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Reviews

Renasant Bank Review: Checking, Savings, CD, Money Market and IRA Accounts

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Year Established1904
Total Assets$10.5B
LEARN MORE on Renasant Bank’s secure websiteMember FDIC

Renasant Bank was founded in 1904 when a group of businessmen came together to form the bank in a Lee County, Miss. bakery. Currently, Renasant Bank manages more than $12.7 billion in assets and has over 190 branches in Alabama, Georgia, Florida, Mississippi and Tennessee.

Even though it’s still mainly considered a brick-and-mortar bank, you can open many of Renasant Bank’s deposit accounts online. In this review, we’ll go over their personal checking, savings, CD, money market and IRA account options. We’ll also show you how these products compare with other competitors and how you may be able to save on fees.

Renasant Bank’s rates may vary region, so we based them off the ZIP code 38804 which is closest to the bank’s headquarters.

Renasant Bank’s Most Popular Accounts

APY

Account Type

Account Name

Compare Rates from Similar Accounts

0.96%

Savings

Renasant Bank Rewards Savings

2.00%

American Express National Bank High Yield Savings Account

on American Express National Bank’s secure website

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Renasant Bank checking account options

Renasant Checking

This account could get expensive if you don’t waive the monthly maintenance fee.
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: $8 (this can be waived)
  • ATM fee: $2.50 for out-of-network ATMs
  • ATM fee refund: None
  • Overdraft fee: $36

The Renasant checking account is best for those looking for a simple option. While it’s unfortunate you don’t earn any interest, you do get free online banking and bill pay. You’ll also get a Renasant Debit MasterCard with extra features such as zero liability protection and extended warranty. You can also link the card to Apple Pay.

To waive the monthly maintenance fee, you should either sign up for e-statements or maintain a minimum daily balance of $500.

How to get the Renasant Checking account

There is an online application form you can fill out to open a Renasant Bank Checking account. First, you’ll need to provide the bank your mobile phone number. Once you receive an access code via text and enter it in the appropriate box, you’ll be asked to fill in your personal details such as your name, address and Social Security number, as well as a method to fund the account.

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Rewards Checking

You can get a pretty competitive rate for your first $25,000 but only if you qualify.
APYMinimum Balance to Earn APY
1.51%
$0.01
0.30%
$25,000
*A lower APY will be applied if you don’t meet the qualifications for the rates above.
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: $8 (this can be waived)
  • ATM fee: $2.50 for out-of-network ATMs
  • ATM fee refund: Up to $25 each month
  • Overdraft fee: $36

If you’re looking for a great rate and a way to save on ATM fees, this could be the account for you. The Rewards Checking account offers you the opportunity to earn a high APY, up to your first $25,000. To qualify for this bonus rate, you’ll need to elect to receive e-statements, have at least one direct or ACH deposit and a minimum of 10 debit card transactions each month. Otherwise, your rate will go down to the lowest APY — which is super tiny.

With this account, you also get online and mobile banking, bill pay and a debit Mastercard. If you can maintain a $500 minimum daily account balance or receive e-statements, your monthly maintenance fee will be waived.

You’re also in the right place if you’re looking for extra features in an deposit account. For an additional $6 each month, you can get the rewards extra checking add-on, where account holders can get bonuses like identity theft protection, 24/7 roadside assistance, accidental death coverage and over 400,000 discounts at qualifying retailers.

How to get the Rewards Checking account

You’ll need to have your Social Security number and personal information such as your address ready. Aside from showing up at your local branch, you can open an account by filling out an online application form. Before filling in your personal details, you’ll need to enter in your mobile number and enter a verification code. Once you do so and fill out the rest of the application, you can then fund the account.

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Student Checking

This account has the same features as the Renasant Checking account, but you do get ATM refunds.
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: $8 (this can be waived)
  • ATM fee: $2.50 for out-of-network ATMs
  • ATM fee refund: Up to $25 a month (you’ll need to meet the bank’s qualifications)
  • Overdraft fee: $36

It’s another non-interest bearing account, but you may be able to qualify for ATM refunds if you elect to receive e-statements and make at least 10 debit card transactions each month. Renasant Bank’s website claims you may be to earn some interest, though you’ll need to call the bank directly to find out their current rates.

Just to be clear — only students 16 to 25 years old can open this account. Once you turn 26, this account will switch to the Renasant Checking account and you can no longer get any rate bonuses or ATM refunds. Anyone who wants to open this account and is under 18 years old will need a parent or guardian acting as a joint account owner.

How to get the Student Checking account

If you’re at least 18 years old, you can open an account by filling out an an online application form. First, you’ll need to enter in your mobile number and type in a verification code before proceeding. Then, you can fill in your personal details such as your name, address and Social Security number, and a way to fund the account.

If you’re under 18 years old, you’ll need to head to a local branch with your parent or guardian to open an account. You’ll probably need your Social Security number as well as the joint owner’s.

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How Renasant Bank’s checking accounts compare

We like the rate for the Rewards Checking account as it’s one of the highest we’ve seen — even compared with the ones on our list of the best online checking accounts. You can also get ATM refunds, which is pretty nice if you intend on using out-of-network ATMs. Add the fact that there is a low minimum opening deposit requirement, and this account can be a great choice.

What we don’t love are the Renasant Checking and Student Checking accounts as you currently don’t earn any interest. If you’re after the best rates, you’re better off going with the Rewards Checking or one of the many online competitors.

Renasant Bank savings account options

Regular Savings

A savings account with a high maintenance fee.
  • Minimum opening deposit: $50
  • Minimum balance to earn APY: $50
  • Quarterly account maintenance fee: $15 (this can be waived)
  • ATM fee: N/A
  • ATM fee refund: N/A
  • Overdraft fee: N/A

This savings account earns interest but it isn’t advertised on their site, so you’ll need to call to find out what it is. Plus, you could be paying a fairly high quarterly maintenance fee if you can’t maintain a $50 quarterly account balance. There is no ATM access, but you can link your Renasant checking account to do so. You do get online banking access, but that’s pretty much all there is to this account.

One more thing — the fees can add up if you’re not careful. You’re allowed up to six certain debits a month because of Regulation D. Renasant Bank will charge you $2 per withdrawal if you make more than six each month. You could also face a $0.07 fee per deposit if you make more than 150 during the quarterly statement cycle.

How to get the Regular Savings account

You’re going to have to head to a brick-and-mortar location to open this account. You’ll most likely need to bring your government-issued ID and Social Security number. To find out more, call customer service at 1-800-680-1601.

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Rewards Savings

You can earn a higher rate but you’ll also need to pay a higher maintenance fee (although it can be waived).
APYMinimum Balance to Earn APY
0.96%
$0.01
0.30%
$100,000
*A lower APY will be applied if you don’t meet the qualifications for the rates above.
  • Minimum opening deposit: $50
  • Minimum balance to earn APY: None
  • Monthly account maintenance fee: $10 (this can be waived)
  • ATM fee: N/A
  • ATM fee refund: N/A
  • Overdraft fee: N/A

The Rewards Savings account is meant to complement the Rewards Checking account, as in it offers you a higher rate compared with the Regular Savings account. You’re also able to waive the monthly maintenance fee if you choose to receive e-statements or maintain a $2,500 minimum daily account balance.

The eligibility requirements to receive the higher rates are simple — link to your Rewards Checking account that receives e-statements, makes at least 10 debit card transactions and make one direct or ACH deposit per month. Remember, because of Regulation D, you’re allowed up to six certain debits each month. If you go over that amount, your transaction may be denied and could be converted to a checking account if you keep trying to make excessive debits.

How to get the Rewards Savings account

You’ll be able to open an account once you verify your mobile phone number by entering in a verification code on Renanant Banks’s online application form. Then, you can fill in your personal details such as your name, address and Social Security number. Afterward, fund your account.

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Children’s savings

Just a simple savings account for minors.
  • Minimum opening deposit: None
  • Minimum balance to earn APY: None
  • Monthly account maintenance fee: None
  • ATM fee: N/A
  • ATM fee refund: N/A
  • Overdraft fee: N/A

The children’s savings account is a free account for customers under 13 years old that doesn’t have any minimum balance requirements nor does it charge any monthly fees — a parent or guardian will need to be a joint owner. One of the few times you’ll be charged is if you go over six debits each month — it’s a $2 fee per excessive withdrawal-related transaction. You’ll also need to pay $0.07 for each deposit you make over 150 each quarter.

Once the child turns 18, this account will be converted to the regular savings one. One more thing — the children’s savings account rates aren’t advertised on their website so it’s best to call and find out the current rates.

How to get the children’s savings account

Both the parent or guardian and the child will need to go in person to open an account. You’ll both probably need to bring your government-issued ID and Social Security numbers.

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How Renasant Bank’s savings accounts compare

We’re a little disappointed in these rates considering the Rewards Checking account has a higher APY based on eligibility requirements than any of the above mentioned savings accounts. The Rewards Savings account offer rates way lower than what other places are offering, such as the competitors on our list of the best online savings accounts. If you’re into maximizing your savings as much as we are, you may be better off looking elsewhere.

Renasant Bank CD rates

Certificate of deposit

We like that it’s a fixed rate CD.
  • Minimum opening deposit: $1,000
  • Minimum balance amount to earn APY: $1,000
  • Early withdrawal penalty: $25 or interest earned (on depends length term), whichever is higher:
    • Less than one year — 3 months’ interest
    • More than one year — 6 months’ interest

Renasant Bank’s CD rates aren’t advertised on their website so we encourage you to call them to double-check. Renasant Bank also offers other terms — anywhere from 32 days to 84 months — so if you’re interested, Renasant Bank’s customer representatives should be able to help.

For these fixed-rate CDs, interest is compounded and credited to your account each quarter. Interest you earn can either be rolled over into your existing CD, transferred to another Renasant Bank account or mailed to you via check. Once your account matures, you’ll get a grace period of 10 business days where you can make any changes like making withdrawals, deposits or renewing your CD for another term. If you don’t do anything, the CD will automatically be renewed for the same term as the original one.

You can also use this CD as collateral, if you decide to take out a personal loan with Renasant Bank. Contacting customer service is your best bet to find out more details.

How to get Renasant Bank’s CDs

Right now, you’re only able to open a CD account in person. The bank will most likely ask you to bring proof of identity such as a government-issued ID and Social Security number.

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How Renasant Bank’s CD rates compare

We can’t tell for certain how good their rates are compared to our list of the best CD rates considering they’re not advertised anywhere on Renasant Bank’s website. If for some reason you do need to make an early withdrawal, the penalties don’t seem as high as some of the other accounts out there.

However, the minimum opening deposit may be a bit high for some people. In that case, it could pay to do some comparison shopping as there are many banks that offer a low or no minimum opening deposit.

Renasant Bank money market account options

Personal Money Market Account

You get ATM access bu the minimum opening deposit may not be feasible for everyone.
  • Minimum opening deposit: $1,000
  • Minimum balance to earn APY: $1,000
  • Monthly account maintenance fee: $15 (this can be waived)
  • ATM fee: $2.50 for out-of-network ATMs
  • ATM fee refund: None
  • Overdraft fee: N/A

We like that you get a debit card with this money market account, but the minimum opening deposit may be difficult for some to meet. By the way, the rates aren’t advertised on their site so it’s not a bad idea to call and check what the most current ones are. The monthly maintenance fee looks pretty steep but you can get that waived if you can maintain a daily balance fee of at least $1,000.

You’ll need to watch out for how many transactions you make in any given month because you could be charged for them. First, you could be paying $5 for each debit you make over six each month. You could also be paying $0.10 for each deposit if you make more than 150 in any given month.

How to get the Personal Money Market Account

You’re going to have to head to your nearest branch to open a Personal Money Market Account. You may need to bring items such your Social Security number and government-issued ID.

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High-Yield Money Market Account

The bank doesn’t advertise rates for this account online so you’ll need to call to find out.
  • Minimum opening deposit: $10,000
  • Minimum balance to earn APY: $10,000
  • Monthly account maintenance fee: $15 (can be waived)
  • ATM fee: $2.50 for out-of-network ATMs
  • ATM fee refund: None
  • Overdraft fee: N/A

Given the fact that the High-Yield Money Market account requires you to deposit at least $10,000 to earn interest, it may potentially offer higher rates than the bank’s other offerings. But there’s no way to tell unless you call the bank for rate info, as it is not currently advertised on the website.

For those who don’t have that kind of money laying around, you may want consider opening Renasant Bank’s Rewards Checking or Rewards Savings accounts.

There is a monthly maintenance fee, but you’ll be able to waive that if you can maintain a $10,000 minimum daily balance. You also get a debit card but you’re allowed up to six certain debits a month due to Regulation D. If you go over that amount, you’ll face a $25 excess transaction fee. You’ll also need to pay $0.10 for each deposit you make that’s over 50 each month.

How to get the High-Yield Money Market Account

Head to the nearest branch to open an account. You can call customer service at 1-800-680-1601 to find out what you’ll need to bring but it’ll most likely be your government-issued ID and Social Security number.

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How Renasant Bank’s money market accounts compare

You need a significant amount of money deposited to qualify for any of Renasant Bank’s money market accounts, which can make it out of reach for many. Other online competitors on our list of the best money market rates and accounts have lower minimum requirements, sometimes none at all.

What we’re trying to say is that if you can’t come up with that much cash to open a Renasant Bank money market account, looking at other money market accounts might be a better choice.

Renasant Bank IRA account options

IRA CD rates

IRA CD

These IRA CDs have a fairly average minimum opening deposit amount.
  • Minimum opening deposit: $1,000
  • Minimum balance amount to earn APY: $1,000
  • Early withdrawal penalty: $25 or interest earned (on depends length term), whichever is higher:
    • Less than one year — 3 months’ interest
    • More than one year — 6 months’ interest

Anyone who’s interested in a conservative investment account might want to consider these IRA CDs. The minimum opening deposit isn’t the lowest we’ve seen but it’s not extremely high either. Just like the regular CDs offered at Renasant Bank, interest you earn is compounded and credited quarterly. However, if you do make an early withdrawal, you’ll face potential IRS penalties on top of what Renasant Bank will charge you. Renasant Bank’s IRA CD rates aren’t advertised on their website so we encourage you to call them to double-check.

Your CD will renew automatically unless you make changes during the grace period, which is 10 business days. You can make changes such as renewing the CD for another term, making withdrawals or additional deposits.

How to get Renasant Bank’s IRA CDs

Head to your nearest branch to open a Renasant Bank IRA CD. You may be asked to provide details and items such as your address and Social Security number.

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How Renasant Bank’s IRA CD rates compare

The minimum opening deposit for these IRA CDs are also around the same as what others require. However, you must open an account in person so it may be a bit of a hassle for you, especially if you don’t live near a branch. In that case, you may want to check out our list of the best IRA CD rates for some ones you can open online.

IRA savings account

This account doesn’t have any monthly maintenance fees and requires a low opening deposit amount.
  • Minimum opening deposit: $50
  • Minimum balance to earn APY: $50
  • Monthly account maintenance fee: $0
  • ATM fee: N/A
  • ATM fee refund: N/A
  • Overdraft fee: N/A

The IRA savings account may be a good choice if you need a place to stash your IRA funds until you figure out what to do with it, like opening an IRA CD. You can make unlimited deposits up to the IRS limits each year. As for withdrawals, you can make up to six per month or else your transaction will be denied. If you’re under 59 1/2 years old, you may also face IRS penalties for making withdrawals from an IRA account, so it’s best to check the current rules.

Keep in mind that the rates for the IRA savings account isn’t currently advertised on their website, so before opening one, check by calling customer service to find out what they are.

How to get Renasant Bank’s IRA savings account

To open an IRA savings account, head to the nearest branch. It’s best to check by calling customer service at 1-800-680-1601 to find out what to bring, but you’ll likely be asked to bring items like your government-issued ID and Social Security number.

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Overall review of Renasant Bank’s banking products

We really like Renasant Bank for their Rewards Checking account as it’s one of the best rates we’ve seen. You also get a wide range of benefits, with or without the add-on option. The CDs are also pretty decent even though they do require a fair bit of cash to open an account.

Other than that, the rest of their accounts aren’t really worth it. Combined with high minimum amounts, monthly fees and the fact that you can’t open all of them online, we’re not terribly impressed. Renasant Bank faces some stiff competition from other online banks, so it may be a better idea to keep your eyes peeled for bank accounts that offer better features.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sarah Li Cain
Sarah Li Cain |

Sarah Li Cain is a writer at MagnifyMoney. You can email Sarah Li here

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Reviews

East Boston Savings Bank Review: Checking, Savings, CD, Money Market and IRA Accounts

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Year Established1991
Total Assets$5.7B
LEARN MORE on East Boston Savings Bank’s secure websiteMember FDIC

East Boston Savings Bank, or EBSB for short, opened in 1848. This makes it the oldest bank founded in Suffolk County, Mass., still using its original name. East Boston Savings Bank is a regional bank with branches in Massachusetts, primarily around the Greater Boston area.

You can only join East Boston Savings Bank if you are a resident of Massachusetts, New Hampshire or Rhode Island. If you live in another state, East Boston Savings Bank does run an online platform, EBSB Direct, with accounts that are available nationwide.

This article will focus on East Boston Savings Bank. We have covered all its personal accounts, using the latest product and interest rate information so that you can decide whether the bank is the right place for your money. Rates do change over time so make sure to double-check any information when you apply.

East Boston Savings Bank’s Most Popular Accounts

APY

Account Type

Account Name

Compare Rates from Similar Accounts

0.10%

Savings

East Boston Savings Bank Statement Savings

2.00%

American Express National Bank High Yield Savings Account

on American Express National Bank’s secure website

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0.45%

CD Rates

East Boston Savings Bank 12 Month CD

2.55%

Goldman Sachs Bank USA High-yield 12 Month CD

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1.00%

CD Rates

East Boston Savings Bank 36 Month CD

2.85%

Synchrony Bank 36 Month CD

on Synchrony Bank’s secure website

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2.15%

CD Rates

East Boston Savings Bank 60 Month CD

3.10%

Goldman Sachs Bank USA High-yield 5 Year CD

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East Boston Savings Bank’s checking account options

Simply Free Checking

Like the name says, this is a simple and free checking account. There’s never a monthly fee, and you get access to 55,000 ATMs nationwide. The downside is you won’t earn interest.
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: None
  • ATM fees: None at East Boston Savings Bank or Allpoint® network ATMs; $2.50 per transaction at other ATMs
  • ATM fee refunds: None
  • Overdraft fees: $35 per item, up to six a day

The East Boston Savings Bank Simply Free Checking account only provides the basics. It comes with a debit card, online banking and the ability to order checks. That’s about it. This account does not earn interest or debit card rewards.

In exchange for having few benefits, this account is completely free. There’s no monthly maintenance fee no matter how low your balance drops. You also don’t need to do anything to keep the account free, such as setting up a direct deposit.

With the debit card, you can make free withdrawals from East Boston Savings Bank ATMs, as well as from any in the Allpoint® network. Allpoint® has more than 55,000 ATMs nationwide, so there are plenty of options from which to choose. If you use an out-of-network ATM, East Boston Savings Bank charges a $2.50 fee per transaction. It also will not refund any fees from the ATM owner.

You can open an East Boston Savings Bank Simply Free Checking account online or by visiting one of its branches. You will need to provide your address, Social Security number and either a driver’s license or state ID for the application. You will also need to provide an opening deposit of $50.

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Interest Checking

Earns some interest, but the rate is incredibly low. At least the account’s free, and you only need a $10 minimum balance to qualify for interest.
APYMinimum Balance to Earn APY
0.05%
$10
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: None
  • ATM fees: None at East Boston Savings Bank or Allpoint® network ATMs; $2.50 per transaction at other ATMs
  • ATM fee refunds: None
  • Overdraft fees: $35 per item, up to six a day

You must deposit of $50 to open an Interest Checking account. After that, there is no minimum balance requirement, and this account does not charge a monthly maintenance fee. But you must set up a direct deposit of any amount to keep this account open.

This account earns interest so long as your minimum daily balance is $10 or more. But the rate is quite low, even by checking account standards. This account also comes with a debit card, online banking and the ability to order checks.

With the debit card, you can make free withdrawals from East Boston Savings Bank ATMs, as well as from any in the Allpoint® network. Allpoint® has more than 55,000 ATMs nationwide, so there are plenty of options from which to choose. If you use an out-of-network ATM, East Boston Savings Bank charges a $2.50 fee per transaction. It also will not refund any fees from the ATM owner.

You can open an Interest Checking account online or by visiting one of its branches. You will need to provide your address, Social Security number and either a driver’s license or state ID for the application. You will also need to provide your opening deposit of $50.

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Premier Checking

Only makes sense if you have a combined $25,000 balance across all your East Boston Savings Bank accounts. But if you can meet the steep balance requirements, this is an excellent account that offers a high interest rate and other benefits.

APYMinimum Balance to Earn APY
1.25%
$0.01
0.10%
Any amount over $25,000
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: $25 (waived if you have a combined balance of at least $25,000 in East Boston Savings Bank personal deposit accounts and loans)
  • ATM fees: None at East Boston Savings Bank or Allpoint® network ATMs; $2.50 per transaction at other ATMs
  • ATM fee refunds: Up to $50 per month from out-of-network ATMs
  • Overdraft fees: $35 per item, up to six a day

It takes a deposit of $50 to open a Premier Checking account. This account charges a steep $25 monthly maintenance fee. But East Boston Savings Bank waives the fee if you have a combined $25,000 balance throughout its personal deposit accounts and loans. This includes any personal deposit account, mortgages, home equity lines of credit and car loans.

The East Boston Savings Bank Premier Checking account earns interest on all balances. The rate is excellent on up to $25,000. If you have more than $25,000, you’ll earn a much lower rate for any amount over the limit.

You can make free withdrawals from East Boston Savings Bank ATMs, as well as from any in the Allpoint® network. East Boston Savings Bank will also refund up to $50 a month in fees from out-of-network ATMs. Finally, if you ever take out an East Boston Savings Bank mortgage, it will deduct $100 off the closing costs when you have this account.

You can open a Premier Checking account online or by visiting one of its branches. You will need to provide your address, Social Security number and either a driver’s license or state ID for the application. You will also need to provide your opening deposit of $50.

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How East Boston Savings Bank’s checking accounts compare

If you can meet the high balance requirements to waive the monthly fee, East Boston Savings Bank’s Premier Checking account is an attractive offer. It earns one of the highest rates in the country for a checking account. It also comes with up to $50 a month in out-of-network ATM refunds so you can conveniently access your money even if you aren’t close to an in-network ATM.

The only downside is you need a $25,000 combined balance throughout deposit accounts and personal loans at East Boston Savings Bank, or else the account charges a costly $25 monthly fee. That’s a tough limit to reach unless you handle all your banking and loans through East Boston Savings Bank.

The rest of East Boston Savings Bank’s checking accounts are less impressive. On one hand, they don’t charge a monthly fee. On the other hand, they don’t offer many benefits. Simply Free doesn’t earn interest, while the rate on Interest Checking is very low. Also, neither account offers ATM refunds.

You don’t have to make these trade-offs for a free checking account. These top online accounts not only offer excellent rates and ATM refunds, but they are also free. They could be a good alternative, especially if you can’t qualify for the Premier Checking account.

East Boston Savings Bank’s savings account options

High Yield Statement Savings

A phenomenal savings account for someone making a large deposit. It earns one of the best rates we’ve seen and doesn’t charge a monthly fee. The only catch is you need $5,000 to earn interest.
APYMinimum Balance Amount to Earn APY
2.50%
$5,000
0.25%
More than $1 million
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: None
  • ATM fees: None at East Boston Savings Bank or Allpoint® network ATMs; $2.50 per transaction at other ATMs
  • ATM fee refunds: None
  • Overdraft fees: $35 per item, up to six a day

You can open a High Yield Statement Savings account for a deposit of just $50. This account earns interest, but only if you have a balance of at least $5,000. If you have less than $5,000, you stop earning interest. But this account does not charge a monthly fee even if you fall below the balance requirement.

The High Yield Statement Savings account limits how often you can take money out because of a government rule, Regulation D. Each statement cycle, you can make up to six certain transactions, including debit card purchases, drafts and transfers to other accounts. If you make more than six, East Boston Savings Bank charges a $15 fee for each excess transaction.

The limit does not apply to bank or ATM withdrawals. You can make as many of these as you’d like. You can make free withdrawals from any East Boston Savings Bank or Allpoint® network ATM. If you make an out-of-network withdrawal, East Boston Savings Bank charges a $2.50 fee and will not refund any charges from the ATM owner.

You can open a High Yield Statement Savings account online or by visiting one of its branches. You will need to provide your address, Social Security number and either a driver’s license or state ID for the application. You will also need to provide your opening deposit of at least $50. You can only fund this account with new money — funds that aren’t already at East Boston Savings Bank.

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Statement Savings

Doesn’t pay nearly as high a rate as High Yield Statement Savings, but you only need a $25 minimum balance to qualify for interest.
APYMinimum Balance Amount to Earn APY
0.10%
$25
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: None
  • ATM fees: None at East Boston Savings Bank or Allpoint® network ATMs; $2.50 per transaction at other ATMs
  • ATM fee refunds: None
  • Overdraft fees: $35 per item, up to six a day

For smaller balances, East Boston Savings Bank offers a Statement Savings account. This account has a $50 minimum opening deposit requirement. To earn interest, your minimum balance only needs to be $25. This account pays the same rate on all balances over $25 — and the rate is low.

The Statement Savings account does not charge a monthly fee. If your balance falls below $25, you stop earning interest but don’t have to worry about a charge.

The Statement Savings account limits how often you can take money out because of a government rule, Regulation D. Each statement cycle, you are allowed up to six certain transactions, including debit card purchases, drafts and transfers to other accounts. If you make more than six, East Boston Savings Bank charges a $15 fee for each excess transaction.

The limit does not apply to bank or ATM withdrawals. You can make as many of these as you’d like. You can make free withdrawals from any East Boston Savings Bank or Allpoint® network ATM. If you make an out-of-network withdrawal, East Boston Savings Bank charges a $2.50 fee and will not refund any charges from the ATM owner.

You can open a Statement Savings account online or by visiting one of its branches. You will need to provide your address, Social Security number and either a driver’s license or state ID for the application. You will also need to provide your opening deposit of at least $50.

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How East Boston Savings Bank’s savings accounts compare

East Boston Savings Bank’s High Yield Statement Savings account is a real beauty. It earns one of the highest interest rates we’ve ever seen. It also doesn’t charge a monthly maintenance fee, no matter how low your balance gets.

It would be a perfect account if it weren’t for the balance requirement, which requires storing at least $5,000 in your account to earn interest. If you ever fall below, you stop receiving interest. This could price out readers looking for a smaller savings account. East Boston Savings Bank does offer a regular Statement Savings account, which only needs $25 to earn interest, but the rate is very low.

There are great options out there for any budget, and you shouldn’t accept a poor rate just because you’re making a smaller deposit. These savings accounts pay rates that are competitive with the bank’s High Yield Statement Savings account, and you don’t need a $5,000 balance to qualify.

East Boston Savings Bank’s CD rates

Certificates of Deposit

East Boston Savings Bank’s CD rates are a mixed bag. Some are excellent, some are average and some are quite poor.
TermAPY
6 months0.30%
9 months0.40%
12 months0.45%
13 months (special)1.26%
14 months (Special)2.20%
15 months2.50%
16 months1.56%
18 months0.50%
19 months1.61%
24 months0.65%
25 months (Bump-Up)1.41%
30 months2.21%
36 months1.00%
48 months1.25%
60 months2.15%
  • Minimum opening deposit: $1,000 ($2,500 for the six-month term)
  • Minimum balance amount to earn APY: $1,000 ($2,500 for the six-month term)
  • Early withdrawal penalty: For six- to 12-month terms, the penalty will equal three months’ interest on the amount withdrawn; for terms of more than 12 months to 36 months, the penalty will equal six months’ interest on the amount withdrawn; for terms over 36 months, the penalty will equal 12 months’ interest on the amount withdrawn.

East Boston Savings Bank offers a huge variety of CDs. It currently has 15 offers, which range from as short as six months to as long as 60 months. Nearly all the CDs require a $1,000 minimum opening deposit, and you need to keep this much in the account to earn the APY. Its six-month CD is the only exception. That requires $2,500 to open and earn the APY.

The quality of East Boston Savings Bank’s CD rates is mixed. Some offers, such as its 15-month CD, are excellent. Others are average and some are quite poor. Pay attention when you apply because the rate is not consistent based on the CD length. For example, the 15-month CD pays roughly five times as much as the 18-month CD, even though they are for nearly the same amount of time.

Its 25-month CD is a Bump-Up, which means if interest rates increase after you sign up, you can adjust to a higher rate.

If you take money out of your CD before the maturity date, East Boston Savings Bank will charge an early withdrawal penalty. The penalty depends on your CD term:

  • For six- to 12-month terms, the penalty will equal three months’ interest on the amount withdrawn
  • For terms of more than 12 months to 36 months, the penalty will equal six months’ interest on the amount withdrawn
  • For terms over 36 months, the penalty will equal 12 months’ interest on the amount withdrawn

When your CD matures, East Boston Savings Bank will automatically renew you for another one. You have 10 days after the maturity date to take money out without owing a penalty. While most of the CDs renew for the same offer, some renew into a different term with a lower rate. The ones that renew at a lower rate are 13 months, 14 months, 16 months, 19 months and 25 months.

East Boston Savings Bank only makes some of its CD offers available online — typically the ones with the highest rates. You can only open the rest of the CDs by visiting an East Boston Savings Bank branch. You will need to provide your address, Social Security number and either a driver’s license or state ID for the application. You will also need to provide your initial deposit for the CD.

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How East Boston Savings Bank’s CD rates compare

Having a lot of choices can be a good thing, but we wonder if East Boston Savings Bank has taken it too far. It has so many terms that it can be a little confusing. Another issue is that there’s such a difference in quality between its rates.

For example, its 15-month CD pays five times as much interest as its 18-month CD, even though they are for nearly an identical amount of time. If someone doesn’t pay attention, they could accidentally pick the wrong option. We also didn’t like that many of its higher-paying offers automatically renew into much worse deals.

If you can look past these issues though, East Boston Savings Bank does have some terrific CD rates. Its 15-month CD is one of the best on the market for this amount of time, and it has a few other options that are nearly as generous. We would recommend paying close attention when you sign up so that you don’t accidentally take a lowball offer.

Or if you’d like some other high-quality options to compare, we’ve tracked down the best CD rates. By following this list, you’ll make sure you receive a competitive return on your savings.

East Boston Savings Bank’s money market account option

Money Market Special 3

If you keep at least $10,000 in your account, East Boston Saving Bank pays an excellent money market rate.
APYMinimum Balance Amount to Earn APY
0.50%
$10
1.57%
$10,000
0.80%
$2 million
  • Minimum opening deposit: $2,500
  • Monthly account maintenance fee: $8 (waived for minimum daily balance of at least $2,500)
  • ATM fees: None at East Boston Savings Bank or Allpoint® network ATMs; $2.50 per transaction at other ATMs
  • ATM fee refunds: None
  • Overdraft fees: $35 per item, up to six a day

The East Boston Savings Bank Money Market Special 3 account requires an opening deposit of $2,500. After that, if your minimum daily balance falls below $2,500, this account charges an $8 monthly fee. East Boston Savings Bank waives the fee so long as you stay above the balance requirement.

The Money Market Special 3 account pays interest so long as your balance is at least $10. The rate is just OK for balances less than $10,000. If you have more than $10,000, you’ll earn a much more competitive rate.

This money market account limits how often you can take money out because of a government rule, Regulation D. Each statement cycle, you are allowed to make up to six certain transactions, including debit card purchases, drafts and transfers to other accounts. If you make more than six, East Boston Savings Bank charges a $15 fee for each excess transaction.

You can open a Money Market Special 3 account online or by visiting one of its branches. You will need to provide your address, Social Security number and either a driver’s license or state ID for the application. You will also need to provide your opening deposit of at least $2,500. You can only deposit new money into this account — funds that aren’t already at East Boston Savings Bank.

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How East Boston Savings Bank’s money market account compares

Whether the East Boston Savings Bank money market account is a good choice depends on how much money you plan on keeping in the account. For balances of $10,000 – $2 Million, it’s an excellent option with a highly competitive interest. On the other hand, if you keep less than $10,000 in your account, the rate is much less impressive. It’s OK, but you can find something better.

If you don’t plan on making a five-figure deposit — and even if you are — we recommend reading up on the best money market accounts in the country. Some of these accounts pay even more than East Boston Savings Bank’s top rate, and you can qualify with a much smaller balance.

East Boston Savings Bank’s IRA account options

Retirement CDs

All the East Boston Savings Bank CDs can be used through an IRA. You can set these up with a smaller $500 deposit.
TermAPY
6 months0.30%
9 months0.40%
12 months0.45%
13 months (special)1.26%
14 months (Special)2.20%
15 months2.50%
16 months1.56%
18 months0.50%
19 months1.61%
24 months0.65%
25 months (Bump-Up)1.41%
30 months2.21%
36 months1.00%
48 months1.25%
60 months2.15%
  • Minimum opening deposit: $500
  • Minimum balance amount to earn APY: $500
  • Early withdrawal penalty: For six- to 12-month terms, the penalty will equal three’ months interest on the amount withdrawn; for terms of more than 12 months to 36 months, the penalty will equal six months’ interest on the amount withdrawn; for terms over 36 months, the penalty will equal 12 months’ interest on the amount withdrawn

If you want to save for retirement, all of East Boston Savings Bank’s regular CDs are available through an IRA. You can set up any of the IRA CDs with a deposit of $500, and you need to keep this much in the account to earn the APY. This limit is lower than the regular CDs, which require $1,000. These accounts charge a $15 IRA annual fee.

East Boston Savings Bank’s IRA CD rates are a mix of quality. Some are excellent, some are average and some are quite poor. Pay attention when you sign up because longer terms don’t always have the higher rate at East Boston Savings Bank.

If you take money out of your IRA CD before the maturity date, East Boston Savings Bank will charge an early withdrawal penalty. The penalty depends on your IRA CD term:

  • For six- to 12-month terms, the penalty will equal three months’ interest on the amount withdrawn
  • For terms of more than 12 months to 36 months, the penalty will equal six months’ interest on the amount withdrawn
  • For terms over 36 months, the penalty will equal 12 months’ interest on the amount withdrawn

Also, if you are younger than 59½, it charges a $25 IRA Premature Withdrawal fee. On the other hand, if you are older than 59½, your IRA CD term is 24 months or less and you only make a partial withdrawal, there is no early withdrawal penalty.

When your IRA CD matures, East Boston Savings Bank will automatically renew you for another one. You have 10 days after the maturity date to take money out without owing a penalty. While most of the IRA CDs renew for the same offer, some renew into a different term with a lower rate. The ones that renew at a lower rate are 13 months, 14 months, 16 months, 19 months and 25 months.

You can open a Retirement CD by visiting one of its branches. They aren’t available online. You will need to provide your address, Social Security number and either a driver’s license or state ID for the application. You will also need to provide your opening deposit.

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Retirement Money Market Savings

The Retirement Money Market Savings account doesn’t have early withdrawal penalties, but it earns less than the IRA CDs. It’s a below-average rate for this type of account.

APYMinimum Balance Amount to Earn APY
0.25%$25
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: None

East Boston Savings Bank also offers a Retirement Money Market Savings account for customers who do not want to commit to a set timeline. You can take money out of this account without owing an early withdrawal penalty to East Boston Savings Bank like you would on the IRA CDs.

In exchange, the account earns a much lower interest rate. Compared to similar accounts on the market, it’s also below average.

You need to deposit of $50 to open this account. You’ll earn interest so long as you balance stays above $25. The rate always stays the same; it doesn’t increase for larger balances. This account does not charge a monthly fee. You just stop earning interest if you fall below $25.

You can open a Retirement Money Market Savings account by visiting one of its branches. They aren’t available online. You will need to provide your address, Social Security number and either a driver’s license or state ID for the application. You will also need to provide your opening deposit.

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How East Boston Savings Bank’s IRA CD rates compare

East Boston Savings Bank offers a few excellent IRA CD rates. Its 15-month IRA CD is one of the best in the country for this amount of time, and there are a few others that aren’t far behind. But these excellent offers are mixed with others that are extremely low. Pay close attention when you sign up to make sure you don’t accidentally pick a lowball option.

The Retirement Money Market Savings account is less impressive. The rate is just too low. While you can open it up for a small deposit, your savings really will not grow using this account. You can find better versions of this type of account elsewhere.

Stick with the highest-paying East Boston Savings Bank IRA CDs. If you’d like a second opinion, we’ve researched the best IRA CD rates in the country. They could be another effective way to grow your retirement savings.

Overall review of East Boston Savings Bank’s banking products

If you plan to keep a large amount in savings, you’re going to like East Boston Savings Bank. Its top-tier checking, savings and money market rates are right up there with the best accounts in the country. But these high rates come with high balance requirements. For example, you need a $5,000 balance to earn interest with High Yield Statement Savings and $10,000 to receive the best money market account rate.

East Boston Savings Bank is less generous with smaller accounts. While the fees are low, small balances don’t earn anything close to a competitive interest rate. It seems East Boston Savings Bank’s priority is attracting clients with deeper pockets.

If you can meet the high balance requirements, East Boston Savings Bank could be an attractive choice. Just remember that you must be a resident of Massachusetts, New Hampshire and Rhode Island to sign up.

Live somewhere else? Some of the best offers from East Boston Savings Bank are also available nationwide through its online service, EBSB Direct.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

David Rodeck
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David Rodeck is a writer at MagnifyMoney. You can email David here

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What Is a Good Debt-to-Income Ratio?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Your debt-to-income ratio, or DTI, compares your debt payments to your income on a monthly basis. It’s an important measurement of how manageable your monthly budget is, as it reveals how much of your income is being devoted to payments on debt you still owe.

But it’s even more important to be aware of your DTI if you’re planning to apply for new credit soon. Here’s what you need to know.

How debt-to-income ratios work

A debt-to-income ratio is expressed as a percentage that represents how much of your monthly income goes toward debt repayment. So a DTI of 20%, for example, shows that your monthly debt costs are equal to 20% of your gross monthly income.

The lower your monthly debt costs and the higher your income, the lower your DTI. But if you borrow more or your income is lower, your DTI will be higher.

There are two types of debt-to-income ratios that a lender might consider.

Your front-end DTI compares your total housing or mortgage costs to gross monthly income. It’s sometimes also called your housing-expense-to-income ratio. This is based on your full mortgage payments if you have a mortgage, and would include principal, interest, property taxes, homeowners association fees and insurance costs. If you rent, it would be your monthly rent amount. It doesn’t include non-fixed costs such as utilities.

Your back-end DTI compares your income to the minimum payments on your outstanding credit accounts, including mortgage and non-mortgage debt. That means your back-end DTI includes:

  • Monthly payments on installment loans such as student loans, car loans or personal loans
  • Housing expenses, such as monthly rent or full monthly mortgage costs (as outlined above)
  • Minimum monthly payments on revolving accounts such as credit cards or lines of credit
  • Other financial obligations such as child support or alimony

Your back-end DTI is more commonly considered by lenders when you submit a loan application. A mortgage application will usually consider both your front- and back-end DTIs when deciding if you qualify.

Because a back-end DTI is more commonly used, assume that we’re referring to this number unless otherwise noted.

Why lenders favor applicants with lower DTIs

Most lenders will also consider your DTI to decide if you can reasonably afford to take out and repay an additional debt. A low DTI tells them that you have room in your budget to take on and repay new debt, increasing your chances of getting approved for credit. But a high DTI could be a red flag to lenders that you’re already stretching yourself thin and pose a larger lending risk.

If you’re planning to apply for a home loan, car loan or other types of credit, it’s important to figure out your debt-to-income ratio. Knowing your DTI will clarify whether you’re likely to qualify for new credit, or if you need to take steps to compensate for a poor ratio.

Even if you aren’t planning to take out a loan soon, maintaining a healthy DTI can be a good idea. It’s a sign that you’re managing your finances well and avoiding taking on more debt than you can afford, and it will also make it easier to get a loan in an emergency or unexpected event.

What is a good debt-to-income ratio?

As you take stock of your debt payments and income, you might be wondering how good a debt-to-income ratio needs to be. When lenders assess your loan application, what is a good DTI?

While DTI standards can vary by lender and product, some general rules can help you figure out where your ratio falls. Here are some guidelines about what is a good debt-to-income ratio:

  • The “ideal” DTI ratio is 36% or less. At least, that’s the common financial advice of the “28/36 rule.” This guideline suggests keeping total monthly debt costs at or below 36% of your income, and housing costs at or below 28%. (You can calculate this number for yourself by multiplying your monthly income by 0.36 or 0.28). A DTI in this range will result in affordable debt and give you the ability to qualify for additional credit when needed.
  • The maximum DTI for most lenders is 43%. This is typically the threshold for getting a new loan, according to the Consumer Financial Protection Bureau. Borrowers with a debt-to-income ratio exceeding 43% are shown to be more likely to struggle with monthly costs. You’re much less likely to get approved for a loan with a DTI above 43%, and might need to seek alternative products.
  • The maximum front-end DTI ratio for a home loan is 31%. At least, that’s the rule set by the Federal Housing Administration for loans it guarantees. Most lenders will want to see that the total costs of your new FHA mortgage payment are equal to or less than 31% DTI. For non-FHA loans, the guideline is a front-end DTI of below 28%, according to the National Foundation for Credit Counseling.
  • The lower your DTI, the better. As mentioned, a high ratio of debt to your income could be a sign that you can’t afford to take on more debt. So the lower your DTI, the better — while a 36% ratio is good, a 20% DTI would be viewed even more favorably.

How to calculate your debt-to-income ratio

Now that you know what is considered a good debt-to-income ratio, it’s time to calculate your own. Here’s a step-by-step process to calculate your DTI.

  1. Look up all your monthly debt costs. To figure out your debt-to-income ratio, you’ll need an accurate dollar amount of every debt you pay each month. Find the monthly minimum payments for your mortgage (or rent, if you don’t own a home), student loans, car loans, credit cards and other financial obligations.
  2. Add your monthly payments together. Add up the dollar amounts of all these monthly payments to get the total you pay toward these each month. (If you want to figure out your front-end DTI, include only your housing-related costs.)
  3. Figure out your monthly income. You’ll need to use your gross income, and include all income sources, including overtime pay, bonuses and pay from a second job or side hustle. A salaried employee can divide annual income by 12 to find monthly income. If you’re hourly or your pay fluctuates, review recent pay stubs to figure out your typical monthly income.
  4. Divide monthly debt costs by your monthly income. This will give you a decimal figure, which, if you multiply by 100, is your debt-to-income percentage.

If you follow these steps, you can calculate your DTI. Here it is as a mathematical formula:

(Sum of all monthly debt payments / Gross monthly income) * 100 = Your debt-to-income ratio

You can also use a calculator to automatically generate your DTI. We like the straightforward DTI calculator from our sister site Student Loan Hero, which generates both your front-end and back-end ratios.

How to improve your debt-to-income ratio

After running the numbers on your debt-to-income ratio, you might be worried that yours is too high. Fortunately, you do have some control over your DTI and, with some time and effort, could decrease it.

The way to do that is to work on the two things that factor into this ratio: your income and your debt costs. Here are some ways you can work on each of these to improve your debt-to-income ratio.

1. Avoid taking on more debt

Any new debt you accrue will only push your DTI higher. If you’re already uncomfortable with how high your debt-to-income ratio is, that’s a sign that you need to stop borrowing until you get it under control.

Take a look at your budget to ensure you’re living within your means and not spending more than you’re making. If you’re used to spending with credit cards, consider putting these away and paying only with debit cards or cash. Save up for major purchases or emergencies, too, so you can rely on your funds instead of borrowing to cover upcoming or surprise expenses.

2. Pay off low balances first

Every time you pay off a debt completely, you eliminate the monthly payment from your budget. So making extra payments on some of your credit accounts could be a smart way to lower your monthly costs.

This can be especially effective if you follow the debt snowball method, which targets your lowest balance first to quickly eliminate your smallest debt. Each time you pay off a loan or credit card, you’ll get rid of a monthly payment and lower your DTI in the process.

On top of decreasing your DTI, following the snowball repayment method will also get you out of debt faster and save you money that you’d have otherwise spent on interest.

But if you’re looking to get out of debt faster by reducing your total interest costs so that more of your monthly payments go toward the principal balance, you could opt for debt consolidation. With debt consolidation, you can take out a personal loan to pay off existing debts. The new loan should have a lower interest rate.

Debt consolidation could also help your DTI ratio by lowering your monthly payment. If you choose a longer repayment term, your monthly payments may decrease, which positively affects your DTI ratio. But a lower monthly payment may mean you’ll be in debt longer.

If you want to explore debt consolidation loan options, you can try out LendingTree’s personal loan tool. You’ll fill out basic information about yourself, your finances and what you need out of a loan. Then you may receive loan offers from lenders you can review. Note that LendingTree owns MagnifyMoney.

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5.99%
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3. Refinance your debt

Another smart strategy to lower your monthly debt payments is refinancing. When you refinance debt, you use a new loan to pay off and replace a previous loan. Doing so gives you a chance to get a loan with terms, costs and payments that are a better fit for your needs.

Here are the main ways that refinancing student loans, a mortgage, credit cards or other debt can help lower your monthly debt costs and, in turn, your DTI.

You can refinance to a lower rate. Your monthly debt payments will include a payment to both your principal, as well as an interest charge. The former goes toward lowering your balance, while the latter is an additional cost you pay in exchange for borrowing these funds.

The interest costs are based on your interest rate. Refinancing can be an opportunity to replace a high-interest debt with a new, lower-interest loan. This, in turn, can help lower your monthly debt costs.

You can refinance to a longer loan term. Since refinancing means getting a new loan, it could also give you the chance to choose a longer loan term. This stretches out your debt repayment over more monthly payments, so you pay less each month.

Say, for instance, you bought a home with a 15-year mortgage but have found yourself uncomfortable with how high your monthly payments are. You could consider refinancing to a 30-year mortgage to decrease your mortgage payments and lower your DTI.

As you consider refinancing, watch out for potential downsides as well. Switching to a longer loan term will increase the total interest you pay over the life of the loan, and refinancing can also trigger new loan fees or closing costs. Weigh the benefits and drawbacks for your situation to see if refinancing makes sense.

4. Earn more at your day job

While it’s important to pay attention to your debt, don’t overlook the other side of the DTI equation: your income. One of the most effective ways to lower your debt-to-income ratio is to increase how much you earn at your day job. Here are a few strategies that can make that happen:

  • Pick up more hours. If you’re not full time, ask your manager for an extra shift or offer to cover for your co-workers. Even full-time workers can sometimes pick up overtime to boost pay, so check with your manager for such opportunities.
  • Work toward a raise. Has it been a while since your pay was bumped or have you taken on new responsibilities? Do you have other reason to think you’re underpaid for your work? Start a conversation with your manager about your pay to see if you can negotiate a pay raise now or set a performance track to qualify for one.
  • Seek higher-paying jobs. Switching to a new company can be one of the best ways to get a big pay increase. Do some research into your local job market to figure out what you’re worth and uncover employment opportunities to pursue.

5. Start a side hustle

Use your off-hours to earn more with a second job or side hustle. This can help you generate more income that can be included when calculating your DTI. As a bonus, this additional pay can be the perfect source of funds to pay your debt off faster.

Here are some side hustle ideas to consider:

  • Pick up an hourly second job. You can get a range of part-time jobs in your time off, from teaching a fitness class to tutoring on the side or waiting tables.
  • Consider freelancing, consulting or coaching. If you have specialized skills, you can apply them after hours and get paid a premium to do so.
  • Try a money-making app. You’ve heard of Uber and Lyft — and might have considered driving for them yourself. But these aren’t the only ways to make money from apps. You can use apps to earn extra money baby-sitting, pet-sitting, cleaning houses, renting out your spare car or room or delivering groceries or takeout to make extra income.

6. Look for ways to offset your DTI

If you can’t or don’t want to wait for your DTI to decrease to apply for a loan, you might still have options. Some mortgage lenders will grant you a loan with a debt-to-income ratio over 43% if you can compensate in other areas of your financial history. One way is by having large cash reserves on which you can fall back.

Applicants who can qualify on their own can also add a cosigner to their application. You and your cosigner will be equally responsible for repaying this debt, and both your incomes and DTIs will be considered as well. Adding a qualified cosigner could help you surpass DTI requirements that you couldn’t meet on your own.

Lastly, you can work to optimize other factors considered on credit applications to improve your approval chances. Building your credit to achieve a good score, for example, can go a long way toward offsetting a higher debt-to-income ratio.

Your DTI is an important measure of your health that should matter to you as much as your credit score or reports. Check in on your debt-to-income ratio whenever it might have changed, such as after paying off a loan or working a side hustle for a few months. Tracking your progress can highlight how far you’ve come and keep you motivated to continue working on your DTI.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Elyssa Kirkham
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Elyssa Kirkham is a writer at MagnifyMoney. You can email Elyssa here

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6 Ways to Managing Money in Your 20s

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Life as a young 20-something-year-old is an exciting time. You’ve likely graduated from college, started your first real-world job, and are making decisions on your own. While your adult life has just begun and retirement seems years away, it’s important to start discussing your financial options, managing your money responsibly, and planning for your future now.

This article will walk you through six suggestions on how to manage money in your 20s.

1. Create a budget

Budgeting is the process of tracking your income, bills and expenses in order to assess how much you can spend and what you can afford each month. Creating a budget and sticking to it is the foundation for financial success as it helps you to live within your means and avoid debt.

“The first thing I recommend to most young people starting out is to understand a budget,” said Corbin Green, a growth and development director and financial advisor based in Salt Lake City. “People need to understand what money is coming in and what money is going out each month, and have it laid out in an organized fashion.”

When creating a budget, you’ll want to write down:

  • Your income: How much are you making each pay period?
  • Your expenses and recurring payments: What does your rent/mortgage, utilities, groceries and gas add up to each month?
  • Debts owed: How much do you owe for student loans, car payment, credit card debt?

Once you’ve assessed your income and expenses, you can make your budget.

2. Pay yourself first

Once you’ve outlined your initial expenses, such as your mortgage, car payment and utilities, it’s crucial to add an “expense” of paying yourself first to start building up a short-term and long-term savings account. Treat your savings and retirement account like a utility bill — it must be paid monthly and on time.

“My recommendation is to pay yourself first. The first bill paid each month should be money to your savings account, then your essential bills and anything left over at the end of the month is fun money,” Green said. “The biggest mistake I see is the younger generations make is not saving early enough. They tend to have a ‘kick the can down the road’ attitude and put off savings until their 30s.”

Let’s look at an example: Assuming you want to have $1 million in savings by the time you retire at age 65, this is how much you’ll need to invest each month:

Monthly savings to reach $1 million by age 65

Starting age

Monthly savings required

25

$381

35

$820

45

$1,920

“This generation lives lavishly, so the number we coach people to save is around 20% of their income. That should help them maintain their current lifestyle in retirement,” Green said. “If you want more travel and more fun stuff during retirement, saving 30% of your income will help you live a lifestyle above what you’re currently living.”

Time is on your side when you’re young. A little bit of money saved now is going to make a big difference later. Make your savings payments consistent, sustainable and automatic.

3. Start an emergency fund

In addition to your retirement account, you’ll want to start an emergency fund. An emergency account is money set aside specifically to cover the cost of an unexpected expense. This account usually consists of three to nine months’ worth of money that is easily accessible in case of an emergency.

If something unexpected were to happen (i.e., inability to work, illness, loss of income), you’d have quick access to cash that would sustain you long enough to pay your bills and allow you to find a qualified job.

4. Pay off existing debt

The average millennial has an average of $23,064 in debt, according to a recent study by LendingTree, the parent company of MagnifyMoney. Debt — or money owed to a lender — can be crippling to your financial, and even your physical and mental health.

Large amounts of debt can seem daunting to pay off, but it’s important to make a plan, start paying it off quickly and include it in your budget as a monthly payment. If you have more than one debt, how do you know which to pay off first?

Green suggests consolidating debt to one payment with a lower interest rate when possible. You may find and compare personal loans you can use to consolidate debt using this tool from LendingTree. You’ll input some personal information before getting to review loan offers.

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But you may be more driven to try the debt avalanche or debt snowball methods of repayment.

“The financial professional in me says to put more money toward the debt with a higher interest rate and some money at the debt with lower interests rates; but never focus on just one expense at a time,” Green said. “But as a human, you may ask yourself ‘which of these debts is a moral victory to pay off?’”

If you owe money to a friend or family member and paying that debt off is a mental relief, Green suggests paying that off first and then moving on to other debts.

As a young adult, it’s important to make a plan to pay off and manage your debt to avoid heavy interest fees.

5. Build credit

A credit report is a report that shows your credit history and is used to determine your creditworthiness. Building a strong credit history and maintaining a high credit score are essential for your financial health. In your early 20s, it’s important to build your credit by paying your credit cards and utilities on time but avoiding debt in the process.

“Never live above your means and use credit for money that you don’t have,” Green said. “I never recommend buying anything on credit unless you have the means to pay it off in full at the end of every month.”

Using a credit card to build credit is a smart use case, but if you can’t afford to pay it off by the end of the billing statement, you probably can’t afford it in the first place.

6. Protect yourself financially

As you enter adulthood, you’ll want to make sure that you are protecting yourself and your finances with adequate insurance. Take advantage of the benefits offered at work — health insurance, life insurance, short and long-term disability insurance and 401(k) match, if offered. You may consider additional benefit packages outside of what your work offers.

“I always recommend you have something outside of work so you have control and coverage should you leave your employer,” Green said.

Managing your money and knowing where to get started with financial planning can be overwhelming and confusing — especially when you’re in your 20s. Finances can be complex, but it’s essential to educate yourself, find out what resources are available to you and start having financial conversations earlier rather than later in life.

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Sage Evans
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Sage Evans is a writer at MagnifyMoney. You can email Sage here

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10 Ways to Make Extra Money to Pay Off Debt

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You keep making the minimum payments on student loans, credit cards, an auto loan — but your payoff dates are still years away. In the meantime, you’re spending hundreds on interest each month.

The good news is, you don’t have to if you get serious about getting out of debt. If you pay more than the monthly minimums, you’ll get out of debt faster. Even better, you’ll avoid paying interest and free up cash flow with each balance you eliminate.

But not everyone has extra money around that they can use to pay even more toward debt than they already do. If you’re trying to pay off debt with a low income or tight budget, earning more might be the answer.

Here’s a look at 10 ways to pay off debt faster by increasing your income.

10 ways to make more money to pay off debt

Generating extra funds and putting it toward balances is one of the most effective strategies to pay off debt. That’s because it allows you to get out of debt faster and pay less interest — without eating into your monthly budget.

Get started with these 10 ideas to make extra money and get out of debt faster.

1. Pick up more hours

One of the simplest ways to get more money is to work more. If you have an hourly job, let your supervisor and co-workers know that you’re available to cover extra shifts. You can also volunteer to work overtime if there’s a need, such as if your team is currently understaffed or is particularly busy.

These extra hours can be a big help, and you’ll see the results fast — as soon as your next paycheck.

2. Take a second look at your pay stubs

It might be worth reviewing your pay stubs anyway, to see if you can increase your take-home pay with doing any extra work.

If you usually receive a big tax refund, for example, that could be a sign that you might be able to withhold fewer taxes and boost your take-home each pay period.

You can also revisit your pay benefits, and consider scaling back contributions to a retirement savings account or other benefits to pay off debt instead.

3. Get a second job

If you’re a salaried employee or can’t get extra hours at your day job, consider getting a second job to generate some additional income. Jobs based on tips, such as waiting, bartending or delivering food, can be particularly lucrative. Many retailers also hire seasonal workers to help out during their busiest times of the year.

Check around to see who’s hiring in your area and find opportunities to pick up some extra work — and earn some extra money.

4. Offer freelance or contract services

Skilled workers and professionals can often make even more in their off hours if they find a way to leverage their know-how to demand higher pay. If you earn more for every hour you work, that will generate even more money you can use to pay off debt.

As a freelancer or contractor, you can offer your services in anything from marketing and web development to performing home repairs or remodels. Figure out what you can do that would make you a valuable freelancer or contractor and line up clients (sites such as Upwork or Toptal can help). You can then can use your off-hours to make some serious extra cash.

5. Rent or sell your stuff

On top of trading your time to make money, consider the stuff you currently possess to generate some additional income. Looking for items to sell, such as clothing, electronics, appliance, furniture or other valuable items that you don’t need or use anymore.

You might also consider renting out your items or space:

  • Rent out your car through a car-sharing marketplace, like Turo or Getaround
  • Rent your parking space or driveway through SpotHero or Spot
  • Put a spare room or your home up for rent on Airbnb or VRBO

6. Sell your own goods

Borrowers with a creative streak might consider making things to sell. Think about things you like to make, and whether you could make a version of that that people would want to buy.

If you can paint or draw, for example, you could consider making commissioned family portraits. As a photographer, you can offer to do photo shoots or upload and sell your photos on stock sites, such as Foap. You can sell your own baked goods, handmade jewelry, hand-cut wooden cutting boards, or personalized leather wallets or billfolds.

Whatever you know how to make, start creating and offer your goods to people you know or consider listing them on sites like Etsy. Then you can turn around and use the proceeds to pay off debt.

7. Teach a skill to others

Another way to leverage your unique know-how to make money is to teach others through a course, class or one-on-one lesson. With just a few hours of teaching per week, you can generate a few hundred dollars per month to make extra debt payments.

If you can play a musical instrument or sing, for instance, you could teach private lessons. Exercise buffs could find work leading a fitness class or working as a personal trainer.

You can even share your skill set online. You might consider teaching English as a second language through QKids, or tutoring on a range of subjects through Brainfuse or Tutor.com. Or, you could create an online or video course and sell it on sites like Teachable or Udemy.

8. Make money with an app

Today’s gig and sharing economies rely on mobile apps to make it easier for enterprising smartphone owners to make money. You can make money with mobile apps such as TaskRabbit, which allows people to hire and pay you to complete small jobs or errands. GreenPal is an app to find jobs performing yard work and lawn care.

You can sign up as a driver and get paid for delivery food or groceries with DoorDash, Shipt or Instacart. And of course, there are ride-sharing apps, such as Lyft and Uber, that remain staples of side hustlers everywhere.

9. Provide care services

You can also provide care services to make some extra money to help pay off your debt. Sites like Sittercity, Care.com or UrbanSitter enable you to offer your services as a babysitter or child care provider. If you’re more of an animal lover, these sites also connect sitters with pet owners, or you can use an app such as Rover. You can also look for house sitting gigs on HouseSitter.com.

10. Start your own side business

Have the entrepreneurial bug? Starting a business as a side hustle is a smart way to ease into a company with fewer costs and risks.

Many of the ideas already listed could be a jumping-off point for starting a business. But don’t limit yourself. Think of several business ideas and test them on a small scale to see if they’re profitable. You’ll quickly see proof of concept and can narrow your business ideas down to one that’s profitable and viable.

You can work your regular job during the day, and build our own business during your off-hours. You’ll get a firsthand taste of what it’s like to be your own boss working on your own projects, all while making some extra money and getting out of debt.

Strategies to pay off debt with extra income

As you start experimenting with different ways to increase your income, you’ll have more firepower and funds to throw at your debt. By ignoring distractions and focusing, you can knock out your debts months or even years ahead of schedule. In the process, you could save big by lowering interest costs and avoiding them altogether.

How you use your extra money to pay off debt will matter, however. Here are some tips you can follow to maximize your new income.

Earmark extra money for debt. Make a commitment to yourself that all “extra” income you make from a second job or side hustle will be put toward paying off your debt — and follow through.

Keep spending under control. If you start earning more only to increase your spending, this will wipe out your extra efforts and keep you in debt. In addition to looking for ways to earn more, revisit your budget and look where you could cut back and change habits to spend less. This could help you free up even more funds that you can use to pay off debt even faster.

Make regular extra payments on your debt. In addition to making your monthly minimum payments, use your extra income to pay more on your debt. You can send extra payments in yourself, or make it even easier by setting up automatic payments through your bank.

Target high-interest debt first. Extra payments will go even further if they are targeted — meaning you pay the minimum on all debts but only pay extra toward a single balance at a time. If you want to get out of debt the fastest and save the most interest, look for debt with the highest interest rates. Paying expensive debts down first will save on interest, and keep your debt payments going toward the principal (what you owe) instead of interest.

Look into refinancing or consolidating debts. Another way to fight high-interest costs while simplifying debt is debt consolidation. If you have several credit cards with balances you’re trying to pay down, for example, you could use a debt consolidation loan to combine those into one debt. Even better, you can consolidate credit card debt with a personal loan, which will typically carry lower rates and could help you get out of debt faster.

To explore personal loan options for consolidation, consider using LendingTree’s personal loan tool. It can help you find lenders after you input basic personal information. Note that MagnifyMoney is owned by LendingTree.

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Take a look at other accounts, too, to see if you could save by refinancing student loans, auto loans or a mortgage.

As you work toward paying off debt, track your progress and celebrate your wins. This will keep you accountable and motivated.

It might take months or even years of hard work and side hustling to pay off debt. But if you follow smart strategies, earn extra income and stay focused, you’ll see results. In the meantime, you might also build additional income streams that you can continue to use to build lasting financial security and wealth, even after your debt is gone.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Elyssa Kirkham
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Debt Consolidation vs. Credit Counseling

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If you are looking for a solution to help you manage your money and ease any financial pressure you’re experiencing, you may be wondering which of the available debt relief options you should use.

Debt consolidation and credit counseling are two solutions available to consumers in need of help with managing their bills. Both of these paths can provide relief, but they do so in different ways.

In this article, we’ll review both options to give you an idea of how they work and which one may be best for you.

Debt consolidation vs. credit counseling

 Debt ConsolidationCredit Counseling

What is it?

A debt solution that replaces multiple existing loans and credit cards with one new debt.

The process of working one-on-one with a financial professional to address multiple areas of your finances.

What costs are involved?

The cost depends on the fees associated with the new loan or credit card. Costs can include an application fee, origination fee, balance transfer fee, or prepaid interest.

It depends on your situation and your ability to pay. In some cases, there is no charge. In others, there could be a monthly fee.

When should it be used?

To reduce the amount of interest paid and lower the total amount of your monthly payments.

If you are behind on your bills and need help managing your finances, or if you want a holistic look at your financial situation.

What are the credit requirements?

You will need to meet the credit requirements of the new loan. Generally, a higher credit score will yield a better interest rate and terms.

There are no credit requirements.

Can you keep your accounts open?

Yes.

Yes. (If counseling leads to entering a debt management plan, you typically would need to close or suspend your accounts.)

How long will it take?

The length of time it takes to pay off the new debt depends on the terms of the new loan or credit card, the amount consolidated, and the monthly payments.

Credit counseling could last several sessions based on your needs.

Will you have to pay taxes?

Generally, no. There may be some scenarios that could result in a tax liability, for example, if you use a 401(k) loan to consolidate and it is not paid back as agreed.

No.

Will it hurt your credit?

Your credit may take an initial hit when the new loan is processed, but as you make on-time payments and reduce the balance, you should see your score improve.

Seeing a counselor will not have a negative impact on your score. If the counseling leads to entering a debt management plan, your credit score may be affected.

What is debt consolidation?

Debt consolidation is when a consumer takes multiple debts and combines them by paying them off with one new loan or credit card, typically at a lower interest rate than the individual debts.

“It can be done a lot of different ways,” said Andrew Pizor, a staff attorney at the National Consumer Law Center. “Some people do [debt consolidation] with a mortgage, some people do it with an unsecured personal loan and some people do it through a credit card advance.”

Even though using your home to consolidate your debt is an option, Pizor said doing so is generally a bad idea because you’re taking unsecured debt and attaching it to an asset.

“If you don’t pay your credit card bill, the worse they can do is sue you,” he said. “But if you don’t pay your mortgage, they can take your house.”

One of the main reasons consumers consolidate their debts is to reduce the total amount of their monthly payments. But sometimes the monthly payment is lower because the term of the new loan is longer.

In that case, even if the interest rate is low, you could be paying more for the new debt in the long run. “[A lower monthly payment] can be important for an immediate need,” Pizor told MagnifyMoney. “But you really have to watch out for going from the frying pan to the fire.”

Consolidating debts can also streamline your finances and make things easier to manage since you will deal with fewer payments and fewer creditors. But Pizor said that alone should not be the primary reason to pursue debt consolidation.

Consumers who are considering debt consolidation should keep in mind that this strategy does not reduce the balances of your debt. It simply moves the debt to a new loan.

How does it work?

Consumers can use debt consolidation to pay off a variety of debts including:

  • Credit cards
  • Student loans
  • Unsecured personal loans
  • Business debt
  • Medical bills
  • Debts in collections
  • Taxes

There are multiple ways consumers can consolidate their debts:

  • Personal loan
  • Credit card balance transfer
  • Home equity loan
  • Home equity line of credit (HELOC)
  • Cash-out refinance on your mortgage
  • 401(k) loan

Who is it useful for?

Since one of the perks in consolidating debt is to reduce the amount of interest paid along with lowering the monthly payment, consumers who qualify for a low rate on the new loan or credit card stand to benefit the most from this strategy.

Also consumers who can manage their payments on their own and are confident they will pay the new loan on time are good candidates for debt consolidation. It is not a good strategy if you are likely to run into trouble with the new loan.

How much does it cost?

Depending on what is used to consolidate the existing debt, costs can include a balance transfer fee, an origination fee, points, or an annual fee among other costs.

You can explore options using LendingTree’s personal loan tool. You’ll input some personal information before potentially seeing loan offers. From there, you can weigh the cost of your options. (Note that MagnifyMoney is owned by LendingTree.)

How long does it last?

The amount of time it will take to pay off the newly consolidated debt depends on what method is used for consolidation, the total amount of debt, and the size of your payments.

Consumers who use a personal loan to consolidate debt can expect their consolidation to last the term of the loan unless they pay it down faster.

When should you use it?

Again, debt consolidation is not a good strategy for consumers who have trouble paying their bills. But it can be advantageous for those looking to lower their payments and reduce the amount of interest they are paying.

What to watch out for

Debt consolidation comes with some potential pitfalls. Consumers should beware the following:

  • Paying even more interest: If you take your no- or low-interest debts such as medical bills and consolidate them with your high-interest debts, you could potentially increase the total amount of interest you pay.
  • Swapping a low payment for an extended loan term: You could be getting a lower monthly payment only because the new loan comes with a longer term, which increases the total amount paid towards the debt.
  • Consolidating unsecured debt with secured debt: Again, if you pay off unsecured debt such as credit cards and medical bills with a home equity loan, HELOC or a cash-out refinance, you are putting your home at risk if up run into trouble paying the new loan.
  • Running up your balances again: It is not uncommon for consumers who consolidate their loans to go deeper into debt by running up their balances again.
  • Giving up your rights on federal debt: If you consolidate federal student loans, you will lose any protections and options associated with them.

What is credit counseling?

Credit counseling is the process of working one-on-one with a trained financial professional. Credit counselors can help consumers work through an immediate need or crisis or can provide a holistic look at their financial situation.

Credit counseling can offer guidance in the following areas:

  • Establishing a budget
  • Reviewing and understanding your credit report and credit scores
  • Developing a plan to pay past-due bills
  • Providing education and resources to help you manage your finances
  • Helping you enter a debt management plan

How does it work?

Consumers who are interested in credit counseling would schedule an initial session. At that meeting, a counselor will take a look at your finances and determine your next steps, whether it’s to have additional sessions or to provide you with other resources.

A counselor may also recommend you enter a debt management plan, which is a program managed by the counselor to help you get (and stay) current with your creditors.

Credit counseling is offered by a variety of sources ranging from agencies to individuals. A few options include:

Who is it useful for?

“Credit counseling can provide very useful advice,” Pizor said. ”If you’re having trouble managing your money and you’re getting behind, it’s definitely worth talking to a counselor.”

Since credit counseling addresses a variety of needs, it can be a useful solution not only for those who are behind on their bills and need help but for those who are looking for education and resources on how to manage their money better.

How much does it cost?

There may be a cost associated with your counseling depending on your situation. Nonprofit credit counseling agencies are usually required to offer assistance regardless of a consumer’s ability to pay.

If your credit counselor suggests you enter a debt management program, there typically is a monthly fee associated with it, ranging from $25 to $35 at NFCC-affiliated agencies.

How long does it last?

Credit counseling can take place over one or several meetings based on your needs and financial situation. You and your counselor will discuss how many sessions you will need to have. If you enter a debt management plan, the average length is four to five years.

When should you use it?

Credit counseling can be helpful in the following situations:

  • You are behind on your bills
  • You have poor credit as a result of mismanaging your money
  • You are overwhelmed by your financial situation
  • You want to learn how to manage your money better

What to watch out for

When considering working with a credit counselor, keep the following in mind:

  • Beware of disreputable companies: There are many trustworthy credit counseling agencies in both the for-profit and nonprofit sectors, but there also many that are not. Research any company you are considering working with thoroughly.
  • Make sure the counseling agency is not pointing you toward a particular service: Some businesses might try to refer you to their debt consolidation partners or to get you to sign up for their debt management plan.
  • High fees: Fees can differ from agency to agency, so be sure to compare costs.

Should you use a debt consolidation loan or credit counseling?

When considering which type of debt relief you should pursue, give some thought to your ultimate goals.

If you are looking for a one-time and immediate solution to paying your bills, debt consolidation may meet your needs. Keep in mind, though, that you will still be responsible for paying the new loan on time and consistently.

If you have multiple issues you want to address or are looking for long-term results and advice in managing your money, credit counseling is probably the solution for you. It can also help you work through an immediate crisis, but it is not an instant fix.

Pizor said it’s a good idea for consumers to consult a credit counselor even if they think they want to do debt consolidation or another type of debt relief.

If you decide you want to pursue one of these options, take the following steps.

Pursuing debt consolidation

  1. Research your options: Look into the multiple ways you can consolidate your debt. Review what products your current bank offers, and also look at credit unions, community banks and online lenders.
  2. Seek preapproval: Many lenders offer fast preapproval online.
  3. Compare loan terms and select your loan: Review the rates and fees of all the options you researched. When looking at loans side-by-side, examine the APR to get the most accurate comparison Choose the loan or credit card with the most favorable terms.

Pursuing credit counseling

  1. Research credit counselors: Pizor advised that consumers do their homework before deciding to work with a credit counseling agency. The U.S. Department of Justice also provides a list of approved credit counseling agencies.
  2. Ask questions: To determine a credit counseling agency with which to work, the Federal Trade Commission suggests consumers ask questions about how their program works.
  3. Consider the fees and other terms and choose a counselor: Compare the fees, as well as the terms of working with multiple credit counseling agencies, before moving forward with one.

Choosing your solution

Pizor stressed the importance of thoroughly assessing where you are and what your goals are before choosing any particular path. “Know your options and understand the situation before you give anyone any money,” he advised.

Regardless of the option you choose, remember that no debt relief solution will provide an instant or permanent fix. If you are attempting to solve or work through a crisis, make sure you take the precautions to avoid repeating the same mistakes in the future.

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What You Need to Know About the New Student Loan Servicing Plan

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More than 11% of America’s student loan payments are more than 90 days delinquent or, even worse, in default. But the Department of Education is hopeful its new student loan servicing system, slated to debut in 2019, will get federal loan borrowers back on track.

The platform, called Next Generation Financial Services Environment, or “NextGen” for short, aspires to be a one-stop shop for anyone with federal loans to manage.

In advance of NextGen’s arrival, here’s what’s new, plus how it could affect you.

How NextGen came to be

Secretary of Education Betsy DeVos created a stir in May 2017 when she announced an overhaul to the federal student loan system. At the time, DeVos proposed awarding a trillion dollars’ worth of federal loans, spanning 42.3 million customer accounts, to a single loan servicer — instead of keeping them spread out among the nine servicers, the contracts for which expire in 2019.

Reactions to the plan cited various pros and cons of a single-servicer platform, but there was pushback from critics who saw a potential monopoly forming, one that would be hard for the government to rein in, let alone serve borrowers best.

After hiring Dr. A. Wayne Johnson to lead the department’s Federal Student Aid (FSA) office, DeVos changed plans. In August 2017, the secretary announced a single online platform accessed by multiple servicers — NextGen.

The latest proposal kept DeVos’ initial promise of a simpler, more streamlined repayment experience for borrowers but balanced it with more competition among servicers.

What to expect from NextGen

If you’re a federal loan borrower, you’re probably familiar with StudentLoans.gov and the FSA’s main website, plus the sites of your loan servicers.

With NextGen, you’d only have one URL to bookmark. Even if you have a number of outstanding loans with varying servicers, you would manage every step of your repayment in one place, whether you want to adjust your repayment plan or consolidate your debt.

“It should be easier for borrowers to manage their student loans and to be placed into the most advantageous repayment programs,” said student loan lawyer Stanley Tate. “For instance, a public service employee should get bright, loud, ringing alarms that tell them some of their loans aren’t eligible for forgiveness.”

One complication is that NextGen will feature two sets of user experiences: one for older federal student loan types (such as now-defunct Perkins loans) and another experience for newer loans.

Still, housing all servicers in one place is bound to be a boon for borrowers with multiple accounts. You’d no longer have to track down the customer service phone number for each of your loans or keep track of sending payments to different places.

How NextGen will keep loan servicers in check

Of course, it’ll be a monumental task to upload about 42 million borrowers’ worth of loan information to NextGen. That would fulfill the FSA’s promise of achieving a “single data processing platform” that not only serves borrowers but also delivers excellent data about how they’re being served.

Via the Consolidated Appropriations Act of 2018, Congress mandated the education department use “common metrics” to judge the performance of servicers before deciding to award them federal borrowers’ accounts.

Once it’s live, NextGen could take that to the next level.

“There is a lot more latitude for Federal Student Aid to measure servicers against one another, because they will have more data available to them on how servicers interact with borrowers than they currently do,” said Colleen Campbell, who wrote a detailed report on NextGen’s development for the Center for American Progress (CAP).

As Campbell noted, however, the education department’s latest solicitation for servicers doesn’t include information on how they would be held in check.

“There has historically been such poor oversight of servicers and other Federal Student Aid contractors that I think it’s difficult to have faith that the organization will do what’s best for borrowers rather than what’s most cost-efficient,” Campbell said.

Navient might not be a match for NextGen

If you peruse the list of companies contending for government contracts to build NextGen, you might notice some familiar names, including Nelnet and the Missouri Higher Education Loan Authority (MOHELA). You’ll also see technology companies without a background in student loans — IBM Corporation is the most recognizable — as the education department looks to build the back end of its new servicing platform.

However, Navient — currently one of the country’s largest loan servicers — is notably absent. It remains involved, however, as a subcontractor teamed with other servicers.

The company itself is a frequent target of lawsuits, and announced in November that it was taking the Trump administration to court over the education department’s handling of servicer contracts, as first reported by Politico. Navient alleges the department broke federal procurement rules during its search for NextGen contractors and put it at a “competitive disadvantage,” according to the lawsuit.

According to government data, Navient has been one of the most complained-about student loan servicers in recent years. NextGen on the other hand, if it lives up to its promise, could offer improved customer service, easier loan management and a clearer path to being debt-free.

“Navient has such a history of poor past performance, it would be difficult to imagine them making it into the new system if there is any integrity in the selection process,” Campbell said. “Their suit strikes me as another blow to that relationship.”

If you have student loans serviced by Navient, you may or may not be happy to learn that either way, it won’t be operating on its own in the future. When the time comes, you’ll need to lean on NextGen instead.

This article was originally published on Student Loan Hero, which like MagnifyMoney, is owned by LendingTree.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
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Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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Reviews

Tally App Review

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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It’s no secret many Americans have credit card debt. The Federal Reserve reported that as of August 2018, Americans carry a total of $1.04 trillion in revolving credit card balances.

Tally, an automated debt manager, aims to make it easier for those with credit card debt to pay down their debt faster and save money while doing it. The fintech company behind the Tally app, Tally Technologies, was founded by serial entrepreneurs Jason Brown and Jasper Platz.

“We created Tally to help people overcome credit card debt and the anxiety that comes with it,” Brown told MagnifyMoney.

What is Tally?

In simplest terms, Tally is an automated debt manager. With the aid of algorithms, automation and a line of credit, Tally says it helps consumers pay down their credit card debt faster, reduces the costs related to carrying credit card debt and minimizes the emotional stress of debt management.

The free Tally app launched in 2017 for iOS devices. The company released a free app for Android devices in September 2018.

How does Tally work?

Tally acts as the middleman between you and your creditors. You make one payment to Tally each month and Tally uses that money along with your Tally line of credit to make payments on your credit cards at least two days prior the due dates. Tally prioritizes paying off your most expensive debts — the highest balances with the highest interest rates — to save you money in interest payments along the way.

You Pay vs. Tally Pays

For each of your credit cards, you have the option to decide if you want Tally to pay the bill on your behalf using your Tally credit line (Tally Pays) or if you would like to manage the credit card payments on your own (You Pay).

If you elect Tally Pays, then Tally will pay your cards using the Tally credit line.

Cards with rates higher than the rate on your Tally credit line: Tally will pay as much as possible toward the balance with your Tally credit line, so you can repay Tally at a lower interest rate.

Cards with rates lower than the rate on your Tally credit line: Tally will make only the minimum payments.

Tally will then send you one bill. It first uses your payment to cover the minimum payments (minimum payments are not added to your credit line balance), and your remaining payment goes toward paying the principal and interest on the line of credit. Tally does not compound interest. You must pay at least the minimum payment on your Tally line of credit, but you can pay more if you wish. Tally told MagnifyMoney its average customer pays 2.5 times the minimum each month. Tally charges a minimum payment equal to the greater of $25 or at least 1% of the total balance on your credit line each month.

Tally does not charge a fee if you go over the Tally credit line limit. You won’t be charged, for example, if your minimum payments send you over the Tally line of credit limit.

With You Pay, using Tally gets a bit more complicated. Tally reminds people using You Pay to pay their credit cards a few business days before the bills become due. You have the option to pay through the Tally app using funds in a linked checking account or pay directly on the creditor’s website. If you use the Tally app to make the payment(s), Tally will show an estimated date of payment arrival.

If you use the creditor’s website, Tally recommends making the payment at least seven business days ahead of the due date to avoid double payments with late payment protection. Tally’s system needs the time to register that you made a payment. If the system can’t detect you made a payment close to the due date — even if your card is set to You Pay — Tally will still make a payment if you have late free protection enabled. For that reason, the company recommends those who pay through a creditor’s website disable its late fee protection to avoid double payments.

Eligibility

While anyone across the U.S. can download the app, as of this writing Tally is only licensed to serve consumers in 16 states: California, Texas, Florida, New York, Illinois, Ohio, Michigan, New Jersey, Washington, Massachusetts, Wisconsin, Colorado, Louisiana Minnesota, Utah and Arkansas. If you don’t live in one of those states, you can sign up to be notified once Tally is available in your state.

You must be 18 years or older to use Tally’s services, and as of this writing, only those approved for a line of credit are eligible to use Tally. Tally requires a minimum 660 credit score and conducts a soft pull to determine eligibility, so your credit score isn’t harmed if you apply.

Tally’s service is two-part: Tally Advisor and a personal line of credit. (Again, you can only use Tally Advisor if you qualify for the line of credit.)

Tally Advisor

  • Analyzes your debt
  • Tells you which cards to prioritize
  • Encourages you to pay down your debt faster

Tally Advisor is the app’s automated debt management feature. It analyzes your credit card balances, spending habits and goal debt-free date to recommend a monthly payment amount. Tally Advisor also shows you how much faster you can get out of debt by paying more each month.

Image via Tally

Line of credit

  • Personal line of credit for consolidating debt
  • Pays your cards with the highest APRs first

Tally issues a line of credit it will use to help you save money on high-interest credit card debt. Tally charges a variable interest rate between 7.99% and 19.99% APR on the line of credit. Your credit limit and APR on a Tally credit line will be determined by the information obtained using a soft credit pull and other factors, like your card balances, interest rates on your credit cards and spending habits. Tally reevaluates your profile every six months and may offer you a higher line of credit or a lower interest rate.

If you elect Tally Pays, the line of credit automatically consolidates high-interest credit card debt at a lower rate. Tally monitors your card balances, interest rates and due dates, so you don’t have to keep track of which cards it’s consolidating. Considering the average credit card charges 16.5% APR, it’s likely you would save money using Tally’s line of credit.

Tally will automatically use the credit line to pay your credit card balances with APRs higher than the line of credit’s APR, and then you will pay down the line of credit. Once space is freed up on the line of credit, Tally will use it to pay debt from the card with the next highest APR and so on, as long as it saves you money in future interest payments.

For the cards with interest rates below the rate charged on your Tally credit line, Tally will only make minimum payments. Tally says it does not use the line of credit to make minimum payments; rather, it plays middleman by repaying your credit card issuers using the payment you make to Tally.

Cost

  • The Tally app is free to download.
  • Tally doesn’t charge any fees to use the app or any maintenance fees associated with the personal line of credit.
  • You pay interest on the line of credit used to consolidate debts, which is how Tally makes its money.

Is Tally secure? Tally transmits all information through secure SSL encryption and does not store any bank usernames or passwords. In addition, Tally does not store sensitive information on your phone.

Our thoughts on Tally

What we like about Tally

The automated debt avalanche

Tally follows the debt avalanche method. It prioritizes and pays off your credit card debts in order of interest rate, from highest rate to lowest rate, ensuring you pay off debts in the order that saves you the most money.

A credit line using a soft pull

Tally uses a soft credit pull to determine your eligibility for a line of credit. The number of credit inquiries, or hard pulls, on your credit report comprises 10% of your FICO credit score, and having several hard inquiries for new credit can damage your credit score. Since a soft credit pull isn’t factored into credit scoring formulas, applying for a Tally line of credit won’t damage your credit score.

Late fee protection

Tally provides late fee protection. It promises never to miss or make a late payment, as it pays your cards at least two days before the due date. Tally also promises to refund late fees if it makes a mistake.

Improve your credit score

Tally told MagnifyMoney that the majority of its users see an increase in their credit scores after signing up.

The app’s services focus on both ensuring on-time payments and paying down credit card balances, targeting the two factors that make up 65% of your FICO credit score: payment history and credit utilization. Payment history determines 35% of your FICO score, while credit utilization — the amount of credit you use out of your total amount of credit available across all your revolving lines of credit — makes up another 30%.

No fees

Tally does not charge any fees for its services. There is no origination fee on the line of credit and it does not charge a late fee if you miss a payment or make a late payment. Although you wouldn’t pay a fee, Tally does report payments to the credit bureaus.

Willing to work with you

If you miss a payment with Tally, the company’s customer success team will reach out and try to work with you to customize a payment plan, Brown told MagnifyMoney.

“As long as they will collaborate with us we will come up with a plan to work with their situation,” said Brown. However, he added that if someone isn’t willing to communicate or collaborate and refuses to pay, Tally will be forced to turn the account over to collections.

After a user misses two payments and they are unresponsive, Tally begins the collections process.

No compound interest

Most credit cards accrue and compound interest daily. The Tally line of credit accrues interest daily but does not add it to your principal balance.

What’s not so great about Tally

It’s complicated

If Tally approves you for a line of credit large enough to cover all your credit card debt and at a rate that’s lower than all your credit card rates, it’s easy to understand how Tally saves you money — it’s simple debt consolidation.

It gets confusing if your Tally line of credit can’t cover all your debt. The idea with Tally is you don’t have to worry about it — Tally automates the debt-payoff process to save you money — but the bite-by-bite debt consolidation by way of a middleman is difficult to envision. It also makes it difficult to know how much debt you have, because until it’s all consolidated, you’ll continue to get bills from multiple creditors. You have to remember that Tally will distribute all your payments appropriately.

It’s particularly complicated if any of your credit cards have a lower APR than your Tally line of credit, because you will hit a point at which you’re merely using Tally as a payment intermediary. When that happens, you’re likely better off setting up automatic payments with your credit card issuer.

Limited availability

Tally is currently only available to residents of the following 16 states: California, Texas, Florida, New York, Illinois, Ohio, Michigan, New Jersey, Washington, Massachusetts, Wisconsin, Colorado, Minnesota, Utah, Louisiana and Arkansas.

Brown tells MagnifyMoney the company aims to be available in all 50 states by the end of 2018. He adds the states where Tally is already licensed to operate are home to nearly 60% of the American population.

Not for subprime borrowers

As of this writing, those who fall below the minimum required 660 FICO credit score cannot use Tally. While the average FICO score may be 700, about a third of U.S. consumers have scores that fall below 660 and would not be able to take advantage of any of Tally’s features.

Avalanche isn’t for everybody

The debt avalanche method helps people save the most money in the long run, but not everyone finds this approach motivating. Even though it doesn’t save as much money, the debt snowball method (paying off small debts quickly) gives some people the momentum they need to get out of debt.

Doesn’t discourage spending

As Tally consolidates your high-interest credit card debt with the personal line of credit, it frees up space on your credit card. Seeing your credit card bill go down — even though the debt has merely moved to a different creditor — may tempt you to keep spending. And because Tally may not pay off all your credit card balances immediately, it can be hard to tell how much debt you have and how much you’re adding to it by continuing to use your credit cards.

Not the best rates

The high end of Tally’s rate range on its personal line of credit (19.99%) is higher than the average APR on credit cards. The low end of the range (7.99%) is competitive, but borrowers may be able to qualify for a better, fixed rate with a personal loan.

Maxed out line of credit

Even though Tally doesn’t perform a hard inquiry on your credit report in the approval process, using Tally can still affect your credit. The company reports your line of credit activity to the credit bureaus. Because using Tally may not consolidate all your debts immediately, you will have more revolving accounts with outstanding balances, which can hurt your credit score. And because the credit line is designed to consolidate as much of your credit card debt as possible, you will have a maxed-out revolving credit line on your credit report (also not great).

Who Tally is best for

Tally’s services may be appealing to those who have been unsuccessfully trying to dig out of credit card debt, carry a balance most months and find it difficult to manage multiple credit card payments.

For those struggling to get out of debt, Tally comes up with a strategy and takes action automatically. The app sorts and pays off your eligible credit cards in an efficient way. All you need to do at that point is make one payment to Tally each month and avoid putting more debt on the credit cards.

How to sign up for Tally

To sign up for Tally, you must first download the app. You create an account in the app by entering your:

  • first and last name
  • email address
  • password
  • mailing address

Tally then asks about your credit rating. You can choose from four options:

  • excellent
  • good
  • fair
  • rebuilding

Then, Tally asks you to scan in your card information, which you can do using the camera on your mobile device.

Note: Tally currently does not support some retail store cards and the camera has some difficulty scanning the card if the numbers are on the back.

In the event you have trouble scanning the card, you can manually enter the card’s number.After scanning the cards, you must link the accounts by entering your login information for each creditor.

Then it’s time to see if you qualify for a Tally line of credit. You must be at least 18 years old and have either a Social Security number or an equivalent ID number. Enter your date of birth, phone number and income, then agree to a soft credit pull to see if Tally approves you for a line of credit.

If you do not qualify: You can ask to be notified when Tally expands to cover users who are not approved for a line of credit. You can also choose to close your account at this point, given you can’t use any of Tally’s features if you’re not approved for a credit line.

The bottom line

If you want to better manage your debt, Tally’s features may help you learn to be a better credit card user. However, if your goals are to save the most money on your debt payoff and simplify your repayment, a personal loan may be worth considering as an alternative to Tally. Here are a few reasons why:

  • If you have the required minimum 660 FICO score to qualify for line of credit with Tally, you may also qualify for a personal loan.
  • You could use the personal loan to consolidate your credit card debt right away instead of in chunks, like with Tally.
  • Consolidating all of your debt right away at a lower rate could save you money as your debt is immediately removed from your high interest credit card(s).
  • A personal loan generally carries a fixed interest rate as opposed to Tally’s variable interest rate, so you will have the same payment each month. This isn’t guaranteed with Tally.
  • A personal loan has a fixed repayment term, so you know the exact date you’ll be done with your debt, which may help to motivate your payoff.

Additionally, a personal loan may carry a lower rate than the Tally line of credit, so it’s worth shopping and comparing your terms with multiple lenders before you decide. In either case, you have to be serious about getting out of debt, or else you run the risk of racking up more debt if you use up the newly available credit on the consolidated cards.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Mortgage

After a Hurricane: A Guide to Homeowners Insurance, Disaster Relief and More

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Hurricane Florence aftermath
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Recovering from a major hurricane can be overwhelming. Many families facing large out-of-pocket storm costs may wonder what the first steps are to begin rebuilding.

To help you get started, we’ve rounded up advice for how to proceed, sort out which insurance will — or won’t —cover and tap financial resources available to the underinsured.

Step 1: Figure out your coverage

The first thing you should do is print out a complete copy of the most recent insurance policies you have on your home, said Amy Bach, co-founder and executive director of United Policyholders, a national insurance consumer advocacy organization.

Many homeowners make the mistake of calling the insurance company and getting things started before they know what kind of coverage they have, Bach said. Many adjusters are overworked, especially right after a natural disaster. “They have lots of clients and sometimes they try to take shortcuts to tell you what coverage you have,” Bach said. “Sometimes they may be right, but they may be wrong.”

She added: “You have the biggest stake in getting the most money out of your insurance so it’s up to you to do your homework.”

You can contact the insurance company directly and ask them to email you a complete copy of your policy. If you worked with an agent, you can try contacting them directly for a copy, too. If you can’t remember who your insurer is or how to get in touch with them, Bach recommends you contact your state’s insurance department for help.

The declaration page

Once you have a copy of the policy in hand, focus on the declaration page, a summary of the policy and how much coverage you have available.

Coverage is usually split into four main buckets:

  • Dwelling: Covers the home itself.
  • Contents (personal property insurance): Covers the items you own inside the home.
  • Other structures: Covers items that are not part of the dwelling but on the property such as detached garages, driveways, fences, sheds and pools.
  • Loss of use: Coverage for any expense you have to incur because you cannot live in your home.

You may or may not have each type of coverage and the extent to which you’re covered will depend on your policy. It may also include personal liability protection and coverage for guest medical payments (when someone else gets hurt at your home).

Flood insurance vs. homeowners insurance

Standard homeowners and renters insurance policies do not cover damage from storm surges and other flooding. That requires separate policies, typically purchased from the U.S. government.

But they should cover damage from, say, a neighbor’s tree that fell on your house and left a hole in the roof where water came through. Questions about claims can generally be answered by your state’s insurance department.

Flood insurance

Homes financed with a federally-insured mortgage in a high-risk flood area, also called a special flood hazard area (SFHA), are required to buy flood insurance from the National Flood Insurance Program, run by the Federal Emergency Management Agency (FEMA), or as a separate policy through a private insurer. SFHAs are areas that have a minimum 1% chance of flooding in any given year. These are also known as 100-year flood plains.

If you live in a moderate- to low-risk area or don’t have a federally-backed mortgage, purchasing flood insurance is optional. However, a lender can also require you to purchase flood insurance, even if you live in a moderate- to low-risk area.

National Flood Insurance Program provides up to $250,000 of coverage for the structure of a single-family home and up to another $100,000 for personal possessions. Alternatively, or in addition to NFIP flood insurance, you can purchase “first dollar” or primary flood insurance policy from a private insurer.

According to federal data, the average paid loss to NFIP policyholders after the four most-recent major hurricanes in 2016 and 2017 were:

  • $55,978 to 581 policyholders after Hurricane Maria in September 2017
  • $115,430 to 75,865 policyholders for Hurricane Harvey in September 2017
  • $47,202 to 21,824 policyholders for Hurricane Irma in September 2017, and
  • $39,249 to 16,547 policyholders for Hurricane Matthew in October 2016

Issues with flood insurance

“The problem with flood insurance is that it does have some very nit-picking requirements,” Bach told MagnifyMoney. Sometimes, companies will say they’ll only pay for items that physically came into contact with water.

That means flood insurance often won’t pay for a damaged foundation or water that ran up a wall, Bach said. Or, it may only provide coverage that can seem partial to homeowners. For example, the coverage may replace the lower cabinets in your kitchen, but they may not match the cabinets that weren’t affected by the flooding.

Problems meeting code. Flood insurance also may not cover code upgrades. If your home was built in the 1960s, for example, and had an old electrical system, the insurance company usually won’t pay to upgrade it, but the county may not allow you to put back old wiring either.

In those cases, Bach said to “go back to the policy and say ‘I cannot replace unless I comply.’” The insurer may require you to provide documentation from the local government as proof. And sometimes, flood insurance policies only cover code upgrades if the damage done to the system is 50% or more.

Finally, Bach tells MagnifyMoney that flood insurance generally does not cover the costs of living elsewhere while your home is repaired. In those cases, your homeowners insurance policy may cover your displacement costs.

Wind. Wind must be insured separately and sometimes this coverage is available only from a state-run insurer of last resort.

What if I don’t have flood insurance?

Excluded from homeowners insurance coverage is flooding caused by rising water, which Bach said is going to be most people’s problem. But, the United Policyholders executive director added: “A little argument goes a long way.”

Homeowners whose insurance does not cover hurricane-related expenses may qualify for disaster aid or low-interest loans, which we’ll cover below.

Step 2: Document the damage

Do the best you can to document all of the damage using pictures and videos. Do this before you start cleaning up or making repairs.

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Step 3: Prevent further damage

Do what you can, within reason and with consideration of your health and safety, to prevent further damage to your home. At this point, you may want to reach out to the insurer and begin the claim process. If your policy covers the cost, the insurer can send someone to help drain the water, patch up holes and dry out your home.

“You want to try to get that done as quickly as possible so that you don’t have a mold problem,” Bach said.
If the insurer cannot get out to your area quickly or your coverage does not cover temporary repairs and drying out, then you may elect to do what you can on your own or hire a professional in your area.

Either way, take care to keep swatches of carpeting, wallpaper, furniture upholstery and window treatments — things that may impact the amount payable on the claim. Try to avoid tossing out damaged items until you file a claim, and the insurance adjuster pays a visit to your home (described below). You can learn more about proper flood cleanup in this federal Homeowner’s and Renter’s Guide to Mold Cleanup After Disasters.

“If you can afford it, you should hire somebody and get them to do it as soon as you can,” Bach said. “But don’t hire the first person you can, because disasters do bring out scam artists.

If FEMA or state emergency services are in your area, they may be able to assist you with drying out your home. And, if there is a local assistance center set up near you, you can go there for help and information. Find a disaster recovery center near you here.

Step 4: File a claim with your insurance company

If you didn’t notify your insurance company before you started cleaning, you should contact them to file a claim as soon as possible. The insurance company should send you claim forms to fill out and you should try to return them as soon as possible to avoid delay in service.

The insurer should then arrange for an insurance adjuster to come out and assess the damage to the property. The adjuster will inspect the property to estimate how much the insurance company will pay for the loss. They will likely interview you, too.

Be prepared to show the adjuster any structural damage and compile a list of damages so the visit is efficient and you don’t forget anything. If you have receipts for any of the damaged items you should present copies to the adjuster. Be sure to ask any questions you may have about your policy and the coverage it may provide.

Finally, if you had to relocate and your policy covers loss of use, keep those receipts and record all additional expenses you had to take on as part of your temporary relocation since you will need to provide proof of those costs.

Step 5: File for federal disaster assistance

If your home is in a presidentially declared disaster area, you can apply for FEMA individual disaster assistance. If you do not have internet access, you can call 800-621-3362.

Disaster aid may cover:

  • Temporary housing
  • Lodging reimbursement
  • Home repairs
  • Home replacement
  • Permanent or semi-permanent housing construction
  • Child care expenses
  • Medical and dental expenses
  • Funeral and burial expenses
  • Essential household items, clothing, tools required for your job and necessary educational materials
  • Heating fuel
  • Cleanup items
  • Damage to an essential vehicle
  • Moving and storage expenses

However, FEMA disaster grants are generally small — see the following chart for average amounts from recent storms. The organization emphasizes that these figures are from only one program, and housing grant money is intended to help survivors get a roof over their heads and not to rebuild a home to its pre-disaster condition. FEMA encourages homeowners to consider the federal grant program as a last resort after insurance and federal loan programs, and not to factor federal grant assistance into disaster preparedness planning.

Below is a breakdown of the average grant payout for recent disasters from the Individuals and Households Program, one the of several disaster assistance programs FEMA offers.

DisasterAverage IHP award

Hurricane Sandy (2012)

$7,950.17

Hurricane Matthew (2016)

$3,409.11

Hurricane Harvey (2017)

$4,365.75

Hurricane Irma (2017)

$1,354.72

Hurricane Maria (2017)

$2,666.10

Hurricane Florence (2018)

$3,653.18*

Hurricane Michael (2018)

$3,836.98*

*As of Nov. 15, 2018

You can find information about other kinds of individual assistance FEMA provides like disaster unemployment assistance and crisis counseling in this factsheet.

FEMA may require you to provide evidence that your insurance company declined your loss claim and will not cover your disaster-caused loss. When you apply for disaster assistance, you’ll need to provide identifying information like your Social Security number and a current mailing address.

Delays with disaster assistance

It’s important to remember some FEMA funds are funneled through the state government, so depending on how your state allocates its resources, your reimbursement or assistance may take months.

According to a FEMA spokesperson, those still waiting on aid from a previous disaster may qualify for FEMA assistance.

Where else can you turn for help?

Loans are now increasingly needed to help people get back on their feet after a storm. “Insurance does fall short a lot more than you would expect,” said Bach, who has been working in insurance consumer advocacy for 26 years.

Below are a few loan options you can turn to for help.

Government assistance programs

The U.S. government provides the following programs that may assist eligible borrowers who need assistance with home repair, replacement, restoration or improvement financing.

Homeowners with an existing mortgage may also find relief with their loan servicer — many lenders will temporarily reduce or suspend payments in a process called forbearance. The Mortgage Bankers Association says one of your first calls following a hurricane should be to your mortgage servicer. The Consumer Financial Protection Bureau provides information on this and other financial problems following a natural disaster here.

SBA disaster loans

The U.S. Small Business Administration provides financial assistance not only to business owners, but also to homeowners and renters in federally declared disaster areas. These low-interest loans may cover up to $200,000 to repair or replace the primary residence to its pre-disaster condition. Collateral is required to secure loans over $25,000. Secondary homes and vacation properties are not eligible for an SBA home disaster loan. Homeowners may also borrow up to an additional $40,000 with a property disaster loan to replace damaged personal property.

For some homeowners, the SBA may be able to refinance all or part of an existing mortgage up to $200,000 if they:

  1. Don’t have credit available anywhere else.
  2. Suffered a substantial amount of disaster damage that isn’t covered by insurance.
  3. Intend to repair the damage.

If you are already paying back an SBA disaster loan from a previous storm, you can still take out another as long as your home was in a declared disaster area and you are current on all of your payments.

FHA 203(h) mortgage

The Federal Housing Administration’s 203(h) loans are government-insured mortgages that may be used to purchase, improve, remodel or rebuild a home. To be eligible, the borrower must reside in a federally designated disaster area and the home must be damaged or destroyed to an extent that requires reconstruction or replacement.

One of the biggest benefits of a 203(h) mortgage is that it does not require a down payment. However, borrowers must pay closing costs and mortgage insurance, which is collected as one upfront charge at the time of purchase and monthly premiums tacked onto the regular mortgage payment. FHA mortgage limits apply and can be found here.

Other types of government loans

SBA disaster loans and the 203(h) mortgage are programs specially designed for disaster victims, but there are other government programs — available to anyone — to help homeowners who want to make repairs.

FHA 203(k) loans

The Federal Housing Administration’s 203(k) program is designed to fund a home renovation. Homeowners can use this loan to refinance their current mortgage to pay for repairs. The minimum credit score to qualify is relatively low, but there are several requirements you will have to meet, including working with an FHA-approved lender and possibly a 203(k) consultant. Read more about the different types of 203(k) loans here.

You can use the Section 203(k) rehabilitation mortgage program along with the HUD Title I Property Improvement Loan program, described here by LendingTree, MagnifyMoney’s parent company.

USDA Home Repair program

The Department of Agriculture offers the Section 504 Home Repair program for low-income homeowners. The program provides loans to repair, improve or modernize homes. It also provides loans or grants to low-income elderly homeowners to remove health and safety hazards.

The USDA offers repair loans up to $20,000 and grants up to $7,500. You can combine a loan and grant to borrow a total of up to $27,500. The property must be in an eligible area. To learn more about the home repair program, you can contact a USDA home loan specialist in your area. You can check income eligibility here.

VA rehab loans

The Department of Veterans Affairs in April 2018 updated its alteration and repair purchase and refinance loan program. The VA allows eligible borrowers to refinance a mortgage based on what the appraised value of the property would be after renovations, up to $227,500. The borrower can also finance closing costs. You can apply for a VA loan through a VA-approved lender.

Fannie Mae HomeStyle® Renovation mortgage

Fannie Mae offers a HomeStyle Renovation mortgage that can help finance home repairs. Homeowners could, for example, refinance the costs into an existing mortgage. Borrowers can finance up to 75% of the appraised value of the property after the renovations are completed. Read more about the HomeStyle program here.

Nonprofit and charitable aid

You may be able to get assistance from national and local nonprofit organizations or charitable institutions. Such groups include the American Red Cross,Habitat for Humanity,Mennonite Disaster Service and the Saint Bernard Project.

Beyond meeting hurricane victims’ immediate needs, these organizations and others may help rebuild homes in your area, so it may be worth reaching out to a local charity regarding grants and other services.

Habitat for Humanity helps low-income survivors rebuild or repair their home if they meet Habitat’s requirements. Contact your local Habitat for Humanity office.

Other financing options

If you have a good credit score and the project’s costs are relatively low (between a few hundred and a few thousand dollars), you may want to consider taking out a personal loan or using a credit card to finance repairs. Bach told MagnifyMoney you might also elect to do this if you don’t have cash on hand to cover temporary living, cleanup and minor repairs that may be later reimbursed by insurance.

Personal loans

Personal loans typically have fixed rates and terms. You can usually borrow anywhere from $1,000 to $35,000 at rates between 6% and 36% APR. There are a few pros and cons with personal loans:

Pros

  • Unsecured: This means you won’t risk losing an asset if you are unable to repay a personal loan.
  • Fast turnaround: You can generally apply for a personal loan in minutes online and, if you qualify, you may receive the lump-sum amount in your bank account as soon as 24 hours.

Cons

  • Credit requirements: Borrowers generally must have a good credit score and a low debt-to-income ratio to qualify. Borrowers with the highest credit scores and lowest debt ratios generally receive the best terms.
  • Fees: You may be charged a loan origination fee or a prepayment penalty.

To get the best offer available to you, compare loan terms and rates at LendingTree.

Credit cards

If you plan to use a credit card for storm-related expenses, one idea is to apply for a new credit card with a 0% APR introductory offer on all purchases. Note that if you’re still carrying a balance once the promotion ends, the new interest rate on the card will apply to whatever balance is left. Some lenders may charge deferred interest, meaning they may charge interest on everything you’ve charged during the promotional period.

Credit cards charge an average APR around 15%, but there are cards with lower (and higher) rates. Generally, lenders offer the lowest interest rates to borrowers with the highest credit scores.

Credit cards typically charge a variable rate and it may change based on your daily balance, so the minimum amount you are required to pay back each month may fluctuate.

When to consider bankruptcy

A homeowner may consider bankruptcy if the cost of repairs exceeds the value of the property, said John C. Colwell, a bankruptcy attorney and president of the National Association of Consumer Bankruptcy Attorneys. He compared it to a vehicle that’s been totaled in a car accident.

But first, Colwell said, homeowners should check for any state protection that may make bankruptcy unnecessary.

California law, for example, protects homeowners after a foreclosure. If a $600,0000 house with a $400,0000 mortgage burns down in a fire, the homeowner can walk away and let the bank foreclose on the home. If the bank forecloses for $300,000, the original homeowner does not owe $100,000 to the bank to satisfy the mortgage. While the homeowner must face the consequences of a foreclosure, they would not need to file for bankruptcy.

But in most other states, the mortgage company has the legal right to try and sue the homeowner to collect the remaining balance on the mortgage. In those cases, it may be appropriate for a homeowner to file for bankruptcy, Colwell said.

Final thoughts

If you were affected by a major hurricane or other natural disasters, help is available. Sources of financial assistance range from your own insurance policies to government assistance and loans, to charitable organizations, to simply borrowing from a private lender. Rebuilding may be costly and seem overwhelming, so look to resources like United Policyholders and the Insurance Information Institute, or your state’s emergency management office.

We also have a supplemental guide for homeowners affected by Hurricane Florence.

If you need advice when deciding between options, consult a fee-only financial professional who has experience working with homeowners following a disaster.

If you are considering bankruptcy, it’s recommended you speak with a bankruptcy lawyer about the options available to you and any protections provided by your state.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Do I Spend More Than I Earn Each Month?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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It can be difficult to know if you’re spending more than you earn each month if you’re not necessarily falling behind on any bills or financial responsibilities. But if you’re not tracking your spending, you may not be aware if you’re digging yourself into debt. In fact, 42% of Americans use credit cards to fill in the occasional shortfall in their budget, according to a survey from CompareCards. (Disclosure: LendingTree is the parent company of both CompareCards and MagnifyMoney.)

Knowing if you are spending more than you earn each month requires paying attention to your money and doing some simple math. Here’s how to do it — and figure out if you need to make adjustments to your budget and spending habits.

Getting started: Track your spending

First, you need to figure out where your money has been going.

“Actually getting the data to visualize your finances can be one of the most powerful exercises you can do to begin your journey of cash flow management,” said Dan Andrews, CFP at Well Rounded Success based in Fort Collins, Colo.

But, before you can even do that, you need to decide which tracking method you want to use. There are several strategies for figuring out what you spend your money on, and we’ve listed a few of the most popular ways to track your spending below.

The automated option: Budgeting apps

Budgeting apps make tracking your spending easy because — depending on which app you use — the app may do most of the work for you. Most budgeting apps like Mint, YNAB or EveryDollar link directly to your bank accounts, credit cards and retirement accounts. After you’ve linked all of your accounts, the app will automatically pull in and categorize your transactions.

“The apps are fantastic because they generally pull in 3 months of information, and 3 months of data is generally good to see spending habits,” says Krista Cavalieri, senior adviser at Evolve Capital Financial Planning based in Columbus, Ohio.

Once the app does its job, all you need to do is check in regularly to correct any mistakes in categorizing or add in any cash expenses, if the app allows. The apps generally learn to categorize things properly after you correct them. Budgeting apps also generally allow you to visualize your spending in charts and graphs.

Understandably, budgeting apps aren’t for everybody. If you’re in that camp, you could try tracking all of your spending manually using a spreadsheet or spending journal.

Spreadsheets

In a spreadsheet, you can simply record what you spent money on and how much you spent. If you want, you can use formulas to make the process easier and to automatically calculate sums, percentages and other parts of your spending habits you’re curious about. Several budgeting templates exist within spreadsheet programs and online to help you get started.

A written spending journal

You can also try keeping a digital or physical spending journal. Every time you spend money, record it by hand in a pocket journal or in a notes application on your phone. At the end of each day or week you can spend time reviewing, categorizing and adding up what you’ve spent.

Check-ins

Check in on your spending challenge regularly to get an idea of where your money went and make adjustments accordingly. For example, it may take 10 to 30 minutes to do a weekly review, so pick a recurring day and time when you know you’ll be free for about half an hour. If you notice during your period check-ins that you are overspending, make some changes then and there to correct yourself, suggested Cavalieri.

Choose the budgeting and check-in method that’s the easiest for you to manage so you can see exactly where your money is going, said Cavalieri. She recommends tracking your expenses for three months to get a good sense of your spending, but recording all your transactions for 30 days will give you a sense of how your regular expenses stack up against your monthly income. A 30-day spending challenge using one of the tracking tactics above will give you the figures you need to answer the question, “Do I spend more than I earn?”

Understand the jargon

Before calculating whether or not you’re spending more than you earn each month, you’ll need to understand the components of the equation.

  • Income — Any and all sources of after-tax income coming into your budget. Examples of income would be:
    • Salary or hourly wages
    • Tips
    • Commission
    • Income from a side gig
    • Social Security or disability income
    • Cash windfalls like a tax refund or gifted money
    • Child support or alimony
    • Any other source of money coming to you
  • Necessary expenses — Necessary expenses are the basics required in your household budget to keep you functioning and gainfully employed. Fixed expenses are non-negotiables like:
    • Rent or mortgage to keep a roof over your head
    • Groceries to cook food at home
    • Transportation
      • For example, your car payment, if having a vehicle is necessary to get yourself and members of your household to their obligations, plus fuel and required maintenance for that vehicle
      • Public transit fare
    • Insurance
    • Health care expenses
    • Child care expenses
    • Utilities necessary to live or communicate like electricity, gas, water, internet and phone bills
    • Any debts owed to the government like child support or alimony payments, tax payments and federal student loan debt. (Exclude credit card debt or collection items, as you will deal with that debt separately.)

When you are tallying up your expenses, take care to account for any recurring quarterly, semiannual or annual payments, too, so they don’t catch you off guard, Andrews said. Those may be things like your vehicle registration or tax payments. You may need to plan to save for those month to month so you will have the money on hand when it comes time to make the payment.

  • Everything else — Everything else, sometimes called flexible expenses, is just what it means: Every other thing in your budget that is — technically — optional spending. This would include things like:
    • Debts
    • Buying lunch or dining out
    • Shopping
    • Subscription payments
    • Vacations
    • Any other line items that don’t fall into the “needs” category in your budget

Now that you understand the important parts of the equation, it’s time to crunch some numbers and get to the answer you’ve been waiting for:

Do the math

    • Step 1 – Income: The question you want to answer is: How much do I make, after taxes, each month? Be sure to include all consistent income streams and any additional windfalls you are expecting during the time period. Write down that number.
    • Step 2 – Necessary expenses: Write down and add up every expense you have that’s vital to meet your basic needs. (To account for fixed annual, semiannual or quarterly payments, figure out how much you’d need to set aside each month to cover that payment when it’s due.)
    • Step 3 — Subtract necessary expenses: Now, subtract your necessary expenses from your income. The equation (so far) should look like:

Income – Necessary Expenses = Amount you have left for flexible expenses.

For example, if your salary (income) is $4,000 a month after taxes, you receive a $1,000 monthly child support payment and your necessary expenses total $3,500, then $5,000-$3,500 = $1,500 left over for flexible spending.

If the number you get is negative, that means your necessary expenses total more than your income and that’s not-so-good news.

“If we are not even making this much per month then we really need to take a look at our life and say what’s our living status,” said Colin Overweg, CFP at Advize Wealth Management based in Grand Rapids, Mich. Look to see if you can increase your income or decrease your expenses. You may be able to pick up a side hustle to increase income or ask for a promotion at work that comes with a raise.

If you realize you can’t cover your fixed expenses, take a look at your standard of living to see where you can cut back, Overweg advised. Consider the following options among other fixed expenses:

      • Can you downsize your home?
      • Can you switch to a car that won’t cost you as much to own and maintain?
      • Can you trim your phone bill by switching plans or carriers?
      • Are you spending too much money on groceries?
      • Can you lower your insurance premiums somehow?
      • Can you negotiate some of your bills down?
    • Step 4 – Subtract everything else:

This is where the math can sometimes get a little messy.

Cavalieri said the hardest part about budgeting is figuring out where the expendable income in your budget is going, because all of those little expenses here and there add up. Before you know it, the money’s gone and you may feel like you have no idea what you spent it on. But if you’ve been diligently tracking your spending, as described in the first section of this guide, this part gets a lot easier. It’s important to record our “everything else” expenses so you know you can cover your spending and not reach for that credit card.

Speaking of credit cards, this is the time to address your debt obligations and factor in the minimum payments you are responsible for paying each month in to your budget. Here’s the equation:

For “everything “else,” you may be able to insert the number you got from your 30-day spending challenge.

Ideally, the number you get in the end will be equal to or larger than zero. If it’s negative, you are definitely spending more than you earn each month.

What to do if you spend more than you earn

If you are spending more than you earn, you are likely carrying a credit card balance each month, and it’s growing. You need to trim back your spending, or else you will continue to dig yourself into debt.

“Understand the needs versus wants expenses, and cut out as many “wants” as possible to either get out of debt, or start having your expenses be less than your income,” Andrews said. “You might have to get uncomfortable for a short-term period to get on track.”

He recommended you start saying “no” to a lot of things to start the trim. “No to expensive vacations, no to expensive bars no to expensive gadgets is a start,” said Andrews.

You can try a spending freeze or other challenge aimed at cutting back your unnecessary expenses. A spending freeze challenges you to not buy anything that’s not a necessary expense for a period of time. You can do a less-inclusive version of a spending freeze and limit yourself to not spending any money at your favorite retailer, or commit to making coffee at home or in the office instead of visiting a coffee shop.

Challenge yourself to adjust your spending

Now that you know where your money is going, you may realize you need to reroute it. There are several tactics you can use to change the way you spend. In addition to using one of the tracking methods mentioned earlier (an app, spreadsheet or spending journal), try one of these exercises:

Ask, “Why?”

Look at what you spent money on and think about why you made that purchase.

“It does benefit a person to bring awareness to spending habits by understanding the psychology of impulse buying,” said Andrews.

Or, you could take a different approach: Before looking at the numbers, guess how much you’ve spent.

“Track what you think you are spending versus what you are actually spending, and check in with yourself at least once a week to see how it’s going,” Cavalieri suggested. The exercise could serve as a much-needed reality check before your spending gets out of control.

Money mantra

Andrews suggested that those who are prone to making impulsive purchases try using a money mantra — a short phrase that can help you ground yourself at the checkout line. For example, you could make it a habit to ask yourself, “Do I really need this?” before you swipe your card.

An accountability partner

Try asking a friend or professional financial planner to join you in tracking your spending habits. Andrews said this tactic may work best for people who are looking for a different perspective on their habits and don’t have an emotional connection to the way the person is spending money. He suggested that those who need a professional choose a fee-only, fiduciary, certified financial planner.

30-day cash diet with a spending journal

Try using cash instead of a debit or credit card for a while. The cash will be a physical reminder of your budget. Take out exactly what you need for a certain spending category, and you’ll be forced to spend within that limit.

What to do if you spend less than you earn but are in debt

If you have room in your budget after accounting for all of your expenses but have debt, you should plan to aggressively address your debt with the money you have left over.

Two common methods used to get out of debt are the debt snowball and debt avalanche. The method you choose will depend on your personality type and what will best motivate you to kill off your debts. Click here to view our Snowball vs. Avalanche calculator.

The debt snowball orders your debts from lowest balance to highest. You will then throw all of the money you can at the debt with the lowest balance first and keep making minimum payments on all of the other debts. The snowball method may help those who will feel more motivated by quickly paying off smaller debts before tackling the larger ones.

The debt avalanche works by listing and paying off your debts in order of highest to lowest interest rate. This method saves borrowers the most money in future interest payments, but may not be the most motivational if the debt with the highest interest rate is also a large debt that will take the a long time to eliminate.

Debt consolidation is another option. Consolidating debt into a personal loan is a good way to save money from eliminating high-interest rates. You can read more about it here.

What to do if you spend less than you earn and are not in debt

If you realize you have wiggle room in your budget and don’t have any debt, the experts suggest you funnel your extra funds into savings and investments.

This is the time to think of your future goals. Are you planning to buy a home? Do you want to start a college savings fund for your child? Would you like to travel or go on vacation soon?

The money left over in your budget can be put toward these savings goals. In addition, you could simply put even more money away for your nest egg. If you are behind in saving for retirement, Overweg suggested you send any leftover income into tax-advantaged retirement plans.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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