Source: moneycrashers.com
7 Best Small Business Loans of 2021
If you recently started a business, you might be wondering whether itâs a good idea to take out a small business loan. Small business loans can make it easier for you to buy equipment, hire…
The post 7 Best Small Business Loans of 2021 appeared first on Crediful.
Source: crediful.com
Personal Loans After Bankruptcy
Bankruptcy is not the end of the world. In fact, while it is more difficult to acquire loans and credit cards, itâs not impossible. In this guide, weâll show you how you can get short-term loans and long-term loans even after you have filed for bankruptcy.
Whether you have debt to repay, bills to cover or credit to build, you can get back on track with a personal loan, even if you have recently filed for bankruptcy.
Challenges in Getting a Personal Loan After Bankruptcy
You will face a few issues when applying for an unsecured personal loan after bankruptcy. Firstly, lenders will insist that you wait a while before you apply. The exact timeframe will depend on the individual lender and the type of loan, but generally, youâll need to give it at least 2 years.
Your credit score is also important. Bankruptcy can reduce your credit score by over 200 points, and it can do all kinds of major damage before you file. Loan companies are not interested in lending to individuals with poor credit scores and recent bankruptcy filings. This is especially true if they filed for Chapter 7, in which case all debts were discharged.
It makes senseâcreditors base their activity on statistics and probability. If you have a recent filing and a terrible credit score, statistically youâre much less likely to meet your monthly repayments.
Some lenders will be more willing to take a risk on the basis that an individual who has recently filed is unable to file again for another few years. However, in these cases, they are still taking a massive risk and to offset that they will offer you massive rates.
Whatâs more, while it seems like they are doing you a favor by taking a chance when no one else will, theyâre actually just taking advantage of your desperation, offering you an unsecured loan when youâre more willing to accept.
Most Common Challenges and How to Overcome
The biggest issue you have when applying for personal loans after bankruptcy concerns your credit score. Your score will likely be very low, and many lenders refuse to offer low-rate loans to consumers with scores less than 660. If you have a score of 550 or less, you may still be offered a loan, but the rates will be high.
The good news is that things get easier with time. A bankruptcy discharge essentially wipes your slate clean, eliminating your monthly payments. This leaves you with more money in your pocket, which means you should have less need for an unsecured personal loan.
If you need a car, try a car loan instead. The fact that it is secured against the vehicle should ensure you receive better rates, even with a low credit score. If you simply need to build your credit score, try a secured credit card instead. Providing you meet your monthly payments on this secured card, youâll get your security deposit back and your credit score will improve, as lenders report all activity to the credit bureaus.
How Bankruptcy Affects Your Ability to Get a Personal Loan
A bankruptcy can remain on your credit report for 10 years and do some serious damage to your credit score in that time. The effects will diminish with each passing year and in the final few years, you shouldnât have any issues whatsoever. However, it will take a few years before your credit score improves to a point where you donât need to limit yourself to high-rate loans.
Your credit score isnât the only issue, either. Many home, car, and personal loan lenders refuse all applicants who have filed for bankruptcy within a fixed period of time, often between 2 and 3 years. If you need a loan during this time then your options are limited, to say the least. You will be forced to choose one of the following options for unsecured credit:
- Bad Credit Car Loans: These loans offer respectable sums and terms, but they have high-interest rates, and these may increase if you donât meet your monthly payment obligations.
- Payday Loans: High-rate and low-limit loans offered over a short period. The idea is that you take the loan when youâre struggling to make ends meet and need some assistance before payday. These loans are not as bad as they once were due to restrictions and regulations, but they are still not ideal. They are also illegal in nearly half of all US states.
- Unsecured Credit Cards: You can also get a revolving line of credit with an unsecured credit card. However, as with bad credit loans, these have high-interest rates and very poor terms.
To trick you into paying a higher APR, lenders wonât always advertise their rates and will instead charge a fixed sum every month. This can be the equivalent of an APR over 20%, much higher than the average, which is around 16%.
Best Installment Loans After Bankruptcy
Before applying for a personal loan, take a close look at your finances. Calculate your debt-to-income ratio, and make sure you can comfortably afford the payments. If you have recently filed for bankruptcy, you canât apply again for several years which means youâve lost your get-out clause and canât afford to fall behind on your payments.
If you struggle to meet your payments, lenders may still offer a repayment plan and financial hardship programs. However, if youâve already been through debt issues then your options decrease and they may be less willing to lend a helping hand.
Only when youâre absolutely confident in your financial situation and your ability to repay should you seek to acquire additional debt.
Here are a few providers and options that can help:
- Upstart: Accepts credit scores as low as 580 with APRs as high as 36%.
- Lending Club: You need a credit score of at least 600 to apply.
- OneMain Financial: There is no minimum credit score and monthly payments begin at just over $200.
- Lending Point: A minimum credit score of 585 is needed for loans of between $2,000 and $30,000.
- Avant: Get up to $35,000 with an APR ranging from around 10% to 36%.
What Happens if you Get Refused?
If you get refused for a personal loan because you have a poor credit card or have recently filed for bankruptcy, there are a few options:
Wait
Patience is the best policy in this situation. It doesnât matter how bleak things seem right now, they will improve in time. The longer you wait, the older your accounts will become, the more your payment history will improve (assuming you have active accounts) and the further away that bankruptcy filing will be.
If you donât have any active accounts, waiting can still help, but you should also look into acquiring a credit card with a security deposit, which can greatly improve your credit score in just a few months
A credit builder loan can also help, as can lending circles. These options are easy to apply for and donât require stringent checks, great credit or a clean bankruptcy history. But before you get excited, they donât give you cash sums in advance and are designed purely to help you rebuild your credit.
Appeal to the Lender
Bigger lenders use a long list of criteria to determine which applicants to accept and which ones to reject. No amount of begging or explaining will change their minds and if youâre rejected, you just need to move on, improve your score, and try again in the future.
However, if a smaller lender rejects you because of your recent bankruptcy filing, itâs worth contacting them to explain your situation. Explain how you have turned things around, show them proof if you have it, and ask them what would be required of you for them to accept. You might not get them to change their minds, but it should give you some valuable insight into their process.
Look for a Co-signer
A co-signer with a strong credit history can back you for a personal loan. However, itâs a very sensitive area and a huge favor to ask of anyone, even someone who loves you.
If you stop meeting those payments the co-signer will become responsible for them, putting their credit in jeopardy. Choose carefully, donât place anyone in an awkward position, never assume they should help you just because you need help, and always make your monthly payments so they are never required to cover for you.
Seek Other Options
There are other creditors, other loans, and other optionsâtry a credit card, borrow from a friend or family member, sell an asset, use a pawn shop. We live in a credit hungry society and there are more options than anywhere else. Use these to your advantage and donât get stuck chasing the same loan.
Personal Loans After Bankruptcy is a post from Pocket Your Dollars.
Source: pocketyourdollars.com
How To Get A Car Loan in 5 Easy Steps
Need a car loan soon? Whether you’re about to buy a car soon or just thinking about it, chances are you will likely finance it (unless, of course, you have the cash to buy it right away). So why not learn a few steps along the way to help you get a car loan. A little knowledge about the process can go a long way; so far as saving you thousands of dollars in the long run!
Ready to start comparing car loan already? Start now… it’s Free.
Step One: Review your credit file
You may need to get a free credit report and make sure you have a good credit score before applying for a car loan. The better your credit score, the higher your chance to get approved and save on interest.
Step Two: Compare interest rates
You should shop around, compare auto rates and fees before you apply for a car loan. The worst thing you can do to yourself is to apply for multiple loans at the same time, as this can affect your credit score.
So, look at multiple rates at one place so you can make the best decision. Also, remember you can choose a fixed rate or variable rate on a car loan.
Whichever you choose depends on what you’re comfortable with. Remember that a fixed rate will stay the same for all of the term of the loan. That means, your repayment will be predictable and you’ll be able to budget for a lot easier than with a variable rate.
Click here to compare car loan rates through LendingTree.
Step Three: Dealer Finance or Car loan?
You should always compare bank/independent loan to dealer finance.
Granted dealer financing may get you a auto loan with a very low rate, but that does not mean you get the best deal. Sometimes dealer financing can be more expensive in the long run. So you may want to compare rates from 2-3 lenders with a dealer finance rate to make sure you get the best rate possible.
Step Four: Get pre-approved
Before you commit to a car you should get pre-approved first. Plus, walking into the car dealership with a pre-approval letter in your hand, gives you greater negotiating power.
Step Five: Gather your documents and go car shopping
Once you decide on an auto loan that you’re happy with, it’s time to go car shopping! So gather your financial documents such as your pay stubs, bank statements, tax returns, and W2s.
Want to explore your car loan options? Visit LendingTree to compare the best car loan rates.
Related: How to save money for a car
Speak With The Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals. Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post How To Get A Car Loan in 5 Easy Steps appeared first on GrowthRapidly.
Source: growthrapidly.com
5 Tips for Keeping Your Business Afloat During COVID-19
Many businesses are laying off employees or shutting
doors, at least temporarily during the coronavirus pandemic. Only you
can make the decision about what’s right for your businessâand you should do so
in consultation with business experts such as CPA advisers or business coaches.
Youâll also want to make sure that you are following the guidelines established
by your local government.
But if you’re looking for ways to weather the storm,
consider these five tips for keeping your business afloat during COVID-19.
1. Offer Delivery
For many businesses, a lack of foot traffic is crushing
cash flow. But that doesn’t mean you don’t have products that others want and
need. During this time when many people are unable or afraid to leave their
homes, you can continue to meet consumer demand by offering delivery.
Many restaurants are already waiving delivery fees or
making deliveries when they didn’t previously. This technique could be
especially lucrative if you offer products, such as books, games, movies or
crafts, that can make quarantine life easier for others.
If delivery isn’t an option, consider contactless curbside
service. Let people buy items online or reserve them over the phone or via chat
service and pick them up without getting out of their cars.
2. Create a Subscription Box
Even before COVID-19, the market was enamored with subscription boxes. In fact, 54% of online shoppers had at least one subscription in October 2019, and many shoppers had more than one. Businesses that can put together a weekly, monthly or quarterly box for patrons can create stable cash flow throughout the COVID-19 stay-at-home periodâand beyond.
Think about what you offer, what people might need or want
on a regular basis and how you can put it together in themed boxes. Consider
meal, beverage, home salon, self-care, craft, entertainment and education kits.
Such subscriptions can help build customer loyalty and maintain cash flow.
3. Scale Down
In some states, nonessential businesses have been
required to close their doors. In others, businesses can remain open as long as
they can maintain social distancing or allow no more than 10 people on the
premises at a time. Consider whether you can scale your business down to
accommodate smaller crowds.
One way any type of store can help ensure smaller numbers and social distancing is offering shop-by-appointment options. Invest in an appointment tracking software that lets people make appointments on your website and then arrive at the store during their allotted time period.
Creative tips for keeping your business afloat during
COVID-19 like this can actually have two benefits. First, they allow you to
generate some revenue. Second, they let you get to know more customers better,
which can be a boost for future sales.
4. Review Support Options
Make sure you’re leveraging all potential funding and relief sources. If your company qualifies as a small business, you may be able to seek a small business stimulus loan. Some of these loans are being offered through the Small Business Administration and its partners and others are being offered by traditional banks.
If you have an existing relationship with an SBA Express Lender, you may be able to get an Express Bridge Loan. The SBA is also offering some debt relief for businesses with current microloans or 7(a) or 504 loans.
The Paycheck Protection Program
The Paycheck Protection Program (PPP) was created to provide small businesses with the funds to pay up to eight weeks of payroll costs. The fundâ$349 billionâran out in just thirteen days. The Senate has approved additional funding of $310 billion, which includes $30 billion specifically for community lenders and credit unions. The money must be used to pay employees, rent, utilities or mortgage interest. Approved businesses that use the money as instructed and keep all employees on payroll for eight weeks don’t have to pay back the loan, as it’s designed to provide an incentive for businesses to keep workers on their payroll.
Economic Injury Disaster Loan Emergency Advance
Qualifying small businessowners can get an advance up to $10,000 that doesn’t have to be repaid. You do have to apply for the loan and meet the eligibility requirements, which include financial distress and loss of revenue related to COVID-19. The SBA is not currently accepting new applications, but keep an eye on potential future funding.
5. Take Out a Small Business or Personal Loan
Not everyone qualifies for the stimulus loans, and in some cases, that relief may not keep your business afloat during COVID-19 on its own. You might consider leveraging your business or personal credit history for a loan, especially if you have good credit.
Find Your Loan
Privacy Policy
Find out if you qualify for a short-term personal or business loan. Because these types of loans are rarely secured, you can use the funds for anythingâincluding paying your employees, covering bills and invoices or purchasing inventory and supplies.
If you’re planning to put one of the tips above into
action, you might need the temporary cash flow to fund the pivot in your
business model that helps you stay afloat during the pandemic.
The post 5 Tips for Keeping Your Business Afloat During COVID-19 appeared first on Credit.com.
Source: credit.com
Forex Trading Margin: What Is it, and Why Should You Care?
The Forex industry is a very interesting one in that Forex traders have the ability to trade in far more currency than their principal investments would generally allow. This is the result of what’s known as a “trading margin.” So what is this trading margin, and why exactly should you care? Let’s talk about it!
Forex Trading Margin: What Is It?
A Forex trading margin is a ratio that defines the leverage a trader has in the market. Trading margins in the world of Forex range from 10:1 to 50:1 on average. So, when it comes to Forex trading, a $1 principal investment gives the trader the ability to trade from $10 to $50 worth of currency.
Forex Margins Are the Same as Stock Market Margins…Right?
For the most part, Forex margins and stock market margins are about the same. However, there are a few key differences:
- Margin Interest –Â A trading margin is essentially a loan. For every dollar the investor puts up, the broker adds a significant amount of money in Forex. However, Forex brokers generally don’t charge interest on the money they put toward your investments. On the other hand, stock brokers generally charge interest on these loans.
- Margin Size –Â In the stock market, brokers generally offer 2:1 margins; however, in the Forex market, the minimum margin a trader will generally find is 10:1. Therefore, Forex margins give traders more leverage in the market than stock market margins.
- Margin Calls –Â Forex traders generally aren’t susceptible to margin calls. Unfortunately, that’s not the case for stock market investors. A margin call happens when a trade moves against the trader. At this point, brokers will require the investor to add to their cash deposits.
Forex Trading Margins: Why You Should Care
Margins can work for you, and they can work against you. To be profitable in Forex, it’s important to understand the advantages added by margins as well as the risks. Here’s how the advantages and risks work:
- Added Advantage –Â Think about what leverage really does for Forex traders. With $200 as a principal investment and 50:1 leverage, Forex traders can take advantage of movements on $10,000 worth of currency. That gives traders a big advantage when it comes to realizing gains in the market.
- Risks –Â On the other hand, high margins can also work against you. That’s because when trades don’t go in your favor, the size of the loss you take will be increased by the margin.
Final Thoughts
If you’re looking to trade Forex, it’s worth the time to do a bit of research on trading margins and how they can help you as well as hurt you. Leave a comment below if you have any specific questions!
This article was written by Joshua Rodriguez, owner and founder of CNA Finance.
The post Forex Trading Margin: What Is it, and Why Should You Care? appeared first on MintLife Blog.
Source: mint.intuit.com
3 Credit Cards for Retirement Investing
The age of the pension has swiftly declined since the 1980s, and more Americans than ever before must invest in their own retirement. Retirement planning and investing is crucial, as it can help you get through your golden years comfortably.
When you have many other financial obligations, it can be difficult to set aside funds for retirement. But some credit cards can help by earning rewards that can be redeemed directly into an investment account.
Here are three credit cards with retirement or investing rewards.
-
Fidelity Rewards Visa Signature Credit Card
Rewards: Two points per dollar spent on all purchases.
Sign-Up Bonus: None
Annual Fee: $0
Annual Percentage Rate (APR): Variable 15.24% APR on purchases and balance transfers.
Why We Picked It: You can redeem your rewards directly into Fidelity retirement accounts.
For Your Retirement: Every purchase earns two rewards points on the dollar. Points can be redeemed as deposits into eligible Fidelity retirement accounts, including a Traditional IRA, Roth IRA, Rollover IRA, or SEP IRA. Every $2,500 you spend is worth a $50 rewards deposit.
Drawbacks: If you arenât a Fidelity member, you wonât see much value from this card.
-
Bank Americard Cash Rewards Credit Card
Rewards: 3% cash back on gas and 2% cash back at grocery stores and wholesale clubs on up to $2,500 in purchases each quarter; 1% back on all other purchases.
Signup Bonus: $150 bonus cash if you spend $500 in the first 90 days.
Annual Fee: None
APR: 0% APR for 12 months on purchases and balance transfers, then variable 14.24% to 24.24% APR.
Why We Picked It: Merrill Lynch investors can use this card to boost their investments.
For Your Retirement: If you use a Merrill Lynch Cash Management Account to invest in your retirement, this card can help you increase your contributions. Cash back can be redeemed for an electronic deposit into an eligible Cash Management Account, and those redemption types earn an extra 10% bonus every time you redeem.
Drawbacks: If you donât have an eligible Bank of America or Merrill Lynch account, youâll lose out on the 10% redemption bonus.
-
Edward Jones World Card
Rewards: One point per dollar spent on all purchases.
Signup Bonus: $100 account deposit if you spend $500 in the first 90 days.
Annual Fee: None
APR: Variable 14.24% APR on purchases; 0% APR for 12 months on balance transfers, then variable 14.24% APR.
Why We Picked It: Edward Jones members can redeem rewards for account deposits.
For Your Retirement: Every purchase you make earns one point on the dollar. Your points can be redeemed for cash deposits into an eligible Edward Jones account, including IRAs.
Drawbacks: You can only access this card if youâre an Edward Jones customer.
Choosing a Credit Card to Help You Save for Retirement
There are many ways to save for retirement: 401(k) plans, IRAs, and more. If you arenât saving for retirement yet (or you think you need to save more), the time to start is now. The earlier you begin, the better shot you have of reaching your retirement goals. Until you decide on the best investment strategy, credit cards should be a secondary concern at best.
When you set up an investment account, you should understand all the different ways you can contribute, and find out if credit card rewards are an option (some investment accounts are more flexible than others).
Credit cards that let you directly redeem your rewards for an investment deposit are convenient, but theyâre not the only way to contribute rewards to retirement. If you have a retirement account that accepts cash contributions, you can simply redeem any credit cardâs cash back rewards for a check or bank deposit, then turn around and put that money in your account.
Whether you choose a rewards card with investment redemptions or not, try to find one that fits your spending habits. If you spend the most money at one or two merchant types, you should try to find a card that rewards those purchases. If your spending is unpredictable, you should find a card with a flat rewards rate on every purchase.
What Is Required to Get a Credit Card for Retirement Investing?
The best rewards cards require good or excellent credit. Before you apply, you should check your credit score to see if youâll make the cut. You can check your credit score for free at Credit.com.
You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.
Note: Itâs important to remember that interest rates, fees, and terms for credit cards, loans, and other financial products frequently change. As a result, rates, fees, and terms for credit cards, loans, and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees, and terms with credit card issuers, banks, or other financial institutions directly.
Image: iStock
The post 3 Credit Cards for Retirement Investing appeared first on Credit.com.
Source: credit.com
How to Avoid a Prepayment Penalty When Paying Off a Loan
Look at you, so responsible. You received a financial windfall â stimulus check, tax refund, work bonus, inheritance, whatever â and youâre using it to pay off one of your debts years ahead of schedule.
Good for you! Except⦠make sure you donât get charged a prepayment penalty.
Now wait just a minute, you say. Iâm paying the money back early â early! â and my lender thanks me by charging me a fee?
Well, in some cases, yes.
A prepayment penalty is a fee lenders use to recoup the money theyâll lose when youâre no longer paying interest on the loan. That interest is how they make their money.
But you can avoid the trap â or at least a big payout if youâve already signed the loan contract. Weâll explain.
What Is a Loan Prepayment Penalty?
A prepayment penalty is a fee lenders charge if you pay off all or part of your loan early.
Typically, a prepayment penalty only applies if you pay off the entire balance â for example, because you sold your car or are refinancing your mortgage â within a specific timeframe (usually within three years of when you accepted the loan).
In some cases, a prepayment penalty could apply if you pay off a large amount of your loan all at once.
Prepayment penalties do not normally apply if you pay extra principal in small chunks at a time, but itâs always a good idea to double check with the lender and your loan agreement.
What Loans Have Prepayment Penalties?
Most loans do not include a prepayment penalty. They are typically applied to larger loans, like mortgages and sometimes auto loans â although personal loans can also include this sneaky fee.
Credit unions and banks are your best options for avoiding loans that include prepayment penalties, according to Charles Gallagher, a consumer law attorney in St. Petersburg, Florida.
Unfortunately, if you have bad credit and canât get a loan from traditional lenders, private loan alternatives are the most likely to include the prepayment penalty.
Pro Tip
If your loan includes a prepayment penalty, the contract should state the time period when it may be imposed, the maximum penalty and the lenderâs contact information.
âThe more opportunistic and less fair lenders would be the ones who would probably be assessing [prepayment penalties] as part of their loan terms,â he said, âI wouldnât say loan sharking⦠but you have to search down the list for a less preferable lender.â
Prepayment Penalties for Mortgages
Although youâll find prepayment penalties in auto and personal loans, a more common place to find them is in home loans. Why? Because a lender who agrees to a 30-year mortgage term is banking on earning years worth of interest to make money off the amount itâs loaning you.
That prepayment penalty can apply if you want to pay off your loan early, sell your house or even refinance, depending on the terms of your mortgage.
However, if there is a prepayment penalty in the contract for a more recent mortgage, there are rules about how long it can be in effect and how much you can owe.
The Consumer Financial Protection Bureau ruled that for mortgages made after Jan. 10, 2014, the maximum prepayment penalty a lender can charge is 2% of the loan balance. And prepayment penalties are only allowed in mortgages if all of the following are true:
- The loan has a fixed interest rate.
- The loan is considered a âqualified mortgageâ (meaning it canât have features like negative amortization or interest-only payments).
- The loanâs annual percentage rate canât be higher than the Average Prime Offer Rate (also known as a higher-priced mortgage).
So suppose you bought a house last year and then wanted to sell your home. If your mortgage meets all of the above criteria and has a prepayment penalty clause in the mortgage contract, you could end up paying a penalty of 2% on the remaining balance â for a loan you still owe $200,000 on, that comes out to an extra $4,000.
Prepayment penalties apply for only the first few years of a mortgage â the CFPBâs rule allows for a maximum of three years. But again, check your mortgage agreement for your exact terms.
The prepayment penalty wonât apply to FHA, VA or USDA loans but can apply to conventional mortgages â although the penalty is much less common than it was before the CFPBâs ruling.
âItâs more of private loans â loans for people whoâve maybe had some struggles and canât qualify for a Fannie or Freddie loan,â Gallagher said. âThat block of lending is the one going to be most hit by this.â
How to Find Out If a Loan Will Have a Prepayment Penalty
The best way to avoid a prepayment penalty is to read your contract â or better yet, have a professional (like an attorney or CPA) who understands the terminology, review it.
âYou should read the entirety of the loan, as painful as that sounds, because lenders may try to hide it,â Gallagher said. âGenerally, it would be under repayment terms or the language that deals with the payoff of the loan or selling your house.â
Gallagher rattled off a list of alternative terms a lender could use in the contract, including:
- Sale before a certain timeframe.
- Refinance before a term.
- Prepayment prior to maturity.
âThey avoid using the word âpenalty,â obviously, because that would give a reader of the note, mortgage or the loan some alarm,â he said.
If youâre negotiating the terms â as say, with an auto loan â donât let a salesperson try to pressure you into signing a contract without agreeing to a simple interest contract with no prepayment penalty. Better yet, start by applying for a pre-approved auto loan so you can get a pro to review any contracts before you sign.
Pro Tip
Do you have less-than-sterling credit? Watch out for pre-computed loans, in which interest is front-loaded, ensuring the lender collects more in interest no matter how quickly you pay off the loan.
If your lender presents you with a contract that includes a prepayment penalty, request a loan that does not include a prepayment penalty. The new contract may have other terms that make that loan less advantageous (like a higher interest rate), but youâll at least be able to compare your options.
How Can You Find Out if Your Current Loan Has a Prepayment Penalty?
If a loan has a prepayment penalty, the servicer must include information about the penalty on either your monthly statement or in your loan coupon book (the slips of paper you send with your payment every month).
You can also ask your lender about the terms regarding your penalty by calling the number on your monthly billing statement or read the documents you signed when you closed the loan â look for the same terms mentioned above.
What to Do if Youâre Stuck in a Loan With Prepayment Penalty
If you do discover that your loan includes a prepayment penalty, you still have some options.
First, check your contract.
If youâll incur a fee for paying off your loan early within the first few years, consider holding onto the money until the penalty period expires.
Pro Tip
If you donât have a loan with a prepayment penalty, contact your lender before sending additional money to ensure your payment is going toward principal â not interest or fees.
Additionally, although you may get socked with a penalty for paying off the loan balance early, itâs likely you can still make extra payments toward the balance. Review your contract or ask your lender what amount will trigger the penalty, Gallagher said.
If youâre paying off multiple types of debt, consider paying off the accounts that do not trigger prepayment penalties â credit cards and federal student loans donât charge prepayment penalties.
By using techniques like the debt avalanche, debt snowball and debt lasso methods, you can tackle your other debts while giving yourself time to let a prepayment penalty period expire.
Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Source: thepennyhoarder.com
How To Pay Off Student Loans Faster Than Ever
Nobody wants to pay off student loans longer than they have to, yet far too many people are stuck in lengthy repayment plans that seem like theyâll never end. While income-driven repayment plans backed by the federal government ask you to pay down loans for 20 to 25 years before leading to loan forgiveness, even the âstandardâ repayment plan for federal loans lasts for a full ten years. No matter how you cut it, thatâs a long time!
With that in mind, you should know that itâs possible to pay off student loans faster if you are willing to think outside the box and forge your own path along the way. However, not all early repayment plans will work for every borrower, so itâs important to think through how to pay off student loans faster in a way that helps you reach your goals in a common sense way.
One strategy many borrowers use to pay off student loans faster is refinancing loans with a different lender. Not only do some student loan refinancing companies offer lower interest rates and flexible repayment terms, but you could even earn a cash bonus just for signing up.
9 Ways to Pay Down Student Debt Faster
The sooner you can pay off all your student loans, the quicker you can move on with your life. Here are some strategies to consider that can help you pay off your student loans much faster than a traditional repayment plan allows.
What You’ll Learn
- Make More Than the Minimum Monthly Payment
- Try the Debt Snowball
- Refinance with a Private Lender
- Enroll in Autopay to Score a Lower Interest Rate
- Make Payments While Youâre in School
- Live Like a Poor Student
- Earn Money On the Side
- Throw All âFound Moneyâ Toward Your Student Loans
- Ask Your Boss for Help
Make More Than the Minimum Monthly Payment
The minimum payment on your student loans is the absolute minimum amount youâre supposed to pay, but thereâs nobody stopping you from paying more. And, if you make extra payments the right way, you could easily pay down the principal of your student loans at a faster pace.
Unfortunately, many student loan servicing companies wonât automatically apply extra payments you make toward your loan principal. Instead, theyâll use any payment overages to âpay aheadâ on your loans and continue making the next monthâs payments as well as the prepaid interest for future months.
If you decide to pay extra toward your student loans, youâll need to specify that you want overage payments to go toward the principal of your balance. You can do this over the phone or by written message when you mail in your monthly student loan payment, but make sure you donât forget.
Try the Debt Snowball
The debt snowball method for getting out of debt is worth considering if you have several different student loan bills to juggle each month. This strategy requires you to make a list of your student loans and each of their balances. From there, youâll start the next month by paying the minimum amount on all your largest loan balances and as much as you can on the smallest balance you have. Over time, youâll continue paying as much as you can toward your smallest balances until theyâre gone, at which point youâll âsnowballâ all your extra payments toward the next smallest debt.
With the debt snowball, youâll slowly pay off your smallest loan balances until you only have the few largest balances left. Eventually, youâll only have one student loan left and youâll pay all the cumulative payments of all the others toward this debt until itâs gone, too.
The benefit of this strategy is the momentum youâll gain as you knock out small balances one at a time. Not only will your balances go down, but youâll have fewer loan payments to make each month as well.
Refinance with a Private Lender
You can also consider refinancing all your student loans into one new one, which has the potential to save you more money than any other strategy on this list. Many private student loan companies offer fixed interest rates as low as 3.50% right now, which is lower than any federal student loans offer. Of course, you do have to have an income and good credit or a cosigner to qualify.
How much can you save by refinancing your student loans? That really depends on how much debt you have, your current interest rate, and your current repayment timeline.
However, letâs say that you have $10,000 in student loans with an APR of 7% and you just started a 10-year repayment plan. In that case, you would pay $121.33 per month for ten years and a total of $4,559 in interest before your loan was paid off.
If you were able to refinance your loans into a new private loan with the same repayment plan at 3.50%, however, you could pay just $96.56 per month for ten years and only $1,587 in interest during that time. Better yet, you could refinance into a new 7-year loan, pay $132.13 per month, fork over only $1,099 in interest during that time, and shave three full years off your repayment timeline.
Enroll in Autopay to Score a Lower Interest Rate
Some student loan companies offer discounts to customers who are willing to sign up for automatic payments. This discount is usually around .25% off, but all you have to do is allow your student loan payment to be debited from your checking account automatically each month.
These programs make it easy to stay on track with your student loan payments, and they also ensure you are never late. All you have to do is make sure you have the cash in your account before the date your payment is automatically debited each month.
Make Payments While Youâre in School
If you havenât graduated from college yet, itâs not too early to start preparing for the inevitability of that first student loan payment. Further, it can be extremely smart to make payments while youâre still in school if some of your student loans are unsubsidized.
Whatâs the difference between subsidized and unsubsidized student loans? By and large, the biggest difference is the fact that the federal government pays the interest on subsidized loans while youâre still in college, but they do not extend this benefit to unsubsidized student loans. By making payments on unsubsidized loans while youâre still in school, you can keep student loan interest at bay and keep your loan balances from ballooning until you have a job and can attack your student loan debt with all your might.
Live Like a Poor Student
Itâs tempting to inflate your lifestyle once you graduate from college and start bringing in a paycheck, but this is the opposite of what you should do if your goal is getting out of debt faster. The longer you can live at home with your parents or share an apartment with roommates, the more money you can continue throwing toward your student loans. And, if you can hold off on buying a house or financing a new car, youâll be in even better shape when it comes to destroying your student loan debt at a record pace.
Finance guru Dave Ramsey frequently gives the following advice, which I absolutely agree with:
âLive like no one else now so you can live like no one else later.â
Living the poor student lifestyle for as long as possible is a smart way to pay down debt when youâre first starting out.
If you have roommates, keep them.
If youâre managing to get by on Ramen, keep it up.
Once your student loans are paid off and in your rearview mirror, you can start using your income to pay for the lifestyle you really want.
Earn Money On the Side
If you want to pay your debts down even faster, earning more money is one approach that always works. The key here is making sure you use the extra money you earn to pay off your student loans instead of paying for stuff you donât need.
Weâve shared myriad side hustles here on Good Financial Cents in the past, from 65 side hustles you can do from your kitchen table to ideas on starting an online business. Some of the easiest ways to earn money include driving for Uber or Lyft, starting a blog, or learning an online skill people will pay you for. You could become an online freelance writer or sell your design or data entry skills with a website like Fiverr.com. Heck, you could walk dogs in your spare time or mow peopleâs yards in your neighborhood.
The basic principle is the same no matter what side hustle suits your fancy. Pour as much time or effort into your side hustle as you can, and use all the extra money you earn to pay off your student loans.
Throw All âFound Moneyâ Toward Your Student Loans
If you get any extra money during the course of the year, you should absolutely throw your âfoundâ cash toward your student loans. This can include your tax refund each year, any Christmas bonuses you get from employment, and money you get from working over time. Heck, you can even throw your birthday money at your student loans.
Any extra money you pay toward your loans can be used to reduce the balances of your debts, which in turn lowers the amount of interest you pay over the life of your loan.
Remember that, when it comes to paying off debt, even small amounts of money can add up in a big way. By throwing all found money you come across toward your loans each year, you can expedite your debt payoff process even more.
Ask Your Boss for Help
While asking your boss for help with student loans is a fairly novel concept, it isnât unheard of.
Actually, nearly anything is on the table when youâre negotiating your salary or benefits â and sometimes, the key to getting what you really want is just asking for it.
Further, some industries and government agencies have already thought of this option. For example, some government employees can receive up to $10,000 a year towards student debt repayment by accessing the federal governmentâs Student Loan Repayment Program.
Similar programs are also available for nurses and teachers through the Nursing Education Loan Repayment Program and Teach for America, which is part of AmeriCorps.
Students who find work in the public sector can also get help with student loans by applying for the Public Service Loan Forgiveness Program.
With this option, the federal government will forgive the remaining balance on your Direct Loans provided you have made 120 qualifying payments and remained employed with a qualified employer in the public service sector.
Which strategy made the difference? 3 financial experts weigh in
Plenty of people have used these tips and others to pay off their student loans once and for all. We reached out to several people who have paid off their loans for good to find out how they did it and which strategies they suggest. Hereâs what they said:
Paying Off Student Loans with a Side Hustle
âIn my early 20âs, I was paying a very affordable $160 per month on my $25,000 of student loan debt. It wasnât much to pay and it seemed my balance never decreased. Thatâs one of the reasons I decided to start blogging at 28 years old. After about six months, I started earning extra income from my blog and began sending extra payments toward my student loan.
As my blog income grew, I was able to send chunks of $1,000 to $2,000 pretty regularly in my 30âs and I finally began making a dent in my balance. I made my final student loan payment at 38 years old and it was glorious. Had I not been able to send in extra money, I probably would have been paying student loans into my 50âs.â â Chris Huntley, co-founder of Credit Knocks
Living the Poor Student Lifestyle
âMy wife graduated with over $80,000 of student loan debt, but we managed to pay it all off in just under three years. We had to make sacrifices to pay that much debt off quickly, but we also had other things going for us that made it easier. My wife is a registered nurse and I was an accountant at the time so we earned a reasonable income.
We didn’t have anyone else relying on us so our spending decisions only impacted ourselves. We kept our expenses to the minimum and continued to live like college students to put as much money toward the debt as we could. We bought a small townhouse that resulted in a monthly mortgage payment of only $500.
We had a very limited fun budget and didn’t go on traditional vacations. We refused to buy new furniture (except for much-needed mattress) or go out to eat multiple times per week. Instead, we cooked at home and relied on hand-me-downs or used furniture to get by until the debt was paid off. We also put off decorating and renovating our home unless the cost was minimal and we could do the work ourselves.â â Lance Cothern, founder of Money Manifesto
Earning Money On the Side to Pay Down Debt
âI paid off almost $43,000 in student loan debt in three years. First, I worked full-time during college and that helped minimize expenses. After graduation, I was promoted at my same company, and earned a starting salary of $45,000 per year.
However, while working, I was also side hustling and earning extra money. My main side gig was buying things to resell on eBay. At my peak, I was making a profit of about $2,000 per month. I would also do off jobs, and I started my blog, The College Investor.
Between my day job and side hustle earnings, I was able to knock out my student loans in a short amount of time.â â Robert Farrington, co-founder of The College Investor
The Bottom Line
Thereâs no reason to pay off your student loans any longer than you have to. Any of the tips on this list could help you get out of debt faster, and itâs even possible to use more than one of these tips to annihilate your debts at lightning fast speed.
As the nationâs total student loan debt levels continue to rise, we all have to take responsibility for ourselves. Let the numbers fall where they may; itâs up to us to find ways to get our finances straight â and if that process includes paying off student loans the hard way, so be it.
Just remember, youâve got a wealth of tools at your disposal.
Using everything from debt calculators to budgeting tools, you can dream up dozens of ways to get out of debt faster, and most importantly, smarter.
With student loan debt levels at an all-time high, youâre going to need all the help you can get.
The post How To Pay Off Student Loans Faster Than Ever appeared first on Good Financial Cents®.
Source: goodfinancialcents.com
Late Payments, Credit Scores and Credit Reports
A missed credit card or loan payment can have a seriously detrimental effect on your credit report. The golden rule of using a credit card is to make your payments on time every time, building a respectable payment history, avoiding debt, and keeping your creditor happy.
But what happens when you fall behind with your monthly payments; what happens when you miss a single loan or credit card payment as a result of a mistake, an oversight or a lack of funds? How will your creditor react, how quickly will the credit reporting agencies find out, and what options do you have for getting back on your feet?
How Late Payments Affect Your Credit Score
A late payment can reduce your credit score significantly and remain on your report for 7 years. It wonât impact your score throughout that time and the longer you leave it, the less of an impact it will have. However, the impact could be significant for individuals with good credit and bad credit.
As an example, if you have a credit score of 750 to 800, which is towards the upper end, a late payment could knock up to 710 points from your score. More importantly, it will remain on your payment history for years to come and reduce your chances of getting everything from a student loan to a credit card and mortgage.
How Soon do Late Payments Show on Credit Reports
You wonât be hit with a derogatory mark as soon as you miss a credit card payment. The credit card issuer may charge you a fee, but by law, they are not allowed to market it as a missed payment until it is 30 days due. And this doesnât just apply to credit card debt, itâs true for loans as well.
Providing you cover the payment within 30-days, you can avoid a missed payment mark appearing on your credit report. But as soon as that period passes, your lender will inform the major credit bureaus and your score will take a hit.
Some lenders wait even longer before reporting, so you may have as long as 60 days to make that payment. Check with your creditor to see when they start reporting missed payments.
What About Partial Payments?
Many lenders treat a partial payment the same as a missed payment, especially where credit cards are concerned. If youâre struggling to meet your payment obligations, contact your creditor in advance, tell them how desperate your situation is and inform them that you can meet part of the payment.
They may offer you some reprieve, they may not, but you wonât know if you donât ask. However, itâs worth noting that this will only impact your score if you donât cover the remaining credit card payment before the 30-day period is up.
To avoid confusion, we should also mention that this only applies to the minimum payment. Some credit card users get confused with the difference between a balance and a minimum payment.
Simply put, the balance is what you clear at the end of the month to avoid accumulating debt and paying interest. If you fail to pay that balance on time, your debt will simply roll over to the next month, after which you will be required to meet a minimum payment on your debt. If, however, you miss that minimum payment, then youâre at risk of your credit report taking a hit.
Reporting agencies donât record the difference between a rolling balance and a debt. If you spend $3,000 on your card every month but pay it off without fail and without delay, you wonât accumulate interest and technically, you wonât have debt. However, at the end of the month, the reporting agencies will show that you owe $3,000 on that card, just as they would show if you had accumulated a balance of $1,000 a month for three months and let it rollover.
How Long Does a Late Payment Stay?
A late payment will remain on your credit report for 7 years. But herein lies another confusion. Just because it reduces your score by 100 points and remains for 7 years doesnât mean you will suffer a reduction of 100 points for those 7 years.Â
It generally stops having a major impact on your score after a couple of years and while it will still have an impact in that 7-year period, it will be infinitesimal by the time you reach the end.
How Many Late Payments Can You Make Before it Reduces Your Score?
One late credit card payment is all it takes to reduce your score, providing that late payment was delayed by at least 30-days. However, that doesnât mean you can forget about it once the 30-day period has passed and it definitely doesnât mean that all the possible damage has been done.
It can and will get worse if you continue to avoid that payment. Your credit report will show how late the payment is in 30-day installments. When it reached 180 days, your account will enter default and may be charged-off, which will reduce your score and your chances of acquiring future credit even more.
Your creditor may sell your account to a collection agency. If this happens, the agency will chase you for repayment, seeking to establish a repayment plan or to request a settlement. Accounts are often in this stage when a consumer goes through debt settlement, as creditors and debt collectors are typically more susceptible to accepting reduced settlements because the debt has all but been written off.
How to Remove Late Payments from Your Credit Report
Although rare, it is possible to remove late payments from your credit report. There are also numerous ways you can reverse late payment fees, and we recommend trying these whenever you can as it will save you a few bucks.
Here are a few options to remove late payments and late payment fees:
Use Your Respectable History
The quickest way to get what you want is to ask for it. If you have a clean credit history and have made your payments on time in the past, you can request that the fee/mark be removed.Â
Write them a letter requesting forgiveness, explain that it was an oversight or a temporary issue and point to your record as proof that this will likely not happen again. Creditors may seem like heartless corporations, but real humans make their decisions for them and, like all companies, they have to put their customers first.
Request Automatic Payments
Lenders have been known to remove late payment fees if the debtor signs up for automatic payments. It makes their job easier as it prevents issues in the future and ensures they get what they are owed, so itâs something they actively promote.
They may make this offer themselves, but if not, contact them and ask them if there is anything you can do to remove the late payment. They should bring this up; if they donât, you can. It doesnât hurt to ask and the worse they can do is say no.
Claim Difficulties
If you claim financial difficulties or hardships and make it clear that a late payment will make those difficulties much worse, the lender may be willing to help. Contrary to what you might think, their goal is not to make life difficult for you and to destroy you financially.Â
Itâs important to see things from their perspective. If you borrow $15,000 and your balance climbs to $20,000 with interest, their main goal is to get that $15,000 back, after which everything else is profit. If you pay $10,000 and start slipping-up, the risk of default will increase. The worse your financial situation becomes, the higher that risk will be.Â
If they eventually sell the account to a debt collector, that remaining $10,000 could earn them just a couple of hundred dollars, which means they will lose a substantial sum of money. They are generally willing to help any way they can if doing so will increase their profits.
How to Avoid Late Payments
A late payment can do some serious damage to your payment history so the best thing to do is to prevent it from occurring in the first place. Itâs a no-brainer, but this is a common issue and itâs one that countless consumers have every single year. So, keep your credit card and loan payments stable with these tips.
Set Automatic Payments
Occasionally, consumers forget to pay. Life is hectic, they have a lot of responsibilities to juggle, and itâs easy for them to overlook a single payment. If this happens, it should be caught and fixed before the 30-day period ends and the credit bureaus find out. But even then, fees can accumulate, and problems escalate.
To avoid this, set up automatic payments so your minimum payment is paid in full every month. You can do this for all debt, including student loan payments. Just make sure you have the money in your account to meet this minimum charge, otherwise, you could be paying for debt on one account by accumulating it on another.
Set a Budget
A credit card is designed to encourage you to spend money you donât have. Youâre buying things you canât afford now in the hope or expectation that you will cover them later, only to realize that youâre struggling so much you canât even cover the minimum payment.
If you ever find yourself in a situation like this, itâs time to analyze your finances and create a sensible budget. You may feel like you have a good idea of what youâre spending each month and how this compares to your gross income, but the vast majority of consumers seriously underestimate their expenses.
Improve Your Credit by Fixing Your Debt-to-Income Ratio
Calculate your debt to income ratio by comparing your total debt (credit card payments, student loans) to your gross income. The higher this is, the harder you need to work, and the less you need to spend on your credit card.Â
Your debt to income ratio should be your central focus when seeking to improve your credit score, because while itâs not considered for loan and credit card applications, it does play a role in mortgage applications and is important for calculating affordability.
Conclusion: Itâs Not the End of the World
A late payment can strike a disastrous blow to your credit report, but itâs not the end of the world and you do have a few options at your disposal. Not only do you have up to 30 (and sometimes 60) days to make the payment and prevent a derogatory market, but you can file a claim to have it removed in the event that it does appear.
And if none of that works, a little credit repair can get you back on track. Just keep making those payments every month, talk with your lender when you find yourself in trouble, and remember that nothing is unfixable where credit is concerned.
Late Payments, Credit Scores and Credit Reports is a post from Pocket Your Dollars.
Source: pocketyourdollars.com