Why Should I Refinance My Student Loans?

If you are looking for ways to better afford your student loan payments, you may come across the option to refinance. Before you actually jump in with both feet, make sure that you have considered all options. Below, we will go over some of the reasons why you may want to refinance your student loans.

What Is Refinancing?

Refinancing is a process where a private banking institution or lender will take your loan and provide you with a new interest rate. The idea behind refinancing is to help make your payments more affordable and allow you to better manage your payments.

Benefits of Refinancing

When it comes down to it, you do not want to refinance your student loans if it is not going to benefit you in any way. It is important to understand just what it does offer, so that you can decide if it is something you want to proceed with.

Benefit 1: Lower Interest Rate

When you refinance your student loans, you will receive a lower interest rate than the one you are paying. Many students who have a variable interest rate will choose to refinance, so that they can receive a fixed rate.

Unlike Federal Direct Consolidation, which just takes a weighted average of your loans, refinancing gives you a completely new, unrelated interest rate that is usually much lower and can save tons of money.

Benefit 2: Shorter Repayment Terms

Though you may have a higher monthly payment, you can refinance to shorten the length of your loan. Instead of being on a 10-year repayment plan, you could switch to a 5-year plan, for example, to pay your loans off faster. If you have the finances to do it and it makes sense, it is a great option.

Benefit 3: Lower Your Monthly Payment

Though it won’t usually save you money, you can lengthen the loan by an additional year or two, which means that your payment will be lower from month to month. When you lengthen your repayment term, however, more interest will accrue over time and you will end up spending more over the life of the loan.

Benefit 4: Improves Your Credit

When you do refinance your student loans, you can build up your credit score by making monthly payments on time. It is important to make sure that you are always making the minimum payment to maintain and uphold your score anyways.

Other Things to Keep in Mind

When it comes time to refinance your loan, there are some things that you need to keep in mind. First, you need to have a good credit score and a decent amount of income to be able to refinance with a private lender. If you do not, you will likely not qualify for this option or you may need a cosigner to sign for you, which would require them to meet the qualifications.

Another thing to take into account is that there is not much protection for you in the event that you do lose your job or run into a financial snag. Your payments will still be due and there is no hold button to place them on the backburner while you catch up.

Another thing to consider is whether or not you are eligible for a loan forgiveness program. If you are, then you may find that when you refinance, you lose the qualification under the forgiveness program. If you are absolutely sure that you may qualify for a forgiveness program, it may be worth it to wait it out and continue paying your federal student loan payments.  The reason behind this is because you usually need to make 120 payments before forgiveness kicks in and if you refinance, it will start those payments over.

Final Thoughts

Be sure that you are checking all of your options and making sure that you qualify to do so before refinancing your student loans. If you find that you do not, there are other options to keep you from defaulting on your loans.

Lastly, if you do plan to apply for refinancing, you need to make sure that you continue to make your student loan payments until you receive the letter that your refinancing has kicked in, otherwise, you may end up defaulting on your loan.

Still Drowning in Debt From the Holidays?

Are you the type of couple of starts arguing over holiday spending even before the tree goes up and don’t stop until sometime around the end of March (or maybe longer) when that last credit card payment is finally made?  If you are, then today’s blog is going to show you a couple of ways that you can finally dig out from under that debt without killing each other (or making the other cry). Enjoy.

The first is to simply stop blaming each other and accept responsibility for your debt together. No matter which one of you actually swiped the credit card, the blame falls on both of you for either not discussing your holiday budget or putting the responsibility for purchasing all the holiday gifts on the other’s shoulders. The fact is, that debt isn’t going away and yelling or arguing about it isn’t going to make it go away either. So stop arguing and instead start figuring out what to do to pay it off as quickly as possible. (And make a note to discuss holiday spending in more depth this year.)

Next is to figure out exactly what you can do to pay off that debt and make a plan to do it. One thing you can do, which we mentioned in a recent blog, is get a Chase Slate credit card and transfer all of your debt onto it because, with a 0% interest rate for 15 months and no transfer fee in the first 60 days, it will help you to pay a lot less in interest fees and give you a little bit more time (if you truly need it) to pay off those debts. Just make sure that you get them all paid off before the 15 month period ends.

Another way to pay off that debt is to cut expenses independently and use the extra money to pay it down. What we mean is that, rather than trying to put $200 or $300 aside from the family budget every month, each of you take half of that out of your own personal expenses, in any way that you wish, so that you don’t feel like you’re being bullied into cutting back on things that you want most.

Finally, you can both agree to pick up extra work wherever possible and use that extra money to pay down the debt more quickly. In fact, some couples have made a tradition of working a little bit more just before the holidays start in order to have the extra money they need to purchase gifts for loved ones and friends.

The point being is to work together, rather than against each other, to solve your holiday debt dilemma. You never know, if you do it right you might even end up with a stronger, happier relationship.

Calling and harassing family members the newest debt scam

There’s a new scam being perpetrated on the public and fraud fighting organizations across the country are beginning to report on it with alarming frequency. It involves fake debt collectors who call and harass family members and friends of their “target”. What they rely on is fear of course, including social pressure and fear that a person will lose their job. Unfortunately their scam works quite well and continues to grow.

The biggest reason that they’re successful is that the average person doesn’t know what their debt collection rights actually are. One of the most important rights states that debt collectors are not legally allowed to give any details of their debt collection activities to someone other than the actual debtor him or herself.

Simply put, anyone who calls you and discloses information about a friend, family member or anyone else who isn’t you is using illegal practices to pressure you, even if they are actually a legitimate debt collector. Not only is this a scam but it’s also a violation of that person’s rights, and yours.

The losses aren’t small either, to be sure. Between October of last year and June of this year, victims of this scam lost an average of just over $1700.

In many cases what happens is that a scammer somehow acquires a consumer’s home and work information, oftentimes from bogus payday loan applications. Even worse is that if someone has successfully been defrauded, their information is then sold to other aspiring criminals who are looking for an “easy mark”. These victims are then subjected to repeated fraud attempts because they’ve been put on a “sucker list”.

If you or anyone you know has been a victim of collection fraud of this kind, or suspect that someone has tried to defraud you in this way, you should alert everyone in your circle of friends, your family and your coworkers. That way if they receive any debt collection calls they will know immediately that scammers are trying to put one over on them.

The most important thing that you need to do when you get any type of phone call from a collection agency, or someone purporting to be a collection agent, is to confirm the legitimacy of their collections account before paying any money whatsoever. Also, you should never provide any type of payment information to any debt collector, real or fake, over the phone.

The good people at Fraud.org also warn that applying for so-called payday loans online is extremely risky, because you may expose personal information about yourself to fraudsters. Not only that but payday loans usually carry much higher fees and rates than the same type of loans that are acquired traditionally.

Tips on Avoiding Medical Debt

 One of the leading cause of bankruptcy in the United States today is medical debt.  More and more families are finding that the cost of a serious illness is a steep one and their finances are being overwhelmed.  With that sad fact in mind we put together a Blog filled with some great Tips on how to avoid medical debt and the problems that it can cause.  Read it and then use the Tips so that you sleep better at night knowing you’re prepared.

Tip 1) Find and purchase a ‘catastrophic’ health insurance plan. The fact is, going without insurance is not advisable and could ruin you if a serious illness or accident happens.  Premiums for a catastrophic plan are much more reasonable because, normally, the deductible is very high. It won’t cover your prescriptions or, frankly, anything else but, in case of a medical emergency that is very costly, at least you will have this safety net.

Tip 2) No matter which carrier you use you should take some time to familiarize yourself with their rules and regulations about what is covered and what isn’t and the many other variables they have. For example, seeing Doctors that are in-network are usually much cheaper than those that are out-of network.  Knowing what your most cost-effective options are is almost as important as knowing what’s covered.

Tip 3) Hospitals and Doctors aren’t infallible so check your statements and make sure that you’re not paying for something that wasn’t done or isn’t yours.  This takes some time and effort but the fact is that more than 40% of all hospital bills have some type of error and, if you don’t spot them, nobody will.  If you have problems the people at the Patient Advocate Foundation can help.

Tip 4) If you’re having trouble making payments don’t stop making them but instead call your provider and see if you can negotiate to pay them using some type of payment plan.  If you can prove hardship in many cases you can even have the amount you owe reduced so don’t wait if you’re having trouble keeping up.  If absolutely necessary find ways to come up with funds in a pinch, like applying for quick payday loans.

Tip 5) Set up your own emergency health fund and ‘donate’ towards it monthly. This is like a health savings plan and, if you ever find yourself in a position that you have sudden health or medical bills, can be a financial life-saver. Flexible Spending Accounts or a Health Savings Account (HSA) are a great idea here but, since there are tax benefits with this type of account, the IRS will be checking to make sure you qualify.  Just fyi.

The fact is, simply crossing your fingers and hoping for the best isn’t a good idea when it comes to medical expenses.  Having something is always better than nothing but, if you can afford it, having more than you need is always good too.

The Simplicity of Getting out of Debt

Do you dread checking the mail? Do you let all the unrecognized phone numbers go directly to voicemail? If this is the case you may suffer from debt. Many times when people let debt get out of control in their lives it takes on a life all its own. If you’re tired of avoiding creditors and want to get your life back it’s important to start right away and know that there are steps you can take to get yourself back on track financially. Here are a few simple steps to get you back on the road to financial control.

  1. Make a list of all your debt. It’s hard to get started if you don’t know where you are starting from. Write down everything including that $50 you owe your best friend. Total up your monthly payments, including the ones you are behind on, if any. Once you have a list you will know just how far you’ll have to climb to get back where you need to be.
  2. Contact any companies you are behind on your payments with and see if you can arrange a payment plan. Believe it or not these companies really just want to avoid taking a loss so the quicker you get in touch with them the more likely they are to be willing to bargain with you. In this stage avoid robbing Peter to pay Paul. In other words don’t get behind to another creditor just to make another happy by giving them more. Be realistic about what you can pay. If you have any lenders that might be able to give you a deferment or let you skip a month now is the time to take advantage of any help offered.
  3. Cut up any credit cards you still have and avoid taking on any additional debt. I know it might be tempting to take out a loan to try and consolidate your current debt load but more debt will never help you get out of debt. Instead you may consider taking on a temporary second job, having a garage sale, or making some additional money doing odd jobs.

Just remember getting out of debt won’t happen overnight but if you take the time to make a plan it will be much easier to see the light at the end of the tunnel.

Turning Distressed Credit Into Financial Gain

Distressed credit or “distressed debt” is the debt owed by a business that is close to or already has declared bankruptcy or that has already gone out of business. These lines of credit or small businesses can be bought by investors to keep the lines of credit or the business itself open in spite of the financial difficulty. A lot of smart investors are buying up distressed credit and turning it into major profits.

One of those investors is Peter Lionel Briger Jr., the head of Fortress Investment Group LLC, is famous for helping Goldman Sachs to make highly profitable investments during the Asian Financial Crisis. He is credited with taking the Fortress Japan Opportunity Domestic Fund and turning into a series of profitable investments.

But what does that mean for you. Is investing in distressed credit something that you should look into for your company? What are the benefits?

1. Distressed debt can be bought at incredibly low prices, because the risk of it going completely south is high.

2. At the same time, if you can turn that debt around and into something profitable, you stand to make a ton of money off of a relatively small investment.

Example: A company is very near completely defaulting and has declared bankruptcy. You buy the company (and its debts, which—thanks to the bankruptcy declaration—can be settled for pennies on the dollar) for a small price and then turn it around. The company starts to make a profit again. You, then, sell the profitable and promising company for far more than you paid to acquire it.

It’s kind of like house flipping but with businesses.  In fact, all of that sub-prime mortgage debt that tanked the housing industry is a perfect example of distressed debt and credit, which is why developers are buying up the foreclosed upon houses faster than an unsupervised kid will jam his pockets full of candy at the candy store.

As an individual person you probably do not have the financial reserves to take on distressed debt all by yourself. You can, however, work with a hedge fund. You can use that hedge fund to buy distressed credit and turn it into a profitable enterprise for all of the fund’s investors.

It’s also possible to buy distressed debt in the form of mutual funds and via the bond market. These methods are actually a lot easier than acquiring a distressed company. More importantly, these methods allow you to acquire more of the debt, which makes for higher potential profit in the future.

If you are interested in investing in distressed credit, particularly from the International Marketplace, make sure you work with an investment and financial advisor who has experience in this arena. You don’t want to wind up completely upside down!

The Best Way to Get out of Debt is to Never Get In It

I’ve heard about the perils of debt since I was a child, my parents made it sound like a big ugly mythical monster.  Then as I got older I realized that debt was big and ugly, it just wasn’t mythical.  Falling into the trappings of debt is such an easy thing to do.  My first credit card had a limit of $200 on it, so little that I would’t have even bothered having one but my parent thought it would be good for me to establish credit at an early age.  I must have had that thing for 4 or 5 months before I even touched it.  I remember driving home one evening and blowing out a tire, and shattering the wheel of my car to boot.  The cost was $300 to repair it all.  I was young, and sadly I was still living paycheck to paycheck.  For the first time in my life I had a necessary bill that I couldn’t afford to pay…and so went my debt spiral.  I dug myself into a deeper debt hole with each passing year, with one balance transfer to the next, but never making any progress on paying the balances down.  I simply incurred additional fees, had rising minimums that became more difficult to meet, and watched the interest accumulate before my very eyes.  I would remain in debt for the next ten years, telling myself it was only temporary until I made more money and was able to pay it off.

The moral of the story, don’t get into debt to begin with!  Yes, I eventually made more money, and instead of paying down the debt I would just buy more stuff.  I was young and soothed my worries of debt by telling myself that “you only live once”.  Now I’m not saying I regret the fun I had in my youth, I just wish I had taken a little more financial responsibility before it cost me years worth of money.  That is money that could’ve been saved, invested, and seen compounded interest returns that would leave me smiling today.  All is well in the world now, I do well at my primary job, and I have a side gig that brings in a healthy bit of income.  However, the real progress came because I started to save more and spend less.  I began to contribute to a 401k for my retirement, and diversify other investments in a brokerage account.  I used coupons when necessary, and bought off the sale rack when money was low.  Quite simply, when I couldn’t afford the item, the trip, the car, the house, I simply started telling myself no.

How to Use Your Credit Card the Right Way

Credit cards can be great things when it comes to making big purchases, budgeting your expenses relative to your income and assets, or even just making those every day purchases from gasoline to groceries.

Having a credit card can help you build much needed credit as you get older, as well as give you the option to pay later on what you purchase today. However, there are some important things to know about credit cards and when and how to use them.

Know What You Can Afford

Credit cards are a benefit to your financial planning, but only if you use them to buy what you can afford. If you purchase large goods on credit that you are unable to pay back later, you not only hurt yourself in the long run with having your products repossessed, you also hurt your credit score.

Make it a point to be sure that you can afford what you’re buying, regardless of when you have to pay it back, when you purchase goods using your credit card.

Understand The Interest Rates

Credit cards come with interest rates, so it is critical that you understand how they work and where you can benefit from them before signing on that dotted line. There is nothing worse that getting a credit card, only to find out that the interest rate is something you are unable to pay back in time!

Find out what you’ll be expected to do before you have to make a payment, and learn what the interest rates are – and how they will affect you – before you sign up for that credit card that seems to be too good to be true.

When In Doubt, Don’t Take It Out

In doubt about a purchase, or thinking that you might be cutting it close with that next big credit card purchase? Resist! When in doubt, leave the credit card in your wallet; either pay in cash that you know you have, or resist the purchase altogether and save the money instead.

There’s nothing worse than overextending yourself on credit, only to find that you are unable to pay back what you owe. So, make it a point to err on the side of caution and avoid overpaying all those credit card fees by leaving it in your wallet.

Credit cards, when used properly, are a financial asset and can help build your credit. But one wrong move with the card can land you in significant trouble. Avoid these issues by being smart when you buy on credit, and watch your financial future glow instead of sink!

How to Manage Money in College

College is a fun time, as well as a time of opportunity. From learning, to living, to relationships, it provides the opportunity for young people to grow up and learn how to become functioning, healthy adults.

In addition to all those benefits of college, the school years can also teach a young adult how to save, manage and track their money and purchases while on campus. And for many people, it can be the first time that a budget and the realities of managing and saving money come into play. Here are a few money management tips.

Make A BudgetAnd Stick To It!

This is critical no matter what you do, or where you live as a college student. Regardless of the amount of money you may have, it’s important to understand what you are able to pay for, and what you need to be saving.

Make a budget that you can live with reasonably – food, clothing, entertainment, and beer – and pledge to stick to it! No unnecessary purchases allowed, though you can build in some fun money to your budget so you’re not all business.

Hit Free Events For Food

One of the best parts of college is the free food. Pizza is everywhere! Hit up free on campus events for food instead of constantly buying food wherever you are, and save some money. In the process, you get to hang out with great people, and meet new friends.

Plus, when you join a few great organizations that offer all this free food at events, you can really help boost your resume and maybe even help make the difference in whether or not you get a job in the future!

Work In Your Free Time

If you’re able to do it, take on a part time job now. Whether it’s on campus, or off campus at a restaurant or company, it’s never too soon to start working and saving money as you go through college.

Take on a job that you can handle and make a little money now, so that when you graduate, you not only have some money to be flexible with, but you’ve also got valuable work experience that you can use right away.

Saving and managing money in college can be a true reality check. Whether it’s making sure that you aren’t overpaying on products and services or making sure that you’ll have enough in the bank when you graduate, it’s critical that you learn to manage money properly if only for the reason that it will build a great habit for your future as a responsible adult.

Reduce Debt Yourself

Some consumers believe that in order to reduce their debt, they must go to a professional. The truth is, anyone can pay off their debts with hard work and dedication. You have to commit to getting rid of your debt and make every effort to do so. It may take several years—depending on the size of your debt—but it will definitely be worth it.

You can do it yourself, without anyone’s help. First step is to find how much you have. Add up all loan and credit card balances that you owe. Calculate the monthly payments you make on them. Now, to pay off your debt, you must pay more than the minimum payment due. Credit card companies calculate the minimum payment based on the outstanding balance. It is usually little more than the finance charge. For example, the minimum payment on a credit card is $30. About $20 to $25 cover the finance charge. The rest is applied towards the principal balance. How long will it take to pay down $1,000 when you pay only $5 to $10 towards the balance each month? It will be at least five years. Can you afford to pay $60 or $100? Pay as much as you can to pay it off sooner.

Use an online debt reduction planner (such as CNN Money Debt Reduction Planner at http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp) to calculate how long it will take to pay your debt off based on the balance, interest rate and payment amount. You can set a debt-free deadline and work towards it.

When you make a decision to pay off your debts, remember to control your spending. Put away or cut your credit cards. Use cash when making purchases. Before buying something, think whether it is a necessity or a luxury. Save money aside for luxuries and only purchase them when you have the full amount.

Beware of the “quick fix” advertisements. They claim to be able to settle debts at 60 to 70 percent less than what you owe. However, many of these companies scam consumers out of money by charging high fees and failing to deliver what they promise. They prey on those who want a quick way out of debt. Only a little over 1 percent of debtors complete these programs. Others drop out when they realize that they are being scammed.