Home » Posts tagged 'student loans'
Tag Archives: student loans
Can I Inherit Debt?
When someone passes away leaving debts behind, you might be wondering if you have any personal liability to pay them. If you have aging parents, for instance, you may be worried about having to assume responsibility for their mortgage payments, credit cards or other debts. If youâve asked yourself, âCan I inherit debt?â the answer is typically no, even though those debts donât automatically disappear. But there are situations in which you may have to deal with a loved oneâs creditors after theyâre gone.
How Debts Are Handled When Someone Passes Away
Debts, just like assets, are considered part of a personâs estate. When that person passes away, their estate is responsible for paying any and all remaining debts. The money to pay those debts comes from the asset side of the estate.
In terms of who is responsible for making sure the estateâs debts are paid, this is typically done by an executor. An executor performs a number of duties to wrap up a personâs estate after death, including:
- Getting a copy of the deceased personâs will if they had one and filing it with the probate court
- Notifying creditors and other entities of the personâs death (for example, the Social Security Administration would need to be notified so any Social Security benefits could be stopped)
- Completing an inventory of the deceased personâs assets and their value
- Liquidating those assets as needed to pay off any debts owed by the estate
- Distributing the remaining assets to the people or organizations named in the deceased personâs will if they had one or according to inheritance laws if they did not
In terms of debt repayment, executors are required to give notice to creditors who may have a claim against the estate. Creditors are then giving a certain window of time, according to state laws, in which to make a financial claim against the estateâs assets for repayment of debts.
If a creditor doesnât follow state guidelines for making a claim, then those debts wonât be paid from the estateâs assets. But if creditors are less than reputable, they may try to come after the deceased personâs spouse, children or other family members to collect whatâs owed.
Not all assets in an estate may be used to repay debts owed by a deceased person. Any assets that already have a named beneficiary, such as a life insurance policy, a 401(k), individual retirement account, payable on death accounts or annuity, would be transferred to that beneficiary automatically.
Can I Inherit Debt From My Parents?
This is an important question to ask if your parents are carrying high amounts of debt and youâre worried about having to pay those bills when they pass away. Again, the short answer is usually no. You generally donât inherit debts belonging to someone else the way you might inherit property or other assets from them. So even if a debt collector attempts to request payment from you, thereâd be no legal obligation to pay.
The catch is that any debts left outstanding would be deducted from the estateâs assets. If your parents were substantially in debt when they passed away, repaying them from the estate may leave little or no assets for you to inherit.
But you should know that you can inherit debt that you were already legally responsible for while your parents were alive. For instance, if you cosigned a loan with them or opened a joint credit card account or line of credit, those debts are legally yours just as much as they are your parents. So, once they pass away, youâd be solely responsible for repaying them.
And itâs also important to understand what responsibility you may have for covering long-term care costs incurred by your parents while they were alive. Many states have filial responsibility laws that require children to cover nursing home bills, though they arenât always enforced. Talking to your parents about long-term care planning can help you avoid situations where you may end up with an unexpected debt to pay.
Can I Inherit Debt From My Children?
The same rules that apply to inheriting debt from parents typically apply to inheriting debts from children. Any debts remaining would be paid using assets from their state.
Otherwise, unless you cosigned for the debt, then you wouldnât be obligated to pay. On the other hand, if you cosigned private student loans, a car loan or a mortgage for your adult child who then passed away, as cosigner youâd technically have a legal responsibility to pay them. Federal student loans are an exception.
If your parents took out a PLUS loan to pay for your higher education costs and something happens to you, the Department of Education can discharge that debt due to death. And vice versa, if your parents pass away then any PLUS loans they took out on your behalf could also be discharged.
Can I Inherit Debts From My Spouse?
When marriage and money mix, the lines on inherited debt can get a little blurred. The same basic rule that applies to other situations applies here: if you cosigned or took out a joint loan or line of credit together, then youâre both equally responsible for the debt. If one of you passes away, the surviving spouse would still have to pay.
But what about debts that are in one spouseâs name only? Thatâs where itâs important to understand how living in a community property state can affect your liability for marital debts. If you live in a community property state, debts incurred after the marriage by one spouse can be treated as a shared financial obligation. So if your spouse opened up a credit card or took out a business loan, then passed away you could still be responsible for paying it. On the other hand, debts incurred by either party before the marriage wouldnât be considered community debt.
Consider Getting Help If You Need It
If a parent, spouse, sibling or other family member passes away, it can be helpful to talk to an attorney if youâre being pressured by debt collectors to pay. An attorney who understands debt collection laws and estate planning can help you determine what your responsibilities are for repaying debts and how to handle creditors.
The Bottom Line
Whether or not youâll inherit debt from your parents, child, spouse or anyone else largely hinges on whether you cosigned for that debt or live in a community property state in the case of married couples. If youâre concerned about inheriting debts, consider talking to your parents, children or spouse about how those financial obligations would be handled if they were to pass away. Likewise, you can also discuss what financial safety nets you have in place to clear any debts you may leave behind, such as life insurance.
Tips for Estate Planning
- Consider talking to a financial advisor about how to manage and pay off debts you owe or any debts you might inherit from someone else. If you donât have a financial advisor yet, finding one doesnât have to be difficult. SmartAssetâs financial advisor matching tool can help you connect with an advisor in your local area. It takes just a few minutes to get your personalized advisor recommendations online. If youâre ready, get started now.
- The Fair Debt Collection Practices Act caps the statute of limitations for unpaid debt collections at a maximum of six years, although most states specify a much shorter time frame. However, some debt collectors buy so-called zombie debts for pennies on the dollar and then â unscrupulously â try to collect on them. Hereâs how to deal with such operators.
Photo credit: ©iStock.com/NiseriN, ©iStock.com/AndreyPopov, ©iStock.com/FatCamera
The post Can I Inherit Debt? appeared first on SmartAsset Blog.
Source: smartasset.com
The Best Student Loan Companies For Refinancing
Refinancing your student loans can make good financial sense, and thatâs especially true if your current loans are stuck at a high-interest rate. With a new loan at a lower APR, you could save a bundle of money on interest each month and ultimately pay your student debt off faster. Consolidating several loans into one new one can also simplify your financial life and make keeping up with bills a lot easier.
College Ave and Earnest topped our list, but since student loan refinancing is an incredibly competitive space, youâll also want to spend time comparing student loan companies to see who offers the best deal. Many lenders in this space offer incredibly low APRs, flexible payment options, borrower incentives, and more. This means itâs more important than ever to shop around so you wind up with the best student loan for your needs.
What You Should Know About Refinancing Federal Student Loans with a Private Lender
The lenders on this list can help you consolidate and refinance both federal student loans and private student loans. However, there are a few details to be aware of before you refinance federal loans with a private lender.
Switching federal loans to private means giving up federal protections like deferment and forbearance. You also give up your chance to qualify for income-driven repayment plans like Pay As You Earn (PAYE) or Income Based Repayment (IBR). Income-driven repayment plans let you pay a percentage of your discretionary income for 20 to 25 years before ultimately forgiving your remaining loan balances, so this perk isnât one you should give up without careful thought and consideration.
Best Student Loan Refinancing Companies of 2021
As you start your search to find the best student loan for your lifestyle, take the time to compare lenders and all they offer their customers. While there are a ton of reputable companies offering high-quality student loan refinancing products on the market today, there are also companies you should probably steer clear of.
To make your search easier, we took the time to compare most of the top lenders in this space in terms of interest rates offered, fees, borrower benefits, and more. The following student loan companies are the cream of the crop, so you should start your search here.
Our Top Picks:
- Splash Financial
- College Ave
- Earnest
- SoFi
- CommonBond
- LendKey
- Wells Fargo
- PenFed Credit Union
Student Loan Refinancing Company Reviews
1. Splash Financial
Splash Financial may be a newer company in the student loan refinancing space, but their offerings are competitive. This company lets you check your rate online without a hard inquiry on your credit report, and their variable rates currently start at just 2.25% APR.
Not only are interest rates offered by Splash Financial industry-leading, but the company has a 95% customer satisfaction rate so far. Their cutting-edge technology also lets you apply for your loan and complete the loan process online, meaning less hassle and stress for you as the borrower.
Check Out Splash Financialâs Low Rates
2. College Ave
College Ave offers student loan refinancing products that can be tailored to your needs. They offer low fixed and variable interest rates, for example, and youâll never pay an application fee or an origination fee. You can even qualify for a discount if you set your loan up on autopay, and a wide range of repayment schedules are available.
College Ave also offers a wide range of online calculators and tools that can help you figure out how much student loan refinancing could help you save and whether the move would be worth it in the end. Considering their low variable rates start at just 2.74% APR, thereâs a good chance you could save money by refinancing if you have excellent credit or a cosigner with great credit.
Get Started with College Ave
3. Earnest
Earnest is another online lender that focuses most of its efforts on offering high-quality student loans. This company lets you consolidate debt at a lower interest rate than you might find elsewhere, and you get the option to pick a monthly payment and repayment period that works with your budget and your lifestyle.
While youâll need excellent credit to qualify for the lowest interest rates, loans from Earnest come with variable APRs starting at 1.81% and low fixed rates starting at just 3.45%. To qualify for student loan refinancing with Earnest, youâll need a minimum credit score of 650 and a strong employment and income history. You also need to be current on all your bills and cannot have a bankruptcy on your credit profile.
Refinance and Save with Earnest
4. SoFi
Also make sure to check out student loan refinancing company SoFi as you continue your search. This online lender offers some of the best student loan refinancing products available today, including loans with no application fee, origination fee, or hidden fees.
SoFi lets you apply for and complete the entire loan process online, and they offer live customer support 7 days a week. You can also check your rate online without a hard inquiry on your credit report, which makes it easier to see how much you could save before you commit.
Get Pre-Approved with SoFi in Less than 2 Minutes
5. Commonbond
Commonbond is another online student lender who lets you check your rate online without a hard inquiry on your credit report. With student loan refinancing from Commonbond, you could easily save thousands of dollars on interest with a new fixed interest rate as low as 3.21%. Repayment terms are offered for 5 to 20 years as well, letting you choose a new monthly payment and repayment timeline that works for your needs.
You can apply for your new loan online and note that these loans donât come with an origination fee or any prepayment penalties. Your loan could also qualify for forbearance, which means having up to 24 months without payments during times of financial hardship.
Apply Online with Commonbond
6. LendKey
LendKey offers private student loans and flexible student loan refinancing options to serve a variety of needs. You can repay your loan between 5 and 20 years, and their refinance loans donât charge an origination fee.
You can use this companyâs online interface to check your rate without a hard inquiry on your credit report, and variable APRs start at just 2.01% for graduates with excellent credit. LendKey loans also receive 9.3 out of 10 possible stars in recent reviews, meaning their customers are mostly happy with their decision to go with this company.
Save Thousands by Refinancing with LendKey
7. Wells Fargo
While Wells Fargo is mostly popular for their banking products, home mortgage products, and personal loans, this bank also offers student loan refinancing products. These loans let you consolidate student debts into a new loan with a low variable or fixed interest rate, and you can even score a discount for setting your loan up on autopay.
Terms for Wells Fargo loans are available anywhere from 5 to 20 years, meaning you can choose a repayment schedule and monthly payment that suits your needs. Wells Fargo also lets you check your rate online without a hard inquiry on your credit report.
Get Started with Wells Fargo
8. PenFed Credit Union
PenFed Credit Union offers unique student loan products powered by Purefy. You might be able to qualify for a lower interest rate that could lead to enormous interest savings over time, and PenFed lets you choose a repayment term and monthly payment that fits with your budget and lifestyle.
You can apply for student loan refinancing on your own, but PenFed Credit Union also allows cosigners. Low fixed interest rates start at just 3.48% APR, and you can check your rate online without a hard inquiry on your credit report.
Learn More about PenFed Credit Union
What To Look For When Refinancing
If you decide you want to refinance your student loans, youâll be happy to know the refinancing market is more robust than ever. A variety of lenders offer insanely attractive loan options for those who can qualify, although you should know that student loan companies tend to be very finicky about your credit score. Some also wonât let you refinance if you didnât graduate from college, or even if you graduated from an âunapprovedâ school.
While you should be aware of any lender-specific eligibility requirements before you apply with any student loan company, there are plenty of other factors to look out for. Hereâs everything you should look for in a student loan refinancing company before you decide to trust them with your loans.
Low Interest Rate
Obviously, the main reason youâre probably thinking of refinancing your loans is the potential to save money on interest. Lenders who offer the lowest rates available today can potentially help you save more, although itâs important to consider that you may not qualify for the lowest rates available if you donât have excellent credit.
Cosigner Requirements
Also consider that most lenders will offer better rates and loan terms if you have a cosigner with better credit than you have. This is especially true if your credit isnât great, so make sure to ask family members if theyâre willing to cosign on your new student loan if you hope to get the best rate. Just remember that your cosigner will be jointly liable for repayment, meaning you could quickly damage your relationship if you default on your loan and leave them holding the bag.
Low Fees or No Fees
Student loans are like any other loan in the fact that some charge higher fees or more fees than others. Since many student loans come with an application fee or an origination fee, youâll want to look for lenders that donât charge these fees. Also check for hidden fees like prepayment penalties.
Discounts Available
Some student loan companies let you qualify for discounts, the most popular of which is a discount for using autopay. If youâre able and willing to set up automatic payments on your credit card, you could save .25% or .50% off your interest rate depending on the lender you go with.
Rate Check Option
Many of the top student loan refinancing companies on this list make it possible to check your interest rate online without a hard inquiry on your credit report. This is a huge benefit since knowing your rate can help you figure out if refinancing is even worth it before you take the time to fill out a full loan application.
Flexible Repayment Plan
Also make sure any lender you go with offers some flexibility in your repayment plan and your monthly payment. Youâll want to make sure refinancing aligns with your long-term financial goals and your monthly budget, and itâs crucial to choose a new loan with a monthly payment you can live with.
Most lenders in this space offer repayment timelines of up to 20 years, which means you could spread your payments over several decades to get a monthly payment that makes sense with your income. Keep in mind, however, that youâll pay more interest over the life of your loan when you take a long time to pay it off, so you may want to consider prioritizing a faster payment plan.
The Bottom Line
Student loan refinancing may not sound like a lot of fun. However, taking the time to consider all your loan options could easily save you thousands of dollars. This is especially true if you have a lot of debt at a high interest rate. By consolidating all your student loans into a new one with a lower APR, you could make loan repayment easier with a single payment and save a ton of money that would otherwise go to straight to interest without helping you pay off your loans.
The first step of the loan process is the hardest, however, and thatâs choosing a student loan refinancing company that you trust. The lenders on this list are highly rated, but they also offer some of the best loan products on the market today.
- Work with College Ave, our top pick, to refinance your student loan.
Start your search here and youâre bound to wind up with a student loan you can live with. At the very least, you’ll have a better idea of the loans that are available and how much you might save if you decide to refinance later on.
The post The Best Student Loan Companies For Refinancing appeared first on Good Financial Cents®.
Source: goodfinancialcents.com
Does Refinancing Hurt Your Credit?
Before you make any big financial decision, it’s crucial to learn how it may affect your credit score. If youâre looking to refinance, itâs natural to wonder if it might hurt your credit.
Typically, your credit health will not be strongly affected by refinancing, but the answer isnât always black and white. Whether youâre still considering your options or already made your choice, weâve outlined what you need to know about refinancing below.
What Is Refinancing?
Refinancing is defined by taking on a new loan to pay off the balance of your existing loan balance. How you approach a refinancing decision depends on whether itâs for a home, car, student loan, or personal loan. Since refinancing is essentially replacing an existing debt obligation with another debt obligation under different terms, itâs not a decision to take lightly.
If youâre worried about how refinancing will affect your credit health, remember that there are multiple factors that play into whether or not it hurts your credit score, but the top three factors are:
1) Having a Solid Credit Score
You wonât be in a strong position to negotiate refinancing terms without decent credit.
2) Earning Sufficient Income
If you canât prove that you can keep up with loan payments after refinancing, it wonât be possible.
3) Proving Sufficient Equity
Youâll also need to provide assurance that the payments will still be made if your income canât cover the cost. Itâs recommended that you should have at least a 20 percent equity in a property when refinancing a home.
How Does Refinancing Hurt Your Credit?
Refinancing might seem like a good option, but exactly how does refinancing hurt your credit? In short, refinancing may temporarily lower your credit score. As a reminder, the main loan-related factors that affect credit scores are credit inquiries and changes to loan balances and terms.
Credit Inquiries
Whenever you refinance, lenders run a hard credit inquiry to verify your credit score. Hard credit inquiries typically lower your credit scores by a few points. Try to avoid incurring several new inquiries by using smart rate shopping tactics. It also helps to get all your applications in during a 14â45 day window.
Keep in mind that credit inquiries made during a 14â45 day period could count as one inquiry when your scores are calculated, depending on the type of loan and its scoring model. Regardless, your credit wonât be permanently damaged because the impact of a hard inquiry on your credit decreases over time anyway.
Changes to Loan Balances and Terms
How much your credit score is impacted by changes to loan balances and terms depends on whether your refinanced loan is reported to the credit bureaus. Lenders may report it as the same loan with changes or as an entirely new loan with a new open date.
If your loan from refinancing is reported as a new loan, your credit score could be more prominently affected. This is because a new or recent open date usually means that it is a new credit obligation, therefore influencing the score more than if the terms of the existing loan are simply changed.
How Do Common Types of Refinancing Affect Your Credit?
Refinancing could help you pay off your loans quicker, which could actually improve your credit. However, there are multiple factors to keep in mind when refinancing different types of loans.
Refinancing a Mortgage
Refinancing a mortgage has the biggest potential impact on your credit health, and it can definitely affect your FICO score. How can you prevent refinancing from hurting your credit too much? Try concentrating your credit inquiries when you shop mortgage rates to a 14â45 day window â this will help prevent multiple hard inquiries. Also, you can work with your lenders to avoid having them all run your credit, which could risk lowering your credit score.
If youâre unsure about when to refinance your mortgage, do your research to capitalize on the best timing. For example, refinancing your mortgage while rates are low could be a viable option for you â but it depends on your situation. Keep in mind that losing your record of paying an old mortgage on time could be harmful to your credit score. A cash-out refinance could be detrimental, too.
Refinancing an Auto Loan
As you figure out if refinancing your auto loan is worth it, be sure to do your due diligence. When refinancing an auto loan, youâre taking out a second loan to pay off your existing car debt. In some cases, refinancing a car loan could be a wise move that could reduce your interest rate or monthly payments. For example, if youâre dealing with an upside-down auto loan, you might consider refinancing.
However, there are many factors to consider before making an auto loan refinancing decision. If the loan with a lower monthly payment has a longer term agreement, will you be comfortable with that? After all, the longer it takes to pay off your car, the more likely it is to depreciate in value.
Refinancing Student Loans
When it comes to student loan refinancing, a lower interest rate could lead to major savings. Whether youâve built up your own strong credit history or benefit from a cosigner, refinancing can be rewarding.
Usually, you can refinance both your federal and private student loans. Generally speaking, refinancing your student loans shouldnât be detrimental in the grand scheme of your financial future. However, be aware that refinancing from a federal loan to a private loan will have an impact on the repayment options available to you. Since federal loans can offer significantly better repayment options than private loans, keep that in mind before making your decision.
Pros | Cons |
---|---|
If the cost of borrowing is low, securing a lower interest rate is possible | Credit scores can drop due to credit checks from lenders |
If your credit score greatly improved, you can refinance to get a better rate | Credit history can be negatively affected by closing a previous loan to refinance |
Refinancing a loan can help you lower expenses in both the short term and long term | Refinancing can involve fees, so be sure to do a cost-benefit analysis |
How to Prevent Refinancing from Hurting Your Credit
By planning ahead, you can put yourself in a position to not let refinancing negatively affect your credit and overall financial health.
Try to prepare by reading your credit reports closely, making sure there are no errors that could keep your credit application from being approved at the best possible rate. Stay one step ahead of any errors so you still have time to dispute them. As long as you take preventative measures in the refinancing process to save yourself time and money, you shouldnât find yourself struggling with the refinancing.
If refinancing makes sense for your situation, you shouldnât be concerned about it hurting your credit. It might not be the most ideal situation, but itâs extremely common and typically relatively easy for your credit score to bounce back.
If you notice that your new loan from refinancing causes alarming changes when you check your credit score, be sure to reach out to your creditor or consider filing a dispute. As long as youâre prioritizing your overall financial health through smart decision making and budgeting, refinancing shouldnât adversely hurt your credit in the long run.
The post Does Refinancing Hurt Your Credit? appeared first on MintLife Blog.
Source: mint.intuit.com
Learning How To Survive On A College Budget
College is expensive and everyone knows that.
Between paying for tuition, parking, textbooks, extra fees, and everything else, you also have basic living expenses to pay for as well.
All of these costs are either brand new or somewhat new to you most likely as well, so you might not even know how to survive on a budget, let alone a college budget.
Don’t worry, though, surviving on a college budget is possible. Learning how to save money in college is possible!
Related post: How I Paid Off $40,000 In Student Loans In 7 Months
Whether you are trying to survive the whole year off of what you made over the summer or if you have a steady job throughout the school year, there are ways to budget your money and not fall into any extra debt. Plus, you can still enjoy your college years on a low budget as well!
Below are my tips on how to survive on a college budget.
Use your student ID.
Your student ID is good at many places beyond just your college campus. Before you buy anything, I highly recommend seeing if a company offers a student discount.
Your student ID can be used to save money at restaurants, clothing stores, electronics (such as laptops!), at the movies, and more. You may receive a discount, free items, and more all just by flashing your student ID.
After all, you are paying to go to college and you are paying a lot. You might as well reap one benefit of paying all of those high college costs.
Make extra money.
You may need to look into making extra money if you just don’t have enough to survive on. I am a firm believer in making extra money and I think extra time can be wisely spent doing this.
Some online side gigs with flexible schedules include:
- Blogging is how I make a living and just a few years ago I never thought it would be possible. I made over $150,000 last year by blogging and will make more than that in 2015. You can create your own blog here with my easy-to-use tutorial. You can start your blog for as low as $3.49 per month plus you get a free domain if you sign-up through my tutorial.
- Survey companies I recommend include Survey Junkie, American Consumer Opinion, Product Report Card, Pinecone Research, Opinion Outpost, and Harris Poll Online. They’re free to join and free to use! It’s best to sign up for as many as you can because that way you can receive the most surveys and make the most money.
- InboxDollars is an online rewards website I recommend. You can earn cash by taking surveys, playing games, shopping online, searching the web, redeeming coupons, and more. Also, by signing up through my link, you will receive $5.00 for free!
- Swagbucks is something I don’t use as much, but I do earn Amazon gift cards with very little work. Swagbucks is just like using Google to do your online searches, except you get rewarded points called “SB” for the things you do through their website. Then, when you have enough points, you can redeem them for cash, gift cards, and more. You’ll receive a free $5 bonus just for signing up today!
- Check out 75 Ways To Make Extra Money for more ideas.
- Read Best Online Jobs For College Students
Use coupons to stay on a college budget.
Just like with the above, you may want to start using coupons.
By doing so, you can save money on nearly everything. You can find coupons in newspapers, online, and in the mail. They are everywhere so you should have no problem finding them and saving money today.
Related post: How To Live On One Income
Learn how to correctly use a credit card or don’t have one at all.
Many college students fall into credit card debt, but I don’t want you to be one of them.
Many college students will start relying on their credit cards in order to get them through their low college budget, but this can lead to thousands of dollars of credit card debt which will eventually seem impossible to get out of due to significant interest charges that keep building up.
In order to never get into this situation, you should avoid credit cards at all costs if you think you will rely on them too heavily.
You should think long and hard about whether you should have one or not. Just because many others have them doesn’t mean they know what they’re doing! However, if you think you will be good at using them, then there are many advantages of doing so.
Related post: Credit Card Mistakes That Can Lead To Debt
Only take out what you need in student loans.
Many students take out the full amount in student loans that they are approved for even if they only need half.
This is a HUGE mistake. You should only take out what you truly need, as you will need to pay back your student loans one day and you will most likely regret it later.
I know someone who would take out the max amount each semester and buy timeshares, go on expensive vacations, and more. It was a huge waste of money and I’m still not even sure why they thought it was a good idea.
Just think about it – If you take out an extra $2,000 a semester, that means you will most likely take out almost $20,000 over the time period that you are in college.
Do you really want to owe THAT much more in student loans?
Skip having a car.
Most campuses have everything you need in order to survive – food, stores, and jobs. In many cases, you do not need to have a car whatsoever.
By foregoing a car, you may save money on monthly payments, maintenance costs, car insurance, gas, and more.
Related post: Should We Get Rid Of A Car And Just Have One?
Eat out less.
Now, I’m not saying you should stop eating out entirely if you are trying to survive on a college budget. I know how it is to be in college and to want to hang out with everyone. These are your college years after all.
However, you should try to eat in as much as you can, make your own meals, and try to eat out only during happy hours or when food is cheaper, such as during lunch time. Eating out can ruin your college budget!
Have a roommate.
The more people you live with, generally the less you will pay when it comes to rent and utilities. If you are living on your own, then you may want to find roommates so that you can split the costs with them.
This will help you to lower your college budget and you may even find some awesome friends.
Related post: What I Learned Having Roommates
What college budget tips do you have?
The post Learning How To Survive On A College Budget appeared first on Making Sense Of Cents.
Source: makingsenseofcents.com
4 Tricks for Budgeting on a Fluctuating Income
If you have an irregular income, you know how great the good times feelâand how difficult the lean times can be. While you can’t always control when you get paid or the size of each paycheck if you’re a freelancer, contractor or work in the gig economy, you can take control of your money by creating a budget that will help you manage these financial extremes.
Antowoine Winters, a financial planner and principal at Next Steps Financial Planning, LLC, says creating a budget with a variable income can require big-picture thinking. You may need to spend time testing out different methods when you first start budgeting, but, âif done correctly, it can really empower you to control your life,” Winters says.
How do you budget on an irregular income? Consider these four strategies to help you budget with a variable income and gain financial confidence:
1. Determine your average income and expenses
If you want to start budgeting on a fluctuating income, you need to know how much money you have coming in and how much you’re spending.
Of course, that’s the basis for any budget. But it can be particularly important if you’re trying to budget on an irregular income because you may have especially high- or low-income periods. You want to start tracking as soon as possible to build up accurate data on your average income and expenses.
For example, once you have six months’ worth of income and expenses documented, you can divide the total by six to determine your average income and expenses by month.
Many financial apps and websites can help with the tracking, including ones that can connect to your online bank and credit card accounts and automatically pull in your transactions. You may even be able to pull in previous months’ or years’ worth of data, which you can use to calculate your averages.
If you’re budgeting on a fluctuating income and apps aren’t your thing, you can use a spreadsheet or even a pen and notebook to track your cash flow. However, without automated tracking, it can be difficult to consistently keep your information up to date.
2. Try a zero-sum budget
“There are several strategies you can use to budget with an irregular income, but one of the easiest ones is the zero-sum budget,” says Holly Johnson. As a full-time freelance writer, she’s been budgeting with a variable income for over seven years and is the coauthor of the book Zero Down Your Debt.
With a zero-sum budget, your income and expenses should even out so there’s nothing left over at the end of the month. The trick is to treat your savings goals as expenses. For example, your “expenses” may include saving for an emergency, vacation or homeownership.
“There are several strategies you can use to budget with an irregular income, but one of the easiest ones is the zero-sum budget.”
Johnson says if you’re budgeting on a fluctuating income, you can adopt the zero-sum budget by creating a “salary” for yourself. Consider your average monthly expenses (shameless plug for tip 1) and use that number as your baseline.
For example, if your monthly household bills, groceries, business expenses, savings goals and other necessities add up to $4,000, that’s your salary for the month. During months when you make over $4,000, put the extra money into a separate savings account. During months when you make less than $4,000, draw from that account to bring your salary up to $4,000.
“We call this fund the ‘boom and bust’ fund,” Johnson says. “By building up an adequate amount of savings, you will create a situation where you can pay yourself the salary you need each month.”
3. Separate your saving and spending money
Physically separating your savings from your everyday spending money may be especially important when you’re creating a budget on an irregular income. You may be tempted to pull funds from your savings goals during low-income months, and stashing your savings in a separate, high-yield savings account can force you to pause and think twice before dipping in.
You earned it.
Now earn more with it.
Online savings with no minimum balance.
Start Saving


Savings
Discover Bank, Member FDIC
An easy way to put this tip into action when creating a budget with a variable income is to have all of your income deposited into one account, then disburse it into separate savings and spending accounts. “Transfer a set amount on the first of every month to a bill-paying account and a set amount to a spending account,” Winters, the financial planner, says.
“The bill pay account is used to pay for all of the regular expenses, like rent, insurance, car payments, student loans, etc.,” Winters says. These bills generally stay the same each month. The spending account can be used for your variable expenses, such as groceries and gas.
When considering your savings accounts, Winters also suggests funding a retirement account, such as an Individual Retirement Account (IRA).
If you’re budgeting on a fluctuating income as a contract worker or freelancer, you may also want to set money aside for taxes because the income and payroll taxes you’ll owe aren’t automatically taken out of your paychecks.
4. Build up your emergency fund
“The best way to weather low-income periods is to prepare with an adequate emergency fund,” freelancer Johnson says. An emergency fund is money you set aside for necessary expenses during an emergency, such as a medical issue or broken-down vehicle.
Generally, you’ll want to save up enough money to cover three to six months of your regular expenses. Once you build your fund, you can put extra savings toward other financial goals.
When you’re budgeting on a fluctuating income, having the emergency fund can help you feel more at ease knowing that you’ll be able to pay your necessary bills if the unexpected happens or when you’re stuck in a low-income period for longer than anticipated.
A budget can make living with a variable income easier
It can be challenging to budget on an irregular income, especially when you’re first starting. You might have to cut back on expenses for several months to start building up your savings and try multiple budgeting methods before finding the one that works best for you.
“Budgeting requires a mindset change regardless of which type of budget you try,” Johnson explains.
“The best way to weather low-income periods is to prepare with an adequate emergency fund.”
However, once in place, a budget on an irregular income can also help free you from worrying about the boom-and-bust cycle that many variable-income workers deal with throughout the year.
The goal is to get to the point where you can budget with a variable income and don’t have to worry about when you’ll get paid next because you set your budget based on your averages, planned ahead during the high times and have savings ready for your low times.
The post 4 Tricks for Budgeting on a Fluctuating Income appeared first on Discover Bank – Banking Topics Blog.
Source: discover.com
Should I Cash Out My 401k to Pay Off Debt?
Paying off debt may feel like a never-ending process. With so many potential solutions, you may not know where to start. One of your options may be withdrawing money from your retirement fund. This may make you wonder, âshould I cash out my 401k to pay off debt?â Cashing out your 401k early may cost you in penalties, taxes, and your financial future so it’s usually wise to avoid doing this if possible. When in doubt, consult your financial advisor to help determine whatâs best for you.
Before cashing out your 401k, we suggest weighing the pros and cons, plus the financial habits you could change to reduce debt. The right move may be adjusting your budget to ensure each dollar is being put to good use. Keep reading to determine if and when it makes sense to cash out your 401k.
How to Determine If You Want to Cash Out Your Retirement
Deciding to cash out your 401k depends on your financial position. If debt is causing daily stress, you may consider serious debt payoff plans. Early withdrawal from your 401k could cost you in
Deciding to cash out your 401k depends on your financial position. If debt is causing daily stress, you may consider serious debt payoff plans. Early withdrawal from your 401k could cost you in taxes and fees as your 401k has yet to be taxed. Meaning, the gross amount you withdraw from your 401k will be taxed in full, so assess your financial situation before making a decision.
Check Your Eligibility
Depending on your 401k account, you may not be able to withdraw money without a valid reason. Hefty medical bills and outstanding debts may be valuable reasons, but going on a shopping spree isnât. Below are a few requirements to consider for an early withdrawal:
- Financial hardships may include medical expenses, educational fees, bills to prevent foreclosure or eviction, funeral expenses, or home repairs.
- Your withdrawal is lower or exactly the amount of financial assistance you need.
To see what you may be eligible for, look up your 401k documentation or reach out to a trusted professional.
Assess Your Current Financial Situation
Sit down and create a list of your savings, assets, and debts. How much debt do you have? Are you able to allocate different funds towards debts? If you have $2,500 in credit card debt and a steady source of income, you may be able to pay off debt by adjusting your existing habits. Cutting the cord with your TV, cable, or streaming services could be a great money saver.
However, if youâre on the verge of foreclosure or bankruptcy, living with a strict budget may not be enough. When looking into more serious debt payoff options, your 401k may be the best route.
Calculate How Much of Your Retirement Is at Risk
Having a 401k is crucial for your financial future, and the government tries to reinforce that for your best interest. To encourage people to save, anyone who withdraws their 401k early pays a 10 percent penalty fee. When, or if, you go to withdraw your earnings early, you may have to pay taxes on the amount you withdraw. Your tax rates will depend on federal income and state taxes where you reside.
Say youâre in your early twenties and you have 40 years until youâd like to retire. You decide to take out $10,000 to put towards your student loans. Your federal tax rate is 10 percent and your state tax is four percent. With the 10 percent penalty fee, federal tax, and state tax, you would receive $7,600 of your $10,000 withdrawal. The extra $2,400 expense would be paid in taxes and penalties.
The bottom line: No matter how much you withdraw early from your 401k, you will face significant fees. These fees include federal taxes, state taxes, and penalty fees.
What Are the Pros and Cons?
Before withdrawing from your 401k, there are some pros and cons to consider before cashing out early.
Pros:
- Pay off debt sooner: In some cases, you may pay off debt earlier than expected. By putting your 401k withdrawal toward debt, you may be able to pay off your account in full. Doing so could help you save on monthly interest payments.
- Put more towards savings: If youâre able to pay off your debt with your early withdrawal, you may free up your budget. If you have extra money each month, you could contribute more to your savings. Adding to your savings could earn you interest when placed in a proper account.
- Less financial stress: Debt may cause you daily stress. By increasing your debt payments with a 401k withdrawal, you may save yourself energy. After paying off debt, you may consider building your emergency funds.
- Higher disposable income: If youâre able to pay off your debts, you may have more financial freedom. With this freedom, you could save for a house or invest in side hustles.
Cons:
- Higher tax bill: You may have to pay a hefty tax payment for your withdrawal. Your 401k is considered gross income thatâs taxed when paid out. Your federal and state taxes are determined by where you reside and your yearly income.
- Pay a penalty fee: To discourage people from cashing out their 401k, thereâs a 10 percent penalty. You may be charged this penalty in full.
- Cut your investment earnings: You gain interest on money you have stored in your 401k. When you withdraw money, you may earn a lower amount of interest.
- Push your retirement date: You may be robbing your future self. With less money in your retirement fund, youâll lower your retirement income. Doing so could push back your desired retirement date.
6 Ways to Pay Off Debt Without Cashing Out Your 401k
There are a few ways to become debt-free without cutting into your 401k. Paying off debt may not be easy, but it could benefit your future self and your current state of mind. Work towards financial freedom with these six tips.
1. Negotiate Your Credit Card Interest Rates
Call your credit card customer service center and ask to lower your rates on high-interest accounts. Look at your current interest rate, account history, and competitor rates. After researching, call your credit card company and share your customer loyalty. Follow up by asking for lower interest rates to match their competitors. Earning lower interest rates may save you interest payments.
2. Halt Your Credit Card Spending
Consider restricting your credit card spending. If credit card debt is your biggest stressor, cut up or hide your cards to avoid shopping temptations. Check in on your financial goals by downloading our app for quick updates on the fly. We send out weekly updates to see where you are with your financial goals.
3. Put Bonuses Towards Your Debt
Any time you get a monetary bonus, consider putting it towards debts. This could be a raise, yearly bonus, tax refund, or monetary gifts from your loved ones. You may have a set budget without this supplemental income, so act as if you never received it. Without budgeting for the extra income, you may feel less tempted to spend it.
4. Evaluate All Your Options for Paying Down Debt
If youâre in dire need to pay off your debts, look into other accounts like your savings or emergency fund. While money saved can help in times of need, your financial situation may be an emergency. To save on early withdrawal taxes and fees, you can borrow from savings accounts. To cover future emergency expenses, avoid draining your savings accounts entirely.
5. Transfer Balances to a Low-Interest Credit Card
If high-interest payments are diminishing your budget, transfer them to a low-interest account. Compare your current debt interest rates to other competitors. Sift through their fine print to spot any red flags. Credit card companies may hide variable interest rates or fees that drive up the cost. Find a transfer card that works for you, contact the company to apply, and transfer over your balances.
6. Consider Taking Out a 401k Loan Rather than Withdrawing
To avoid early withdrawal fees, consider taking out a 401k loan. A 401k loan is money borrowed from your retirement fund. This loan charges interest payments that are essentially paid back to your future self. While some interest payments are put back in your account, your opportunity for compounding interest may slightly decrease. Compounding interest is interest earned on your principal balance and accumulated interest from past periods. While you may pay a small amount in interest fees, this option may help you avoid the 10 percent penalty fee.
As your retirement account grows, so does your interest earned â thatâs why time is so valuable. While taking out a 401k loan may be a better option than withdrawing from your 401k, you may lose out on a small portion of compounding interest. When, or if, you choose to take out a 401k loan, you may start making monthly payments right away. This allows your payments to grow interest and work for you sooner than withdrawing from your 401k.
This type of loan may vary on principle balance, interest rate, term length, and other conditions. In most cases, youâre allowed to borrow up to $50,000 or half of your account balance. Some accounts may also have a minimum loan balance. This means youâll have to take out a certain amount to qualify. Interest rates on these loans generally charge market value rates, similar to commercial banks.
Pulling funds from your retirement account may look appealing when debt is looming over you. While withdrawing money from your 401k to pay off debt may help you now, it could hurt you in taxes and fees. Before withdrawing your retirement savings, see the effect it could have on your future budget. As part of your strategy, determine where youâre able to cut out unnecessary expenses with our app. Still on the fence about whether withdrawing funds is the right move for you? Consult your financial advisor to determine a debt payoff plan that works best for your budgeting goals.
The post Should I Cash Out My 401k to Pay Off Debt? appeared first on MintLife Blog.
Source: mint.intuit.com
Which Student Loan Should You Pay First?
The financial camps are divided between paying off your smallest first vs. your highest interest student loan. So whoâs right? Finance people can agree on a few things. Some debts like payday loans and IRS back taxes are worse than…
The post Which Student Loan Should You Pay First? appeared first on Modern Frugality.
Source: modernfrugality.com
Different Types of Debt

Debt comes in all shapes and sizes. You can owe money to utility companies, banks, credit card providers, and the government. Thereâs student loan debt, credit card debt, mortgage debt, and much more. But what are the official categories of debt and how do the payoff strategies for these debts differ?
Categories of Debt
Debt is generally categorized into two simple forms: Secured and Unsecured. The former is secured against an asset, such as a car or loan, and means the lender can seize the asset if you fail to meet your obligations. Unsecured is not secured against anything, reducing the creditorâs control and limiting their options if the repayment terms are not met.
A secured debt provides the lender with some assurances and collateral, which means they are often prepared to provide better interest rates and terms. This is one of the reasons youâre charged astronomical rates for credit cards and short-term loans but are generally offered very favorable rates for home loans and car loans.
If the debtor fails to make payments on an unsecured debt, such as a credit card, then the debtor may file a judgment with the courts or sell it to a collection agency. In the first instance, itâs a lot of hassle without any guarantee. In the second, theyâre selling the debts for cents on the dollar and losing a lot of money. In either case, itâs not ideal, and to offset this they charge much higher interest rates and these rates climb for debtors with a poorer track record.
There is also something known as revolving debt, which can be both unsecured and secured. Revolving debt is anything that offers a continuous cycle of credit and repayment, such as a credit card or a home equity line of credit.Â
Mortgages and federal student loans may also be grouped into separate debts. In the case of mortgages, these are substantial secured loans that use the purchase as collateral. As for federal student loans, they are provided by the government to fund education. They are unsecured and there are many forgiveness programs and options to clear them before the repayment date.
What is a Collection Account?
As discussed above, if payments are missed for several months then the account may be sold to a debt collection agency. This agency will then assume control of the debt, contacting the debtor to try and settle for as much as they can. At this point, the debt can often be settled for a fraction of the amount, as the collection agency likely bought it very cheaply and will make a profit even if it is sold for 30% of its original balance.
Debt collectors are persistent as thatâs their job. They will do everything in their power to collect, whether that means contacting you at work or contacting your family. There are cases when they are not allowed to do this, but in the first instance, they can, especially if theyâre using these methods to track you down and they donât discuss your debts with anyone else.
No one wants the debt collectors after them, but generally, you have more power than they do and unless they sue you, thereâs very little they can do. If this happens to you, we recommend discussing the debts with them and trying to come to an arrangement. Assuming, that is, the debt has not passed the statute of limitations. If it has, then negotiating with them could invalidate that and make you legally responsible for the debt all over again.
Take a look at our guide to the statute of limitations in your state to learn more.
As scary as it can be to have an account in collections, itâs also common. A few years ago, a study found that there are over 70 million accounts in collections, with an average balance of just over $5,000.
Can Bankruptcy Discharge all Debts?
Bankruptcy can help you if you have more debts than you can repay. But itâs not as all-encompassing as many debtors believe.
Chapter 7 bankruptcy will discharge most of your debts, but it wonât touch child support, alimony or tax debt. It also wonât help you with secured debts as the lender will simply repossess or foreclose, taking back their money by cashing in the collateral. Chapter 13 bankruptcy works a little differently and is geared towards repayment as opposed to discharge. You get to keep more of your assets and in exchange you agree to a payment plan that repays your creditors over 3 to 5 years.
However, as with Chapter 7, you canât clear tax debts and you will still need to pay child support and alimony. Most debts, including private student loans, credit card debt, and unsecured loan debt will be discharged with bankruptcy.
Bankruptcy can seriously reduce your credit score in the short term and can remain on your credit report for up to 10 years, so itâs not something to be taken lightly. Your case will also be dismissed if you canât show that you have exhausted all other options.
Differences in Reducing Each Type of Debt
The United States has some of the highest consumer debt in the world. It has become a common part of modern life, but at the same time, we have better options for credit and debt relief, which helps to balance things out a little. Some of the debt relief options at your disposal have been discussed below in relation to each particular type of long-term debt.
The Best Methods for Reducing Loans
If youâre struggling with high-interest loans, debt consolidation can help. A debt consolidation company will provide you with a loan large enough to cover all your debts and in return, they will give you a single long-term debt. This will often have a smaller interest rate and a lower monthly payment, but the term will be much longer, which means youâll pay much more interest overall.
Debt management works in a similar way, only you work directly with a credit union or credit counseling agency and they do all the work for you, before accepting your money and then distributing it to your creditors.
Both forms of debt relief can also help with other unsecured debts. They bring down your debt-to-income ratio, leave you with more disposable income, and allow you to restructure your finances and get your life back on track.
The Best Methods for Reducing Credit Cards
Debt settlement is the ultimate debt relief option and can help you clear all unsecured debt, with many companies specializing in credit card debt.Â
Debt settlement works best when you have lots of derogatory marks and collections, as this is when creditors are more likely to settle. They can negotiate with your creditors for you and clear your debts by an average of 40% to 60%. You just need to pay the full settlement amount and the debt will clear, with the debt settlement company not taking their cut until the entire process has been finalized.
A balance transfer can also help with credit card debt. A balance transfer credit card gives you a 0% APR on all transfers for between 6 and 18 months. Simply move all of your credit card balances into a new balance transfer card and then every cent of your monthly payment will go towards the principal.
The Best Methods for Reducing Secured Debts
Secured debt is a different beast, as your lender can seize the asset if they want to. This makes them much less susceptible to settlement offers and refinancing. However, they will still be keen to avoid the costly foreclosure/repossession process, so contact them as soon as youâre struggling and see if they can offer you anything by way of a grace period or reduced payment.
Most lenders have some form of hardship program and are willing to be flexible if it increases their chances of being repaid in full.
Different Types of Debt is a post from Pocket Your Dollars.
Source: pocketyourdollars.com