Browsing Category: Paying Off Debt

Student Loans, Credit Cards & Mortgages, Oh My: How Recent Grads Can Find Financial Peace

If you owe a lot, you’re not alone. Today’s consumer owes an average of $28,000 on credit cards and loans, according to Experian’s latest annual State of Credit report, and that’s not even counting mortgage debt. If you’re a recent college grad carrying this type of financial load and wondering what to pay off first, you should know that all debt is not equal. You can pay off what you owe more effectively if you pursue an informed repayment strategy.

Student Loan Debt piggy cap

The average student loan debt rose to $29,400 last year, according to the most recent Project on Student Debt statistics. Repaying your college bills can be tough if you don’t graduate or if you have trouble finding work after graduation. Also, federal student loan interest rates have been rising, resulting in 30 percent of borrowers getting 90 days or more behind their repayments, according to the Federal Reserve Bank of New York.

However, this summer Congress passed legislation to lower and cap interest rates. Other legislation has been pushing to make education more affordable, and student loans have more flexible repayment schedules and options than other types of debts, with hardship deferment and other forms of assistance available. The U.S. Department of Education Federal Student Aid guide can help you develop a repayment plan.

Credit Card Debt

The average American household owes $7,128 on credit cards, according to the latest Federal Reserve data. When deeply indebted cardholders are factored in, this grows to $15,279, making credit cards the third-highest source of indebtedness after mortgages and student loans. Credit card interest rates can run high, and if you only pay your minimums, you can end up stuck in debt for a long time paying off much more than you borrowed.

Your best bet with credit cards is to get a card with a low interest rate and repay what you borrow as soon as possible. If you have significant credit debt, consider your options for paying it off faster to avoid future interest. If you currently receive regular payments from a structured settlement or annuity, a company like J.G. Wentworth can buy your structured settlement for a lump sum of cash now. You can use this money to pay down your credit card debt and save you future interest.

Mortgage Debt

Mortgage debt varies regionally with the cost of real estate and living expenses. If you live in the Midwest, the average mortgage balance is $143,850, according to this year’s SaveUp’s U.S. Consumer Savings and Debt Report. If you live in the West, where the cost of living is much higher, the average is $255,979. No matter where you live, mortgage debts carry the largest balance of all type of debt and take the longest to pay back. Combined with the risk of lost equity, this can make mortgage obligations potentially the worst type of all debt.

On the other hand, you may be able to use your equity to lower interest rates and consolidate credit card balances. You may also be able to refinance to a shorter-term loan to pay off your mortgage sooner. Financial expert Dave Ramsey suggests pursuing early mortgage repayment after you’ve paid down other debts with lower balances.

Bob Howell is a financial counselor from the Southwest who helps families dig out of debt.

Destroying $40,000 of Debt in 2 Years

choose the right credit card

choose the right credit cardThis week I want to share some wonderful stories and experiences I read from Clark Howard’s new book, Living Large for the Long Haul. In it, he shares the stories of over 50 different people from all socio-economic backgrounds who have improved their finances even through The Great Recession.

Paying Off $40,000 of Debt

One of my favorites stories was Joyce and Don Fondren who worked together as a team to pay down $40,000 in 2 years. It started with the couple listening to Clark Howard’s show on the radio evening. During the show, they heard about NFCC.org (National Foundation for Credit Counselling) and got the idea to get their debts in order. Using a local affiliate of the organization, they were able to drastically lower their interest rate, making more of their monthly payments go towards paying down the principle instead of treading water with interest payments.

They also made the cjoice to avoid getting into more debt by shredding their credit cards. They’re on track to be completely debt free in another couple of years, but they have already paid off about half of it.

Paying Down Debt Quickly and Easily

Many people get into debt, not from lack of financial knowledge (99% of us know to spend less than we earn), but they get into habits and behaviors which sabotage their finances.

Basically when paying down debt, it comes down to:

  • Learn the Exact Amounts of Your Debt and Your Budget: Having the exact numbers can be powerful and eye-opening in some cases. Seeing how much debt in you’re in can motivate you to get rid of your high interest debt on the credit cards.
  • Set Up a Payment Plan You Can Keep: You can compare your money habits in the past and see where your money leaks are so you can redirect that money to a debt snowball. You may find that transferring your debt to a no interest credit card can help you save money.
  • Stay Motivated and Reward Your Achievements: Staying motivated while paying down debt usually means celebrating milestones.

Everyone has their own methods to staying motivated with paying down debt.  I’m grateful that my husband and I are working together on getting rid of this student loan. Before I started writing about our family’s finances, I was reading and being encouraged by others sharing their financial struggles and victories online.  I also love to read and some of my financial books have proved useful as I tried to find ways to cut back on needless expenses and stay focused on eliminating debt.

Having a system in place can keep you on track with your financial goals.

Thoughts on Getting Rid of Debt

What is your strategy for paying off debt? By the way, if you’d like use ReadyforZero to speed up your debt free journey, you can sign up for a free account with them today.

What Do You Need to Look Out For with Debt Management Plans

debt management plans

For some people, they are drowning in a sea of debt. If you are having a hard time getting your debt under control and you can’t keep yourself on your debt repayments (after numerous tries), then you may want to check out a debt management plan as a possibility.

While you may use a debt management plan, you’re still responsible for your finances, so make sure you have the 411 about the company and your case. Here are some tips on how you can find a credit counseling company that would be a good fit for you.

How Debt Management Plans Worksdebt management plans

Typically when someone is on a debt management plan, they send in their debt payments to the credit counseling organization. The organization is then supposed take care of the debts based on a payment plan that the two parties agree to.

What consumers need to make sure is that the organization fulfills the plan and the payments are being divvied up accordingly. While no guarantee, working with an establish organization can reduce your chances of having problems come up.

Questions to Ask Before Signing Up

Before you have a company handle your bill payments you should ask some questions. The Federal Trade Commission offers some helpful suggestions:

  • What services does the organization offer?
  • Are you licensed or accredited to do business?
  • Will I have a written agreement with the plan?
  • Who will be helping me and my case? What are their qualifications?
  • How are your employees are paid?
  • How will you keep my information secure?
  • What fees are involved?

Make sure you’re completely comfortable and happy with their answers. Don’t sign anything unless you’ve read and agreed everything.

Thoughts on Debt Management Plans

You have to decide for yourself whether or not you need credit counseling help from an agency. Hopefully you’ll be on your way to eliminating your debt sooner rather than later. Have you ever used a debt management plan? Did it work well for you?

Photo Credit: Alan Cleaver

Want to Get Out Debt? Ready for Zero Can Help

ready for zero debt reduction tool review

Getting rid of debt is a goal that many people have and yet so many have a problem getting it done. One reason is that it can be overwhelming to find the right place to start. Should you go for the debt with the highest interest or should you start with the lowest balance? As more and more companies are offering help, I thought I would review a tool that is currently gaining some traction in the personal finance industry and fans of its service –Ready for Zero.

ready for zero debt reduction tool review

Basically Ready for Zero helps users take all of their debts and helps them organize and manage them online on one site. Once you sign up, you can get all of that data pulled in and create a personalized plan to get you out of debt faster.

What Ready for Zero Can Do (and What It Doesn’t)

If you are looking for a ‘debt relief who negotiates with your creditors on your behalf, Ready for Zero is not your spot. They have the online tools that can help you create a sustainable plan. The free option is a wonderful tool, I’m using it for paying down the student loan during The Debt Movement.

For those needed more assistance with managing their debts, there are two paid options – Ready for Zero Plus ($4.99/month) and Ready for Zero Plus Bi-Weekly ($4.99/month plus a one time $50 set up fee).

How Ready for Zero Works

Ready for Zero is pretty straightforward when it comes to how it works. 

  1. Grab all of your accounts into one spot. When you sign up, you can go ahead and link all of your debts into one spot and quickly see all the necessary information about your accounts, like the balances, interest rates, and payments.
  2. Create a realistic debt reduction plan. Using the data given along with the online tools you can find the optimal monthly payments you need to make to reach your goals.
  3. Make payments on your debts. Follow your personalize plan and track your progress online or with Ready for Zero’s mobile app.
  4. Reach your goals. Stick to the plan and watch your debts decrease and eventually be paid off.
It took me about 5 minutes to get my account started. With your personalized plan, Ready for Zero includes suggestions on how you can save money which can then be used to pay down your debts faster (this is one way they make money). They have also partnered up with LendingClub to offer loan consolidation to get a lower rate for some users.

Who Is Ready for Zero For?

I think if you are someone who is sick and tired of being in debt and want to come up with a plan that you can keep, the Ready for Zero is a fantastic tool for you. Whether you go for the free or paid option, you can get your finances squared away. In addition to the resources they have on their own site, Ready for Zero has many partners, including Steve Rhode from Get Out of Debt who can answer your financial questions.

Ready for Zero provides the tools to help those motivated to get rid of their debt.

Thoughts on Using Ready for Zero to Get Out of Debt

I know there a lot of people who would like to get out of debt, but don’t know where to start. I think Ready for Zero can be a great option for them. While the paid versions have their benefits, I recommend trying their free option first. I have found it quite handy and perfect for my needs. If you’d like to try it out, you can sign up for an account with Ready for Zero today.