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Tips For Tackling Debt As A Couple

couple looking at a laptopWhether you’re married or in a committed relationship, the time always comes when you must discuss the ‘D’ word or the debts that one of you has brought to the relationship. These are never fun discussions and easy ones for you to put off – especially if you’re the one who came to the marriage carrying a lot of debt. In fact, money and debt are two of the most common things that stress relationships. There are statistics showing that couples that have regular fights about their finances are 30% more likely to end up divorced. However, if you’re honest with one another and plan ahead you can alleviate the stress of having to share a budget. And here are some tips that can start the conversation, help you create a plan and work towards becoming a debt-free couple.

1. Be upfront right from the beginning

Sitting down to talk about money can be very stressful but it’s crucial that you have a realistic expectation of each other’s finances. Talk about all those things you’d rather not discuss– your outstanding loans, your income and whether you’re in a position to make progress towards paying off your debt. Of course, talk is the easy part. You’ll then have to make a budget. If you’re planning on sharing a balance sheet you’ll have to factor in things such as your debt payments, where you want to go on vacation and how often you’ll go out to dinner. In other words, get everything in order today before you begin planning for the future.

2. Understand the law in your state

In general, the two of you won’t be responsible for debts incurred before your marriage but there are instances where you may be liable for your partner’s debts. The simplest explanation of this is that if your name is on the form, you are liable for the debt. As an example of this, you’re fully on the hook, whether or not you’re married, if you cosigned any loans with your partner. If you did cosign a loan, you might try to split the payments down the middle. However, if you find your partner can repay only 25%, you’ll have to be responsible for the other 75%.

You should also understand that there is a difference between communal property states and equitable division states. If you live in a communal property state, you will jointly be liable for all debts that were incurred after you married. On the other hand, if you live in an equitable division state and get a divorce, either you and your spouse will have to decide how to handle your joint debts or a judge will do it for you.

3. Have both joint and separate bank accounts

No couple wants to think about this but it never hurts to prepare for the fact that you may eventually need to separate your finances. This makes it a good idea to have both separate bank accounts as well as joint ones – just in case.

4. Make sure your plans include your debts

When the two of you are planning for your future together, don’t forget to include paying off any debts. If you have a heavy debt load, this can actually affect your ability to get a mortgage as well as where you can afford to live and even how you’ll pay for your children’s college.

5. Reduce the amount you pay on your debts.

This may sound very simplistic but it’s important that you do what you can to reduce the amount you actually pay on your debts. You might be able to do this via a balance transfer on your credit card debt, by looking into a student loan consolidation (if appropriate) or refinancing your mortgage. However, be careful because some of these options can end up costing you more than they save. As an example of this, a lower mortgage rate may come with fees and higher property taxes. And debt consolidation can be a good option for some people but it’s not a one-size-fits-all kind of solution.

6. Remember that you’re in it together

Never forget that you are in this together. Don’t let money issues come between you and your partner. You are still together regardless of how much debt you have and how you plan to pay it off. Be supportive and kind even if your partner’s finances are in worse shape. In the event that you’re the one that’s bringing debt to the relationship or marriage, remember that you still have much you can contribute. With some focus and good planning, the two of you should be able to weather any debt storm.

Seven more helpful financial tips for couples

1. Have common financial goals

You should have shared goals when it comes to building a life together. This needs to include everything from buying a home to having children and from their college education to how you will handle each other’s healthcare and retirement. Sitting down to discuss finances may not be very romantic but it’s important to have the same goals. Also, understand that a financial plan is just a beginning point. Life happens, things change and you will need to make adjustments. But a good financial plan will help you remember what your big goals are and how you intend to reach them.

Young couple in financial trouble

2. Share the costs

Whether it’s buying a home or shopping for food you should be able to earn efficiencies by combining the costs. If you combine your savings, you will probably qualify for lower fees on bank transactions and retirement accounts. Personal loan fees and checking account fees can also be combined and should provide significant savings.

3. Take advantage of tax benefits

If you go from filing single to filing married, you may pay a bit more in income tax but you should enjoy some overall tax savings. For example, in the case of the estate tax, the two of you should be able to transfer up to $5 million to each other tax-free. It’s really important to have the ability to transfer assets to each other.

4. Respect your partner’s money skills.

The two of you probably don’t have the same financial expertise and it’s not always the man who has more. The important thing is to let the spouse who has the best money skills lead. For example, one of you might focus on bill paying while the other focuses on investing. Of course, the both of you need to be involved in all major decisions or one of you could end up feeling bitter.

5. Share your goals and diversify assets

If you have money you can invest, the more you can invest together, the more creative you can be in your asset mix. For example, if you combine assets you could diversify more to protect against risk. In fact, to get the most out of your investments, you should pool both spouses’ holdings together into one account. When you have a bigger pool of money, you will have more freedom to add a few growth stocks with upside that you might not be able to put in a smaller account.

6. Support one another through the bitter and the sweet

There are a number of things you can do to take the pressure off one another. In terms of income, women have gotten closer to equality with men. One Wells Fargo survey revealed that 25% of women earned more than their male spouses. If one of you loses your job or becomes underemployed, it’s important that the other be supportive. After all, in a few years the shoe may be on the other foot.

7. Do regular financial checkups

Couples rarely just want to go off and each do their own thing financially. Most couples are more interested in finding a financial path and then staying on it. But this requires ongoing communication between the spouses, creating a sound financial plan and updating it when things change. Although this may sound basic, it’s important that the two of you sit down regularly and perform financial checkups.

Save More Money Or Pay Down Debt? Ay, There’s The Rub

stressed old manIn his play “Hamlet, William Shakespeare wrote, “To die, to sleep;
To sleep: perchance” to dream: ay, there’s the rub…” But a better question today might be “which comes first to save more or to pay down debt, ay there’s the rub.

10% to 20% – seriously?

Financial advisers say that we should be saving 10% to as much as 20% of our income. But the latest data from the Federal Reserve Bank of St. Louis is that the United States’ savings rate is just 4.2%. Why do so many of us have a tough time saving money? In most cases it’s because we’re deeply in debt. If you’re facing the double curse of high cost debt and little in the way of savings, what’s better? Should you put your money into savings or pay down your high interest debts as quickly as possible?

Put first things first

The simple fact is that if you have high interest debt and are trying to save money it’s like trying to swim when you have a cement block tied to your feet. Paying down high-cost debt should always come first before trying to save money. Here’s why. Let’s suppose that you are carrying $10,000 in credit card debt at a 15% interest rate. If you make just the minimum payments each month, it will take you nearly 30 years to pay off that debt and it would cost you about $12,000 in interest. As you can see from this example, your number one priority should be paying down debt before you do anything else, including putting money into savings. That’s because this will have a much bigger impact down the line – especially if you’re dealing with credit card debt.

However, most experts also say that before you start using money to pay down your debt you need to put a little bit aside as an emergency fund. Ideally this should be three to six months worth of living expenses. Unfortunately, that’s not easy to do if you’re carrying thousands of dollars in credit card debt. So instead of this, you might try to start with $2000 so you would have some money to cover unexpected bills.

Get a guaranteed return

The biggest benefit of paying down credit card debt is that it gives you a guaranteed return on your money. You can precisely determine and quantify a guaranteed rate of return by using your interest rate, balance and payment plan. While you would be lucky to earn 2% these days on a certificate of deposit, you could get a guaranteed 15% or more by paying down your credit card debt – making this a very good deal.

Save a fortune

When you pay more on your debt you will not only get out of debt faster, you will save a fortune in interest. Plus, once you pay down that debt you will be able to put a lot more money in your savings.

Back to the previous example

If you go back to the example given above of the $10,000 in credit card debt let’s assume that you increase your payments to $400 per month – instead of making just the minimum payments. In this case, you’d pay off your debt in three years and your interest costs would be only $2000. That would be a savings of $10,000 that you could then add to your savings account in subsequent years instead of your bank getting the money.

$9600 in just five years

In this example if you did increase your payments to $400 then continued to save that $400 per month once you paid off the debt, you’d not only be debt-free you’d have $9600 in the bank in just five years.

get out of debtPaying off that debt

One way to get out from under credit card debt is to get a home equity loan or home equity line of credit and pay it off. This would dramatically reduce your interest rate, which will reduce the amount of interest you will end up paying. However, there is a danger to this and you should tread very carefully with the equity in your home. The problem is that you would have a new loan and if not careful, could very well rack up new credit card debt. This would leave you in a worse situation because you would now have a home equity debt as well as credit card debt. For this to work, you need to have a tremendous amount of discipline and personal commitment because if you don’t, you could easily end up in even worse shape than before you took out the loan.

Another option

Another way to get credit card debt under control would be to do a balance transfer from your high interest cards to one with a lower interest rate. There are still cards available that give new cardholders anywhere from six to 18 months with 0% interest. However, before you rush off to get one of these cards make sure that you read the fine print as some have balance transfer fees of 2% to 3%. Plus, you must pay off the credit card before your promotional period expires or you’ll be hit with more interest that could be as high as 18% or even 20%.

Snowballing your debt

Third, you could use the snowball strategy to pay off your debts. The way this works is that you start by paying off the card with the lowest balance because this will give you a psychological boost to continue paying off your debts. And when you get that first credit card paid off, you will have more money available to begin paying off the debt with the second lowest balance and so on. Where this strategy gets its name is because as you pay off that first debt you will begin to gather momentum just like a snowball rolling downhill. Many people have paid off as much as $25,000 or $30,000 in debt in just two to three years by using this strategy. It was invented by the financial guru, Dave Ramsey who explains more about it in this brief video.

The worst option

There is yet another option for getting out of debt that is sometimes called the “nuclear” option. It’s to file for a chapter 7 bankruptcy. If you can qualify for one of these bankruptcies you will get all of your credit card debts discharged (eliminated). If you have medical debts, a personal loan or personal line of credit, they should also be discharged. But there’s a good reason why this is often called the nuclear option. A bankruptcy will stay in your credit file for at least seven years. It’s likely that you would not be able to get any new credit for the first two or three years after the bankruptcy and when you can get credit it would come with a very high interest rate. Plus, there are some debts a chapter 7 bankruptcy can’t discharge, including student loan debt, alimony, child support, a mortgage or auto loan and any debts incurred through fraud.

Marked for life

The worst consequence of a chapter 7 bankruptcy may be the fact that it will stay in your personal file for the rest your life. Fifteen years from now you could get turned down for a really great job when your prospective employer saw that you had a bankruptcy. Many employers now routinely check credit reports as part of their hiring process. And like it or not, some people will always hold a bankruptcy against you because they believe it shows that you’re irresponsible when it comes to handling your personal finances. Your chances of getting that dream job may also be reduced if that prospective employer sees other negative items in your credit report such as late payments, defaults, accounts that have gone to collection and charge offs.

The best policy

What this all means is that the best policy is to get your debts paid off as quickly as possible. This should always come first before putting money into savings. It will pay off big in the long-term and when it comes down to it, what’s better – to be in debt or debt free? If you were to pose this question to that group of kids sitting around a table in those commercials that are currently running, we’re sure they’d all yell “debt-free.”

13 Ways To Cut Your Spending This Year

Pair of scrissors cutting the word SpendingIf you made some financial mistakes last year, think about 2014 as a “do over.” Now, while the year is still young would be an excellent time to make some changes that will boost your financial bottom line. Of course, before you can begin to slash your spending, you need to know where your money’s going. If you don’t already have a budgeting tool, you need to get one such as Mint. It’s free and is available for use on your computer, iPhone or Android-powered device. The best thing about Mint – other than the fact it’s – free – is that all you’re required to do is type in all your account numbers – those of your checking and savings accounts, credit cards, etc., and Mint does the rest, bringing all your financial information together so you can see exactly where you stand at a glance. Mint will even organize your spending into budget categories and then send you an email alert if you overspend in any of them.

Once you get a budgeting tool, you will need to make a note of all your spending for at least a month, right down to that soda you purchased at work.

It doesn’t work for everyone

You may have hard that old cliché that all you have to do to get your finances under control is just skip that morning latte. However, this doesn’t work for everybody, especially people who never have a morning latte. But here are 13 things that most people could do to save money and avoid overspending.

1. Cook at home more

Most of us tend to eat out too frequently. Suppose you’re a couple and eat out three times a week and spend $30 each time. That’s $90 a week, $360 a month and $4320 a year. Stop and think what you could so with that $4320 – like a nice two-week vacation. Anyone can cook and the Internet is replete with recipes for good-tasting meals that aren’t that expensive to make.

2. Use couponsCoupon Savings

We read recently that you really don’t have to pay full price for anything anymore and this is certainly true of groceries. You could go online to sites like www.coupons.com or www.couponmom.com and find coupons that would save you money on just about everything you buy at the supermarket, especially cleaning and personal care products. You should also get a loyalty card from your favorite supermarket. We get money-saving offers from our store every week and all we have to do is click on a few links and the “coupons” are loaded right on to our loyalty card. Also, make sure you watch for sales on items you can buy in bulk like paper towers, bathroom tissue, shampoo, rice and the like.

3. Drop your landline

We mean this seriously. If you have a cell phone, why do you still need a landline? This can cost $50 or more a month and why? Cancel that service and you could save as much as $600 this year.

4. Review your insurance costs

Auto and homeowner’s insurance is a competitive business. Take a hard look at your insurance bill(s) then go online to www.esurance.com or a comparable site and do some comparison shopping. You might be surprised at what you find. Also, check to make sure your insurance fits your needs. Think about your coverage and your deductibles. If you could increase the deductible on your collision insurance from, say, $250 to $500 or even $1,000, you would definitely slash that bill.

Woman talking on the cell phone5. Negotiate with your credit card providers

Check around to see if you can find a credit card with a lower rate than the one(s) you’re currently using. If you find one, call your current card company and ask it to match that lower rate. If it refuses to do so, transfer your balance to that other card.

6. Find a cheaper health club

You really don’t need to spend $100 a month or so on a health club membership. If you shop around a bit you should be able to find a much cheaper one. We have a rec center near us with a great workout facility where we get a card and then buy “punches” so that we’re paying only when we actually use the facility, which puts us in total control or our spending.

7. Pay off your debts

Wouldn’t you like an instant raise of $200, $300 or even more a month? Then pay off your debts. If you have multiple credit card debts, first tackle the one with the lowest balance. You should be able to pay it off fairly quickly. What this will do is free up money you can then use to begin paying off the credit card with the second lowest balance. Do this for a year or two – depending on how much you’re in debt – and you will be debt-free.

8. Stop using those credit cards

Debt is just borrowing from tomorrow to pay for today’s spending. If you stop using those credit cards you’re paying for today, well, today and won’t have to worry about tomorrow’s debt. There is a psychological term called being “mindful.” This simply means stop and think before you do something such as pulling out a credit card. One of the worst things about credit cards is that they are too easy to use. Say that you are looking at an item costing $599.95 and you know you only have $400 in your checking account. It’s just too easy to “card it” and worry about that $599.95 later. But if you’re mindful and think about the consequences of charging that $599.95 you just might decide to take a pass and not pile on more debt.

9. Call your Internet and TV providers

If you ask, you may find that you can get a better deal. More and more people are abandoning cable and satellite television and there are now a number of competitors in the market. Cable and Internet companies are eager to hang onto their customers. This means you may be able to get a deal. The best deals will come from your provider’s customer retention department, which is the one that you call to cancel your service. One person this recently and saved close to $50 a month.

10. Review your cell phone bill

The cell phone carriers are now offering new deals including no-contract and pay-as-you-go plans. If your contract is up see if can find a plan that would save you money. If you find one then should ask your existing provider if it will match that other price or give you a better deal. If it won’t, say sayonara and move to the other plan.

11. Watch that online spending

If you have trouble sleeping at night, it can be easy to go online and start shopping in those wee, small hours of the morning. However, if you’re not careful that type of spending can add up dramatically. One way to prevent this is to unsubscribe from all those email alerts from stores and online retailers that are offering those sweet, sweet deals.

12. Create an emergency fund

Whether you like to think about this or not, you are going to have an emergency of some kind. It could be that the transmission in your car falls out, that you’re in an accident and require hospitalization or you lose your job. If you don’t have an emergency fund, you’ll have to use debt to get through the emergency. If it’s a really serious emergency, you could end up literally thousands of dollars in the hole, which would take you years to pay off. Most financial experts say that you should have the equivalent of six months’ living expenses banked away in an emergency fund. That way when an emergency does occur, you will be able to pay for it without adding big debt.

Family Budget Planning13. Make a budget and stick to it

Whether you use Mint, some other budgeting app or just a piece of paper and a pen, it’s critical to make a budget and stick to it. However, it’s almost bound to fail if you are too stringent with yourself. Be realistic and give yourself an allowance for discretionary spending. Then don’t spend any more than that. Budgeting works and if you’re not taking advantage of it, it’s time to start.

How To Be A Smart Credit Card User

woman breaking a credit cardThere was a time when credit cards were treated with respect. For example, my parents had just one credit card and used it very carefully. They made only a few charges each month and were almost religious about paying off their balances on time every time.

Today, we tend to be more nonchalant about our use of credit cards. They’ve become so commonplace that many of us take them way too much for granted. As a result many Americans are having a problem with debt – due to those little pieces of plastic.

Protecting yourself from overspending

Fortunately, there are things we can do to protect ourselves from credit card abuse. It begins with making some rules about the way your use your credit cards to avoid that sinking feeling of loss when your credit card statements arrive and you see how your balances have swollen to the point where you begin to feel things have become hopeless.

10 tips for avoiding credit card  problems

Here are 10 tips that for smart credit card use than can help prevent this from happening.

1. Pay more than the minimum. If you pay only the minimum amounts due on your credit cards each month, you’re basically sentencing yourself to credit card hell. In fact, if you do this you might literally never get out of debt. One example of this is if you owed $10,000 and made just a minimum payment of $30 or $40 every month, it could take you as long as 18 years to become debt free. On the other hand, if you were to make more than the minimum required payment, you’d be out of debt in no time. As an example of how this works watch the following video to learn how one family paid off  $12,712.65 in credit card debt in just a year.

2. Pay off your cards. This may seem obvious but the best way to stay out of trouble with credit card debt is to pay off your cards. If you have a card with small balance, pay it off first, then go to work on your other cards. If you concentrate on knocking off your debts one at a time, you might be surprised at how quickly things get better.

3. Be smart about how you charge. Make sure you never run up a card to its limit. When you use a card sensibly, it will have a very positive effect on your credit. Conversely, if you run up your balance to the max, this will have a negative effect. The reason for this is that when a financial institution checks your credit one of the most important things it will look for is how much credit you have available vs. the amount you’ve used. This is called your debt-to-credit ratio and the lower it is, the better. So if you must have a balance on one of your cards, make sure you keep it low.

4. Don’t take cash advances. Cash advances come with much higher interest rates than when you use a credit card to make purchases. If you have an emergency and no other choice, it might be acceptable to take a cash advance but otherwise, stay away from them – especially those “checks” you probably get periodically from one or more of your credit card companies.

5. Always pay on time. No matter what else is going on in your life financially be sure to pay your credit card bills on time. Most financial experts say that just one late payment can drop your credit score by as many as 50 points. This could easily move you from having “good” credit to “poor” or even “bad” credit, which could cost your money because of the higher interest rates you will be charged.

6. Don’t be afraid to negotiate. Go online periodically and check to see what other cards might be available with lower interest rates than the ones(s) you have now. If you find one with a better interest rate, call your current credit card provider and ask it to match that better rate. Smart consumers do this almost every month. And if your current credit card issuer won’t match the other card, transfer your balance to it.

7. Keep an eye on your account. If you’ve been paying any attention at all to the news recently you know that there was a credit card breech that affected more than 90 million Target customers. Now, more than ever, you need to keep an eye on what’s happening with your cards. Go online and check your balances regularly – at least once a week – to make sure all the purchases you see are yours If you spot any fraudulent activity, contact the credit card company immediately and alert them as to the problem.

8. Be careful about transferring your credit card information. Don’t send your credit card information via the Internet unless you’re positive the site is secure. There are phishers out there just waiting to steal your information. Never transfer a credit card number, your social security number or other important financial information to a site unless you’re positive it’s secure and trustworthy

9. Keep your credit card accounts open. When you pay off a credit card, don’t make the mistake of closing the account. This will lower your credit score because one of the five components used to calculate your score is “length of credit history.” If you were to close out an account you’ve had for a long time this would definitely ding your credit score. Plus, it would affect the total amount of credit you have available, which in turn would damage your debt-to-credit ratio.

10. Get your credit reports on a regular basis. There was a report issued by the Federal Trade Commission last year that one in five Americans have errors in their credit reports and that 5% have errors so serious, it could be damaging their credit scores. You can get your credit reports free once a year, either from the three credit reporting bureaus – Experian, TansUnion and Equifax – or on the site www.annualcreditreport.com. The best way to get your reports is one at a time at three-month intervals. That way you would be able to monitor your reports yourself and avoid the expense of paying some company to do it.

What to look forSample credit report and key

When you review your reports, look for negative items such as late payments, defaults, accounts that have gone to collection and missed payments as these are what would damage your credit score the most. If you do find one or more of these items, make sure they aren’t errors. If you do find a mistake, you need to immediately write the credit bureaus and dispute it. You will need to have documentation supporting your claim. But if you do this the credit bureau is required by law to contact the financial institution that provided the information and ask that it be validated. If the institution that provided the information can’t validate it or fails to respond within 30 days, the credit-reporting bureau must, by law, delete the information from your credit file. As you might imagine, this could give your credit score a nice and immediate boost – maybe by as many as 50 or 100 points.

In summary

The net-net of credit card usage is actually pretty simple. Just use your credit cards wisely and with common sense. Don’t run up huge balances you can’t pay off at the end of the month, never take cash advances and keep an eye on your accounts. Do this and you will be able to take advantage of the convenience of having a credit card without the danger of a person or an originator of the will and of falling into credit card debt hell.

Could You Actually Use Credit To Get Out Of Debt?

Woman holding bills in both hands and looking confusedI’m sure you’ve heard that old proverb that, “you can’t borrow your way out of debt.” And for the most part that’s true. Take debt consolidation loans for example. If you owed $15,000 on credit cards, took out a loan and paid them all off, you would still owe $15,000. The only differences are that you would owe the money to a different lender, you would have a lot more time to ` off the debt and you would have a lower – in some cases a much lower – interest rate than you’ve been paying on your credit cards. However, there are some ways you could use credit to sort of get out of debt and here are three of them.

0% interest balance transfer cards

If you could qualify for a 0% interest balance transfer card you debts wouldn’t be eliminated but it could be a useful tool. The way these cards work is that when you transfer the balances on your other credit cards to the new one, you would have a debt-free introductory period of anywhere from six to 18 months – depending on the card you choose. The benefit of these cards is that all of your payments during your introductory period would go to paying down your balance and not for any interest charges. If you could make two or three times the minimum payment before your introductory period expired, you could have your balance completely paid off.

Interest-free financing offers

There are cards that are similar to balance transfer cards in that they offer the opportunity to save money with 0% APR financing on new purchases. This would allow you to keep enjoying the convenience and security of your credit cards but without being charged interest on your purchases. If you use the money you save to pay down your debt, you should be able to pay off your balances much faster.

Low-interest credit cards

If you can’t qualify for or choose not to get a 0% interest balance transfer card, you could at least transfer your high-interest balances to a lower interest credit card. Look up the interest rates you’re currently paying and you might find they’re as high as 19% or even higher. You could save a substantial amount of money by transferring the balances on those cards to a new one with a much lower interest rate. For example, as of this writing there were cards available with an interest rate of 13.2%. Get one of these, transfer your balances to it and again you would free up money you could use to pay down your debts.

Use a credit card repayment calculator

Whether you realize this or not, thanks to the CARD Act of 2009 your monthly statements now show how long it would take you to pay off your balance if you made only the minimum payments and how much you could save if you paid off your balance in three years. This information can be very helpful. But if you’re having a problem with debt, you might need a more powerful tool that could help you create a plan to pay off your balances as quickly as possible. One that we like is the Credit Card Repayment Calculator on the Federal Reserve Website. Or you could use the Credit Card Pay Off Calculator on Credit.com. It’s very flexible and will show you how long it will take to pay off your balances given your interest rates and different payment amounts.

For more tips

If you’d like some additional tips on paying off credit card debts, watch this brief video.

How to save money with your smart phoneMobile Banking On Smart Phone

Have you ever thought of your smart phone as a tool for saving money? They can actually be a sort of Swiss Army Knife what with all the different apps available for use on them. In addition to using your smart phone to take photos and make phone calls, you could have, as the Manning brothers revealed in that funny video, football on your phone. Plus, you could use it a variety of different ways that would save you money. Here are nine apps you should have and the best part is that most of them are free.

Redlaser

Why pay the full price for anything when you could have this free app on your iPhone, Windows Phone or Android phone? It’s great for comparison shopping because when you find something you want to buy, you use it to scan the item’s bar code. It will then automatically search, compare and spit out the best prices available at all online and brick-and-mortar stores within a few miles of where you’re shopping.

Retail Me Not

This free app is, unfortunately, available for use only on an iPhone. It provides you with access to tens of thousands of retailer deals and coupons almost instantly. You can shop online on your phone and then drag promotional codes into the Retail Me Not website to boost your savings or even redeem the coupons directly from the app in the store – without ever using a printer.

Eyeona

Here’s another free app that can be used with an Android phone or iPhone. The way you use it is to photograph all your receipts. If any item goes on sale within the next 30 days, the app will alert you. You can then go back to the merchant, show him or her the lower price and request an adjustment.

Key Ring

Aren’t you tired of carrying around all those store loyalty cards? I know I am. You can eliminate this with the free app, Key Ring. You use it to take pictures of the ID numbers of all your loyalty cards, which it stores away. You can then whip it out and use it whenever you would qualify for a discount or a reward at one of your favorite stores. You can put all those loyalty cards away in a drawer where they won’t be stuffing up your wallet.

Coupon SavingsCoupon Sherpa

You probably know that a Sherpa is a guide that helps people climb mountains in the Himalayas such as Everest. Well, Coupon Sherpa can guide you to some great savings. This app is cool in that it totally eliminates the need to clip and take coupons to the store with you. The way it works is that you find coupons online and then simply flash the phone at checkout to get your discounts. It’s free and is available for use on iPhones and Android phones.

GasBuddy

This app is free for use on Android phones but costs $2.99 in the iTunes store. You type in your zip code and it will show you the lowest gas prices at stations near you – with the stations displayed either as a list or on a map.

CompareMe

This app is available for use only on an iPhone and costs $1.99. What it does is let you quickly compare and convert the prices of products based on many different package sizes, lengths, volumes, and units to find the best deal. It will calculate discounts and premiums and display them directly or you can set prices, numbers and amounts yourself using the app’s optimized keyboard.

FareCompare

If you’re looking for an airfare that won’t break your budget and have an iPhone, you need this app. You use it to find cheap flights at the nearest airport or you can set it to provide up to six alerts a day if the prices drop on an airfare to your favorite destination.

RepairPal

There’s no need to over pay for auto repairs ever again Whether you need service or roadside assistance with a flat tire, this app will show you a list of the shops closest to you along with accurate estimates of whatever it is you need done. RepairPal is free and can be used on iPhones or Android phones.

Four Stories Of People Who Tamed the Debt Monster

Debt monsterIt can be said that a little debt never hurt anyone. And that there’s even such a thing as “good” debt. But big debt generally means big problems. The stress of dealing with debt can cause both emotional and physical problems, including headaches, insomnia, ulcers, high blood pressure and heart problems. What can you do if you’re struggling with big debt? Here are the stories of four people and how they tamed the debt monster.

$140,000 in debt

Our first story is of a couple that was faced with a mountain of $140,000 in debt. Yet, they were able to eradicate it in less than three years. How did they do this? They would be the first to admit it took hard work, dedication, good fortune and perseverance. While they were required to make numerous sacrifices they didn’t starve themselves or make their lives miserable. Where did all this debt come from? It came from student loans.

The good and bad news is that the husband lost his job. However, he received severance pay and when he got a new job was able to use the money to begin paying down the couple’s debt. They then used the money in his savings account along with his new paycheck to pay off $15,386 in debt.

Their next step was to develop a budget where they could live on his salary alone and use all of her monthly paychecks to pay down their debt. In addition, they minimized their monthly expenses as much as possible and used all unexpected income to make additional payments. They cashed out his investments and then used their emergency fund to do a final payoff.

$150,000 – mostly in business debt

Our second story is of a couple that became $150,000 in debt mostly because they lost two businesses. It took them five years to pay off this debt but they were able to do it using a combination of tactics. First, the wife became a mad coupon clipper. Her favorite websites were Southern Savers and Money Saving Mom. The stores she chose were CVS, Target, and Harris Teeter.

Second, they stopped going into debt. They cut up their credit cards so there was no way they could create any more debt. There were some instances such as unexpected medical expenses where they did have to pay them off over time. Plus, they had a bigger tax bill one year and had to pay it off over the following 12 months. But the important thing is that they saw their debt slowly and steadily going down. They had learned the important lesson that you cannot pay off debt while you are continuing to go into debt.

happy familyThird, they followed the advice of Dave Ramsey and snowballed their debts. This meant first paying down the debt that had the smallest balance while continuing to pay the minimum amounts on their other debts. The minute they paid off the debt with the smallest balance, they went to work on the next one and threw all of their extra money at it. They did stay flexible with some of their spending. For example, they sent their kids to a three-day-a-week private school and even bought season passes to a nearby amusement park. Beyond this, their only vacations consisted of staying at a beach condo owned by a family member or by going on vacation with other members of their family.

Another tactic this couple used was to have two separate banks. They had one for everyday spending and a second for savings and sinking funds. Before when they had just one account they found it was more difficult to save money, as the “extra” money they had earmarked for paying off debt would somehow shrink. Now, they put enough to cover their living expenses in an account at their main bank and the rest into their secondary account at a different bank. This helped them save more money each month.

They say the most important lesson they learned is that if the couple agrees to pay off debt it may take longer but it is better than trying to pay it off faster where one of the two is a bureaucratic tyrant.

Paying off $18,500 in debt

This story may not seem as dramatic as the two previous ones but debt is much like art in that it’s all in the eye of the beholder. We’re sure that the $18,500 that this couple had in debt was just as scary to them as was the $150,000 that couple #2 had in debt. The wife admitted that they were this much in debt mostly because of her. So how did she fix things?

Her first step was to create a spreadsheet to review all of her debts. She then created a list of her monthly fixed expenses and developed a spending plan. Her next step was to create a “debt snowball.” This meant ordering her debts from the one with the smallest balance to the largest and then scheduling payments to the smallest debt until she had paid if off while continuing to make the minimum payments on her other debts. She would then move on to the debt with the next smallest balance and concentrate on paying it off.  Think that debt snowballing might work for you. Watch this Dave Ramsey video to learn more about this strategy for becoming debt free.

This woman  initially believed that it would take her 18 months to pay off everything. But she got lucky and received a sizable bonus and was able put $1000 in savings and used the rest to retire her last debt.

Two important things this woman learned about paying off debt is that you should allow yourself a certain amount of money for fun out of each paycheck to help stay happy and motivated. She paid off all of her bills as soon as she received a paycheck including her debt and then viewed whatever she had left in her account as “fun” money. This is what kept her from overspending. Second, she learned that if she had a small setback such as a vet bill or car repair bill to not that eat into her debt snowball or to get her down.

Over $14,000 in debt and no savings

Our fourth story is of a woman who became debt-free after owing more than $14,000 in debt and with no savings. She felt her financial life was totally out of order and didn’t know how to fix it.
In this case, the woman had a full-time job that paid $37,072 a year plus bonuses and side jobs that totaled $5000. This came out to be an average of $3496 a month or about $42,000 a year.

The way she chose to get rid of this debt was to first pay off her credit card debts because they had the highest interest rate and were unsecured debts, which made them riskier. In addition, they had the smallest balances, which made it easier for her to start small and then work her way up. In addition, she created a four-step program for becoming debt-free. Her first step was to create a tough but attainable timeline. In her case it was to become debt free by December 2012.

Her second step was to learn where her money was going and where she could make the necessary sacrifices. This amounted to living on about two thirds of her income, which was definitely rough in the beginning. She viewed her budget as a spending plan that gave her more control over where her money went. She actually learned to love living below her means. What did she have to give up? She had to give up her cable TV, vacations and traveling, dining out at restaurants, movies, a gym membership, and visits to tanning salons. As tough as this was, she soon learned that those activities had delayed her time and production and kept her from reaching the debt-free position she wanted to achieve.

Step three for this woman was to create more income. She spent a good deal of time marketing herself and her skills to increase her income. She had already cut back on her expenses as much as she felt she could so now was the time to maximize her earnings. She did this by freelance writing in her spare time, which added more than $500 per month to her income.

Finally, her step four was learning how to stay motivated and to celebrate even her small wins. To become debt-free is not a sprint. It’s more of a marathon. But as she learned, if you celebrate the small “wins” this can help keep you going. She also learned that while there are also awesome financial tools available, the biggest and most important tool in her financial arsenal was herself – her determination and discipline.

Student Loan Debt Settlement: What You Need To Know About This Debt Solution

hands chained while holding coinsStudent loan debt settlement is one of the options for those who are struggling with their debt payments. But while it is an option, you need to possess the right qualifications before you can opt for this debt solution.

Debt settlement is when you pay your creditors with a lump sum payment that is usually smaller than your current balance. You will convince the lender or creditor to accept this smaller amount and whatever it cannot cover will be considered forgiven. There are many techniques to get them to agree to this. One is to tell them that if they will not agree to settle with you, you have no other choice but to opt for bankruptcy. Most of the time, people going through debt settlement are on the brink of bankruptcy.

In student loan debt settlement, you cannot use the bankruptcy argument. That is because student debt cannot be discharged in bankruptcy. It is one of the debt types that will not be affected when you file that you are bankrupt. This makes the settlement process a bit more complicated as a student loan debt relief.

Current predicament of graduates and their student debt

Settling your debt becomes an option for consumers when they have stopped paying their monthly obligations or they are just about to do so. The only way that they can qualify for this debt solution is when they are in a real financial crisis.

Well if the qualification is a financial crisis, then a lot of consumers and new graduates will qualify for debt settlement. Based on the information from the Student Aid website, the delinquency statistic for the past two quarters are as follows:

Direct Loan Portfolio.

  • In Q3 of 2013, out of the 27.8 million student loan borrowers, 2.1 million have defaulted on their student loan. The amount of delinquent loans is $30.5 billion of the total $569.2 billion.

  • In Q4 of 2013, out of the 29.2 million student loan borrowers, 2.2 million have defaulted on their student loan. The amount of the delinquent loans is $33.8 billion of the $609.1 billion total debt.

  • The percentage of direct loan delinquents in Q4 slightly went down to 7.53% from 7.55% of Q3.

Federal Family Education Loan (FFEL)

  • In Q3 of 2013, out of the 22.9 million FFEL borrowers, 4.4 million have defaulted on their student loan. The amount of delinquent loans is $58.8 billion of the total $429.5 billion.

  • In Q4 of 2013, out of the 22.5 million FFEL borrowers, 4.4 million have also been delinquent on their student loan. The amount of the delinquent loans is $59.7 billion of the $423 billion total debt.

  • The percentage of FFEL delinquents increased in Q4 to 19.5% from 19.2% in Q3.

Source: National Student Loan Data System (NSLDS) or http://studentaid.ed.gov/sites/default/files/fsawg/datacenter/library/PortfoliobyLoanStatus.xls

The report defines the default as loans that are over 360 days delinquent. Overall the percentage of delinquent borrowers slightly decreased from 12.8% in Q3 to 12.7% in Q4. Although there is a decrease, it is too small to be considered a real improvement.

And when it comes to improvement, the job market does not give much confidence. Based on the data from the Bureau of Labor Statistics, the job market in October was not as promising as we hoped it will be. This is probably because of the government shutdown and the persisting issue about the debt ceiling. The highlights of the report for the month of October are as follows:

  • Civilian labor force decreased by 720,000.

  • The unemployed for more than 27 weeks or more is at 4.1 million.

  • Part time employees changed slightly to be 8.1 million.

  • 815,000 are discouraged workers – meaning they are not looking for a job because they feel that there is no job for them.

Source: http://www.bls.gov/news.release/empsit.nr0.htm

How to settle your student loans?

The statistics above gives us reason to believe that the borrower’s ability to pay the student loan is not improving at all. If the job market does not improve soon, the number of borrowers falling behind on their payments could increase. This means more people may look into student loan debt settlement to help with their monthly payments.

But how exactly can you use debt settlement for student loans? FinAid.org defines it as offering a lump sum payment for a portion of the debt that equivalents the full payment. The site is firm to say that it is not a new payment plan. There are two ways that the US Department of Education want to get their settlement payment.

  • Lump sum payment to be received within 90 days of the offer.

  • Installment payments that has to be completed within the fiscal year (October 1 to September 30).

Here are the other important facts that you need to know about student loan debt settlement.

  • The US Department of Education will not entertain settlement offers from debts that are involved in fraud or are results of a court judgement.

  • The US Department of Education will not settle for anything less than the default claim on a FFELP loan or principal balance of a direct loan. They will also not accept anything less than the recovery rate (percentage of disbursements). Most of the time, they accept at least 115% of the default claim or loan balance – but they can accept lower than that if the default is recent.

  • The US Department of Education considers settlement offers together with the cash flow being received from income tax refunds or wage garnishments.

  • Delinquent borrowers are advised to begin their negotiations by offering to pay half of the current amount owed less the amount of the default claim.

  • Debt collection agencies are authorized to agree to settlement that also result in the waiving of collection fees, 90% of the principal and interest balance or the full principal balance and half of the accrued unpaid interest.

Tips when settling your student debt

If there is one thing that you need to remember, it is that student loans need to be repaid at all cost. Obviously, settling student loans will not offer much debt reduction compared to other types of debt. But if that is what will get you out of debt, you may want to go through with it. A small reduction is better than nothing. But whatever settlement agreement you go into, make sure that you remember these tips:

  • Get everything in writing. It is very important that you specifically ask them to include in the document that the rest of your debts will be forgiven once you have paid the settlement fund.

  • Never agree to an amount that you cannot afford to pay. If you are dealing with debt collectors, they usually profit from commissions on the settlement fund that you will both agree on. So expect them to try and get more out of you.

  • Call the US Department of Education if you feel like the negotiation with debt collectors are going nowhere.

  • Know about the FDCPA (Fair Debt Collection Practices Act). Although the employees of the US Department of Education is not under this law, the debt collection agency that they will hire is. Do not let yourself be abused or bullied into paying more than what you can afford.

The settlement fund is ideally something that you need to possess already so you can successfully settle your dues before the time limit. If you do not have the money, you can opt to borrow from a friend or relative to help you out. If you get them to agree, you can lower your debt amount and help control the interest rate on your new loan.

You can also use your tax refund and have it considered as part of the settlement – but only if the release falls under the 90 days period after you make the settlement offer.

In the end, student loan debt settlement is effective for people who are in a real financial crisis and cannot afford their monthly payments. But do not expect too much of it and make sure you have a plan in place for the settlement fund that you have to pay off.

Debt Consolidation Programs – 3 Important Questions To Ask

unsecured loan and secured loanIf you are looking for a means to fix your multiple credit problems, one of the most effective ways to do that is through debt consolidation programs. It literally involves combining your different debt obligations so you can simplify your debt payment process.

There are many debt solutions that will allow you to consolidate everything that you owe so you end up with only one payment every month. Debt management, debt settlement and balance transfers can all give you this one monthly payment. However, none of them is as comprehensive as debt consolidation loans. Any type of debt can be combined through this option – mortgage and even student loans.

As the name suggests this type of debt relief program involves getting a loan that is significant enough in amount to pay off all the other debts that you owe. When you apply for this loan and you get an approval, you want to completely pay off the other debts so you are left with only one debt and one lender to pay every month. You can choose between secured or unsecured loans – depending on your qualifications.

But before you use debt consolidation programs as your debt relief option, you need to ask yourself three questions first.

When is debt consolidation loan a good idea?

Not all financial experts agree that debt consolidation programs that use loans to pay off debt is effective. That is because they think that getting a debt to pay for another debt is just like digging a hole to cover another one. However, there are studies that show how people are more emotionally inclined to erase debt accounts regardless if it causes them to pay more in the long run.

Scott Rick, a marketing professor from the Michigan Ross School of Business, and other professionals conducted experiments and surveys that will help identify how consumers behave when it comes to debt payments. In an article published on their website in 2011, the authors of the study revealed results that showed how consumers focus on lowering the number of debts that they owned. They do not necessarily concentrate on the total amount of debt that they will end up paying off. According to Rick, participants in the experiment would rather eliminate debt accounts even if there is heavy evidence that it will cost them more. The news release about this study is fully explained in the link: http://www.bus.umich.edu/NewsRoom/ArticleDisplay.asp?news_id=23284.

Truth be told, even the most clueless of all consumers will immediately assume that getting a big loan as a debt solution is effective. It seems like the emotional satisfaction of having only one debt to deal with is appealing to consumers. That is true even if it means having the same or a higher amount of debt.

Although it may seem like your emotions lean towards using debt consolidation programs, you still have to identify the signs that it is the right debt solution for you. There are specific hints that will determine if this solution will get you out of debt or not.

  • You mostly have high interest credit card debts. Since credit cards accumulate the fastest thanks to the interest rate and the finance charges, you can benefit from debt consolidation programs. It addresses the multiple accounts and the high interest immediately – since loans generally have a lower interest than these card accounts.

  • You have a stable and steady income. One of the requirements to get a loan approval is being able to show that you have the ability to pay back the loan. If you cannot prove that you have a stable and steady income every month, then you will have a hard time finding a lender that will approve your loan.

  • You can qualify for a low interest rate on the loan. To get a low interest rate on the loan that you are applying for, you need to convince the lender that you are a low risk borrower. That means, the chances of you defaulting on your loan will be low. They do not have to protect themselves by issuing a high interest rate. There are two ways to do this. If you have a good credit score, you can get any unsecured loan. If you do not have a good credit score, having a collateral that will guarantee the loan will suffice.

Ideally, you have to possess all of these signs before you use this debt relief option to solve your debt problems. But if not, you may just have to say no to debt consolidation loans.

What are the pitfalls of consolidating debts through a loan?

The second question that you need to seriously consider when using debt consolidation programs are the pitfalls that can make it fail. Even if all the signs point you towards using it as a debt solution, you may want to ensure that you can implement this program properly so debt freedom is assured.

Here are some of the common pitfalls to using debt consolidation loans.

  • Feeling like you have paid off your debt. Remember that you just shifted your credit accounts and combined it under one lender. You may have closed off the accounts but the debt that you owe remains the same.

  • False sense of complacency. Be careful of the convenience that you feel because of the one payment that makes your debt payments easier. It might prompt you to be relaxed and less vigilant when it comes to monitoring your expenses. This should not happen. You still need to control how you spend your money and to make sure that your budget is followed strictly.

  • Giving in to the temptation to use your credit cards again. Since your credit cards are now completely paid off, you have to battle the temptation to use it once more. You do not want to grow your debt if you still haven’t paid what you currently owe.

  • Relying on getting another loan to pay off any accumulated debt. Some people, if they give in to the last pitfall, think that they can easily get out by relying on debt consolidation programs once more. This debt solution is best to be used only once. After that, you need to be more careful about how you will manage your money.

Knowing these pitfalls will allow you to ensure that debt consolidation loan is effective in getting you debt freedom. Remember that it takes constant hard work and discipline to complete this program.

Where to get a loan to consolidate your debts?

The last question that you will encounter is where do you usually get the loan to finance debt consolidation programs? You have so many options before you but it is important to know which lender will suit your financial capabilities. Here are some of your choices.

  • Banks. Obviously, banks are the primary sources of loans. However, it is best to get a loan from a bank that you do not have an account with. Some banks will offer you a good rate just to get you as a client. But do not hesitate to get a quotation from your own bank too. That way, you can compare them.

  • Credit unions. Another option for consumers are credit unions. These act like banks but you have to be a member before you can have an account with them. This is a great alternative to banks especially when you have a less than favorable credit score and could end up with a high interest on your loan.

  • Peer to peer lending sites. This is not as old as the two other options but it is gaining popularity in recent years. Instead of being lent money by the company behind website, the lenders are people from the community themselves. This is usually done online so the overhead costs are not too big. That helps influence the low interest rate. Sample peer to peer lending sites are LendingClub.com or Prosper.com.

There are other sources of loans but make sure that you only get from trusted companies. You may end up being scammed out of your money if you are not careful.

Despite the effectiveness of debt consolidation programs, make sure that you learn how to manage your money and debt to keep out of another financial crisis. The debt solution will help pay off your debts but staying out of it is another lesson altogether.

How Budgeting Can Help To Stop Debt

Is A Frugal Budget Really HelpfulIf you think being in debt is fun, you’re the member of a very small minority. In fact, it might be a minority of one or just you. Most people who are struggling with debt don’t think it’s any fun at all. Being deeply in debt can cause stress, which, in turn, can actually cause physical issues such as heart and stomach problems, headaches, insomnia, constipation, bladder infections, arthritis and high blood pressure.

Start tracking

There’s a simple reason why you’re having a problem with debt. It’s because your spending exceeds your income. But the question is by how much? Are you spending 10% more than you earn? 20%? 30% or more? The only way that you can answer this question is by tracking your spending for at least 30 days. You will need to write down every penny you spend – for clothes, food, entertainment, dining out – everything. You could do this the old school way with a notebook and a pen or with one of the many smart phone apps now available. There are several good ones that are even free such Expenser, PocketMoney Lite and BudgetPulse.

Add up your spending and your income

Next, you will need to add up all of that spending and all of your income. This will answer the question as to how much more you’re spending than your income. Knowing this, you can then get started on doing something about it, which means making a budget.

Creating your budget

Since you’ve been spending more than you earn, your first step should be to reduce your spending until it’s less than your income. This will mean creating a budget and then determining where you can make some cuts and maybe even some sacrifices. For example, you may find that you need to cut your food costs by $100 or more a month as well as your spending on entertainment and eating out. We can’t tell you precisely where to make cuts but here’s an example of how you might budget by category.

  • Savings 5 to 10%
  • Debt repayment (loans) 5 to 10%
  • Food 5 to 15%
  • Utilities (heat, water, telephone, etc.) 5 to 10%
  • Transportation (automobile, public
  • transportation, taxis) 10 to 15%
  • Clothing 2 to 7%
  • Leisure and education 5 to 10%
  • Housing (rent, mortgage, taxes,
  • insurance) 25 to 35%
  • Health (insurance, dentist, medication, etc.) 5 to 10%
  • Personal 5 to 10%

Have an emergency fund

You must start saving a small amount each month as soon as possible to create an emergency fund. In fact, most experts feel that you should create an emergency fund before you start saving money for retirement or any other goal. Your goal should be to contribute 5% to 10% of your net monthly income until you have the equivalent of three months’ living expenses. The reason why this is important is because you will definitely have an emergency of some kind within the next one or two years. Your car could break down, your house could need emergency repairs or you could be hospitalized. If you don’t have an emergency fund, you would probably have to use a credit card, which means creating more debt rather than stopping it.

If you need help developing your budget, here’s some good advice from financial expert Dave Ramsey

How much do you owe?

If you haven’t done this already you need to add up your debts to determine how much you owe. The best way to do this is by using a spreadsheet program such as Excel or Google Docs. You should have four columns – one for the name of your creditors, one for your balances, one for the interest you’re paying on each debt and one for your due dates. The reason why it’s best to use a spreadsheet is that once you enter this information you can sort it several different ways. You could reorder your debts so that the one with the smallest balance is at the top or the one with the highest interest rate.

Paying down your debtstack of paid bills

There are two schools of thought regarding the best way to pay down debt. The first is called snowballing and the second is creating a debt avalanche. What the snowball strategy calls for is concentrating all your resources on first paying off the debt with the highest interest rate. The idea behind this is that it saves you the most money to begin paying off the debt with the second highest interest rate and so forth. Conversely, the avalanche strategy calls for first doing everything you can to pay off the debt with the smallest balance. The experts who favor this approach believe that it works better because when you see you have been able to pay off one of your debts fairly quickly, you will stay motivated to continue paying off the rest. Whichever of these you choose, be sure to continue making the minimum monthly payments on all of your other debts.

The other side of the equation

If you find that it’s just not possible to cut your spending enough to both pay down debt and save money, you may have to work the other side of the equation, which means finding ways to increase your income. One simple way to do this is to get a second job.
Our economy has been rebounding and you should find it relatively easy to get part-time work in the hospitality or food service industry or some other retail area. You might not earn much more than $9 or $10 an hour but if you work an extra 20 hours a week this could be $600 or $700 a month. Since this is not income you would be using to cover your living expenses, you could apply all of it to paying down your debts. If you combine this with either the snowball or avalanche strategy, you could be debt free in just two or three years even if you owe $30,000 or more.

There is no time like the present

The most important thing is to begin taking action now. There’s the old question of, “How to you eat an elephant with the answer – one bite at a time.” The same is true of stopping debt. No matter how much you owe, you can eliminate it by starting with just one step today. You could begin tracking your expenses, make a list of your debts or just download a smart phone app for budgeting. It really doesn’t matter what you do so long as you do something.

Step By Step Guide To Debt Consolidation Loans

man holding moneyAre you looking for the best debt solution for your multiple credit obligations? You may want to consider consolidating your debts.

The purpose of doing this is to provide you with a more simple payment plan. Instead of tracking multiple debts, you will only end up with one debt to pay off. Among the other goals of this debt solution is to give you a lower monthly payment requirement. This will help free up some amount from your budget so you can use it on other things like growing your savings. This can be done by stretching your payments over a longer period. There is no debt reduction here. The longer plan will allow you a lower payment every month. It can also get you a lower interest rate – which can lower your payments even further.

If that is appealing, you can make sure that you choose the right program that you can use. There are many debt consolidation programs that can successfully get you out of debt. One of them is debt consolidation loans.

5 steps to consolidate debt through loans

The whole idea of debt consolidation loans is to borrow a master loan that is enough to pay for your other debts. That is how you consolidate the debt. You will completely pay them off so you only owe the lender that gave you the loan amount. That makes payments easier. If you use debt consolidation loan for your credit card debt, that will give you a lower interest rate for a balance that is stretched over a specified payment period. It will keep your interest fixed and the balance will not accumulate any finance charges.

So how do you go about debt consolidation loans?

  1. Know how much you owe. Find out how much you owe so you can get the amount that you need to loan. If you have a mortgage loan, car loan, credit card debt and even student loans, see which of these can be combined. It may not be possible to combine your student loans with the others but if you have more than one debt from college, you may be able to combine them. For the rest, you can usually get a loan to pay for all of them.

  2. Check your finances. When you know your debts, it is time to figure out how much you will be qualified to loan. This can be determined by figuring out how much you are earning every month. That way, you will know if you can combine all of your debts. If you cannot qualify for a big loan, you may have to choose the debts that you will prioritize. This is also a great time for you to check your expenses to see if you can cut back on some of them. That way, you can boost your ability to pay off your debts.

  3. Choose a loan. The next step is to choose which loan you will use to pay off your debts. Call you local bank and ask them about your options. If you are still paying off your mortgage, you may want to borrow against the equity of your home. Or if you only have credit card debts, a good credit score may qualify you to get a low interest personal loan. Compare debt consolidation loan rates for you options. When you have chosen, prepare the document and apply for it.

  4. Pay off your debts. When you have been approved of the loan, you must use that money to immediately pay off the debts that you owe. Do not use it on something else and only on the debt that you intended when before you borrowed the loan.

  5. Strictly pay off the loan. Once you have completely paid off the debt, you should strictly pay the debt as indicated in your payment terms. Do not be late and manage your budget so you will always have money to use for your payments.

Tips when combining your debts into one loan

When you are using debt consolidation loans, you have to follow certain rules to make sure that this will be effective in getting you out of debt. Here are some of the important tips that you have to follow.

  • Make sure you qualify for a low interest loan. Not only should you qualify for a loan, you must qualify for a low interest one. This can only be done if you have a collateral or a good credit score. To see if you have a good score, you can download a copy of your credit report from the AnnualCreditReport.com and use a free online credit score calculator.

  • Stay away from more debts. It could be tempting to use your paid off credit cards now that they have zero balance. Try to keep yourself from doing this by keeping your cards – or cutting them off completely.

  • Choose the right type of loan. It is also very important that you choose the right type of loan for your debt payments. Make sure that it is a low interest one that will not endanger your assets unnecessarily. If you have a good credit score, just get a personal loan. Try not to put your home on the line if you do not have to. Also, stay away from high interest loans like payday loans or credit card cash advance. These will only put you further in debt.

While you use debt consolidation loans for your specific financial situation, make sure that you learn your lesson. Make the right financial decisions this time so you will not fall into the same debt pit again.

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