credit card debt

Rethinking “The Rules” of Your Financial Affairs

Here’s how my wife and I found freedom from credit card debt… without paying them back!

First, a short true story. My wife and I were up to our necks in debt. I had lost my job with a major mortgage broker due to the subprime/economic crisis. My wife’s job as a commission-only job placement recruiter was drying up because no one was hiring. We were in serious trouble. We’d even heard of some people who, trying to save their homes, had taken all their savings…and lost their house anyway, leaving them with zilch!

That was not going to happen to us! We drew a line in the sand, so to speak. We would go only so far – and no further! – to save our home. After that, we’d take the meager leftovers of my IRA and we’d try to start again somewhere else. At least we’d have a little something to help tide us over until better times came.

Long story short, better times did not come. I remained without full-time employment for well over two years. My wife even endured a stroke during this time (she’s in her thirties!). We had run up an awful lot of credit card debt. It started when we needed funding to remodel the older home we had bought.

Then there were those too-good-too-refuse credit card offers – so we paid off one of our vehicles, upping our debt even more. And then we did the really dumb thing of charging fast food, small Wal-mart purchases, a little here and a little there… until we could afford only to pay the minimum each month. Then, upon everything going south, we found it more and more difficult to even keep up with the minimum payments!

Having been indoctrinated into the “Your Credit Rating Is The Most Important Thing In The World” club at an early age, my wife and I had an outstanding credit rating. But then again, we’d never been in a bind quite like this one. Now, for the first time ever, we were on the brink of default. What to do?

Well, having worked for a giant financial company so long, I knew that the best thing was to not ignore it but to try to work something out. At least that’s what I THOUGHT I knew… As it was, when we told them the truth about our circumstances – even offering them HALF of all our savings in order to settle our credit rating – the answer was NO. After all, we had never been late on a payment, were not late now, so why settle with us? We had thought that they might spare our credit rating due to our circumstances. But the hard truth was that this giant financial corporation refused to work within our means.

Finally, we reached that place where we simply could not afford to make another payment. We had no choice but to default. We didn’t want to. We’d tried not to. We’d tried to reason with our creditors, but it was not to be.

Now I was mad. I had done everything in my power to preserve our precious credit rating, but the corporation refused to let me settle without first defaulting – or in any case ruining my credit if I settled. Then a revelation hit me:

WHY WAS I TRYING SO HARD TO PRESERVE MY CREDIT RATING WHEN THAT WAS WHAT GOT ME IN THIS MESS TO BEING WITH???

Now, certainly, my wife and I bear responsibility. We get it. We accept it. We own it. But our good credit rating had brought in offer after offer after offer from the credit cards. I mean, they DO have fancy computers and algorithms, right? They wouldn’t offer me credit if I really couldn’t afford it, right? And so we had spent and spent–and they kept upping our credit limit – until the wheels came off of the machine. But instead of understanding that under normal circumstances we’d have continued to pay them, the financial giant instead wanted us, without jobs, to continue paying them as if nothing had changed. BUT EVERYTHING HAD CHANGED!

Finally, four or five months into default, they settled with us. I had told them what I would give them. If they had asked for even a penny more, I would have rejected it out of hand. We settled for approximately 31% of our debt. In retrospect, I should have offered less–or perhaps paid them nothing for the stress they placed us under, as well as their forcing us to ruin our credit and then settling with us for almost exactly what we had originally offered. I’m not sure that it did not contribute to my wife’s health problems.

BUT HERE’S WHAT I REALIZED…

My family’s needs were FAR more important than my credit rating. In fact, as I said above, it was our credit rating that got us into trouble, to begin with! Why were trying to hard to salvage the very thing that had contributed (at least in part) to our troubles? In fact, the finance company had held that over my head–“If you don’t pay, you’ll mess up your credit.” And for a while, I bought into it.

But while I have to pay for my house (they can take that away from me), I realized that credit card debt was different.

Pay off your house. It becomes your bank via home equity. If you are putting all your money to paying off your credit cards and your refrigerator goes out… where are you going to get the money to replace it? That’s right, you’ll just put it on your credit cards and restart the cycle of debt. You have to break free. Use your home equity for NEEDED things. Need a car? Well, you might be able to get one on credit anyway, but if not, take out a small direct deposit loan from elcloans or a similar company, so that you can afford a car (more details here).

Remember to pay off your payday loan quickly. But make sure that you never are beholden to those lifeless corporations again. My credit rating is broken. So are my chains.

Looking back, I realize now that the credit card company didn’t care if I prostituted my wife, sold my kids, sold drugs, stole cars, or sold my blood–just give them their money. They were being ruthless about it. So I decided to become equally ruthless. I was going to take care of my family’s needs–education, retirement, savings, a new roof, etc.–BEFORE I was going to give it to the credit card company. It’s kind of like hypothermia–your body starts shutting down all the less necessary parts in order to preserve your life.

That’s what I was doing. I was refusing to pay under those circumstances. If I’d still had my job, I’d never have missed a payment. But as it was, I HAD to take care of my family’s needs. I had a child depending on my for his education and well-being. I had a wife that would have to be taken care of when we retired. I had a house I had to take care of so that it would be habitable.

So here’s my advice to you: If you CANNOT pay, then quit worrying and start taking care of your family. Hang up on the collectors until someone offers to settle on YOUR TERMS. If you can pay, then do so. This is advice for those who refuse to allow vampiric financial companies to suck them dry.

What Are The Things That You Must Consider If You Need A Loan With Bad Credit?

No individual wishes to have a bad credit, but many end up have one. A credit history makes it clear how well a person uses and repays his credit. So if a person with bad requires to apply for a loan, then there things that must be considered.

What Is A Bad Credit?

It usually defines a record of the past failures in keeping up with the payment on credit agreements. A bad credit means that you have not repaid your loan instalment or credit on the scheduled time or have not even at least paid them ever. A credit card report also considers public records like a state or federal tax liens, bankruptcy and legal judgement against an individual. Companies known as credit reporting agency or bureaus fetch a person’s credit score and collate it into a report. Each of the agencies maintains their own individual credit report. Thus a person’s credit history and credit scores can vary among different agencies as a result of any error or deletion of information. A person will be able to view records as well as history for his each and every actual credit account on his credit report. But he will not be able to notice any credit score on the report.

What Happens Due To Bad Credit?

If you have a bad credit, lenders will less likely lend you money. It is because the probability of irregular or non-payment on a new loan or credit card is increased. You can see that all the applications for a new credit card or loan is getting rejected. If you still get an approval, your rate of interest for the loan or credit card will be much higher than that of those who have a good credit score. This increased rate of interest is a way by which the lenders compensate themselves if they take the risk of lending money to someone with a bad credit. A bad credit will not only affect your credit card or loan approval or the approved loan’s rate of interest. There are few insurance companies who look at an individual’s credit score when they quote any insurance rate. Providers of mobile phones and utility often demand security deposit from those applicants who have a bad credit. If you have a bad credit, then a high amount of security deposit can be demanded by landlords or your lease or rental agreement can also be rejected.

How Costly Are Loans With Bad Credit?

Although an individual can avail a personal loan if he has a bad credit. But he needs to be aware that a high rate of interest will be charged. For instance; if your car stops to work and you require a personal loan of amount $2500 for the repair of your car. If you have a very good credit score, suppose base FICO score is 740, then you may get approval of a 3 year personal loan at a rate of interest 9.33%. Your monthly repayments will be of $79.88. At this rate, you will require to repay an interest of $375.82 overall during the period of the loan. But if you have a poor credit score, i.e.:  Base FICO score less than 580, you may get approved for a loan and rate of interest may be 35.89%. So your monthly repayment will come to $114.35 and you have to pay a total interest of $1616.70 during the 3-year loan period. Thus if you have a bad credit then for this 3 year personal loan amount of $2500 you will have to pay an additional $1240.88

Will A Bad Credit Affect You Forever?

You should be aware that a bad credit is not anything permanent. Late payments, bankruptcy and foreclosures get off a credit report after 7-10 years. So even if a person files for bankruptcy, it is possible that you can work towards improving your credit. You can take few steps to improve it. Firstly you should check your credit report. According to a recent survey, almost 25% of the citizens in U.S. found some errors on their credit reports that can hugely affect their credit rating. So find such error and dispute them successfully so that they get removed from your reports. It is a simple thing that can be done by a person to improve his credit score. Secondly become aware of what are the factors that are included to calculate a credit score. If work to improve all these factors, your general credit report might improve and it will include your credit history and scores. For instance, ensuring you make timely payments and pay your credit card debts can help a lot to improve your credit score.

 

It can be very frustrating when you try to secure a loan if you have a bad credit. Search genuine lenders who will lend you money. Moreover availing a personal loan with a bad credit score and making timely repayments will aid you to get rid of your bad credit score.

 

What Are The Benefits Of Federal Student Loans?

Government student loans after scholarships are called federal student loans. These loans are convenient to access, flexible as well as cheaper if you wish to lower repayments compared to private student loans. You will never need any co-signer or a good credit score for getting a federal student loan.

  • Lower Rate of Interest And Fees

Federal student loans usually have lower rate of interests than private loans. Rate of interest of new federal loans are fixed. So they will remain the same during an entire loan period. Private loans often provide variable rate of interest that increases whenever the benchmark of the rate of interest is raised by the Federal Reserve. If you get an option, a private loan with a fixed rate of interest is a better choice. Refinancing of a student loan can offer you a lower rate of interest if your credit score is strong and you start earning after graduating. It will also aid you in turning any private loan with a variable rate of interest into a loan with a safer and fixed rate of interest.

  • No Credit Report

 Federal loans are available to any undergraduate. But Direct PLUS federal loans that are accessible to graduate students as well as parents will need a credit check. Private loans need a credit history for showing you will make timely loan repayment. Your credit score will also be used to decide the rate of interest that will be applied on your approved loan. But most of the undergraduates will be having short credit history and low credit score if they have any score at all. So before opting for a private student loan, take a maximum amount of federal student loans. If you require a private student loan to cover your school’s funding gap, but there is no credit history or score, then there are many loan providers or lenders who may aid you.

  • Co-Signer Not Required

 As federal loans are not based on credit score or history, they never need any co-signer. So your family member does not have to get worried about making repayments if you cannot. Undergraduates or graduates with no credit can qualify for private student loans if they bring a co-signer mostly a parent or some adult with a good credit and who agrees to repay the balance of the loan if the student is unable to repay. You can also look out for such a private loan that allows release of a co-signer after few repayments

  • Greater Time To Pause Repayments

Deferment in federal loans will allow you to postpone repayments because of economic challenges till 3 years.

  • Good Credit Not Needed For Consolidation

 If you have many federal student loans, you can consolidate them into a single payment easily. Federal consolidation will make some of the loans eligible for Public Service Loan Forgiveness along with repayment plans that are driven by income. But it will not save your money as the rate is decided by one weighted average of the rate of interest of your previous loan.

  • Consolidation Of Several Federal Loans Into One Without Any Credit Check

You will be able consolidate as well as refinance a student loan via private loan provider. It will reduce your rate of interest depending on your credit score as well as income.

  • Greater Options Of Forgiveness

 Unlike private student loans, federal student loans can get dissolved if you take part in a repayment plan that is driven by your income or you work for the government or at any non-profit organization. After 10 years federal loans are forgiven by Public Service Loan Forgiveness. Borrows of Perkins loan who work in any public service can get the option of loan forgiveness after a much shorter time.

  • Assured Loan Cancellation If A Borrower Dies

 A federal student loan will get discharged if a borrower dies or becomes disabled permanently. Any parent PLUS loans that has been taken on behalf of a student will get cancelled too if the parent who hold it dies.

  • Lower Rate Of Interest On Subsidized Federal Student Loans

Students with high financial requirement will qualify for subsidized federal student loans. The interest on these loans if there is any deferment while a borrower is in school, there is a grace period or a break from repayments is repaid by the government.

  • Income Driven Repayment Is Accessible

 A federal student loan makes it easy to reduce repayments if you require to. You need to apply for repayment that is income driven and thus you will be repaying a certain percentage of your monthly income or nothing if you have no income. You must reapply each year and ensure you are on this plan that will be most beneficial for you.

 

  • More Time Before Any Default

 There are many private student loans that go into a default status if you miss a single repayment. A federal loan will give you some time to bring your repayments on track if you fail to make it. There will be no default announced and you will not be reported to the credit bureaus until you miss 3 monthly repayments. Your federal student loan will become a default after 9 months of missed repayments. At that time, the government will be taking money from your income or your tax return for recovering the debt.

 So before you decide to take a student loan, understand the benefits of taking it. Then decide accordingly which student loan will be best suited for you. Also ensure that you will able to make timely repayments before you apply for the loan.

Get A Complete Overview Of Student Loans

If you require money for your college costs, then you should know and also a have a good idea about your borrowing choices. Two of the most common ways of borrowing are federal student loans as well as private student loans. Read on to get more information.

What Are The Types Of Federal Student Loans?

There are 3 types of federal student loans such as:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans

These federal student loans are accessible via the Federal Direct Loan Program. As the federal loans give different advantages over the private student loans, a student must always try to explore these loans first. So gain some more knowledge about these 3 types of federal student loans:

  • Direct Subsidized Loans: These federal loans are for those students who have financial requirement that is determined by the federal regulations. No interest will be charged when the undergraduate student will be in school during half-time, deferment or grace period that is usually 6 months after a student leaves school or become a graduate, before he begins to pay principal as well as interest.
  • Direct Unsubsidized Loans: These federal loans are never based on financial requirement. Your school will determine the loan amount that you will be able to borrow depending on the attendance cost as well as other financial help that you get. Interest will be charged throughout the entire duration and will get capitalized even if you are in school, during grace and deferment periods. This will increase your overall federal loan expense.
  • Direct PLUS Loans: These are unsubsidized federal loans that are credit based for parents of the dependent students as well as graduate and professional students. PLUS loans will aid in paying for education cost till the attendance cost once your other financial help get exhausted. Interest will be charge throughout and will get capitalized too. It will be increasing your overall federal loan expense.

What Are The Types Of Private Student Loans?

If you have explored federal loans, scholarships as well as grants and still require money for your college, then you can look out for private student loans.

  • It will be used by any financial institution such as a bank.
  • Students take this private student loan. Their parents or any individual with a good credit become their co-signer.
  • Private loans taken by parents are another method of getting money for college costs. A parent or guardian who is creditworthy can take a private loan to help their student in paying for his college.

How Can You Apply For A Student Loan?

There are many application processes that can be followed by a student on the basis of the type of loan they are in search of. The federal loan application process is:

  • Fill out a Free Application for Federal Student Aid or FAFSA and submit it if you wish to apply for a federal student loan. You need to submit it so that you meet the eligibility for any federal student loan.

For submitting FAFSA for a federal student loan, there is a list of thing that you must remember.

  • Become aware that there will be no cost when you will submit it. If you are asked to make payment, be sure that it is a fake website.
  • Complete it each year when you require money for your college.
  • Receive it as soon as possible. It is better if you receive it earlier as some grant amount gets awarded to students who apply and receive it first.

On the other hand as private student loans are provided by banks as well as other financial institutions, you will be able to apply to the lender directly. Follow the below mentioned instructions if you need to apply for a private student loan:

  • Visit the website of a private loan provider.
  • Check out the rate of interest of the loan, flexibility of payment options as well as other advantages.
  • Directly apply on the lender’s website. You can select the type of repayment choice as well as rate of interest that you will want.
  • You can add a co-signer if you want and it will improve your chance of getting an approval for your loan. But remember to select such a co-signer who has a good credit.
  • The loan provider or money lender will be checking your and your co-signer’s (if you have one) credit report and will convey his decisions to you.

So when you will borrow money for your college cost it is essential that you do it responsibly. Consider what will be your salary after you graduate, be aware that you have to repay your loan as well as interest and never borrow more than you require for college expenses.

 

How Will Students Become Eligible For Student Loans?

The eligibility of student loans depends on the loan type. There are two types of student loan; federal student loan and private student loan. The eligibility criteria of these two loans are different. Read below to have information regarding the student loan eligibility.

What Are Federal Student Loans?

These loans are also popular as government loans that let students as well as parents or guardians borrow money for the college from federal government directly. Federal student loans are offered via the U.S. Department of Education. Students are frequently advised to make use of each and every federal loan options that are accessible to them before they consider opting for any private student loan. Loan forgiveness plan is a key feature that urges students to take federal loans and not private student loans. A federal student loan will never need any co-signer and the rate of interest of a federal student loan is set by the federal government and does not depend on the credit score and history of a borrower. Students are also encouraged so that they estimate their college education expenses before they apply for federal student loans. Thus it will give them an idea of what is required and help them to avoid any over borrowing that will be very beneficial in the future.

What Is The Eligibility For Federal Student Loan?

The eligibility needs for federal student loans are:

  • Students need to file the FAFSA or Free Application For Federal Student Aid.
  • Borrower should be enrolled for minimum a half-time term.
  • Borrower needs to a permanent resident or citizen of U.S. or an eligible non-citizen.
  • In case of federal parent PLUS loan, a student need to qualify the criteria of citizenship.
  • Federal Stafford loan’s eligibility criteria is independent of any borrower’s credit.
  • A good credit score is essential for taking a federal PLUS loan.
  • Federal education loan’s eligibility never depends on credit score, ratio of debt to income, least income values or any employment history. But the borrower can never be in default on any federal education loan.
  • No least age limit is there for taking a federal student loan.
  • A subsidized loan’s eligibility is dependent on the financial requirement of a student.
  • The student needs to get enrolled in any eligible course as a regular student.
  • The normal eligibility needs for federal student help like Selective Service registration for male student, holding a high school diploma or a GED and maintaining good academic records.
  • Federal student loan will not be accessible to any borrower after they graduate like during medical school occupancy or after passing law school.

What Are Private Student Loans?

These loans are given by private loan providers like local banks, national banks as well as online loan providers or credit unions. They are used for covering higher education expenses of a student who is either a graduate or an undergraduate. Some private student loans will also cover additional costs. If you have to complete your occupancy after medical school then there are private student loans that can be taken to fulfil all such obligations. Many loan providers offer private student loans to students as well as parents. Further a student might face difficulty to qualify for a private student loan on himself.

What Is The Eligibility For Private Student Loan?

The eligibility needs for private student loans are:

  • Borrower needs to have creditworthiness or have a co-signer who is creditworthy. Greater than 90% of the private student loans are offered to undergraduate students and greater than 75% of them to students who have not graduated. But they require a co-signer with good credit.
  • Creditworthiness of a borrower or co-signer is measured by making use of credit scores, yearly earning, ratio of debt to income as well as job history.
  • The least legal age of a borrower of private student loan usually depends on the state where he resides. Majority age is 21 in New York and 18 in most of the other U.S. states.
  • A borrower and co-signer of a private loan need to qualify the requirements of citizenship. All the loan providers need a co-signer who is U.S. citizen or permanent U.S. resident with a good credit. Most of the loan providers also need the students to be U.S. citizen or a permanent state resident. Some loan providers are seen to allow any international student for qualification if he has a creditworthy U.S. citizen or permanent state resident as a co-signer.
  • Most money lenders need a borrower to get enrolled for minimum half-time term. Some offer special loan programs to continue education students.
  • The eligibility of a private student loan can also depend on degree, educational major or the school involved.
  • A private student loan will never need any student to apply for FAFSA.

 

So now that you have complete idea of the eligibility requirements of a federal student loan and a private student loan, you can understand which one you will qualify for. Select the most suitable one and apply for that loan by researching well online.

How Students Loan Work?

Most of the students need to borrow a student loan before they become a graduate as there are not adequate government grants for covering every college expenses. Since this loan debt is unavoidable, it is vital for students to know how the loan works.

Define Student Loan

A student loan is a borrowed fund that is taken and paid off over a time period. Apart from repayment of the borrowed amount, most of the borrowers need to pay a fee that is known as the interest. Student loans are used for paying college costs. It is available from different sources. Most loans are part of the federal government and come via the U.S Department of Education’s Federal Direct Loan program. Others are given by private loan providers like banks as well as other funding institutions, state government along with colleges. Usually students must take federal student loans initially as they are cheaper, more accessible and include better terms of repayment.

How Much Loan Can A Student Take?

The limit of a loan will be specifying the highest amount that can be borrowed. Some of the student loans will let you borrow the total college cost, lowered by the amount of any other student financial help. There are also some student loans that come with lower fixed yearly as well as cumulative limits for the loans. It might be a great debt as they are a future investment. But remember to borrow as much as you need rather than as much you can.

How To Avail The Money From Student Loan?

A federal student loan is sent to the college financial help office and the private one is sent to the college financial help office or even to the borrower. If the proceedings of the loan are collected by the financial help office, it will be applicable to your college’s tuition and fee charges and room along with board if a student resides in the home that is under the college’s control. Any amount of the loan that remains is refunded so that the students make payments for books, supplies as well as college related expenses.

How Will You Repay A Student Loan?

After graduation or dropping below the enrolment of half-time, the student will have to start to repay his student loan. Most of the loan providers will be offering a grace period of 6 months before the repayment of the loan will start.

The standard repayment of federal student loans will involve a repayment period of 10 year with equal loan payments every month. These types of loans will also provide the students with extended repayment term and will have a longer term for repayment of the loan. It also includes repayments based on earning of the graduate student that base the repayment every month on the discretionary earning of the borrower. Such plans of repayments will be lowering the monthly repayment and will increase the on-going federal student loan’s term.

The loan provider or lender will be sending a coupon book to the borrower before the repayment begins. The borrower needs to send every month’s repayment with the right coupon that the lender has sent. Some of the lenders are also seen to send statements to the borrowers rather than a coupon book. Borrowers are allowed to apply for auto-debit option, where each month’s repayment of the loan is transferred automatically from the bank account of the borrower to the loan provider. Some loan providers are there who offer the borrowers with a reduction in rate of interest of the loan in the form of incentive for applying for auto-debit as well as electronic billing.

What Will Happen If You Do Not Repay A Student Loan?

If a borrower fails to make repayment of a loan by the scheduled or due date, he will be considered as a defaulter. Late fees and penalties are charged by many lenders to these borrowers. Borrowers who are too much late with their loan repayment suppose for 360 days on a federal student loan and 120 days on private student loans, then the borrower will become a defaulter. For instance, collection charge till 20% will get deducted from each payment after a borrower becomes a defaulter on a federal student loan. The government can also seize till 15% of the wages of the borrower and stop refunds of federal as well as state income tax. Social security as well as federal payments may also get garnished. Sometime loan providers are also seen to put a lien on a property that you own. You will also lose eligibility for extra financial help along with some programs such as deferment, change of repayment plans, forbearance and student loans forgiveness.

So before taking a student loan, you must have a proper idea on its terms and conditions. Once you are well aware of it, then only apply and avail it.

 

 

Selling Your Life Insurance Policy!

Life settlements are a great way to fund your retirement. Selling a life insurance policy involves selling the policy to another entity or investor. That buyer becomes the owner of the policy, pays the premiums, and receives the death benefit when you die. We offer specific advice on saving more, spending less, investing, and avoiding debt – without making your eyes glaze over.