loans http://www.wisebread.com/taxonomy/term/1008/all en-US Why You Shouldn't Panic If Your Credit Score Drops http://www.wisebread.com/why-you-shouldnt-panic-if-your-credit-score-drops <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-you-shouldnt-panic-if-your-credit-score-drops" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_shocked_bills_183361464.jpg" alt="Woman learning not to panic after a credit score drop" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Credit scores matter &mdash; in a big way. Mortgage lenders rely on these numbers to determine who qualifies for home loans and at what interest rates. You'll struggle to <a href="http://www.wisebread.com/5-best-credit-cards-for-people-with-excellent-credit?ref=internal">qualify for the best credit cards</a> if your score is too low. And getting an auto loan? A low score will leave you again with higher interest rates, if you can find financing at all.</p> <p>So what if your credit score takes a fall? First, don't panic. Second, it's time to take the steps necessary to <a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps?ref=internal">boost your score</a>.</p> <h2>How Scores Work</h2> <p>Before panicking over a credit score drop, it's important to learn how scores work.</p> <p>The most important credit score is your FICO credit score. Generally, lenders consider a FICO score of 740 or more to be in the top range. But if your score is under 640, you'll struggle to qualify for mortgage or auto loans. And when you do qualify, you'll pay high interest rates because lenders view you as a risky borrower.</p> <p>Your credit score is a quick representation of how well you've handled your credit in the past. If you have a history of mailing in credit card payments late, your score will fall. If you've missed payments on your auto loan in the recent past, your score will, again, take a tumble. A large amount of credit card debt could hurt your score, too. (See also: <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=seealso">The Most Important Ratio That Determines Your Credit Score</a>)</p> <p>If you instead have a history of paying your bills on time and have a manageable amount of credit card debt, you should have a solid FICO credit score.</p> <h2>Checking Your Score</h2> <p>You can order one free copy of each of your three credit reports &mdash; maintained by the national credit bureaus of TransUnion, Experian, and Equifax &mdash; each year from AnnualCreditReport.com. This report will list your credit card, auto, mortgage, and other open accounts. It will also list any of your missed or late payments from the last seven years.</p> <p>This is important information to have: It can tell you quickly why your credit score might be lower than you thought. A single missed or late payment can drop your credit score by more than 100 points.</p> <p>But a credit report doesn't list your credit score. To get your score, you'll usually have to pay. You can spend about $15 to order your FICO credit score from Experian, Equifax, or TransUnion. Each of the scores from these credit bureaus might be slightly different, but they should all be fairly similar.</p> <p>Your credit card provider might <a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores?ref=internal">provide your credit score</a> with each bill it sends you, too. A growing number of card providers are doing this. Be careful, though: This score might not be your official FICO score, but instead an alternative score. These alternative scores do generally sync up with what your actual FICO score might be, but it's best to order your FICO score if you want to see the same credit score that mortgage and auto lenders will see.</p> <h2>If Your Score Has Dropped</h2> <p>What if your score has taken a fall since the last time you reviewed it? What if it's much lower than you expected?</p> <p>Again, this is not the time to panic. It's the time to act.</p> <p>First, try to determine <a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score?ref=internal">why your score might have fallen</a>. Some reasons are obvious: If you forgot to pay your auto loan earlier this year or if you sent in a credit card payment more than 30 days late, your score could dip by 100 points or more. But smaller dips &mdash; ranging from 10 to 60 points or so &mdash; can be the result of less obvious financial missteps.</p> <p>Did you close a credit card lately? You might think that's a smart financial move. After all, once you've paid off a credit card account, you don't want to run up its balance again. By closing it, that can't happen.</p> <p>But closing a credit card can ruin something called your <em>credit utilization ratio</em>. This ratio measures how much of your available credit you are using at any one time. Using too much of your available credit can cause your FICO score to fall. Closing an open credit card account can immediately weaken this ratio. (See also: <a href="http://www.wisebread.com/5-times-its-okay-to-close-a-credit-card?ref=seealso">5 Times It's Okay to Close a Credit Card</a>)</p> <p>Here's an example: Say you have three credit cards all with an available credit limit of $3,000. This gives you a total available credit of $9,000. Say you also have $3,000 worth of credit card debt. You are now using 33% of your available credit.</p> <p>If you close one of those cards, you'll immediately lower the amount of credit available to you by $3,000, from $9,000 to $6,000. If you have the same $3,000 of credit card debt, you are now using 50% of your available credit, for a significantly higher credit utilization ratio.</p> <p>Another reason for a sudden fall in your FICO credit score: Have you been applying for several new credit cards? If you are, your score can fall. Every time you apply for a new form of credit, something called an <em>inquiry </em>is filed on your credit report. Each inquiry can cause your credit score to fall by a small amount, maybe one to five points. If you make several inquiries for new credit at the same time, this can cause a bigger drop to your score.</p> <p>The good news is that inquiries don't always hurt your score by much. Say you are ready to apply for a mortgage loan and you are shopping around with different mortgage lenders. Each of these lenders will run a credit check on you. Each of the inquiries that these lenders make, though, will be counted as just one total inquiry. That's because you are applying for one mortgage loan, not several new credit cards.</p> <h2>Fixing a Drop</h2> <p>Once you determine why your credit score has fallen, it's time to fix the problem.</p> <p>Realize, though, that if your score has fallen significantly from a missed or late payment, it will take time to recover. Pay your bills on time and cut back on your credit card debt. Do this for a long enough period of time &mdash; several months, maybe a year or longer &mdash; and your FICO credit score will steadily improve. (See also: <a href="http://www.wisebread.com/7-ways-to-increase-your-credit-score-quickly?ref=seealso">How to Improve Your Credit Score Quickly</a>)</p> <p>If your score has fallen by a smaller amount, say 10 to 50 points, your recovery period will be shorter. Often, these drops will fix themselves. Pay down a good chunk of your credit card debt &mdash; without closing any credit card accounts &mdash; and your score should improve. Keep paying your bills on time every month, and, again, your score will rise.</p> <p>There are no quick fixes for drops in your credit score. But there are also no scores that can't be rebuilt. All it requires is patience, a willingness to <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=internal">pay down large amounts of credit card debt</a> and a vow to pay all of your bills on time every month.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/why-you-shouldnt-panic-if-your-credit-score-drops">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same">Here&#039;s Why Credit Scores and Reports Are Not the Same</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you">5 Surprising Ways Revolving Debt Helps You</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world">Your Bad Credit Isn&#039;t the End of the World</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you">15 Surprising Ways Bad Credit Can Hurt You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance credit history credit score FICO score interest rates loans qualifying Thu, 15 Dec 2016 10:00:09 +0000 Dan Rafter 1852821 at http://www.wisebread.com Earn More Interest by Reducing Savings Friction http://www.wisebread.com/earn-more-interest-by-reducing-savings-friction <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/earn-more-interest-by-reducing-savings-friction" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_shopping_phone_513937132.jpg" alt="Woman earning more interest by reducing savings friction" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Friction is the small resistance that stands between you and a transaction. Think of the way your favorite e-tailers remember your credit card information, saving you the hassle of having to get up, find your wallet, and type in your information. Those e-tailers are reducing the friction of your purchase, making it that much more likely for you to buy.</p> <h2>Transaction Costs</h2> <p>We've talked before about how friction is another term for <a href="http://www.wisebread.com/save-more-and-spend-less-by-increasing-your-mental-transaction-costs">mental transaction costs</a>. These are the nonfinancial costs associated with making a purchase or transferring money to a savings account. There are several types of transaction costs that increase friction, but the two that are most likely to affect your ability to save money and control your spending are time costs, and search and information costs.</p> <h3>Time Costs</h3> <p>Any time you have abandoned a purchase in the store because the checkout line was too long and you were unwilling to wait for the slow-as-molasses staff to help you, then you have felt the impact of <em>time costs</em>. Time costs can keep you from saving money because you are unwilling to put in the time to manually transfer the funds.</p> <h3>Search and Information Costs</h3> <p><em>Search and information costs</em>are the work you do to figure out the best course of action for your money. If you have to think about what kind of savings product to use or how much money to transfer to savings, then you are less likely to actually save the money.</p> <p>Friction can help or hurt your bottom line, depending on what type of transaction is affected by it. In general, you want to reduce the friction you feel when you save money, and increase the friction you feel when you spend it. Read on to find ways to use friction to your advantage to increase your savings and reduce your spending.</p> <h2>1. Automate Your Savings</h2> <p>The ultimate way to reduce friction when you save money is to make it automatic. Setting up an automatic transfer from your paycheck into your savings account means that you don't have to think about putting the money aside, find the time to set up the transfer, or agonize about the amount to save. It's a seamless transfer of your money to savings.</p> <h2>2. Move Your Savings Account to Another Bank</h2> <p>For some savers, putting money aside is no problem. The issue is that it's far too easy to access that money. Increase the friction involved in accessing the money in your savings account by opening an account with another bank &mdash; preferably one with no branches near you. Generally, it will take a couple of days for a fund transfer between banks, whereas a transfer within a bank is instantaneous. The time cost of waiting for your savings to transfer from the inconveniently located bank to your checking account will be enough friction to keep you from raiding your savings.</p> <h2>3. Have Your Paycheck Deposited Into Your Savings Account</h2> <p>Many prolific savers put their pay directly into their savings account and then transfer the amount they need for monthly bills into checking. This harnesses both the reduction in savings friction, and the increase in spending friction. Since the money is already deposited into your savings account, there is no friction on that portion of the transaction. Placing the friction on the transfer-to-checking side of the equation allows you to keep more money in savings and lessen the chances that you will spend your money mindlessly.</p> <h2>4. Use an Automatic Savings App to Round Up Your Purchases</h2> <p>Starting with Bank of America's Keep the Change program, which launched back in 2005, technology has been working hard to remove the friction from your savings habit by making it automatic. There are now a slew of different automatic savings apps that do everything from rounding up your purchases and placing the excess into savings (Bank of America's <a href="https://www.bankofamerica.com/deposits/manage/keep-the-change.go">Keep the Change</a> and <a href="https://www.acorns.com/">Acorns</a>), to analyzing your cash flow to determine an amount that's safe to transfer to savings (<a href="https://digit.co/">Digit</a>), to letting you know the amount of money that is still safe to spend in your account (<a href="https://www.getpennies.com/">Pennies</a> and <a href="https://www.levelmoney.com/">Level</a>).</p> <h2>5. Bill Yourself for Savings</h2> <p>If you already have a solid bill-paying routine in place, add one more obligation to your list: yourself. Making &quot;savings&quot; a bill can actually reduce your savings friction because you will complete the action while you are already paying all your other bills. Set up a bill reminder to transfer money to savings on the same day you pay your other regular bills. It will be surprisingly easy to pay yourself if you treat it like a bill.</p> <h2>6. Continue Making Payments on Your Paid Off Loans</h2> <p>Once you have finally sent your lender the last payment for your car loan, your student loan, or your credit card balance, it may be tempting to just enjoy the extra money each month. But a savvier plan would be to continue paying that amount to yourself. As you come to the end of your loan, set up an automatic transfer of the payment amount into your savings account on the same day of the month you paid your loan. That will reduce the friction of saving the amount, because you will not even notice a difference in your monthly spending.</p> <h2>Harnessing Friction for the Win</h2> <p>It is truly amazing how unmotivated we all can be in the face of transaction friction. Increasing your savings and reducing your spending is just a matter of strategically tweaking the friction you will feel when you save or spend money.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/earn-more-interest-by-reducing-savings-friction">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-need-to-make-financial-habits-not-goals">Why You Need to Make Financial Habits, Not Goals</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-one-thing-that-will-help-you-actually-save-money">The One Thing That Will Help You Actually Save Money</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-deals-to-look-for-at-pawn-shops-thrift-shops-and-other-weird-stores">The Deals to Look for at Pawn Shops, Thrift Shops, and Other Weird Stores</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-manage-your-money-no-budgeting-required">How to Manage Your Money — No Budgeting Required</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-apps-that-make-budgeting-fun-no-really">7 Apps That Make Budgeting Fun — No Really!</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living apps automating savings friction loans saving money search and information costs time costs Mon, 28 Nov 2016 11:00:09 +0000 Emily Guy Birken 1839211 at http://www.wisebread.com How to Manage Your Money During a Spousal Separation http://www.wisebread.com/how-to-manage-your-money-during-a-spousal-separation <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-manage-your-money-during-a-spousal-separation" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/rope_cash_stretched_23510828.jpg" alt="Learning how to manage your money during a spousal separation" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When your marriage isn't working out, a separation might be in order. While you might not be certain whether you'll reconcile or move forward with a divorce, there is still an important matter that needs to be addressed together &mdash; your finances.</p> <p>Dealing with finances in a separation can be messy and lead to a lot of arguments. Use these tips to help you and your spouse manage your money during a difficult time.</p> <h2>1. Don't Be Afraid to Get Help</h2> <p>If you and your spouse cannot sit down and talk about your finances without raising your voice, then seek help. A marriage counselor can help you hear each other out and keep the room calm.</p> <p>Talking with a family law attorney can help you understand how costly a divorce can be and give you both a better idea of where you would be financially if you made your split official.</p> <p>Finally, a financial adviser can provide insight on the ramifications of separation and divorce. The goal is to leave both of you in a stable financial situation if you do make your split final. Look for a financial adviser that has some experience dealing with separation or divorce cases. (See also: <a href="http://www.wisebread.com/5-money-moves-to-make-the-moment-you-decide-to-get-divorced?ref=seealso">5 Money Moves to Make the Moment You Decide to Get Divorced</a>)</p> <h2>2. Establish a New Budget</h2> <p>It is important to establish a new budget together. For couples without children, this should be relatively easy. You should each be responsible for half of all shared bills, and agree to take care of your own food and shopping needs.</p> <p>When children are involved or when one spouse does not earn income, then establishing a new budget can be tricky. You have to both admit that you cannot enjoy the same luxuries during this time of separation. Basic bills need to be paid, and of course, all of your children's needs should be met.</p> <h2>3. Aim for Financial Independence</h2> <p>Close as many accounts possible that contain both of your names. If you pay off and cancel credit cards in both of your names, it can protect you from taking on further debt if you move forward with divorce.</p> <p>Having separate checking accounts can also make life easier. If both of you earn a paycheck, set up direct deposit into each of your own accounts.</p> <h2>4. Deal With Mutual Debt</h2> <p>If you decide to move forward with a divorce, know that your debt might be split down the middle along with your assets. Any debt, including student loan debt that was taken on after saying &quot;I do,&quot; is considered mutual property. This means you can get stuck paying off debt that your spouse essentially racked up.</p> <p>While you are still together, make it a goal to tackle your debt. Agree on an amount that each of you should pay toward the debt each month. If money is tight, try putting saving goals on hold for a few months.</p> <p>If managing mutual debt payments is becoming a hard task for you, both of you can apply for a free or low-fee <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal">balance transfer card</a> to split up the debt in your own name. You can do this with a personal loan, as well. The point is to split the debt and put it in each of your names so that you can eventually close out accounts that are in your shared name. This can prevent your spouse overusing a credit card for revenge purchases.</p> <h2>5. What About the House?</h2> <p>If your house is too expensive for either of you to keep separately, then you need to consider selling it. Taking your home into a divorce can be messy and complicated. A divorce can also put a tight deadline on both of you to sell your home, causing you to get less than the full value for it.</p> <p>If you cannot sell your home for the value of the property, try renting it out to pay the mortgage payments. This can take a huge burden off your shared financial situation and you can wait to sell at a better time. If you end up staying together, your home is still there for you to live in.</p> <p>If you both want to live in the house while separated, then you need to know your state's laws. When you file for a divorce, you will need to establish a point of separation. Some states count that point as when one spouse announces they want to pursue divorce, while other states require proof of living separately. (See also: <a href="http://www.wisebread.com/heres-what-happens-to-a-mortgage-in-a-divorce?ref=seealso">Here's What Happens to a Mortgage in a Divorce</a>)</p> <p>Nothing about separation or divorce is ever simple. Every couple's situation will be different based on finances and personalities. Dealing with a hard spouse is not easy, but going through a divorce isn't always the quick fix that it appears to be, either.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/how-to-manage-your-money-during-a-spousal-separation">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/does-divorce-affect-your-student-loans">Does Divorce Affect Your Student Loans?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-things-i-learned-about-money-after-getting-married">8 Things I Learned About Money After Getting Married</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-money-moves-to-make-the-moment-you-decide-to-get-divorced">5 Money Moves to Make the Moment You Decide to Get Divorced</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/reach-your-money-goals-faster-with-a-simple-naming-trick">Reach Your Money Goals Faster With a Simple Naming Trick</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-simple-guide-to-planning-for-a-loved-ones-long-term-care">A Simple Guide to Planning For a Loved One&#039;s Long-Term Care</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Family advisers budgeting counselors debt divided assets divorce financial help loans marriage separation Fri, 11 Nov 2016 10:00:08 +0000 Ashley Eneriz 1830852 at http://www.wisebread.com Does Divorce Affect Your Student Loans? http://www.wisebread.com/does-divorce-affect-your-student-loans <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/does-divorce-affect-your-student-loans" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/broken_heart_cash_25865628.jpg" alt="Learning if divorce affects your student loans" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Going through a divorce can get messy, especially when there are a lot of assets to divide and financial matters to take care of. Even worse, couples often forget that debts &mdash; and not just assets &mdash; must often be split. And student loan debt can be especially hairy. Understanding the ramifications of divorce on student debt is essential to negotiating a mutually beneficial split. (See also: <a href="http://www.wisebread.com/heres-what-happens-to-a-mortgage-in-a-divorce?ref=seealso">Here's What Happens to a Mortgage in a Divorce</a>)</p> <h2>When Did You Take on the Debt?</h2> <p>If you took on your student loan before marriage, then the debt is considered separate property, and you are solely responsible for it. Similarly, you won't be held responsible for any debt taken out by your spouse before marriage.</p> <p>However, if you or your spouse took on student <a href="https://www.nolo.com/legal-encyclopedia/debt-marriage-owe-spouse-debts-29572.html">loan debt while married</a>, then the debt is considered your shared property. As a matter of fact, any debt taken on in a marriage is considered shared property, including the following:</p> <ul> <li>Mortgages</li> <li>Car loans</li> <li>Personal loans</li> <li>Sometimes business loans</li> <li>Credit card debt</li> </ul> <h2>It All Depends on Your State's Laws</h2> <p>Many states are <a href="https://en.wikipedia.org/wiki/Community_property">community property states</a>, which means everything is split down the middle. If you live in a community property state, the student loan debt (along with all other debt) will be split 50-50. Even if one party will suffer financial hardships from the split debt, the court will still hold them liable for half of it.</p> <p>Of course, it is the court's discretion how they split marital property, and each state has unique rules in place. In <a href="https://www.legalzoom.com/knowledge/divorce/topic/equitable-distribution-community-property">equitable distribution states</a>, such as New York, each divorce is weighed differently. According to The Wall Street Journal, &quot;If it seems like one spouse will have high income after a divorce and another will struggle to make debt payments, the higher earner may end up having to fork over some <a href="http://www.wsj.com/articles/SB10001424052702304626804579363253873904162">temporary spousal support</a> to cover the ex's debt payments.&quot;</p> <h2>Consolidated Student Loans</h2> <p>Before 2006, married couples were able to consolidate their loans. Many couples did this to get a lower interest rate and save money &mdash; but for couples that did this, they had to permanently attach themselves to the loan.</p> <p>Unfortunately, if one party does not pay their assigned portion of their loan, the other party will still be held fully responsible. Married couples can no longer consolidate their student loans, so if you were married after 2006, then this does not apply to you.</p> <h2>How to Avoid Problems Before Marriage</h2> <p>No couple wants to think about divorce before they get married, but if student loan debt is worrisome to you, there are a few things you can do before tying the knot. First, it is important that both you and your potential spouse know how much debt you each have. Everything should be laid out on the table. Secondly, to protect yourself, sign a prenuptial agreement that states how debt is supposed to be split in the case of a divorce. (See also: <a href="http://www.wisebread.com/could-a-divorce-improve-your-finances?ref=seealso">Could a Divorce Improve Your Finances?</a>)</p> <h2>So How Much Student Loan Debt Will I Be Responsible for After Divorce?</h2> <p>When it comes to figuring out how much student loan debt you will be responsible for after a divorce, it all depends on your case and the state you live in. It is important for you and your spouse to know <a href="http://www.wisebread.com/life-after-bankruptcy-whats-next">the financial weight of your divorce</a> before committing to one fully. Talk with a divorce attorney to find out more information that relates to your specific case.</p> <p>If the court does hold you responsible for your spouse's student loan debt after divorce, then it is important to pay it. If you don't, you will be held liable, your wages could be garnished, and your credit score can suffer.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/does-divorce-affect-your-student-loans">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-manage-your-money-during-a-spousal-separation">How to Manage Your Money During a Spousal Separation</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-every-parent-should-know-about-the-new-college-financial-aid-rules">What Every Parent Should Know About the New College Financial Aid Rules</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-make-the-most-of-your-student-loan-grace-period">4 Ways to Make the Most of Your Student Loan Grace Period</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/could-a-divorce-improve-your-finances">Could a Divorce Improve Your Finances?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-pay-off-your-student-debt-faster">5 Ways to Pay Off Your Student Debt Faster</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training consolidation court divorce loans marriage state laws student debts Tue, 08 Nov 2016 10:00:15 +0000 Ashley Eneriz 1827231 at http://www.wisebread.com 3 Sources of Fast Cash Besides Your 401K http://www.wisebread.com/3-sources-of-fast-cash-besides-your-401k <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-sources-of-fast-cash-besides-your-401k" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/handling_cash_780905671.jpg" alt="Finding sources of fast cash outside of 401K" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're in the middle of a remodeling project, and due to unforeseen circumstances, your money runs out early. You can't live with a half-completed kitchen, but you can't pay for it to be finished right now. And while you have plenty of equity in your home and a healthy retirement account, there's nothing in the bank.</p> <p>Once you've decided to take out a loan, what is the best source of funds? Are 401K loans or borrowing against home equity ever a good idea?</p> <p>&quot;The best option is of course is your parents,&quot; says financial planner Bob Goldman. But if you can't tap the bank of mom and dad for an interest-free loan, your other best options are probably a cash-out refinance, a secondary mortgage, a home equity line of credit, or a 401K loan. Deciding which one to use requires some number crunching and a hard look at your personal situation, including your job security, your repayment timeline, and your will power.</p> <h2>Cash-Out Refinance</h2> <p>Mortgage interest rates are at historic lows, making now a good time to think about refinancing. When you refinance your home, you are replacing your current loan with a brand-new one, preferably at a better interest rate. Depending on how much equity you have in your home, you may have the option of borrowing cash at the time of the refinance &mdash; so that once all the paperwork is done, you'll have a lump sum in your bank account, which you will pay back as part of your regular mortgage payments.</p> <h2>Cash-Out Refinance Pros</h2> <p>A cash-out refinance has a lot going for it.</p> <h3>1. Low Rate</h3> <p>A mortgage often offers the lowest interest rate you can get, outside of promotional offers. And because rates are near historic lows, a lot of people feel that locking in a low rate now for a long loan term is a good call.</p> <h3>2. Low Payments</h3> <p>Because the payback period will be long &mdash; generally 30 years &mdash; a cash-out refi can ease the month-to-month strain of repayment, especially if you are able to lower the interest rate. If you are paying, say, 5% interest on your mortgage and you are able to refinance to 3.77%, you could add $50,000 to your loan principal while only adding about $100 a month to your payment.</p> <h3>3. No Surprises</h3> <p>As long as you take out a fixed-rate mortgage, you know what your payment will be for the life of the loan.</p> <h3>4. Tax Benefit</h3> <p>The interest you pay on your refinanced mortgage will be tax deductible. According to this <a href="http://www.calcxml.com/do/hom09">mortgage tax savings calculator</a>, if you add $50,000 to a $200,000 mortgage, you could save about $10,000 in taxes over the life of the loan, more or less depending on your tax bracket and the interest rate.</p> <h2>Cash-Out Refinance Cons</h2> <p>As great as a cash-out refinance is, it's not free money.</p> <h3>1. Risk</h3> <p>Your home is on the line. For most people, your house is your biggest asset, and putting it even at slight risk isn't a decision to take lightly. Far too many homeowners ended up losing their homes during the financial crisis when they overborrowed against their homes' value.</p> <h3>2. Fees</h3> <p>You have to pay closing costs, which average about $1,800 on a $200,000 loan.</p> <h3>3. Qualifying</h3> <p>You need good credit, especially for the best rates.</p> <h3>4. Starting Over</h3> <p>One thing people often overlook when refinancing, Goldman says, is that taking out a new 30-year loan pushes out the date when you'll be done paying off your mortgage. &quot;You reset the clock on your mortgage,&quot; Goldman says. &quot;You're back to Day One, where you're paying mostly interest.&quot;</p> <h2>What's the Total Cost of a Cash-Out Refinance?</h2> <p>Getting $50,000 this way would cost a typical borrower about $30,000 in interest and fees over the course of 30 years at current interest rates. I calculated this using a mortgage calculator to compare the lifetime cost of borrowing $200,000 versus $250,000, keeping in mind that getting cash out usually increases your interest rate by about ⅛ percent. I added $2,000 in closing costs and subtracted $10,000 in tax savings.</p> <h2>Home Equity Loan</h2> <p>A home-equity loan is so much like a mortgage that it's also known as a &quot;second mortgage.&quot; The only difference between this and a cash-out refinance is that instead of replacing your original mortgage with a new one, you're adding a second loan also using your home as collateral. But everything else &mdash; the fact that you're taking a fixed amount of money, usually at a set rate, and paying it back over time &mdash; remains the same.</p> <h2>Home Equity Loan Pros</h2> <p>A second mortgage is a lot like a cash out refi, but with some wrinkles.</p> <h3>1. Simplicity</h3> <p>If you have a great mortgage rate on your home and don't want to change it, this is a way to borrow money while leaving your original mortgage untouched.</p> <h3>2. Shorter Time</h3> <p>If you have a 30-year mortgage but only want to borrow money for five to 15 years, you can do that with a home-equity loan.</p> <h3>3. Tax Benefit</h3> <p>Like a regular mortgage, your interest is usually tax deductible.</p> <h2>Home Equity Loan Cons</h2> <p>You'll need to be sure you understand the downsides of this kind of loan.</p> <h3>1. Interest Rate</h3> <p>Data from Bankrate shows home equity loans averaging at least a percentage point higher than mortgage rates.</p> <h3>2. Qualifying</h3> <p>You need good credit, especially for the best rates.</p> <h2>What's the Total Cost of a home-equity loan?</h2> <p>About $11,000 in interest and fees to borrow $50,000 for 10 years.</p> <p>If you borrow $50,000 for 10 years through a second mortgage, you would pay about $13,000 interest over the life of the loan. Closing costs would be similar to a mortgage refinance, about $2,000. During that time, the mortgage interest deduction could save you about $4,000 in taxes.</p> <h2>Home Equity Line of Credit</h2> <p>Like a home-equity loan, a Home Equity Line of Credit (HELOC) is a secondary loan that piggybacks on your original loan. As with both types of loans discussed above, your home is still the collateral. The big difference is that while you can get cash out of a first or second mortgage only once, a HELOC is a revolving credit line, meaning that you don't need to know upfront exactly how much you'll need over the life of the loan. You can borrow $10,000 this month for a new furnace, and then $5,000 another month for landscaping.</p> <h2>HELOC Pros</h2> <p>The key advantage of a HELOC is its flexibility, but there are others to consider, too.</p> <h3>1. Borrowing Flexibility</h3> <p>Experts recommend these loans for ongoing expenses such as college tuition, rather than a home repair that you might pay for in a lump sum. If you do a refinance and then realize you'll need to borrow more money, you would need to pay closing costs all over again and might not be able to lock in the same rate.</p> <h3>2. Tax Benefit</h3> <p>Like the above loans, the interest paid on a HELOC is usually tax deductible.</p> <h3>3. Payment Flexibility</h3> <p>Your loan may allow you to pay interest-only for a certain amount of time.</p> <h2>HELOC Cons</h2> <p>As with the other home loans discussed, a HELOC carries some costs.</p> <h3>1. Risk</h3> <p>Like both the above loans, your home is on the line.</p> <h3>2. Rate Uncertainty</h3> <p>Since HELOCs often have <a href="https://www.consumer.ftc.gov/articles/0227-home-equity-loans-and-credit-lines#lines">variable interest rates</a>, and rates are currently at historic lows, they will probably rise in the future. By law, how much the rates go up is capped &mdash; the lender must tell you the maximum potential rate when you take out the loan. The average HELOC rate at the moment is similar to home equity rates, or around a point above 30-year-mortgage rates.</p> <h3>3. Balloon Payments</h3> <p>Many HELOCs start out requiring only interest payments, then expect the borrower to pay the whole principal at the end. If you can't, Goldman said, you'll probably end up refinancing the debt into a much longer, more expensive loan.</p> <h3>4. Temptation</h3> <p>As with credit cards, having a line of credit to draw on can encourage overspending. &quot;It's one thing to be on a diet when the refrigerator is empty. It's another thing to be on a diet when the freezer is full of ice cream,&quot; Goldman said. &quot;You'll have this money available to you, so it will require a great deal of discipline to manage it.&quot;</p> <h3>5. Qualifying</h3> <p>You need good credit to qualify, especially for the best rates.</p> <h3>6. Fees</h3> <p>You may or may not have to pay closing costs, and may be charged ongoing fees such as annual maintenance fees and transaction fees.</p> <h2>What's the Total Cost of a HELOC?</h2> <p>Rough estimate: $9,500. It's more difficult to predict the lifetime cost of a HELOC if the rate is adjustable and the amount you owe on it varies, but this <a href="http://www.calcxml.com/calculators/adjustable-rate-mortgage-calculator">adjustable mortgage calculator</a> figures that with steady, modest interest increases, a 10-year, $50,000 HELOC could cost $14,000 in interest. Fees vary, but if your bank charges a $50 annual fee, that adds $500 to the cost. Subtract an estimated $5,000 in tax savings.</p> <h2>Borrowing From Your 401K</h2> <p>If you have a 401K retirement account through your employer, you might have the option of &quot;borrowing&quot; from its balance. This is not a true loan, since the money in your 401K already belongs to you. In reality, what you're doing is getting an exemption from early withdrawal penalties and taxation, as long as you promise to put the money back and pay yourself an interest rate &mdash; generally one to two percentage points above the prime rate.</p> <p>Despite all those articles out there warning you to avoid borrowing from your 401K, Goldman says this can be a good option if conditions are right.</p> <p>&quot;If I had my choice, I would definitely borrow from a 401K,&quot; he said. Although neither borrowing against your home or borrowing against your retirement are without risk, at least if you fail to pay back your 401K loan, you're not out on the street.</p> <h2>401K Loan Pros</h2> <p>This type of loan may be the easiest of all to get &mdash; it's your money, after all!</p> <h3>1. Qualifying</h3> <p>You don't need good credit to qualify for a good rate, making this an attractive option for folks who wouldn't qualify for a regular loan.</p> <h3>2. Risk</h3> <p>If you fail to pay it back, it won't affect your credit score or send collection agents after you. You also don't risk having your home repossessed.</p> <h3>3. No Bank</h3> <p>You pay the interest to yourself, which is sort of like not paying interest at all.</p> <h2>401K Loan Cons</h2> <p>There are not too many downsides to borrowing from your 401K &mdash; but there's a big one you should think very carefully about.</p> <h3>1. Risk to Your Retirement Savings</h3> <p>Failure to pay back this loan could cause great harm to your retirement account. For instance, if your employment ends for any reason, the loan becomes due immediately. If you can't pay it, it's converted to a distribution, which means that you pay taxes and (if you are under age 59 &frac12;, a 10% penalty). So you're basically stuck at your job while you have a 401K loan out; you might end up turning down a new job offer if you don't have the cash to pay the loan. Worse, if you get fired and can't pay it, you could be out of a lot of money in addition to having no job.</p> <h3>2. Double Taxation</h3> <p>The disadvantage that people often don't consider with 401K loans is that while you filled your account with pretax dollars, you repay the loan with post-tax dollars &mdash; but you'll have to pay tax again on the money when you eventually withdraw it in retirement. How much you can get: While home loans let you borrow a percentage of your home equity, 401K loans are capped at $50,000 or half your balance, whichever is less.</p> <h2>What's the Total Cost of Borrowing From Your 401K?</h2> <p>It would vary greatly depending on how close you are to retirement and how well the market does during your loan. Using <a href="http://www.calcxml.com/calculators/impact-of-borrowing-from-my-retirement-plan">this calculator</a>, I came up with an estimated cost of $25,000 in lost investment and tax benefits to borrow $50,000 for five years. That assumes your retirement account would have $10,246 less in it at the time of retirement, and that you lost out on $15,000 worth of tax benefits.</p> <h2>Bottom Line</h2> <p>By these calculations, home equity loans tend to be less costly than mortgage refis or 401K loans. You should run the numbers using your own circumstances before making that determination for yourself.</p> <p>Cost is not the only thing to consider when deciding how to borrow. There's also the degree of risk involved, and the amount of time you have to pay the money back. Again, personal circumstances will dictate your choice: If you only need the money for a short time, for instance, until your stock options vest next year, a 401K loan might be the best choice. If you can't afford to pay the loan off in the near-term, the refinance gives you the most time.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/3-sources-of-fast-cash-besides-your-401k">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt">5 Ways to Pay Off High Interest Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you">15 Surprising Ways Bad Credit Can Hurt You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/never-borrow-money-for-these-5-buys">Never Borrow Money for These 5 Buys</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-you-need-to-know-about-credit-scores">5 Things You Need to Know About Credit Scores</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance 401k borrowing HELOC home equity line of credit interest loans mortgages refinance second mortgage Wed, 02 Nov 2016 10:00:10 +0000 Carrie Kirby 1825229 at http://www.wisebread.com Reach Your Money Goals Faster With a Simple Naming Trick http://www.wisebread.com/reach-your-money-goals-faster-with-a-simple-naming-trick <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/reach-your-money-goals-faster-with-a-simple-naming-trick" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/boy_piggy_bank_33365082.jpg" alt="Boy reaching money goals faster with naming trick" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I used to feel crushed by my to-do list. I could never complete all the tasks on the list according to my (unrealistic) schedule, so I always felt like a loser. Even when I did complete all the tasks on my daily list, I never felt the sense of accomplishment that I hoped for.</p> <h2>What Would Han Solo Do?</h2> <p>While researching a better way to manage my list, I stumbled across the concept of <a href="http://www.wikihow.com/Create-an-Effective-Action-Plan">action plans</a>. According to project managers who specialize in getting things done, to-do lists aren't particularly useful for a variety of reasons. Action plans lead to success. Learning to action plan was going to revolutionize my schedule!</p> <p>But then I got sidetracked, so I never got around to actually formulating an action plan. But it didn't matter. Just renaming my daily list of chores &quot;Plan of Action&quot; instead of &quot;To Do&quot; made me feel so much better about myself. I became more productive because I'd freed my brain from worry and made more space for creative thinking. Who writes to-do lists? Chumps, obviously. Who writes action plans? The architects of D-Day. The United Nations. Han Solo.</p> <p>Did Han Solo consult his to-do list before he shot first? No. He did not.</p> <h2>Is My Home Equity Line of Credit Half Full or Half Empty?</h2> <p>Currently, my husband and I are <a href="http://www.wisebread.com/my-2016-budget-challenge-why-i-need-to-find-31k-this-year">paying down a $15,000 loan</a> that we had to take out to replace the outgoing sewer line of our house. Plumbing is pretty much the least sexy way to spend money on home repair.</p> <p>Other than our home mortgages, this loan is, by far, our largest debt. And, I hate debt. Debt makes me feel unsafe and without choices. The lack of control attached to this debt specifically ticks me off. It's not like we had a choice in the matter. We didn't accrue this debt by doing something fun like taking a vacation we couldn't afford. We have this loan because our sewer line broke and we had to fix it.</p> <p>Since a simple name change made my to-do list feel more manageable, I wondered if renaming the sewer loan would make me feel less angry about paying down this debt.</p> <h2>First World Pooping</h2> <p>&quot;Oh, you're the one with the funny account names,&quot; says the bank teller as she completes my deposit. The HELOC that I had to take out to pay for the sewer line is now named &quot;First World Pooping.&quot;</p> <p>In my hours of grumpy rumination about how much I hate the sewer line loan, I had come to two realizations:</p> <ul> <li>About 60% of the world's population doesn't have indoor plumbing or even adequate sanitation. I have $15,000 in debt because my husband and I made the choice to repair our sewer line, instead of letting raw sewage drain into the dirt under our house. Six out of 10 people on the planet <a href="http://www.slate.com/blogs/future_tense/2013/02/22/_60_percent_of_the_world_population_still_without_toilets.html">can't choose to have a working toilet</a>.</li> </ul> <ul> <li>Although $15,000 is a huge chunk of change for me, 80% of the world's population&nbsp;<a href="http://www.globalissues.org/article/26/poverty-facts-and-stats">lives on less than $10 per day</a>, so just my ability to get an emergency loan for $15,000 puts me in the uppermost strata of wealth on the planet.</li> </ul> <p>In other words, my $15,000 sewer repair is a First World Problem. I may not like the cost of my choice, but I have enough financial control over my life that I can enjoy the privilege of flushing the toilet with drinking water.</p> <p>Paying down the sewer loan each month still gives me no pleasure, but I no longer resent this debt like I used to. By renaming the loan &quot;First World Pooping&quot; I get a monthly reminder to practice gratitude for my comfortable, First World life.</p> <h2>Motivated Savings</h2> <p>In addition to renaming my loans, I have renamed all my bank accounts to help me meet my financial goals. I am more inspired to put money into my &quot;OMG Retire Early!&quot; account than I ever was when it was just named &quot;Retirement.&quot; Socking away cash in my &quot;Escape Plan&quot; is somehow more fun than topping off my &quot;Emergency Fund.&quot; Who has emergency funds? People who are worried about future plumbing problems. Who has an &quot;Escape Plan?&quot; Han Solo.</p> <p>My account formerly known as &quot;Savings&quot; has been repeatedly renamed with the location of my next vacation. Every time I open up my bank records I get a positive push to save more money.</p> <h2>Obsessive Compulsive Labeling</h2> <p>I know this will come as a complete shock to anyone who reads this, but I have OCD. When I mentioned to my OCD support group that relabeling chores had a positive effect on my productivity, worldview, and bank account, I discovered that this brain hack is actually a fairly common <a href="https://www.psychologytoday.com/blog/in-practice/201301/cognitive-restructuring">Cognitive Behavioral Therapy</a> exercise that is used to treat a variety of common psychological problems. I don't know if renaming every chore will cure my OCD, but it has made reaching financial goals a little easier.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/max-wong">Max Wong</a> of <a href="http://www.wisebread.com/reach-your-money-goals-faster-with-a-simple-naming-trick">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/youve-been-saving-money-all-wrong-heres-why">You&#039;ve Been Saving Money All Wrong. Here&#039;s Why</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-personal-finance-resolutions-anyone-can-master">8 Personal Finance Resolutions Anyone Can Master</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-manage-your-money-during-a-spousal-separation">How to Manage Your Money During a Spousal Separation</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-golden-rules-of-personal-finance-everyone-should-know">10 Golden Rules of Personal Finance Everyone Should Know</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-brilliant-tips-from-smart-mom-rich-mom">4 Brilliant Tips From &quot;Smart Mom, Rich Mom&quot;</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Life Hacks Organization bank accounts banking budgeting debt fun inspiration loans motivation renaming saving money Thu, 27 Oct 2016 10:00:11 +0000 Max Wong 1821541 at http://www.wisebread.com 4 Ways to Make the Most of Your Student Loan Grace Period http://www.wisebread.com/4-ways-to-make-the-most-of-your-student-loan-grace-period <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-ways-to-make-the-most-of-your-student-loan-grace-period" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_happy_diploma_94435335.jpg" alt="Woman making the most of her student loan grace period" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Graduating from college with your degree in hand is exciting. But the thought of paying back your students loans? Not so much. But, depending on the type of student loans you took, you're probably eligible for a grace period, or a set number of months after graduation in which you don't have to start repaying your loans.</p> <p>During this time, you can take financial steps to prepare yourself not only for your looming monthly loan payments, but also for your entire financial future. Take advantage of this grace period to begin building your savings, building a solid credit score, and building a budget.</p> <p>Don't skimp on these steps. After all, that grace period doesn't last forever.</p> <h2>How Grace Periods Work</h2> <p>The federal government doesn't always expect you to begin repaying your student loans as soon as you leave college. Instead, most federal student loans come with a grace period. The goal is to give recent graduates a chance to start earning money and settle their finances before they have to start making monthly student loan payments.</p> <p>The grace period varies depending on the type of federal loans you are repaying. Direct subsidized loans, direct unsubsidized loans, subsidized federal Stafford loans, and unsubsidized federal Stafford loans come with a grace period of six months during which you won't have to make payments. Federal Perkins loans come with a grace period of nine months. Depending on when you took them out, the interest on some loans might continue to grow even during the grace period.</p> <h2>1. Select a Repayment Plan</h2> <p>It's during your grace period that you'll need to select a repayment plan for your student loans. For federal student loans, you'll automatically be entered into the Standard Repayment Plan. This plan gives you at least 10 years to repay your student loan debt, and is usually the most affordable choice. Under this plan, you'll pay the least amount of interest.</p> <p>There are exceptions, though. If you haven't been able to find a job or if your job pays you little, an income-driven plan might make more sense. These plans come with lower monthly payments that are designed to be affordable to you. However, you will end up paying more interest over the long run.</p> <p>As your grace period ticks away, make sure to stay in contact with the servicer that is handling your loan repayments. Your servicer can answer any questions you have and help you find the best repayment option. You can find the servicer of your loan at <a href="https://studentaid.ed.gov/sa/?login=true">My Federal Student Aid</a>.</p> <h2>2. Create a Budget</h2> <p>Once you enter the workforce, it's essential to create a budget. Simply list all of the money that you earn during the month. Then list all of your expenses, including estimated costs for items such as groceries, dinners out, and entertainment. Now you'll know how much extra money you should have every month. (See also: <a href="http://www.wisebread.com/build-your-first-budget-in-5-easy-steps?ref=seealso">Build a Budget in 5 Easy Steps</a>)</p> <p>Make sure to factor in your estimated monthly student loan payments in this budget. This will help you determine whether you can repay your loans under the Standard Repayment Plan or if you'll need to consider an income-based option for tackling your monthly loan payments.</p> <h2>3. Start Building Your Savings</h2> <p>It's tempting when you get your first paychecks to spend everything you've earned. Resist. Instead, start building your savings. It's important to have an emergency fund that you can tap into whenever a financial emergency pops up. And these emergencies will happen. Your car might suddenly need expensive repairs. If you've built up an emergency fund, you won't have to rely on your high interest rate credit cards to cover these unexpected financial hits. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso">Transfer Balances to These Low Interest Rate Cards</a>)</p> <p>It might sound good, but your grace period is a great time to start saving for retirement. The sooner you start putting money away for your eventual retirement, the better off you'll be once you leave the workforce. Retirement might seem like it's ages away. But if your employer offers a 401K plan, enroll in it and start saving at least some of each paycheck for retirement. If your employer doesn't offer a 401K plan, consider opening an IRA on your own.</p> <p>Of course, this assumes that you'll have enough money to save and meet your monthly financial obligations, including your upcoming student loan payment. If you can't, put retirement savings on hold.</p> <h2>4. Build Your Credit</h2> <p>You need a strong credit score today. Lenders rely on this score when determining who qualifies for auto and mortgage loans and at what interest rates. Fortunately, you can start building a good credit score as soon as you graduate (or before, really). Pay all your bills on time. When you use credit cards, only charge what you can afford to pay off in full when your payment is due. If you take out a car loan, make your payments on time every month.</p> <p>Taking these simple steps will help you build a solid credit score. And when it's time to start making your student-loan payments? Every time you make one of these payments on time, you'll be taking a small step to building your score, too.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/4-ways-to-make-the-most-of-your-student-loan-grace-period">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-11"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-money-moves-to-make-the-moment-you-graduate">5 Money Moves to Make the Moment You Graduate</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-stop-student-loans-from-ruining-your-life">How to Stop Student Loans From Ruining Your Life</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-every-parent-should-know-about-the-new-college-financial-aid-rules">What Every Parent Should Know About the New College Financial Aid Rules</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-unique-ways-millennials-are-dealing-with-student-loan-debt">7 Unique Ways Millennials Are Dealing With Student Loan Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-do-if-you-didnt-save-for-your-childs-college">What to Do If You Didn&#039;t Save for Your Child&#039;s College</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training budgeting college federal loans grace periods loans planning repayment plans savings stafford loans student loans Wed, 05 Oct 2016 10:00:05 +0000 Dan Rafter 1805246 at http://www.wisebread.com What Every Parent Should Know About the New College Financial Aid Rules http://www.wisebread.com/what-every-parent-should-know-about-the-new-college-financial-aid-rules <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-every-parent-should-know-about-the-new-college-financial-aid-rules" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_student_books_21091679.jpg" alt="Parents should know about the new college financial aid rules" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>While school just started for many, if your child is college-bound or in college, it's already time to start planning for the next school year. Many families rely on the Free Application for Federal Student Aid (FAFSA) to help shoulder the costs of college, and there have been many new changes to the program. These new changes go into effect this October, so listen up.</p> <h2>New Application Start Date</h2> <p>In the past, families would submit the FAFSA form at the beginning of the new year. However, the new start date is now as early as October 1, 2016. This is a huge change, and if you are in college or have a child in college, you will want to fill the application out that day, or at least in the first few weeks of October.</p> <p>For some states, FAFSA aid is distributed on a first come, first served basis. Individuals who apply earlier have a better chance of receiving aid, including grants, work-study, and federal loans.</p> <h2>Change Tax Information Submissions</h2> <p>Another big change is that individuals will not be required to submit the previous year's taxes, but instead tax information from two years prior. This means for the 2017&ndash;2018 school year, families will send in 2015 information. For families that filled out the FAFSA for the 2016&ndash;2017 year, this means you will be sending in your 2015 tax info two years in a row.</p> <p>This change will make filling out and submitting the FAFSA on time a lot easier, since families used to begin the application process at the beginning of the year. Many families would have to estimate tax information and fix it later on.</p> <h2>Less Asset Protection Could Mean Less Aid</h2> <p>When parents report their finances for their child's FAFSA, a portion of their assets, including savings and investment funds, is not calculated as part of the <a href="http://www.finaid.org/calculators/finaidestimate.phtml">Expected Family Contribution</a> (EFC). This was good news for families with healthy investments but not a lot of liquidity to pay for college.</p> <p>However, the dollar amount of assets exempt from the EFC will drop this year, and will continue to drop in following years. This change could mean less financial aid for many families. This will affect middle-income families that were relying on financial aid the most. However, families with lower incomes will most likely not feel the change.</p> <h2>Don't Fall for These FAFSA Myths</h2> <p>Even though there were three major changes to the FAFSA this year, it is still a free form that all families should fill out. Don't fall for these common FAFSA myths and leave money and aid on the table.</p> <h3>1. My Child's Grades Are Not Good Enough</h3> <p>While some schools use FAFSA applications to award merit-based aid, most aid is needs-based. A good portion of financial aid is awarded based off a family's income and size.</p> <h3>2. I Make Too Much Money to Qualify</h3> <p>Many families often forgo applying for financial aid because they believe they make too much. Even if your income makes you ineligible for aid, colleges give out federal student loans through the FAFSA process. If you plan on taking out federal student loans, which are preferable to private student loans, then you must fill out the FAFSA.</p> <h3>3. I Didn't Qualify Last Year</h3> <p>It is wise to apply for FAFSA each year, even if you didn't qualify for aid the year before. There could be unseen changes to your family that you might not have accounted for, such as two children in college rather than one. Also, with the new changes happening this year, you might qualify for aid.</p> <h3>4. The FAFSA Is Too Confusing to Fill Out</h3> <p>This year, you are now allowed to skip questions that do not relate to your family's financial situations. This should make the process a little easier and streamlined. If you are still having issues with your application, there are many free resources online and offline that can help. Please remember that you should never have to pay someone to file this application, nor should you pay for information regarding the process.</p> <p>Circle October 1st on your calendar and have your tax information ready and easy to access. Even if you don't think you will qualify for aid, apply anyway. And remember: You must apply each and <em>every</em> year your child is in college. This isn't a one-time thing.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/what-every-parent-should-know-about-the-new-college-financial-aid-rules">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/css-is-one-source-of-college-financial-aid-you-cant-afford-to-overlook">CSS Is One Source of College Financial Aid You Can&#039;t Afford to Overlook</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-do-if-you-didnt-save-for-your-childs-college">What to Do If You Didn&#039;t Save for Your Child&#039;s College</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-college-students-can-save-money-before-class-starts">8 Ways College Students Can Save Money Before Class Starts</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-make-the-most-of-your-student-loan-grace-period">4 Ways to Make the Most of Your Student Loan Grace Period</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-most-common-financial-aid-mistakes-and-how-to-avoid-them">The 10 Most Common Financial Aid Mistakes — And How To Avoid Them</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training changes college FAFSA free application for federal student aid loans rules school student loans students Wed, 28 Sep 2016 09:30:25 +0000 Ashley Eneriz 1801616 at http://www.wisebread.com Refinance These 4 Common Debts Before Year Ends http://www.wisebread.com/refinance-these-4-common-debts-before-year-ends <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/refinance-these-4-common-debts-before-year-ends" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/calculator_pencil_math_82097885.jpg" alt="You should refinance 4 common debts before year end" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The year is almost over, which gets many people thinking about New Year's resolutions. Perhaps you are recalling the resolutions you made at the beginning of this year and getting down on yourself for not saving more money and paying off more debt. &quot;Next year,&quot; you promise yourself.</p> <p>But if you refinance these four loans, you can get a head start on your financial goals and even sail into the New Year with a little less financial burden on your shoulders. Here are the top loans you should refinance, as well as a few tips to decrease your debt burden altogether.</p> <h2>Credit Cards</h2> <p>Does your credit card debt seem like it never goes down, even when you throw extra money at it each month? It's the interest rate. There are two ways that you can refinance your credit card balance and save money each month. The first is to <a href="http://www.wisebread.com/best-lenders-for-personal-loans">refinance your debt</a> with a low interest personal loan, like one through<a href="https://sofi.com/wisebreadpl">SoFi</a> or<a href="http://prosper.evyy.net/c/27771/27132/994"> Prosper</a>.</p> <p>This works well for individuals that have <a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt">high interest credit card debt</a>. A low-interest personal loan will allow you to pay off your credit card debt faster, but be aware that your monthly payments will be higher. This is because credit cards only require a minimum payment each month, which can be very low, depending on the debt. Keep in mind, however, that those low monthly minimum payments are what keep you in debt for so long. Therefore, when you switch the debt to a three- or five-year personal loan, you will be required to pay more each month.</p> <p>Another popular way to refinance credit card debt is to transfer it to a promotional <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">0% balance transfer card</a>. This will allow you to transfer your debt to a card that does not charge interest for the promotional period. To use this transfer to your advantage, divide the amount of debt you have by the number of promotional interest free months offered. For example, if you are transferring <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt">$10,000 of debt</a> on a card that offers 15 months of 0% interest, then be prepared to pay about $667 each month to avoid interest charges at the end of the promotion. Do not use this card to accumulate new debt.</p> <p>(See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">When Should You Transfer a Balance to Pay Off Debt</a>)</p> <h2>Mortgages</h2> <p>Mortgage rates remain historically low, but recent news shows that <a href="http://www.marketwatch.com/story/us-mortgage-rates-climb-to-post-brexit-high-2016-09-15">rates are slowly rising</a>. If you are still battling with a mortgage rate higher than 5% or are paying PMI, now is the time to refinance.</p> <p>Refinancing your mortgage can extend the life of your home loan, but it can also save you dramatically each year, especially if you are paying<a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway">pesky PMI fees</a>. Research the cost to benefit ratio, knowing how much money you will save each month. Also research to know if a 15-year mortgage makes financial sense. In many cases, switching to a 15-year loan is riskier for your budget, but other times it can be a small monthly increase that will pay off big time in reduced interest payments.</p> <h2>Car Loans</h2> <p>Americans owe a lot on their car loans. USA Today reports, &quot;The total balance of all outstanding auto loans <a href="http://www.usatoday.com/story/money/cars/2016/09/06/car-loans-now-top-1-trillion-delinquency-rates-rise/89911210/">reached $1.027 trillion</a> between April 1 and June 30.&quot; If you secured your auto loan through a dealer, there is a good chance you are overpaying for your car loan. Contact your local credit union for rates, and don't forget to research online for the best rates.</p> <p>I have used two credit unions in the past to successfully secure an auto loan for less than 2.50%, and those credit unions did not have an actual building within 100 miles of me.</p> <h2>Student Loans</h2> <p>The burden of student loan debt is crippling millions of Americans. You don't need to live with your student loan forever. As long as you have good credit and are not in default with your loans, you have options. If you have federal student loans, then I strongly recommend looking into the <a href="http://www.wisebread.com/5-careers-that-offer-student-loan-forgiveness">forgiveness programs</a> available. It might mean taking a less than desirable job for a few years, but if that job forgives a large portion of your student debt, then it could be worth more to you than a higher paying job. Other options include income-sensitive repayment programs, such as <a href="http://www.wisebread.com/the-definitive-guide-to-pay-as-you-earn-a-great-student-loan-repayment-plan">PAYE and IBR</a>, which peg your monthly payments to your income level. Thus, if you're struggling to make a standard monthly payment, these programs set your monthly outlays at a more affordable level.</p> <p>If you are not eligible (or a fan) of the forgiveness programs, <a href="http://www.wisebread.com/should-you-refinance-your-student-loan">refinancing your student loans</a> is your next best option. Note that if you refinance your loans, you will be switching them over to a private lender. This means that if you have federal student loans, you will no longer be protected for federal loan repayment programs if you suddenly lose your job or face financial hardships.</p> <p>(See also: <a href="http://www.wisebread.com/5-ways-to-pay-off-your-student-debt-faster">5 Ways to Pay Off Your Student Loans Faster</a>)</p> <p><a href="http://sofi.com/wisebread">SoFi</a> is one company that offers student loan refinancing and also offers unemployment protection for borrowers that lose their job at no fault of their own. The company says, &quot;In fact, members who refinance with us save an average of $316 a month &mdash; and $17,208 total.&quot; Other notable companies to consider include:</p> <ul> <li><a href="https://www.earnest.com/">Earnest</a></li> <li><a href="https://commonbond.co/choose-your-loan?referrer=b75172e7076c5472bed5baec5e28309c&amp;referred">CommonBond</a></li> <li><a href="http://lendkey.7eer.net/c/27771/187810/3276">LendKey</a></li> </ul> <p>Refinancing these common debts can help you pay less each month, as well as less overall. Use these refinancing strategies to get out of debt faster and take control of your finances.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/refinance-these-4-common-debts-before-year-ends">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-11"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-to-your-debt-after-you-die">What Happens to Your Debt After You Die?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-ignore-these-4-things-before-refinancing-your-student-loans">Don&#039;t Ignore These 4 Things Before Refinancing Your Student Loans</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/prioritize-these-5-bills-when-youre-short-on-cash">Prioritize These 5 Bills When You&#039;re Short on Cash</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management car loans interest rates lenders loans mortgages new year's resolutions personal loans refinancing repayment programs student loans Mon, 26 Sep 2016 10:30:07 +0000 Ashley Eneriz 1798863 at http://www.wisebread.com 5 Surprising Ways Revolving Debt Helps You http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-surprising-ways-revolving-debt-helps-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_happy_credit_card_49216544.jpg" alt="Woman learning surprising ways revolving debt helps you" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Debt can be good or bad, depending on how you use it. Different types of debt serve different purposes. We use installment loans like mortgages, car loans, and student loans to purchase homes, cars, and to get an education &mdash; but these aren't the only types of debt.</p> <p>There's also revolving debt, such as a credit card or a home equity line of credit. This type of debt can be more dangerous because it lacks a fixed payment amount, and minimum payments are based on how much you utilize the line of credit. Despite the unpredictable nature of revolving debt, however, it can be surprisingly helpful. Here's how:</p> <h2>1. It's Available When You Need It</h2> <p>Life is unpredictable. Even when you're financially responsible with money, an emergency can pull the rug out from under you. Sometimes, there isn't enough cash in your account to handle the unexpected. Or maybe you have cash, but don't want to drain your savings. Revolving debt lets you pay off purchases over time, so that you can keep more cash in your wallet.</p> <p>Revolving debt is also convenient because you have immediate access to funds when you need it. This is different from an installment loan. You can apply for a loan when you need money for an unexpected expense, but it's not immediate. You have to submit an application and wait for an approval, which can take days. Plus, there's no guarantee the bank will approve the amount you need.</p> <h2>2. It Helps Build Creditworthiness</h2> <p>Whether you're looking to establish your credit history or rebuild your credit after a blunder, you have to use credit to improve your FICO score. Revolving debt can help in this regard.</p> <p>Several factors make up your credit score, including the types of credit accounts in your name. Some people only have one type of credit account, perhaps an installment loan like a mortgage or car loan. Making timely payments on these accounts help their credit scores, but they need other types of account to increase credibility and creditworthiness.</p> <p>Credit mix makes up approximately 10% of your credit score, so it's worth adding a revolving account if you don't already have one. What's surprising is that revolving debt can be a good thing on your credit report. If you have a revolving account and you manage this account well, other creditors and lenders will take notice. This builds their trust in you, which makes it easier for you to qualify for other types of accounts in the future.</p> <p>For revolving debt to be helpful, however, you have to pay your bills on time, and you shouldn't utilize too much of your available credit. Payment history makes up 35% of your credit score, and the amount you owe makes up 30% of your credit score.</p> <h2>3. It Protects Your Credit Score</h2> <p>If you're self-employed or an employee who gets paid once a month, a revolving account can keep your head above water until you receive a paycheck. Ideally, you should have a savings account for situations like this, but if you're in the process of growing your emergency cushion, using a credit card to tide you over and acquiring short-term revolving debt is the lesser of two evils. In this case, revolving debt can protect your credit &mdash; and you'll avoid late fees.</p> <p>If your creditors don't receive a payment after 30 days, they'll report the lateness to the credit bureaus. A single late payment can reduce your credit score by 50 to 100 points, depending on the type of account. Using a credit card and increasing your revolving debt can cause a slight decrease in your credit score, but your credit score will rebound as soon as you pay down the balance. On the other hand, a late payment can stay on your credit report for up to seven years, and it takes years to regain lost points.</p> <h2>4. You Have Flexibility of Use</h2> <p>Revolving debt is also helpful because there's flexibility of use. When you apply for an installment loan, you have to use funds for a specific purpose. For example, a mortgage loan can only be used to buy a house, and a student loan can only be used for educational purposes. Revolving debt can be used for any purpose, such as renovating your home, paying tuition, taking a vacation, etc.</p> <h2>5. You May Experience a Lower Interest Rate</h2> <p>The interest rate on your revolving debt could be lower than the interest rate on personal loans offered by banks, but only if you have good credit. If so, you'll pay less in interest charges over the life of the debt, and you can enjoy lower minimum payments.</p> <p>Make sure you shop around and compare rates. Some <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases?ref=internal">credit cards offer 0% interest</a> on balance transfers and purchases for the first six to 18 months, and then a low permanent APR after the introductory rate period.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-13"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-shouldnt-panic-if-your-credit-score-drops">Why You Shouldn&#039;t Panic If Your Credit Score Drops</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/never-borrow-money-for-these-5-buys">Never Borrow Money for These 5 Buys</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same">Here&#039;s Why Credit Scores and Reports Are Not the Same</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/best-of-personal-finance-credit-where-credit-is-due-edition">Best of Personal Finance: Credit Where Credit Is Due Edition</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Debt Management borrowing money credit history credit score home equity line of credit interest rates loans revolving debt Tue, 20 Sep 2016 09:00:05 +0000 Mikey Rox 1794234 at http://www.wisebread.com 5 Ways to Pay Off High Interest Credit Card Debt http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-to-pay-off-high-interest-credit-card-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_coffee_credit_cards_82594511.jpg" alt="Woman paying off high interest credit card debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Credit card debt is one of the most costly forms of debt, with interest rates between 20% and 30% in some cases. (Cardholders who have missed a payment might even incur higher penalty rates.) In contrast, secured loans such as car loans and home mortgages can have far lower rates. And unlike a home mortgage or student loans, interest on credit card debt is never tax deductible.</p> <p>So as with any costly loan, your first priority should be <a href="http://www.wisebread.com/5-day-debt-reduction-plan-pay-it-off?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">paying it off as soon as possible</a>. And even if you have to take out another loan to do so, you can save money when you are able to <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">transfer your debt</a> to a new account that has a lower interest rate than your existing credit card balances.</p> <p>See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=seealso2&amp;utm_campaign=cc_article">The Fastest Way to Pay Off 10K</a></p> <p>Here are five ways that you can pay off your high interest credit card debt.</p> <h2>1. Credit Card Balance Transfer</h2> <p>If you have a balance on a high interest credit card, you can save money by transferring it to a <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">card with a lower interest rate</a>. Better yet, some cards offer <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">0% APR promotional financing on balance transfers</a> for a limited time, from six to as long as <a href="http://www.wisebread.com/retire-your-credit-card-debt-with-citi-simplicity-card?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">21 months</a>. Most cards will impose a balance transfer fee of 3% to 5% of the amount transferred. However, there are cards available that offer <a href="http://www.wisebread.com/5-best-credit-cards-with-no-balance-transfer-fees?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">balance transfers with no fee</a>. These balance transfer offers are your best way to eliminate interest charges while you pay down your debt.</p> <h2>2. Personal Loan</h2> <p>Many banks and credit unions are willing to offer <a href="http://www.wisebread.com/best-lenders-for-personal-loans?ref=internal">personal loans</a> to applicants with good or excellent credit. So long as the interest rate offered is lower than your credit card balance, you can use these loans to pay off your credit cards and reduce your interest costs. However, the best rates will only be available to those who have excellent credit. If you have <a href="http://www.wisebread.com/best-credit-cards-for-bad-credit?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">poor credit</a> and a lot of debt, you may not be approved for a loan with a lower interest rate than the one you currently have.</p> <h2>3. 401K Loan</h2> <p>It's possible to <a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account?ref=internal">loan yourself money from your 401K</a> so that you can pay off your high interest credit card balances. When you withdraw money from your 401K account, you can pay yourself back over as long as five years using very competitive interest rates that will be lower than nearly all credit cards. And since you are essentially acting as your own lender, there is no need to have excellent credit. On the other hand, you will be missing out on the compound interest your investments would have earned, and you will face tax penalties if you fail to pay the back the loan on time.</p> <h2>4. Life Insurance Loan</h2> <p>There are some types of whole, universal, or variable universal life insurance policies that allow you to take out a loan against them. Any money you withdraw is then deducted from your death benefit. And while interest rates can be below that of high interest credit cards, any unpaid interest will be added to your loan amount and subject to compounding. Just like a 401K loan, you are borrowing from your own funds, so your current credit rating will be irrelevant.</p> <h2>5. Home Equity Line of Credit</h2> <p>If you have equity in your home, you may be able to borrow money against it for any purpose, including paying off your high interest credit cards. Current interest rates for <a href="http://www.wisebread.com/home-equity-loan-or-heloc-which-is-right-for-you?ref=internal">home equity lines of credit</a> are below 5%, which is far better than any standard credit card's interest rate. Your ability to secure a home equity line of credit will depend on your home's debt to credit ratio as well as your current credit history.</p> <p><em>Have you ever borrowed at a lower rate to pay off high interest debt? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jason-steele">Jason Steele</a> of <a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-sources-of-fast-cash-besides-your-401k">3 Sources of Fast Cash Besides Your 401K</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-strategies-to-wipe-out-your-credit-card-balance">5 Strategies To Wipe Out Your Credit Card Balance</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-scary-facts-about-credit-card-debt">6 Scary Facts About Credit Card Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards 401k balance transfer debt HELOC high interest home equity line of credit interest rates life insurance loans Wed, 07 Sep 2016 10:31:09 +0000 Jason Steele 1785333 at http://www.wisebread.com 4 Surprising Things Lenders Check Besides Your Credit Score http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-surprising-things-lenders-check-besides-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_paperwork_house_83751927.jpg" alt="Man learning things lenders check besides credit score" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You know how important your FICO credit score is to mortgage lenders. They rely on this number to gauge how well you've handled credit and paid your bills in the past. A high credit score means that you'll qualify for a low mortgage interest rate. A low score? You might not qualify for a loan at all.</p> <p>But mortgage lenders don't look only at <a href="http://www.wisebread.com/7-reasons-you-are-more-than-your-credit-score" target="_blank">your credit score</a>&nbsp;when you apply for a home loan. They also consider several other key factors &mdash; everything from your job history to the size of your down payment.</p> <p>Here is a look at four noncredit factors that lenders will be studying when you apply for a mortgage loan.</p> <h2>Debt</h2> <p>Outside of your credit score, your debt-to-income ratio is the most important number for mortgage lenders. This ratio measures the relationship between your monthly debt obligations and your gross monthly income.</p> <p>As a general rule, lenders strongly prefer your total monthly debts &mdash; including your estimated new mortgage payment &mdash; equal no more than 43% of your gross monthly income (your income before taxes).</p> <p>If your debt-to-income rises past this level, lenders won't be as willing to lend you mortgage money. They'll worry that you're already overburdened with debt, and the addition of a monthly mortgage payment will only make your financial situation worse.</p> <h2>Job History</h2> <p>Lenders prefer borrowers who have worked for the same employer, in the same position, for at least two years. Lenders believe that such workers are less likely to lose their jobs and, therefore, less likely to lose the income stream they need to pay their mortgage loan on time each month.</p> <p>But there's a lot of flexibility with this rule. For instance, if you took on a new job with your same employer in the last two years, this probably won't hurt you. Even if you moved onto a new job with a different employer in your same industry, lenders probably won't worry.</p> <p>But what if you've taken a new job in a new industry in the last two years? That might cause some concern. Lenders might worry that you'll be more likely to lose that new position. However, you can usually still qualify for a loan.</p> <p>If you've been unemployed for a significant amount of time in the last two years, that can cause more problems. Be prepared to explain to lenders why you have a gap in your work history. As long as you have a solid income now, the odds are still good that you'll be able to qualify for a home loan.</p> <h2>Savings</h2> <p>To qualify for the lowest interest rates, make sure you have enough money in savings. You'll need money to pay for your down payment, closing costs, and a certain number of months' worth of property taxes, of course.</p> <p>But lenders often require that you also have enough in savings to pay at least two months of your new mortgage payment, including whatever you're paying each month for property taxes and insurance. If your total monthly mortgage payment will be $2,000, you'll need at least $4,000 in savings in addition to whatever you'll be paying for closing costs and down payment.</p> <p>Lenders want to see that you have savings in case you suffer a temporary reduction in your monthly income. This way, you'll be able to use your savings to pay for at least a couple months of mortgage payments.</p> <h2>Down Payment</h2> <p>The size of your down payment plays a big role in the size of your mortgage interest rate. In general, the bigger your down payment, the smaller your interest rate.</p> <p>That's because lenders consider you less of a risk to default on your loan if you come up with a larger down payment. You've already invested more in your home, the theory goes, so you'll be less likely to walk away from it.</p> <p>You can qualify for mortgage loans today with a down payment of as little as 3% of your home's final purchase price, in many cases. But if you want to qualify for the lowest interest rates? Putting down 20% of your home's final purchase price &mdash; admittedly not an easy task &mdash; will increase your chances of nabbing that ultralow rate.</p> <p><em>If you're getting ready to buy a house, have you taken steps to improve these parts of your finances?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-shouldnt-panic-if-your-credit-score-drops">Why You Shouldn&#039;t Panic If Your Credit Score Drops</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking Real Estate and Housing closing costs credit history credit score debt down payment FICO score interest rates job history lenders loans mortgages savings Mon, 29 Aug 2016 10:00:09 +0000 Dan Rafter 1779806 at http://www.wisebread.com 5 Times It's Okay to Delay Retirement Savings http://www.wisebread.com/5-times-its-okay-to-delay-retirement-savings <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-times-its-okay-to-delay-retirement-savings" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/hand_coin_piggybank_75172163.jpg" alt="Woman learning times it&#039;s okay to delay retirement savings" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>About one in five Americans isn't confident about <a href="https://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&amp;content_id=3328">having enough money</a> for a comfortable retirement. If you're among them (or even if you aren't), putting off retirement savings seems like terrible advice. But if you're handling an ever-growing debt monster or an imminent threat of past contributions becoming taxable income &mdash; it may be okay to temporarily put a hold on retirement savings.</p> <p>Here are some of the very few instances you should ever consider temporarily delaying saving for retirement.</p> <h2>1. Paying Back a Loan From Your 401K</h2> <p>According to a study from The Wharton School of the University of Pennsylvania, 20% of Americans <a href="http://www.pensionresearchcouncil.org/publications/document.php?file=1271">take out a loan</a> from their 401K plans. Even worse, there is evidence that treating your nest egg like a credit card can quickly become a bad habit: 25% of 401K borrowers take out a <a href="http://www.nytimes.com/2013/08/17/your-money/one-dip-into-401-k-savings-often-leads-to-another.html?_r=0">third or fourth loan</a> and 20% of them take out five or more loans!</p> <p>While the full loan balance is generally due within five years, it becomes due within 60 days when terminating employment or failing to meet the established repayment schedule. Any outstanding balances become taxable income, triggering not only applicable income taxes but also additional tax penalties.</p> <p>Letting a 401K loan become taxable income will leave you with an unexpected, large tax bill next year and make you miss out on all the interest gains until retirement age. If you need to put retirement savings temporarily on hold to pay a 401K loan back ASAP, it's an understandable choice.</p> <h2>2. Dealing With Major Medical Expenses</h2> <p>If you're facing a major medical expense, you'll probably need all the help you can get. If your medical and dental expenses for the year are more than <a href="https://www.irs.gov/publications/p502/ar02.html">10% of your adjusted gross income</a> (7.5% if you or your spouse are over 65 or turned age 65 in 2016), you may qualify for hardship withdrawals from your retirement accounts. But a better option might just be to adjust the withholding on your paycheck using the <a href="https://www.irs.gov/individuals/irs-withholding-calculator">IRS Withholding Calculator</a>. This might allow you to pay for the expenses out of pocket by giving your budget more breathing room for the rest of the year. Sure, your retirement savings rate might temporarily slow, but at least you won't actively dip into them, either.</p> <h2>3. Eliminating High-Interest Credit Card Debt</h2> <p>In 2015, 21% of Americans believed that they would be in debt forever, up from 9% in 2013 and 18% in 2014. And high interest debt &mdash; such as credit card balances &mdash; are a big culprit.</p> <p>Instead of mortgaging your future to high-interest debt, <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">pay it off quickly</a>, and commit to putting the savings on interest payments toward retirement contributions. You'll probably even end up saving more toward retirement in the long run than if you kept making minimum credit card payments and wasting money on interest and fees. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">When to Use a Balance Transfer Offer</a>)</p> <h2>4. Building an Emergency Fund</h2> <p>Thinking that your 401K is already your emergency fund is one of the <a href="http://www.wisebread.com/6-emergency-fund-myths-you-should-stop-believing">emergency fund myths</a> you should stop believing. Taking a loan from your 401K is very often a bad idea because of the reasons explained earlier. Instead, take a couple of months to build an emergency fund that meets your unique financial situation. (See also: <a href="http://www.wisebread.com/figuring-the-size-of-your-emergency-fund?ref=seealso">Figuring the Size of Your Emergency Fund</a>)</p> <h2>5. Being Stuck in a Bad Forced-Transfer IRA</h2> <p>If a recent job change resulted in your previous 401K being forcefully transferred to an IRA, you might temporarily reconsider your retirement savings.</p> <p>If your forced-transfer IRA charges outrageous fees, you're better off holding off on your contributions until you qualify for your new employer's qualified plan. In the meantime, you could put the money that you would contribute to the IRA in an investment or saving account with a better return or pay down high-interest credit card debt.</p> <p>Once you set up your 401K with your new employer, roll over the entire balance from the forced-transfer IRA to the new account to improve the performance of your nest egg.</p> <p><em>What are other times it's okay to put off retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/5-times-its-okay-to-delay-retirement-savings">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account">5 Questions to Ask Before You Borrow From Your Retirement Account</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rich-people-spend-350k-to-park-their-cars-heres-how-wed-spend-it-instead">Rich People Spend $350K+ to Park Their Cars — Here&#039;s How We&#039;d Spend it Instead</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what">The Inventor of the 401K Has Second Thoughts About Your Retirement Plan — Now What?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-people-dont-retire-early-and-how-you-can">4 Reasons People Don&#039;t Retire Early — and How You Can</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k borrowing money debt emergency funds IRA loans medical expenses Thu, 11 Aug 2016 09:30:31 +0000 Damian Davila 1769335 at http://www.wisebread.com How to Build Credit Without Using Credit Cards http://www.wisebread.com/how-to-build-credit-without-using-credit-cards <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-build-credit-without-using-credit-cards" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_reading_letter_73633147.jpg" alt="Woman learning how to build credit without credit cards" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There are lots of reasons people avoid using credit cards. The <a href="http://www.wisebread.com/everything-you-didn-t-understand-about-credit-card-interest-grace-periods-and-penalty-aprs?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">interest rates on credit cards</a> can be horrible &mdash; in some cases, 20% or higher. And walking around with a large amount of spending power in your pocket can lead to unintended purchases and being saddled with big credit card payments. So, you might be forgiven for thinking that your credit rating would be higher if you just didn't use credit cards. (See also: <a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps%20?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=cc_article">How to Rebuild Your Credit in 8 Simple Steps</a>)</p> <p>Important <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">factors in calculating your credit score</a> include on-time payment history and available credit. If you don't use credit cards or make any loan payments, you may not have sufficient <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score%20?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">credit history to obtain a high credit score</a>. It seems illogical, but if you don't have any debt, you can end up with a poor credit rating due to lack of recent credit history!</p> <p>But let's say you're still not interested in using credit cards. How do you build your credit without them?</p> <h2>Be Added as an Authorized User</h2> <p>An easy and free way to boost your credit rating is to have a family member add you as an authorized user on one of their cards so you can get the available credit and payment history added to your credit report. Make sure that person has a good credit history and can be counted on to make on-time payments and to keep their balance low. Agree that you will not use the card (even better, let them hold onto your card). For a bigger boost, ask to be added to the card with the highest available credit and lowest debt.</p> <h2>Get a Secured Credit Card</h2> <p>Most consumer credit cards are unsecured. If you don't trust yourself with access to credit, a <a href="http://www.wisebread.com/a-secured-credit-card-can-repair-your-credit-score-heres-how-to-pick-the-best%20?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">secured credit card can improve your credit score</a>. To get a secured credit card, you have to put down a deposit, which would then be your available credit. You can't use more money than you've already put in. If you have some cash to make a security deposit, this can be a good way to establish a good credit history by making on-time payments to build your credit score, without the temptation to spend more than you have. The <a href="http://www.wisebread.com/the-5-best-secured-credit-cards%20?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">best secured cards</a> even come with valuable cardholder benefits such as extended warranty coverage and automobile rental insurance.</p> <h2>Take Out a Loan</h2> <p>Even if you don't need to borrow money, you can take out a loan, have the funds deposited in your account, and make payments on time to boost your credit rating. You can find lenders at <a href="https://www.prosper.com">Prosper</a>, <a href="http://track.flexlinks.com/a.ashx?foid=1029882.227343&amp;fot=1074&amp;foc=1">Lending Club</a>, or <a href="https://www.selflender.com">Self Lender</a>. You will pay a small amount of interest fees, but building your credit rating can save you lots of money in the long run.</p> <h2>Make Car Payments on Time</h2> <p>Car loans typically have much lower interest rates, and you can build your credit history with on-time car loan payments. A big problem with car loans is that people tend to buy much more expensive cars than they would if they had to pay cash. One strategy is to buy the same car you were going to buy with cash, but put down a large deposit, and get a car loan for the rest. Use your cash to make the loan payments on time for the life of the loan. You will pay a little more for the car due to interest and fees, but this is a relatively low-cost way to build your credit history.</p> <h2>Make Student Loan Payments on Time</h2> <p>If you have student loans, making your payments on time counts to build your credit history. Set up automatic payments to make sure you never have any late or missed payments reported.</p> <p><em>How do you maintain a good credit rating without using credit cards?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/how-to-build-credit-without-using-credit-cards">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/building-a-credit-history">Building a Credit History</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-after-the-holidays-moves-your-credit-score-will-thank-you-for">5 After the Holidays Moves Your Credit Score Will Thank You For</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-your-credit-score-suffering-without-your-knowledge">Is your credit score suffering without your knowledge?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-secured-credit-card-facts-to-remember">6 Secured Credit Card Facts to Remember</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards authorized user bills building credit credit history credit score loans payments Mon, 08 Aug 2016 09:30:29 +0000 Dr Penny Pincher 1767115 at http://www.wisebread.com How to Avoid Getting Scammed With a Reverse Mortgage http://www.wisebread.com/how-to-avoid-getting-scammed-with-a-reverse-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-avoid-getting-scammed-with-a-reverse-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/upside_down_house_22048959.jpg" alt="Learning how to avoid being scammed by reverse mortgage" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Reverse mortgages have been negatively cast as a last-ditch option for seniors short on cash. However, reverse mortgages can also provide many helpful benefits, including the ability to replenish or boost your retirement account or help you stave off foreclosure. Find out what a reverse mortgage is and the best ways to make it work for your financial situation.</p> <h2>What Is a Reverse Mortgage?</h2> <p>A reverse mortgage, also known as a home equity conversion mortgage (HECM), is a specialized loan available to individuals who are over 62 years old. This loan allows borrowers to convert a portion of home equity into cash. Interest on the loan is deferred until the home is sold or the last borrower dies.</p> <p>To qualify for a reverse mortgage, homeowners will need to own their home outright or have a low mortgage balance that can be paid off easily with the proceeds of the loan. Homeowners must also live in the home to remain qualified. Homeowners will still be required to pay for property taxes and insurance premiums.</p> <h2>What Are the Best Ways to Use a Reverse Mortgage?</h2> <p>If you have a lot of home equity but are still struggling to pay the monthly payments, a reverse mortgage can then pay you the equity, which can then in turn be used to pay off your mortgage. You will need to have a reverse mortgage with a lump-sum disbursement and show that you can afford taxes and insurance costs.</p> <p>Another great way to use a reverse mortgage is to give your retirement fund the boost it needs. If you didn't save enough for retirement, know that you aren't alone &mdash; the majority of Americans don't. Receiving some of your reverse mortgage as a lump-sum allows you to invest the money if market conditions are favorable.</p> <h2>What Are Other Ways to Use a Reverse Mortgage?</h2> <p>Technically, the money you receive from a reverse mortgage is your money, and you can use it however you like. You don't even need good credit or a lot of income to qualify for an HECM. Investing your HECM into your retirement is one of the best things you can do with the money. Here are a few other wise financial moves you can make with the money you earn from a reverse mortgage.</p> <h3>Purchase Investment Property</h3> <p>You can purchase property in cash from your HECM and not worry about being approved for a mortgage. Of course, buying property is not always a good investment, so be sure the property you purchase is worth it. Don't just throw your money into any property purchase and hope to live off rental income.</p> <h3>Buy a Second Home</h3> <p>If you love to split your time in a vacation home, then a HECM with enough equity can help you afford to buy a second home without having to worry about mortgage payments. Don't just buy a second home just because you can. A second home purchase should be considered if it can save you money and also earn you money. A second home can help you avoid vacation or hotel rental fees, and you can rent out your home when you are not living there. Remember you must keep your current home, the home you wish to get a HECM loan with, as your primary residence.</p> <h3>Pay Off Debt</h3> <p>If debt is weighing you down each month, then consider using your HECM to pay it off and save money on interest payments. However, don't be tempted to get back into debt. Using your HECM to pay off debt should be the start of a debt-free lifestyle, not a bandage to place on a shopping or gambling addiction.</p> <h2>What Are the Downsides of a Reverse Mortgage?</h2> <p>If you're currently using other government programs, such as Medicaid or SSI, having your HECM disbursed to you as monthly payments will be counted as income. You will face foreclosure if you cannot afford the property taxes or insurance premiums. Another thing to consider before proceeding with a reverse mortgage is that the upfront fees to do so can be quite high. Also, the amount of money you get upfront from your mortgage is dependent on several factors, such as your age and the value of your home. You might not get as much money as you need. (See also: <a href="http://www.wisebread.com/5-downsides-of-a-reverse-mortgage?ref=seealso">5 Downsides of a Reverse Mortgage</a>)</p> <p>Before tapping into your equity, take time to consider if this is really the best option for your financial situation. If you truly have that much equity in your house, you could even sell your home and downsize to a smaller home, mortgage-free.</p> <p><em>Are you considering a reverse mortgage? How do you plan to use the funds?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/how-to-avoid-getting-scammed-with-a-reverse-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/home-reverse-mortgaged-heres-how-to-sell-it">Home Reverse Mortgaged? Here&#039;s How to Sell It</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-downsides-of-a-reverse-mortgage">5 Downsides of a Reverse Mortgage</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-times-a-refinance-is-the-wrong-move">3 Times a Refinance Is the Wrong Move</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-it-makes-sense-to-apply-for-a-mortgage-loan-without-your-spouse">When It Makes Sense to Apply for a Mortgage Loan Without Your Spouse</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing equity HECM home equity conversion mortgage investment properties loans retirement reverse mortgages second homes Wed, 03 Aug 2016 09:00:06 +0000 Ashley Eneriz 1763994 at http://www.wisebread.com