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

6 Lowest Fixed Student Loan Refinance Rates

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Do you want to refinance your student loans? You’re in luck.

The student loan refinance market has expanded to include many solutions for graduates who are stuck with high interest rates. (We’ve even found 19 lenders and counting that currently offer refinancing, take a look at the entire list here!)

When you shop around for a lender you’ll notice that most offer variable and fixed interest rates. There’s a big difference between the two. Variable interest fluctuates over time while fixed interest stays the same throughout the life of your loan.

We suggest you choose a fixed interest rate unless you can pay off your debt very quickly. Otherwise, you risk an increase in interest while you repay the loan. Thankfully, there are lenders that offer very competitive fixed rates. Here are the lowest rates available.

SoFi

SoFi offers refinancing and consolidation for both Federal and private loans with fixed rates from 3.50% to 7.24% APR. In order to get these low rates, you must sign up for autopay. Loan terms are available up to 20 years. The minimum loan amount is $10,000, but may be higher in some states due to legal requirements. The maximum loan amount you can obtain from SoFi is the balance of your qualifying student loans.

You must have graduated from an eligible Title IV accredited university or graduate program to be eligible for SoFi refinancing. Co-signers are accepted on a case-by-case basis. Both you and your co-signer must be U.S. citizens or permanent residents to apply. However, it does not offer co-signer release. SoFi has no application or origination fees plus no penalties for prepayment.

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*referral link

Earnest

Earnest will refinance private and Federal loans with fixed rates from 3.50% to 7.25% APR if you sign up for auto-pay. Terms are available for 5, 10, 15 and 20 years. The minimum loan amount you can refinance is $5,000 and the maximum is $400,000. Earnest will accept co-signers to improve your chances of securing a low rate, but it’s not required.

In order to qualify, you must be a U.S. citizen or permanent resident. Your debt also has to be from a Title IV accredited school. You must live in CA, CO, CT, FL, GA, IL, MD, MA, MI, MN, NJ, NY, NC, OH, OR, PA, TN, TX, UT, WA, Washington D.C., or WI. If you don’t live in one of these states (or district), Earnest suggests you still apply so you can receive a notification once loans become available in your area. This refinance has no origination fees or prepayment penalties.

Earnest

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Darien Rowayton Bank

Darien Rowayton Bank offers fixed interest at 3.50% to 6.25% APR if you sign up to make automatic payments from a Darien Rowayton Bank checking account. According to the website, you can easily open a checking account to receive the interest discount during the loan closing process. Loan terms are available up to 20 years. The minimum loan amount is $5,000 and Darien Rowayton Bank will fund up to 100% of outstanding private and Federal student loans.

You must be a working professional with a bachelor’s or graduate degree to be eligible. You must also be a U.S. citizen or permanent resident. A co-signer isn’t required, but you’ll likely need a co-signer to get approved if your gross annual income is less than $50,000. This refinance has no origination fee nor penalty for prepayment.

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CommonBond

CommonBond offers fixed interest from 3.74% to 6.14% on student loan refinances if you sign up for autopay. Terms are available for 5, 10, 15 and 20 years. With CommonBond you can refinance up to $220,000.

You must have obtained a degree from one of the graduate programs on the CommonBond eligibility list to qualify. Find out if your school is in the network on the CommonBond refinance FAQs page. Applicants must be U.S. citizens or permanent residents. A cosigner isn’t required, but if you don’t meet the underwriting requirements you can reapply with one. CommonBond charges no fees for application or origination. There’s also no penalty for prepayment of the loan.

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*referral link

Citizens Bank

Citizens Bank will refinance both undergraduate and graduate loans. APR ranges from 4.74% to 8.90%. Loans are available from $10,000 to $170,000 depending on your education. Citizens Bank offers up to 0.50% in interest rate reductions if you sign up for autopay or have a qualifying account with Citizens Bank before applying. Terms are available for 5, 10, 15 and 20 years.

You must be a U.S. citizen, permanent resident or resident alien to qualify. A co-signer isn’t required but if you don’t have a strong credit history a co-signer may increase your chances of getting a low rate. Co-signers can apply for release if 36 on-time, consecutive payments are made. However, the borrower must meet certain credit eligibility requirements on their own at the time of release. Citizens Bank doesn’t charge application, disbursement or origination fees. There’s also no prepayment penalty.

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iHELP

iHELP offers discounted fixed rates at 6.22% to 7.99% APR if you have a co-signer. Both private and Federal loans are eligible for refinance. The minimum loan amount is $25,000. The maximum loan amount is $100,000 for an undergraduate degree and $150,000 for a graduate degree.

Both you and your co-signer must be U.S. citizens or permanent residents to apply. Your co-signer may be eligible for release after 24 months of on-time payments if you meet credit requirements when he or she is released. You must have graduated from one of the iHELP eligible schools to receive a loan. iHELP charges a 2% supplemental fee upon loan disbursement. This is the only refinance to make the roundup that charges this type of fee.

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Education Success

Until recently, Education Success also offered a student loan refinance. It’s not available at this time because the original lender could no longer provide funding. Fixed rates were available as low as 4.99% APR for the first 1 to 10 years and variable interest thereafter from 5.24% to 8.24%. The minimum amount you could refinance was $15,000 depending on state requirements.

A loan with fixed and variable interest like this one is worth considering if you can pay off your debt within the fixed interest period. We’ll update this post if and when the refinance at Education Success becomes available.

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Is a refinance the right choice for you?

A refinance can give you a better interest rate and save you money in the long run, but there’s one factor you must bare in mind. A refinanced Federal loan may no longer qualify for Federal loan benefits like loan forgiveness, income-based repayment, forbearance or deferment. These are invaluable benefits to fall back on if you run into financial trouble in the future, so make the decision to refinance carefully.

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Best of, Pay Down My Debt, Personal Loans

Best Debt Consolidation Loans

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Are you stuck under an overwhelming pile of consumer or student loan debt? Do you feel like it might be impossible to get out?

We have good news: it’s not. Have you considered consolidating your debt? If not, it could be the solution you’re looking for.

Debt consolidation is typically used for two purposes:

  1. Make payments simple: If you owe a lot of lenders and are having a tough time keeping track of all the payments, then consolidating will make your life easier. You’ll only owe one lender and have to keep track of one due date. There’s less of a chance of anything falling through the tracks.
  2. Lower your interest rate: This is where you have to run the numbers to see if debt consolidation makes sense for you. What’s the average interest rate you’re paying on your debt? If it’s quite high (which is likely if you have a lot of consumer debt), you may benefit from consolidating under better terms. Having a smaller payment each month can help you manage your cash flow better.

If you think debt consolidation makes sense for your situation, we have a list of the best debt consolidation loans you can use to refinance your consumer debt, and we also have information on consolidating and refinancing student loan debt. Read on for our recommendations.

Personal Loans to Consolidate Credit Card Debt

SoFi*

You can borrow between $5,000 and $100,000, which is the most out of the personal loans recommended here. Its fixed APR ranges from 5.50% – 9.99% and its variable APR ranges from 4.04% – 8.04%. You can choose a term of 3, 5, or 7 years. You should have a credit score above 700 for the best chances of qualifying. There is no origination fee or prepayment penalty associated with a personal loan from SoFi.

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*referral link

Earnest

You can borrow between $2,000 and $30,000 with Earnest, and the maximum term is 5 years. Its APR ranges from 4.25% – 9.25%, but if you can find a lower rate offered elsewhere, you’re encouraged to email Earnest. You can borrow on terms of 1, 2, or 3 years. The minimum credit score to qualify is 720, though Earnest, like SoFi, takes other factors into account. There are also no origination or prepayment fees. However, you need a LinkedIn account to apply for a loan.

Earnest

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Lending Club*

This is a peer-to-peer platform, which means individual investors are contributing to your loan. You can borrow between $1,000 and $35,000 with Lending Club, and its APR ranges from 5.32% – 32.99%, depending on the type of loan grade you’re eligible for. Be aware there are origination fees (ranging from 1% – 5%) associated with this personal loan, but there are no prepayment penalties. You can borrow on terms of 2, 3, and 5 years. The minimum credit score needed is 620.

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*referral link

Payoff*

You can only consolidate credit card debt with Payoff right now. You can borrow $5,000 to $25,000 on a term of 2, 3, 4, or 5 years. Its APR ranges from 10.00% – 22.00%. There are origination fees ranging from 2% – 5% of the loan amount, but there are no prepayment or penalty fees. The minimum credit score needed to qualify is 660.

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*referral link

[Check out other Personal Loans on Our Comparison Table Here]

Consolidating and Refinancing Student Loans

If you’re thinking about refinancing or consolidating your student loans, there are a couple of things to know.

First, what’s the difference between refinancing and consolidating?

  • Private Loan Consolidation: This involves combining all your loans into one loan so you only owe one lender and have to make one simple payment.
  • Federal Loan Consolidation (Direct Consolidation Loan): Only have Federal student loans? You can combine them through a Direct Consolidation Loan with the government. According to studentaid.ed.gov, “The fixed rate is based on the weighted average of the interest rates on the loans being consolidated.” This doesn’t save you much money, but your payments will be more manageable. For a complete list of Federal loans that can be consolidated, check here.
  • Refinancing: This is when you apply to a completely new lender for new terms – you’ll have a new loan, and your new lender will pay off your old loan.

The difference isn’t all that big – when you consolidate private (or private and Federal) student loans, you’re essentially going through the refinancing process.

If you currently have Federal loans, you need to be aware refinancing or consolidating means giving up certain benefits that come with federal student loans.

That means income based repayment, deferment, forgiveness, and forbearance options disappear. A few of these benefits are forfeited even with the Direct Consolidation Loan. These benefits could get you through an otherwise rough time, so make sure refinancing makes sense beforehand.

If you do have federal student loans, and you’re thinking of refinancing or consolidating, first see if you’re eligible for deferment or forbearance. There’s no reason to go through the process of having your credit checked if you can lessen your student loan burden another way.

If you have private student loans, you can also check with your lender to see if it offers payment assistance. Many lenders are making improvements to their student loan refinance programs and including forbearance and deferment options.

Also, once you consolidate or refinance your student loans, there’s no going back. This applies to the Direct Consolidation Loan as well.

Okay, still think refinancing or consolidating is right for you? Here are two options worth considering.

SoFi*

There’s no limit to the amount you can borrow with SoFi (the minimum is $10,000), which is nice for those with larger student loan debt. Fixed rates range from 3.50% – 7.24% APR and variable rates range from 1.90% – 5.19% APR. The maximum term you can refinance for is 20 years.

The additional benefit to refinancing with SoFi is that it offers unemployment protection. If you lose your job while repaying your loans, SoFi will help you get back on your feet through career counseling. You might also be eligible for forbearance during this time.

There is a school eligibility list – you can call or fill out the application to see if your school is on it.

SoFi takes into account your employment history, cash flow, and payment history – not just your credit score. However, having a score over 700 is recommended. If you need a co-signer, SoFi accepts them on a case-by-case basis, but there’s no co-signer release.

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*referral link

Citizens Bank

You can borrow a minimum of $10,000, up to a maximum of $90,000 with a Bachelor’s degree, $130,000 with a graduate degree, and $170,000 with a professional degree. The maximum repayment term is also 20 years.

Its variable APR ranges from 2.83% – 7.47%, and its fixed APR ranges from 5.24% – 9.39%. If you already have an account with Citizens Bank, you may be eligible to receive a 0.25% interest rate deduction. If you enroll in auto-pay, you’re eligible for another 0.25% interest rate deduction.

There are no strict credit requirements with Citizens Bank, and it does accept co-signers. They are eligible for release after 36 consecutive on-time payments. However, if your loan entered into forbearance at any point (it offers payment assistance), then the loan is no longer eligible for a co-signer release.

Both of these options don’t have any hidden fees, meaning you don’t pay to apply, there are no origination fees, and there are no prepayment penalties. You can also refinance both private and federal loans with these two lenders. SoFi uses a soft credit inquiry to start, whereas Citizens Bank uses a hard inquiry.

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[Find other Student Loan Refinance Options on Our Comparison Table Here]

Shopping Around is a Must When Consolidating or Refinancing

The goal of refinancing or consolidating is to ultimately make your debt less of a burden on you. That means getting the best rates and terms offered. The easiest way to accomplish this is to shop around with different lenders. If you do so within a 30-day window, credit inquiries won’t count against you as much as they would if you shopped around for months. Plus, there are many lenders out there who will give you rates with just a soft credit inquiry (though a hard inquiry is required to move forward with a loan). Always put yourself first, as you’re never obligated to sign for a loan you’re approved for.

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

The Dangers of Co-Signing a Loan

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By contributor Steven of EvenStevenMoney

When you first step out into the real world it is hard to ignore the marketing of what you need or want in your new life. You’ll find advertisements for colleges, credit cards and which car to buy are about as normal as a McDonald’s advertisement. Because money is currently not growing on trees, you may need to borrow some to make life happen. If you have ever applied for a loan before you received your first job or while in college, the application may have asked for a co-applicant or co-signer. The two terms may sound similar, but the obligations of a co-signer and co-applicant are different.

In a co-applicant the individual is attempting to get a joint loan with someone else, an example would be obtaining a mortgage. In most cases when buying a home, both incomes will be needed to obtain the loan and will feature both names on the mortgage loan and deed.

A co-signer is usually brought on if the applicant lacks income or good credit or for that matter any credit at all. Assuming the co-signer’s credit history meets the lender’s requirements, the co-signer will act as a default if the borrower or individual receiving the loan does not make payments per the loan agreement. A co-signer is required if the bank is worried you may not pay back the loan. To reduce the risk it requires someone who has a good credit history, income, and demonstrated they have paid their bills on time. So that doesn’t sound so bad, where’s the danger?

Who’s Responsible?

Co-signers are common with student loans as an 18 year old rarely has built a strong credit report with a history of good behavior. Both the student borrower and the cosigner are equally responsible for paying back the loan. Some private student loans offer the student loan borrower the option to release the cosigner, but this is usually at the financial institutions discretion after a certain amount of consecutive monthly payments are made on time and the borrower/student has meet certain credit requirements.

Even in the event the borrower has reached the consecutive monthly payments made on time the Consumer Financial Protection Bureau (CFPB) has received complaints that borrowers have experienced a challenge getting the co-signer released from a loan. One particular complaint noted that even after making the required 28-on time payments, and then finding out it was 36 on-time payments, to only be met with a policy change from the lender that requires 48 on-time payments before applying to release the co-signer.

Remember that co-signing a loan means the obligation is shown on your credit report and thus affects your credit score. So if little Johnny forgets a payment because he failed to set up automatic payments or is having trouble making the payments on time, then this also can negatively affect your credit score as the co-signer.

It’s also important to remember, if you co-sign for a $20,000 student loan during little Johnny’s freshman year in college, this loan has 4 years to grow and accumulate interest. If the borrower defaults on the payments, then you are responsible for paying back your new student loan.

What’s the Worst That Could Happen?

Any time you co-sign for a loan, it is in your best interest to consider that you are fully responsible for paying back the full amount of the loan, because in the eyes of the law and the financial institution you are. It could even be the case if the borrower passes away before repaying the debt.

In the unfortunate case the borrower passes away, Federal student loans are discharged after the death of the borrower.

Under the same circumstances with private loans, in many cases the co-signer is now fully responsible for the balance of the loan; this also works the other way as well if the co-signer passes away.

According to a April 2014 mid-year student loan update from the Consumer Financial Protection Bureau, from 2008 to 2011 there was a more than a 20% uptick in private loans being co-signed. In 2008 67% of private loans were co-signed often by a parent or grandparent, but by 2011, over 90% of loans were co-signed.

One scary highlight from the CFPB report found that borrowers  are discovering when a co-signer passes away, like a parent or grandparent, an automatic default occurs. This default can occur even if the borrower is in good standing and current on the loan. I’m sure you can imagine the confusion when borrowers received notices to pay the loan in full.

It never really occurred to me when I received my private student loan that if the borrower or co-signer of the loan were to pass away it could result in financial distress. If you are already in a private student loan with a co-signer, then it may be a good time to consider having life insurance on one another as a source of funds to pay off the loan in the event of a death.

Private Student Loans: My Story

I was accepted to study in Rome, Italy, but unfortunately I did not attempt to obtain anything more than Federal student loan funding for my study abroad trip, so I was forced to cancel. I told myself I would pursue my dream of studying in another country at any cost. I found a study abroad program in London and I was accepted. However I needed extra finances and more than the Federal government could spare. I started applying for private student loans, the university I planned to attend was a private university, which cost four times more than current in-state tuition. Because I did not have much of a credit score or any income to report, I asked my parents if they would co-sign to receive the funding I needed to study abroad.

After a short online application process with my parents, we were approved and the loan did exactly what I needed at the time; it helped pay for my tuition, room and board, and whatever other shenanigans London and the surrounding European countries had to offer. At that exact moment I could not have been happier, I was going to London and studying abroad in another country. But I didn’t focus on the fact my lender expected me to pay the loan back in full plus interest.

While I enjoyed my time in London, my private student loan put financial stress on myself and my parents. I never defaulted but I remember the pressure I felt to make sure it was never the financial responsibility of my parents. I couldn’t imagine putting my parents through a financial hardship all because I wanted to study abroad while I was in college. I made a commitment to pay off my private student loan first for a number of reasons, but most of all it was to make sure my family was not a story in the news that resulted in a son defaulting on a loan to only hurt my family’s financial situation.

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Best of, Pay Down My Debt

7 Personal Loans for 600 to 700 Credit Scores

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If you have a less-than-perfect credit and want to pay off credit card debt, fund home improvement projects, or pay for unexpected expenses, then finding a lender that will consider your credit might seem like an uphill battle.

Refinancing high-interest debt with a personal loan can quickly cut down the amount of interest you’re paying, which effectively allows you to pay if off in less time. You particularly want to avoid payday and title loan lenders at all costs. So, check out these 7 personal loans for people with credit scores of 600 to 700 and see if one is right for you!

Avant

Avant offers loans ranging from $1,000 to $20,000 when financed through Avant, and up to $35,000 when financed through WebBank. According to its FAQ, Avant will consider credit scores as low as 550, but prefers to work with scores in the 600-700 range.

The Fine Print

Despite its seemingly ideal low credit score requirements and high maximum loan amount, Avant has some fine print for which to watch out.

Interest rates range from 9.95% to 36.00%, although some states may see higher interest rates, like South Dakota, that at the time of writing topped out at 39.99%. The upfront fee for an Avant personal loan ranges from 1% to 6%, and loans are not available in Maine, Iowa, North Dakota, or West Virginia.

However, an Avant loan application only requires a soft pull to see your rate, which does not affect your credit score, and there are no prepayment penalties.

The Avant personal loans scores an “A” Transparency Score.

Pros

  • Minimum credit score of 550, through it prefers to work with scores above 600
  • “A” Transparency Score
  • Can see your rate with a soft credit pull
  • Fixed terms, fixed interest rate, no prepayment penalties

Cons

  • Interest rates range from 9.95% to 39.99% depending on state
  • Not available in Maine, Iowa, North Dakota, or West Virginia
  • 1% to 6% upfront fee

While Avant’s interest rates seem high, with its “A” Transparency score, this loan is a great option for individuals with credit scores as low as 550.

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*referral link

OneMain

OneMain offers loans up to $10,000 for individuals with credit scores starting at 550. It offers terms of up to 60 months and APR ranges from 12% to 35%.

The Fine Print

In order to be accepted for a OneMain Loan, you must live near a OneMain branch, as a face-to-face meeting is required to finalize the loan. OneMain personal loans are not available in Alaska, Arkansas, Connecticut, Massachusetts, Nevada, Rhode Island, Vermont, or Washington D.C.

In order to qualify you must have:

  • Verifiable, steady income
  • No bankruptcy filings, ever
  • Be at least 18 years of age
  • Have at least some established credit history
  • Credit score of at least 550

If, at any time during the application process, OneMain becomes aware that you intend to use the personal loan for gambling, your loan application will be cancelled. OneMain personal loans cannot be used for business expenses or tuition.

You cannot see your OneMain rate until it performs a hard credit pull, which does affect your credit, and the OneMain personal loan earns a “B” Transparency score.

Pros

  • Credit score as low as 550
  • Fixed Rates
  • No Prepayment penalty
  • Fixed terms
  • Convenient location, at OneMain branches

Cons

  • APR ranges from 12% – 35%
  • Loans cannot be used for business expenses or tuition
  • Cannot see rate without a hard credit pull
  • Personal loans only available up to $10,000
  • Loans not available in Alaska, Arkansas, Connecticut, Massachusetts, Nevada, Rhode Island, Vermont, or Washington D.C.
  • You must visit a OneMain branch to complete the loan.

The OneMain personal loan caters to people with low credit scores, or who would prefer to complete the personal loan application process at a branch, rather than online.

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Springleaf

Springleaf offers personal loans ranging from $1,500 to $25,000. Borrowers can actually apply online and receive instant approval before visiting a branch. The online application does require a hard credit pull.

The Fine Print

Springleaf APRs range from 15.99% to 39.99%, which could actually be higher than the APR of a credit card.

Springleaf loans are only available in 27 states, but will consider borrowers with scores of less than 600.

Pros

  • No application fee
  • Will consider credit scores as low as 550
  • Many local branches, to receive funds

Cons

  • APR ranges from 15.99% – 39.99%
  • Hard credit pull required
  • “B” Transparency Score
  • Only available in 27 states

If you have damaged credit, a Springleaf loan may be perfect for you. Just be careful with the APR, as its minimum APR is quite high.

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Vouch

Vouch offers a unique lending experience, where your friends and family are able to “vouch” for your financial responsibility by putting a monetary stake on it and your rate decreases. Your friends and family must offer to pay back some of the loan in case you can’t, much like a co-signer. The Vouch personal loan basically lets you leverage your network and get a lower rate on a loan.

Vouch offers installment loans ranging from $500 to $7,500 and APR ranges from 5% to 30%. However, even if you receive a loan at a 20% APR, your rate can actually decrease during the term as more friends and family vouch for you.

The Fine Print

In order to apply for a personal loan from Vouch, you must:

  • Be 18 or older
  • Be a legal U.S. resident
  • Have a credit score of at least 600
  • Must not be in foreclosure or bankruptcy
  • Have a verifiable bank account

Vouch does not charge any application, annual, or prepayment fees. It does charge 1% to 5% in origination fees. Late fees are 5% of your payment with a minimum of $15.

You can apply for a Vouch loan online with a soft credit pull, as long as you have a mobile phone to which Vouch can send a security code. Once the application has been filled out, it takes 24-48 hours to receive a loan offer.

Pros

  • APR as low as 5%
  • Can see your rate with a soft credit pull
  • Minimum credit score of 600
  • No application, annual, or prepayment fees
  • Can apply online

Cons

  • APR up to 30%
  • Late fees are 5% of your payment, with a minimum of $15
  • Loans only up to $7,500

The Vouch personal loan is a great option if you have damaged credit and a network of friends and family that can support you in order to lower your rate.

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Freedomplus

Freedomplus offers loans ranging from $5,000 to $35,000 that can be used for everything from debt consolidation, to unexpected expenses. APR ranges from 8.45% to 29.90%.

Its biggest selling point is the same-day approval and availability of funds within 48 hours, a lifesaver in some circumstances.

The Fine Print

In order to qualify for a Freedomplus loan, you must:

  • Be 18 years or older
  • Be a legal US resident
  • Have a valid ID
  • Minimum credit score of 600
  • At least $25,000 in verifiable income
  • No bankruptcies in the last two years

Freedomplus charges origination fees ranging from 1.38% to 5.00%, which is deducted from the loan amount before you receive the funds. There are no prepayment penalties.

The Freedomplus personal loan scores a “B” Transparency score because its fee structure and much of the fine print is unclear or not covered by the final contract.

You can prequalify with a soft credit pull, which does not affect your credit score. However, Freedomplus requires a phone screening with each applicant before the loan is approved.

Pros

  • Will approve credit scores as low as 600
  • The phone screening may improve your chances of being approved for the loan
  • Same-day approval and funds within 48 hours
  • No prepayment penalty
  • Can prequalify with a soft credit pull

Cons

  • APR ranges from 8.45% to 29.90%
  • The fee structure is not readily available for review
  • Origination fee of 1.38% to 5.00% applies

The Freedomplus personal loan is a good option for you if you have less than perfect credit, and need access to funds quickly, without visiting a physical branch.

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Prosper

The Prosper personal loan process is a little different than a traditional lender. It is not a bank, but rather a peer-to-peer lender. Once you have applied, and checked loan terms and rates, you create a loan “listing” that then appears on in the Prosper marketplace.

From these listings, peers (investors) choose which loans they would like to finance. When your loan listing is financed, the money is transferred to your bank account.

Prosper offers loans from $2,000 to $35,000, and APR ranges from 6.68% to 35.97%. It offers loans terms of either 36 or 60 months. Your APR is determined during the application process, and is based on a credit rating score created by Prosper. Your score is then shown with your loan listing to give potential lenders an idea of your creditworthiness.

The Fine Print

Your loan listing will remain active for 14 days. After 14 days, your loan must be at least 70% funded to receive the funds. If you are not 70% funded within 14 days, you must reapply to have your loan re-listed.

Origination fees range from 1% to 5% and are based on your Prosper score. In order to qualify, you must:

  • Have a bank account
  • Have a social security number
  • No more than 7 inquiries on your credit in the last six months
  • A verifiable, steady income
  • A credit-to-debt ratio of less than 50%
  • At least three open accounts, such as checking, savings, and credit card.
  • No bankruptcies in the last year

A returned payment may result in a $15 fee, and late payments past 15 days are charged a 5% fee, with a minimum of $15.

Prosper’s overall fine print is very clear is its fees are quite minimal, so it scores it an “A” Transparency Score. Also, you can check your Prosper rate with a soft credit pull, which will not affect your credit score.

Pros

  • Minimum credit score of 640
  • Can see your rate with a soft pull
  • No prepayment penalties
  • Paying off a Prosper loan can reduce your APR on future Prosper loans

Cons

  • Only 14 days to secure financing from peer lenders
  • Origination fee of 1% to 5% applies
  • APR varies from 6.68% to 35.97%

Prosper is a flexible alternative with a low-end APR that beats a credit card.

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Lending Club

Lending Club offers loans of up to $35,000, for individuals with a minimum credit score of 620. Its APR ranges from 6.68% to 29.99%. Lending Club also uses a soft credit pull to determine your rate, which will not affect your credit.

The Fine Print

In order to qualify for a Lending Club personal loan you must:

  • Not have more than 5 hard credit inquiries in the last 5 months
  • Have at least two active credit accounts open
  • Have a credit history of at least 36 months
  • Debt-to-income ratio of less than 40%
  • Be able to verify employment and income

Once you have met the minimum criteria, Lending Club uses its own scoring system to determine what amount you can borrow as well as your rate.

You can borrow money for up to 60 months, but it does charge up-front (origination) fees depending on credit worthiness, which come out of the loan amount.

Pros

  • Can see your rate with a soft credit pull
  • Will consider applicants with credit scores as low as 620
  • APR as low as 6.68%
  • The application process only take a few minutes

Cons

  • Missed payments or items in collections will result in your application being rejected
  • Loan processing could take a week or more
  • APR tops out at 29.99%
  • It does charge origination fees

While Lending Club has very strict requirements, its lowest APR of 6.68% and its minimum credit score of 620 can open the doors to a personal loan if you wouldn’t be approved elsewhere.

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Shop Around to Find the Best Deal

If you have made past credit mistakes, or have very little credit, there are personal loans out there for you. Many of these lenders offer rates much lower than what you would be paying on a credit card, shaving month and hundred or thousands of dollars off of your debt.

Don’t give up on a personal loan just because of your credit – there are options out there for you. It never hurts to shop around and look for the best rates available, especially if the lender does a soft credit pull to show you your options.

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College Students and Recent Grads, Pay Down My Debt

7 Things You Need to Know About Private Student Loans

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When you realize you will have to take out loans to finance your college education, your best bet is to take out Federal loans because you are afforded protections that you are not otherwise granted with private loans. But the best case scenario is not what always happens. If you do end up taking out private student loans, there are seven things you need to know to handle your student loan debt.

1. “Private Student Loans” Defined

Private institutions such as a bank, credit union or other type of lender are responsibly for funding private loans. This is different than Federal student loans, which are backed by the Federal Government of the United States. With private loans, the lender (the entity that extended you the loan) sets the terms of the loans, including the interest rate (based on your credit), loan limit, repayment options, etc.

Whatever you can do to learn about your repayment options and restrictions (including a prepayment penalty) prior to taking out your student loans, the better off you will be because you can plan accordingly.

2. How Do You Know if You Have Private Student Loans?

If there are any gaps in funding after you receive your financial aid package from your university or college, you will have to fill them in with private loans. If you do not remember whether you did this during college, you can simply log into your student loan account and look at the loans. The loans will either be categorized as federal or private. Alternatively, you can call your loan servicer (Navient or Sallie Mae, for example) and ask the provider whether you have any private loans in your account. A final way to know whether you have any private loans in your name is to get your credit report (which is a good idea to do annually, anyways). All of your loans will appear on your credit report, and you will be able to identify which are private based on the name of the loan and service provider.

You can get copies of your credit report from all three credit bureaus by going to annualcreditreport.com

3. Get Life Insurance If You Have a Cosigner

It is not uncommon to need a cosigner in order to get a private student loan because the lender is looking at your credit to determine whether you qualify. If this is the case for you, then you should consider life insurance that covers the loan amount. Here’s why: if you die, your private loans are not forgiven. This means that if you die, the cosigner on your private loans will still have to pay off your debt. There is no hardship requirement or loan forgiveness with private loans like there is with federal loans. (Often these stories make headlines – remember the story of the 27-year-old nurse who died and whose father was on the hook for a whopping $200,000 in student loan debt after he could not keep up with the payments? These stories are horrible, yet not uncommon.) If you have a cosigner on your private loans, be sure to read the fine print of your loan agreement. If the loans are not forgivable upon death, then you need to get life insurance in order to protect your cosigner if you die before the loans are repaid.

4. Repayment Options for Private Loans are More Restrictive than Federal Loans

Federal loans come with mandatory protections, including income-based plans and forbearance and deferment options, based on your circumstances. This is not the case for private loans. All repayment options are up to the lender, and private student loan lenders usually do not offer these flexible repayment options. That means you will be stuck with whatever the provider offers – possibly a standard, ten-year repayment plan or a longer, twenty-five year repayment plan. The point is that you are stuck with what they offer.

5. Pay Off Private Loans First Because of the Inherent Risk

If you have private student loans and Federal loans, you may be tempted to repay the loans by the highest interest rate first. This makes sense, mathematically speaking. However, it ignores the inherent risk of private student loans. If you have private student loans and something happens to you where you can no longer afford the payments, you may not be able to do anything about it if the lender is not willing to work with you. Conversely, with Federal loans, you have options based on your circumstances. This means your private loans are inherently riskier than your Federal loans. Because of the greater risk, you should prioritize repaying your private student loans, even if the private loans have a lower interest rate. This will reduce the risk you have associated with your student loan debt and put you in a better position financially.

6. Refinancing Your Federal Loans Turns Them into Private Loans

There is a lot of chatter lately about refinancing Federal student loans to get lower interest rates. This is especially the case for people who took out high interest rate loans for graduate programs, law school, and medical school. If you have Federal student loans with a 6.5%-8.5% interest rate, you can go through a company like SoFi*, Earnest or CommonBond* and refinance these loans to get a lower interest rate (just like you would if you were refinancing a mortgage on a house). What you need to know about refinancing Federal student loans is that you are turning your federal loans (with lots of protections) into private loans (with little protections). This may not be a good move because it increases your risk, even if it does lower your interest rate. 

7. Private student loans are not dischargeable in bankruptcy 

Private loans are generally not dischargeable in bankruptcy. This is not different than Federal loans, but it is worth noting because of the inherent risk associated with student loans in general. This means that if you have to claim bankruptcy, you will still owe your student loan debt afterwards. The only exception to this rule is a finding of undue hardship that is so great that you have no chance of ever increasing your income. But barring extreme circumstances, this means that you are stuck repaying your student loans, no matter what.

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Balance Transfer, Pay Down My Debt, Reviews

PNC Flex Visa Credit Card Balance Transfer Review

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If you are struggling with credit card debt, making large payments every month, but feel trapped under the enormous interest rate on your current card, then you may be able to shave months and hundreds to thousands of dollars off your debt by completing a balance transfer.

The Offer

The PNC Flex Visa Balance Transfer offers:

  • 0% APR on balance transfers for the first 18 months
  • Balance transfers need to be completed within the first 90 days of account opening
  • No annual fee
  • 4 points for every $1 spent on qualifying purchases
  • Bonus points awarded based on deposit account balance, but we don’t recommend getting into the rewards game on a balance transfer card
  • $0 Fraud liability

How To Apply

There are 4 ways to apply for the PNC Flex Visa: online, by phone, in person at a PNC branch, or by mailing or faxing a printed application. In order to apply you will need your Social Security number, your monthly housing payment, and your total annual income.

If you apply online you will receive a response immediately, and if you are approved your card will arrive in 7-10 days. Applying by phone, in person, or by mailing or faxing a printed application could result in a longer period of time before receiving a response.

How To Complete The Balance Transfer

In order to successfully complete a balance transfer with the PNC Flex Visa, you must first apply and be approved. Once the account has been opened, you have 90 days to complete the balance transfer or you will lose the 0% balance transfer APR.

When you are ready to complete the balance transfer, fill out the balance transfer form completely. Continue to make the minimum payment on the account from which you are transferring the balance until you verify that the transfer has been completed. This could take up to 3 weeks.

Once completed, resist the temptation to spend on the card, as purchases are subject to the full, non-promo APR after the 21-day grace period. Pay off the balance as aggressively as you can. We suggest dividing your total balance by the number of months left at 0% APR. However, if you are not able to pay off the entire balance during the first 18 months of account opening, you do have the option to transfer the remaining balance to another card before the 0% APR expires.

The Rewards Program

The PNC Flex Visa is not a good card to use as a rewards card. You do earn 4 points for every $1 spent on qualifying purchases, but then points are redeemed through a catalog.

Redeeming points for cash back starts at 3,000 points for $4, which is 750 points per $1. However, if you wait and save your points until you have 7,500, you can redeem them for $15, which works out to 500 points per $1. This represents as 0.8% cash-back return.

You can redeem your points for other things, such as 40,000 points for a $100 Amazon gift card. This represents 1% cash back, but there are other offers that vary by rate of return on your points.

The rewards program on the PNC Flex Visa is not the best, so you shouldn’t use it for the rewards.

Fine Print Alerts

The 0% balance transfer APR is valid for the first 18 months after account opening. Completing a balance transfer after the first 90 days or having a late or returned payment could result in the loss of the 0% balance transfer APR.

Late or returned payments may also result in fees of up to $35, in addition to a penalty APR 28.99%. You cannot transfer a balance from an existing PNC card.

The non-promo APR ranges from 10.99% to 19.99%, and the APR for cash advances ranges is 28.99%. You will not know your non-promo APR until you apply. A balance transfer fee of 3%, cash advance fee of 4%, and foreign transaction fee of 3% will apply. There is no annual fee with the PNC Flex Visa.

Pros

  • 0% APR on balance transfers up to 18 months
  • No annual fee
  • Up to 4 reward points for every $1 spent
  • $0 fraud liability

Cons

  • 3% balance transfer fee applies
  • Purchases are subject to the full non-promo APR after 21 day grace period
  • Non-promo APR ranges from 10.99% to 19.99%
  • Will not know your non-promo APR until you apply
  • 5% cash advance fee and APR of 21.99%
  • 3% foreign transaction fee
  • Late or returned payments could result in fee of up to $35
  • Reward program is complicated

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How It Stacks Up

The PNC Flex Visa is a good offer, but there are other balance transfer deals that offer longer terms, fewer fees, or 0% APR on purchases.

For example, the Chase Slate balance transfer offer is 0% APR on balance transfers and purchases for 15 months. Even though the promotional term is shorter, there is no balance transfer fee with the Chase Slate balance transfer, which on a $10,000 balance transfer would save you $300. At 15 months, you could pay off a $10,000 balance in 15 months by paying $666.67 each month.

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The Citi Simplicity 0% balance transfer APR is a 21-month offer, if you need more time to pay off the balance. A 3% balance transfer fee still applies, but with a longer 0% APR period, you wouldn’t have to pay off your balance quite as aggressively as with the PNC Flex Visa balance transfer.

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On a $10,000 balance plus 3% fee, you could pay off your entire balance in 21 months by paying $490.47 each month.

Who Is This Offer Best For?

The PNC Flex Visa offers decent terms, with 18 months at 0% APR for balance transfers, and is ideal for someone who does not have a balance with PNC already, as you cannot transfer a balance from an existing PNC card.

It should not, however, but used for purchases or as a rewards card, and you should always weigh your options before applying for a balance transfer. Compare how long the promotional period is, as well as the balance transfer fee to ensure you are applying for the best balance transfer card for your unique situation.

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

Eastman Credit Union Student Loan Consolidation Review

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Eastman Credit Union (ECU) is based in Tennessee and Texas. Unfortunately, its website offers little to no information about its student loan consolidation product. This review aims to shed some light on the details so you can make a smarter decision regarding your student loans.

Refinancing Details

The maximum amount you can consolidate with ECU is $125,000 – that’s for undergraduate and graduate loans. You can consolidate both federal and private loans as well.

You can get a 10, 12, 14, or 15 year term. All terms are offered on a fixed rate that currently range from 6.50% – 8.00% APR. You can see current rates here.

If you were to borrow $20,000 on a 6.50% APR on a 10 year term, your monthly payment would be $227.10.

Pros and Cons of Eastman Credit Union Student Loan Consolidation

As with any loan offered on a longer term, be aware it will cost you more. This is due to paying more in interest over the life of the loan.

Longer loan terms aren’t necessarily a bad thing, as they can drastically lower your payments, making them more affordable. Just try and pay extra whenever possible.

While consolidating your student loans makes it easier to manage payments, you need to know the benefits you may sacrifice in order to consolidate.

Federal student loans come with many perks that disappear once you refinance or consolidate them. These benefits include deferment, forbearance, forgiveness, discharge, and income-based repayment plans.

Essentially, the flexibility you get with Federal student loans is taken away when you consolidate. Calculate exactly how much you’re saving by consolidating, and take into account your current and possible future job situation. You don’t want to end up in a rough spot where you’re struggling to afford your payments.

ECU has an asset recovery group that evaluates loans on a case-by-case basis in case borrowers are experiencing difficulty in making payments, but you don’t want to rely on a service like this just in case you’re not eligible.

The Fine Print

ECU has no prepayment penalty, origination fee, nor application fee. There are fees to pay if you’re late on a payment or your payment doesn’t go through, but the fee depends on the amount you owe. ECU was not particularly forthcoming with this information in a phone call.

Eligibility Requirements

Who’s eligible to consolidate student loans with ECU? As with any credit union, you must be a member to be eligible. Those that reside within a community on ECU’s coverage map can apply for membership, and there are additional sponsor and contractor companies they service as well.

Considering it only has locations within two states, not many people will be eligible to apply. If you don’t live within the area of coverage, scroll down a few sections to take a look at alternative lenders.

If you are within the area of coverage, you need to be 18 years or older and have a valid social security number. While your credit score mostly determines your interest rate, ECU also looks at your debt-to-income ratio in comparison to the amount you want to borrow.

Documents Needed to Apply

Before you start filling out the application (which can be completed online), get the necessary documents together so applying goes smoothly. Note that when you fill out an application with ECU, it uses a hard credit pull, which can lower your credit score.

You should have the following:

  • Driver’s License
  • Your salary and employment information
  • You’ll need loan statements for each of the loans you wish you consolidate
  • If you’re paid bi-weekly, you’ll need your last two pay stubs; if you’re paid weekly, you’ll need your last 4 pay stubs (they need a month’s worth)
  • Are you applying with a co-applicant? Their pay stubs will also be needed

When you begin the application process, you’ll be asked how much you want to borrow. Terms will be given to you on the following page based on the amount requested.

ECU also lets you save any progress you make on your application. You just have to create a password to access your application – it’s only saved in the system for 7 days.

The entire application process can be completed fairly quickly. The sooner you submit the documents needed, the sooner your funds can be received.

Who Benefits the Most from Consolidating With Eastman Credit Union?

It makes sense for those that are already members of ECU to check with the credit union first when consolidating their student loans. If you’re wary of online lenders and have an established relationship with representatives at ECU already, you might find peace of mind in being able to make an appointment at a local branch.

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What About Other Alternatives?

While ECU doesn’t have bad rates, you can still do better with other online lenders.

SoFi is the first online lender we recommend because of its low rates and benefits. Fixed rates range from 3.50% – 7.24% APR and variable rates range from 1.90% – 5.19% APR. There’s no maximum set amount you can borrow, and it offers terms up to 20 years instead of 15 years.

The added bonus with SoFi is that it offers unemployment protection. If you’re laid off from your job, SoFi can temporarily pause your payments and coach you on how to secure another job. There are no prepayment penalties or origination fees.

The only downside is there’s a list of eligible schools and programs SoFi services, so if your school or program isn’t on there, you’re not able to refinance. SoFi has been working to expand its reach, so call to see if your school is eligible.

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Another option specific for graduates is CommonBond*. It offers a maximum loan amount of $220,000 with a term of up to 20 years. Its fixed rate APR ranges from 3.74% – 6.49%, and its variable rate APR ranges from 1.93% – 4.98%. These terms are very close to what SoFi offers, and both lenders initially use a soft pull of your credit to give you your rates. A hard pull will only be used once you agree to move forward with the loan.

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Lastly, if your school or program isn’t on either CommonBond or SoFi’s list, check out Citizens Bank. Undergraduates can refinance up to $90,000, graduates can refinance up to $130,000, and professionals can refinance up to $170,000. It offers the same 20 year term as the others. Its fixed rates range from 4.74% – 8.90% APR, and its variable rates range from 2.33% – 6.97% APR. Citizens Bank uses a hard credit inquiry.

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Aim to Get the Best Rates Possible

ECU doesn’t offer variable rates, and while variable rates are unstable, they do start off fairly low. If you know you can pay your student loans off quickly, you might want to look into the alternative lenders that offer a variable rate option.

ECU’s lowest rate – 6.50% – might be lower than what your current private and federal student loans are at (especially if you graduated several years ago), but most of these lenders start in the 3% or 4% range.

If you want to shop around, find lenders willing to use soft credit pulls initially, such as SoFi and CommonBond. You can get a feel for the kind of rates you’ll be offered, and you’re never under any obligation to accept a loan. Not satisfied with what they’re offering? Shop around within a 30-day window and your credit score won’t decrease as much.

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College Students and Recent Grads, Pay Down My Debt

Is Credit Card Debt Really That Bad?

Very Upset Woman Holding Her Many Credit Cards.

I recently had a tough time with a question that would seem to have an incredibly obvious answer.

“Is credit card debt really that bad?”

My client asked me this question a couple of weeks ago, and even though my brain immediately screamed “YES!!!!!” at full volume inside my head, I actually stumbled over the answer a little bit.

See, she’s 26. She has no husband or kids or anyone else who is financially dependent on her. She has no student loans or mortgage. All of her friends have at least a little bit of credit card debt. She wants to be able to enjoy herself now while she has relatively few obligations.

And she has a habit of enjoying herself to the tune of about $5,000 worth of credit card debt at a time. She has been finding ways to pay it off before it gets bigger than that, but I’ve been working with her to stop it from happening at all.

It’s been tough, and she finally just asked me outright whether all this work was really necessary? How bad is credit card debt anyways? Was it really that bad if it was just $5,000?

I didn’t answer her well right away, and the reason I stumbled is because I was focused on the wrong thing.

Yes, credit card is bad. But not for the reason I immediately gave and not for the reason you probably think either.

It’s Not about the Interest Rate

Let me get this out of the way first: paying interest on credit card debt is bad for your financial health. Even if the interest rate is low, you probably used the money to buy something that decreases in value as soon as you bought it.

Paying extra interest on top of the purchase price for something that loses value is a good way to lose money fast.

“But what about 0% credit cards?”

“But can’t I just do it for a little while and then stop once I have real financial responsibilities?”

“I’ll pay it off soon. It won’t actually cost me all that much.”

So yes, the interest rates are harmful. But there are plenty of ways to minimize them in both real and perceived ways if you really want to spend the money.

So no, it’s not just about the interest rate.

Here’s the REAL Problem with Credit Card Debt

The real problem with credit card debt isn’t the debt itself. The real problem is the habit of getting into credit card debt.

See, there’s only one path to financial independence. Just one. Every single person who has ever gotten there has done the exact same thing.

It looks like this:

  1. Spend less than you earn.
  2. Put the difference into savings accounts.

That’s it. That’s the only way. You simply have to take those two steps again and again, month after month, year after year.

There is no other path.

And if you have the habit of getting into credit card debt, you are acting in direct opposition to that two-step path.

In order to get into credit card debt you have to spend more than you earn. That violates Step 1 above. It makes Step 2 impossible.

All of which leads to this one simple truth: the habit of getting into credit card debt makes it impossible to ever be financially independent.

Your Life. Your Freedom.

Looking back at what my client was asking, one of the key things that stands out is the idea that because she’s young and single she doesn’t have anyone who is financially dependent on her.

Maybe you’re in the same boat and kind of feel the same way. Like this is your one chance to be a little bit free.

To some extent that’s absolutely true. And I would encourage you to take advantage of some things that may be a little more difficult if you have a family down the line.

But I would also encourage you to think about the one person to whom you owe a tremendous amount of responsibility.

Yourself.

You have your own goals and dreams. Things you would like to be able to do down the road. Things like quitting your job and traveling the world for a year. Things like eventually having enough money to never need another paycheck.

Whatever they are, these are the things that define your financial independence. They’re the things that are actually most important to you.

And the only way you can reach them is if you start building the habits today that will make them possible:

  1. Spend less than you earn.
  2. Put the difference into savings accounts.

That doesn’t mean you can’t enjoy yourself now too. There’s always a balance to be struck between saving for tomorrow and spending on today, and I’m personally a huge proponent of making room for both.

But that balance has to fit within the boundaries defined by your income.

It’s the only path to financial freedom.

Dealing with debt? Download our free guide to help you dig out of debt!

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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: May 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 judgment 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.

Below we highlight the student loan refinance companies that offer the lowest interest rates.

  • SoFi*: Fixed interest rates start as low as 3.50%, and variable rates start as low as 1.90%. SoFi offers student loans to borrowers who graduated from a selection of Title IV accredited colleges and universities. You need to be employed, or have a job offer with a start date in 90 days. You also must be able to demonstrate a strong cash flow.
  • CommonBond*: CommonBond offers fixed rates from 3.74% and variable rates from 1.93%. You need a degree, a job and a stable cash flow. They will also review your payment history with other lenders. CommonBond focuses on people with graduate degrees, and can offer up to $220,000. They will not refinance undergraduate degrees.
  • Earnest: Just like SoFi, Earnest offers fixed interest rates starting at 3.50% and variable rates starting at 1.90%. You need to have a job or an employment offer. You need an emergency fund of at least one month. You also must have a positive bank account balance and a budget that makes sense. If you have had credit in the past, you need a history of on time payments.
  • Darien Rowayton Bank: Just like the other market leaders, Darien offers fixed rates from 3.50% and variable rates from 1.90%. You will need to have a degree and a full time job. Darien will review your credit history and your cash flow.

Below is an alphabetical listing of all providers we have found so far. This list includes credit unions that may have limited membership. We will continue to update this list as we find more lenders.

  • 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%. Anyone can join this credit union by making a $10 donation to Foster Care for Success.
  • Citizens One (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 2.33%.
  • CommonBond*: CommonBond was highlighted earlier in this post, with fixed and variable rates available. This is only for graduate degrees.  Fixed rates start at 1.93% and variable rates start at 3.74%.
  • CommonWealth One Federal Credit Union: Variable interest rates start at 3.25%. You can borrow up to $75,000 and need to be a member of the credit union in order to qualify.
  • Credit Union Student Choice: This is a tool offered by credit unions. The criteria and pricing vary by credit union. The credit unions have limited membership, but you can find out if you qualify on this site.
  • 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 2.92%. You will be matched with a credit union that anyone can join.
  • 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%.
  • Eastman Credit Union: They don’t share much of their criteria publicly. Fixed rates start at 6.5% and you must be a member of the credit union. Credit union membership is not available to everyone.
  • 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. Variable rates start at 3.580%, and fixed rates start at 4.40%.
  • 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%.
  • IHelp: This service will find a community bank. Community banks can actually be expensive. 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% and you would need to join the credit union.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve, the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 3.51%.
  • RISLA: You need at least a 680 credit score, and can find fixed interest rates starting at 3.99%. This is only available to residents of Rhode Island.
  • 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 1.90% 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 5.7%. 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 3.51% and fixed rates starting at 7.49%. You need to join the credit union in order to refinance your loans.
  • 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%. Wells Fargo does not have a tradition of being a low cost lender.

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, Reviews

UW Credit Union Student Loan Refinance Review

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Looking to refinance your student loans, and live in Wisconsin? You may have already heard that UW Credit Union can refinance your student loans for you. If simplifying your payments and possibly lowering your interest rates is what you’re looking for, read on to find out what UW Credit Union can offer you.

Refinancing Details

When you refinance with UW Credit Union, you can consolidate $5,000 to $45,000 of student loan debt – both federal and private. The repayment term is 15 years, and you have the option to make interest-only payments during the first 2 years of your loan.

There are two loan options: variable and fixed rate. The variable rate is as low as 3.51% APR and as high as 10.26% APR, though rates can change quarterly. UW Credit Union specifies the cap is 15%.

The fixed rate ranges from 7.49% – 13.24% APR.

If you borrow $20,000 at a fixed rate of 7.49% APR for 15 years, your monthly payment will be $185.29.

You can receive the typical 0.25% interest rate deduction if you enroll in automatic payments as well.

Your interest rate is determined by your credit score, credit history, and type of school you attended. You can have a cosigner if your credit isn’t up to par. There is a cosigner release after 36 consecutive timely payments.

Longer Repayment Terms

Keep in mind that while a longer repayment term lessens your monthly payment, it increases the amount you’ll ultimately pay over the life of the loan.

In our above example, borrowing $20,000 at 7.49% APR for 15 years gives you a monthly payment of $185.29. You’ll make 180 payments, which equals $33,352.20. That means you’re paying $13,352.20 in interest!

Of course, you can always pay extra on your loans – there’s no prepayment penalty associated with UW Credit Union’s student loan refinance program. Just keep that in mind before you fall for the lower monthly payment and are content to stick with it.

If you’re in a rough spot right now and need that lower monthly payment, that’s fine, but do your best to pay extra when your situation improves.

A Word on Refinancing Federal Student Loans

If you’re refinancing Federal student loans, you need to be aware you’ll lose some important benefits associated with federal loans. For example, deferment, forbearance, forgiveness, and any income based repayment plans typically go out the door when you refinance.

If you’re in the military, you also lose out on an interest rate deduction under the Servicemembers Civil Relief Act for both Federal and private student loans taken out prior to enlisting.

In addition, most Federal student loans are fixed rate loans. While lower interest rates on variable rate options look attractive, know it means your payment could increase at any time. Fixed rates mean stability, even if they’re a tad higher.

Make sure refinancing your federal loans is worth the tradeoff. You can use UW Credit Union’s refinance savings calculator here to see what rates you’re eligible for, and how much you’ll save.

The Fine Print

As mentioned, there are no prepayment penalties with this loan, and there is also no origination fee.

If you’re late on a payment, you’ll have to pay 5% of the amount past due, or $10 – whichever is less.

If your payment fails to go through for any reason, you’ll have to pay a $15 fee.

UW Credit Union does receive an F for it’s lack of transparency and no soft pull to view rates before applying.

Eligibility

UW Credit Union has a list of eligibility requirements to look over before you apply to refinance with them:

  • You have to be a member of UW Credit Union to get your student loans refinanced
  • You must be age of majority in your state of resident when you apply (usually 18)
  • You must be a U.S. citizen or permanent resident with a Social Security number
  • You need a yearly salary of $25,000 (variable rate only)
  • Your debt-to-income ratio should be “reasonable” (likely around 35%)
  • You should have built up at least 5 years of credit history (student loans excluded)

Wondering what’s needed to become a member? You have to be associated with the University of Wisconsin System (any of the 26 branches) or Madison College in some way, whether you’re a student, faculty, staff, or alumni. You can also live or work within 5 miles of a branch.

Documents Needed to Apply

Before you begin the application process with UW Credit Union, you’ll want to have the following documents and information handy:

  • Personal Information: You’ll need your Social Security number, the address of your school, your address, and driver’s license number.
  • Employment Information: You’ll be required to list your current employer, so have the address and phone number ready. You should also know your annual salary.
  • Contact Information for Nearest Relative: This relative can’t be your cosigner (if you apply with one), and he or she can’t live at the same address as you. Have his or her phone number and address ready.
  • Student Loan Information: You should have your most recent student loan statement scanned in (or have a PDF copy).
  • Cosigner Information: If you’re applying with a cosigner, you’ll need the same information for him or her as you need for yourself.

The application process takes place with Cology, a company partnered with UW Credit Union to process the student loan applications.

Be aware Cology uses a hard credit inquiry when you apply, so your credit score may be affected.

Additionally, UW Credit Union states it may take 2 – 4 weeks to complete the application process. It has an entire timeline you can view so you know what to expect.

Who Benefits the Most from Refinancing With UW Credit Union?

Unless you’re a member of UW Credit Union already, you’ll likely receive better rates elsewhere (and with less stringent eligibility requirements).

There are other online lenders who don’t require 5 years of credit history, and you won’t need a cosigner to apply with them, either.

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These lenders are worth taking a look at even if you’re a member of UW Credit Union.

What Are the Other Alternatives?

SoFi can be a great option for eligible applicants – it has a specific list of schools and programs it services. The maximum repayment term is 20 years instead of 15, and there is no origination fee. Fixed rates range from 3.50% – 7.24% APR (UW’s starting rate is higher), and variable rates range from 1.90% – 5.18% APR. If you have more than $45,000 in student loan debt, you’ll be happy to know SoFi has no maximum loan amount.

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*referral link

Is your college not on SoFi’s list? Citizens Bank can be a good option for those not eligible for SoFi. It also has a maximum repayment term of 20 years, and its fixed rates range from 4.99% – 9.14% APR. Its variable rates range from 2.58% – 7.22% APR. The maximum loan amount is $90,000 for undergraduates and $170,000 for graduates. There’s no origination or prepayment penalty with Citizens Bank, either.

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Look Out For Yourself

The number one thing to keep in mind when refinancing your student loans is to look out for yourself. You want to ensure you get the best rates available. As you can see, other lenders clearly have better terms than UW Credit Union, so don’t assume the first approval you get is the best (even if it’s from a credit union).

You should shop around to get the best rates available. Shopping around in the span of 30 days or less, or looking for lenders that initially use a soft pull of your credit, will do the least amount of damage to your score.

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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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Balance Transfer, Pay Down My Debt, Reviews

Visa Signature Balance Transfer From TruWest Credit Union

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If you’re looking to transfer your credit card debt to a low interest rate, you’ve probably noticed there are many balance transfer promotions available on the market. With so many options you may be having trouble figuring out which one will help you pay off your debt the fastest and save you the most money over time.

Here we’re going to put one balance transfer, the Visa Signature Credit Card by TruWest Credit Union, under a microscope to help you decide if it’ll work for you. We’ll examine the perks, fees and compare it to the competition to help you weigh it as a balance transfer solution for your credit card debt. 

The Visa Signature Credit Card Balance Transfer At A Glance

A quick overview of the very basic terms and benefits of the TruWest balance transfer. 

  1. No annual fee
  2. 0% introductory APR for 18 months. Includes new purchases and balance transfers
  3. 3% balance transfer fee for each transfer
  4. The APR range is a variable 7.90% to 8.90% after the 18 month introductory period. The standard APR will apply to new purchases and any unpaid balances that remain after the 18 month promotional period ends
  5. You can get paid $100 for spending $100 within 90 days of opening the credit card account. It’ll be credited back on your credit card statement, but we don’t recommend spending on a balance transfer card. That’s how you get trapped into generating more debt
  6. As a cardholder you gain access to the TruRewards program to earn up to 1.5% cashback. Receive up to 1 point for every dollar that you spend. And earn up to 10 extra points per dollar for making qualifying purchases in the Get Extra Points Portal of TruRewards, but again we don’t recommend using this card for rewards 

Are you eligible for a TruWest Visa Signature Credit Card?

To apply for this balance transfer offer you must be a member of the TruWest Credit Union and a minimum deposit of $5 is required to become a member. There are a few eligibility options for joining. You can live, work or own a business in the following counties: 

  • Maricopa County, Arizona
  • Pinal County, Arizona
  • Travis County, Texas
  • Williamson County, Texas

If you’re a resident of or work at the Riata Apartment Community in Austin, Texas or The Shady Hollow Homeowners Association in Austin, TX you’re also eligible for membership. Some other ways to qualify include being related to a member or working for certain employers like Motorola or Compass Group PLC. To find out if you qualify check out the TruWest eligibility page. 

Fees and Gotchas

The most obvious fee you must calculate to decide if this balance transfer is worth your while is the 3% fee per transfer. This is especially important to note if you have multiple credit card balances to consolidate.

Other fees include penalties for late or returned payments. The fee for both late or returned payments is the amount of your minimum payment due, but no more than $25. There’s no fee for over-the-credit limit charges. The cash advance fee is 4% the amount of the cash you request. There’s also a foreign transaction fee of up to 1%.

This card does receive a C transparency score for its fine print.

Pros and Cons 

Now that we’ve discussed the basics of this balance transfer, let’s cover the pros and cons of transferring your balance to the TruWest Credit Union Visa Signature Credit Card. 

Pros 

  • There’s no annual fee for the credit card
  • The 0% introductory rate is for all new purchases and balance transfers
  • You get cash back for purchases made without racking up interest within the 18 month grace period
  • The 0% interest period of 18 months gives you a decent amount of time to pay off your credit card debt before interest kicks in 

Cons 

  • All balance transfers are charged a 3% fee, so if you have a lot of credit card debt to consolidate you should be mindful of how much it’ll cost you
  • Once the promotion period ends, standard interest applies to all unpaid balances including your transfers 

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How does the TruWest Visa Signature Card stack up to the competition? 

Other credit union balance transfers give the TruWest Visa Signature Credit Card some tough competition when it comes to fees.

For instance, the American Heritage Credit Union offers the Platinum Preferred MasterCard with no balance transfer fee. There’s 2.99% APR on transferred balances for 24 months.

With American Heritage you can avoid the fees and receive pretty low interest on your transfer for a longer period of time than at TruWest, will save you more money.

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Still TruWest has competitive rates after its 0% interest introductory period compared to other credit cards. Valor Credit Union offers a balance transfer via its Visa Premier Cash Credit Card which also has 0% introductory interest like TruWest with a 3% balance transfer fee. However, TruWest has better interest after the promotion. Valor offers variable 8.99% to 17.99% standard interest where TruWest offers variable 7.90% to 8.90%.

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You could also transfer the remaining balance to a no fee, zero percent card like Chase Slate. The Chase Slate card is 0% at no fee for 15 months, which may give you enough time to knock out the last of your debt at no interest instead of going up to 8%.

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Who will benefit the most from this balance transfer?

This credit card will work well for you if you have few balances to transfer and you plan to make purchases and pay them off within the first 18 months. The 18 month interest free promotion for new purchases with rewards is a pretty good deal.

If you wish to transfer several balances the 3% fee on each transfer may become pricey. So calculate the money you save on interest vs the amount you’ll spend on fees to make the best decision for you

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Balance Transfer, Best of, Pay Down My Debt

7 Best 0% APR Credit Card Offers – May 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. Edward Jones World MasterCard – 0% APR for 12 months, NO FEE

edwardjonesYou’ll need to go to an Edward Jones branch to open up an account first if you want this deal. Edward Jones is an investment advisory company, so they’ll want to have a conversation about your retirement needs.

But you don’t need to have money in stocks to be a customer of Edward Jones and try to get this card.

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

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

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

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

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

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

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

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

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

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

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Are these the best deals for you?

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

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

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

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

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

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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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Pay Down My Debt, Personal Loans, Reviews

LightStream Personal Loans Review

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LightStream is the online lending division of SunTrust Bank. If you’re not a member of SunTrust Bank, you can still apply for a loan with LightStream*.

While LightStream is bank owned, its approval process is similar to other online lenders: straightforward and quick. If you get all of your documents in on time, you might actually be eligible for same-day funding.

LightStream is so sure you’ll have an easy time applying for a loan, it will give you $100 if you don’t have a satisfactory experience.

With that kind of guarantee, it’s worth taking a look at what LightStream’s personal loan has to offer.

Personal Loan Details

LightStream personal loans are offered on terms of 2 to 7 years, and you can borrow between $5,000 and $100,000.

It also offers low rates – its APR range is 5.99% – 9.99%, although the website says auto loans start as low as 1.99%, and home improvement loans start as low as 3.99%.

What’s different about LightStream is your intended use of the loan changes the terms available (including the APR). Normally, online personal loan lenders ask you why you’re taking out the loan, but your answer doesn’t affect your rates.

LightStream uses the following payment example on its website: if you borrow $20,000 at a 2.5% APR for 5 years, your monthly payment will be $354.95.

The Pros and Cons

LightStream offers very competitive rates and terms, and its max loan amount and term are higher than what other lenders have to offer. Typically, personal loans max out at 5 years and you can only borrow between $25,000 – $35,000.

If you have a large home improvement project you want to tackle, or a lot of debt to consolidate, LightStream could be a great option for you.

However, you’re locked into using the funds for the purpose you specify on the application, and different terms and rates apply for each. For example, the 1.99% APR offered on auto loans isn’t offered for wedding loans.

You’ll also need good or excellent credit to qualify for a loan with LightStream. It wants to see a strong, positive credit history with multiple lines open. You’ll have a better chance at being approved if your credit score is over 720.

What You Need to Qualify

To qualify for the best rates, you’ll need to have “excellent credit,” which is defined by LightStream as having 5 or more years of significant credit history, an excellent payment history with no delinquencies, money saved up, and stable and sufficient income. Your credit lines should also have some variation.

LightStream defines “good credit” as just a few steps below that, with only several years of significant credit history.

A credit score of 720 is recommended, and you shouldn’t have any recent late payments or delinquencies on your credit.

Application Process and Documents Needed to Apply

The application process is fairly straightforward, and you don’t need any documents to apply. However, if you proceed with the loan agreement, you might be asked to supply basic proof of income and residency.

There’s no pre-approval process, and you must apply online. There are three stages of the application:

  1. Providing the terms of the loan you would like
  2. Entering your personal information (including address and employment information)
  3. Entering security information.

Note that LightStream uses a hard credit inquiry when submitting your application.

You can receive same-day funding on business days if you complete all the necessary steps and submit your final documents by 2:30pm EST.

According to the application page, you’ll need a valid Visa or Mastercard credit card for verification purposes before you can receive your funds.

Who Benefits the Most from a Personal Loan with LightStream?

Those with great credit will benefit the most as they’ll have the highest chance of getting approved.

Unfortunately, the one downside to note is LightStream is unable to refinance student loans, unlike other personal lenders. If you’re looking to do that, you’ll need to apply with another lender. There are many personal loans out there without that restriction.

LightStream pushes its home improvement loans on its social media platforms and website, and for good reason. If you’re looking to do a major overhaul on your home, like an addition or kitchen renovation, you might need more than the $35,000 other lenders offer.

Overall, potential borrowers are more likely to be approved if they’ve been responsible with their use of credit in the past, and with how they handle money in their everyday lives.

The Fine Print

Is it hard to believe that there’s no fine print with LightStream’s personal loan? Its website states there are no fees of any kind that will be incurred.

Further inquiry yielded the same results, as a customer service representative clarified, “There are no fees (application fee, late fee, prepayment penalty) associated with our loans.”

What happens if you’re late on a payment? “You must pay the interest accrued on a per diem basis until you make the payment.”

Most other lenders charge around $15 any time you miss a payment or a payment fails to go through, so this is good to hear.

Transparency Score

LightStream’s website is fairly straightforward and easy to use, but there were a few missing elements we had to check up on. It doesn’t explicitly state whether or not a hard or soft credit check is used, and it doesn’t go over eligibility requirements.

At first glance, it might not look like you can call LightStream. If you go to its “Questions” page, only an email form is listed. However, if you’re filling out the application, a “Contact Us” link appears at the top of the page, which gives you the phone number to call if you have questions.

Understandably, LightStream is trying to keep costs down (so it can pass the savings onto borrowers), so you should send an email if it’s not urgent. It’s good to know the option to call is there, but representatives are on the ball when it comes to answering questions via email as well.

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How LightStream Stacks Up

LightStream has very good terms and the fact it has no fees associated with its personal loan makes it a great choice. However, if your credit score isn’t up to par, you might not be approved. Here are a few other choices to consider when applying for a personal loan.

SoFi’s personal loan has similar rates and terms: the max amount you can borrow is $100,000, the max term is 7 years, and the APR ranges from 5.50% – 9.99%. The minimum credit score needed to apply is 700, but SoFi takes other factors into consideration. It uses a soft pull for your credit to tell you your rates, and there are no origination or prepayment penalties.

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If you don’t need that much money and it’s only for credit card debt, consider Payoff. You can borrow up to $25,000 on a max term of 5 years, and the APR range is 10.00% – 22.00%. Its minimum credit score is only 660, and you’ll only have to undergo a soft credit check to find out your rates. Unfortunately, Payoff does have an origination fee of 2%-5%, but there aren’t any prepayment or penalty fees.

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Shop Around First

Those looking to apply with LightStream for a personal loan will likely need excellent credit, but they’ll benefit from not having to worry about any fees. The downside is that you must use the loan for the purpose you select, whereas other lenders don’t have such limitations. If you’re looking to refinance student loans, you’ll have to look elsewhere.

It might be worth looking into an alternative like SoFi that uses a soft pull of your credit before shopping with lenders like LightStream that use a hard credit pull. You can see what rates you’re eligible for at those lenders first. If you choose to shop around, doing so within a 30-day period is recommended as it will have the least negative impact on your credit score.

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

iHELP Student Loan Refinance Review

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Do you have multiple student loans with high interest? Do you believe your credit is strong enough to get you a better rate?

A consolidation and refinance is something you should consider. Consolidation combines your student loans into one convenient payment. And refinancing can reduce your interest rate or even lower your monthly payment depending on the terms.

There are several lenders in the market that now offer refinancing and consolidation for student loans. Here we’ll give you an in-depth look at the iHELP Loan Consolidation Program which offers both.

iHELP Consolidation Fixed Rate Program Qualifications

You must have graduated from an eligible school to apply for this program. (Click here to find out if your school’s on the list). A cosigner isn’t required for the application, however iHELP suggests that you have one because a cosigner may help you get a lower interest rate. One of the other program requirements is that both you and your cosigner are U.S. citizens or permanent residents.

In terms of creditworthiness, iHELP doesn’t disclose its credit score minimum, but you must meet the following standards:

  • No open collections or charge offs in the past 2 years.
  • No bankruptcies, foreclosures or repossessions in the past 5 years.
  • No defaults on a Federal or private student loan.
  • At least 2 years of positive credit history.
  • An annual income of at least $24,000 for the past 2 years.
  • A debt-to-income ratio less than 45%.

Loan Refinancing Details

iHELP offers loan terms up to 15 years and consolidation of both Federal and private loans.

The interest rate you receive for the refinance depends on whether your loan is cosigned or not cosigned. The APR range for cosigned loans is 6.22% to 7.99%. APR for non-cosigned loans is 7.21% to 9.04%. The minimum iHELP loan amount is $25,000. The maximum loan amount is $100,000 for an undergraduate degree and $150,000 for a graduate degree.

There are a few great benefits that come with this program. You can request 24 months of interest only repayments. And you may qualify for graduated repayments where your scheduled payment amounts increase over time. Your cosigner is also eligible for release after 24 months of on-time payments if you can meet credit requirements.

iHELP offers three forbearance options including:

  • Hardship Forbearance – Postponed payments for financial difficulty for up to 24 months.
  • Partial Payment Forbearance – Reduced payments for up to 24 months.
  • Administrative Forbearance – Postponed payments for situations like military service or natural disaster.

The Inside Scoop on Fees

The main fee you’ll encounter with iHELP is the supplemental fee which is 2% and is charged when the loan is disbursed.

Transparency Score

iHELP gets a transparency score of “A” because it allows cosigners to be released after 24 months if payments are made on-time. Plus it offers fixed rates, clear terms, borrower benefits and solutions if you face financial trouble while repaying the loan.

Pros & Cons

We’ve covered the important details of iHELP, so now we can dig into the pros and cons of choosing it to consolidate and refinance your student loan debt.

Pros

  • iHELP consolidates both Federal and private loans.
  • It offers competitive and fixed rates especially if you have a cosigner.
  • Options are available for forbearance.
  • There are borrower payment benefits including interest only payments or graduated payments.
  • Cosigners may be released if payments are made on-time for the first 24 months.

Cons

  • iHELP performs a hard pull to check rates which will impact your credit score.
  • The iHELP loan is only offered to graduates of specific schools.
  • iHELP has higher APR than other lenders that offer student loan refinance

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iHELP Against the Competitors

iHELP has some tough competition from SoFi and Citizens Bank when it comes to interest and fees.

First off, SoFi offers lower interest. Its fixed rates range from 3.50% to 7.24% and variable rates from 1.90% to 5.17% (if you sign up for auto pay). There’s no origination fee at SoFi. iHELP charges a supplemental fee of 2%.

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Citizens Bank has longer loan terms and allows you to borrow more than iHELP. The maximum loan term at Citizens Bank is 20 years and you can borrow up to $170,000. Citizens Bank offers fixed rates starting at 4.74% APR and variable interest rates at 2.32% APR. There’s also no origination fee, disbursement fee or prepayment fee.

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Who will benefit the most from this loan refinance?

iHELP is an ideal solution if you have many student loans and you think you can secure better interest on them, but it’s not right for everyone. SoFi and Citizens Bank offer comparable benefits and lower interest, so it’s wise to check many lenders before making any decisions.

You should also weigh the benefits of your current loan against the advantages of refinancing prior to making any moves. Keep in mind, if you refinance Federal loans you may lose out on access to the rebates, forgiveness programs, rate discounts or cancellation benefits that come with them.

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Pay Down My Debt, Personal Loans

Personal Loans That Shouldn’t Be Your First Choice

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When shopping personal loans, the devil is in the details, because even an interest rate of 1% more can cost you thousands of dollars. And, since many individuals use personal loans to help pay off debt, flexibility and transparency are the keys to a perfect personal loan.

With that in mind, we have identified several personal loans that borrowers should not seek out as their first choice because there are far better, less costly, more transparent and flexible options out there that we encourage borrowers to try first. Here are the personal loans that should not be your first choice.

Avant

While Avant* offers loans to borrowers who may not be approved elsewhere, its APR start at 9.95% and, at the time of writing, tops out at 39.99% in South Dakota. South Dakota seems to be the exception, though, as the APR in most states tops out at 36%. So, on a $1,000 personal loan, the smallest loan Avant offers, a borrower could pay as much as $399 in interest. Avant offers loans up to $35,000 in certain states where backing by WebBank is available. When funded directly through Avant, loans are available up to $20,000.

However, Avant does score an “A” Transparency Score, and allows applicants to check their rate with a “soft pull” that does not affect their credit.

Pros

  • Minimum credit score of 550 required
  • “A” Transparency score
  • Soft credit pull
  • Fixed terms, fixed interest rate, no prepayment penalties

Cons

  • APR ranging from 9.95% to 65.00%
  • 1% – 6% upfront fee
  • Not available in Maine, Iowa, North Dakota, or West Virginia

Even with its high Transparency Score, Avant’s high interest rates should make it a last resort for personal loans. Keep in mind, this option is still much better than dealing with a payday or title loan.

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First Choice Option

An excellent alternative to Avant for those with average credit is Prosper*, which requires a minimum credit score of 640, offers loans from $2,000 – $35.000, and APR ranging from 6.68% – 35.36%, a far cry from Avant’s 39.99% maximum interest rate.

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One Main

OneMain Financial is owned by Citibank, and offers up to $10,000 personal loans through its physical branches. Its APR varies from 12% – 35%, and terms up to 60 months are available.

OneMain loans are available in every state except Alaska, Arkansas, Connecticut, Massachusetts, Nevada, Rhode Island, Vermont or Washington, D.C.

You must live near a branch in order to get a OneMain loan because an in-person meeting is required to finish the application process.

OneMain Minimum Acceptance Criteria:

  • Verifiable, steady income
  • 550 minimum credit score
  • No bankruptcy filings, ever
  • At least 18 years of age
  • At least some established credit history

Personal loans from OneMain can be used for anything except business expenses or tuition. If at any time during the application process OneMain becomes aware that the borrower intends to use the loan for gambling, the application will be canceled.

Additionally, applicants cannot see their rate with OneMain until it performs a “hard” credit pull, which does affect FICO credit scores.

For these reasons, OneMain only scores a “B” on the Transparency scale.

Pros

  • Low credit score requirement
  • Convenient location, at OneMain branches
  • Fixed term, fixed interest rate, no prepayment penalties

Cons

  • Loans are only available up to $10,000
  • High interest rates, from 12%- 35%
  • Loans cannot be used for business expenses or tuition
  • Cannot see rate without hard credit pull
  • “B” Transparency score
  • You must visit a bank branch in order to complete a loan

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First Choice Option

A great alternative to OneMain is Lending Club*. With a minimum credit score of only 620, a Transparency Score of “A”, APR varying from 4.99% – 29.99%, and loan amounts up to $35,000, Lending Club is a much cheaper, safer alternative for those seeking personal loans with less than perfect credit.

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Springleaf

Springleaf offers personal loans to those with past credit mistakes through its network of bank branches. Borrowers can receive approval online before visiting a branch, but online approval requires a “hard” credit pull, which does affect a credit score.

There are no application fees, and if the borrower is approved online, the money can be withdrawn from a local branch the same day or wired into the borrower’s account.

Springleaf loans have a minimum amount of $1,500 and a maximum of $25,000. APR ranges from 15.99% to 39.99%, and loans terms vary from 12 to 60 months. These interest rates are fairly high when compared with other lenders. Additionally, Springleaf will consider borrowers with credit scores of less than 600.

Springleaf scores a “B” for transparency.

Pros

  • Have approved credit scores as low as 550
  • No application fee
  • Many local branches

Cons

  • High interest rates, ranging from 15.99% – 39.99%
  • Hard Credit Pull
  • “B” Transparency Score
  • Only available in 27 states

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First Choice Option

An excellent alternative to Springleaf, for those with lower credit scores, is Upstart. Upstart offers a “soft” credit pull to see rates before taking the loan, APR starting much lower, at 5.67%, and with a Transparency score of “A,” Upstart can not only save borrowers money, it can save hassle. It’s minimum FICO score is 640.

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Freedomplus

Freedomplus is a relatively new bank, striving to create a different personal loan experience. It will allow credit scores as low as 600, but prefers to focus on those greater than 640. You can find your rate with a soft pull, which won’t affect your credit score.

Freedomplus offers same-day approval in some instances, and its APR varies from 8.45% to 29.90%. Loan terms can range from 24 to 60 months, and loans are offered for $1,000 up to $35,000.

Freedomplus scored a “B” on the transparency scale.

Pros

  • Loan amounts up to $35,000
  • Will accept credit scores as low as 600
  • Same day approval, in some cases APR as low as 8.45%
  • No pre-payment penalty

Cons

  • Interest rates up to 29.99%
  • “B” Transparency score
  • Origination fee of 1.38% – 5%

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First Choice Option

We recommend choosing another loan provider if at all possible, such as Karrot.

Karrot offers loans up to $35,000 and loan terms up to 60 months, just like Freedomplus. Its minimum credit score requirement is 660, and its APR varies from 6.44% to 29.27%.

Most importantly, Karrot scores an “A” on the transparency scale, and only requires a “soft” credit pull to find out your rate.

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Santander

A personal loan from Santander can be a little as $5,000 or as much as $25,000 with no collateral required and terms of up to 60 months. In addition, Santander does not require an application fee, APR vary from 6.99% to 14.99%, and it will consider credit scores as low as 680.

Santander prefers that borrowers use its ePay option, which automatically debits the monthly payment amount from your checking account. If ePay is discontinued, the APR will increase by 0.25%.

The Santander personal loan application does require a “hard” credit pull, which will affect credit regardless of whether or not the application is approved. Because of this, the Santander personal loan scores a “B” Transparency score.

Pros

  • No collateral required
  • No application fee
  • Rates start at 6.99%
  • 680 minimum credit score

Cons

  • Prepayment penalties apply
  • Hard Credit pull
  • Loans start at $5,000
  • Interest rate penalties apply upon discontinuance of ePay
  • “B” Transparency score
  • Must reside in NH, CT, DE, DC, RI, MA, ME, NY, NJ, PA, MD, or VT.

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First Choice Option

A great alternative to the Santander personal loan is SoFi*. SoFi lends up to $100,000 with APR varying from 5.50% to 9.99% and its minimum credit score is 700.

You can obtain your rate without a hard credit pull, and there are no upfront fees. While SoFi is strict with approvals, it scores an A+ transparency score and has loan terms up to 84 months.

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Don’t Be Afraid to Shop Around

Sometimes your options can seem limited to when trying to obtain a personal loan. Fortunately, so many lenders allow you to see rates without affecting your credit score that it’s in your best interest to shop around for the lowest interest rate. Lenders like Avant, OneMain, Springleaf, Freedomplus, and Santander are not bad lenders; there are simply better options out there that should be explored first.

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Pay Down My Debt

She Saved $4,339 In Under 30 Minutes

Senior Couple Talking To Financial Advisor At Home

 

Credit card debt impacts over 40% of Americans. The numbers tell a frightening story. The average family has over $10,000 of debt and pays an interest rate above 17%. That means indebted Americans are paying more than $1,500 each year on credit card interest alone.

Even worse, people are afraid to talk about their debt. Although nearly half the country has credit card debt, no one wants to admit it. Instead, people carry around their debt like a shameful burden. But there is a big problem with remaining silent. Rather than looking for the fastest way to get out of debt, people often pretend that they don’t have debt. The silence and shame of so many Americans makes it easy for big banks and credit card companies to make huge profits lending money at high interest rates. But people don’t have to keep paying such high interest rates. For the first time, real alternatives exist.

You Can Pay Off That Debt

Debt does not have to be a life sentence. Getting out of debt quickly requires three steps:

  1. Admitting that you have a problem, and committing yourself to finding a solution.
  2. Making a budget that prioritizes debt repayment, but still allows a comfortable life.
  3. Refinancing your debt to the lowest possible interest rate (just like you would do with a mortgage).

If you do all three of these things, you can take years off your debt repayment. At MagnifyMoney, we just recently helped a woman save $4,339 in under 30 minutes. And her story does not have to be unique: anyone can do this.

Sarah had come to MagnifyMoney with $25,000 in debt, at an average interest rate of 19%. She had above average credit. Her score wasn’t perfect, but it was above 660. Sarah knew that she had a problem. Her debt built up over the years due to a combination of issues. She spent more than she should have spent on restaurants and clothes. She hadn’t built a proper emergency fund, so whenever she had a medical issue or a problem with her car, she would end up adding a few thousand dollars to her debt. And one morning she realized that her debt had reached $25,000.

Sarah made a budget. She slashed her expenses and was able to free up $800 each month to put towards her debt. Gone were the weeknight trips to restaurants and binge shopping. In its place was a commitment to getting out of debt.

Every month she was making a payment of about $800, but $400 of that payment went to interest. That is when she came to MagnifyMoney, and we introduced her to Payoff, a company that helps people get out of debt faster with low cost loans.  In just a few minutes, she was able to qualify for a $25,000 loan at an interest rate of 12%. With this new loan, she was able to save $4,339 of interest and be debt-free in just three years.

Online Lenders Make It Easy

Before, shopping for a lower interest rate on your credit card debt was difficult, if not impossible. But online lenders, like Payoff, are making it very easy. You can apply online without hurting your credit score. Payoff uses a soft inquiry, which means you do not lose any points. And their entire goal is to offer a loan that gets you out of debt faster. So, they are usually cheaper than a credit card.

Personal loans are a great tool, because they have a fixed monthly payment, a fixed interest rate and do not offer the temptation of more spending. If you have credit card debt, you should spend the five minutes it takes to see if you can get a lower interest rate at Payoff. There is no downside, because you will not have a hard inquiry on your credit report.

Things To Remember

If you refinance your credit card debt with a personal loan, just remember to do the following:

  1. Lock up your credit cards, but don’t close the accounts. By closing the accounts, you will hurt your score. But if you keep the credit cards in your wallet, you will just be tempted to use them. We suggest locking up the cards somewhere safe, and out of reach.
  2. If you have extra money, put it towards the debt. There is no pre-payment penalty, and every extra payment you make can go straight to principal, saving you a lot more money.
  3. Tell your friends about your commitment to becoming debt free. In general, none of us like to admit that we are in debt. But if you tell your friends about your plan to get debt-free, maybe they won’t tempt you with restaurants, vacations or clothes you can’t afford. You want friends who support your debt-free plan, not friends who encourage you to buy things you can’t afford with money you don’t have.

If you have the desire to become debt-free, there are now tools and resources that can help you get out of debt faster than ever before.

 

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Balance Transfer, Pay Down My Debt, Reviews

Santander Bravo MasterCard Balance Transfer Review

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Enjoy a long introductory rate of zero percent APR on balance transfers for the first 18 billing cycles with the Santander Bravo MasterCard. If you’re looking to buy some time to pay off your high interest debt, transferring the balance to the Santander Bravo MasterCard can give you an extra year and a half to pay it off without accruing interest- all for a nominal 3 percent (or $10 minimum) fee.

In addition to the attractive introductory APR, the Santander Bravo MasterCard also comes with rewards- offering 3 percent cash back on gas, groceries, and restaurants on up to $5,000 worth of qualified purchases each quarter. Unlike other rewards cards, you don’t have to keep track of rotating cash back categories to enjoy the high reward rate. With gas, grocery, and restaurant spending always earning 3 points for every $1 spent (up to the $5,000 cap), and all other purchases rewarded with 1 point per dollar spent, this card offers a convenient way to leverage your day to day spending while also paying down your existing debt.

Santander Bravo MasterCard Pros

  • Get 0% APR for 18 months on balance transfers.
  • Enjoy a top rewards rate on gas, groceries, and restaurants with simple redemption and no expiration dates.
  • Sign up bonus: Get 10,000 bonus points when you spend $1,000 on new net retail purchases during the first 90 days of opening your account- a $100 value.
  • World MasterCard perks: travel benefits and concierge services.
  • Price protection and extended warranty coverage.

However, we don’t encourage you to be spending on your balance transfer card. It’s best to transfer the balance and then lock it away until you’ve paid down as much of the debt as possible.

Santander Bravo MasterCard Cons

  • $49 annual fee (waived for the first year).
  • Balance transfer fee: 3 percent (minimum of $10).
  • Foreign transaction fee: 3 percent.
  • Caps on bonus cash back- 15,000 points per quarter.

What Do I Need To Qualify?

  • Excellent credit required.

Who Is It Best For?

The Santander Bravo MasterCard is best for those with a strong credit history looking to buy some extra time to fulfill their consumer debt obligations. While the zero percent intro APR period lasts for a full 18 months, the annual fee of $49 is only waived for the first year. If you can’t get your debt paid off before the 12-month mark, sticking with the card through the $49 fee may not be worthwhile.

Take a look at your balance and make an assessment of your estimated debt pay off timeline, the potential savings, and the potential costs. The rewards of the Santander Bravo MasterCard can provide some additional allure, but staying focused on the primary objective of reducing amounts owed can help ensure that value assessments remain objective and grounded in the ultimate goal of getting to zero balance.

[Use our debt repayment calculator.]

Looking Out for the Fine Print

  • Balance transfers must be completed within the first 90 days to benefit from the 18 month zero percent APR offer.
  • The balance transfer fee is 3 percent (or a minimum of $10).
  • After the introductory 0 percent APR period, purchases are subject to variable APR from 15.99 percent to 24.99 percent based on creditworthiness.
  • Penalty APR: Up to 29.99 percent.
  • There is no grace period on balance transfers, so if you take the balance transfer offer and fail to pay the balance in full by the payment due date, you will have to pay interest on new purchases from the date of purchase.
  • Cash advance APR: 24.99 percent.
  • Cash advance fee: 5 percent ($10 minimum).
  • Foreign transaction fee: 3 percent.
  • Annual fee: $49 (waived for the first year). You can continue to waive the annual fee after the first year by maintaining a Santander Select Checking account. Note that this checking account comes with its own set of fine print fees.

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How It Compares to the Competition

While 18 months to benefit from 0 percent APR is a nice long time to enjoy interest free debt payoff, the annual fee that kicks in at the 12 month mark and a balance transfer fee of 3 percent are reason alone to consider fee free alternatives to the Santander Bravo MasterCard.

The Chase Slate credit card is one of those alternatives, offering zero percent introductory APR on balance transfers for 15 months. While the timeline on this intro offer is somewhat shorter, the absence of an annual fee and no fee for transferring the balance means no cash being deferred to cover costs. 100 percent of payments go to reducing debt for a full 15 months.

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If you want to stay with Santander or prefer the flexibility of a longer interest free debt payoff period, consider the Santander Sphere credit card. There is no annual fee charged to benefit from the Santander Sphere’s zero percent APR on balance transfers for a lengthy 24 billing cycles.

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An introductory balance transfer offer paired with a decent rewards program is admittedly hard to come by, but when trying to buy time to get to zero balance, your focus should remain on that top priority. Don’t get stuck paying for the privilege of additional spending rewards when what you really need is to be from debt. With that objective in mind, the Santander Bravo MasterCard may not be your best option.

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Balance Transfer, Pay Down My Debt, Reviews

Logix Platinum Rewards MasterCard Balance Transfer Review

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If you are digging yourself out of credit card debt, a balance transfer can be a great way to reduce the interest paid, as well as the time it will take to pay off the balance. As long as you can handle an additional credit card responsibly, and are committed to aggressively paying off debt, a balance transfer will shave time and hundreds to thousands off your debt repayment.

The Offer

The Logix Platinum Rewards MasterCard offer is 4.99% for 24 months with no balance transfer fee.

Pros

  • No balance transfer fee
  • No annual fee
  • Promotional APR as low as 4.99% for 24 months
  • Zero Liability for fraudulent purchases
  • No foreign transaction fees
  • No cash advance fees

Cons

  • 99% – 9.99% promotional APR, depending upon creditworthiness.
  • Exact promotional interest rate is not known until you apply
  • Hard credit pull required to see rate
  • 24% – 17.99% APR after promotional period expires
  • Balance transfer must be completed within 60 days, or may lose promotional APR

How to Qualify           

Individuals must have a credit score of 640 or higher to be eligible for the Logix Platinum Rewards MasterCard, but to even be considered for the 4.99% promotional APR, you must have a credit score of 680 or higher. In addition, applicants cannot see if they qualify for the lowest promotional APR of 4.99% without a hard credit pull.

Logix is a Credit Union – you don’t have to be a member to apply but you need to become one by putting $5 in a savings account. You must live in: AZ, CA, DC, MA, MD, ME, NH, NV, or VA or be eligible to open an account with Logix and to be able to even apply for the balance transfer card.

Fine Print Alerts

  • Balance transfers must be completed within 60 days of account opening, or risk losing the promotional APR
  • 99% penalty APR
  • Late/Returned Payment Fee: Up to $30
  • 99% promotional APR is not guaranteed. Promotional APR could vary from 4.99% to 9.99% depending upon creditworthiness

Account holders should complete the balance transfer process immediately, because you don’t want to risk losing the promotional APR or being charged the full APR of up to 17.99%.

Missed payments, or late payments result in a fee of up to $30. Cardholders may be charged the full 17.99% penalty APR. This late and missed payments policy is not unique to the Logix Platinum Rewards MasterCard. Regardless of which balance transfer credit card you choose, late or missed payments should be avoided, as they result in fees and penalty interest rates. Finally, returned checks or going over the credit limit can result in a $29 fee.

The Logix Platinum Rewards MasterCard does allow for a grace period of 25 calendar days, during which the cardholder will not pay interest on any new credit purchases. In order to avoid interest charges on new purchases, the entire new balance listed on the statement must be paid by the due date. There is no grace period on balance transfers or cash advances. The APR for cash advances is 17.99%.

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How It Stacks Up Against The Competition

While the 24-month balance transfer offer may seem appealing, it is worth noting that the 4.99% promotional APR is not guaranteed. However, even for an account holder who secured the 4.99% APR on a $10,000 balance transfer, the total interest charged would be $528. There would be no balance transfer or annual fee.

If you are committed to paying off your debt in a short timeframe, then the Chase Slate balance transfer may be a good option for you. The promotional period is only 15 months, but with a 0% promotional APR and no balance transfer fee. You would pay nothing in fees or interest.

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Another option, if you need the full 24-month promotional period is the Santander Sphere Visa. The balance transfer fee is 4%, which would cost you $400 on a $10,000 balance, but you would have the same amount of time to pay off the debt. Even with the fee, you’d still come out ahead because of the 0% promotional rate. You’d save $198 over the 4.99% APR offered by the Logix Platinum Rewards MasterCard.

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The Logix Platinum Rewards MasterCard is a good option, but not even close to the best on the market. The 24-month timeframe is appealing, but the promotional APR only goes as low as 4.99%, but could be as much as 9.99%. It would still be better to start with a 0% balance transfer offer as long as the fee is 4% or less.

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Pay Down My Debt

Even a Six-Figure Salary Won’t Keep You Away from a Payday Loan

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Trevor* was at the end of his rope. The very, very end of it, in fact. He was in six figures of credit card debt. He wasn’t communicating with his wife at all, and he had exhausted every single financial option available to him. He couldn’t do any more balance transfers, and he couldn’t get approved for any new promotional rate credit cards fast enough to get to his next payday. He was sinking, quickly, and he didn’t know where to turn.

All he cared about was making it to his next paycheck, so he went with the only option left to him and what thousands of people across America do every day: take out a payday loan.

When things are going badly with your finances, it’s difficult to know where to turn. Many people have family or friends they can rely on for help in a financial emergency, but others seek out the “help” of a payday lender. I put “help” in quotation marks for a reason, since payday lenders rarely, if ever, truly benefit the person taking out the loan. Instead payday lenders are known for their sky-high fees and their tendency to trap people in debt who already have serious financial issues.

Trevor was one of those people, but the catch was that he actually had a very high income. Years of spending too much, however, had caught up with him. He was so nervous walking into the doors of the payday loan shop, wondering what the person behind the counter was thinking. She tried to give him a smile to reassure him, but he felt like she was judging him, his high income, and his need for $1,000 right then and right there.

It only took a few minutes, but he walked out of the shop with $1,000 cash in his hand. He felt a wave of relief. Unfortunately, the relief only lasted 10 days. He got his paycheck and went back to the payday loan shop to pay $120 in interest and fees. Of course, his financial situation hadn’t improved so he was left with the same problem. So, he took out another payday loan to get to his next paycheck.

Trevor’s situation is not uncommon. An article in the Washington Post asserts “more than 80 percent of payday loans are rolled over or are followed by another loan within 14 days.” This is because people, like Trevor, can’t afford their expenses, and borrowing money from the next paycheck is only going to help them in the short term. Eventually, they are going to be short on cash again…and again…and again. The process of payday lenders letting borrowers take out a new loan and roll their old one into it creates a deep trap of debt with interest rates that can reach in the three and four figures.

Last month the Consumer Finance Protection Bureau said soon it would propose some restrictions on payday lenders. These restrictions would call for a stricter loan process to ensure borrowers actually have the ability to repay the loans in a reasonable manner.

[Stuck in a payday loan trap? Here are ways out.]

All of this is good news for the future of an industry that has profited on others’ financial struggles for far too long. However, the best way to avoid the trap that comes with payday loan debt cycles is to not take part in them at all.

I know this is easier said than done for someone who is in a financial pinch, but before you look for a quick fix to your money problems, instead try to utilize one of the options below:

Short-Term Financial Fixes

Use one of these methods if you are in need of a short-term loan right away. This is for those of you who are in such a bad financial position that you are considering a payday loan as a last resort.

1. Borrow money from someone you trust

It’s not easy to ask people to borrow money, but there is a way you could make it official. Instead of just asking to borrow money, actually give your family member or friend a detailed proposal asking for a particular amount, naming an interest rate, and listing out a repayment schedule. Include information about your income and the steps you will take to ensure you can pay your bills in the future. If you approach borrowing from family or friends in this way, it shows you mean business and don’t want to take advantage of them. Rather you want to pay them in interest (just not interest as high as payday lenders!)

2. Credit Union Loans

Credit unions offer loans or a personal line of credit that may help alleviate your financial struggles. Typically credit unions are situated within their communities and understand the people who live there. They will be more willing to work with you on a personal loan if they understand your current struggles.

3. Negotiating with creditors

Don’t always assume that your debt is fixed at a certain number. Anything is negotiable and at some point, people just want to get paid. This is especially true when it comes to healthcare costs, collection agencies and possibly your credit card bills. Stay strong, be firm but friendly when you ask, and you might be surprised at how much money you can save on your total debt repayment.

4. Credit card cash advance

Most credit cards have the ability to give cash advances, and many of them come in the mail with checks. This is definitely a last resort because the interest rates can be extremely high; however, they are not nearly has high as a payday loan interest rates and for that reason, should be considered before a payday loan.

Long Term Financial Fixes

1. Credit Counseling

Getting your finances on track is a very long-term process. I’ve been writing for personal finance blogs for five years now, and I still have months where I totally blow my budget and other months where I’m right on track. So, just because you’re not in the best financial shape of your life doesn’t mean you never will be. Start with non-profit credit counseling if you have a lot of debt and work towards trying to get out of it. Slowly but surely make your way to the finish line with the help of some professionals.

2. Budgeting

Budgeting is a great habit to start whether alongside credit counseling or just on its own. There are many different ways to budget, but essentially, it’s best to give each dollar a place in your budget. I like creating a budget at the beginning of the month and checking in once a week to see how things are going. That way, if I fell off the wagon and ordered too much pizza, I can do better in the weeks going forward. Budgeting will also help you realize your weak areas so you’re always aware of them. It will also help you to see which expenses might not be necessary so that you can continue to reduce them and throw that money at debt repayment instead.

3. Tracking Expenses

When you are trying to get out of debt, tracking expenses is a very difficult but effective habit to start. When you have to write down everything you spend, you are much more likely to avoid spending at all. This will help with sticking to a budget, which will in turn help with minimizing expenses and paying off debt.

You Can Break the Debt Cycle

Trevor’s story has a happy ending. He admitted that there was no way to get out of the payday loan debt on his own. He ended up borrowing the money from a family member who they paid back over time without interest. Fed up with his situation, he enrolled in credit counseling to get help. It took several months but by making massive changes to his lifestyle and large payments each month, he successfully paid off over $100,000 in debt and has been debt free ever since.

So, it is definitely possible to become financially savvy in the future even if you find yourself in debt and struggling right now. With just a few adjustments, a bit of knowledge, and a lot of support, you can definitely turn your financial life around. The way to do it, though, is through budgeting, expense tracking, smart borrowing and not payday loans.

*Names have been changed.

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Pay Down My Debt, Personal Loans

Personal Loans for People with Bad Credit

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When your credit is less than satisfactory, it can be difficult to find a lender willing to give you a personal loan. That doesn’t mean it’s impossible to find one – there are more options available now than ever before to get a personal loan with bad credit. What’s better is you can easily apply online to see the rates for which you qualify.

That’s thanks to lenders such as Springleaf, Avant, and Lending Club. They each have lower credit thresholds and none rely solely on your FICO score when deciding to lend to you, making it easier to qualify.

Even though you might have a poor credit score, your actual credit history may not be that bad. Your credit file could be thin because you didn’t start building any credit until recently, or maybe you’ve only ever had one open line of credit. Whatever the reason, just because your score is low doesn’t mean you’re not creditworthy, and these lenders know that.

Therefore, it’s worth making sure you’re still getting a decent deal on personal loan terms. It can be easy to think that because your score is low, you’ll be approved for a less than ideal interest rate, but you shouldn’t accept the first offer that comes your way.

Let’s take a look at what these three lenders offer so you know what terms are available to you.

Springleaf Personal Loan

Springleaf offers personal loans ranging from $1,500 to $10,000. You can apply for a secured or unsecured loan. You can also apply online and have a decision within a day.

Springleaf has been around for over 90 years, has an A+ rating with the BBB. It is a brick-and-mortar bank with over 800 branches across 27 states. Unfortunately, that means it’s limited to those with branches nearby, as you need to physically sign for the loan.

Its website has minimal information on APRs, terms, and fees for loans, but from the calculator provided, we know the APR range is 15.99% to 39.99%, and 2 to 5 year terms are offered.

Springleaf also has a track record for working with borrowers who have low credit. You need a minimum credit score of 550 to qualify.

What would an example loan look like? If you borrow $4,000 on a 3 year term, at an interest rate of 30%, your monthly payment will be around $169.81.

You can check to see if Springleaf has a pre-qualified offer for you, as it doesn’t affect your credit score. If you do accept its offer, then a hard credit inquiry occurs.

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Avant Personal Loan

You can borrow anywhere from $1,000 to $35,000 with a personal loan from Avant*. Specific rates and terms vary depending on your state of residence, but in general, terms offered are 2 to 5 years, and APRs range from 9.95% to 39.95%.

An example loan repayment: if you borrow $3,000 with an APR of 36.00% on a 3 year term, you’ll have a monthly payment of $137.41.

Applying with Avant doesn’t affect your credit score – it’s initially just a soft pull. On its FAQ, it states most customers have a FICO score ranging from 600 to 700, though you can still qualify with a score of 550.

Its customer service team is on staff seven days of the week to assist you in case you have any questions. It’s also possible to receive your funds as soon as the next business day.

Avant’s personal loans are currently offered in all states except West Virginia, North Dakota, Iowa, and Maine.

There is no prepayment penalty or origination fee. However, if you’re 10 days past due on a payment, you’ll be charged a $25 late fee. Avant does mention it offers late fee forgiveness, though.

If your payment is returned unpaid, you’ll be responsible for a $15 fee each time your payment fails to go through.

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*referral link

Lending Club Personal Loan

Lending Club* is different than Springleaf and Avant because it’s a peer-to-peer lender. Individual investors can choose to put their money toward your loan – the money isn’t coming from a bank.

As with Avant, you can borrow anywhere from $1,000 to $35,000 with Lending Club. It offers a 3 and 5 year term, as well as a 2 year term (which is reserved only for those with the highest loan grade). Its APR ranges from 6.68% to 29.99% on a 3 year term, and from 7.64% to 28.69% on a 5 year term.

For example, if you borrow $20,000 on a 5 year term at an APR of 8.91%, your monthly payment will be around $185.24. That’s including an origination fee of 3% (or $600), so the total amount you receive would be $19,400.

There’s no prepayment penalty, but you need to watch out for the origination fees. These range from 1% to 5%, depending on your loan grade. Remember to factor this in when receiving offers, because being charged an origination fee lessens the amount of money you actually receive.

There’s also a late payment fee of 5% of the unpaid amount or $15, whichever is greater, in the event you fail to make a payment by the 16th day it’s past due.

If your payment is unsuccessful, you’ll also be charged a $15 fee, and if you pay by check, you’ll have to pay a $15 check processing fee.

To be eligible for a loan with Lending Club, you must be 18 years or older and have a verifiable bank account. You must be a U.S. citizen, permanent resident, or have a valid long term visa. Your credit score should be at least 620 to qualify.

Lending Club does not offer loans in Iowa, Idaho, Maine, North Dakota, and Nebraska.

When determining creditworthiness, it takes the following into consideration:

  • Debt-to-income ratio
  • Credit score
  • Length of credit history
  • Number of open accounts
  • Usage and payment history
  • Other credit inquiries over the past 6 months

It has an A+ rating with the BBB and has been accredited since 2007.

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*referral link

Which Lender is the Best Choice?

It’s largely going to depend on the rates you receive. Luckily, with Avant and Lending Club, you’re able to apply without a hard inquiry on your credit, which allows you to shop around without worry. It’s smart to start with these two lenders and see which of the two offers you better terms.

Here’s a side-by-side comparison of the rates and terms offered by all 3 lenders:

Criteria Springleaf Avant Lending Club
Amount Borrowed Up to $10,000 Up to $35,000 Up to $35,000
APR Range 15.99% – 39.99% 9.95%-39.95% 6.68% -29.99%
Length of Loan Up to 5 years Up to 5 years Up to 5 years
Min. Credit Score 550 550 620

While Lending Club has the lowest APR cap, remember that it also has an origination fee, whereas Avant doesn’t. Springleaf isn’t transparent about its fees on its website, but given that it’s a traditional bank, it’s very possible it has an origination fee as well.

Springleaf offers the lowest amount you can borrow, so if your needs are greater, you’ll want to look at Avant and Lending Club.

However, if you value having a personal relationship with your lender, and a Springleaf branch is located near you, there’s nothing wrong with going the traditional route.

As always, it’s important to keep your best interests in mind, as lenders won’t. Take your time to shop around for the best possible rates and check with lenders that initially only do a soft pull of your credit. In the meantime, do what you can to increase your credit score so you have more options available to you in the future.

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Pay Down My Debt, Personal Loans

No Credit, or Poor Credit? Here Are Your Loan Options

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

Don’t have a credit history established, or have a low credit score? It can be challenging to find lenders that will approve you if you have a thin credit file or poor credit, but it’s not impossible.

You still have options when it comes to personal loans, and these options come from reputable lenders.

What’s even better is that these lenders will only conduct a soft credit inquiry when you apply to find out what rates they can offer you. This means your credit score won’t be negatively affected, so you don’t have to worry about damaging it further.

In this article we’ll review how to find reputable lenders, why you should stay away from two popular options people turn to when they’re in a poor credit situation: payday and title loans. And what you can do to increase your credit score.

Let’s get started.

Personal Loan Lenders That Initially Conduct Soft Credit Inquiries

It’s worth noting low scores aren’t always indicative of how responsible you are with credit. A low score, or thin file, could just be a result of a short credit history. If you have a clean history (no late payments, low credit utilization, etc.), you’ll have an easier time obtaining a loan over someone who has had delinquencies on their record, but might have a higher score.

Here are 5 personal loan lenders for people who have less than ideal credit (meaning under 700):

Avant: You can borrow anywhere from $1,000 to $35,000 with Avant, and you can receive your funds on the next business day. Specific terms and APRs vary by state, but Avant offers terms up to 5 years and fixed APRs ranging from 9.95% to 39.95%. You need a minimum credit score of 550 to qualify. Avant also has late fee forgiveness.

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*referral link

LendingClub: This is a peer-to-peer marketplace lender, which means individual investors can choose to fund your loan. Similar to Avant, you can borrow $1,000 – $35,000 and get the money deposited into your account within a few days. Fixed APRs range from 6.48%-29.99% on terms up to 5 years. LendingClub has an origination fee of 1%-5% on its loans, and you’ll need a minimum credit score of 620 to qualify.

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 *referral link

Upstart: Borrow between $3,000 and $25,000 for up to 3 years with APRs ranging from around 5.7% to 25.26%. While the minimum credit score needed to qualify is 640 (Upstart will also consider applicants who don’t have a score), you must have a clean credit history. You could also be eligible for next day funding.

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*referral link

Karrot: You can borrow $5,000 all the way up to $35,000 on 3 or 5 year terms. Karrot loans come with an origination fee, which range from 1.05%-4.75%. Fixed APRs range from 6.44% to 29.27%. The minimum credit score you need to apply is 660, and your rate is largely determined by your overall credit history.

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Prosper: Another peer-to-peer marketplace lender, Prosper’s loans are similar to LendingClub’s. You can borrow $2,000 to $35,000 with APRs ranging from 6.68%-35.97% on 3 and 5 year terms. There’s an origination fee of 1%-5%, and its minimum credit score is 640.

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*referral link

There are several other personal loan lenders that will do a soft credit check. You can find them on our personal loan table here. While many of these lenders have minimum credit score requirements, you’ll find they take other factors into account aside from your FICO score.

Additionally, since these lenders only do a soft credit pull, you’re free to shop around for the best rates without fear of damaging your credit score.

Why You need to Stay Away from Payday Loans and Title Loans

Not eligible for personal loans? Don’t turn to payday loans or title loans.

If you’re not familiar with either, you might be wondering what’s so bad about them. After all, they seem convenient – most offer “fast cash,” and if you live in a populated area, you’ll probably find a payday loan or title loan shop nearby.

However, both require you to give something in exchange for funds, and neither require any sort of stringent approval process to ensure borrowers can afford the loans.

Payday Loans

Payday loan companies require you to write a check for the amount you wish to borrow, plus a set fee. The lender holds onto the check until the loan becomes due (typically on the borrower’s next payday, hence the name), and gives the borrower the money they need in the meantime.

The problem? If you can’t pay when the loan balance becomes due, you can choose to extend the term of the loan. When you do, you get hit with more fees. The APR on payday loans is extremely high, so you’ll pay more each time you extend your loan term.

Payday loans are on the smaller side – anywhere from $100 to $1,000. According to PayDayLoanInfo.org, the average term is two weeks, with 400%+ APRs. When you factor in fees, the APR can go up to 780%.

[Stuck in a Payday Loan Trap? Here are the ways out.]

Title Loans

Title loans require you to give your car’s title to the title loan company in exchange for an amount equal to the appraised value of your car. You usually have to own your car outright to be eligible for a title loan, and the term is around 30 days.

Like payday loans, if you can’t pay on time, you may choose to roll the loan over to the next month, incurring more fees. If you can’t pay back the loan at all, you run the risk of the lender repossessing your car.

As you can tell, both of these options are bad ideas if you want to stay clear of getting into a horrible debt cycle. These loans are purposely too expensive for borrowers to afford. If people are looking for quick cash because they don’t have any, it stands to reason they’ll be in the same situation a week or two from the time they borrow.

Non-Profit Credit Counseling to Rebuild Credit Score

You want to make every effort to improve your credit score, even after you’re approved for a loan, because having a good credit score will benefit you in other areas of life. For that reason, you might want to consider teaming up with a non-profit credit counseling service.

These companies can provide you with personalized advice on your specific situation so you can work on rebuilding your credit score. They can also work with your creditors and negotiate on your behalf to possibly lower interest rates or get better terms on your existing debt.

It can be tricky to find a reputable credit counseling agency – even with a non-profit organization. If you’re interested in a credit counseling service, USA.gov lists a few considerations and questions you should ask before committing. You want to make sure the credit counseling agency is actually going to help you get your credit and financial situation under control.

Alternative to Ways to Build Your Credit Score

If you don’t qualify for a personal loan, and don’t want to turn to payday or title loans, there are a few steps you can take to increase your credit score. This post has 6 tips to help get you started. These methods won’t boost your score immediately, but over time, you’ll see an improvement.

The Federal Trade Commission also has 6 alternatives to payday loans on its website, which might apply to your situation. For example, if you’re a member of a credit union, you could inquire about a loan through them as you have an established relationship already.

Also, if you haven’t started budgeting and tracking your spending, you should – doing so can help you spot problem areas with your money.

Read the Fine Print and Shop Around

Regardless of which loan you decide to apply for, always consider the cost. You want to make sure you’re getting the best possible terms, which means getting the lowest APR offered. Typically, cash advances and credit cards are going to have higher APRs than personal loans but lower than payday lenders.

Remember to always read the fine print. Loans of any type have plenty of fees associated with them that you should avoid. Shop around for the best deals and work on improving your credit score so better options become available to you.

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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

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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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*referral link

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.

Prosper 1

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.

Prosper 2

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 9.99%, 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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 *referral link

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 Student Loan 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:

  • You must be a U.S. citizen or permanent resident
  • You must have graduated from a graduate school degree program in its eligible network

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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*referral link

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.

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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

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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.

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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

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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

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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 will likely be a much more expensive way to settle the debt. In addition, by paying the debt you may restart the statute of limitations (in some states). Also, some collection agencies will be liberal with their reporting and will try to use the recent payments to keep the collection item alive on your credit report. If that happens, you should complain to the CFPB. The better strategy is to save up money each month (rather than making a monthly 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.

OneMain

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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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College Students and Recent Grads, Pay Down My Debt

Can You Discharge Student Loans in Bankruptcy?

Students throwing graduation hats

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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*referral link

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 CommonBond* 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 CommonBond*. 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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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

mortar board cash

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

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

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

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

When Should You Skip a Student Loan Payment?

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

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

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

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

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

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

Are There Consequences to Skipping a Student Loan Payment?

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

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

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

Lenders Who Let You Skip a Payment

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

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

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

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

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

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

What If I Have a Different Lender?

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

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

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

After Skipping a Payment

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

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

Proceed With Caution

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

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Pay Down My Debt

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

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?

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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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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*

  • Maximum Loan: $100,000
  • Minimum Credit Score: 700
  • Duration: 84 months
  • APR: 5.50% – 9.99%
  • 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

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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

Students throwing graduation hats

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

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

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

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

How Does Gradible Work?

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

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

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

How Can You Earn LoanCreds?

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

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

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

Where the Money Comes From

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

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Is it Worth the Work to Earn LoanCreds?

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

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

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

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

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

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

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

Gradible as an Educational Resource

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

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

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

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

The Fine Print

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

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

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

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

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

Should I Sign Up?

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

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

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

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

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

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

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Life Events, Pay Down My Debt, Strategies to Save

5 Things Every New Mom Needs to Know About Money

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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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