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Earnest, who was recently acquired by Navient, is making a name for themselves within the student refinancing space. With their flexible repayment options and low rates, they are definitely an option worth exploring.
CommonBond started out lending exclusively to graduate students. Over time, CommonBond has expanded and now offers student loan refinancing options to graduates of almost any university graduate and undergraduate. CommonBond not only offers low rates but is also making a social impact along the way. Consider checking out everything that CommonBond has to offer in term of student loan refinancing.
LendKey works with community banks and credit unions across the country. Although you apply with LendKey, your loan will be with a community bank. Over the past year, LendKey has become increasingly competitive on pricing, and frequently has a better rate than some of the more famous marketplace lenders.
LendKey is a good option to keep in mind if you are looking for an alternative to big bank lending. If you prefer working with a credit union or community bank, LendKey may be the route to uncovering your best offer. As a lender,Laurel Road Bank prides itself on offering personalized service while leveraging technology to make the student loan refinancing process a quick and simple one.
Consider checking out their low-rate student loan refinancing product, which is offered in all 50 states. Citizens Bank offers student loan refinancing for both private and federal loans through its Education Refinance Loan. No degree is required to refinance: If you are a borrower who did not graduate, with Citizens Bank, you are still eligible to refinance the loans that you accumulated over the period you did attend. In order to do so, borrowers much no longer be enrolled in school.
Citizens Bank offers a 0. You lose certain protections if you refinance a federal loan: Any time that you refinance a federal loan to a private loan, you will give up the protections, forgiveness programs and repayment plans that come with the federal loan.
The Education Refinance Loan offered by Citizens Bank is a good one to consider, especially if you are looking to stick with a traditional banking option. Consider looking into the competitive rates that Citizens Bank has to offer.
Discover, with an array of competitive financial products, offers student loan refinancing for both private and federal loans through their private consolidation loan product. Just keep in mind that if you apply for a student loan refinance with Discover, they will do a hard pull on your credit. In addition to the Top 7, there are many more lenders offering to refinance student loans. Below is a listing of all providers we have found so far. This list includes credit unions that may have limited membership.
We will continue to update this list as we find more lenders:. Instead, you should look at options to avoid a default on student loan debt. Check the Federal loan repayment estimator to make sure you see all the Federal options you have right now. If you can afford your monthly payment, but you have been a sloppy payer, then you will likely need to demonstrate responsibility before applying for a refinance. But, if you can afford your current monthly payment and have been responsible with those payments, then a refinance could be possible and help you pay the debt off sooner.
Like any form of debt, your goal with a student loan should be to pay as low an interest rate as possible. Other than a mortgage, you will likely never have a debt as large as your student loan.
If you are able to reduce the interest rate by refinancing, then you should consider the transaction. However, make sure you include the following in any decision:. Many lenders have no fee, which is great news. If there is an origination fee, you need to make sure that it is worth paying. If you plan on paying off your loan very quickly, then you may not want to pay a fee. But, if you are going to be paying your loan for a long time, a fee may be worth paying.
Variable interest rates will almost always be lower than fixed interest rates. But there is a reason: We are currently at all-time low interest rates. This is a judgment call.
Just remember, when rates go up, so do your payments. And, in a higher rate environment, you will not be able to refinance your student loans to a better option because all rates will be going up. We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period.
But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk. You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance.
You can also email us with any questions at info magnifymoney. Looking for a balance transfer credit card to help pay down your debt more quickly? This guide will show you the longest offers with the lowest rates, and help you manage the transfer responsibly. It will also help you understand whether you should be considering a transfer at all.
You have only 60 days from account opening to complete your balance transfer and get the introductory rate. You can provide the account number for the account you want to transfer from while you apply, and if approved, the bank will handle the transfer.
If you think it will take longer than 15 months to pay off your credit card debt, these credit cards could be right for you. It is almost always better to pay the fee than to pay a high interest rate on your existing credit card. You can calculate your savings including the cost of the fee at our balance transfer marketplace. These deals listed below are the longest balance transfers we have in our database. Each credit card company has their own criteria, and you might still be approved by one of the companies listed below.
This is a basic balance transfer deal with an above average term. With this card, you also have the ability to earn cash back, and there is no late fee for your first missed payment and no penalty APR.
Hopefully you will not need to take advantage of these features, but they are nice to have. After the intro periods end, a This provides plenty of time for you to pay off your debt. There are several other perks that make this card great: If you think it will take longer than 2 years to pay off your credit card debt, you might want to consider one of these offers.
The longest offer can give you a low rate that only goes up if the prime rate goes up. There is also no balance transfer fee. Just about anyone can join Unify Financial Credit Union.
The deal is you get the prime rate for 3 years with no intro balance transfer fee. In order to be approved for the best balance transfer credit cards and offers, you generally need to have good or excellent credit. If your FICO score is above , you have a good chance of being approved.
If your score is above , you have an excellent chance. However, if your score is less than perfect, you still have options. Your best option might be a personal loan. You can learn more about personal loans for bad credit here. There are balance transfers available for people with scores below The offer below might be available to people with lower credit scores. However, it will still be better than a standard interest rate. If you use this offer to pay down debt aggressively, you should see your score improve over time and you will be able to qualify for even better offers.
That way you can apply with more confidence. If you use your credit card at an ATM, it will be treated as a cash advance.
And there is no grace period, so interest starts to accrue right away. A cash advance is expensive, so beware. If you do not make your payment on time, most credit cards will immediately hit you with a steep late fee. Once you are 30 days late, you will likely be reported to the credit bureau. Late payments can have a big, negative impact on your score. Just automate your payments so you never have to worry about these fees.
Most balance transfer offers are from the date you open your account, not the date you complete the transfer. It is in your interest to complete the balance transfer right away, so that you can benefit from the low interest rate as soon as possible. With most credit card companies, you will actually lose the promotional balance transfer offer if you do not complete the transfer within 60 or 90 days.
Just get it done! Your goal with a balance transfer should be to get out of debt. If you start spending on the credit card, there is a real risk that you will end up in more debt. Additionally, you could end up being charged interest on your purchase balances. In other words, you lose the grace period on your purchases so long as you have a balance transfer in place. Credit card companies make balance transfer offers because they want to steal business from their competitors.
So, it makes sense that the banks will not let you transfer balances between two credit cards offered by the same bank.
If you have an airline credit card or a store credit card, just make sure you know which bank issues the card before you apply for a balance transfer.
The calculator will show you which cards offer you the most savings on interest payments. But you might feel more comfortable with a single fixed monthly payment, and a single real date your loan will be paid off. A lot of new companies are offering great rates on loans you can pay off over 2, 3, 4, or 5 years. You can find the best personal loans here.
Use our calculator to see how your payments and savings will compare. It depends, some credit card companies may allow you to transfer debt from any credit card, regardless of who owns it. Though, they may require you to first add that person as an authorized user to transfer the debt. Just remember that once the debt is transferred, it becomes your legal liability.
Most banks will enable store card debt to be transferred. Just make sure the store card is not issued by the same bank as the balance transfer credit card. Here is a simple test. Divide your credit card interest rate by You can use that simplified math to get a good guide on whether or not you will be saving money. And if you want the math done for you, use our tool to calculate how much each balance transfer will save you.
With all balance transfers recommended at MagnifyMoney, you would not be hit with a big, retroactive interest charge. You would be charged the purchase interest rate on the remaining balance on a go-forward basis. But all balance transfers recommended by MagnifyMoney do. Many companies offer very good deals in the first year to win new customers. Or your cable company could offer a big discount on the first year if you buy the bundle package.
Credit card companies are no different. These companies want your debt, and are willing to give you a big discount in the first year to get you to transfer. But, if you neglect making payments and end up with a balance post-intro period, you can easily fall into a trap of high debt — similar to the one you left when you transferred the balance. Balance transfers can be easily completed online or over the phone.
After logging in to your account, you can navigate to your balance transfer and submit the request. If you rather speak to a representative, simply call the number on the back of your card. For both options, you will need to have the account number of the card with the debt and the amount you wish to transfer ready.
You will be charged a late fee by missing a payment and may put your introductory interest rate in jeopardy. Many issuers state in the terms and conditions that defaulting on your account may cause you to lose out on the promotional APR associated with the balance transfer offer. To avoid this, set up autopay for at least the minimum amount due. Balances can only be transferred between cards from different banks. Many credit card issuers will allow you to transfer money to your checking account.
Or, they will offer you checks that you can write to yourself or a third party. Check online, because many credit card issuers will let you transfer money directly to your bank account from your credit card. In most cases, you cannot.
However, if you transfer a balance when you open a card, you may be able to. Some issuers state in their terms and conditions that balance transfers on new accounts will be processed at a slower rate compared with those of old accounts.
You may be able to cancel your transfer during this time. Yes, it is possible to transfer the same debt multiple times. Just remember, if there is a balance transfer fee, you could be charged that fee every time you transfer the debt.
You can call the bank and ask them to increase your credit limit. However, even if the bank does not increase your limit, you should still take advantage of the savings available with the limit you are given. Transferring a portion of your debt is more beneficial than transferring none. Yes, you decide how much you want to transfer to each credit card. No, there is no penalty. You can pay off your debt whenever you want without a penalty. You literally pay nothing to transfer your balance and can save hundreds of dollars in interest had you left your balance on a high APR card.
Check out our list of the best no-fee balance transfer cards here. However, those cards tend to have shorter intro periods of 15 months or less, so you may need more time to pay off your balance. At least two months before your existing intro period ends, start looking for a new balance transfer offer from a different issuer. This can provide you with the additional time needed to pay off your balance. Laura Woods is a Los Angeles-based freelance writer with more than 10 years of experience in business and personal finance.
A debt consolidation loan streamlines existing debts into one new loan. Most unsecured consumer debt can be consolidated, including credit cards, medical bills, utility bills, payday loans , student loans, taxes and bills sent to a collection agency. Having one monthly payment instead of several can make it easier to get your finances in order and could allow you to save money on interest fees. Generally speaking, the higher your credit score, the lower your interest rate.
On its website, credit bureau TransUnion explains that your credit score offers financial institutions a quick snapshot of your credit health. The manner in which scores are used is entirely up to the individual lender. Several other elements are also taken into consideration as part of the loan underwriting process, including:. A key indicator of your financial fitness, your debt-to-income ratio allows financial institutions to weigh your current debt against your income.
This helps lenders determine your ability to keep up with new loan payments. Your debt-to-income ratio is calculated by dividing the total sum of all your monthly obligations by your gross monthly income. Your bill-paying habits can help or hinder your ability to get a good interest rate.
Lenders, credit bureaus and credit scoring firms generally believe that the past is the greatest indicator of future behavior, so this data can provide telling insights. Loan repayment is expected to be funded by your income, so lenders want to verify your ability to hold a job.
Some will dig deeper into your employment history than others. In many cases, a steady employment history will be enough, but some financial institutions prefer applicants who have worked for the same company for several years or at least have a long track record in their current industry.
All else equal, the lower the interest rate on your debt consolidation loan, the lower your monthly payment. You want to achieve financial freedom as quickly as possible, and much of that weighs on finding the most competitive interest rate.
Each lender has its own criteria and pricing model, which can lead to major rate discrepancies. LendingTree, the parent company of MagnifyMoney, allows you to compare up to 5 lenders without affecting your credit score. Find the best debt consolidation loan for you today! Most people have credit scores in the range of to , according to Experian. For scores that fall within the to range, the consumer credit reporting agency cites a score of or higher as good and or higher as excellent.
You can also help your score by only applying for new credit only when absolutely necessary and getting a head start at paying your loans off now, if possible. Many lenders tack on additional costs that can cause you to end up paying more than you were before consolidating your payments.
Taking out a loan should be a relatively seamless process. There are a lot of lenders to choose from, so conducting research to see which financial institutions provide the best — and worst — user experience can save you a lot of headaches. When your financial health is at stake, you need a lender you can trust. Unfortunately, some financial institutions make it difficult to find all the information you need to make an educated decision. Before applying for a loan, take a look at other alternatives to get a well-rounded look at every available route.
This can help you save a great deal of money, but there are a few things you should know first. If the rate rises, your monthly payment could also increase. If you own a home, you might also consider a home equity loan or a home equity line of credit, which will provide you with extra cash.
Home equity loans come at a fixed rate, while home equity lines of credit have variable interest rates and follow a flexible repayment structure. More equity tends to equate to better terms. Taking out a home equity loan could also require you to pay closing costs that can add up to hundreds or thousands of dollars, according to the CFPB. If the property declines in value, you could also run the risk of falling underwater on it.
With that said, a home equity loan or a home equity line of credit could serve as an optimal way to pay off debt. As with any major financial decision, being well-informed will help you make the best choice for your unique situation.
Shopping around and comparing personal loans for debt consolidation is essential, but you might not know where to start. Simply complete one online form, and LendingTree will run a soft credit pull that could match you with multiple loan offers.
This is a convenient way to connect with multiple lenders in a matter of minutes. Compare debt consolidation loans and save money with the best rates you can find. This does not impact our rankings or recommendations You can learn more about how our site is financed here. Get in touch via Twitter , Facebook or email info magnifymoney. Laura Woods is a writer at MagnifyMoney. You can email Laura here. In fact, you are one of many millions of Americans who deal with debt and its consequences in any given year.
The painful reality is that 70 million Americans were contacted about a debt in collections in , which typically means their debt was in default for at least days. Debt collectors call consumers to follow up on these debts over one billion times per year, with up to 15 calls made per account per day. While consumers can sometimes figure out a way to pay debt off on their own, there are strategies that can expedite the process. Some opt to consolidate their debts with a new loan that offers better terms and a lower interest rate, for example.
Others sign up for a debt management plan, which is a debt repayment plan operated by a third-party credit counselor. Finally, some consumers opt to negotiate their debts down through a process known as debt settlement. This option comes with its own share of pros and cons, and risks for consumers.
Before you decide to settle your debts, understand how it works, what the consequences might be and who can help you manage the process. Unlike debt management plans, which are often offered by nonprofit companies, debt settlement programs tend to be administered by for-profit organizations. You do maintain ownership over the funds you save as well as any interest that accrues in your account, though.
Your debt settlement company may ask you to stop making payments on your debts during the negotiation process, resulting in you purposely putting yourself further in default. The end goal of these programs is that once a settlement amount is reached, you would have saved enough cash to pay the lowered amount in full.
Once the final lump sum payment is made, the accounts are considered satisfied. While debt settlement is an imperfect solution to a complex problem, this strategy could be the best option for you. Those instances can include:. Here are the main ways consumers can settle their debts by working with a third party or handling negotiations on their own. Mike Sullivan, a personal finance consultant with Take Charge America , a national nonprofit credit counseling and debt management agency that does not offer debt settlement services, said that consumers settling their own debts with collections agencies is very rare.
This is partly because the process is complex, but also because it takes so long. Working with an agency that offers debt settlement is an easier proposition for many consumers since the debt settlement firm will perform most of the steps involved on your behalf.
The main steps required to work with a debt settlement company include:. While negotiating a settlement that is less than what you owe might sound advantageous, and it can be, debt settlement comes with both pros and cons.
Here are the main advantages and disadvantages of this strategy:. If you can move through the debt settlement process successfully and put all your debts behind you, the time and energy spent could be worth it despite the potential downsides.
Because your debts could go away for good, granting you a chance at a fresh start to rebuild your finances. As we noted already, you may find you are liable for income taxes on some of your forgiven debts. You should also be aware that your credit score may have taken a significant hit that will take months or years to recover from.
In any case, there are several alternatives to debt settlement you can consider. Debt management plans are debt repayment plans administered by third-party credit counselors who work for nonprofit agencies. These credit counselors call your creditors and negotiate more favorable terms on your behalf, including lower interest rates and reduced or waived fees.
Once creditors agree to these concessions, consumers begin making a single monthly payment to the nonprofit agency overseeing their debt management plan. The nonprofit agency then distributes funds to their creditors on their behalf, taking care of the grunt work for them. Debt management plans can take up to 48 months or longer to complete.
Consumers are also asked to stop using credit cards and get on a budget or spending plan during the process. Ultimately, the goal of debt management plans is helping consumers escape high interest and fees, pay down their debt over time and learn positive money habits along the way.
Debt consolidation is another option to consider if you are financially unable to repay your debts. With debt consolidation, you will replace your existing loans with a new loan with better terms and a lower interest rate. The goals of debt consolidation can include lowering your monthly payment, saving money on interest and simplifying your finances with a single loan instead of several.
As you continue researching ways to pay off your debt for good, it helps to educate yourself on debt settlement and its alternatives. This list of frequently asked questions could help you with your decision. The FTC states that debt settlement companies are required to disclose certain information upfront such as the fees they charge, how long it will take to get results, how much you need to save before they can settle your debts and the consequences you will face when you stop making payments to your creditors.
You should also be notified that the money you save — including interest — is yours and that the account you use for savings is not affiliated with the debt settlement company. You also have the right to withdraw your funds at any time for any reason without penalty. Fees charged by debt settlement companies can vary based on how many of your debts they settle and the percentage they agree to charge upfront.
This could add up to thousands of dollars in fees once the program is complete. Because debt settlement companies ask you to stop making payments on your debts and save up to settle them instead, your credit score will take a hit.
These programs are often the last resort for consumers who struggle to keep up with minimum monthly payments and know they need help from a third party to avoid bankruptcy. Debt settlement can take 36 months or longer to complete depending on how much debt you owe, how long your creditors take to negotiate and how long it takes you to save up the money you need to settle.
Longer timelines are typically reserved for individuals with considerable debt and many creditors. Typically, unsecured debts qualify for debt settlement. This can include credit card debt, unsecured personal loans, some private student loan debt, medical bills, auto repossessions, cell phone and utility bills from past providers and department and store charge card debt.
Debt consolidation involves getting a new loan with a lower interest rate and better terms with the goal of combining old, higher interest debts into a single new debt. Common financial products used in debt consolidation include personal loans, home equity loans, home equity lines of credit HELOCs and balance transfer credit cards.
Debt settlement is a long-term process that involves having a third-party debt settlement company settle debts on your behalf while you save the cash for your settlement instead of making payments on your debts. With debt settlement, you may be able to repay less than the amounts you owe.
A debt management plan is a third-party debt repayment plan that is typically administered by a nonprofit credit counseling agency. With a debt management plan, the credit counseling agency will negotiate with your creditors to lower your interest rate and remove late fees or over-the-limit fees from your account.
What does the American dream look like to you? Does it include a home of your own, a car or two in the driveway and a career that helps you feel happy and fulfilled? Maybe you want or have children, too , regardless of how much it costs to raise them. Unfortunately, pursuing these dreams can be a costly endeavor. A car and a house, for example, may each require a loan.
If you want both, the cumulative effect of those loans can be devastating. High debt could make it difficult to realize your financial dreams. But there are plenty of ways to borrow less, pay off debt you already owe and gain more financial freedom. Not all debt is created equal. There is debt that can help you build wealth, and there is debt that prevents you from building wealth.
Generally speaking, a mortgage for a home you live in is good debt, he said. Your home may go up in value, and everyone needs a place to live. It is also difficult and time-consuming to save up the money to pay for a home in cash, especially in areas of the country where real estate is pricey. So taking out a home loan may be necessary. The same can be said for car loans, Liddle said.
You may need a car to get to work, but you may not need to borrow the maximum a lender offers. Student loans can also run in the same vein. Financial adviser Don Roork, of AssetDynamics Wealth Management and Wisdom for the Wealthy, said consumers should focus on paying off unsecured debt first. This includes debt such as credit cards and personal loans.
The average credit card currently has an APR of While credit cards can be convenient to use, the exorbitant interest rates they charge can make it difficult to repay balances over time. We already mentioned how the average credit card interest rate is Liddle also noted that the gimmicks that credit card issuers come up with can make it hard to avoid them.
Some cards offer rewards for every dollar you spend, for example. Consolidate credit card debt with a personal loan. How to stay out of credit card debt once you pay it off. These cards let you avoid interest payments during that time, which can expedite your debt payoff process. Also, note that your introductory APR only lasts for a while before resetting to a much higher rate. Sullivan said no creditor wants to be the one left holding the bag while others collect. But you may want to give it a try if you have credit card debt you truly cannot pay off.
Also keep in mind that there are debt settlement companies who can assist you with this process. These two debt repayment strategies may help you stay motivated as you get ahead on your finances. Use this calculator to find out which method is better suited for you. Personal loans come with fixed interest rates, fixed repayment schedules and fixed monthly payments that can make paying off debt easier to plan.
You may also qualify for a much lower interest rate depending on your creditworthiness. Clements said personal loans are good for people who need a longer timeline to repay their debts and prefer the stability of a fixed-rate, fixed-payment loan.
Use our table below to compare multiple options to get the lowest interest rate! But not enough people realize just how harmful huge car payments can be, and far too many tend to buy more car than they can truly afford. Very often, those who take out car loans with bad credit have it the worst since they tend to pay higher interest rates.
Roork said that, most of the time, it boils down to self-image. Consumers want to look like they have money, so they take out car loans for tens of thousands of dollars and pledge to pay them off for up to 84 months.
And since automobiles are notorious for depreciating at a rapid pace, huge car loans are akin to setting money on fire. That way, your larger monthly payments have a better chance of keeping up with depreciation as your car loses value. If your car loan has a high interest rate and you believe you can get a better deal, it may be possible to refinance your auto loan into a new loan with a lower interest rate and better terms.
Paying more than the minimum payment on your car loan can help you get out of debt faster. If you owe less than your car is worth, you can also sell your car by owner or through trade-in at a dealership and start over with a less expensive car. If you owe more than your car is worth e. As you can see, student loan debt can be good debt if used wisely.
While you are borrowing money to attend college, your loan can pay off in the form of higher earnings for your entire career. The good news is, federal student loans tend to come with low interest rates and fixed repayment schedules. For that reason, it makes sense to focus on paying off higher-rate and unsecured debts first. If you need your student loan payments to be lower, consider these strategies. While the standard repayment plans for federal student loans last 10 years, you can opt for an extended repayment plan that lasts for up to 25 years.
Income-driven repayment IDR plans let you pay a percentage of your discretionary income for up to 25 years before forgiving your remaining loan balances. Read about the pros and cons of IDR plans before you consider this option. There are myriad student loan forgiveness options, ranging from Public Service Loan Forgiveness PSLF to special forgiveness for teachers and members of the military.
Read about student loan forgiveness options to see if you qualify. If you have excellent credit or a cosigner with excellent credit , you may be able to refinance student loans with a private lender who can offer a lower interest rate. But keep in mind that you give up federal protections such as forbearance and deferment, along with access to IDR plans, if you refinance federal loans with a private lender.
If you can refinance your student loans with a private lender and get a lower interest rate, you can pay less in interest each month and pay your loans off faster. As we mentioned already, you will give up federal student loan protections and benefits if you refinance federal loans into private loans. Paying as much as you can toward your student loans each month will help you get out of debt faster, particularly if you can make extra payments regularly.
Since interest accrues on unsubsidized loans during school, making regular payments on those loans can save you even more. Doing so will reduce your loan balance and help you get out of debt faster. Some student loan servicers offer a. The debate over whether to pay off your mortgage has waged on for years. Some experts suggest that you should take as long as possible to pay off your mortgage since you likely have a low interest rate and may be able to write off mortgage interest on your taxes.
Others who are averse to debt would rather you pay off your mortgage loan early. There is no right or wrong answer here, but you may want to focus on paying off your mortgage once your other debt is gone. If you have an adjustable-rate mortgage ARM and you worry interest rates may rise, for example, focusing on mortgage debt could be a smart move.
Perhaps you are less than five years from retirement and want to make sure you have all debt paid off before you settle into a new life with a fixed income. Maybe you just dislike debt and no longer want to owe anything to anyone. Provided other more important debts are paid off, this is OK as well. But Liddle notes that you could be better off investing your money instead of prepaying your mortgage. But again, the right answer for you depends on your attitude toward debt, your appetite for risk and your goals.
Review government-backed loan modification and refinance programs. These programs can help you qualify for a lower interest rate that can make paying off your mortgage faster a much easier task. You can also refinance your mortgage through traditional means, either to reduce your interest rate, your repayment timeline or both. Refinancing a year loan into a fixed-rate year loan may help you secure a lower interest rate and cut years or a decade or more off your repayment timeline, for example.
If you were able to sell your home and turn a profit after real estate fees and moving expenses were factored in, you could purchase a less expensive home and start the process over. Also keep in mind that you can pay off your mortgage faster by making extra payments or biweekly payments. With extra payments, you can either round up your payment each month to an amount you can afford or strive to make at least one extra mortgage payment each year.
You could also opt for biweekly payments that would result in one extra mortgage payment being made every 12 months since you would make 26 half-payments instead of 12 full mortgage payments. Unfortunately, late payments can hurt your credit score and result in late fees and fines that make catching up that much harder.
While creditors may try to collect on a late debt themselves for up to days, your debts in default will eventually be sent to collections.
Some creditors have in-house collections professionals, while others hire outside firms to contact consumers to see if they can get them to pay. Sullivan said, sometimes, creditors will just sell off their outstanding debts to collections companies. Either way, someone is eventually going to contact you about the amounts you owe. Debt collectors tend to get a bad reputation since they are known for hounding debtors at home and at their jobs.
Fortunately, the Fair Debt Collection Practices Act FDCPA spells out limits for debt collectors, as well as penalties for those who threaten, call too late at night or contact employers and family members.
According to Sullivan, the FDCPA permits consumers to notify collectors in writing that they must stop all communication with that consumer, but many do not know this or fail to take advantage of it. Make sure to read up on the FDCPA at our parent company, LendingTree, and know your rights if you feel you are being unfairly targeted or the victim of abusive practices. The best way to deal with debt in collections is to deal with debt collectors directly and honestly, Sullivan said.
If you decide not to repay your debts and send a letter to ask debt collectors to cease communication per FDCPA rules, debt collections calls should theoretically come to an abrupt halt. If the calls do not end, keep careful records of all contact. If you do want to pay off your debt and strike a deal, Sullivan said to put your negotiation cap on. Often, debt collection companies pay only a fraction of the price of your debt to take it over. With that in mind, you could offer a fraction of what you owe and still help them turn a profit.
The key is to agree on an amount that ends all collection efforts while helping the collection agency get its investment back. While it may be tempting to ignore debt collectors altogether, this strategy can backfire. Consumers also need to understand that if wage garnishment is successful, their total debt owed can balloon because of late fees, legal fees and interest, Sullivan said.
There are two main types of bankruptcy to consider:. You can only file for Chapter 7 bankruptcy if your income is lower than the median income in your state for your family size. This type of bankruptcy may require you to sell your assets, but your house and cars are protected up to certain amounts that vary by state. Retirement accounts, including k , b s and IRAs, are also protected fully or up to certain limits.
With Chapter 13 bankruptcy, you need to be able to prove you can afford a repayment plan. But you do not have to sell any property to make up for shortfalls when you file for Chapter 13 bankruptcy. Filing for Chapter 7 or Chapter 13 bankruptcy requires an in-depth knowledge of the law and your finances. For that reason, it is strongly recommended that you hire a qualified attorney to help with your bankruptcy case. Bankruptcy forms are also available for free online.
Bankruptcy is best used as a last resort. Debt consolidation is an option that should be considered before filing bankruptcy. You can compare the two options here. Clements said that without the right mindset, no debt-payoff strategy can help you. A monthly budget can help you manage your income and your expenses while also keeping you accountable for each dollar you spend. While there are plenty of budgeting apps out there, you can also budget using a pen and paper. Also take the time to track your spending from the last few months.
If you find areas you can cut in your budget, you can reallocate those extra funds toward your debts. Both Liddle and Roork suggested a similar approach to emergency funds. And remember, you can automate payments toward recurring bills and your debts. Life without debt can be a reality, but it takes a lot of work to get there. Roork said the key to living debt-free is making sure your lifestyle aligns with your wages — not your wants. Contribute at least enough to get an employer match if your employer offers one.
Of course, it never hurts to save a lot more than that if you can afford it. Also remember that anyone can open and contribute to a traditional IRA and may be able to deduct their contributions on their taxes depending on their income. You can also open a Roth IRA, provided you meet income requirements. After all, you will likely want to enjoy the spoils of your debt-free lifestyle to a certain extent.
Perhaps you want to take a vacation, remodel your kitchen or upgrade to a nicer home. Once you are debt-free, all those goals become easier to accomplish provided you make savings a priority. A life without debt is entirely possible, and there are myriad benefits to enjoy on the other side. With enough time and hard work, you can build a life that requires few bills or financial stress.
You can start saving and investing for a future you can be excited about, and you can break the paycheck-to-paycheck cycle that has plagued you so far. Believe in yourself and focus on the life you want, and you can get out of debt with enough time. Use our comparison widget below to find the best loan for you!
That being said, taking out a loan to pay off a credit card is not always the best option for everyone. Why should I pay off a credit card with a loan? Credit card consolidation loan vs. Shopping for credit card consolidation loans online. A credit card consolidation loan is a personal loan that can be used to consolidate your credit card debt. An unsecured personal loan allows you to take out money without collateral. However, these loans can sometimes have higher interest rates because they are a risk to lenders.
These types of loans can provide a fixed loan amount what you want to borrow with a fixed monthly payment and a fixed term. These r ates usually depend on your credit history. Those with good credit can usually receive lower rates than those with poor credit. People consolidate for many reasons and at various times. However, high-interest rates on current debt can be a major deciding factor. A credit card debt consolidation loan can possibly offer lower interest rates and provide one easy monthly payment.
This might be a good time to consider consolidating your debt. With a credit card consolidation loan, you have a set period of time to pay off your debt unlike with a credit card so you can possibly get it paid off sooner. If you consolidate your credit card debt with a loan, that debt is paid off. You no longer need to worry about high-interest rates and fees on your credit card accounts. While there are many good reasons to use a loan to consolidate your debt we will get to a couple below!
When applying for a credit card consolidation loan, lenders look at certain aspects , including your credit score and income and expenses. Because your credit score is a reflection of your ability to manage and repay debt, the higher your credit score, the more likely it is you could qualify for a loan.
LendingTree is the parent company to MagnifyMoney. If your credit is poor, you may want to consider a cosigner with good credit. You could also follow these steps to building your credit score.
Income is another factor lenders may consider when approving you for a loan. But a high income does not necessarily mean you will get a better interest rate. Although a higher income could mean you will be able to pay your monthly obligations, if you have high expenses, lenders may be wary of lending money to you. Thus, you should aim to have a low debt-to-income ratio.
Your debt-to-income ratio compares your monthly payments to how much money comes in each month. A lower debt-to-income ratio is preferable when you are applying for credit. There are certain things to watch out for, including fees, penalties and the annual percentage rate APR , which can vary with each lender. This type of fee is generally included in the APR and deducted from the loan amount. An origination fee can be a percentage of the loan amount itself or charged as a flat rate. If a borrower has good credit, there is a better chance of receiving a lower rate.
This is a fee to the borrower if they decide to pay off their personal loan early. A certain way some lenders calculate interest on a personal loan that can have you paying a higher interest rate if you pay off your loan before the term is up. Personal loans can be used to pay off different types of unsecured debt, including medical bills not covered by insurance, along with credit cards. Promo periods typically last months; balance can revolve indefinitely after that. Keep an eye on your credit history so you know your score and can attest all information is correct.
Search and compare credit card consolidation loans online with the help of our easy-to-use online comparison tool at the top of this article. You can shop different borrowers at once with only a soft credit inquiry that will not impact your score.
LendingTree, our parent company, also has a convenient debt consolidation calculator that can help determine your estimated monthly payments by simply entering your consolidation loan amount.
Carissa Chesanek is a writer at MagnifyMoney. You can email Carissa here. Alexandria White Alexandria is a credit card writer covering everything from the latest credit card news, individual card reviews, and Best Of roundups to tips for getting the most value out of your card. Learn More Life after consolidating credit card debt Pay your bills in full and on time.
Set up an emergency fund. Resist the temptation to overspend just to earn rewards. Balance transfer What is it? The new card you open may provide long-term value if it offers additional perks or rewards. You will need good or excellent credit to get the best BT offers. Most balance transfer cards require good or excellent credit. Personal loan What is it?
You can pre-qualify for many personal loans without hurting your credit score, allowing you to shop around for the best rates. May be able to get approved even with poor credit, but expect higher interest rates in return. Typically no prepayment penalty. Interest rates vary by credit score with rates as low as 3.
If you have a credit score below , you most likely will receive a high-interest rate. There may be an origination fee also known as an upfront fee which is nonrefundable and deducted from your total loan amount before you receive the loan.
Home equity loan What is it? Typically longer terms and lower rates than personal loans. Home equity loans come with more fees than personal loans and may have appraisal, application and processing fees in addition to an origination fee. The interest you pay on your loan is to yourself, not a lender.
There is no credit check, so this could be a decent option for people with bad or fair credit. If you lose your job, your loan is typically due in full within 60 days. You have to stay at your current job until the loan is paid off in order to avoid the fees mentioned above. You miss out on potential investment gains while you owe money on your loan. Debt management plans What is it? Before you open a DMP, a credit counseling session is required.
This helps analyze your current financial situation and even recommend a different program that is better suited to your situation. Typical plans take four or five years to complete, which is shorter than it would take if you only made the minimum payment on your credit card debt.
Your counselor may negotiate better terms for your debts which may include lower interest rates and less fees. Creditors may even suspend or close your lines of credit. There may be a fee for the initial credit counseling session and for enrollment. Time needed to pay off.
Staying debt free after credit card consolidation Pay your bills in full and on time. Bottom line Ultimately, the best way to consolidate credit card debt depends on your financial situation. FAQ What is credit card consolidation? Why do people consolidate credit card debt? Are there any risks to consolidating credit cards? Will credit card consolidation affect my credit score?
Debt Relief That Works. What is it for? How is your credit? Advertiser Disclosure Share this article: Nick Clements Nick Clements has worked in consumer banking for nearly 15 years and is the co-founder of MagnifyMoney. Other offers from big banks Are these the best deals for you? The good news is we can figure it out for you. The savings from just one balance transfer can be substantial.
Before you do any balance transfer though, make sure you follow these 6 golden rules of balance transfer success: Never use the card for spending.
Have a plan for the end of the promotional period. Make sure you set a reminder on your phone calendar about a month or so before your promotional period ends so you can shop around for a low rate from another bank. Apply for one from another bank.
Get that transfer done within 60 days. Otherwise your promotional deal may expire unused. Never use a card at an ATM. You should never use the card for spending, and getting cash is incredibly expensive. Always pay on time. If you pay more than 30 days late your credit will be hurt, your rate may go up, and you may find it harder to find good deals in the future. Yolander Prinzel Yolander Prinzel is a financial writer and editor with almost two decades in the industry as a writer, underwriter, marketing director and securities trader.
How Chapter 13 works How to file Chapter 13 bankruptcy Pros and cons of declaring Chapter 13 bankruptcy Chapter 13 bankruptcy: How Chapter 13 works. Pros and cons of declaring Chapter 13 bankruptcy. FAQs Will Chapter 13 erase my debts? How is my repayment determined in a Chapter 13 bankruptcy? If I file Chapter 13, can I keep my car, home, boat, timeshare?
Can creditors still put me through collections after I file? Life after bankruptcy One of the biggest considerations people make when deciding whether to file for bankruptcy is the potential impact it will have on their future financial lives. Alternatives to Chapter In addition, you may want to avoid closing old accounts after consolidation. As a result, new purchases could be charged the standard APR — which can be very high. Your cardholder agreement will state the APR for purchases and whether any intro rate applies.
Creating a budget, and sticking to it, will help with getting the most from credit card consolidation and paying off balances faster.
Balance transfer fees are typically charged, which range from 2 to 5 percent of each balance transferred. In fact, some non-profit credit counseling organizations charge very high fees. Signs of a reputable organization include:. Research credit counseling agencies with your state attorney general and local consumer protection agency. These agencies will help you uncover if the company has any complaints against them. Balance Transfer Pay off debt faster with a balance transfer.
How much debt do you have? Gather all credit card statements, and add up how much debt you owe to your creditors.