interest http://www.wisebread.com/taxonomy/term/798/all en-US 6 Reasons Cash Back Is Better Than Travel Rewards http://www.wisebread.com/6-reasons-cash-back-is-better-than-travel-rewards <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-reasons-cash-back-is-better-than-travel-rewards" 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_holding_credit_card_cash_dollar_bills.jpg" alt="Woman shopping holding credit card cash dollar bills" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you apply for a rewards credit card, you usually have to choose between cash back and travel rewards. To help sway your decision, the companies that offer travel rewards credit cards often try to seduce you with images of exciting vacation destinations that you can supposedly use your rewards for. (See also: <a href="http://www.wisebread.com/how-travel-rewards-credit-cards-really-work?ref=seealso" target="_blank">How Travel Rewards Credit Cards Really Work</a>)</p> <p>For people who travel often, these rewards programs can be very valuable. Some expensive airfares, for instance, can be had for rewards rates that no cash-back card can compete with. (See also: <a href="http://www.wisebread.com/comparing-miles-which-airline-loyalty-program-is-better?ref=seealso" target="_blank">Which Airlines Offer the Best Value for Their Miles?</a>)</p> <p>But most people don't travel enough to earn the points needed to score such deals. You may find the points and miles that these travel reward cards offer to be difficult, or sometimes impossible, to redeem for reservations you need. As a result, cash back credit cards are the better choice for many people. (See also: <a href="http://www.wisebread.com/how-rewards-credit-cards-really-work?ref=seealso" target="_blank">How Cash Rewards Credit Cards Really Work</a>)</p> <p>Here are six reasons that <a href="http://www.wisebread.com/5-best-cash-back-credit-cards?ref=internal" target="_blank">cash-back cards</a> could be a better choice than travel rewards.</p> <h2>1. Cash back offers consistent value</h2> <p>What's a point or mile worth with your favorite airline or hotel program? You may never know, as you could receive excellent value from your rewards one day, and very poor value at another time. But with cash back, you always know exactly what your rewards are worth (usually 1 cent per point or a certain percentage of your purchases).</p> <p>See also: <a href="http://www.wisebread.com/best-credit-cards-that-offer-flat-rate-rewards-for-all-spending?ref=seealso2" target="_blank">Best Credit Cards that Offer Flat Rate Rewards for All Spending</a></p> <h2>2. Cash-back cards have gotten more competitive</h2> <p>It used to be that a strong cash-back card allowed you to earn 1 percent on most purchases, and perhaps 2 percent on a few bonus categories such as groceries or gas. But now, there are plenty of cards that offer as much as 5 or 6 percent bonus cash back on purchases from eligible merchants such as <a href="http://www.wisebread.com/5-best-gas-rewards-credit-cards?ref=internal" target="_blank">gas stations</a>, <a href="http://www.wisebread.com/the-best-5-credit-cards-for-groceries?ref=internal" target="_blank">grocery stores</a>, and <a href="http://www.wisebread.com/best-credit-cards-for-office-supply-purchases?ref=internal" target="_blank">office supply stores</a>. (See also: <a href="http://www.wisebread.com/how-credit-card-issuers-classify-your-purchases-for-bonus-rewards?ref=seealso" target="_blank">How Credit Card Issuers Classify Your Purchases for Bonus Points</a>)</p> <h2>3. Frequent traveler programs are less valuable</h2> <p>If you've tried to redeem your airline miles or hotel points recently, then you know how hard it can be to get substantial value from your rewards. For example, most airlines now charge a &quot;standard&quot; rate that requires at least double the miles of the traditional rates, often referred to now as the &quot;saver&quot; rates. Unfortunately, airlines have gotten stingy about the amount of award seats available at the saver rate. (See also: <a href="http://www.wisebread.com/which-credit-cards-have-the-best-travel-redemption-value?ref=seealso" target="_blank">Which Credit Cards Have the Best Travel Redemption Value?</a>)</p> <p>Likewise, hotel programs may claim to make every standard room available as an award for points, but many independently owned properties have gotten around this by curtailing the number of rooms that are labeled &quot;standard.&quot; As a result, you may well be told that no rooms are available for your points, as the remaining ones have a superior &quot;city view&quot; or &quot;garden view.&quot;</p> <h2>4. Cash back is more flexible</h2> <p>Even when you can earn travel rewards that are equal in value to the cash back that you could have earned, you may find yourself wanting cash instead. By using a travel rewards card, you are limiting yourself to travel rewards, whether or not you actually want or need to travel. For example, if you have several thousand dollars' worth of travel rewards, you might regret not earning cash back if you decide not to travel next year due to illness, job loss, or just a busy work schedule.</p> <p>In short, you can always use your cash back to pay for travel reservations, but you can't pay your bills with frequent flyer miles. (See also: <a href="http://www.wisebread.com/5-ways-to-earn-cashback-rewards-without-extra-spending?ref=seealso" target="_blank">Best Ways to Earn Cash Back Without Spending Extra</a>)</p> <h2>5. Points and miles depreciate, while cash earns interest</h2> <p>As travel reward programs have become less valuable, your points and miles have fallen in value as a &quot;currency.&quot; And there's seemingly no end to this process. It's a fair bet to say you can expect the miles that you've already earned to fall in value each year. This is important as it can take some people years to save up enough travel points for a big trip. On the other hand, you can invest your cash back rewards and earn interest just as you would on your other savings.</p> <h2>6. Travel prices are falling</h2> <p>Flying is less expensive than it once was, thanks in part to low fuel prices and increased competition from ultra low-cost airlines. It's actually common to find sales offering domestic airfare for less than $100 each way. While that's great news for travelers, it also means that your frequent flyer miles are worth less than they were when flights were more expensive. In addition, home sharing services like Airbnb have reduced the cost of lodging for many travelers. This makes hotel stays less necessary and their rewards points less valuable.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-reasons-cash-back-is-better-than-travel-rewards&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Reasons%2520Cash%2520Back%2520Is%2520Better%2520Than%2520Travel%2520Rewards.jpg&amp;description=6%20Reasons%20Cash%20Back%20Is%20Better%20Than%20Travel%20Rewards"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/6%20Reasons%20Cash%20Back%20Is%20Better%20Than%20Travel%20Rewards.jpg" alt="6 Reasons Cash Back Is Better Than Travel Rewards" width="250" height="374" /></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/6-reasons-cash-back-is-better-than-travel-rewards">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/5-ways-to-turn-credit-card-rewards-into-real-wealth">5 Ways to Turn Credit Card Rewards Into Real Wealth</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/7-things-you-should-never-do-with-your-travel-rewards-credit-cards">7 Things You Should Never Do With Your Travel Rewards Credit Cards</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-credit-card-transactions-that-dont-earn-rewards">4 Credit Card Transactions That Don&#039;t Earn Rewards</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-ways-to-use-travel-rewards-cards-to-get-free-trips">How to Use Travel Rewards Cards to Get Free Trips</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/12-expert-tips-for-redeeming-miles-for-free-travel">12 Expert Tips for Redeeming Miles for Free Travel</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards best value cash back interest points rewards travel Tue, 12 Sep 2017 08:30:10 +0000 Jason Steele 2019383 at http://www.wisebread.com When Does Your Credit Card Start Charging Interest on a Purchase? http://www.wisebread.com/when-does-your-credit-card-start-charging-interest-on-a-purchase <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/when-does-your-credit-card-start-charging-interest-on-a-purchase" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/young_girl_is_paying_using_her_credit_card.jpg" alt="Young girl is paying using her credit card" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Credit card interest can be a mystery. It's all explained somewhere in the fine print, and any experienced attorney should be able to figure it all out. But for the rest of us, the most important thing to know is when our credit card will start charging us interest. (See also: <a href="http://www.wisebread.com/everything-you-didn-t-understand-about-credit-card-interest-grace-periods-and-penalty-aprs?ref=seealso" target="_blank">Everything You Didn&rsquo;t Understand About Credit Card Interest, Grace Periods, and Penalty APRs</a>)</p> <h2>The basics of credit card interest</h2> <p>Credit cards calculate your interest based on your average daily balance. At the end of each day, your account's balance is added up, including any new charges, fees, payments, or credits. And at the end of your statement period, the average daily balance is determined by adding up each day's balance, and dividing it by the number of days in the billing period.</p> <p>This means that you will be incurring interest charges on your purchases from the date of the transaction. Just keep in mind that many transactions initially begin as &quot;pending&quot; and can take a few days to change to &quot;posted.&quot; Nevertheless, your average daily balance, and your interest charges will be based on the date the transaction occurs, not when it actually becomes &quot;posted.&quot;</p> <p>For example, let's assume that your credit card statement period begins on the 15th of June and ends on the 14th of July. If you were to make a $1,000 charge on the 15th of June, it might be pending for a few days before it posts. Nevertheless, the charge will appear on your account as of the 15th of June. And if you don't make any further charges that month, your average daily balance will be $1,000. But if you make that charge at a later time, your average daily balance will be less, as will your interest charges. (See also: <a href="http://www.wisebread.com/7-ways-to-lower-your-credit-card-interest-rate?ref=seealso" target="_blank">7 Ways to Lower Your Credit Card Interest Rate</a>)</p> <h2>The exception to the rule</h2> <p>Now that you see how credit card interest begins the day you make a purchase, it's important to understand a key exception to this rule. Nearly all credit cards allow you to avoid interest charges by paying your monthly statement balance in full. Technically, interest is still being accrued, but those charges get waived when you pay your entire statement balances by the due date.</p> <p>The period of time between your statement closing date and your payment due date is called a grace period. Almost all credit cards offer grace periods, with the typical length being 25 days. If a credit card offers a grace period, by law it must mail your bill at least 21 days before your payment is due.</p> <p>If you fail to pay your entire statement balance in full before the due date, then you lose your grace period and will accrue interest on your average daily balance. Those charges will appear on your next statement. And once you've lost your grace period, then you will have to pay interest charges on your current and future transactions until you've paid off your entire statement balance in full again. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso" target="_blank">The Best Low Interest Rate Credit Cards</a>)</p> <h2>Getting a bit of extra free interest</h2> <p>Paying your balance in full each month is the best way to manage your credit card accounts, as you'll pay no interest charges on your purchases. This gives you essentially a free loan from the date of your purchase until the next statement's due date.</p> <p>In fact, you can get as much free interest as possible with a simple trick. If you can delay a major purchase until after just your statement has closed, then you will get an additional month of free interest compared to a purchase made just before your statement closes. By waiting until after the statement closes, the purchase will appear on the following statement, which will have a due date a month later than the previous statement.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhen-does-your-credit-card-start-charging-interest-on-a-purchase&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhen%2520Does%2520Your%2520Credit%2520Card%2520Start%2520Charging%2520Interest%2520on%2520a%2520Purchase-.jpg&amp;description=When%20Does%20Your%20Credit%20Card%20Start%20Charging%20Interest%20on%20a%20Purchase%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/When%20Does%20Your%20Credit%20Card%20Start%20Charging%20Interest%20on%20a%20Purchase-.jpg" alt="When Does Your Credit Card Start Charging Interest on a Purchase?" width="250" height="374" /></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/when-does-your-credit-card-start-charging-interest-on-a-purchase">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/6-smart-reasons-to-pay-your-credit-card-bill-before-its-due">6 Smart Reasons to Pay Your Credit Card Bill Before It&#039;s Due</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-use-cash-for-these-11-things">Never Use Cash for These 11 Things</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/6-reasons-cash-back-is-better-than-travel-rewards">6 Reasons Cash Back Is Better Than Travel Rewards</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/same-as-cash-store-offers-vs-0-intro-apr-credit-cards-which-is-right-for-you">Same-As-Cash Store Offers vs. 0% Intro APR Credit Cards — Which Is Right for You?</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/11-ways-your-credit-card-will-save-you-money-while-holiday-shopping">11 Ways Your Credit Card Will Save You Money While Holiday Shopping</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards billing period buying due dates interest payments shopping Fri, 25 Aug 2017 08:30:06 +0000 Jason Steele 2009179 at http://www.wisebread.com 6 Smart Reasons to Pay Your Credit Card Bill Before It's Due http://www.wisebread.com/6-smart-reasons-to-pay-your-credit-card-bill-before-its-due <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-smart-reasons-to-pay-your-credit-card-bill-before-its-due" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/girl_with_a_credit_card_buying_online.jpg" alt="Girl with a credit card buying online" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We all know there can be dire consequences if you are late in paying your credit card bill. But is there also a benefit to paying your bill early?</p> <p>It may seem unnecessary to pay your bill any sooner than required, but there are some advantages to sending in your payment earlier.</p> <h2>1. It frees up your credit</h2> <p>Most credit cards have a limit to the amount you can charge. But you can actually charge more if you pay off any spending right away. This is helpful if you plan to use the credit card to make a big-ticket purchase. It also makes sense if you plan to travel, because hotels, airlines, and rental car companies can place holds on your card that may last several days, or even as long as a week.</p> <h2>2. It can improve your credit score</h2> <p>The easiest way to prove to the credit bureaus that you are creditworthy is to pay your bill, and paying it off early can only help. Moreover, credit bureaus base your debt on the total at the end of the statement cycle. So if you can pay off debt before the cycle even ends, it reduces the debt reported. (See also: <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?ref=seealso" target="_blank">How to Use Credit Cards to Improve Your Credit Score</a>)</p> <h2>3. You'll do a better job of tracking spending</h2> <p>If you get in the habit of paying off credit card charges as they come in, you will likely check your balance more frequently. By doing this, you will be more aware of how much you are spending, and on what.</p> <h2>4. It reduces the interest you are charged</h2> <p>If you've carried over a credit card balance from the month before, interest is charged each day, so it can accumulate over the course of the month. If you pay part (or all) of your bill early, that means you will have a smaller average daily balance and lower interest payments. (See also: <a href="http://www.wisebread.com/7-ways-to-lower-your-credit-card-interest-rate?ref=seealso" target="_blank">7 Ways to Lower Your Credit Card Interest Rate</a>)</p> <h2>5. You'll chip away at debt faster</h2> <p>Consider this: If you direct money to pay off your credit card bill as soon as you can, that means your money can't be used anywhere else. In essence, you are preventing yourself from spending cash on something that might be wasteful. You are making a commitment to use money to <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=internal" target="_blank">pay off debt</a> rather than add to it.</p> <h2>6. You'll be less likely to forget about it</h2> <p>When you pay bills only after you see the final monthly statement, mistakes can happen. Bills can get lost in the mail. You can set it aside but lose it between the couch cushions. But if you are in the habit of checking your credit card balances and making payments frequently, you'll be less likely to have a problem. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">How to Never Make a Late Payment on Your Credit Card Again</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-smart-reasons-to-pay-your-credit-card-bill-before-its-due&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Smart%2520Reasons%2520to%2520Pay%2520Your%2520Credit%2520Card%2520Bill%2520Before%2520Its%2520Due.jpg&amp;description=6%20Smart%20Reasons%20to%20Pay%20Your%20Credit%20Card%20Bill%20Before%20Its%20Due"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/6%20Smart%20Reasons%20to%20Pay%20Your%20Credit%20Card%20Bill%20Before%20Its%20Due.jpg" alt="6 Smart Reasons to Pay Your Credit Card Bill Before It's Due" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/6-smart-reasons-to-pay-your-credit-card-bill-before-its-due">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/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-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-credit-without-using-credit-cards">How to Build Credit Without Using Credit Cards</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/6-moves-to-make-before-cutting-up-your-credit-card">6 Moves to Make Before Cutting Up Your Credit Card</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/when-does-your-credit-card-start-charging-interest-on-a-purchase">When Does Your Credit Card Start Charging Interest on a Purchase?</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-happens-when-your-credit-card-debt-is-charged-off">What Happens When Your Credit Card Debt Is Charged Off?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards bills credit balances credit score debt early interest payments revolving debt tracking spending Wed, 05 Jul 2017 09:00:11 +0000 Tim Lemke 1977308 at http://www.wisebread.com How to Build Equity in Your Home http://www.wisebread.com/how-to-build-equity-in-your-home <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-build-equity-in-your-home" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/imagine_owning_our_dream_house.jpg" alt="Imagine owning our dream house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Equity is the difference between what you owe on your mortgage loan and what your home is currently worth. Say you owe $150,000 on your mortgage and your home is worth $200,000. You now have $50,000 worth of equity built up in your home. Congratulations!</p> <p>Equity is important when you sell your home. If you sell the home in the above example for $200,000, you'd end up with a sizable check, whatever is left of that $50,000 equity after you subtract your real estate agent's commission and any other fees you might have to pay to close the sale. (See also: <a href="http://www.wisebread.com/8-unexpected-costs-of-selling-a-home?ref=seealso" target="_blank">8 Unexpected Costs of Selling a Home</a>)</p> <p>You can also tap your home's equity for home equity loans or home equity lines of credit. Maybe you want to remodel your bathroom. If you have enough equity, you can take out a home-equity loan of, say, $20,000 to pay for it. You can also rely on home equity loans to pay for a child's college tuition or pay off high-interest credit card debt.</p> <p>And if you ever want to refinance your mortgage loan to one with a lower interest rate, you'll usually need equity to do so. Most lenders won't approve a refinance unless you have at least 20 percent equity built up in your home.</p> <p>So how do you build equity? Mostly by making your mortgage payments on time and hoping that the value of homes in your local housing market continues to rise.</p> <h2>Keep making your mortgage payments</h2> <p>Every time you make a mortgage payment, you'll gain a small bit of equity, as long as your home's value isn't falling at the same time. But don't think that if you are paying $1,500 each month, you are gaining $1,500 worth of equity with every payment. Not all of your monthly payment goes toward reducing your mortgage's principal balance.</p> <p>There's something known as PITI, which stands for principal, interest, taxes, and insurance. This means that a portion of each of your mortgage payments goes toward paying off your loan's principal balance, interest, property taxes, and homeowners insurance. Only the portion that goes toward paying off your principal helps you build equity.</p> <p>In the earliest days of your payments, a greater chunk of your mortgage check will be used to pay off interest. The deeper you get into your mortgage's life span, the more principal you'll pay off with each payment &mdash; and the more equity you will gain.</p> <h2>Count on rising home values</h2> <p>When you buy a home, you hope that its value will continue to increase. If your home does rise in value, the equity you have will automatically increase.</p> <p>If your home is worth $200,000 and you owe $190,000 on your mortgage, you have $10,000 in equity. But if your home's value was instead $210,000, owing that same $190,000 would leave you with $20,000 worth of equity. Just be aware that your home is not guaranteed to rise in value.</p> <h2>Make a bigger down payment</h2> <p>If you are using a mortgage to finance the purchase of a home, you'll usually have to come up with a down payment. With some loan products, that down payment can be as low as 3 percent of your home's purchase price. For a home costing $200,000, a down payment of 3 percent comes out to $6,000.</p> <p>The larger your down payment, however, the more equity you'll have as soon as you take ownership of your house. When you reach 20 percent equity, you'll no longer have to pay private mortgage insurance (PMI). That's why if you can afford it, it makes financial sense to come up with as large of a down payment as possible. (See also: <a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house?ref=seealso" target="_blank">Do You Really Need a 20 Percent Down Payment for a House?</a>)</p> <h2>Take out a shorter mortgage</h2> <p>Taking out a loan with a shorter term means larger monthly payments. But it also means that you'll build your home's equity at a faster pace. If you take out a 15-year, fixed-rate mortgage instead of a 30-year, fixed-rate loan, your monthly payment will be significantly higher because you are stretching out your payback period over a smaller number of months.</p> <p>But that larger monthly payment also means that you'll be reducing your mortgage's principal balance by a greater amount each month, something that will help you build equity much faster. This is one reason why, if you can afford the larger monthly payment, a shorter-term mortgage is a smarter financial move. Just be careful not to take a shorter-term mortgage if the monthly payment will be a struggle.</p> <h2>Make bigger mortgage payments each month</h2> <p>You can increase the speed at which you gain equity by making larger mortgage payments each month, as long as you tell your lender that you want this extra money to go toward paying down your loan's principal balance.</p> <p>If you owe $1,700 each month on your mortgage, you might instead send a check for $1,900, with the extra $200 allocated to paying down your principal. Your lender's mortgage statement probably has a line that you can fill out stating that you want your extra money to go toward principal. Make sure to fill that out.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-to-build-equity-in-your-home&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520to%2520Build%2520Equity%2520in%2520Your%2520Home.jpg&amp;description=How%20to%20Build%20Equity%20in%20Your%20Home"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20to%20Build%20Equity%20in%20Your%20Home.jpg" alt="How to Build Equity in Your Home" width="250" height="374" /></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/how-to-build-equity-in-your-home">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/heres-whats-included-in-a-homes-closing-costs">Here&#039;s What&#039;s Included in a Home&#039;s Closing Costs</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-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</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-biggest-regrets-of-new-homeowners">8 Biggest Regrets of New Homeowners</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-things-to-consider-before-buying-a-home-when-youre-single">5 Things to Consider Before Buying a Home When You&#039;re Single</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/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing down payments equity homeownership interest loans mortgages principal Tue, 20 Jun 2017 09:00:08 +0000 Dan Rafter 1966194 at http://www.wisebread.com The New Grad's Guide to Debt Management http://www.wisebread.com/the-new-grads-guide-to-debt-management <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-new-grads-guide-to-debt-management" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/graduating_student_worrying_about_career_path_and_financial_future.jpg" alt="Graduating Student Worrying About Career Path and Financial Future" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>According to Student Loan Hero, the average 2016 graduate left college with $37,172 in student loan debt. The class of 2017 will graduate owing roughly the same amount, if not more.</p> <p>For many young adults, a student loan is the only option for obtaining a degree. The problem, however, is that it takes years to pay off these balances. Some graduates also have difficulty juggling student debt with their other expenses.</p> <p>Luckily, student loan debt doesn't have to cripple a new grad's finances. Here are a few strategies to help graduates manage their debt and stay on track.</p> <h2>1. Get organized and prepared for that first bill</h2> <p>Student loan repayment typically begins six to nine months after graduating college. You'll likely receive information regarding your first payment in advance. If you haven't received this information yet, it doesn't hurt to contact your student loan lender to ask about your due date and minimum payment. Having this information early helps you prepare your budget ahead of time.</p> <p>To stay organized and avoid late payments, set up automatic reminders a few days before your student loan payments are due. If you have multiple lenders, look into consolidating all your loans into a single loan. This way, you don't have to juggle multiple payments and due dates. If consolidation isn't an option, contact your lenders to see if you're allowed to change your due dates. It might be easier to manage student debt when due dates are within a few days of each other. (See also: <a href="http://www.wisebread.com/what-s-the-difference-between-student-loan-refinancing-and-consolidation?ref=seealso" target="_blank">What's the Difference Between Student Loan Refinancing and Consolidation?</a>)</p> <h2>2. Sign up for autopay to stay on schedule</h2> <p>Signing up for autopay is one way to avoid missing a due date on your student loans, which can trigger a late fee or a negative mark on your credit report. With autopay, your student loan lender automatically drafts monthly payments from your checking or savings account on a specific day of the month. As a bonus, your lender may reduce your interest rate when you agree to automated payments. This results in paying less interest over the life of the loan.</p> <p>Of course, the key to making this a successful solution is ensuring that there's always enough money in your checking account to cover the deductions &mdash; something you'll really need to stay on top of.</p> <h2>3. Request forbearance if you need more time</h2> <p>If you're scheduled to begin repaying your student loan, but you don't have enough income, don't ignore the bills. Student loan lenders &mdash; especially federal lenders &mdash; are flexible and offer assistance to students requiring financial help.</p> <p>One provision is forbearance, which allows you to temporarily suspend student loan payments for a certain number of months. For example, request a one-month forbearance if you have a temporary hardship, or request a one-year forbearance if you experience longer financial troubles. Keep in mind that interest continues to accrue with forbearance, which can put you deeper in the hole. Only use this option as a last resort.</p> <p>Deferment, on the other hand, is an income-based hardship provision. This option works the same as forbearance in that it suspends monthly payments without penalty. With a deferment, however, the federal government pays the interest that accrues during this period. (See also: <a href="http://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans?ref=seealso" target="_blank">4 Things You Need to Know About Deferring Student Loans</a>)</p> <h2>4. Deduct student loan interest</h2> <p>Student loan interest is a deductible expense, so remember to include this item when filing your income taxes. This is critical in cutting your tax liability, especially when you're already on a tight budget. Since it's an &quot;above-the-line deduction,&quot; you don't have to itemize your tax return to take advantage of this write-off. You're allowed to write off up to $2,500 of student loan interest paid annually. This will reduce how much you owe in federal and state taxes. (See also: <a href="http://www.wisebread.com/4-ways-student-loans-impact-your-taxes?Ref=seealso" target="_blank">4 Ways Student Loans Impact Your Taxes</a>)</p> <h2>5. Hold off on other types of financing</h2> <p>After finishing college, you're likely ready to get your &quot;adult&quot; life started. This might include buying a new car and furnishing an apartment. But since you're fresh out of school with student loan debt, try to hold off on other types of financing &mdash; at least for now.</p> <p>The more debt you acquire, the harder it might be to juggle student loan and other credit payments. If you can avoid a car loan and unnecessary credit card debt, the money you would have spent on these expenses can go toward paying down student loan debt.</p> <h2>6. Live at home</h2> <p>The financial decisions you make as a young adult can affect your life later on. Although your friends might move into their own apartments, buy new cars, and spend most of their money on fun stuff, consider the benefits of living at home after graduation. By doing so, there's an opportunity to put a major dent in your debt. I did it for two years immediately following college, and I wasn't even a little bit embarrassed about it; I've paid off two student loans as a result.</p> <p>Whether you have credit card debt or student loan debt, minimizing your expenses now and prioritizing debt elimination sets the foundation for a strong financial future. Not only should you pay off debt, you should use this time to build a solid emergency fund. It'll be easier to save money and get ahead financially when you commit to living as cheaply as possible. (See also: <a href="http://www.wisebread.com/8-surprising-ways-to-pay-off-your-student-loans?ref=seealso" target="_blank">8 Surprising Ways to Pay Off Your Student Loans</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fthe-new-grads-guide-to-debt-management&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThe%2520New%2520Grad%2527s%2520Guide%2520to%2520Debt%2520Management_0.jpg&amp;description=The%20New%20Grad's%20Guide%20to%20Debt%20Management"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/The%20New%20Grad%27s%20Guide%20to%20Debt%20Management_0.jpg" alt="The New Grad's Guide to Debt Management" width="250" height="374" /></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/the-new-grads-guide-to-debt-management">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-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</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-things-you-need-to-know-about-deferring-student-loans">4 Things You Need to Know About Deferring Student Loans</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-times-student-loan-refinancing-can-save-you-big">4 Times Student Loan Refinancing Can Save You Big</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/what-is-student-loan-forbearance-anyway">What Is Student Loan Forbearance, Anyway?</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-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Education & Training college grads deductions forbearance interest new graduates student loans taxes Wed, 14 Jun 2017 08:31:16 +0000 Mikey Rox 1963760 at http://www.wisebread.com 8 Biggest Regrets of New Homeowners http://www.wisebread.com/8-biggest-regrets-of-new-homeowners <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-biggest-regrets-of-new-homeowners" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house_key_on_keychain.jpg" alt="House key on keychain" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Buying a home is a big decision. When you buy your first home, it can turn out to be one of the happiest moments of your life, and set you and your family up for years of comfort. But there are also countless decisions to make during the buying process, and it's easy to make one you'll regret later.</p> <p>It helps to know common traps others have learned from. Try to avoid these mistakes that many new homebuyers have made. (See also: <a href="http://www.wisebread.com/what-you-need-to-know-before-buying-your-first-home?ref=seealso" target="_blank">What You Need to Know Before Buying Your First Home</a>)</p> <h2>1. You bought more house than you can afford</h2> <p>It's easy to purchase a home that may be out of your price range. Banks are known to approve homebuyers for loans that are way beyond what should be sensibly budgeted. It's also tempting to buy a more costly home than you need, based on the assumption that you will earn more in the future.</p> <p>A good rule of thumb is to avoid paying more than 30 percent of your gross income on housing. Anything more than that, and you may find yourself financially handcuffed. When searching for homes, be sure to have a budget in mind, and do your best to stick to that budget even if it means walking away from homes you like. (See also: <a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor?ref=seealso" target="_blank">How to Make Ends Meet When You're House Poor</a>)</p> <h2>2. You did not put enough money down</h2> <p>Making a big down payment can make things much easier for a homeowner in the long run. If you are able to save up enough to put down at least 20 percent, there's a good chance you'll avoid paying private mortgage insurance (PMI), which can add thousands of dollars in overall costs. Plus, a bigger down payment will help you qualify for a more favorable loan, and will reduce the amount you need to borrow.</p> <p>Homeowners who can't make a sizable down payment often find themselves struggling financially because the mortgage costs are onerous. The more money you put down, the more money you'll save &mdash; and the better off you'll be.</p> <h2>3. You did not get the right kind of mortgage</h2> <p>There are many different mortgage products out there. <a href="http://www.wisebread.com/fixed-or-adjustable-choosing-the-right-mortgage-loan?utm_source=feedburner&amp;utm_medium=feed&amp;utm_campaign=Feed:+wisebread+(Wise+Bread)" target="_blank">Loans with fixed interest rates or adjustable rates</a>, interest-only loans, <a href="http://www.wisebread.com/choosing-the-right-mortgage-loan-15-or-30-years" target="_blank">30-year loans, and 15-year loans</a>. It can be bewildering and hard to find the right mortgage for you. The key is to understand what kind of homebuyer you are.</p> <p>Generally speaking, if you want to build equity in your home and plan to stay a while, you will want a fixed-rate mortgage. A 30-year term is most common and often allows for manageable monthly payments, but shorter terms can make sense if you want to pay off your loan sooner and you can afford to pay more each month.</p> <p>Adjustable rate mortgages, which often start with low interest rates that can change after a certain time period, make sense for those who think they may only stay in the home for a few years.</p> <p>Interest-only loans, in which you begin paying interest before any principal, tend to be riskier and don't help you build equity. But they might be right for people who want very low payments to start and think they can refinance or handle higher payments later.</p> <p>Do you plan to stay in the house a long time or move within a few years? What is your budget, both in terms of down payment and monthly payments? These are hard decisions, but it is important to research your mortgage loan options thoroughly before locking one in.</p> <h2>4. You didn't reduce debt and improve your credit before buying</h2> <p>The interest rate on your mortgage is based on a variety of factors, most importantly your current debt level and credit score. If you already have a high debt load and your credit score is mediocre or poor, you may end up with a higher interest rate. This could add thousands of dollars to the overall cost of your home.</p> <p>You may be eager to buy that first house, but you should first take time to pay off any current debts and <a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps" target="_blank">improve your overall credit picture</a>.</p> <h2>5. You should have continued renting</h2> <p>There is a lot of pressure on people to buy instead of rent, because it can be a path to long-term financial security. But there are many cases where it's perfectly fine &mdash; and perhaps wiser &mdash; to continue renting.</p> <p>If your income is inconsistent or your job security is in question, renting is a better option. If you expect you may need to move within a short period of time, renting makes sense. If you don't have enough money for a sizable down payment yet, continuing to rent is fine. Renting offers flexibility and is often cheaper, so there should be no rush to buy if you're not comfortable doing so. (See also: <a href="http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide?ref=seealso" target="_blank">Rent Your Home or Buy? Here's How to Decide</a>)</p> <h2>6. You bought a home that needed work</h2> <p>A so-called &quot;fixer upper&quot; can be a great bargain for those willing to invest the time, sweat, and money on making necessary repairs. But this type of home isn't for everyone.</p> <p>Purchasing a home that requires heavy renovation can be a source of stress, and if you're not handy enough to fix things yourself, it may be more expensive for you in the long run.</p> <h2>7. You waived the inspection</h2> <p>During the housing boom a decade ago, competition for homes was so fierce that buyers were willing to forgo a routine inspection in order to close a deal. In fact, some sellers saw a demand for an inspection as a deal-breaker. Today, this is a recipe for potential disaster.</p> <p>An inspection should be an essential part of the homebuying process, allowing you to learn about any problems before you make a financial commitment. No homeowner should find themselves stuck with a house full of problems simply because they waived their right to inspect the property beforehand. (See also: <a href="http://www.wisebread.com/thinking-of-skipping-the-home-inspection-heres-what-it-will-cost-you?ref=seealso" target="_blank">Thinking of Skipping the Home Inspection? Here's What It Will Cost You</a>)</p> <h2>8. You researched the house, but not the area</h2> <p>It's a beautiful house and you got it for a great price. But after moving in, you realize that your commute to work just doubled. Or maybe you learned that the school system is not well-regarded. Or that the neighborhood has a high crime rate. Or the home backs up to the wastewater treatment plant.</p> <p>Remember that when you buy a home, you're not just buying a property. You're selecting a place to live and possibly raise your family. There's more to home than just the structure and the yard. If you don't do the research on your new neighborhood, you could end up sorely disappointed. (See also: <a href="http://www.wisebread.com/how-to-evaluate-a-neighborhood-before-you-buy?ref=seealso" target="_blank">How to Evaluate a Neighborhood Before You Buy</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-biggest-regrets-of-new-homeowners">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/how-to-build-equity-in-your-home">How to Build Equity in Your Home</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-home-buying-habits-we-can-learn-from-millennials">4 Home-Buying Habits We Can Learn From Millennials</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/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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-whats-included-in-a-homes-closing-costs">Here&#039;s What&#039;s Included in a Home&#039;s Closing Costs</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/how-to-make-ends-meet-when-youre-house-poor">How to Make Ends Meet When You&#039;re House Poor</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing house house poor inspections interest loans mortgages new homeowner payments regrets renting Tue, 06 Jun 2017 09:00:09 +0000 Tim Lemke 1959133 at http://www.wisebread.com 5 Ways to Turn Credit Card Rewards Into Real Wealth http://www.wisebread.com/5-ways-to-turn-credit-card-rewards-into-real-wealth <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-to-turn-credit-card-rewards-into-real-wealth" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-623196850.jpg" alt="Man turning credit card rewards into real wealth" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Using a rewards credit card is an easy way to pocket a few hundred dollars a year in cash back rewards, or earn free travel. And if you're willing to put in the effort, you'll find there are plenty of ways to parlay your points into something more meaningful and long-lasting.</p> <h2>1. Invest your cash back for the long haul</h2> <p>The simplest way to make <a href="http://www.wisebread.com/5-best-cash-back-credit-cards?ref=internal" target="_blank">cash back rewards</a> even more rewarding is to put the money into a retirement account and let compound interest work its magic. For example, we've worked out how to save <a href="http://www.wisebread.com/how-to-save-an-extra-109486-a-year?ref=internal" target="_blank">over a thousand dollars a year</a> using credit cards.</p> <p>Let's say you banked your $1,000 in rewards and savings and invested them in a Roth IRA each year for 20 years. If you earned an average return of 6 percent, you'd have almost $40,000 after 20 years, before fees.</p> <h2>2. Invest in experiences</h2> <p>Ask any dying person what they value most, and it won't be money they speak of. Most people look back on their lives and cherish the memories they've made &mdash; the sight of beautiful places, the laughter of their children, and the life-changing moments they've spent with the people they love.</p> <p><a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">Travel rewards cards</a> may not help anyone grow rich, but they can help them afford a wide range of experiences that may otherwise be out of reach. An Alaskan cruise may fit into even a modest budget with the smart use of credit card rewards. Meanwhile, a $1000+ economy flight to Europe can be had for as little as 45,000 American Airlines frequent flyer miles, which you can earn with an <a href="http://www.wisebread.com/which-american-airlines-us-airways-credit-card-should-you-get?ref=internal" target="_blank">American Airlines credit card</a>.</p> <p>Used wisely, travel rewards can help families make memories they'll cherish for a lifetime. At the very least, they make it possible to travel farther, participate in more activities, and stay longer once you're there. (See also: <a href="http://www.wisebread.com/5-steps-to-getting-a-free-or-close-to-free-vacation-in-9-months-or-less-with-credit-cards?ref=seealso" target="_blank">How to Earn a Free Vacation in 9 Months With Credit Card Rewards</a>)</p> <h2>3. Donate rewards to a worthy cause</h2> <p>Even if you aren't remotely interested in spending rewards, you can make a difference. Some <a href="http://www.wisebread.com/best-credit-cards-that-give-back-to-charity?ref=internal" target="_blank">credit cards give rewards directly to charities</a>. Other credit card programs let you donate your points to charity, letting you turn your regular spending into a boon for someone else.</p> <p>While each credit card rewards program works differently, most make it possible to donate your rewards to causes you believe in. And if you don't want to donate through your issuer's official program, you can always simply give the cash back you earn to your favorite charity.</p> <h2>4. Use rewards to pay down debt and save money on interest</h2> <p>If you have credit card debt, you shouldn't be chasing credit card rewards. But if you have other debt that you'd like to pay off sooner, like a car loan, you can rack up cash rewards and make an extra payment each year. This will help you reduce interest on that debt as well as pay it off sooner.</p> <h2>5. Avoid a high-interest loan</h2> <p>If you have a huge expense coming up and need to take out a loan, you can avoid interest payments and earn rewards in one fell swoop. With a credit card that offers <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases?ref=internal" target="_blank">0% APR on new purchases</a> you essentially get an interest-free loan for a limited time.</p> <p>For example, let's say you plan to finance a roomful of furniture to the tune of $5,000. You want to pay it off over a year or so, and hope to avoid huge interest payments. You can get a card that offers 0% APR for the first 15 months, allowing you to pay off that $5,000 interest free. Remember though that you have to stay committed to your plan to pay off that amount during that period. Rewards cards typically charge higher interest rates. If you don't think you'll be able to pay off your balance, you'll want instead to look into <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=internal" target="_blank">low interest credit cards</a> to keep a handle on your debt. Before you pursue rewards, make sure you're prepared to use credit responsibly.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/holly-johnson">Holly Johnson</a> of <a href="http://www.wisebread.com/5-ways-to-turn-credit-card-rewards-into-real-wealth">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/6-reasons-cash-back-is-better-than-travel-rewards">6 Reasons Cash Back Is Better Than Travel Rewards</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/7-things-you-should-never-do-with-your-travel-rewards-credit-cards">7 Things You Should Never Do With Your Travel Rewards Credit Cards</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/9-ways-to-use-travel-rewards-cards-to-get-free-trips">How to Use Travel Rewards Cards to Get Free Trips</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-save-frequent-flyer-miles-that-are-about-to-expire">How to Save Frequent Flyer Miles That Are About to Expire</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/9-ways-to-use-miles-and-points-for-holiday-gifts">9 Ways to Use Miles and Points for Holiday Gifts</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards cash back charity experiences interest loans miles rewards travel wealth building Mon, 22 May 2017 08:30:16 +0000 Holly Johnson 1946267 at http://www.wisebread.com 4 Things You Need to Know About Deferring Student Loans http://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-things-you-need-to-know-about-deferring-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/iStock-528499384.jpg" alt="Man learning about deferring student loans" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>Finding a way to pause your student loan payment can be a lifesaver when your financial life goes sideways. And trust me, this can happen to anyone at any time.</p> <p>For me, the financial roller coaster ride started in June 2010. I was expecting our first child when my husband accepted a job in another state. I'd had to quit my teaching job when we moved, and I knew I was not going to be bringing in a paycheck for at least a year.</p> <p>On top of this reduction in income, we bought a house in our new city, but it took nearly a year to sell our old house. We were stuck paying two mortgages for 11 months.</p> <p>Between the two of us, my husband and I also had about $35,000 in outstanding federal student loan debt. To help get a better handle on our monthly budget, we decided to explore the option of deferment until our financial situation became more stable.</p> <h2>What is deferment?</h2> <p>Deferment allows you to pause the monthly payments on your federal student loans for a set period of time. For subsidized loans (these include Federal Perkins loans, Direct Subsidized loans, and Subsidized Federal Stafford loans), interest will not accrue on your loans while they are deferred. Unsubsidized loans, on the other hand, do accrue interest during the deferment period. If you have an unsubsidized loan that you plan to defer, you are allowed to pay the interest to keep it from being capitalized and added to your principal, but it is not a requirement for your deferment.</p> <p>Deferment can make a huge difference in your bottom line, but it is not necessarily a cure-all to your financial problems. Here is what you need to know about deferring your student loans.</p> <h2>1. You might not be eligible for deferment</h2> <p>When we applied for a deferment of our student loan payments, our first big surprise was the discovery that we were not eligible. Borrowers are eligible for, and have the right to take, deferment in the following circumstances:</p> <ul> <li>During at least half-time enrollment in postsecondary school;<br /> &nbsp;</li> <li>During full-time enrollment in an approved graduate program;<br /> &nbsp;</li> <li>During enrollment in an approved rehabilitation training program if you are disabled;<br /> &nbsp;</li> <li>During a period of unemployment (limited to three years);<br /> &nbsp;</li> <li>During active duty with the military, or within 13 months of when your active duty occurred;<br /> &nbsp;</li> <li>During periods of economic hardship, as defined by federal regulations (also limited to three years).</li> </ul> <p>My husband and I had assumed that going from two family members to three, from two paychecks to one, and from one mortgage to two, was sufficient enough to meet the economic hardship requirements. But federal regulations only allow for <a href="http://www.studentloanborrowerassistance.org/wp-content/uploads/2013/05/self-help-EconomicHardshipDeferment.pdf" target="_blank">economic hardship deferment</a> if you are either on public assistance, or the salary from your full-time employment is no more than 150 percent of the federal poverty guideline for your family size and state. His salary was too high to qualify.</p> <p>Instead of deferment, we had to apply for a discretionary forbearance, which is the option available to borrowers who aren't eligible for a deferment.</p> <h3>What's the difference between deferment and forbearance?</h3> <p>The biggest difference between the two processes is that interest will accrue on your loans if they go into forbearance, even if your loans are subsidized. This means that unless you pay the interest during the forbearance period, the accrued interest will be capitalized (added to your principal).</p> <p>In addition, deferments are granted in six-month increments, and you may keep applying for the next six-month increment of deferment as long as you qualify for it. Forbearance, on the other hand, is granted in 12-month increments, and you may only apply for it three times over the life of your loan.</p> <p>In some situations, forbearance is mandatory, which means your loan servicer must offer forbearance to you. You can receive mandatory forbearance in any of the following situations:</p> <ul> <li>During a medical or dental internship or residency program;<br /> &nbsp;</li> <li>During economic hardship wherein your total monthly student loan payment is 20 percent or more of your total monthly gross income;<br /> &nbsp;</li> <li>During service in a national service program, such as AmeriCorps;<br /> &nbsp;</li> <li>You are a teacher who is eligible for teacher loan forgiveness;<br /> &nbsp;</li> <li>You meet the eligibility requirements for the U.S. Department of Defense Student Loan Repayment Program;<br /> &nbsp;</li> <li>You are a National Guard member who has been activated by a governor, but who is not eligible for a military deferment.</li> </ul> <p>For student loan borrowers who do not meet any of the eligibility requirements for a mandatory forbearance, the only other option is applying for a discretionary forbearance. As the name implies, these are granted to borrowers at their lender's discretion, and generally borrowers apply for them because of financial hardship or illness.</p> <p>In 2010, my husband and I were granted a discretionary financial hardship forbearance. My unemployment was nominally my choice &mdash; although I was actually unemployed because of my baby's insistence on a Virgo birthday that coincided with the beginning of the school year. If I had been unable to find full-time work, that would have potentially made us eligible for a deferment, rather than a discretionary forbearance.</p> <h2>2. Accrued interest can pack a mean punch</h2> <p>Unless you are lucky enough to be eligible to defer a subsidized loan, you are likely going to deal with accrued interest. The problem with accrued interest is that it's like the inverse of compound interest: The interest that you accrue on your student loan is capitalized, which generates even more interest.</p> <p>For instance, between the two of us, my husband and I paid about 4.5 percent interest on our outstanding $35,000 student loan debt. By putting our loans into forbearance and not paying the accrued interest, we added over $1,600 to the $35,000 principal over 12 months.</p> <p>Not only does capitalized interest increase the total amount you owe, but it can also potentially increase either your monthly payment or your repayment term.</p> <h2>3. Be prepared for paperwork</h2> <p>Neither deferment nor forbearance is an automatic process, even when they are &quot;mandatory.&quot; You will always have to apply for either deferment or forbearance.</p> <p>If you are applying for deferment, you will need to submit a request to your loan servicer. For deferments while you are enrolled in school at least half-time, you will need to contact your school's financial aid office as well as your loan servicer. This process is relatively simple, but you will need to go through it every six months to maintain your deferment.</p> <p>For forbearance requests, the paperwork can be a little more onerous. Like deferment, you will need to submit your request to your loan servicer. In some cases, you will need to submit documentation to support your request, especially if you are requesting a discretionary forbearance. For instance, my husband and I were required to prove we were paying two mortgages at once to be granted our forbearance.</p> <h2>4. You must continue paying until your request is granted</h2> <p>After you have made your request for deferment or forbearance, you are required to continue making your monthly payments until your lender informs you that the request has been granted. Generally, this process takes about 10 business days, but it can take as many as 30.</p> <p>Not making payments during this time can be serious. If you skip a month after submitting your request, and your request is denied, then your lender will consider you delinquent and you risk defaulting.</p> <p>Both the paperwork and the necessity of continuing payments means that deferment and forbearance are options you have to plan ahead for. If you have a sudden financial downturn with no emergency fund, then you might be scrambling to request a deferment or forbearance, which may not be immediately granted.</p> <h2>Postponing your student loan payments doesn't erase them</h2> <p>Anyone can fall into an untenable financial situation. Your student loan servicer wants to work with you to help you stay afloat, but deferment and forbearance are not instantaneous processes nor are they a given. Putting your student loan payments on hold can help you get back on your feet financially, but you need to be prepared to handle the costs and be ready to get back to paying off your loans as soon as you can.</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/4-things-you-need-to-know-about-deferring-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-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/what-is-student-loan-forbearance-anyway">What Is Student Loan Forbearance, Anyway?</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-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</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-ways-to-pay-off-your-student-debt-faster">5 Ways to Pay Off Your Student Debt Faster</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-money-moves-every-new-college-student-should-make">7 Money Moves Every New College Student Should Make</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 capitalized deferment financial aid forbearance interest monthly payments student loans subsidized loans Mon, 24 Apr 2017 08:30:13 +0000 Emily Guy Birken 1932491 at http://www.wisebread.com 8 Signs You're Paying Too Much for Your Mortgage http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-signs-youre-paying-too-much-for-your-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-495980844.jpg" alt="Learning signs that you&#039;re paying too much for your mortgage" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Buying a home can be a great step along the path to financial freedom, but it can also become a burden if you're not careful. A mortgage can be a heavy weight on your finances if you either buy a house you can't afford, or get locked into unfavorable loan terms.</p> <p>Here's how to tell if your mortgage is too expensive.</p> <h2>1. You Are Having Trouble Making Ends Meet</h2> <p>No matter what you do, you feel like you're struggling to get ahead financially. It always seems like there's only a small amount leftover at the end of each month to pay bills or place into savings. It could be that your house is weighing you down. If you're working too hard to get ahead with your money, it may be time to <a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance?ref=internal" target="_blank">refinance your mortgage</a> or move into a less expensive home.</p> <h2>2. It's Eating Up More Than 30% of Your Income</h2> <p>The federal government advises that homeowners should avoid paying more than 30% of their income on housing. The theory behind this number is that for most people, keeping payments below this level will leave them with enough to pay for other non-discretionary spending. Keep in mind that many lenders will approve prospective homeowners for a loan even if their payments would be above that 30% threshold. Lenders will often instead refer to a person's &quot;debt-to-income&quot; ratio, and will lend if that ratio is as high as 43% &mdash; and banks went even higher during the housing bubble.</p> <p>Even if you are comfortably able to make your mortgage payments, it's wise to try and get under the 30% threshold. After all, more money in your pocket means more money to take care of your other financial obligations, invest for the future, or simply enjoy life.</p> <h2>3. Your Interest Rate Is Higher Than Everyone Else's</h2> <p>It's very easy to get a fixed-rate mortgage, make the payments, and not concern yourself with how interest rates are going up and down. But you never want to be locked into a higher rate than necessary. If you bought your home more than a decade ago, chances are your interest rate is higher than what's available now. The rate on a 30-year fixed rate mortgage is a little over 4% right now. If your rate is considerably higher, look to refinance and see what you can save.</p> <h2>4. You Are Barely Making a Dent in the Loan Principal</h2> <p>You've been making mortgage payments for years, but every time you look at your account statement, it seems like the principal balance barely budges. What gives? It's normal to pay mostly interest when you first get a loan, but over time your money should increasingly go toward paying off principal. If you find that you're not paying down the loan as quickly as you want, it could be because your interest rate is too high or your term is too long (or both.)</p> <h2>5. Your Income Has Gone Up</h2> <p>When you bought your house, your interest rate was based at least partially on your household income. But if you've received multiple pay raises since, you might qualify for a lower rate. Or, you may be able to refinance into a shorter loan term, thus saving you money in interest over time.</p> <h2>6. Your Credit Score Has Improved</h2> <p>A mortgage interest rate is also partially based on a homeowner's credit score when they apply for a loan. If your credit score was mediocre back then, there's a chance you got stuck with a high rate. If you've worked hard to be financially responsible ever since, your credit score may be much higher. Thus, you may be able to refinance your mortgage into a lower rate. According to FICO, a person with a credit score of 650 might pay as much as $100 more per month on a $200,000, 30-year fixed loan than someone with a score of 800. That could add up to tens of thousands of dollars over the course of a loan. (See also: <a href="http://www.wisebread.com/7-easy-ways-to-raise-your-credit-score-this-year?ref=seealso" target="_blank">7 Easy Ways to Raise Your Credit Score This Year</a>)</p> <h2>7. Your ARM Just Adjusted</h2> <p>During the housing bubble, many homeowners were lured into adjustable rate mortgages that offered low interest rates initially and then jumped after a certain number of years. (In 2005, these loans made up nearly 40% of the mortgage market.) Many families saw their payments increase sharply and beyond what they could afford. If you currently have an adjustable rate mortgage, make sure you are prepared to make payments once the interest rate adjusts upward. Otherwise, consider refinancing to a fixed mortgage with a low rate.</p> <h2>8. You Are Paying for Mortgage Insurance</h2> <p>Many lenders require borrowers to pay <a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=internal" target="_blank">private mortgage insurance</a> (PMI) if they put less than 20% down on a home. This is to protect the lender if a home ends up in foreclosure. Mortgage insurance essentially adds to your cost of homeownership, often to the tune of hundreds of dollars annually. This requirement goes away once your principal balance drops below 78%. Ideally, you want to avoid paying PMI altogether by putting more than 20% down. This also means you're borrowing less overall and will save money in the long run. But if you can't quite save that much up front, work aggressively toward paying off your loan so you can get rid of the PMI requirement sooner.</p> <div class="bankrateWidget" app="ratetables" kind="tabbed" template="standard" pkey="yxx5914ebb" tabs="mortgage" rowsperpage="4" fontfamily="Overpass" mtgheadertext="Best Mortgage Loan Rates" mtgloanamount="$200,000" mtgdefaultloantype="refinance" pid="kawb"></div> <script src="//widgets.bankrate.com/booter.js" ></script><br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-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-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/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</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-is-private-mortgage-insurance-anyway">What Is Private Mortgage Insurance, Anyway?</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-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</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-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</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/how-to-build-equity-in-your-home">How to Build Equity in Your Home</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing adjustable rate down payment fixed rate interest loans mortgage pmi private mortgage insurance saving Fri, 10 Mar 2017 10:00:23 +0000 Tim Lemke 1902766 at http://www.wisebread.com 10 Surprising Ways Real Estate Cuts Your Taxes http://www.wisebread.com/10-surprising-ways-real-estate-cuts-your-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-surprising-ways-real-estate-cuts-your-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-121277252.jpg" alt="Learning surprising ways real estate cuts taxes" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Once you own property, you may be eligible for a long list of tax breaks, whether you use it as your primary home, for rental income, or sell it for profit. Let's run through familiar benefits, such as the mortgage interest deduction, and also the various (stunning!) tax breaks real estate investors, landlords, and homeowners enjoy.</p> <h2>1. Mortgage Interest<strong> </strong></h2> <p>This is the most familiar of all deductions and one of the very few times that you can use the interest that you're paying to reduce your tax bill. Besides deducting mortgage interest that you're paying for the purchase of your primary residence, you can also deduct mortgage interest from a second mortgage or a home equity line of credit (HELOC).</p> <p>You can deduct up to $500,000 ($1 million if married filing jointly) in all mortgage interest used to buy, construct, or make substantial improvements in your first home (and second, if applicable). You can't, however, deduct any mortgage interest for purchases on a third home and so on. You can also deduct up to $50,000 ($100,000 if married filing jointly) from all home equity debt for reasons other than to buy, build, or substantially improve your first or second home.</p> <h2>2. Mortgage Interest Credit</h2> <p>Recipients of a mortgage credit certificate (MCC) by a state or local government under a qualified mortgage credit certificate program could be eligible for a federal income tax credit of up to 20% of their annual mortgage interest. Figure this credit on Form 8396. The best part is that the remaining 80% of your mortgage interest is still eligible as a deduction!</p> <h2>3. Points</h2> <p>Charges paid by a borrower to secure a mortgage (also known as origination fees, maximum loan charges, or discount points) can generally be deducted. However, if you were to pay points to refinance an existing mortgage, you would amortize the points over the life of the mortgage. When you refinance a loan, your lender will send you a Form 1098 listing the points that you paid, but in the event that they don't, look for your points in your HUD-1 settlement sheet.</p> <p>Page 6 of <a href="https://www.irs.gov/pub/irs-pdf/p936.pdf" target="_blank">IRS Publication, 936 Home Mortgage Interest Deduction</a> provides a useful diagram to determine whether or not your points are fully deductible for this year.</p> <h2>4. Real Estate Taxes</h2> <p>You can deduct real estate taxes, including state, local, or foreign, you paid on real estate you own that wasn't used for business. Tally only taxes paid to government institutions and don't include itemized tax charges for services to specific property or people, such as a gardener or trash collection service. If you were to sell your property and receive a refund or rebate of real estate taxes, you would reduce your deduction by the amount of the refund or rebate.</p> <h2>5. Mortgage Insurance Premiums</h2> <p>You can deduct eligible mortgage insurance premiums provided by government authorities, including the Department of Veterans Affairs, the Federal Housing Administration, and the Rural Housing Service, as well as private mortgage insurance (PMI) issuers on loans issued after December 31, 2006. (See also: <a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=seealso" target="_blank">What Is Private Mortgage Insurance, Anyway?</a>)</p> <p>In 2017, you can't deduct your mortgage insurance premiums if your adjusted gross income is more than $54,500 ($109,000 if married filing jointly). If your adjusted gross income falls between $50,000 and $54,500 ($100,000 and $109,000 if married filing jointly), your deduction is limited and you must use the Mortgage Insurance Premiums Deduction Worksheet to figure your deduction.</p> <h2>6. Capital Gains Exemption</h2> <p>Eventually, you may sell your real home. Depending on several factors, such as years of ownership, substantial improvements, and neighborhood developments, your home may have appreciated by several thousands of dollars. To lessen the tax hit on taxable capital gains from the sale of your property, the IRS may exempt up to $250,000 ($500,00 if married filing jointly) of that gain from your income.</p> <p>In general, you qualify for a capital gains exemption as long as you have owned and used your home as your main home for a period aggregating at least two years out of the five years before its date of sale. Consult <a href="https://www.irs.gov/publications/p523/index.html" target="_blank">Publication 523, Selling Your Home</a> for more details. The beauty of this tax break is that there is no restriction as to how many times you can use it!</p> <h2>7. Investment Interest</h2> <p>Real estate investors also get a tax break on interest paid on money they borrowed that is allocable to property held for investment. Such investors need to use Form 4952 to figure out their investment interest expense deduction.</p> <p>Despite its name, this investment interest deduction doesn't cover interest gained from passive-income activities or securities that generate tax-exempt income.</p> <h2>8. Expenses for Business Use of Homes</h2> <p>Freelancers, independent contractors, and small business owners can deduct expenses for business use of their homes. With Form 8829, you can claim the area used regularly and exclusively for business to allocate a deductible portion from a wide range of expenses, including utilities and depreciation.</p> <p>If your deductions for home business are greater than the current year's limit, you can carry over the excess to 2017! This carry-over will be subject to the deduction limit for that year, whether or not you live in the same home during that year.</p> <h2>9. Tax Credits for &quot;Green&quot; Improvements</h2> <p>To encourage more energy efficient home improvements, the IRS provides tax credits for qualifying expenses. Here are two examples:</p> <ul> <li>Windows, doors, and skylights that met the ENERGY STAR program requirements and were installed between January 1, 2012 and December 31, 2016 at the homeowner's primary residence may grant you up to $500 in energy efficiency tax credits.<br /> &nbsp;</li> <li>Solar energy systems provide a tax credit of 30% of cost with no upper limit through December 31, 2019. The credit will decrease to 26% in 2020, drop to 22% in 2021, and goes away in 2022.</li> </ul> <p>To learn about other tax credit opportunities from energy efficient home improvements, visit&nbsp;<a href="http://www.energystar.gov" target="_blank">EnergyStar.gov</a>.</p> <h2>10. Deductions From Rental Income Activities</h2> <p>Rental real estate provides several tax breaks to landlords. For example, landlords could potentially deduct:</p> <ul> <li>Local transportation expenses to collect rental income or to manage, conserve, or maintain rental property;<br /> &nbsp;</li> <li>Expenses for managing, conserving, or maintaining rental property from the time it was made available for rent;<br /> &nbsp;</li> <li>Depreciation expenses for the wear and tear of rental property;<br /> &nbsp;</li> <li>Local benefit taxes for maintaining, repairing, or paying interest charges for the benefits;<br /> &nbsp;</li> <li>Legal and professional fees directly related to operating expenses; and<br /> &nbsp;</li> <li>Prepaid insurance premiums.</li> </ul> <p>To learn the full list of rental expenses and guidelines for deduction, consult <a href="https://www.irs.gov/publications/p527/ch01.html#en_US_2016_publink1000218979" target="_blank">Publication 527, Residential Rental Property</a>. If you use some of your rental properties for personal purposes throughout the year, then you should hire a tax pro to appropriately deduct expenses for rental income. Hiring an accountant to report income from your rental activities is itself an eligible deduction, after all! (See also: <a href="http://www.wisebread.com/4-times-you-should-splurge-and-hire-a-pro?ref=seealso" target="_blank">4 Times You Should Splurge and Hire a Pro</a>)</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/10-surprising-ways-real-estate-cuts-your-taxes">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/4-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</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/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-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</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-only-5-rules-of-home-buying-you-need-to-know">The Only 5 Rules of Home Buying You Need to 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/7-lessons-from-tax-day-to-remember-for-next-year">7 Lessons From Tax Day to Remember for Next Year</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Taxes business owners capital gains credits deductions energy efficient homeowners interest landlords mortgages rental properties Fri, 24 Feb 2017 10:00:13 +0000 Damian Davila 1897585 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-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/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/5-surprising-ways-revolving-debt-helps-you">5 Surprising Ways Revolving Debt Helps 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/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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-equity-in-your-home">How to Build Equity in Your Home</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/8-biggest-regrets-of-new-homeowners">8 Biggest Regrets of New Homeowners</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 5 Ways to Pay Off Your Student Debt Faster http://www.wisebread.com/5-ways-to-pay-off-your-student-debt-faster <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-your-student-debt-faster" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/new_grad_debt_100645843.jpg" alt="New grad finding ways to pay off student debt faster" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Plenty of us face student debt payments every month. In fact, in the United States an <a href="http://www.marketwatch.com/story/americas-growing-student-loan-debt-crisis-2016-01-15">estimated 40 million people</a> have student loan debt. With the rising cost of education, loans are becoming an increasingly common way for people to pay for school.</p> <p>While compounding debt may feel overwhelming, paying off your student debt isn't impossible &mdash; and you may be able to pay it off faster than you think. There are a few advantages that come along with paying off your debt faster. The sooner you reduce those balances, the sooner you'll stop paying interest on them. And once your debts are all paid off, you can feel good about putting that money toward something else.</p> <p>Here are some easy steps you can take that will help you pay off your student debt faster, saving you money in the long run.</p> <h2>Refinance and Consolidate Your Loans</h2> <p>If you've never <a href="http://www.wisebread.com/what-s-the-difference-between-student-loan-refinancing-and-consolidation?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=student">refinanced your student loans</a>, consider that it may be a good way to save a lot of money and help you to pay off loans faster. With <a href="http://www.wisebread.com/3-private-lenders-that-can-really-save-you-money-on-your-student-loans?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=student">online lenders like CommonBond</a>, you can save thousands through lower APRs.</p> <p>You may also want to consolidate multiple loans so that you're making a single monthly payment. This will simplify your payment process, and you'll further benefit from a lower APR when it applies to all of your loans &mdash; not just one of them.</p> <h2>Pay Off Your Student Debt With a Credit Card</h2> <p>You can actually put your monthly loan payment on a credit card and earn rewards for cash or travel. But don't do this if you can't pay off your balance in full each month. You'll end up paying more in interest than any amount of rewards you could earn. (See also: <a href="http://www.wisebread.com/the-5-best-credit-cards-for-college-students?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=student">Best Credit Cards for College Students</a>)</p> <h2>Make an Extra Principal Payment</h2> <p>This is an extra payment that you can make on a schedule that you determine &mdash; every two weeks, for instance. If you're making extra payments, it will reduce the time it takes to pay off your loan in full.</p> <h2>Set a Goal and Stick to It</h2> <p>It's really important to figure out a budget that makes sense given your personal situation. You'll need to take into account monthly expenses, like rent, food, a car payment, etc.</p> <p>From there, consider how much money you can put toward paying off your student debt. Remember that the more money you pay toward your loan, the faster you'll be able to pay it off. So you should also consider how much time you'd like to take to pay off your loan. Then you can factor in the money you'll save in the long run by paying off your debt sooner rather than later.</p> <h2>Get a Second Job or Side Hustle</h2> <p>If your budget falls a bit short on cash, you can always look into getting a second job and put those funds toward paying off your student debt. The more time you spend working, the less free time you'll have to spend your money, anyhow. And the effort and discipline you expend on acquiring or perfecting a second income stream will serve your career path and finances well in the future.</p> <p><em>How are you paying off your student loans?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nick-wharton">Nick Wharton</a> of <a href="http://www.wisebread.com/5-ways-to-pay-off-your-student-debt-faster">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-things-you-need-to-know-about-deferring-student-loans">4 Things You Need to Know About Deferring 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/what-is-student-loan-forbearance-anyway">What Is Student Loan Forbearance, Anyway?</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/6-ways-to-travel-when-you-have-student-loans">6 Ways to Travel When You Have Student Loans</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/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance 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/dont-get-trapped-by-these-higher-education-scams">Don&#039;t Get Trapped by These Higher Education Scams</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training APR consolidation debt interest monthly payments online lenders principal side jobs student loans Thu, 01 Sep 2016 09:30:34 +0000 Nick Wharton 1783722 at http://www.wisebread.com What Is Student Loan Forbearance, Anyway? http://www.wisebread.com/what-is-student-loan-forbearance-anyway <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-is-student-loan-forbearance-anyway" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/education_costs_graduation_17985755.jpg" alt="Learning what student loan forbearance is" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Struggling to make your student loan payments each month? You're in good company. According to a May story by CBS Moneywatch, members of the class of 2016 who took out student loans left college with an <a href="http://www.cbsnews.com/news/congrats-class-of-2016-youre-the-most-indebted-yet/">average of $37,173</a> in student loan debt. That's the highest average ever, and an increase of 6% from just one year earlier when such students graduated with an average debt of $35,051.</p> <p>If you're struggling to pay your student loans each month, you can apply for either forbearance or deferment of your federal student loan payments. Deferment and forbearance both put a temporary halt on your payments. That sounds good, and it can provide you with relief. But both programs come with limitations and neither does anything to <em>reduce </em>your <a href="http://www.wisebread.com/5-sobering-facts-about-student-loan-debt" target="_blank">student loan debt</a>.</p> <p>Deferment and forbearance are worth investigating if your student loan payments have become a burden. But before you sign up for either program, here are the facts you need to know.</p> <h2>What Loans Qualify?</h2> <p>You can only apply for forbearance or deferment of federal student loans. Private loans are not eligible for these programs. If you are struggling to pay private student loans, you'll need to work directly with the lenders behind them.</p> <h2>Deferment</h2> <p>Deferment is the preferred option for a temporary halt on your payments. That's because in deferment, not only are your payments delayed, but the government might even pay the interest on your loan during this period if you are paying off Federal Perkins loans, direct subsidized loans, or subsidized Federal Stafford loans.</p> <p>The government won't pay interest on any of your unsubsidized or PLUS student loans. But even if the government doesn't pay this interest, you do not have to make interest payments on your own during the deferment period. If you don't, though, the interest that accumulated during the deferment period will be added to your principal balance when you do begin making payments again.</p> <h3>Who Qualifies for Deferment?</h3> <p>You are eligible for deferment if you are unemployed or have been unable to find full-time employment. You might also qualify if you are suffering through an economic hardship, such as a reduction in your full-time income.</p> <h3>You Will Have to Apply for Your Deferment</h3> <p>To start the process, call the loan servicer to which you mail your loan payments, unless you need deferment for Perkins loans. In this case, call the school you were attending when you took out the loan. You'll most likely have to fill out a form detailing the reasons why you can't afford your monthly payment.</p> <h2>Forbearance</h2> <p>In forbearance, your federal student loan payments will again be temporarily halted, usually for up to 12 months. But in forbearance the government will not pay your interest during the temporary halt, no matter what type of federal loan you are paying off.</p> <p>You can make the interest payments on your loans during forbearance or you can temporarily stop making these payments, too. Your interest will continue to accumulate during the forbearance period, though, and will be added to your principal balance when this halt ends. This means that the amount you owe after your forbearance period ends will be higher than when you started forbearance. This could make paying off your student loan debt even more challenging.</p> <h3>Who Qualifies for Forbearance</h3> <p>You can qualify for a discretionary forbearance because of illness or financial hardship. Again, you will have to start the process by contacting the lender to which you are sending your student loan payments each month.</p> <h3>Mandatory Forbearance</h3> <p>There are times when the federal government requires your lender to grant forbearance. This is known as mandatory forbearance. You might qualify for this if you are serving in a medical or dental internship or residency program, the total you owe in student loan payments is more than 20% of your total monthly gross income, you qualify for the U.S. Department of Defense's Student Loan Repayment System, or you are serving in a national service program.</p> <p>You might also qualify for mandatory forbearance if qualify for the teacher loan forgiveness program or you are a member of the U.S. National Guard and have been called to duty but don't qualify for a military deferment.</p> <p><em>Are you struggling to repay your student loans? Have you considered these options?</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/what-is-student-loan-forbearance-anyway">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/4-things-you-need-to-know-about-deferring-student-loans">4 Things You Need to Know About Deferring 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-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</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-ways-to-pay-off-your-student-debt-faster">5 Ways to Pay Off Your Student Debt Faster</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-new-grads-guide-to-debt-management">The New Grad&#039;s Guide to Debt Management</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-money-moves-every-new-college-student-should-make">7 Money Moves Every New College Student Should Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training deferment federal government financial hardships forbearance interest principal student loans unemployed Tue, 02 Aug 2016 10:00:11 +0000 Dan Rafter 1762586 at http://www.wisebread.com 4 Ways Student Loans Impact Your Taxes http://www.wisebread.com/4-ways-student-loans-impact-your-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-ways-student-loans-impact-your-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_grad_broke_53019460.jpg" alt="Woman learning how student loans affect taxes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Tax time can make many feel anxious, especially if they're already burdened by student loan debt. Many people might not even think about their student loans when it comes time to file, and that would be a huge mistake.</p> <p>Here are three big tax issues &mdash; and one <em>huge</em> tax benefit &mdash; you should be aware of if you have student loan debt.</p> <h2>You Can Deduct Loan Interest</h2> <p>Yes, you can deduct your <a href="https://www.irs.gov/publications/p970/ch04.html">student loan interest</a>, reducing your income by up to $2,500. But to qualify for this deduction, you must earn less than $80,000 if single or $160,000 if you are filing jointly.</p> <p>If you paid more than $600 in interest on your student loan, you should automatically receive a Form 1098-E in the mail. However, if you do not receive this, you can still claim the interest you paid. Just request this form from your lender in January. (See also: <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=seealso">15 Ways to Pay Back Student Loans Faster</a>)</p> <h2>Defaulting on Your Loan Could Cost You Your Tax Refund</h2> <p>If you default on your federal student loan, your tax refund could go straight to your lender. They are legally allowed to take 100% of your tax refund. For most federal loans, you will be considered in default if you have not made a payment in 270 days.</p> <h2>Filing Jointly Can Cost You More in Student Loans</h2> <p>Many couples will file jointly to save money on their taxes and have easier access to tax credits, like the child tax credit and the dependent care credit. However, filing jointly can also make you pay more in student loan repayment throughout the year.</p> <p>Many individuals pay for their student loans on an income-driven repayment plan, which calculates monthly payments based off earnings. Since your joint income will be significantly higher than your individual incomes, your loan payments are likely to be higher. To make smaller monthly payments on your loans, you should probably file separately.</p> <p>You want to understand how much money it will cost to file your taxes separately versus how much you'll make in additional monthly student loan payments if you file jointly. MagnifyMoney.com put together a simple example scenario of a married couple without children. In their example, the couple would have saved over $1,100 in federal taxes if they filed jointly, but they would have saved $6,816 on their student loan payments by filing separately.</p> <h2>Student Loan Forgiveness/Cancellation Could Mean More Taxes</h2> <p>Student loan forgiveness programs are a great way to offset some of your student loan debt. However, some student loan forgiveness programs also come with a hefty tax bill in the end.</p> <p>Student loan forgiveness programs such as the Public Service Loan Forgiveness (PSLF) and other plans for teachers, health professionals, lawyers, or volunteers are all tax-free. If you follow the programs' rules for loan forgiveness, your loan will be forgiven without tax repercussions.</p> <p>Certain student loan forgiveness programs offered through individual states can be subjected to taxes. Many are not, but it is a good idea to do your research.</p> <p>If your student loan is cancelled or discharged, it can be considered taxable income. It might be cancelled or discharged for one of the following reasons:</p> <ul> <li>Cancellation for closed school;<br /> &nbsp;</li> <li>Cancellation for False Certification of the loan;<br /> &nbsp;</li> <li>Cancellation for unpaid refund of the loan;<br /> &nbsp;</li> <li>Discharge for death or disability.</li> </ul> <p>Finally, if you sign up for repayment programs that offer loan forgiveness after a certain number of years, any unpaid amount which is forgiven is considered taxable income. This usually happens with the income-based repayment (IBR) plans and the Pay As You Earn (PAYE) repayment plan. (See also:<a href="http://www.wisebread.com/5-sobering-facts-about-student-loan-debt?ref=seealso"> 5 Sobering Facts About Student Loan Debt</a>)</p> <p>Talk with a financial adviser that specializes in student loan debt for more help.</p> <p><em>Do you write off your student loan interest on taxes? </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/4-ways-student-loans-impact-your-taxes">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/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-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans">8 Tax Tricks to Try if You&#039;re Stuck With Student Loans</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-new-grads-guide-to-debt-management">The New Grad&#039;s Guide to Debt Management</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-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</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/10-surprising-ways-real-estate-cuts-your-taxes">10 Surprising Ways Real Estate Cuts Your Taxes</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training Taxes deductions filing jointly filing single interest loan forgiveness refunds repayment student loans Thu, 09 Jun 2016 09:30:21 +0000 Ashley Eneriz 1725704 at http://www.wisebread.com 5-Day Debt Reduction Plan: Stop Waiting for Tomorrow http://www.wisebread.com/5-day-debt-reduction-plan-stop-waiting-for-tomorrow <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-day-debt-reduction-plan-stop-waiting-for-tomorrow" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_binoculars_000029643960.jpg" alt="Woman learning to stop waiting for tomorrow with debt " title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>[Editor's Note: This is the first part of a five-part series on debt reduction. To read more, see <a href="http://www.wisebread.com/topic/5-day-debt-reduction-plan" target="_blank">5-Day Debt Reduction Plan</a>.]</p> <p>Debt sucks. It ties up your resources, robs you of the ability to save, and can cause stress, anxiety, and depression. Still, debt is a big part of our society &mdash; so big that many don't realize the impact it has on their personal finances, even when they're struggling to keep up with payments.</p> <p>Some people stick their heads in the sand because it's easier to ignore debt than take responsibility. The consequences of overcharging and overspending eventually catch up &mdash; and that burden can lead to other consequences, like <a href="http://www.wisebread.com/your-debt-is-killing-you-heres-the-cure?ref=5dayplan">physical and mental health issues</a> &mdash; but it doesn't have to.</p> <p>If your debt is out of control, <em>today </em>is the day to take control of your money.</p> <p>The good news is that you don't have to be a financial guru or have a ton of cash to succeed. Whether you have a little or a lot of disposable income, you can begin chipping away at your debt little by little each day when equipped with the correct set of tools and a handy guideline.</p> <p>See Also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=5dayplan&amp;utm_source=wisebread&amp;utm_medium=seealso2&amp;utm_campaign=5dayplan">Fastest Way to Pay Off $10,000 in Credit Card Debt</a></p> <h2>Debt Reduction Starts With a Decision</h2> <p>Be honest, how long have you been talking about reducing debt? A few weeks? A few months? A few years?</p> <p>Now think back to the first time you expressed a desire to get rid of debt. Have you successfully paid off (or paid down) some of your balances? Or have your balances remained the same or increased?</p> <p>If you answered &quot;yes&quot; to the last question, you're not alone. Getting rid of debt has its challenges, and at times you might think it's impossible. The fact that you're reading this article demonstrates a desire to change your mindset and your situation. It doesn't matter what you've done (or haven't done) in the past; this can be a new beginning and the first day on your journey to eliminating debt.</p> <p>See also: <a href="http://www.wisebread.com/how-to-start-fighting-debt-today?ref=5dayplan">How to Start Fighting Debt &mdash;&nbsp;Today</a></p> <h2>You're Not the Only Person With Debt, But You Still Need to Address It</h2> <p>Some people say debt is a part of life and everyone should stop whining and accept debt for what it is. Don't let the naysayers get in your head.</p> <p>Yes, most of us have some sort of debt, but this doesn't mean we have to accept all types of debt. Student loans and mortgages are &quot;good&quot; debt. They are usually cheap (the interest rates are low), and both generally improve our financial lives (education helps us earn more; a home is a valuable asset).</p> <p>Credit card debt, on the other hand, can be a vicious monster. It's expensive and most of what we borrow for will not improve our financial lives. But the moment we confront the monster and say &quot;no more,&quot; the easier it is to break habits that keep us indebted.</p> <p>See also: <a href="http://www.wisebread.com/how-to-start-fighting-debt-today?ref=5dayplan">8 Signs You&rsquo;ve Crossed from &ldquo;Healthy&rdquo; Debt to &ldquo;Problem&rdquo; Debt</a></p> <h2>What Led to Your Debt?</h2> <p>There's not one particular bad habit, but rather several possible habits. Everyone has their own weakness &mdash; mine, for instance, is clothes shopping &mdash; and it's each person's responsibility to identify habits that keep them in a pattern of overspending.</p> <h3>Impulse Buying</h3> <p>Most of us are familiar with this type of buying. You go to the store with intentions of buying one item, but you walk out with three or four items &mdash; basically every trip to Target I've ever had; you know what I'm talking about. This behavior may seem innocent, but it can throw off your budget and increase the likelihood of debt.</p> <p>See also: <a href="http://www.wisebread.com/13-creative-ways-to-avoid-spending-money?ref=5dayplan">13 Creative Ways to Avoid Impulse Spending</a></p> <h3>Lack of a Budget</h3> <p>If you never budget, you probably have no idea where your money goes, which means you could be overspending on nonessentials and using credit cards as an extension of your income. Keeping a paper trail helps you visualize how much you're spending and where your money is going, and that alone can be a deterrent to spending more.</p> <p>See also: <a href="http://www.wisebread.com/one-simple-thing-you-can-do-to-start-budgeting-today?ref=5dayplan">One Simple Thing You Can Do to Start Budgeting Today</a></p> <h3>Keeping Up With the Joneses</h3> <p>If your best friend or neighbor buys a new car, you may feel pressure to keep up and prove you can hang with the big spenders. But in reality, you're digging a financial hole for yourself.</p> <p>We're all guilty of at least one of these bad financial habits. We're human, so we're going to make mistakes. But regardless of the habit(s) you're guilty of, you <em>can </em>break the cycle.</p> <p>See also: <a href="http://www.wisebread.com/how-to-keep-peer-pressure-from-destroying-your-finances?ref=5dayplan">How to Keep Peer Pressure From Destroying Your Finances</a></p> <h3>Lack of Income</h3> <p>This isn't a habit, exactly, but whenever our income falls short of our expenses, and we've cut as much as we can, it's time to find more money. Whatever side job or career shift you choose, keep your debt reduction goals in mind. The extra money you earn should go first toward your debt reduction plan.</p> <p>See also: <a href="http://www.wisebread.com/100-ways-to-make-more-money-this-year?ref=5dayplan">100+ Ways to Make More Money This Year</a></p> <h2>The High Cost of Credit Card Debt</h2> <p>If you need help overcoming bad habits and breaking out of debt, it helps to have an understanding of the <a href="http://www.wisebread.com/the-most-valuable-thing-debt-takes-from-you-isnt-money-its-this?ref=5dayplan">true cost of debt</a>.</p> <p>Take for example a $5,000 credit card balance. If you're making $100 payments every month, in your mind, you should be able to pay off this debt in roughly 50 months (4 years). It's simple mathematics, right? Well, not exactly. There's this &quot;little&quot; thing called interest, which is what you pay for the privilege of using credit.</p> <p>Let's say the interest rate on that $5,000 is 18%. Making $100 payments every month, it will take almost eight years to pay off the balance, and you'll have paid over $4,000 in interest, for borrowing that $5,000. Think of how much interest you could <em>earn</em> if you invested that money instead.</p> <p>When you get a credit card statement, the amount due is typically between 1%-3% of the total balance. It will take a staggering amount of time to pay off your debt if you only make minimum payments. If you're just making the minimum payments, to pay off $5,000, it would take <strong>more than 39 years</strong>. You would have paid over $8,000 in interest.&nbsp;</p> <p>&quot;It will take a discouragingly long time to pay off a debt if you stick to only minimum payments,&quot; says Julie Ford, a financial planner in New York City. &quot;Creditors want you to only pay the minimum amount so they can collect interest from you for as long as possible.&quot;</p> <p>The more money you give creditors, the less money you have available for building a rainy day fund. And of course, if you don't have a reserve, it only takes one emergency to put you deeper in debt.</p> <p>According to the American Household Credit Card Debt Study, the &quot;average U.S. household with debt carries $15,762 in credit card debt,&quot; and a recent Google Consumer Survey found that &quot;approximately 62% of Americans have less than $1,000 in their savings accounts, and 21% don't even have a savings account.&quot; As a personal finance expert who has experienced debt myself, these statistics are sobering to say the least.</p> <p>When debt prevents saving for a rainy day fund, it may also interfere with your ability to save for retirement. Even if you have a 401K or an individual retirement account, you might only contribute the bare minimum, if anything. As a result, the prospect of working until you're literally on your deathbed is a real possibility.</p> <p>See also: <a href="http://www.wisebread.com/everything-you-didn-t-understand-about-credit-card-interest-grace-periods-and-penalty-aprs?ref=5dayplan">Everything You Didn&rsquo;t Understand About Credit Card Interest</a></p> <h2>Find Your Motivation &mdash; And Stay Motivated</h2> <p>The road to getting your bank accounts into the black can be rough. What's the motivating force driving your desire to reduce debt? If you don't have an end goal or a reason for eliminating debt, it's easy to give up as soon as you hit a bump in the road. I've seen it time and time again, especially from chronic spenders. To avoid this pitfall, brainstorm and write down what you hope to accomplish by reducing debt.</p> <ul> <li>Do you want to set a good example for your children?<br /> &nbsp;</li> <li>Are you tired of losing sleep and worrying about your debt?<br /> &nbsp;</li> <li>Do you want to buy a house, but fear debt will prevent qualifying for a mortgage?</li> </ul> <p>Of course, it isn't enough to know what motivates you, but rather you have to stay motivated. The best way to do this is to surround yourself with likeminded individuals &mdash; those who share your goal and can offer encouragement along the way &mdash; and avoid those people who encourage your negative spending habits, like your house-poor friends who spend all their disposable income on Thirsty Thursday shots and late-night tacos. (We all still have a few of 'em.)</p> <p>If your close friends and family are in debt and don't have a desire to reduce or eliminate their balances, don't expect these people to steer you in the right direction or provide the support you need. Look outside your inner circle and connect with people who share your mindset. For example, you can work with a financial planner, join a debt support group, or follow the debt success stories of personal finance bloggers.</p> <p>See also: <a href="http://www.wisebread.com/5-inspiring-people-who-each-paid-off-over-100000-in-debt?ref=5dayplan">10 Dark-Side Motivations to Get You Out of Debt</a></p> <h2>Stop Procrastinating</h2> <p>Procrastination is the avoidance of starting or completing a task. It's a natural human tendency and we procrastinate for different reasons. These reasons might include the fear of failure, lack of interest, and even the fear of success. But with regard to debt, procrastination might have everything to do with lack of knowledge. You know you need to deal with your debt, but you don't know how, so you put it off.</p> <p>If you want to overcome procrastination, you have to learn ways to make debt reduction a reality. It's a step-by-step process that can take months or years. But the process is easier than you think when you have realistic expectations and set small, manageable goals for yourself</p> <p>But before you can get to that point, you need to first find out how much you owe and learn strategies to monitor your debt. Check back tomorrow, and we'll take that first step by Adding It Up.</p> <h2>Debt Management Resources</h2> <ul> <li><a href="http://www.wisebread.com/how-to-manage-your-debt-in-10-minutes-a-week?ref=5dayplan">How to Manage Your Debt in 10 Minutes a Week</a></li> <li><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask?ref=5dayplan">5 Debt Management Questions You&rsquo;re Too Embarrassed to Ask</a></li> <li><a href="http://www.wisebread.com/6-free-debt-management-tools?ref=5dayplan">6 Free Debt Management Tools</a></li> <li><a href="http://www.wisebread.com/12-reasons-your-debt-isnt-diminishing?ref=5dayplan">12 Reasons Your Debt Isn&rsquo;t Diminishing</a></li> <li><a href="http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make?ref=5dayplan">8 Debt Reduction Mistakes Even Smart People Make</a></li> <li><a href="http://www.wisebread.com/should-you-use-peer-to-peer-lending-to-pay-down-credit-card-debt?ref=5dayplan">Should You Use Peer-to-Peer Lending to Pay Down Credit Card Debt?</a></li> <li><a href="http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them?ref=5dayplan">6 Common Debt Reduction Roadblocks -- And How to Beat Them</a></li> <li><a href="http://www.wisebread.com/six-steps-to-eliminating-your-debt-painlessly?ref=5dayplan">6 Steps to Eliminating Your Debt Painlessly</a></li> <li><a href="http://www.wisebread.com/8-organizations-that-really-can-help-you-with-your-debt?ref=5dayplan">8 Organizations That REALLY Can Help You With Your Debt</a></li> <li><a href="http://www.wisebread.com/should-you-sell-your-home-to-pay-down-debt?ref=5dayplan">Should You Sell Your Home to Pay Down Debt?</a></li> <li><a href="http://www.wisebread.com/taming-your-debt-aggressive-repayment-strategies?ref=5dayplan">Taming Your Debt: Aggressive Repayment Strategies</a></li> <li><a href="http://www.wisebread.com/the-7-best-credit-card-debt-elimination-strategies?ref=5dayplan">7 Best Credit Card Debt Elimination Strategies</a></li> </ul> <p>&nbsp;</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-day-debt-reduction-plan-stop-waiting-for-tomorrow">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/why-retiring-with-debt-isnt-the-end-of-the-world">Why Retiring With Debt Isn&#039;t the End of the World</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-fastest-method-to-eliminate-credit-card-debt">The Fastest Method to Eliminate Credit Card Debt</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/7-easy-first-steps-to-paying-off-debt">7 Easy First Steps to Paying Off Debt</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-types-of-overspenders-which-one-are-you">5 Types of Overspenders — Which One Are You?</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/snowballs-or-avalanches-which-debt-reduction-strategy-is-best-for-you">Snowballs or Avalanches: Which Debt Reduction Strategy Is Best for You?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management 5 day debt reduction plan budgeting impulse spending income interest keeping up with the joneses Mon, 06 Jun 2016 10:30:06 +0000 Mikey Rox 1723444 at http://www.wisebread.com