Tagged: Student Loans

Increasing Your Savings on a Low-Income Salary

A low-income salary can create challenges when it comes to reaching your financial goals. You may want to take a vacation, buy a new car, or just put some cash away for a rainy day, but how can you do that with a limited income? Although you may struggle to add to your savings, there […]

The post Increasing Your Savings on a Low-Income Salary appeared first on Credit Absolute.

Credit Card Balance Transfers

Credit card balances are crippling households across the United States, giving them insurmountable debts that just keep on growing and never seem to go away. But there is some good news, as this problem has spawned a multitude of debt relief options, one of which is a credit card balance transfer. Balance transfers are a […]

Credit Card Balance Transfers is a post from Pocket Your Dollars.

Does Refinancing Hurt Your Credit?

Before you make any big financial decision, it’s crucial to learn how it may affect your credit score. If you’re looking to refinance, it’s natural to wonder if it might hurt your credit. Typically, your credit health will not be…

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The post Does Refinancing Hurt Your Credit? appeared first on MintLife Blog.

I Thought I Was Too Good For Community College

Whether you are about to head to college (no matter what your age may be), if you have a child who is about to attend college, or if you know someone who is about to experience this, then this article is for you. When I was around 17, I applied to several different colleges, but […]

The post I Thought I Was Too Good For Community College appeared first on Making Sense Of Cents.

Digital Assets and Cryptocurrency

cryptocurrencies

In the last ten years or so, a new asset class has swept the globe—digital assets and cryptocurrency. It began with Bitcoin in 2009 and has since expanded into thousands of different cryptocurrencies. Bitcoin, the first and largest cryptocurrency by market cap, is widely considered the gold standard of the asset class. Over time, other […]

The post Digital Assets and Cryptocurrency appeared first on SoFi.

The Best Cities for Working Students in 2017

Not all students can cover the cost of their college education with the grants or scholarships in their financial aid packages. Some begin their college careers by taking out student loans, while others look for part-time jobs and work-study positions. … Continue reading →

The post The Best Cities for Working Students in 2017 appeared first on SmartAsset Blog.

What Is a Stafford Loan and How Do You Qualify?

If you’re in search of financial help for higher education, you may have explored different scholarships and grants to pay the way. Gifted money is a great way to pay for school without having to worry about paying it back … Continue reading →

The post What Is a Stafford Loan and How Do You Qualify? appeared first on SmartAsset Blog.

How to Pay Off Credit Card Debt Faster

I've received several questions from Money Girl podcast listeners about paying off credit card debt. It's a fundamental goal because carrying card balances come with high interest, a waste of your financial resources. Instead of paying money to card companies, it's time to use it to build wealth for yourself.

7 Strategies to Pay Off Credit Card Debt Faster

1. Stop making new card charges

If you're carrying card balances from month-to-month, it's essential to understand what it costs you. As interest accrues, it can double or triple the original cost of a charged item, depending on how long it takes you to pay off.

The first step to improving any area of your life is to acknowledge your mistakes, and financing a lifestyle you can't afford using a credit card is a biggie. So, stop making new charges until you take control of your cards and can pay them off in full each month.

As interest accrues, it can double or triple the original cost of a charged item, depending on how long it takes you to pay off.

Yes, reining in your card spending will probably require sacrifices. Consider ways to earn extra income, such as starting a side gig, finding a better-paying job, or selling your unused stuff. Also, look for ways to cut costs by downsizing your home, vehicle, memberships, or unnecessary expenses.

2. Consider your big financial picture

Before you decide to pay off credit card debt aggressively, look at the "big picture" of your financial life. Consider any other debts or obligations you should prioritize, such as a tax delinquency, legal judgment, or unpaid child support. The next debts to pay off are those already in default or turned over to a collection agency.

In many cases, not having a cash reserve is why people get into credit card debt in the first place.

Assuming you don't have any debts in default, focus your attention on your emergency fund … or lack of one! I recommend maintaining a minimum of six months' worth of your living expenses on hand. In many cases, not having a cash reserve is why people get into credit card debt in the first place.

3. Make more than the minimum payment

Many people who can pay more than their monthly minimum card payment don't do it. The problem is that minimums go mostly toward interest and don't reduce your balance significantly.

For example, let's assume your card charges 15% APR, you have a $5,000 balance, and you never make another purchase on the card. If your minimum payment is 4% of your card balance, it will take you 10½ years to pay off. And here's the worst part—you'd have paid almost $2,400 in interest!

4. Target debts with the highest interest rates first

Make a list of all your debts, including credit cards, lines of credit, and loans. Include your balances owed and interest rates charged. Then rank your liabilities in order of highest to lowest interest rate.

Getting rid of the highest interest debts first saves you the most.

Remember that the higher a debt's interest rate, the more it costs you in interest per dollar of debt. So, getting rid of the highest interest debts first saves you the most. Then you can use the savings to pay more on your next highest interest debt and so on.

If you have several credit cards, evaluate them the same way—tackle them in order of highest to lowest interest rate to get the most bang for your buck. And if a credit card isn't the most expensive debt you have, make it a lower priority.

In general, debts that come with a tax deduction such as mortgages, home equity lines of credit, and student loans, should be paid off last. Not only do those types of debt have relatively low interest rates, but when some or all of the interest is tax-deductible, they cost you even less on an after-tax basis.

5. Use your assets to pay off cards

If you have assets such as savings and non-retirement investments that you could use to pay down high-interest credit cards, it may make sense. Just remember that you still need a healthy cash reserve, such as six months' worth of living expenses.

If you don't have any or enough emergency money saved, don't dip into your savings to pay off credit card debt. Also, consider what you could sell—such as unused sporting goods, jewelry, or a vehicle—to raise cash and increase your financial cushion.

6. Consider using a balance transfer card

If you can’t pay off credit card debt using existing assets, consider optimizing it by moving it from higher- to lower-interest options. That won’t make your debt disappear, but it will reduce the amount of interest you pay.

Balance transfers won’t make your debt disappear, but they will reduce the amount of interest you pay.

Using a balance transfer credit card is a common way to optimize debt temporarily. You receive a promotional offer during a set period if you move debt to the account. By transferring higher-interest debt to a lower- or zero-interest card, you save money and use it to pay down the balance faster.

7. Consolidate your high-rate balances

I received a question from Sarah F., who says, “I love your podcast and turn to it for a lot of my financial questions. I have credit card debt and am wondering if it’s a good idea to get a personal loan to pay it down, or is that a scam?”

And Rachel K. says, "I love listening to your podcasts and am focused on becoming more financially fit this year. I have a couple of credit cards with high interest rates. Would it be wise for me to consolidate them to a lower interest rate? If so, will it hurt my credit?" 

Depending on the terms you’re offered, using a personal loan can be an excellent way to reduce interest and get out of debt faster.

Thanks to Sarah and Rachel for your questions. Consolidating credit card debt using a personal loan is not a scam but a legitimate way to shift debt to a lower interest rate.

Having an additional loan added to your credit history helps you build credit if you make payments on time. It also works in your favor by reducing your credit utilization ratio when you reduce your credit card debt.

If you qualify for a low-rate personal loan, here are some benefits you get from debt consolidation:

  • Cutting your interest expense
  • Getting a fixed rate and term (such as 6% APR for 60 months with monthly payments of $600)
  • Having one monthly debt payment
  • Building credit

A couple of downsides of using a personal loan to consolidate debt include:

  • Being tempted to continue making credit card charges
  • Having potentially higher monthly loan payments (compared to minimum credit card payments)

While it may seem counterintuitive to use new debt to get out of old debt, it all comes down to the interest rate. Depending on the terms you’re offered, using a personal loan can be an excellent way to reduce interest and get out of debt faster.

What should you do after paying off a credit card?

Credit cards come with many benefits, such as purchase protection, convenience, and rewards. Don't forget that they're also powerful tools for building credit when used responsibly. If maintaining good credit is one of your goals, I recommend that you keep a paid-off card open instead of canceling it.

You don't need to carry a balance from month to month or pay interest on a credit card to build excellent credit.

To maintain or improve your credit, you must have credit accounts open in your name, and you must use them regularly. Making small purchases charges from time to time that you pay off in full and on time is enough to add positive data to your credit reports. You don't need to carry a balance from month to month or pay interest on a credit card to build excellent credit.

To learn more about building credit and getting out of debt, check out Laura’s best-selling online classes:

  • Build Better Credit—The Ultimate Credit Score Repair Guide
  • Get Out of Debt Fast—A Proven Plan to Stay Debt-Free Forever