Debt

How to Actually Decide if Debt Consolidation is Right For You (and When It Isn’t)

Sometimes when you’re swimming in debt, taking control of your circumstances once and for all seems like an unbearable burden.

You have most likely considered a few different paths you could take to pay off your debt, but decision paralysis is a real thing, my friends. Just remember, you’re not alone.

Credit card debt is America is growing at near lightening speed. In fact, the average American household carries over $15,700 in credit card debt. With average interest rates being nearly 14%, American families are paying more than $2,000 of interest if they choose to only make the minimum monthly payment.

That’s crazy!

It probably won’t surprise you then that debt consolidation is a hot topic among those working to get out of debt and achieve financial freedom.

Not only can a debt consolidation loan help achieve this goal, but it already has for many thousands of Americans living with debt.

But that still doesn’t make it the right choice for everyone.

In case you’re unfamiliar or foggy brained on what it means, debt consolidation is essentially the process of gathering up all of your eligible debt, combining them into one lump sum, and taking out a new loan with new terms and conditions to create a single monthly payment. Once the process is in motion, you make a single monthly payment and the firm you are working with distributes the funds to the appropriate debtor until the debt is completely paid off.

So, what’s the catch?

This is where the “not right for everyone” advice comes in.

While combining debt into one payment may be a promising option, it’s good to understand what you’re getting yourself into before diving straight in.

To Consolidate or Not Consolidate, That is the Question

First, it’s critical to understand which debts can be combined and which cannot.

Debt generally falls into one of two categories: Unsecured debt and secured debt.

Unsecured debt is debt that has no underlying asset backing it up, like credit card debt, medical bills, utility bills, and other types of loans or credit you may have.

Secured debt is debt that is backed by an asset, meaning if you fail to make payments, your creditors have the legal ability to take away the asset. Examples of secured debt are things like auto loans and mortgages.

The vast majority of debt consolidation companies only work with clients who have unsecured debt, so if you are hoping to make this work with a car loan or mortgage payments, it’s time to go back to the drawing board.

Benefits Anyone Can Appreciate

When researching debt consolidation, it’s easy to find all the black and white reasons why you should or shouldn’t sign-up with a consolidation firm, but here are few areas where we can all meet middle ground about whether it’s good or not.

Payments become easier. Instead of worrying about meeting due dates on multiple credit cards and various other debts, you will only need to worry about making one payment, on time, each month.

Lower interest rates. If you’re able to secure a consolidation loan with a lower APR than you are currently paying against, the savings in interest could potentially take years off of your debt repayment, which is huge!

Improved credit score. Debt consolidation won’t do your credit score any favors in the short term, but once debts are paid off, many people see a significant improvement on their credit scores in a relatively short time. As you know, this is incredibly important when bouncing back from a serious amount of debt.

Still sound good?

Let’s move on to discussing the not so glamorous side of consolidation: The risks.

Risks to Consider

As you have probably guessed, there are risks involved when it comes to choosing and working with a firm for help with your debt. After all, debt is big business. But being aware of the risks involved is key to avoiding a bad situation.

Before signing up with a firm, consider how you got into your current situation in the first place. Was there a major life event that essentially forced you into a large amount of debt, or maybe you just aren’t sure how to create and stick to a budget. Whatever the reason is, try to identify it.

Second, once your debt is paid off and you can spend freely again, how confident are you that you won’t end up in the same situation later down the road. Many people swear they will never fall back into an overwhelming amount of debt, but without the knowledge and discipline to spend and save wisely, it can happen easier than you might realize.

The Bottom Line

Consolidation can be a great tool to systematically pull yourself out of debt, but as with most things in life, there are risks and rewards to consider. If you are ready to commit to the process and ask for assistance when you need it – both before and after debt – it may help you get out of debt sooner than you realize.

Author’s Bio:

christineChristine Yaged is a co-founding partner and Chief Product Officer of FinanceBuzz. Christine launches and scales brands. She is passionate about technology, digital marketing, and people.


American students to collectively owe $2 trillion by 2021 – What is Trump planning?

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As per a recent analysis, it has been seen that the student loan debt in the US is gradually moving towards a new milestone and it will witness a 30% rise in the approaching 36 months. The Federal Reserve Bank of New York says that as the debt climbs higher in order to reach a record high level, up from $1.55 trillion, the ROI for fresh college graduates is shrinking pretty fast. As the student loan debt costs is growing by $30 billion in every quarter and hence it is soon racing towards $2 trillion by 2021. As there were hosts of protests regarding the crossing of $1 trillion in 2012 and now it is even going to cross that level too.

What are the experts saying?

As the overall population of the nation grows and as college tuition costs keep rising, the US student loan debts will also continue to soar like never before. The CEO of an online lending platform has seen a noteworthy rise in the total number of student loans being taken out from community banks and credit unions.

Since the year 2010, there has been an increase in the number of federal loans that are being made available to the students. Students are also taking up second jobs in order to pursue passive income so that they could pay off the $20,000 in the form of student loans. Whenever you make free flow of credit with access to credit, this inflates the asset class. If you take a glance at the Great Recession, mortgages were made available and then you remember what had happened.

The constant rise in student loan debt

It was just in the last decade that student loan debt had surged by around 60% and if you take a look at the recent forecast, this will only speak about the financial pain. Millions are joining the latest cadre of 45 million American education loan borrowers and it is seen that an average undergrad in 2017 has owed $40,200. There are couple of people who owe $200,000 and this is a rather scary amount.

How is Donald Trump planning to solve this debt dilemma?

Donald Trump is also alarmed at the burgeoning student loan debt level. Here are few things to watch out for.

  • PSLF can be stopped for new borrowers

As the Congress passed a measure to boost the amount of funds available for PSF by $350 million, Donald Trump has chosen to stop this program. PSF is a federal program which forgives federal loans of the borrower who work in the public or non-profit sector.

  • Federal loan repayment options can be changed

Presently there are 8 different categories of loan repayment programs under the federal government loans. The Trump administration simplifies the choices of the borrowers by creating a repayment plan which is income-driven. Under the repayment plan, monthly payments will be capped at 12.5% of the discretionary income of the borrower.

  • Changes in discharging debt during bankruptcy

The Department of Education issued a request for comment on evaluating undue hardship claims, which is the standard used to check if a debt is discharged through bankruptcy.

Therefore, with the current state of student loan debt that is grasping the entire nation, it is vital to repay your student loan debt as soon as possible in order to avoid a bad impact on your credit score.


The Basics of Personal Loans

In case you need money on the spot and you cannot simply find urgent cash anywhere, you might think of getting a personal loan. These are one of the most widely chosen options and people do not hesitate to get involved with an online lender or a bank in order for their money to enter their bank account fast and easily. What most people do not know, however, is that personal loans must be taken seriously and with much responsibility. Here are the basics of this type of loan that every potential borrower should know before getting one.

What Are Personal Loans?

Personal loans are credits given to each borrower who needs money quick for a personal event, such as weddings, holidays, anniversaries or other personal expenses. Because they are usually unsecured, they are based on the borrower’s ability to pay and integrity.

Regarding the interest rates of this type of loans, you must know that they come in many shapes, according to the borrower’s needs. They can be offered at a fixed rate, floating rate or flat rate. These are based on your credit repayment ability and history and can be anywhere between 14% and 25%.

Unlike long-term loans, these can be repaid in up to 5 years and therefore, you can negotiate the monthly fee you are able to offer each month, depending on your income. This is one of the advantages of personal loans and this is the reason so many people find it convenient.

Who Is Eligible for a Personal Loan?

Depending on the lender you choose to borrow this sum from, you should know that you must meet the eligibility criteria set by that specific institution. Usually, nearly all banks will accept salaried individuals, self-employed individuals, and self-employed professionals and will provide the right offer, depending on the monthly income and the ability to repay the sum. Nevertheless, there are some other factors that will make your application successful:

  • Age
  • Residence
  • Work experience
  • Repayment capacity
  • Past obligation
  • Credit history
  • Place of work

This means that you must provide the right documentation in order for the process to go as smoothly as possible. From your personal documents to your bank statements, you need to be prepared to prove that you are responsible enough to get the sum you need in order to solve your problems.

These are the basic information you need to know before applying for a personal loan. Whether you choose to do it online, on sites like www.micropaydayloans.com, or at your local bank, you should know that this type of loan is a responsibility you need to take seriously, as it may turn into a financial struggle later and destabilize your financial situation even more.

If all the things above are considered and you opt for this type of loan, you must know that this is a rather simple solution to obtain money easily and without waiting too much in order for your application to be successful.


Women hold a major share of student loan debt in the US – Any reasons behind this?

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As per a recent report, women are carrying around 2/3rds of the outstanding student loan debt of the nation. This alarming statistic has been given by a new report offered by the American Association of University Women which is an education advocacy group. In order to be sure about the statistics, 58% of the college students are women and hence it can be easily concluded why so many women are carrying student loan debt. Student loans are gradually becoming a burden as too many of them are pursuing their higher education.

At present, 7 among 10 students take resort to loans so that they could obtain their degree. The average student leaves school with $30,000 in debt and nearly 25% of them owe more than $100,000. Majority of the Americans are extremely burdened with educational loans and these loan amounts are way more than what they owe on car loans and credit cards.

Implications of student loan debt on the economy of the nation

As long as the conversation on student loan debt is concerned, this starts with definite demographics which are harder and tougher than others. Even though you might compare apples to apples, still women are carrying more debt individually. As per recent statistics, in the year 2016, the average woman left undergraduate education owed $22,620 as against $18,650 for men. Hence there is a huge difference between the two amounts. In fact, black women are taking on disproportionate debt amount and they’ve racked up $25,000 in the form of student loans to obtain bachelor’s degree.

Besides, women are more likely than men to have household responsibilities to balance their coursework and hence they might take too long to graduate. As they spent more time in school, this can lead to more and more loans.
Is there a wide wage gap too?



The fact that as compared to men, more women are borrowing in bigger amounts is troubling the women. It is also true that women earn 28% less as compared against their male counterparts outside school. This clearly implies that women will take longer than men to pay back their student loans and hence they can dig deeper into debt.

What do the personal finance experts have to say?

While the men are seen to pay back 14% of their debt annually, women can just pay off 10% of their debt, as per a recent study. 3 years post graduation, women have been seen to pay back less than a third of their debt and during the same time period, men has successfully paid back 40% of the entire amount. These numbers can clearly indicate the irony of education and the system that prevails in the country.

Education certainly plays the role of an equalizer within the nation and in case the rising tuition costs are setting an impact on few people, few more than others, this is now demotivating them to take any step. Hence, as long as you wish to pay off your student loan debts, make sure you are proactive about them.


Lending Options When You Have Bad Credit

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If you have bad credit, then you may think that a loan is out of your reach. However, it is possible to get a loan without having a good credit score. There are many lending options that you have.

Home Equity Line of Credit

If you are a homeowner and the home has built equity, then you can get a home equity line of credit. This is a risky type of loan because you are using your home as collateral. However, it is one of the best options if you have bad credit.

You will be able to use your funds in whatever way that you want. A home equity line of credit typically has a lower interest rate than credit cards.

Secured Loans

Lenders feel more comfortable lending to people with bad credit if they have something that they can use as collateral. The item that you use as collateral can be repossessed if you do not pay the loan back. There are several things that you can use as collateral.

You can use your vehicle as collateral. A loan that is secured by a car is also known as a vehicle title loan. You can also use investments that you have as collateral. Additionally, some lenders will allow you to use your future paychecks as collateral.

Payday Loans

Payday loans are a popular option for people who have bad credit. It is relatively simple to get a payday loan. If you have proof of income and a bank account, then you will likely be able to get approved for a payday loan. However, there are downsides that come along with getting a payday loan.

Payday loans typically have high interest rates. Even though no credit check is required, your credit score will be affected if you do not pay back the loan.

Unsecured Loan

Contrary to popular belief, it is still possible for you to get an unsecured loan with bad credit. However, your lender will likely require that you apply with a co-signer. The co–signer must have good credit and a stable employment history. If you cannot pay back the loan, then the co-signer will be responsible.

You and your co-signer’s credit will take a hit if the loan is not paid back. However, there are benefits that you can reap from applying with a co-signer. You may be able to get a loan with a lower interest rate. A cosigner also allows you to get a loan without having to risk your possessions by using them as collateral.



Credit Union Loans

If you trouble getting a loan from a bank, then you should consider going to a credit union. It is easier to get approved for a credit union loan because the standards are more relaxed. They also offer loans for a lower interest rate because they work on a non-profit basis. Additionally, there are fewer fees and penalties.

Keep in mind that your credit score will still determine how much you will be able to borrow.

 


More college dropouts fail to repay their student loans – What are the reasons?

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The researchers have delved into the best predictors of whether or not students are able to repay their student loans – college completion. Although there are several factors which influence the education loan repayment rates, yet whether or not a student has a credential post attending college is said to be the strongest predictors of whether or not the student will repay the loan. 5 years post entering the cycle of student loan repayment, 70% of the borrowers who passed out college with a certificate and a degree have made some kind of progress while paying down the principal amount on the loan. However, for the borrowers who couldn’t complete college, the rate of repayment is also 45%.

The link or the relation between repayment of loans and completion of college has become established and you must be wondering as to why and how it exists. Read on the remaining concerns of this article to know more on the mutually exclusive explanations which establish the link between the two.

#1: Graduates of colleges usually make more money

The income made by 4 year college graduates surpass by around 50% than those people who have earned college experience but who don’t hold any degree. People who earn a big amout are more capable of meeting monetary obligations like making repayments towards their student loans. Although it is true that college graduates accumulate more debt than the dropouts, they are also able to handle their payments in a better way.

#2: College dropouts usually have less urge to pay off their loans

There’s noone who will love to pay off their student loans and it is especially more grating and saddling for those who think that they’ve not received any benefit from their education. Due to the fact that a dropout doesn’t own any credential which he can use for advancement in his career, the benefit that he got from his college education will certainly be minimum. Although several dropouts will afford such payments, who will wish to pay for anything that is just not worth it? The immediate consequence of inability to pay student loans is not serious enough. Being delinquent on you rent payments will mean eviction but not being able to pay your student loan won’t repossess your college degree. As the upshot is lenient enough, this is one more reason for defaulting.

#3: Dropouts and graduates differ in different ways

The factors which cause the gap in repayment rate between dropouts and graduates actually start existing whenever the students set their foot on the campus. Researchers can usually account for the factors like financial resources, family background, and income post-college and few observable differences always exist between all those who complete college and those who don’t.



All the three explanations usually play a vital role in deciding the repayment gap between the dropouts and the college goers. However, the decision about which one is the most important point is still a topic of debate among the policymakers.


Financial Options Compared: Which Is Better, Debt Settlement or Debt Consolidation?

debt

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As you’re looking for reliable methods to eliminate your debt, you’ll come across two terms: debt settlement and debt consolidation. How are they different? Which one is right for you?

The answer will differ based no your unique needs, but both exist to provide relief in situations where your debt is simply too much for you to handle alone. Here’s an overview on the difference, and what each entails.

Debt Settlement

Debt settlement is where a company enters negotiations with the companies you owe money to. In some cases, the savings can be incredible. Let’s assume you owe $4,000 on a credit card. Debt settlement can see you paying this debt off for a one-time lump sum payment of $2,500.

Now, if you have a large enough amount of cash to do this, it can be great. Getting rid of a debt in one large payment, with a balance reduction of 30-50%, is amazing. But there are a few drawbacks to choosing settlement.

The first is that it can take time. Some sources report that finalizing their debt settlement took a few years. During this time, you’re discouraged from making payments, which means your balance climbs in penalties and interest. Which, as we know, is bad for your credit score.

This can be exacerbated by the fact that you won’t be settling all of your debts at once. The company you choose – and you should be very discriminating when choosing – will have to negotiate each debt separately, meaning there could be mixed results overall.

Debt Consolidation

Debt consolidation is an option for people who have a flood of statements coming in, and are looking to seriously reform their spending habits. While there are a few different kinds of debt consolidation, they usually involve rolling all of your debts into one and getting the best loan to pay it all off.

What this means is that from here on out, you are making one payment. The loan has covered your debt, and now you’re paying it back.

Therefore, like debt settlement, this can take a few years to accomplish. The biggest problem is that once you consolidate, you have to avoid creating more debt while you’re paying off your consolidation loan.

Remember that with consolidation, you aren’t paying a reduced amount; you’re just taking care of your debt with one payment at a time. If there’s any reduction in what you end up paying, it should be thanks to the single, agreeable interest rate you have, as opposed to multiple interest rates across your balances.

So, before you sign up for debt consolidation, do a complete breakdown of what you would pay to eliminate your debt as it stands now, interest included. If consolidation somehow ends up costing the same or more, try another company.



Financial experts typically regard debt consolidation as a more practical option, reserving settlement for extreme cases only. And if you choose a reputable company to walk you through it, it can even end up improving your score. Any way you look at it, both are options worth exploring before you consider bankruptcy.

 


What You Need To Know About Getting A Home Loan

When you’re thinking about getting a home loan, it can be incredibly exciting. Because deciding to buy a house is something that feels incredibly grown up and momentous. But at the same time, it’s also a very serious thing too. So you often have to know exactly what it takes to get the home loan. So if you’re just starting out and you want to know what to do, here’s three points to be aware of.

The Downpayment

So, of course, you’re going to need to make a downpayment. And you have to save up the money for the downpayment. So make sure that you’re working out what kind of house you want to buy, and how much it’s going to cost. That way, you can then give yourself a goal of what you need to save, which is usually 10% of that.


The Terms

You should also then take a look into mortgage terms that are offered. Understand what kind of rates there are available, how long you’ll need to make the repayments for, and any other terms that come with the loan.

The Requirements

But that’s not all. Because alongside knowing everything that you really do need to know about your home loan, you also need to be aware of what you need to bring to the table. To get your home loan, you may find that you need a certain credit score. So take a look at some of the scores in the infographic below, and then work on building your credit before you look to get the loan.


Infographic Design By mortgage credit score rules


Take these steps if you wish to pay off your debts as soon as possible

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If you have taken long to think about the best indicator that will prompt you to trigger off your credit card debts, then remember that it isn’t dependent on your income or the total amount of debt that you owe! Rather it mostly depends on the way you plan to trigger off your debts. Researchers, Michaela Pagel and Theresa Kuchler published the works in their latest working paper by the National Bureau of Economic Research.

More than 520 customers were chosen as a sample in between the months of September 2014 and 2016 and it was made sure that all of them linked their checking accounts, received bi-weekly paychecks and appeared to link all credit card accounts. After they signed up for ReadyForZero, the customers made a plan on the total reduction that they wished to make on their debt every month. This turned out to be the biggest predictor of how much they’ll be able to pay down. However, the American consumers have got a long way to go as the Americans collectively owe a mammoth amount, that of $1 trillion in the form of credit card debt.

People still give more priority to their short term wants

Even after the consumers were provided with such improved odds, they still fell short of achieving their goals. On an average, every individual was just able to reduce their debt by 25-30% of the dollars that they planned to pay off. It was seen that the consumers got impatient and they wished to fulfill their short term goals which they gave more priority over paying off their debts. If you ask about this to the behavioral economists, they will name this as present bias which including giving more priority to short-term wants rather than on long-term wants.

This is not the first study which concluded that the commitment to repay debt is a vital ingredient which lets you actually do it. Majority of the people are more likely to pay off their credit card bills when they get a called where an automated voice asks them to commit themselves to paying back the debt within a short time span, like 24-72 hours. This was found out by the researchers who studied this in the Boston University’s Questrom School of Business.



Millennial women are lagging behind men with their finances

Both the millennial men and women are gradually giving more priority to their family and household but there is a sharp difference in the way in which they plan to achieve a goal. Men usually tend to give more value to money and they are given more pressure about offering money to the family. For the women, it’s just flexibility and time. Their long term goal is to just have that balance between life and work.

One more divide for women and men is parenthood. More than half of the millennial parents are of the opinion that having kids has got a positive impact on the advancement of their career. This half is mostly the male generation. It is not that having kids will always have a positive impact as 25% of the female millennials reported that their career advancements were halted due to the fact that they had kids.

Therefore, as the American consumers are all drowning in debt in all forms, it is high time that they take up immediate actions to bid goodbye to debt and live debt free.


Paperless Borrowing Is Good For Your Business and the Society

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Instant loans or quick cash loans are a great means of matching your urgent cash requirements. Certain mismatches pertaining to your cash flow may arise out of exigency. You must know the benefits of availing the personal loans online and how simple it is for you to acquire them. Alongside a few other benefits, these loans prove to be cost-effective and yield considerable flexibility in repayment.

Small Businesses Are Opting For Green Options

Going Green is actually about going paperless and making the most of other resources. Instead of using hoardings, a majority of businesses are utilizing the power of social media for promoting their brands. This is a great move towards consuming less of paper and saving more trees.

Small businesses are even opting for paperless credit options like quick loans in their attempt to reduce operational costs and accumulate working capital. Paperless loans can help save much of the processing time besides saving the processing costs.

Benefits of Paperless Loans Have Been Stated Below:

Simple and Fast

Cash loans are much simpler and faster to achieve than the secured loans that are of traditional nature and taken for a longer term. Quick loans can be processed and the funds transferred instantly due to a back-end support technology that’s based on consumer data. Much of this ease and comfort has been driven by the advent of technology.

No Paperwork

Online loans don’t involve paperwork. They don’t require you to spend time in visiting a physical lending organization. They even help save much of your invaluable time as the processing time is much faster than traditional loans. The KYC information of an application is processed by the engine for determining the creditworthiness of the applicant. The funds are transferred within 24 hours. These loans are your perfect option to go green.

Apt Borrowing

The utility bills that you pay and your monthly income help in determining the amount that you actually need to borrow. It helps to keep a borrower away from the debt burden besides helping him borrow within the eligible limit. The creditworthiness of a borrower is even enhanced as recovery of cash loans involves a simple and timely procedure.

Data Security

All individuals aren’t comfortable about sharing his income and other personal details. The lending organization is bound to store all personal information pertaining to customers in an encrypted server. Such personal data shouldn’t be shared with any third party business. Both the borrower and the lender gains more ground to develop their relationship based on mutual trust and transparency.

Emergency Avenue

Regardless of how efficiently you plan, life often shows you through some unpredictable circumstances. Quick loans can be availed within a span of 24 hours. There are instances wherein these loans got disbursed within an hour or just a couple of hours. Certain financial factors might lead you through exigencies; quick loans help you resolve all of these issues.

Convenient Methods

Lenders providing quick loans provide their services through applications that are run on the web or mobile. These applications can be run 24×7. The minimal requirement of manual applicability and computations that are backed by data make things more convenient for the borrower. It even enables a borrower to avail it with just a few clicks.

Flexible Usage

Under circumstances when a mismatch in cash flow arises, you may utilize quick cash loans. For instance, you may consider buying a gift, buying a cell phone or experience shortfall while repaying your utility bills. You won’t feel any restriction while utilizing these loans; you may utilize them for all activities.

Transparency

The Federal Trade Commission regulates the quick loan operations within the US. A certain degree of transparency is maintained throughout the process and it even rules out breaching of the policies governing the issuance of loans. While borrowing a certain amount, the applicant achieves much comfort once he obtains the regulator’s license.

Limiting Fees and Interest Rate

Online loans aren’t believed to be secured and hence the regulator enforces some limitations on their interest rates. It actually depends on the lender’s organization channels. This is one way of protecting the borrower from unjustifiable charges and pricing.

Flexible Tenure

Regardless of the loan tenure opted by the borrower while submitting his application, he can opt for an extension of the loan tenure or may even choose to decrease it. Lenders may choose to offer it on certain cases wherein more flexibility is provided to the borrower against a higher fee. These online loans are usually offered on a short-term basis that enables the borrower to repay the entire amount when he receives another paycheck.



Quick loans come with a lot of simplicity, processing speed, and repayment flexibility. These days, the loan application model based on Android apps makes it easier for the user to enter all necessary information even while he’s on the move. The computation seems to be perfect with the assistance of a back-end engine and paperless application helps support the Go Green movement!


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