone We Just Mentioned Above

If your score is below 620, your options are even more limited. However, there are companies you can consider. There are a few personal loan companies that specialize in this area. And, in the credit card space, we strongly recommend applying for a store credit card.

  1. Personal Loan

You might want to consider three companies that will lend to people with credit scores below 620. One of them (Avant) is an internet-only lender. The other two (OneMain and Springleaf) have branches.

Avant*: Avant will offer loans up to $35,000 and interest rates go up to 39.95%. These are not cheap loans. However, they are better than payday loans because you will actually have an amortizing loan that will be paid off during a fixed term. You can apply online to see if you qualify without hurting your credit score, and Avant has some of the most liberal acceptance criteria of the online lenders. However, 39.95% is a very high interest rate. If you are financing an emergency, this is better than a payday loan. However, we strongly recommend that you download our Debt Guide and set up a free consultation so that we can help you build a plan to get debt free forever.

Otherwise, consider applying to Springleaf or OneMain Financial. Both of these lenders will let you see if you can be prequalified online (this is a hard inquiry on your credit report and will cause a dip in your score). However, you need to visit a branch to close the loan and receive the funds. You can receive the money in the same day (sometimes less than 30 minutes), but you need to be prepared to verify your income and visit a branch. Because you need to have a branch in your neighborhood, you should look for a local branch before applying. These lenders can go all the way down to a 500 credit score. With these lenders, you really need to make sure you know the following:

  • You should probably avoid the insurance that they offer at the time of the loan closing. Most of these policies are incredibly expensive. If you need life insurance, you should buy a good term life policy that covers everything you need, not just this loan.
  • Be careful about renewing the loan with these lenders. After 6 months, they will try to encourage you to take more cash. Because these lenders charge origination fees and, in the case of Springleaf, have pre-computed interest, paying off early means your actual interest rate will be much higher than the advertised rate.
  1.   Store Credit Card

Store credit cards (like Walmart, for example) often approve people with credit scores as low as 520. In addition, they usually have no annual fee. And although the interest rates are not low, they are much lower than other subprime credit cards.

There is a reason store card approve people with such low scores. Banks fight hard to win a co-brand deal with a retailer. For example, Citi just made a huge bid to steal the Costco co-brand away from American Express. When banks bid for these deals, the retailer is very focused on the credit card approval rate. The retailers want to sell as much product as possible, and credit cards help them do that. And, when they make banks compete for the co-brand credit card deals, they force banks to agree to approval rates that are much more liberal than the bank’s usual criteria. Banks are willing to do this, because they either get all of the business (if they win the co-brand deal), or they get none of it. That is why you will see store card cutoffs in the 500s, when the same bank may only approve you with a 650 on a normal bankcard.

Here are some store cards with no annual fee that you can apply for online

3. Which Companies Should You Avoid?

There are a number of credit card companies out there targeting people with scores below 650. They have a very simple model:

  • Charge an application fee
  • Offer a very low credit limit
  • Charge a high annual fee (that uses up a big portion of the line)
  • Charge very high interest rates
  • Collect aggressively
  • Charge very high late fees

This is the standard playbook. You are much better off applying for a store credit card or a personal loan than turning to one of these lenders. One of the worst is First Premier, and we gave it an F (on our transparency score) in this article. It has a $95 application fee, a $75 annual fee and usually only offer $300 credit limits. And the interest rate is 36%. When First Premier increases the credit limit, it charges you 25% of the increase as a fee. This card is a tool to generate fees for the credit card company, rather than to provide affordable access to credit for the borrower. A store card would be a much better option.

Payday Lenders and Title Lenders of all types should be avoided. Payday lenders have a simple product construct. They will lend you money with very few questions asked. For every $100 you borrow, they will typically charge $15 – $20. In two weeks, you will be given a choice. You can pay the $15 – $20 fee to extend the loan, or you can pay back the full balance and the fee. So, you are given the choice of an interest-only payment or a balloon payment. Because it is not an amortizing loan, you end up in a debt trap, where you balance grows rapidly over time. Once you get into a payday loan, it is very difficult to get out.

[Stuck in a Payday Loan Trap? Read this article.]

Title loans are fee and interest machines. They try to get as much cash out of you as possible, and then frequently repossess the automobile.

4. How To Build Your Credit For The Future

Ultimately, your goal should be to get a credit score above 700. At that level, you can qualify for the best deals and refinance any high interest rate credit card debt to much lower rates.

Here are the most important things to remember for getting a good credit score:

  • You need to constantly feed your credit report with positive information. That means you need to use credit (you don’t need to pay interest!) and you need to make payments on time. If you don’t have any credit at all, you should start building by finding a secured credit card. We compare the best here.

[Read Build Credit with $10 a Month on a Secured Card]

  • You must bring all of your accounts up-to-date. And you must pay on time every month. Even just a single missed payment (more than 30 days late) could be enough to keep you below 700.

[Read 6 Simple Steps to Improve Your Credit Score]

  • You should watch your credit card balance carefully, and make sure that you never charge more than 20% of your total available credit. If you have $30,000 of available credit across three cards, make sure your total statement balance stays below $6,000. Using a personal loan to pay down your credit card debt will reduce your utilization and help boost your score. (Just make sure you don’t fall into the credit card debt trap again).

[Read Decoding How FICO Determines Your Credit Score]

  • If you have collection items, do not enter an arrangement where you only pay small amount each month forever. That keeps the item on your credit report. Instead, save up money each month (rather than making a payment) and try to settle with your collection agency in full and get a “pay for delete” while you are at it – so that they remove the item from your credit report after you pay in full. And if the item is close to 7 years old, it might be wise to ignore it. Once it is 7 years old, it no longer impacts your credit score.

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

You can read all about how to build your credit score in our free Debt Guide, starting on Page 30. Please email us (info@magnifymoney.com) with any questions, and one of our experts will do their best to help you.

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Pay Down My Debt, Reviews

Citizens Bank Education Loan Refinance Review

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Citizens Bank offers student loan refinancing for both private and federal loans through its Education Refinance Loan.

Since Citizens Bank is a traditional bank, its loan process is very thorough. You’ll have to fill out the application and supply the requested documentation before hearing back. Additionally, Citizen’s Bank conducts a hard credit inquiry, which can affect your credit.

Let’s take a look at what Citizens Bank can offer if you’re looking to refinance your student loans.

Refinance Terms Offered

With Citizens Bank, you need a minimum of $10,000 in student loans to refinance. The max amount you can refinance is $90,000 if you have a Bachelor’s Degree, $130,000 if you have a graduate/doctoral degree (MBA included), or $170,000 if you have a professional degree (law, medical, dental).

The range on its fixed rate loans is 5.24% – 9.39% APR, and the range on its variable interest rate loans is 2.82% – 7.46% APR.

You can refinance on a 5, 10, 15, or 20 year term.

You can also receive up to 0.50% in interest rate deductions. 0.25% comes from enrolling in automatic payments (meaning your monthly payment is automatically deducted from your checking account). The other 0.25% comes from already having an account with Citizens Bank (its “loyalty” discount).

An example payment would look like this: $10,000 balance at a 5.44% fixed rate on a 20 year term = $68 per month (that’s with excellent credit).

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The Pros and Cons

Citizens Bank offers low rates and the option of having a fixed rate or variable rate loan. It claims to save borrowers an average of $145 per month. It offers a wide variety of terms (fixed and variable rates, and 5, 10, 15, and 20 year terms), and it has a forbearance option for those face financial hardship and have difficulty paying back the loan.

There aren’t too many downsides to refinancing with Citizens Bank aside from the more involved application process, and the hard credit inquiry.

One con to note is its 0.25% loyalty interest rate deduction won’t be available to everyone. Its checking and savings accounts are only available in Connecticut, Delaware, Maine, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Vermont. If you don’t live in those states, you’re out of luck (but can still get the 0.25% auto-payment discount).

If you graduated with a Bachelors degree but have six-figures of student loan debt, refinancing with Citizens Bank might not be the best option, due to its maximum loan cap. There are other lenders out there with a larger maximum loan limit.

[Find out what happens when you refinance a Federal student loan.]

What You Need to Qualify

To be eligible to refinance your student loans with Citizens Bank, you must meet the following requirements:

  • You can’t be currently enrolled in school
  • You should have a history of paying your current student loans back on time
  • It’s not necessary to have graduated, but if you didn’t obtain a degree, then you must make 12 full on-time payments of principal and interest before you’re eligible to refinance
  • If you have a Bachelors degree, then you only need to make 3 full on-time payments of principal and interest before being eligible to refinance
  • You may be able to refinance even if you’ve previously consolidated your student loans
  • You must be a U.S. citizen, residing in the U.S., with a valid Social Security Number
  • As for credit, Citizens Bank states, “You’ll need to present a reasonably strong credit history, which is derived from your credit score”
  • You need a minimum household income of $24,000

If you’re worried about the income and credit qualifications, you can elect to have a cosigner on your loan. Cosigners are released after 36 consecutive payments on the loan.

Documents and Information Needed to Apply

Citizens Bank recommends you have the following documents on hand during the application process:

  • Existing student loan information (you’ll need recent billing statements for the loans you want to refinance)
  • Employment information (employer, gross monthly income, phone number, length of employment)
  • Social Security Number or birth certificate
  • Two most recent pay stubs
  • Receipt of monthly housing payments, if applicable

If you’re self-employed or earn any income on the side, additional documentation such as previous tax returns may be required. Citizens Bank has a list of other documents you might want to have on its FAQ.

Who Benefits the Most from Refinancing Student Loans with Citizens Bank?

The most common reason to refinance student loans is to get a better interest rate, and to simplify how many payments you’re sending out a month. If your interest rates are on the higher side (above 7%), or if you’re making payments to several different lenders, refinancing could be beneficial.

When it comes to refinancing with Citizens Bank, borrowers (or cosigners) who have a strong credit history and score are most likely to be approved.

With a good credit score, you may be able to refinance to lower interest rates. If you would like to have a fixed rate instead of a variable rate, you can refinance for that reason, too.

If you have federal student loans you’re refinancing, be aware that certain benefits are no longer available once you refinance them into private loans. For example, you won’t have access to the variety of repayment options that comes with federal loans.

Citizens Bank does at least offer a forbearance option for those facing financial hardship.

[Click here to read more about student loan forgiveness programs.]

Fees and Gotchas

When you refinance with Citizens Bank, there are no hidden fees. You won’t have to worry about an application, origination, or disbursement fee, and there’s no prepayment penalty, either.

The only fee you might incur is a late fee, which is 5% of your monthly payment amount. This is standard for most loans.

Transparency Score

Citizens Bank receives an A+ transparency score from MagnifyMoney because it offers both a co-signer option and a co-signer release. However, its late fee and whether or not they conduct a hard or soft credit check wasn’t explicitly stated on their website, unlike other lenders. It’s a hard credit check, which will impact your score.

Alternative Student Loan Refinancing Lenders

There are many lenders offering student loan refinancing solutions. If you don’t qualify with Citizens Bank, you might qualify with another lender.

If you have a good credit score, but have a larger amount you want to refinance than Citizens Bank will allow, look into SoFi. It doesn’t have a maximum loan amount, and it has lower fixed and variable interest rates.

SoFi* also has the same options for loan terms (5, 10, 15, and 20 years). Your credit score should be at least 700 or higher and co-signers are accepted on a case-by-case basis. However, SoFi does a soft credit inquiry to start, so applying with it first is recommended.

cuStudentLoans may also be a good option, although it only offers variable interest rates. The maximum amount for borrowers with an undergraduate degree is $125,000, and $175,000 for those with a graduate degree.

Its loan term is only up to 15 years, though the shorter the term, the less you’ll pay in interest over the life of your loan. It also allows cosigners in case your credit needs a bit of work. Its loans are offered exclusively through credit unions.

SoFi and cuStudentLoans also offer forbearance options and will work with borrowers in the event they face a financial hardship. Remember, you’re giving up payment flexibility when refinancing federal loans privately, so this is important to consider.

Don’t Be Afraid to Shop Around

You always want to get the best rates on your loans, especially if you’re refinancing to lower the amount of interest you’re paying. It’s wise to first apply with lenders who only conduct a soft credit inquiry to get an idea of your rate options.

If you’re not satisfied with your results, continue to shop around with lenders who conduct a hard credit inquiry. As long as you do so within a 30-day period, your credit score won’t be affected as much, as all the inquiries made will count only once.

Check out our Student Loan Refinance Marketplace Here

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Pay Down My Debt, Personal Loans, Reviews

OneMain Financial Loan Review

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OneMain Financial is owned by Citibank, and offers personal loans to borrowers via its branch network. OneMain will approve people with FICO scores as low as 550, and if you apply before noon you can have the money during the same day. However, the interest rates tend to be higher than other online lenders – especially if you have an excellent credit score.

In this review, we will share:

  • The terms of the loans offered
  • The minimum acceptance criteria
  • The loan application process
  • The fine print and traps that you need to avoid
  • Alternatives that you should consider

Loan Terms

OneMain offers personal loans up to $10,000.

The interest rates are from 12.00% – 35.00%.

OneMain loans are not available for business expenses or tuition. However, beyond those restrictions, you can use the proceeds of your loan for any purpose. The loan will be disbursed to you in the form of a check, which can be deposited into your bank account and then used for any purpose. Note: if OneMain is made aware during the application process that you plan to use the funds for gambling or any illegal purposes, your application would be declined.

The loans are fully unsecured, and no collateral is required.

In addition to the loan, OneMain will likely try to sell you insurance products. It offers several types of insurance:

  • Unemployment insurance: if you lose your job during the term of the loan, some of your monthly loan payments would be paid on time
  • Life insurance: if the primary borrower dies during the term of the loan, the insurance proceeds would pay off any remaining balance
  • Disability Insurance: if you become disabled, payments would be made on your behalf

Before buying insurance from OneMain, you should seriously consider other options. For example, it is usually much cheaper to buy a term life insurance premium that would cover all of your needs, and not just the loan.

There is no prepayment penalty, and you can choose your due date to make sure that it aligns with your paycheck cycle.

Minimum Acceptance Criteria

Although OneMain has a lower credit score cutoff, it still has some strict credit criteria. Here are some of the most important requirements:

  • You must be employed, and have verifiable income. It is easiest if you have full-time employment with paystups. If you are self-employed, you will likely be asked for a few years of tax returns. OneMain is serious about making sure you have steady, recurring income. It could be difficult to be approved if you have highly volatile income or depend largely upon bonuses or other variable compensation.
  • You should have a credit score of at least 550.
  • No bankruptcy filings. If you filed bankruptcy in the past, you will be declined.
  • You are at least 18 years old (19 in Alabama and Nebraska)
  • You are a resident of the United States (but do not live in Alaska, Arkansas, Connecticut, Massachusetts, Nevada, Rhode Island, Vermont or Washington, D.C.)
  • You have some established credit, which means you have a history (it can be short) of making payments on time with some accounts.
  • You can demonstrate an ability to repay. OneMain will talk to you about your income and your monthly expenses. Unlike credit card companies, it will go into much greater depth about where and how you spend your money. And it will look at both a debt burden ratio (the percent of your income that goes towards debt payments) and your cash flow. You need to prove that you will be able to afford all of your existing payments and your new loan payment, and still have money left over.

Note: If you are using the OneMain loan to pay off other credit card companies, you can have OneMain make check payments directly to the credit card companies. When you do this, OneMain will not double count the credit card monthly payments (which you are going to pay off) and your new loan in the debt burden.

OneMain is not a payday lender or title loan company. It’s willing to make loans to people with a lower credit score. But, OneMain doesn’t approve everyone with a 550 credit score. You will have to provide documentation verifying your income and sit down with a loan officer. OneMain will only make loans to people who prove that they can afford to repay. And its much more rigorous in its underwriting than credit card companies (which generally don’t verify information) or payday lenders (which generally don’t test affordability).

For these reasons, we give OneMain a B rating in our Transparency Score.

Application Process

You can apply for a loan online. However, in order to actually get the loan you will need to visit a branch. To find out if a branch is near you, use this branch locator.

If there is a branch near you, start the loan application process online. It is a quick and easy process. However, it will result in a hard inquiry on your credit report (which typically takes 10 to 20 points off your score).

Once you complete the online application (which is fairly standard), you will get an instant response. If you are approved, you will be referred to a branch. In addition, you will most likely be required to bring in a few bits of information. OneMain will usually ask you to verify your identification (a driver’s license usually works), your address (via a utility bill) and your income (via a paystub).

When you bring those documents into the branch, the employee will verify the information and then have you sign the loan documents. You will then be given a check that you can deposit into your bank account. If you bring all of the right documents, you can spend less than 30 minutes in the branch.

If you apply online before noon, you can usually get the loan on the same day. Otherwise, you will get your loan the next day.

After the loan is approved, you have 14 days to change your mind and return the loan proceeds. If you do that, you will not be responsible for any of the accrued interest.

At the time of the loan closing, OneMain will try to sell you add-on insurance products. In addition, you will have to select your due date. We highly recommend selecting a due date that aligns with paycheck being deposited into your bank account.

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Fine Print Traps

Personal loans are relatively simple contracts. You borrow a fixed amount of money, for a fixed period of time at a fixed interest rate.

The loans offered by OneMain are interest bearing, and interest accrues daily. You can take advantage of that by making payment more often. For example, if you pay your account weekly you will reduce the amount of time it takes to pay off your loan. However, if you pay late (especially early in the loan term), you could end up adding years to your loan. So, make sure you always pay on time. And it is to your benefit to pay earlier and more often than required.

OneMain will service the loan from the branch where you booked the loan. However, a big part of the incentive scheme for the branch employees is to lend more money. That means they will constantly be tempting you with more cash. Once you are an existing customer making payments on time, OneMain will make it very easy for you to borrow more money quickly. Just make sure you stick to your plan of paying off the debt.

The insurance offered by personal loan companies like OneMain can offer questionable value. Make sure you do your homework before signing up for any insurance products.

OneMain loans are incredibly convenient, especially if the branch is near you. However, as your credit score improves (especially above 600), you may be paying too much for a OneMain loan. Make sure you shop around to see if you can get a better deal somewhere else.

Alternatives You Should Consider

For a long time, OneMain and Springleaf were the only two companies making personal loans. And it targeted people with scores below 700. However, in the last few years a number of online personal loan companies have been created. These companies do not have the expense of a branch network, and can offer much lower interest rates. Even better, with most of these loan companies you can check your rate without hurting your credit score.

We encourage you to use our personal loan marketplace to consider other companies. If your score is above 750, you could probably get a rate as low as 5%. Including companies like SoFi*, which offers no origination fees, no prepayment penalties and no application fees. If your score is below 750, most of these companies will still beat OneMain pricing. LendingClub* approves scores down to 620 and offers APR ranges of 4.49% – 29.99%. Even better, you will not need to go to a branch.

It only takes a few minutes to see if you can qualify at all of the online lenders listed in our marketplace. If you can’t find a loan that works for you, then OneMain may be the right option.

However, if you need the money today (or even in the next few days), the online lenders are not for you. OneMain still beats the internet-only lenders with its ability to make decisions and disburse funds same day. But you will pay for that convenience.

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*We’ll 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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College Students and Recent Grads, Pay Down My Debt

Can You Discharge Student Loans in Bankruptcy?

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Student loans have been a hot topic in recent news and for good reason. The level of student loan debt in the United States has grown substantially over the past several decades. As of 2014, the balance of student loan debt reached $1.2 trillion. Students burdened with debt have one option when it comes to repayment: pay the debt. However, in extreme circumstances, it may be possible to completely discharge student loan debt in bankruptcy.

How to Discharge Student Loans in Bankruptcy

The U.S. Department of Education website provides four cases in which federal student loans may be discharged. Those include:

  1. Closed school discharge
  2. Total and permanent disability discharge
  3. Death discharge
  4. Bankruptcy discharge

There are a few more options for partial discharge with qualifications. The website lists bankruptcy as an option in rare cases.

“If you file Chapter 7 or Chapter 13 bankruptcy, you may have your loan discharged in bankruptcy only if the bankruptcy court finds that repayment would impose undue hardship on you and your dependents. This must be decided in an adversary proceeding in bankruptcy court. Your creditors may be present to challenge the request.”

The U.S. bankruptcy court will use the three-part Brunner test to determine if the student loans are eligible for discharge in bankruptcy. To show hardship you must show that:

  1. If you were forced to repay the loan, you would not be able to maintain a minimal standard of living.
  2. There is evidence that this hardship will continue for a significant portion of the loan repayment period.
  3. You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).

If you are unable to satisfy any of the three requirements, the loan will not be discharged. However in a study published in the American Bankruptcy Law Journal by Jason Iuliano, 39% of those who applied were granted at least some discharge.

For example, if you are 30 and your student loan payments make up a significant portion of your total income, and you can prove that this hardship will continue for many years you might be able to have your student loans included in your bankruptcy.

But if you just started making payments and have not attempted to use available programs such as income-based repayment, then you may have a harder time discharging your student loans.

If you feel that bankruptcy is for you, consult a lawyer and consider including your student loans.

[Struggling to pay back private student loans? Learn about loan modification here.]

Ramifications of Bankruptcy

Choosing to eliminate your student loans using bankruptcy is a difficult path. Moreover, you will mark your credit report for 7 or 10 years with a bankruptcy filing. This could prevent you from purchasing a home, opening new lines of credit, and benefiting from the best rates to borrow money. It could also prevent you from getting a job with credit pre-screening.

Options So You Can Avoid Bankruptcy

If you would rather avoid bankruptcy, here are more ways to eliminate your student loan debt.

Reduce or Halt Your Current Payment

Determine if you are eligible for deferment or forbearance. A deferment is a period during which repayment of the principal and interest of your loan is temporarily delayed. Depending on the type of loan you have, the federal government may pay the interest on your loan during this period.

If you can’t make your scheduled student loan payments, but don’t qualify for deferment, a forbearance may allow you to stop making payments or reduce your monthly payment for up to 12 months.

[Miss a student loan payment? Learn how to find help here.]

Choose a Reduced Payment Plan

For federal loans, there are a few repayment plans that can help you manage your student loan repayment. Choose one of the following:

  • Income Based Repayment Plan – Payments are calculated based on your discretionary income and can extend up to 25 years of repayment.
  • Graduated Repayment Plan – Payments start off small then increase every two years for a maximum of 10 years of repayment.
  • Extended Repayment Plan – Payments can extend up to 25 years of repayment.
  • Pay as You Earn Repayment Plan – Payments are calculated based on your discretionary income and can extend up to 20 years of repayment.
  • Income-Contingent Repayment Plan – Payments are based on your adjusted gross income and can extend up to 25 years of repayment.
  • Income Sensitive Repayment Plan – Payments are based on your annual income and last for a maximum of 10 years; however, you will pay more over time versus the standard 10-year repayment plan.

[Read about Student Loan Forgiveness Programs Here.]

Career Based Discharged

You can also have your student loans discharged if you take a certain career path and your loans are: Direct, FFEL Program, or Federal Perkins loans. Private loans are often not eligible for forgiveness programs. As an eligible public service employee you can have 100% of your loan balance forgiven after 120 consecutive payments; this assumes that you maintain your status as an eligible public service employee while making those payments. If combined with one of the reduced payment plan options that could mean a substantial reduction in total repayment balance.

Check out our Student Loan Refinance table to compare your options.

 

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Best of, College Students and Recent Grads, Pay Down My Debt

5 Best Student Loan Refinancing Options

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It’s no secret students are becoming more reliant on student loans to fund the ever increasing cost of a college education. As of 2013, 69% of borrowers who graduated from a public school had an average of $28,400 in debt. You can bet that number is significantly higher for students attending pricey private schools.

But it isn’t just the increasing debt loads that should concern borrowers. They are dealing with (relatively) high interest rates as well. For example, graduate students taking out PLUS loans are currently saddled with a 7.21% fixed interest rate.

Historically, no matter if you had a federal or private loan, you were either locked into a fixed rate or at the mercy of your lender with a variable rate. But that’s all changing now with student loan refinancing.

Student loan refinancing serves to help borrowers consolidate their loans and refinance to lower interest rates. It’s a great option for those looking to combine loans, lower their interest rates and make managing payments a bit easier. However, it’s important to note that through refinancing you may be giving up some of your federal loan protections, so make sure refinancing is right for you.

Here at MagnifyMoney, we award products transparency scores of A+, A, B, C, or F. Student loan refinancing transparency scores are based on whether or not a lender gives you the option for a co-signer, a co-signer release and caps variable interest rates.

If you do decide that refinancing is the right option for you, check out the best student loan refinancing providers:

SoFi*

SoFi, which is short for Social Finance, offers student loan refinancing with competitive interest rates. Borrowers can consolidate and refinance both their federal and private student loans and get a fixed rate between 3.50 to 7.24% or a variable rate between 1.92 to 5.18%. According to SoFi’s website, borrowers save an average of $11,783 when they refinance with SoFi. There are no application or origination fees, nor are there any pre-payment penalties.

Transparency Score: A+

  • No origination fees
  • No pre-payment penalty fees
  • Co-signer option available
  • Capped variable rates
  • Ability to see rates with a soft pull

SoFi also offers some unique perks for its borrowers. It offers Unemployment Protection, which allows you to put your payments on pause for 6 months. In addition, SoFi will actually help you find a job. SoFi also has an Entrepreneur Program, which helps foster entrepreneurship for borrowers by allowing you to defer your loans for 6 months and connecting you with investors and mentors within the SoFi community.

So, who is eligible to refinance with SoFi?

  • You must be the age of majority in your state (likely 18)
  • A US citizen or permanent resident
  • Employed or have an offer of employment to start within 90 days
  • Graduated from one of a selected number of Title IV accredited universities or graduate programs
  • A strong credit score (700 is the minimum for personal loans)
  • A strong monthly cash flow

SoFi is geared towards young professionals with high incomes and strong credit.

Currently, the minimum loan amount is $10,000 and the maximum term of a loan is 20 years. Odd fact: Refinancing is available in all states except Nevada. However, variable rate loans are not available in Minnesota or Tennessee.

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Citizens Bank Education Refinance Loan

Another option for borrowers looking to refinance is the Citizens Bank Education Refinance Loan. This loan offers a fixed rate between 4.74 to 8.90% and a variable rate between 2.3 to 6.97% with a maximum loan term of 20 years. Currently, the minimum loan amount is $10,000, but the maximum amount varies depend on your degree. For example, borrowers with bachelor’s degrees can borrow up to $90,000, graduate degree holders up to $130,000 and those with professional degrees, such as medical or law degrees can borrow up to $170,000.

Transparency Score: A+

  • No origination fees
  • Co-signer option
  • Co-singer release available
  • Capped variable rates

There are no application or origination fees and you can refinance even if you didn’t graduate, however you are not eligible to refinance if you are still in school. You can refinance both your federal and private student loans.

According to its eligibility requirements, to qualify for a loan you need a “reasonably strong” credit history as well as a minimum household income of $24,000. If you are wondering if refinancing with them is right for you, Citizens Bank has a helpful chart on how refinancing can help you.

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cuGrad Student Loan Refinancing

This next refinancing option varies from the others — instead of refinancing through a private company, cuGrad Student Loan Refinancing works in partnership with over 150 not-for-profit credit unions to help you refinance your loans and offer the best rate possible.

Currently this refinancing option does not offer fixed interest rates and has variable interest rates between 2.77 to 8.02% with a maximum term of 15 years. The interest rates are competitive, but because variable interest rates means the rate is at the discretion of the lender and could change at any time.

Transparency Score: A+

  • Co-signer option
  • Co-singer release available
  • Capped variable rates – but these are subject to increase at lender’s discretion

cuGrad Student Loan Refinancing lets borrowers refinance both federal and private student loans and allows you to borrow between $125,000 to $175,000 depending on whether you have an undergraduate or graduate degree. Compared to other lenders, cuGrad Student Loan Refinancing has a lower minimum loan amount of $7,500.

To be eligible, you must have a “reliable gross monthly income of $2,000” and be able to provide proof of income. This refinancing option may be a good fit for recent graduates who are just starting out and are looking to refinance with a community-based institution like a credit union.

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iHelp Consolidation Loan

If you are looking for a fixed rate, iHelp might be your best bet. They currently do not offer variable rates, but have fixed rates between 6.22 to 7.99%. Admittedly, these rates are quite a bit higher than the other lenders. It’s important to note that iHelp offers two different rates, depending on whether or not you have a cosigner. In addition, there is a 2% fee that is added to the loan at the time of disbursement.

Transparency Score: A

  • Co-signer option – rates vary depending on if you have a co-signer
  • Co-singer release available
  • Capped variable rates
  • Does have an disbursement fee

In order to qualify for a loan, you need to have graduated from an eligible school. The maximum amount you can borrow is $100,000 for undergraduate degrees, and $150,000 for graduate degrees, with a minimum loan of $25,000. The maximum term for a loan with iHelp is 15 years.

iHelp’s income requirements are a bit lower than other lenders and requires borrowers or cosigner’s to have an annual income of $24,000 for at least two years. In addition, borrowers must have two years of positive credit history and a debt to income ratio of 45% or less.

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CommonBond’s Grad Refinance Loan

Looking a value driven refinancing option? CommonBond may be the right fit for you. It has a Social Promise to give back to community. According to its website, “For every degree fully funded on the company’s platform, CommonBond funds the education of a student in need abroad for a full year. As the first company to bring the 1-for-1 model to education, we are proud to partner with education non-profit, Pencils of Promise, to fulfill our Social Promise.”

CommonBond offers loans with a fixed rate between 3.74 to 6.49% and variable rates between 1.92 to 5.64%, with a maximum term of 20 years. It also offers hybrid rates, where you have a low fixed rate for the first five years and a variable rate for the last five years. There are neither pre-payment penalties nor origination fees.

Transparency Score: B

  • Co-signer option
  • Co-singer release available
  • Capped variable rates
  • Must have a graduated school degree within CommonBond’s network
  • Only available to degrees in professional service

Out of all the refinancing options, you can borrow the most with CommonBond at $220,000. To qualify for a loan, you must have graduated from one of the graduate school degree programs in its network — many of the degree programs that are eligible are professional service degrees in medicine, health, accounting and more. So if you have an arts or humanities degree, this option isn’t for you.

CommonBond also offers Unemployment Protection, so if you lose your job you can temporarily postpone your payments and CommonBond will help you find a job, a concept is similar to SoFi’s offering.

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Be Selective About Refinancing

As you can see, the loan requirements, terms and conditions all vary depending on lender. If you are looking for a better rate on your student loan and currently have good credit and a stable income, refinancing may be right for you. Refinancing can potentially save you thousands of dollars in interest and make repayment easier through consolidation. Just be careful, refinancing a federal loan does mean you give up certain protections and eligibility student loan forgiveness programs.

Check out our Student Loan Refinance table to compare even more options.

*We’ll 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

Avant vs LendUp: Which Loan Should You Choose?

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Avant and LendUp are two companies aimed at helping consumers build their credit. Each company wants to improve the online lending industry in a way that helps customers. They both offer a simple application process to make it easier for borrowers to get the money they need, and they’re both transparent about the process.

However, they’re structured very differently. Avant offers personal loans in the form of actual installment loans, whereas LendUp offers a slightly better version of a predatory payday loan.

Avant is trying to bridge the gap between consumers needing to resort to payday loans because they lack the credit to qualify for a personal loan. In Avant’s own words, its personal loans are for “when you need a repayment option that extends beyond your next payday.”

Let’s take a look at the similarities and differences between the two, and which one might be right for you.

Avant and LendUp Are Filling a Void

Both Avant and LendUp are offering alternatives to borrowers in each provider’s respective industries – personal loans and payday loans.

LendUp does this by offering its loans to those with damaged or nonexistent credit. It also provides educational incentives for consumers to get better terms on their loans with their “LendUp Ladder” program.

Customers can earn points by watching educational videos on credit, and these points advance them up the ladder to different statuses. Each status offers access to more money at lower rates, and for longer periods of time.

Avant similarly loans to people with lower credit scores. Neither company focuses solely on your FICO credit score – instead, each takes into account your financial situation, your income, your employment history, and your loan repayment history.

If you don’t have the best credit score, which lender should you choose? With very few exceptions, you should always apply for Avant first as it offers the better deal. If you’re declined for Avant, you can turn to LendUp.

The Biggest Difference is the Terms Offered

Because LendUp is a payday loan alternative, its terms are extremely short – from 7 days to 31 days. Avant offers much longer terms – from 12 to 60 months.

Additionally, since LendUp is focused on shorter loan terms, it also has lower loan amounts – from $250 to $1,000. Avant offers loans from $1,000 to $35,000 (with the minimum varying from state to state).

Screen Shot 2015-03-31 at 2.39.11 PMThe biggest difference? The APR. LendUp’s APRs range wildly depending on how long your loan is and how much you borrow – anywhere between 291% to 1147%! Avant offers APRs much less than that, though the range does vary depending on the state – in New York, for example, the range is 9.95% to 24.99%.

A loan from Avant might look like this: a $4,300 loan with an APR of 36%, resulting in a monthly payment of $219.38, with 30 payments.

An example loan from LendUp: a $200 loan with a term of 14 days, costing you $30.10 in interest – that’s an APR of 392.38%. (As of March 31, 2015)

If you’re looking for a small amount of cash to tide you over until your next paycheck, it makes sense to choose LendUp. If you’re looking for a much longer term, or for more money, then choose Avant. But carefully consider the fine print and interest rates before going with either lender.

Don’t Use Either One For the Sole Purpose of Building Credit

As helpful as Avant and LendUp may be, they’re not your only options if you need to build credit, nor are they the best options out there.

From the example shown above, it’s clear that borrowing from LendUp comes with an additional cost due to the interest charged on the loan. Building credit and having to pay that interest isn’t worth it. Likewise, Avant doesn’t have the best interest rates out there for personal loans.

If you need to build your credit, you should look to opening a secured credit card instead. If you can qualify, store credit cards work as well. You want to make on small purchase a month and pay it off on time and in full to start with so you can prove you’re a responsible consumer.

By opening a credit card, you can pay on time and pay in full, and never have to pay interest.

When you take a loan, you’re going to be paying a decent amount in interest, which causes you to pay much more than the original loan amount you took out.

Let’s go back to the Avant example cited above. If you took out a $4,300 loan with 36% APR, 30 payments of $219.38 actually equals $6,581.40. In this case, you’re paying $2,281.40 more than the original loan amount!

Is building your credit worth that cost? Not if you can get approved for a different solution.

You should only be taking these loans if you truly need the money. Don’t take them for the sake of building your credit unless you’ve exhausted all your other options.

The Fine Print

Both Avant and LendUp state they have no hidden fees, but that doesn’t mean there aren’t any.

Avant charges a late fee of $25 when payments are past due for 10 days, and a dishonored payment fee of $15 if your money is returned unpaid. Both offer the option to enroll in automatic payments.

Depending on the state, LendUp charges between $15 and $30 for a returned payment.

Note that both lenders strongly encourage borrowers to call if they’re experiencing difficulty making a payment. Both lenders are willing to work with customers. Avant states it can offer a courtesy due date adjustment if needed, and it also has a Payment Planning Team dedicated to working with borrowers.

What about other fees? There are no prepayment or application fees with Avant. LendUp doesn’t charge an application fee either, but if you want to pay your loan before the due date, you’ll face extra charges to cover the cost of the transaction from using your debit card.

The Application Process

LendUp and Avant have simple online applications. You don’t have to worry about going through a mountain of paperwork like you would if you were applying for a traditional loan with a bank.

LendUp’s application process might be a bit quicker overall, because it offers instant and same-day funding options for borrowers (though same-day is only available to those with Wells Fargo bank accounts). Avant simply offers next-day funding if you’ve been approved by 4:30 central time, Monday through Friday.

Avant states that most of its customers have credit scores ranging from 600 to 750, so if you fall somewhere between that range, you have a good chance of being approved.

Of course, your credit score isn’t the sole determining factor for either of these companies. They’re looking to see whether or not you have the ability to pay based on your current financial situation.

As far as credit checks go, Avant only conducts a soft inquiry on your TransUnion credit report when you apply – there’s no hard inquiry involved.

LendUp offers a no credit check option for its payday loans. You’re eligible if you have an active bank account and can provide proof of income.

One big thing to note is that LendUp is currently only offered in select states (Ohio, New Mexico, Washington, Maine, Oklahoma, Louisiana, Florida, Texas, Wyoming, Alabama, Idaho, Indiana, Illinois, Mississippi, Oregon, Kansas, California, Missouri, Tennessee, and Minnesota), whereas Avant is offered in all states except West Virginia, North Dakota, Iowa, and Maine.

Which Lender is Better?

Considering they’re both used for different purposes, we can’t say definitively which is better for you. It depends on your financial needs.

promo-personalloan-halfIf you’re struggling to afford your bills or any other immediate needs, you might want to consider getting a loan from LendUp, if you can pay it off on time. LendUp does not allow rollovers at the end of your loan-term, which is a common debt trap with traditional payday lenders.

If you have loftier financial goals, such as wanting to make improvements around your home, needing help financing a car, or wanting extra breathing room in your wedding budget, then personal loans are the way to go. If you have better credit, we encourage you to look at the other personal loan lenders we’ve reviewed, as many of them offer better interest rates than Avant.

Always remember to shop around and see which lenders can offer you better rates. Many personal loan lenders only do soft inquires which won’t impact your credit score. If you shop around within a 30-day window, you’re inquiries will be grouped together, making less of an impact on your score.

How to Make Your Decision

If your main goal is to improve your credit score, try and get approved for a secured credit card instead. You won’t be stuck paying interest, and you’ll still reap the same credit-building rewards. If you’re hard-pressed for cash and don’t need a huge amount, then LendUp is a better solution than a typical payday loan lender. If you need more than a few hundred dollars to fund your goals, but don’t have the best credit, then consider applying for a personal loan with Avant.

Dealing with debt? Download our FREE debt free forever guide!

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Consumer Watchdog, Pay Down My Debt, Personal Loans

Should You Avoid LendUp? A Review of Its Loans

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LendUp is a company offering a better alternative to the typical shady payday loan. Its aim is to disrupt the payday loan system by providing consumers with more affordable loans, more education, and transparency.

This is quite a change from storefront payday lenders, who have confusing policies that often leave customers paying more huge amounts in interest.

LendUp wants to reform the payday loan industry by helping its customers get out of debt and build credit.

However, it could come at a hefty price for consumers. Payday loans are known for outrageous APRs, and while LendUp has more reasonable APRs than typical payday loan companies, it’s still something to be aware of.

Who Should Use LendUp?

Before we get into the details of the loans offered by LendUp, it’s important to address who should avoid its loans and who should consider them.

Payday loans are typically short-term loans to tide you over if you need money in between pay periods. The term can be one week, two weeks, or one month long. That’s a big difference from other personal loans that have terms of 1 to 5 years.

It comes down to your personal situation, and what you’re looking to use the money for.

If you have damaged credit or no credit at all, then payday loans might look like the only solution. LendUp can help you, but it’s important to consider the price.

If you’re simply looking to build credit, there are much better options out there. Taking a payday loan should be one of your last resorts. You can only start to build credit via LendUp when you reach Platinum or Prime status, which requires you to take on multiple loans.

Each time you borrow money from LendUp, you’ll be paying a significant amount in interest. For example, even if you only borrowed $100 for 31 days, you’d still pay $24.40 in interest (287.29% APR), according to their calculator.

For that reason, if you have poor or no credit, it’s better to look into opening a secured credit card, or trying to get approved for a store card. There’s no reason to pay $24 in interest if you don’t have to.

For those with severely damaged credit who are unable to get approved for any other solution, or for those who are in dire need of cash to afford necessities like food, then you should consider LendUp over going to a regular payday loan store. LendUp is certainly the better option.

That said, if you’re looking for a long-term loan, or looking for more cash, then LendUp is not the right choice. You should check out the other personal loan lenders we’ve reviewed, such as SoFi*, Payoff*, Vouch*, and Upstart.

How Does LendUp Work?

LendUp Ladder APRLendUp is a completely new solution to payday loans. It has what it calls the “LendUp ladder,” which is a point-based system. When you show that you’re a reliable customer and can make timely payments, you’re rewarded points, which enable you to climb up the LendUp ladder.

You can also earn points by watching LendUp’s educational courses on credit and for taking loans with them.

Climbing up the ladder gives you different statuses. You start at Silver, and from there, you can advance to Gold, Platinum, or Prime status. Each status has better terms, and at Platinum and Prime status, you can report your payments to credit bureaus to build your credit.

LendUp also doesn’t allow rollovers. That means if you’re unable to pay back your loan on time, LendUp will not charge you a fee to extend it, as other payday lenders do.

Instead, it offers free 30-day extensions on loans, so if you’re unable to make a payment, all you have to do is log into your account, and choose the option to extend your loan. LendUp tries to work with its customers as much as possible to ensure they’re getting out of debt, not back into it.

According to its website, LendUp is also the “first and only licensed direct lender with a relationship to the major credit bureaus.” LendUp emphasizes that there’s no middleman involved when customers take a loan, which allows LendUp to maintain its transparency.

LendUp Loan Details

Terms vary based upon the status you have with LendUp. Silver starts you off with a minimum loan amount of $100 and a maximum of $250. The terms range from 7 to 31 days. The maximum loan amount offered is $1,000, accessible at Prime.

Screen Shot 2015-03-27 at 5.57.58 PMLendUp provides a helpful calculator on its front page that gives you an idea of what you can expect with different loan amounts and terms.

For example, if you want to borrow $250, the APR range is 209.75% (30 days) to 755.03% (7 days).

According to ResponsibleLending.org, the typical two week payday loan as an annual interest rate ranging from 391% to 521%. LendUp falls within that spectrum.

Unlike payday lenders, LendUp rewards customers for continuing to borrower. LendUp does offer rates as low as 29% to its Prime customers, which is great when comparing against other payday loans. However, we’d prefer you focus on building your credit score and look to establish a line of credit with a credit union or get a personal loan from lender with better terms.

LendUp payday loans are also currently offered in only the following states: Ohio, New Mexico, Washington, Maine, Oklahoma, Louisiana, Florida, Texas, Wyoming, Alabama, Idaho, Indiana, Illinois, Mississippi, Oregon, Kansas, California, Missouri, Tennessee, and Minnesota.

LendUp is working on increasing its presence throughout the United States, but since its a direct lender, its has to comply with individual state laws and policies.

LendUp Application Process

The application process is fairly straightforward. LendUp says it should take 5 minutes or less to fill out the application and you’ll get an instant decision.

LendUp offers standard next day funding, instant funding, and same-day funding (Wells Fargo customers only). It warns that if you take instant or same-day funding, you’ll have to pay a fee to cover the cost.

LendUp offers a no credit check payday loan option. To qualify, you just need an active bank account and proof of income.

It assesses applicants on much more than just their FICO scores, which comes as no surprise. Throughout its site, LendUp makes it clear it wants to lend to those with bad or nonexistent credit. Like other personal loan lenders, LendUp uses its own algorithm consisting of different data points to determine whether or not to extend a loan to an applicant.

The Fine Print

LendUp states it doesn’t have any hidden fees, but as with any payday loan, you need to read the fine print.

First, fees and rates are dependent upon the state you live in, so make sure to review state specific information here.

The only fee that’s mentioned with a dollar value attached is a non-sufficient funds fee. LendUp automatically takes money out of your bank account, and if you don’t have enough money in there to cover it, you’ll get hit with this fee, which can be between $15 and $30.

Additionally, if you want to pay before your due date, you can pay with your debit card, but you’ll incur a fee to cover the cost of the transaction.

Opting to get your money instantly or same-day also comes with a fee.

What happens if you can’t afford to pay and you used your extension? This is a common concern among those already tight on money. On its site, LendUp says to contact them at the first sign of trouble. It’s willing to work with borrowers.

However, if you don’t pay, and you don’t contact LendUp, then there are consequences. LendUp can suspend your LendUp account, send your account to outside collection agencies, take legal action, and report your account delinquent to the credit bureaus.

Commendable, but Still a Payday Loan

LendUp’s mission is a commendable one – it wants to educate its customers and provide them with a better way to get back on their feet. LendUp is certainly an improvement over traditional payday lenders, but at the end of the day, it’s still a payday loan. When taking one, you need to consider the overall costs you might face.

Look into secured lines of credit or store credit cards – don’t look to take a payday loan first. Only take one if you desperately need the cash and you’re in a rough spot. Be aware of exactly what you’re getting yourself into, and make every effort to pay off your loan on time and improve your financial situation.

If you’re interested in looking into a loan with LendUp, use its site map to get specific information related to the state you live in, as loan terms vary depending on state.

*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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College Students and Recent Grads, Consumer Watchdog, Pay Down My Debt

Consumer Watchdog: Consequences of Refinancing Federal Student Loans

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A majority of today’s college graduates exit college with a diploma and a significant chunk of student loan debt. It’s become an assumption that everyone under the age of 30 carries (or carried) debt at some point. While this isn’t true, the vast number of graduates struggling with student loans are looking for every chance to offload the burden. Lowering interest rates and digging out of debt sooner is exactly what makes consolidating and refinancing so appealing. While refinancing federal student loans may seem tempting, this action could carry irreversible consequences. 

Crunching the Numbers

Refinancing can make a lot of sense, especially if it results in a significant drop in your interest rate(s). Federal student loans disbursed before July 1, 2014 ranged in fixed interest rates from 3.86% to 5.41% to 6.41% depending on the type of loan.

One loan with an interest rate of 3.86% may not be worth refinancing because the most competitive fixed refinancing rates are at 3.50%. Revoking your federal loan status for 0.36% probably isn’t worth the cost.

However, refinancing loans at 5.41% (or higher) could drop as low as 3.50% with SoFi* or 3.74% with Common Bond or 4.74% with Citizens Bank.

For the sake of argument, let’s say you’re paying $270 a month on $25,000 worth of federally funded direct unsubsidized student loans on a 10-year term at 5.41%. In that time, you’d pay $7,409 in interest.

Pay the same amount on $25,000 of refinanced loans at 3.50% and you’ll only fork over $4,183.56 in interest.

$3,225.44 is a pretty significant difference.

Who Should Consider Refinancing Federal Student Loans?

You should only be refinancing federal student loans if you have the following:

  • A high credit score – so you can get the most competitive interest rates
  • A stable job
  • Money stashed away in case an emergency or job loss occurs
  • Wouldn’t qualify for forgiveness programs anyway

Here Are Perks You’ll Be Giving Up 

By consolidating debt and refinancing federal student loans to a private loan, you’ll be walking away from certain benefits the government offers. 

Income-Based Repayment, Income-Contingent Repayment and Pay As You Earn Plans

Income-Based Repayment Plans allow you to prorate your student loan payments based on your income. After 20 (for PAYE) to 25 (IBR and ICR) years of qualifying payments, depending on the plan, any remaining balance on your loan will be forgiven. There is also an interest subsidy if your monthly payment is less than the interest accruing on your loan. The government will pay the difference for the first three years.

Fine Print Alert: The loans discharged after 20-25 years could count as income and require you to declare it to the IRS and pay taxes.

Student Loan Forgiveness 

The government backs a variety of student loan forgiveness programs for professionals. These include:

  • Equal Justice Works (Lawyers)
    This forgiveness program is offered at select law schools and is used to provide financial aid to law school graduates working in low-paying legal fields such as government or the public interest sector.
  • Teacher Loan Forgiveness (Teachers)
    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.
  • Public Service Loan Forgiveness (PSLF)
    Employees of the government, non-profit organizations, and other public workers may qualify for the Public Service Loan Forgiveness 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.

[Read more about Student Loan Forgiveness here]

These programs are not eligible to those with private loans, so by refinancing federal student loans you’d be forsaking eligibility for forgiveness programs. If you have a handle on your debt and feel it can be paid off in less than 10 years, go ahead and refinance. But this could be hard to pass up if you’re drowning in debt and eligible for a forgiveness program. 

Discharge Benefits in Case of Disability or Death

Federal loans are discharged in the case of death and in certain instances of disability.

If you’re the borrower and die, your federal student loans will be discharged. If you’re a parent PLUS loan borrower – the loan may be discharged if you die or the student whose behalf you obtained the loan passes away.

Disability discharge occurs if you can prove that you are totally and permanently disabled through one of three methods:

  1. You are a veteran and have documentation from the U.S. Department of Veterans Affairs stating you are unemployable due to a service-connected disability.
  2. You’re on Social Security Disability Insurance or Supplemental Security Income and submit documentation stating your next scheduled disability review is within five to seven years from the date of your most recent SSA disability determination.
  3. You have a certification from a physician that you’re totally and permanently disabled.

Read the fine print when you consider refinancing student loans. If you need a co-signer on the loan, he or she may be liable for the loans in the case of your death or disability, which is why you should have life insurance if your debt could be transferred to someone else. Be 100% sure of what will happen to your repayments in the case of disability or death.

Deferring Payments 

Federal loans are eligible for deferment or forbearance, meaning you can delay or make a temporary stop to student loan payments based on circumstances. These circumstances may include enrollment in college or career school, a period of unemployment, economic hardship, participation in an approved graduate fellowship program.

Private loans are notoriously less lax about deferment or forbearance.

There are student loan refinance options that offer unemployment protection (like SoFi* and Common Bond. You need to explore the options for handling hardships before refinancing federal student loans.

Doesn’t Hurt to Check Your Options

Certain student loan refinancing providers like SoFi* offer the ability to check your rate without hurting your credit score (the provider performs a “soft pull” of your credit report). It won’t hurt to check your rates and then do the math to see if refinancing federal student loans makes financial sense for you.

Find our list of top student loan refinancing options here.

* We’ll 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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Balance Transfer, Best of, Pay Down My Debt

6 Best 0% APR Credit Card Offers – April 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.

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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. 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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4. 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.

Go to site

5. 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.

Go to site

6. 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

Go to site

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.

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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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Life Events, Pay Down My Debt, Strategies to Save

5 Things Every New Dad Needs To Know About Money

Dad_lg

Being a dad is awesome. It’s also the hardest thing I’ve ever done.

And the truth is that even with my financial background, it was the money side of things that stressed me out the most, particularly in the months before our first son was born. There were just so many new decisions to make and I didn’t feel confident that I was making them correctly.

But I’ve learned a lot along the way, and today I want to share the 5 most important tips I would tell a new dad worrying about money just like I was.

1. A Little Bit of Savings Goes a Long Way

For me, the hardest part of being a first-time parent was that EVERYTHING was new. My entire routine was thrown off by all the new responsibilities I had to handle, and I honestly just felt overwhelmed by it all.

But one thing I didn’t have to worry about was whether I’d be able to pay the bills each month. We had a savings cushion in place, and that meant I could afford to make some spending mistakes without jeopardizing my family’s financial security.

promo-savings-halfThat peace of mind was priceless. It meant I could focus on being a dad without worrying about whether my son would have a roof over his head next month.

Building that savings cushion can be tough, but I give the same piece of advice to every expectant parent I work with.

If you can, start living on your expected baby budget BEFORE the baby actually gets here. In the meantime you can funnel all those baby expenses into a savings account, which will do two big things for you:

  1. Get you used to the new budget before the baby gets here (and chaos ensues), and
  2. Build up that savings cushion.

You can make sure your savings cushion is getting the highest interest rate by putting your money in an account earning 1.00% or higher.

2. A baby doesn’t have to cost a fortune

Okay, I’ll get this part out of the way first: if you’re paying for daycare, then YES, that can cost a lot of money.

But beyond daycare, the truth is that new babies actually have very few needs. Some diapers and wipes. Maybe formula. A couple of basic outfits. A car seat.

And honestly, for the most part that’s really it. Most of the rest of it is just marketing that’s designed to scare you into thinking that you’ll fail as a parent if you don’t have all the latest gear.

You won’t. Your baby would be as happy as a hipster in Brooklyn with nothing but your love and attention, and neither of those things cost a penny.

3. Automation is your friend

Remember all those new responsibilities I talked about above? They’re going to be taking up most of your time and that will make it hard stay on top of your little financial responsibilities, like paying bills on time and hitting your savings goals.

That’s why automating as much of your financial system as possible will make your life a whole lot easier.

Certain bills, like your rent, electricity and water, simply have to be paid on time. They not only keep the lights on, but those on-time payments will help you avoid late fees and keep your credit report in good shape. Putting them on auto-pay will make sure they’re handled no matter how chaotic your life gets.

And then there’s your savings. A lot of new parents tend to pause or decrease their long-term savings, but it’s important to remember that your savings rate is the single most important factor in reaching your long-term financial goals. The more you can automate your savings, the more you can consistently work towards your most important financial goals.

4. Learn to love a good insurance policy

Insurance gets a bad rap, and in many cases that reputation is well-deserved. There are a lot of salesmen out there willing to sell you any policy that earns them a fat commission, regardless of how well it actually fits your needs.

But good insurance is priceless for the simple reason that it allows you to protect your family from financial catastrophe.

Health insurance will pick up the tab for those really big medical bills, especially the ones that are ongoing.

Term life insurance will replace a working parent’s income, or will bear the cost of replacing all the duties of a stay-at-home parent (like childcare, cooking, cleaning, etc.).

Long-term disability insurance will replace your income if there’s ever an extended period of time where your health prevents you from working.

And liability insurance will pay the damages if you ever accidentally injure someone or damage their property (like in a car accident).

These are all things that would be difficult or impossible for most of us to handle on our own, which is exactly why good insurance is so valuable.

5. Everyone struggles. Don’t be afraid to ask for help.

No matter how much you know or how much prep work you do, the transition to fatherhood is going to be tough. In between all the amazing moments like your baby’s first laugh, holding her while she sleeps, and that time she pukes all over your best friend, you’ll go through plenty of financial and emotional stress.

Just know that it’s normal. Everyone has the same worries, fears and struggles, and everyone makes mistakes along the way. You are NOT alone.

So when times get tough, don’t be afraid to ask for help. Whether it’s friends, family, professionals or even online forums, there’s always someone who’s been through what you’re going through and is willing to lend a hand. All you have to do is ask.

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Building Credit, Pay Down My Debt

Handling Your Credit Score After Divorce

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 www.annualcreditreport.com. 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

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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

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

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

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?

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?

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

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

SoFi

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

PAVE

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

Payoff*

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%

Karrot

  • 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%

CircleBackLending*

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

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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?

Retirement

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?

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

piggybank

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.

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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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Pay Down My Debt

5 Steps to Help Your Parents Get Out of Debt

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

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*

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.

SoFi*

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*

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]

Earnest

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]

Gradible

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.

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*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

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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.

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 info@magnifymoney.com).

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

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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

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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 Review: A Unique Way to Pay Down Student Loans

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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

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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 info@magnifymoney.com  

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Pay Down My Debt

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

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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

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

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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 info@magnifymoney.com. 

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Pay Down My Debt, Strategies to Save

Awkward Money Talks To Have With Your Partner

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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.

Dating

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 info@magnifymoney.com. 

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Pay Down My Debt

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

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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

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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

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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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*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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Balance Transfer, Pay Down My Debt

How to Complete and Make Payments on a Balance Transfer

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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.

promo-balancetransfer-wide

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 info@magnifymoney.com.

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.

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 Use a Balance Transfer to Attack Your Debt

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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:

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  • 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.

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

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

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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

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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.

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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 www.annualcreditreport.com, 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

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

Mortgage

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.

Rent 

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.

Automobile

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 https://www.penfed.org/- 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 https://www.billguard.com/ 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.

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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

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?

Below, you’ll find the most complete list of lenders currently willing to refinance student loans. You can also go directly to our comparison tool, which lets you see student loan terms all at once, with no need to give up personal information.

But before you do that read on to see if you are ready to refinance your student loans.

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.

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%.

You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance.

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

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*We’ll 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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College Students and Recent Grads, Pay Down My Debt

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

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 (info@magnifymoney.com). 

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Pay Down My Debt, Strategies to Save

The Secret to Setting Financial Goals You’ll Actually Keep

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 (info@magnifymoney.com).

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College Students and Recent Grads, Pay Down My Debt

You Need to Understand How Interest Impacts Your Student Loan Payments

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.

Takeaway

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.

Follow us on Twitter @Magnify_Money and send questions to info@magnifymoney.com 

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Pay Down My Debt

MagnifyMoney Launches Get Debt Free Campaign

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 info@magnifymoney.com 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

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.

holiday-debt-2

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%

holiday-debt-1

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%

Methodology

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

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 info@magnifymoney.com.

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Pay Down My Debt, Strategies to Save

Finally, The Actual Amount You Should Save For a Baby

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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

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.

Nelnet

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.

Resources

If you’re interested in exploring goodwill letters further, and the results that others have had, check out these websites:

  • ed.gov: 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

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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: http://www.asmarterchoice.org/ 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.

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College Students and Recent Grads, Pay Down My Debt

How to Get Student Loan Modification and What Qualifies

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

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.

PNC

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 op