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50 Side Hustles Or Simple Things You Could Do On The Side To Pay Off Your Debts

If you’re awash in a sea of debt you must be pretty uncomfortable. The worst thing about debts is they just never go away. You could ignore a debt for six months and you might stop hearing from that particular lender but trust us. It will sell your debt to a third-party so it won’t have gone away. It will only have moved. And it will probably have moved to a debt collector. If you don’t already have debt collectors harassing you then get busy before the harassment starts. Debt collectors are like the cockroaches of life. They won’t stop making your life miserable until you settle the debt. If that particular debt collector gives up on you, which is seriously unlikely, that debt still won’t disappear. The collector will simply sell it to yet another collection agency and so on and so on.

The good news is that if you seriously want to get out of debt it’s not all that difficult. There is a bunch of “side hustles” or simple ways to make money on the side. Pick one or several of the 50 we’re about to share with you and you could be debt-free in practically no time at all.

Happy BusinessmanBe your own boss

You really don’t even have to work for someone, as there are there are easy businesses to start that you could run in your spare time. Some of these could even be fun as well as moneymakers.

#1: Get crafty

Craftsmen were dealt an awful blow by today’s mass production technology. But they’ve been coming back these days in a big way. Many people have become sick and tired of assembly-line stuff made in China. Thanks to the website Etsy.com you could set up shop and sell whatever it is that appeals to you and that your tools and skills can handle. We’ve seen people making simple things such as shaving brushes, lamps, personalized notebook covers and hundreds of other items – and making good money.

#2. Got a degree in English?

There’s a big market out there for people who can be proofreaders and editors. This is a great how to make money on the side because the only tool that’s required is your brain. You might be able to start working for friends or former classmates. But as you build your “creeds” you should be able to branch out and find work in Craigslist postings and independent/indie author’s forums.

#3. Personal chef or meal delivery

Got a knack for cooking? There was a time when only the rich could afford a personal chef but now more and more middle class people are jumping on the bandwagon. You could go into the home and make meals for them several times a week or prepare the meals in your house and then deliver them. One note of caution. If you want to fix meals in your own home and then deliver them, be aware that there may be laws that requirimg you to make the food in a kitchen that’s commercially-certified. And it can be costly to get that certification. You might be able to work around this if your city has a commercial kitchen where you could rent time.

#4. Pick up dog poop

This might sound like a nasty side hustle but it’s one of the easiest business to start. For that matter, some people actually do this full time. All dogs have to poop and there are people who don’t want to have to go over their yards every week looking for their dog’s droppings. Get as few as 10 customers a week at $30 a week and there’s a cool $300.

#5. Troubleshoot computersManager working diligently on the computer

If you’re one of those kind of, well, geeks that are not afraid to tear apart a computer to replace a motherboard or install a hard drive, this could be a way to pick up some real cash. Most people don’t know much about their computers except how to turn them on. Become a repair service for those people and you could earn $50 or more an hour by teaching them how to use their computers and then fixing them when they freeze up.

#6. Create blogs and websites

There’s hardly a business today that doesn’t need a website and maybe even a blog. Pick a couple dozen local businesses, go check out their websites and you’ll probably find most are dull, boring and static. You could not only help businesses by upgrading their sites but then charge extra to make those sites rank higher in the search engines to get the businesses new customers.

#7. Be a pet taxi service

There are many families these days where both the husband and wife work and maybe very long hours. They simply don’t have enough time to taxi their dogs or cats to the veterinarian or to get it groomed or get a medical check-up. You could be a pet taxi, pick up the animals and transport them to their appointments.

#8. Clean windows

Another way to be your own boss is to get a squeegee, some cleaning product and wash windows. This is another area where many people simply don’t want to have to face the task and are more than eager to let someone take it over for them.

car wash cartoon#9. Detail automobiles

Some people and I’m certainly not one of them prefer to detail their own cars. But there are plenty of people who will gladly pay you to take this task off their hands and make their vehicles shine like new.

#10. Create a blog

I’ll be honest and tell you it’s not easy to earn money with a blog but it is possible – if you don’t mind investing a lot of your time and sweat. But pick the right niche, generate a lot of good content, get a bunch of readers and you could make excellent money selling them products.

#11. Make music

Are you good on the keyboards or string instruments? A good side hustle would be performing at small business events and weddings. See, all that practice really didn’t go to waste.

#12. Teach music

You don’t have to be a performer to make money with music. You could become a music teacher. You could either give lessons in your home or go to people’s’ homes.

#13. Create family histories

There are numerous people who would love to know their family’s history but have neither the time nor the skills to do the work required. People sometimes even have software to do this but are still confused and don’t know how to use it. Your how to make money on the side could be to help them create their family trees.

#14. Sell you own t-shirts/posters/mugs

It seems like it was just a few minutes ago that to make your own T-shirts meant screen-printing them yourself. However, the cost to get started in this business is now practically zero what with all those sites that will print on demand and then ship your t-shirts or whatever for you. You could create designs and put them on everything from shirts to coffee mugs. These companies do everything for you including even the shipping. Of course, it’s up to you to do the graphic design. Be prepared for the fact that the printer will take a big cut leaving you with a much smaller net profit. But it’s a great way to get started in a new area to determine if there are people who would pay for your creations.

#15. Refurbish stuff

Do you like to refurbish your furniture? Then why not charge people to do theirs? You could even specialize in refurbishing certain items like furniture, clocks, phonographs or old-time radios.

#16. Make “artisan” jerky

Yes, you read that right. You could become a jerky maker. When women think of easiest business to start they almost inevitably think cupcakes. But we guys have jerky. There are a lot of independent makers of jerky and jerky artisans that have emerged in the past few years as an alternative to that low-quality, mass-produced jerky you find in grocery stores.

#17. Teachteacher a school

What could you teach? The list is almost endless. You could teach a foreign language, origami, drawing, or basic computer skills. All you would need is a place to hold your classes and some willing learners. If you have the right skills or expertise you could give a class through CE (continuing education) sites, libraries and rec centers. There is also the new site dabble.com where it’s possible to host classes for students interested in your subject.

#18. Be a tutor

If you’re really proficient in math, language arts or the SAT test you could become a tutor as there is never a shortage of people willing to pay for this service. Finding these clients is fairly easy. Just call a few of your local public schools as many of them keep lists of available tutors to give the parents that need one for their children.

#19. Be a jack of-all-trades handyman

Do you live in an apartment complex Then you know there‘s that one guy that repairs all those small things that can go wrong. But people in homes have to call someone different to fix every different thing from the furnace to the dishwasher. One of the great side business ideas is to become a Jack-of-all trades handyman. You could actually try asking for a retainer where people pay you a fee monthly so they could call you whenever they needed you and for whatever reason just like in an apartment complex.

#20. Personal shopper

There are so many choices available today for just about every single item that finding the right one can be time-consuming and frustrating. Where could I find a sweater like this one? What’s the best computer for my needs? What’s the best-priced ticket for my flight later this month? Let your clients tell you what they need. You would then go to work sorting through all the available options and then present them the three best choices or, depending on their level of trust, make the purchase for them.

#21. Be a travel agent

Professional travel agents have sort of gone the way of the dodo bird leaving a wide-open niche for helping people find the best travel deals. You could even specialize by setting yourself up as that person who finds and books the best vacation packages.

cartoon cute girl shoot photo with camera#22. Shoot photographs

If you have a good DSLR, the requisite skills and experience you could set yourself up documenting people’s weddings, family moments and birthdays. You could also license the rights to your photos for commercial use as well as many other things. It’s easy to do this through Flickr.

#23. Become that dirty jobs guy

There’s just a ton of unpleasant stuff that people either don’t want to do or can’t do. If you’re not afraid to clean the cobwebs and old junk out of a basement or clean a shower that’s gotten so aeful looking that the owner is embarrassed to contact a maid service you could charge good money for this. Spend a few minutes thinking about all the gross things you could do. You’ll probably come up with a fairly lengthy list. Put up a listing on Craigslist and you might actually find yourself overwhelmed with work.

#24. Write content

Content has become the battle cry of almost all bloggers and website hosts as content is what attracts and keeps readers. You may not make a lot per 500-word article but if you can crank out a dozen or so a day it could be good money. Plus, traditional magazines also still pay top dollar for great stuff.

#25. Videography/video editorVideographer

Many people no longer want just photographs of their weddings. They want them professionally videotaped and edited. With more and more video being watched online the market for good videographers and editors is only going to keep going up. If you can make and edit short films, you could sell your service to people to “shoot” their wedding. Local businesses can also be clients. You might sell them on the idea of a brief video for YouTube.com or that the business could put on its webpage.

#26. Computer programmer

Practically everybody has that great, brilliant idea for a smart phone app that will make them a gazillion dollars. Fortunately for you very few of them have the skills necessary to create the app and reliable computer programmers are hard to find..

#27. Personal trainer/fitness expert

You would need to be certified to do this but once you get your creds you could help people with their workouts at their favorite health club. Or you could start what’s called a boot camp. There are people who need specialized workout programs to help them train for an event such as a triathlon. There are also people looking for good exercise without going to a gym. It seems to us that there is a really good market for people offering what you would call “off the wall” kinds of fitness programs.

mower#28. Landscaper and lawn care

One of the small business ideas for men is where you could make good money with just a mower, a pickup truck and an edging tool. Plus you could do it evenings and weekends. Our lawn care guy charges $30 a week. Get 10 customers and that’s $1200 a month.

#29. Do other people’s taxes

This is an easiest business to start because again all you need is your brain and the computer you already own. We know of people who do this for their friends and relatives and charge a just small percentage of their returns. If you were to charge $60 and do this for four people a week during tax season that would be $960 in a month. You could actually use TurboTax to do the work for you. This is just a perfect side hustle.

#30. Drop shipping on the Internet

Drop shipping is where you create a storefront on the Internet and sell products but then let the manufacturer or wholesaler fulfill the sale for you. This means you actually never touch the inventory. You won’t make as much money as if you were selling your own product because the wholesaler or manufacturer will take its cut. But the work is almost effortless and once you get rolling, it requires practically no more work on your part.

#31. Teach on Udemy

You could make an online course in just a few hours and then sell it on Udemy. We know of one guy who earned more than $10,000 in just a few months from an online course that took him less than seven hours to create

#32. Airbnb

Could you rent out your home while you’re away? This can be a great moneymaker. Alternately, if you have two bedrooms and your rent is $1000 a month you could rent out one of them at $70 a night. This could generate a profit of $1100 a month.

#33. Sell your services on Fiverr

If you can do something fast, whether it’s create a logo, make a jingle or do fan pages you could make good money selling your services on Fiverr. Of course, as you probably know you only make five dollars per “gig” but we’ve seen people making more than that by offering logical add-on services for another $20 or $30.Cooking girl holding cake

#34. Be a baker

Do you have a knack for baking cakes, cupcakes and the like? You could dominate your workplace. We know of one woman who loves to cook and started offering to make salads for her coworkers. She ended up turning this into almost a full-time business.

#35. Start a painting service

You might look down at painting services but the good ones charge $50-$70 a room. If you live in a college town you could paint student-housing complexes. Three rooms at $75 each means $225. Multiply that by 500 apartments and that’s a cool $112,500.

#36. Write and fine-tune cover letters and create resumes

Given the way hiring works these days people absolutely need great cover letters and resumes. But this is beyond the abilities of many people. Smart people will pay good money for great resumes and cover letters. You could charge more if you have to start from scratch but you could also make money just doing critical revisions.

#37. Be a mover

No, this isn’t like being a mover and shaker. If you live in a town where people seem to move around a lot, you could create a moving service with the help of one or two of your buddies. College towns are great for this because they generally have people moving around every several months.

#38. Pick up other people’s trash

People end up with a ton of junk in their homes because they don’t want to have to move it. Charge people to take the junk out of their homes and off their hands. If you don’t think this would be a good side hustle look at the money being earned by 1-800-got-junk.

#39. Be a tour guide

Do you come from another country or are you intimately familiar with a foreign country? You could start a small tour guide company for people who want to visit that country. We have one friend from Sweden who earns tons of money every summer tour guiding Americans through his nation.

cartoon bartender pouring cocktail#40. Tend bar

This is one where you probably would have to be certified and certification programs can cost $500 and up. However, some bars will actually teach you on the spot if they’re really desperate for help. The hourly pay here tends to be on the low side but where you really make the money is in tips. In addition, you get to meet a lot of people along the way, including people of the opposite sex (grin).

#41. Bike messenger

Do you own a bike and a backpack? That’s all you need to be a bike messenger. You would help companies (especially advertising and legal) that do business with each other and need to send original documents back and forth. Believe it or not even in this day and age of FedEx and UPS there is still the need for someone that can get an original document from a company to a customer in less than an hour.

#42. Plan events

Just because a person or a company wants to put on an event doesn’t mean they will know how to do it. There are banquets, anniversaries, baby showers, birthdays, weddings and anniversaries where people need help planning, coordinating and executing. If you enjoy doing this, there’ll always be events and you will always have business.

#43. Stage fundraisersbreast cancer design

Do you know of a nonprofit that wouldn’t like some extra money? We’ve personally never run into one. There are numerous websites that help nonprofits raise money online and then take a percentage of it. You could do the same if you can get to the right people in a room or put together a campaign or event that would help a nonprofit you believe in raise more money to do more good work.

#44. Do gardening

This is different than doing lawn work because you would actually be planting and caring for flowers and bushes. This is also a great repeat side hustle because once you create that garden and those flowerbeds you’ll have an ongoing job maintaining them.

#45. Assemble IKEA furniture

Can you read diagrams and are good with your hands? People buy furniture from IKEA, bring it home, open the carton and 100 pieces fall out. If you like building stuff you could put an ad on Craigslist offering to help people assemble IKEA stuff and other “shipped flat” items. All you really need is a wrench and a screwdriver.

#46. Life coaching

Are you that guy or gal your friends are constantly coming to for advice. Why not charge – other people – for the service. The reason why your friends and relatives come to you is because you’re a great listener and you appear to have everything together. People value this and will value you and your advice as a result of it.

#47. House sitting

People who are away from their homes for long periods of time often don’t like the idea of them sitting unoccupied. They might even have pets that need to be cared for while they are gone. Or they might live in a neighborhood that isn’t quite the safest. Whatever the reason might be, housesitting can be a great side hCleaning womanustle – especially if you’re a real homebody.

#48. Start a housekeeping service

While there are professional housekeeping services they can be pricey and pretty stringent about what they’re willing to do. You might be able to build a good side hustle business offering to do customized housecleaning where you do everything your customer requests and not just whatever can be done in four hours.

#49. Massage therapy

While you would need to be certified to do this it could be a great side job especially if you’re good with your hands. There are a lot of stressed-out people today and this stress tends to manifest itself in their backs, shoulders and other parts of their bodies. You could make a good deal of extra money by helping them work out those knots.

#50. Hairstyling

Did you grow up doing your sister’ hair? Did you develop a sort of a passion for it? Some people do and some people don’t. However, there is a ton of money in women’s hair care and design. Do a few friends a week and you could see your bank account fatten up considerably.

Everything You Need To Know To Deal With Nasty Debt Collectors

stressed old manWhat’s worse then being seriously in debt?

It’s being seriously in debt and having to deal with debt collectors.

The problem is that these people usually work on a commission basis and have a quota. If they want to get paid and keep their jobs they must collect money from you –by hook or by crook, which is an old English phrase that means by any means necessary. And trust us. Debt collectors will use any means necessary up to and including threatening to go to your employer or your relatives, to take you to court, to have you arrested or to sue you.

“I’m mad as hell”

If you’re one of the millions of Americans being harassed by debt collectors you may have reached the point where you’re like the character Howard Beale in the movie Network and are saying to yourself, “I’m mad as hell and I’m not going to take this anymore.”

Well, you’re right. You don’t have to take being pressured by debt collectors anymore. You have rights and when you know what they are you can either stop any more phone calls or at least negotiate favorable settlements of your debts.

The first thing to do

First of all, a debt collector has to be able to prove the debt is actually yours. We live in a nation of more than 330 million people, many of whom have the save names and have done business with the same companies. Last I looked there were at least 30 other people just on Facebook with the same name as mine and isn’t John Smith, Bob Jones or Tom Brown.

So the next (or first) time a debt collector calls, make him prove the debt he’s trying to collect is yours. You can ask him for the name and address of the original creditor and the exact amount you owe. If the collector is unable to provide this information, he has five days to send you a written notice with the information you’ve requested. You could also dispute the debt by writing a letter to the collection agency asking that it verify the debt. This could mean requesting a copy of the statement showing your balance, a copy of the original credit agreement or any other information you deem pertinent. Once the collection agency receives your letter it has 30 days to respond during which time it is not allowed to contact you.

If the debt is really yours

If the debt collector is able to prove the debt is yours, you have a couple of choices. First, you could try to settle it for less than you owe. One thing the debt collection agency doesn’t want you to know is what it paid for the debt. In most cases the original creditor (think bank or credit card issuer) bundled up a bunch of debts it had written off and sold them to the collection agency for pennies on the dollar. If your original debt was for $500, the collection agency mighjt have paid five dollars or even less for it. This means there is room to negotiate. You could offer to settle the debt for, say, $50. The collector can then either accept your offer or make a counter offer. In either event the odds are that you’ll be able to settle the debt for much less than its face amount.

Make the collector stop calling youDebt collector hollering into mic

A second alternative is to make the collector stop calling you and then just wait to see what happens. Yes, you read that right. You can make the collector stop calling you. In fact, all you need to do is write and send his agency a cease and desist letter. You can find samples of this letter by clicking on this link. Be sure to send the letter certified and return receipt requested so that you can prove the collection agency actually received it.

If the collection agency does indicate that it received your letter (which it may not do) it can contact you just one more time to either acknowledge it won’t be contacting you again or to inform you what legal action it will take next such as suing you.

If you’re lucky

Once the collection agency has stopped contacting you, start holding your breath to see what it does next. If you’re lucky it will simply go away and you won’t hear from it again. If it’s a big debt you may not be so fortunate. The agency might sue you or sell your debt to yet another collection agency, which would then start harassing you.

Get an attorney

A third alternative is to hire an attorney to represent you. Of coarse, you wouldn’t want to do this unless it was a very large debt as you will have to pay the attorney somewhere between $100 and $500 an hour for his or her services. But once the debt collector knows you are being represented by an attorney, he will generally stop calling you and will contact your attorney instead. This means the debt collector must know your attorney’s name and contact information. If you do have an attorney and receive a call from a debt collector make sure you tell him that that you are being represented by an attorney and that he should start contacting him or her and not you.

Understand your rights

Assuming a worst-case scenario – that the collection agency continues to harass you over the debt – it’s important to know what it can’t do. This is covered in a law passed by Congress several years ago called the Fair Debt Collection Practices Act (FDCPA). It sets out what a debt collector can and can’t do. The most important things it can’t do are …

  • Call you prior to 8:00 AM or beyond 9:00 PM unless you give the collector permission to do so
  • Contact your employer unless your debt is past-due child support
  • Call you where you work if he knows your employer doesn’t want you to be contacted there
  • Send you a postcard or envelope that clearly indicates it had been sent by a debt collector
  • Call your neighbors, friends or relatives about the debt in order to embarrass you into paying it
  • Use an envelope or post card that makes it appear that it came from a court or government agency
  • Call you frequently during a relatively short amount of time as this constitutes harassment and harassment is illegal under the FDCPA.
  • Force you to accept collect calls from the agency
  • Swear or insult you when you’re talking or threaten to ruin your reputation or have you jailed
  • Try to collect more than your debt unless the contract it has with the creditor allows this

What to do if the debt collector violates the FDCPA

If the debt collector does any of the things listed above, you could file a complaint with the Consumer Finances Protection Bureau either online or by calling (855) 411-CFPB (2372). You can report any problems you’re having with a debt collector to your state’s attorney general. You might also be able to sue the debt collector in your state’s or federal court. If you are successful you could win up to $1000, which is not a huge amount but you would also win a lot of self-satisfaction in having beaten the collection agency.

5 Questions To Ask Before You Use Savings To Pay Off Debt

debt and save targetDid you know that your savings can keep your finances from flying apart? In fact, you can use savings to pay off debt. These are only a few of the reasons why this is such an important part of your financial life. In fact, some experts are saying that you cannot be a financial success unless you have some form of savings to your name.

While we are all aware of the importance of savings, sadly, this is a difficult goal for a lot of Americans to reach. According to an article published on Mint.com, the ideal saving rate is 10% to 20% of consumer’s income. However, a report from the Federal Reserve Bank of St. Louis reveal that the current savings rate in the country is actually 4.2% only. That is not even half of what the saving rate should be. The article also mentioned why it is so difficult for consumers to save. It is because they have too much debt.

But if you think about it, that is not the only issue that we have about savings. While it makes sense to get rid of debt first, a lot of people are actually struggling to decide if it is a good idea to use savings to pay off debt. After all, this is already money that you have. Some experts will frown at the idea but if you do the math, you will be losing more if you keep your savings intact and your debt accumulating. Looking at the interest rate alone, debt has a higher rate compared to your savings account. It makes more sense to pay off debt first because you will be saving more in terms of the interest amount that you are paying.

However, that decision is harder to make than you think. Some people need the security of a savings – that is why they opt to keep it intact. But if you find yourself right in the middle of saving or paying off debt, there are a couple of questions that you can ask yourself to help you decide.

Ask yourself these questions before you pay your debts with savings

If you are torn between using your stashed cash to get rid of your debts, there are 5 simple questions that you can ask yourself.

Where will you get the savings from?

There are a lot of savings that you can use to finance your debt payments. According to WashingtonPost.com, debt has a high effect on our retirement savings. In fact, a study done by the Employee Benefit Research Institute revealed that 74.8% of their respondents cashed out their retirement savings after leaving their jobs to pay off debt. Whether you are leaving your job or not, it is never a good idea to use your retirement savings for anything other than your retirement expenses.

Do you have sufficient emergency savings?

Unless you have your emergency fund intact, you should never use savings to pay off debt. This is one of the requirements that you need to have. In case you do not have this yet, you need to save up for sufficient emergency savings. Anything in excess can be used for your debts. This emergency fund can actually help you sustain your debt payments. In case something happens, your reserve fund will allow you to continue paying off what you owe while taking care of that additional unexpected expense.

How much is your debt and the respective interest rate?

In case of multiple debts, list all of them down and take note of each interest rate. In case the interest rate is more than 7%, then you will end up saving more money if you pay off your debts first with your savings. But if you mostly have mortgage or student loans that have less than 7% of your debts, then to use savings to pay off debt is not really that beneficial. The best scenario to finance debt payments through your savings is when you have mostly credit card debt – a debt that can reach up to 36% of interest rate.

Are you expecting any extra money in the near future?

Another question to ask yourself is this: will there be any extra money in your near future? This should be something guaranteed like a commission that is already being processed, a confirmed holiday bonus or your tax refund. If you have this extra money, you can go ahead and use your savings and just replace it with the money that is coming your way.

Is it in line with your financial goals?

The last question that you should ask yourself is whether this move is in line with your financial goals. Smart money management requires you to set goals and that also means your decisions should be aligned with your goals. If you are saving up for a downpayment of a new home, then it might not be a good idea to use your stashed money to lower your debt. But if you need to lower your debt level to have better chances at a low interest home loan, then go ahead and use savings to pay off debt.

Other options to pay back your debts without touching your savings

In case the answer to the 5 questions point you towards not using your savings to pay off your debts, then that is okay. There are other means for you to eliminate debt without touching your savings.

PIOnline.com published a survey that revealed how more than half of Americans set saving goals. But when it comes to retirement, less than half are able to save through their employer’s saving plans. The current survey revealed that the number of Americans saving is basically slipping – that is why you may want to opt not to use savings to pay off debt. Use other options that will allow you to get out of debt while still adding to your savings.

Here are some of your options:

  • Debt Consolidation Loan. This debt relief program involves you borrowing a bigger loan that can help you pay off all or most of your existing debts. What will happen is you will consolidate your old debts under one low interest loan. That should make things easier to pay off.
  • Debt Management. This is also a form of consolidation – but this time, you get the help of a credit counselor. For a maximum fee of $50 a month, you can enjoy their service that includes a careful analysis of your debts and the creation of a Debt Management Plan or DMP. This plan contains your proposed lower monthly payment plan that stretches it over a longer period. That means you get a lower monthly payment requirement.
  • Debt Settlement. In case you are in need of debt reduction, this is a debt solution that can work for you. The whole idea is to convince your creditor or lender that you are in a financial crisis. Then, you will offer them a lump sum money that can pay for a percentage of your debt. You will ask them to accept this lump sum and have the rest of the debt forgiven (at least anything that this big payment cannot cover).

These are only a few of the debt relief programs that you can use to achieve debt freedom. If you do not want to use savings to pay off debt, then make sure you know your other options.

5 Reasons Why Your Debt Payment Plan Is Failing

calendar with pay credit noteA debt payment plan is one of the many financial plans that you can use in money management. But more importantly, it is one of the plans that you can use to improve your financial situation.

Too much debt is devastating financial condition to be in. It has enough influence in your finances and it is even powerful enough to control your future. It can dictate the type of salary that you need to have, what expenses you can make and even your future goals. If you do not solve this problem immediately, you might find yourself unable to grab opportunities that could have increased your net worth exponentially.

MarketWatch.com published an article that mentioned how American consumers are relying on credit cards quite heavily once more. In fact, in the second quarter of this year, consumers added $28.2 billion worth of credit card debt to the current unpaid balance. This is said to be the biggest amount in the past 6 years. Not only that, it is 200% more than the debt added in 2009 (the same quarter).

If our debts keep on growing, it is probably time for us to take a look at the debt payment plan that we are using to slowly but surely eliminate our credit obligations. If you do not have one yet, then it is about time that you think about creating one. When you have plan, your pursuit to pay off debts will be more effective than when you are just blindly making payments to every bill that you have.

What is making your payment plan for debts ineffective?

You can assume that our increasing debt may have been caused by our growing confidence when it comes to our financial security. According to the October 2014 survey done and published on Bankrate.com, 24% feel that their net worth is higher compared to 15% who felt that it was much lower. This confidence may have been causing consumers to rely on credit once more.

While total credit elimination is tough to accomplish at this point, you may want to consider checking your debt payment plan to make sure that your credit will be lowered to manageable amounts. If you leave your debts to chance, it might soon overtake your ability to pay it off.

Of course, you also need to check if your payment plan is working at all. If you find that you had been making payments every month but your debt does not seem to be getting any lower, you may want to check these 5 reasons why your plan may be failing.

Your plan is not realistic.

One of the primary reasons why most plans fail is because they are not realistic. The only way that you can assure yourself that your debt payment plan is realistic is when you consult your current finances. You need to be honest with yourself about how much money you can really afford to contribute towards your debts on a monthly basis. If not, you may find yourself with a plan that is doomed to fail from the very start.

You chose the wrong debt relief program.

In most cases, when your plan is not realistic, it leads to you choosing the wrong debt relief program. For instance, you could have chosen a debt management plan when all your money can really afford is a debt reduction. You need to look at your budget plan to choose the right debt solution. Otherwise, you might find yourself struggling to keep up with a plan that is too expensive for your income.

You do not have an emergency fund.

Another reason why you could be in trouble with your debt payment plan is because you do not have an emergency fund. Some people might not get the connection but let us explain. You may have just enough money to satisfy the debt payments but if something happens to compromise your budget, like a blown car transmission or a sudden illness – you might be in trouble. You should remove any possibility of you getting into more debt.

You are not committed to your plan.

If your debt payment plan is not working, it might be also because of your inability to commit to it. If you find yourself making late payments are failing to consider the penalty charges, you are already compromising the effectiveness of your plan. A plan, no matter how fool-proof it is will only be effective if you can follow it. Unless you can commit to it, then your plans of getting out of debt will not be realized.

You have not stopped taking more debts.

The last reason for your plan to fail is when you are still taking on more debts. This is one of the reasons why you need an emergency fund – to keep yourself from the need to take on more debt if the unexpected happens. But even if you have an emergency fund, if you continue to use your credit cards, you will find it hard to be completely be out of debt. You need to stop taking on more debts if you really want to complete your debt payment plan.

Steps to create a fail-safe credit repayment plan

In case you haven’t been working with a plan to get out of debt, there are a couple of things that you need to remember. First things first, know the importance of having a plan. That is because a plan will give your quest to eliminate debt some direction. It will give you a target and will allow you to gauge how far you have come. Creating a plan will force you to think forward into getting rid of your debts.

But for you to maximize the benefits of your debt payment plan, you may want to consider the following steps in creating it.

  • Consult your finances. Do not just create a plan. Make sure you consult your budget so that you will know just how much you need to pay off your debts. It will also tell you if you need to reduce or debts or at least lower your monthly payments. Once you know how much you can comfortably afford to contribute towards your debts, then you can determine how you can pay it all off.
  • Know your debts. The next step is to understand what type of debts you have. One article published on USNews.com tells a story of how some consumers paid off their debts. The article mentioned that if consumers had student loans and credit card debts, they should consider paying more towards the latter because it has a high interest rate. This is why you need to know what your debts are so you can prioritize appropriately.
  • Identify the cause of debts. The next thing you have to identify is what caused you to fall into debt. You need to see if it is your lifestyle or your complete disregard for what you can or cannot afford. Once you know that, you can easily identify the habits that you need to change.
  • Change your bad financial habits. The next, obviously, is you changing your habits. You need to make sure you will not fall into the same debt pit again. Unless you enjoy debt payment plans, you may want to make sure that you will not commit the same mistakes that got you in this financial position in the first place.
  • Create the plan. Once you have all these details, you can create your debt payment plan. If you consider all of these, you should be able to create a plan that is realistic and effective.
  • Monitor your finances. After creating your plan, that is not the end of your task. You need to monitor your finances so you can make sure that you are following your plan. You should try to monitor not just your plan, but also your spending, debt balance and your savings.

Read What Dick Blumenthal Wants To Do To Public Service Loan Forgiveness

female doctorSo whom you might ask is Dick Blumenthal? He’s Sen. Richard Blumenthal from Connecticut. Why might you love him? It’s because if you’re a government worker and have a load of student debt, he wants to help you. The way he’s done this is by introducing legislation that could make it easier for you to get those debts forgiven.

How it works now

If you’re not aware of this there is a program called Public Service Loan Forgiveness or PSLF. You would qualify if you work for the federal, state or local government or a not-for-profit organization that has been designated tax-exempt by the Internal Revenue Service (IRS). You must also have loans that you received under the William D. Ford Federal Direct Loan Program. If you got loans under the Federal Family Education Loan (FFEL) Program, a Perkins Loan or any other type of student loan program you would not be eligible.

10 years

In the event you qualify for PSLF you would be required to make 120 scheduled, on time, full monthly payments for 120 months or 10 years. These must be payments that you made after October 1, 2007 and you must have made them under what’s called a “qualifying” repayment plan. Finally, you must be working full time at a qualifying public service organization when you make these payments.

A “qualifying” repayment plan is where you repay your loans under one of the income-driven repayment programs, which includes Pay As You Earn, Income-Based Repayment or Income-Contingent repayment. You would likely also qualify if you were on 10-year Standard Repayment or any other program where your monthly payment would equal or exceed what you would pay under 10-Year Standard Repayment.

Loan forgiveness

Assuming you meet these criteria you would then have any remaining balance on your student loans forgiven after those 10 years or 120 payments. But, and here’s the big but, you can’t wait too long to get started on PSLF as the more payments you make, the lower your remaining balance will be, which means less money will be forgiven. In fact, if you were to make all 120 payments under this program, you would have a remaining balance of zero and there would be nothing left to be forgiven.

A word of warning

It’s important to also understand that under Income-Based Repayment, your monthly payments will likely be less than under any of the other PSLF-qualifying repayment plans and your repayment period or terms will be longer. This means that additional interest will accrue on your loan and with a smaller monthly payment; you will end up with a higher loan balance to be forgiven. What happens if you do not meet the eligibility requirements for PSLF? Then you would be responsible for repaying the entire balance of your loan, including all interest that had accrued. Of course, this would not be true if you qualify for forgiveness under the terms of Pay As You Earn, Income-Contingent Repayment or Income-Based Repayment.

What Sen. Blumenthal’s legislation would do

What Sen. Blumenthal has proposed is a plan that would make it easier for you, as a government worker, to get your student loans forgiven. His bill would alter the Public Service Loan Forgiveness program so that 15% of a government worker’s student loan would be forgiven after two years. Two years after this, another 15% would be canceled. If you work for six years in the public sector, you would see another 30% of your debts forgiven. Then, after 10 years on the job you would see the remaining 30% forgiven.

What the senator believes is that the way PSLF is currently structured is that it’s an all-or-nothing deal. You don’t get forgiveness unless you complete 10 years of public service. If you were to quit or lose your job after nine years and 11 months, you’d lose forgiveness. Since PSLF loans continue to accrue interest over those years, if you were to lose your public service job, you might feel as if you are being forced to start all over from scratch.

The downside of his proposed legislation

The biggest negative of Sen. Blumenthal’s legislation is that no one knows how much this would cost the US government – or, to put it bluntly, US taxpayers.

Also, while federal government workers might have been underpaid in the past, this is no longer true. The average US federal government employee now earns $14,632 more in direct income than his or her counterpart in the private sector. In fact, the average US federal government employee now earns$74,436 versus the average private sector worker at $59,804. In addition US federal government workers earn the equivalent of $26,632 in benefits so that their total compensation is $114,436 versus the private sector employee at $87,804. So while Sen. Blumenthal may be well intentioned, it would seem that at least federal government workers already have a major reason to sign up for PSLF and work for the 10 years – although this may not be quite so true for people who work for state or municipal governments.

What types of jobs qualify?

A public sector job is defined as any kind of job where you are paid directly by the government. This even includes civil service jobs such as working for the US Postal Service, the Federal Bureau of Investigation, the Internal Revenue Service or even holding public office. Beyond this, here is a list of the jobs that would definitely qualify for Public Service Loan Forgiveness:

  • Law enforcement
  • Military service
  • Public safety
  • Emergency management
  • Early childhood education (including licensed or regulated health care, Head Start, and state-funded pre-kindergarten)
  • Public interest law services
  • Public education
  • Public service for individuals with disabilities and the elderly
  • Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations)
  • Public library services
  • School library or other school-based services

TeacherTeacher Loan Forgiveness

While most teachers would qualify for Public Service Loan Forgiveness under “Public education” (as listed above), there is another program specific to teachers called Teacher Loan Forgiveness.

If your five years of teaching service began before October 30 of 2004 you could have up to $17,500 of your student debts forgiven if you teach for five consecutive years in specified elementary and secondary schools and educational service agencies that serve families with low-incomes, and that meet other qualifications. The loans eligible for this program include Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford loans. Unfortunately PLUS loans are not be eligible for this program.

However, you could earn up to $5000 in loan forgiveness if the chief administrative officer of the school where you taught certifies that you are a full-time elementary school teacher that showed teaching skills and knowledge in reading, writing, reading, mathematics and other parts of the elementary school curriculum; or where you were a teacher full time for five years in a secondary school where you taught in a subject area related to your academic major.

After Oct. 30, 2004

If your five consecutive years of teaching began after October 30, 2004, you could qualify for that $5000 in loan forgiveness if you were a highly qualified elementary or secondary school teacher. To earn the $17,500 in forgiveness you must be certified by your chief administrative officer that you are a highly qualified full-time teacher of mathematics or science in an eligible secondary school; or are highly qualified as a special ed teacher where your main job was to teach children that had disabilities and taught them in an area that corresponded to your training in special education. In addition, you must have shown that you have knowledge and teaching skills in the content area of the curriculum in which you taught.

There are some other requirements to be classified as a highly qualified teacher and you can learn more about them by clicking on this link.

How To Talk Your Way Out Of Debt

woman looking at her credit cardDid you know that you could talk yourself out of debt?

Yes, really you could talk your way out of debt.

The solution is called debt negotiation, debt settlement or debt arbitration. But whichever you call it, it’s basically the same thing. It’s where you contact your creditors and talk them into helping you get out of debt.

Sound too good to be true?

Does this sound just too good to be true – that you could just talk your creditors into helping you? Well, it is true but only under certain circumstances. For one thing it’s not worth trying unless you owe a good amount of money. And second, you should already be behind in your payments.

How it works

For the sake of an example let’s say you owe $5000 on a credit card and you haven’t been able to make a payment for the last three months. Before you contact the credit card provider you need to have a goal in mind. It could be to get a reduction in your interest rate, to ask for forbearance (where you make no payments for some period of time), a temporary reduction in your payments or to settle your debt for less than you owe (debt negotiation).

The first thing you will need to do is get through to a person that has the authority to work with you. In many cases this isn’t as easy as it might sound. The first customer representative you reach probably won’t have that authority. In fact, you may have to keep making phone calls and talking with people until you finally work your way through all the various levels to get the someone who has the authority to really help you.

As a general rule it’s easier to get a concession such as a reduction in your interest rate, forbearance or a temporary pause to your monthly payments then debt settlement. Why is this? It’s because the whole idea behind debt settlement is to pay that credit card company less than what you owe – maybe much less than you owe. As you might guess, credit card companies are pretty much opposed to doing this.

If your goal is debt settlement

If your goal is to negotiate a debt settlement, you will need to be further behind in your payments than three months – probably something around six months. The reason for this is that most credit card companies are loath to talk settlement unless you’re this far behind. Plus, after six months most of them would sell off your debt to a third party such as a collection agency. This means it’s important that you contact that lender sometime between when you haven’t made a payment for five months but it hasn’t quite yet been six months.

Be honest

When you do finally reach a person that has the authority to help you be honest about your finances and explain them as clearly and comprehensively as possible. What you’re doing at this stage is building a case for settlement. You may also need to convince that person that if he or she fails to settle you will have to to file for bankruptcy. This is the old “half a loaf is better than none” deal where the credit card company understands it would be better to get a substantial chunk of what you owe than nothing at all.

What to ask for

Unfortunately there’s no hard and fast rule as to how much of your debt you should first offer to pay. If you have the necessary intestinal fortitude you might offer to pay 30% or 40% of your debt. You can just about figure that this offer will be refused. However, your customer rep will have to come back with a counter offer – after all this is called debt negotiation. Where you end up will depend largely on how good a negotiator you are and how much you owe. But if you are pretty good and if you do owe $5000, you might end up settling for 50%.

Get it in writing

Assuming that you are successful in talking your way into a settlement make sure you get it in writing. Also be prepared to pay for the settlement almost immediately. In fact, this can be one of your best bargaining chips – “settle with me today and I’ll send you the money by cashier’s check or wire transfer tomorrow.” Of course, this does mean you will need to have the necessary cash on hand. The Catch-22 here is that if you did have $5000 on hand you might not have to ask for any concessions let alone debt settlement. So where would the money come from? If you are fortunate you might be able to borrow it from a relative. Barring that you will need to get creative. For example, if you have a 401(k) or IRA you might be able to borrow the money from it. The best thing about this is that you will have to pay the money back with interest but you will be paying interest to yourself. And you will need to repay it within six months or it will be treated by the IRS as ordinary income and you will be taxed accordingly.

What can you do if you don’t have either a rich relation, a 401(k) or an IRA? You could get a second job and use the extra income to pay off your settlement. Our economy has rebounded to the point where there are a number of part-time jobs available. For example, we recently saw that both our local Best Buy and Staples stores were looking for help. While these jobs generally don’t pay more than $10 an hour you should be able to easily net $600 a month or more.

Does this sound just awful?

Make no mistake about it; DIY debt negotiation takes time, patience and steel nerves – as well as the cash to pay off any settlements you negotiate. Plus, it will seriously ding your credit score. This is why debt settlement should be low on your list of ways to deal with your debt.

Bankruptcy is worse

The one thing that can be said without argument about debt settlement is that it’s better than filing for bankruptcy. Yes, a chapter 7 bankruptcy would get rid of all or almost all of your unsecured debts such as medical debts, credit card debts and personal loans. But it comes at a very serious cost. For one thing, a bankruptcy will stay in your credit reports for either seven or 10 years and in your personal record forever. You could be turned down for a really great job 10 years from now because the prospective employer won’t hire anyone that has had a bankruptcy. It will probably be two to three years after your bankruptcy before you can get any new credit and when you do it will come with a very stiff interest rate.

couple with debt management consultantA better option

This means that for many people a better option is credit counseling. There’s undoubtedly a nonprofit credit-counseling agency near you that either provides its services free or at very low cost. When you go to one of these agencies you will be assigned a debt counselor that will review all of your finances and help you develop a budget or plan for getting out of debt. He or she will probably also work with your creditors to get your interest rates or even your monthly payments reduced. If you’re really stuck in a black hole of debt your counselor will probably offer you what’s called a debt management plan or DMP. This is where you send the agency one payment a month and it then distributes the money to your various creditors. The benefit of this is probably fairly obvious – that you get all of those creditors off your back and would make just one payment a month versus the multiple payments you’re probably now making. However, like many things in life there are downsides to a DMP. For one thing, it will probably take you as many as five years to complete it. And second, all of your accounts will be closed and you will be required to give up your credit cards. Sadly enough a large percentage of people who sign up for DMPs never complete them and these are probably the reasons why.

About The Statute Of Limitations And Your Old Debts

payment overdueOld debts can still be a pain. It can still haunt you for as long as it remains unpaid. It is either you pay it off, settle it or suffer the consequence of having debt collectors call on you to pay what you owe.

This is where the Statute of Limitations on debts come in. This is like an expiration date for your credit accounts. The time varies per state but it usually means that if your debt reaches beyond this time frame, no debt collector can win in a legal court against you. That is because you can use this as justification for not paying it. Even the original creditor whom you owe this debt to cannot win in court as long as your old debts have already gone past the statute of limitations.

This law does not remove your responsibility to pay back the debt. It is also known as a “time-barred” debt. Although you can use it as justification for leaving it unpaid, it will always remain to be your debt. You can still pay it off if you wish but most people will not do so.

If you have any old debts, you may want to understand how to use the statute of limitations to your advantage.

What does the statute of limitations say about old credit accounts

One of the most important protections that you can get from the statute of limitations is being abused by a debt collector. Although the Fair Debt Collection Practices Act (FDCPA) prohibit abusive debt collection for all types of credit, some states have made it illegal to collect old debts that are past the statute of limitations.

Here are some of the important facts about this that you should know.

There are two debt expiration dates.

When it comes to old credit accounts, it is important for you to define two important expiration dates.

  • Credit Reporting Time Limit. This is the time when your debt is removed from your credit report by the major credit bureaus. The general rule is that after 7 years, all of the old credit in your history will be removed. This excludes debts that are discharged by bankruptcy because that usually takes 10 years before it can be removed from your credit report. The longest debts that will be removed from your report are tax liens – which can stay there for up to 15 years.
  • Statute of Limitations. The other expiration, as we have been defining, is the one that will discourage debt collector from suing you in court for old debts. This is separate from the credit reporting time limit. Even if your debt is still in your credit report, as long as it is past the statute of limitations, both the original creditor or debt collector cannot win in court against you.

The statute of limitations vary per state.

First of all, you need to know the specific time frame in the state where you owe that debt from. Even if you moved, the time frame that you need to follow is the state where you borrowed the money from. For instance, you acquired the debt in Texas where both written and oral debt contracts expire in 4 years. Even if you moved to Louisiana (where the time frame is 10 years) your old debts will still follow the expiration of 4 years. You can view the statute of limitations per state online. There are website like NOLO.com that provides a complete list.

When does the time frame begin.

One of the most confusing parts about the statute of limitations is when will you know if your debt is already expired. This starts on the last date of activity that you have made on your credit account – not the due date. Do not confuse it with the date when your debt officially goes to default. If your last payment was March 2010, your debt usually goes to default after 90 days – which is on June 2010. If you live in Texas, your debt will go past the statute of limitations by March 2014 and not June 2014.

It is possible to restart the statute of limitations.

This is what debt collectors would want to happen. You have to be careful about what you say when you are talking to them about old debts. If you know that your credit is past this time frame, you should not feel intimidated by the threats that they will make. If you make a payment, promise to pay the debt, go into an agreement to pay it back or reuse the credit account, your statute of limitation will restart. When that happens, the debt collector now has a fighting chance when they sue you in court for that debt.

Not all debts are covered by this law.

Be careful about using this as justification that you do not have to pay back a debt. There are certain credit types that are not covered by this. These include child support, income taxes and federal student loans. When you are sued in court for these, the statute of limitations cannot protect you.

3 things the law about old credits will not do

It is important to note that while the statute of limitations will release you from the legal obligation to pay back unpaid old debts, there are certain things that it cannot do. Here are three important aspects of your debt that it cannot help you with.

  • It cannot stop the debt collector from suing you in court. You can use it to keep them from winning but if the collection agency decides to file a case against you, this is not illegal for them to do. It will bring you a lot of hassle of course, and that is probably what they want to happen. Their intention is still to intimidate so make sure you know the law enough to keep yourself from making any rash actions to restart the statute of limitations.
  • It will not erase the debt. Even if you are legally obligated to pay it back, you still have the moral obligation to do so. It will forever be your debt and it is up to you and your conscience to live with the fact that you left the debt unpaid.
  • It will not keep the debt from being included in your credit report. As long as it is not beyond the 7, 10 or 15 year mark, this credit account will remain in your credit report. It will continue to bring your credit score down – although the longer it stays there, the less impact it will have. But it will still be a stain on your records.

Be careful about zombie debts

The knowledge of the statute of limitations on old debts will help protect you from the burden of zombie debts. You have to know that there are certain practices wherein debt collectors will purchase unpaid credits from creditors and lenders. According to an article published on BloombergView.com, there are debt collection agencies who buy these debts for pennies on the dollar. Then, they call up the list of debtors, hoping that they know nothing about the statute of limitations. But even if these debtors know about it, these collectors will go through abusive methods to intimidate, threaten and harass consumers so they end up paying off the debt anyway. At the very least, they will try to trick you into restarting the statute of limitations.

Well there are certain ways to deal with zombie debt collectors and here are some tips that we have for you.

  • Always ask the collector to send you a written notice about the debt.
  • Ask them to validate the debt and send you a document proving that you owe it.
  • Make sure you are already past the statute of limitations before you decide to do anything.

When you have confirmed it is an old debt, there are two things you can do.

First option is to send them a letter asking the collector not to call you again. The FDCPA states that they should honor this if you requested it. However, that will not stop them from selling your old debts to another collection agency so the process will start again.

The second option, if you want to avoid the consequence of the first, is to check your finances if you can try to settle the debt. These companies bought your debt for pennies on the dollar so they should not mind you paying lower than what you really owe. They will still make profit from it. Remember that getting into a settlement agreement will restart the statute of limitations but if you get a good deal, it can stop future collectors from ever calling you again.

Good News: You Can Have Your Own Government Stimulus Package

money raining on womanThere was much talk a few years ago about the government stimulus package. It was a $787 billion bill termed the American Recovery and Reinvestment Act of 2009. It contained a huge array of spending projects as well as tax breaks designed to stimulate a swift revival of the US economy. The theory behind this package was Keynesian economics, which teaches that increased government spending can lessen the effects of a recession.

It may or may not have worked

Whether or not the American Recovery and Investment Act actually lessened the impact of the recession we were suffering is still up for debate. There are those who believe that it was successful while others say it was a waste because most of the money was used to pay down debts and reduce borrowing. Be that as it may it did lead to one thing that could be your own government stimulus package. It’s called the Home Affordable Refinancing Plan or HARP.

Never a better time

Thanks to HARP there has literally never been a better time to refinance your home. This is because you could use HARP to refinance it at an amazingly low rate and in doing so reduce your payments by $3000 a year or even more.
Would you be eligible?

To be eligible for HARP you would need to have a mortgage for $625,500 or less – unless your home is in a high-cost area in which case the loan limits might be higher. The whole idea behind this program is that the federal government wants banks to cut your mortgage rates to put more money in your pocket, which is good for the economy.

Unhappy banks

Of course, the banks are not very happy with HARP because it means you could shop several different lenders and not just your current mortgage holder. In addition, your home’s loan-to-value ratio (LTV) can be 80% to 125%. Banks would rather keep you at the higher interest rate you got when you financed your mortgage many years ago. In fact, this is such a good deal that it’s practically a no brainier to jump on HARP now. But you will need to act quickly if you want to refinance your house at these current low rates.

The benefits

Most Americans that do a refinance through HARP save $250 a month. Could you use an extra $250 a month? We thought so. Depending on your current rate you might even be able to shorten the term of your loan. And what typically happens is that one or two payments are deferred or skipped, which would put even more money in your pocket.

Where do you find these low rates?
There are several free websites where you can compare the rates on mortgages and then choose the lowest one. This, of course, is one of the best things about the Internet. It allows you to do business with banks and other lending institutions all over the country – not just in your city or state. One of the biggest and best respected mortgage refinance comparison websites is RateMarketplace.com. It is one of the few online companies that have HARP lenders in its network.

There is no cost or obligation to use RateMarketplace.com and its service is both easy and fast. In fact, it will take you only about five minutes to calculate what your new payment would be. The service is free. You can also calculate what your payments would be if you chose to refinance with cash out, consolidate your debts, get a home equity loan or buy a house. The net/net of using RateMarketplace.com is that you have nothing to lose but maybe your high mortgage interest rate.

Speaking of debt consolidation

If you feel as if you are sinking in a quicksand of debt and have equity in your house, one good solution is to use that equity to consolidate and pay off those debts. Many people have found debt consolidation to be a good way to get their finances under control. While a debt consolidation loan can come in the form of a secured loan, an unsecured loan or even by borrowing from your retirement plan, the best idea is probably to tap into the equity in your home because you end up repaying yourself.

The two types of home equity loans are a straight home equity loan and a home equity line of credit or HELOC, which resembles a credit card in that you pay interest only on the amount of money you withdraw. Most HELOCs have a variable rate of interest and low minimum payments. If you are approved for a HELOC you will probably have 10 years to take out the equity and then another 15 to 20 years to repay it.

man pushing a wheelbarrow full of moneyHow much could you borrow?

How much you could borrow to pay off your debts usually depends on a combined loan-to-value ratio of 80% or 90% of the value of your home. Naturally, the interest you’re charged will depend on your credit score and how good you’ve been about making payments on your debts.

A lower rate of interest

One of the biggest advantages of a home equity loan is that the interest on it will be less than the average interest of your current debts. These loans are relatively easy to get if you have equity built up in your house. In addition, the interest you pay on a home equity loan or HELOC is deductible just as it is with a conventional mortgage — if you itemize your taxes. In fact, a home equity loan is the only type of interest you can deduct under any circumstances except for qualified student-loan interest.

The downside

The biggest possible problem with a home equity loan is pretty obvious. If you don’t repay the loan, there can be horrible consequences. If you can’t make your loan payments, you might lose your house. Your credit score will suffer dramatically and it may be some time before you can get any other type of financing.

Do a careful analysis

You can avoid this by doing a careful analysis of your cash flow to make sure you will be able to make that new payment every month. It’s also good to make more than the minimum payment required although this may not be important if you are using the money to consolidate high-interest debts that are causing you serious financial problems.

A hypothetical example

Here is a hypothetical example of how you could use a home equity loan or home equity line of credit to consolidate your debts. For the purpose of this example let’s assume you have the following debts:

  • $10,000 in high-interest credit card debt with a monthly payment of $172
  • A $4500 car loan with an 8% interest in a monthly payment of $330
  • $3300 in student ßdebt where you defaulted on the loan but that prior to this your monthly payment was $150.

Again for the sake of the example we will say that you have a 30-year mortgage on your house and $50,000 in equity. However, you still owe $100,000. This means that you have debts totaling less than $40,000 and could consolidate them with a home equity loan or HELOC, as you would be well under the 80% loan-to-value ratio. You would trade three monthly payments for a single, lower payment and the interest would be deductible. In addition, if you pay off those three loans, it will improve your credit – especially because that student loan you defaulted on will now be off your credit reports.

The net/net

A home equity loan or line of credit can be a useful tool if you are a responsible homeowner and need to consolidate your debts. One of these loans will provide easy access to capital at lower rates of interest, reduced payments and even a tax deduction. Unfortunately, homeowners who abuse these loans and don’t make their payments can literally find themselves out on the street.

Want To Be Debt Free? Be A Minimalist

woman with arms stretchedThe US economy is 70% driven by consumers who are all looking for ways to be debt free. The more people spend and buy, the better the economy will be. A Gallup.com survey revealed that as the consumer spending in the country goes up (currently at $98 as a daily average), that is good news for the economy. It shows that Americans are confident about their finances – more than they had been in the past few years.

However, that does not mean the economy is asking consumers to throw caution in the air and buy items left and right. It will not help the economy in the long run if people purchase a lot of items and and are unable to meet the payments. Getting in debt is a big possibility if purchases are made on a whim.

Some people say it is better to spend two dollars for a one dollar item that you need rather than spend one dollar for a two dollar item you do not need. Smart spending is at the core of US economy. Stopping altogether with consumption could be the end of the economy. But at the same time, smart spending and careful expense budgeting is the key in moving forward.

This is where minimalism comes in. Sometimes referred to as life hacking, frugality or simple living, being a minimalist comes down to being able to focus on what is important. But this is not about eating on the floor and dumpster diving. Even a frugal lifestyle can be fun and minimalism can be just the same. It is also a very real solution to a very real problem. There are successful people who took on a minimalist lifestyle and became debt free.

Finding debt freedom through minimalism

There are people who took on being a minimalist and even has the results to show that it is possible to pay down debt with this particular mindset. One such story is of an olympic rower Rachel Jonat who was staring down at $82,000 in debt with her husband. Using a minimalist approach, they were able to pay everything down in just one year and seven months after they started. Below are their learnings from the experience as shared by Businessinsider.com.

Recognizing the problem

The number one point in trying to be debt free is recognizing the problem and the source of it. For Rachel, she admits that debt has been a way of life from the time she was 17 and got her credit tool. She has been charging expenses and as an olympian, she racked up these items quickly. She had a dream of going into the olympics and participating as a rower.

Rachel was able to pursue her dream while the financial obligations that came with it was left for the credit cards to handle. She was charging items to her card and at one point, her mom even took out a second mortgage on their house just to help out. This is not the usual circumstances where you take out a second mortgage but they did it just the same and debt just became a part of their life.

Even after Rachel got married, they all charged the expenses on their credit card. This will take them back in their attempt to be debt free but it was already done. It was only when they had to renovate their home where they able to sit down and look at their expenses and debt. This is when they realized that they have racked up debt that they do not know what to do.

Minimalism can be a debt solution

Among the other debt solutions out there, the family opted to makeover their lifestyle entirely by letting go of consumerism and becoming minimalists. Here are the reasons why this lifestyle helped them get rid of their debts.

  • It opened their eyes about the role of “stuff” in their lives. Rachel initially got into the idea of minimalism when her sister sent her links to articles about it. She was skeptical at first but she soon realized that it is not about the number of stuff – it is about the idea of the stuff “owning” you. When they own you, the compulsion to have a lot of “stuff” becomes a measurement of your success.
  • It promotes frugality. Frugality can help change lifestyles just as minimalism can be a great help in reaching your objective of being debt free. Being frugal is similar to minimalism in the sense that it encourages you to to focus on the important things. It is not about the quantity but the quality of what you own.
  • It taught them how to choose the things they need to sacrifice. When the couple decided to change their lifestyle, they just had their first child. They were honest enough to admit that it was not an easy adjustment but it made them more determined to identify the things in their lives that they can sacrifice. For instance, Rachel decided to sell her wedding gown. It was very painful but when she found the perfect buyer and glimpsed how happy the bride-to-be was, she realized it was easier to let it go. When she did that, it became very liberating. It became easy to let go of the other stuff as well.

All of these helped the family break free from the clutches of material possessions – especially the need to amass a whole lot of them. Since the compulsion to buy is no longer there, you are able to free funds to help you pay off your debts a lot faster.

Do you have what it takes to eliminate debt and be a minimalist

Towards the end of the article, the Jonat family revealed that although they credit minimalism in being debt free, it was not without any challenges. This is why you need to understand minimalism completely so the changes that will happen to your life will be more acceptable.

There are three important truths about being a minimalist.

  • You have to change your perspective. It is on how we see things that can propel how far we can go. We need to change our outlook on life and see that minimalism isn’t deprivation of material possessions, it is discerning what is essential in your life and leaving behind those that serves no purpose.
  • You need to find what is important. Having focus and knowing your goal is an important aspect of minimalism. You need to put your goal on top of mind and everything you do should push you towards that direction. In this process, you get to appreciate the more important things in life. It can be more time to pursue your passion of reading and writing rather than being glued to the TV. Eliminating the clutter gives you focus and clarity.
  • You learn to put money in its rightful place and role in your life. You start to see money as a tool and not as a master. Minimalism makes you realize that you need to be in control of your money – not the other way around. Once you do that, you will find yourself more in control of your financial decisions. It will give you that initiative to spend not based on what you can afford, but what you really need in life.

Here is a video of Graham Hill as he talks about how less makes you more happy. He gives three important steps to help you achieve a minimalist lifestyle. It is not about how much you own but how much room you have for the important stuff.

Debt Relief In The Form Of Donation

Graduation cap with money

In today’s time, debt relief is goal because of all the debt around us. From the time we get in college, to our first employment, to our first house and even when we have kids. Debt varies in amount as well as various multinational companies are millions in debt to that 6th-grader in Houston-area middle school whose breakfast was trashed because he was short of 30 cents in credit as reported by Washingtontimes.com.

Even colleges are also in debt. But one learning institution recently made headlines as they went down a route not usually wandered on by those in debt. As reported by Mlive.com, Calvin College, a private school in Grand Rapids, Michigan, put together a fundraising project to raise the money to address their debt problem.

The school was looking at a long-term debt of $116 million. At the moment, the school needs to raise $25 million to pay down debt and start on the right track. The school has been around for quite some time now being built in 1876 but the way it handled its finances in the past years got the school deeper in debt. Debt relief could be a far dream with the amount of payments they had to make. Then they started fundraising.

The school was able to raise the target amount in 8 months time. It was a herculean task and made possible by a strong alumni network and the hope of quality education being turned-out by the school in its students.

Though unconventional, this is not the first time fundraising was done to pay off debt. Washingtontimes.com carried a story early this year about an eight year old student from Michigan who started the “Pay It Forward: No Kid Goes Hungry” campaign. This was when his friend was denied hot lunch because he did not have enough credits for lunch.

Why debt relief is a goal for the school

There were missteps along the way that got the school deep in debt. As they are in the rebuilding stage, it would benefit a lot of institutions and even individuals if we look back and see what went wrong. Analyzing and looking at the insights and lessons from the circumstances that lead them to debt would yield a lot of learnings.

Proper use of money

We have different goals in life and a lot of them requires financial counterpart. That house we dream about would need to be bought first or taken into a mortgage. That car we always wanted to drive would require finances as well so we can purchase and  drive it around town. That college degree we want to graduate with needs tuition fee so we can carry it in our job hunt.

To make these happen, we save up for it or we allocate funds to pay for it. That power tool we need to start making DIY repairs at home, we can put away a few dollars a week so we can purchase it at the end of the month. But if we use that saved up money to buy something else, we forego the original intention for the money and would have to save up for it again.

That is what happened with Calvin college. They had funds to start construction on some buildings on the campus. Good move considering they had the money and a 390 acres space to build around in. But the problem was they took the money and put them in investment instruments. The intention was to use the the income from the investment to pay off for the construction expense.

There are several investment options to choose from. Some people and companies use them as a debt relief option but using them and maximizing the tools needs careful planning and thorough understanding of the risks.This is where Calvin college’s problem started.

Below par investment income

The school had the best intention in mind. Invest the capital and earn off from the income to pay off for construction expenses. If done right, they would finish the building project and still have the capital intact. They can even use it for other building projects. The forecast might have been favorable that the school voted on it.

What the school did was to take out a loan so the monthly payments can be in small amounts enough for the investment income to cover. This is one form of passive income where the you make your money work hard for you. The problem was the investments did not yield the expected results and payments are not made.

Unbudgeted payment

Knowing how much money comes in is essential to plan who much money comes out and vice versa. This budget plan allows you to keep track of finances and avoid having to think about debt relief options. The school did not budget the payments for the year and when the time came that payments had to be made and the investments did not yield expectations, they had to cut budgets from different areas.

Rebuilding the finances

After Calvin college raised the money, there are the steps they took to ensure they are on the right track in terms of their finances. Calling it budget prioritization plan, the school laid out a plan to get them out of debt and ensure they are out of debt. Consumers can learn a lot from these and how to handle finances the right way.

Internal audit

The school took a good close look of their internal processes and procedures to ensure there are not any loopholes in their planning phase. This is essential before they can reach out again for benefactors to believe in the system .

Consumers can do this as well in their own quest of financial freedom using any debt relief programs. Study their own spending and income and see where they can improve. There is always a big room for improving any process whether as big as a learning institution or as small as those of a family of five.

Budget cuts

As soon as the internal audit was complete, the school now has a clear picture of where budget cuts can be executed. Whether to strike out non-performing courses or control utilities, the school can save up and add that up to debt payments.

Same thing with consumers, taking on a frugal living can do wonders for the budget. It can free up some funds that you can redirect to either savings or retirement or emergency funds. See where you can lower down or eliminate expenses altogether. This will do wonders for your financial standing down the line.

Revenue increase

The school will also concentrate on increasing revenues from enrollment and cashing in on non-performing real estate. This means prioritizing those performing sources of income and letting go of those that can be sold. Increasing their revenue will help the company pay for their debt and provide cushion in case the same incident strikes their finances.

We can learn from this move by looking for ways to increase income. It could be from taking on a second job, putting up a side business or doing yard sales. The additional income can be used to pay off debt and save up for the future.

Debt refinancing

There are several options depending on the financial situation. There is no single formula that can apply to all. Each situation has to be carefully studied to discern the most suitable course of action. The school is now refinancing their debt as a way to address their debt problem.

This is one of the many possibilities to achieve debt relief. Consumers can take refinancing or consolidate their debt to make it easy to make one payment every time.

There are a lessons consumers can learn from even the biggest institutions including colleges. They have their own share of financial difficulties and their own take on how to solve them. We can look into their process and learn from their mistakes and apply those debt relief options that works.

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