Work With A Nonprofit Credit Counseling Organization
can review your entire financial situation and work with you to create a plan to tackle your financial challenges. They give advice about credit issues, budgeting, money management and debt management.
If you work with a credit counselor, its important to research the organization before you get started. Check with your state attorney generals office and consumer protection agency to ensure its reputable.
Pros: A credit counseling organization may work with your to set up a debt-management plan on your behalf, which requires you to make a single monthly payment to the credit counseling organization each month. The organization then uses the money you provide to pay your creditors. Your credit counselor may also work with your creditors to negotiate lower interest rates or waive certain fees.
Cons: Some credit counselors may charge a fee for some of their services, and you may have to agree not to apply for new credit or use your existing credit if you participate in a debt-management plan.
Borrow From Your Retirement Funds
If you have a sizable amount of money built up in your retirement account at work, you might be tempted to borrow from your 401 to pay off your credit card debt.
Its a question Clark gets all the time, and he feels very strongly about the answer:
Almost 100% of the time people have asked me about borrowing from their 401, the answer is No! Clark says. That has to be the last option and something you do when youre out of all other possibilities.
When people do borrow from a 401, historically it means that they end up with not near enough money to live on in retirement, he says.
Thats scary, considering that according to a study from the Investment Company Institute, nearly one in five people who are eligible have a loan against their 401.
Even a single loan from a 401 can throw you off-track because you lose so much time in saving for retirement and having to pay back that loan, which often reduces what you can contribute, Clark says.
Non Installment Credit Definition
Category: Credit 1. what is non installment credit Lisbdnet.com Non-installment credit: Single-payment loans and loans that permit the borrower to make irregular payments and to borrow additional funds Installment loans include automobile loans, loans for other consumer goods, home repair and modernization loans, personal loans,
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How To Get The Most Out Of Your Rewards Credit Card
Rewards credit cards may sound like free money, but thats not always the case. Credit card companies typically use rewards programs to attract consumers that like to travel, rack up points or burn through gallons of gas on long road trips. If you sign up for one of these cards, you may be able to earn a free flight, cash back rewards or discounts on gas, groceries and other everyday purchases. Whatever the reward may be, there are a few things you should keep in mind when using these cards. Learn how to make the most of your rewards program without spending more than you need to.
Option : Look Into Balance Transfer Offers
Many credit cards will offer you the opportunity to transfer balances from other cards onto that card at a promotional interest rate.
Most often, this will take the form of a limited-time balance transfer offer.
With a limited-time balance transfer offer, if you are approved you will pay a lower rate for a specific period of time. At the end of that specified period, any balance you have remaining will accrue interest at the standard rate for that card.
There are many ways to get out of debt, says U.S. News and World Report credit card expert and consumer finance analyst Beverly Harzog, But if you still have good-to-excellent credit , a balance transfer credit card might be your get-out-of-debt ticket.
If you have great credit, you might qualify for a balance transfer credit card that offers a 0% introductory interest rate. Right now, the best cards have intro periods ranging from 12 months to 21 months.
But note that theres a balance transfer fee of 3% to 5% with most credit cards. If you end up paying a fee, make sure you add that to the cost of repaying the debt.
For instance, if you transfer $5,000 to a card with a 3% transfer fee, youll owe an extra $150 , and that will bring the total amount you owe to $5,150.
In many cases, youll still come out ahead because what you save on interest more than makes up for the fee. But do run the calculations and make sure the card youre considering is worth the transfer fee.
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Interest Rates’ Impact On The Housing Market
Most people need a mortgage to buy a home, and this means borrowing money from a lender. The lender will always charge interest on top of the principal amount used to buy the home. The interest rate depends on a number of factors, including those related to monetary policy and the health of the economy, as well as those related to your personal finances and credit history. Learn more about how these rates affect the housing market and your bottom line.
Pros Of A Personal Loan
- The large number of potential lenders means you can shop around for the best terms.
- There is one monthly payment, due on a specific date.
- Monthly payments significantly reduce the balance, unlike the minimum payments on credit cards that dont put a dent in total amount owed.
- The loan is paid off in a specific time period, unlike the open-ended balance of a credit card.
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What Is Home Equity
A home equity loan is basically a second mortgage on your home you borrow against the equity that has accrued over time in your property. Youll usually have a fixed interest rate, which makes it easier to plan for how much your monthly payments will be, and because second mortgages typically have lower interest rates than credit cards, your total debt has the potential to be reduced.
Some homeowners with good credit might be able to refinance their mortgages for a lower rate than what theyre paying on their credit cards, but thats not necessarily true for everyone. Even if the interest rate isnt lower, consolidating debts into a new mortgage still could help you save money if you have very high rates on your credit cards.
How To Consolidate Credit Card Debt In 8 Steps
Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It may not have been reviewed, commissioned or otherwise endorsed by any of our network partners.
High credit card balances and expensive interest fees are a combination that can overwhelm any budget. If you currently owe more money on credit cards than you can afford to pay off right away, it might be time to consider consolidating your credit card debt.
When you combine credit card debt with a new line of credit or a loan with a lower interest rate and fewer fees, it can help you save money each month and give your credit score a boost. This guide will help you discover how to consolidate credit card debt in a few simple steps.
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Types Of Debt Consolidation
There are several avenues open to consolidate debt, including a debt management plan home equity loan personal loan credit card balance transfer and borrowing from a savings/retirement account.
The route you choose should be based on research and whether the solution offered fits your budget and time frame. Your credit score and debt-to-income ratio are factors, if you choose to get any kind of consolidation loan. You many also choose to pursue online debt consolidation.
Here is a quick look at each option.
How Credit Card Debt Consolidation Can Hurt Your Credit:
- Opening new balance transfer cards or taking out loans will result in hard inquiries being placed on your credit report. New account activity may account for a small percentage of your credit score.
- New accounts through a debt consolidation loan or balance transfer credit card will also lower your average account age. An account with a long and positive history can contribute favorably to your overall score.
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Does Debt Consolidation Work On A Limited Income
Debt consolidation can be difficult for people on a limited income. There must be room in your monthly budget for a payment that at least trims the balance owed. Even with a limited income, however, there can be places where you reduce expenses — dont eat out eliminate cable and other entertainment spending no trips to clothing stores — to make debt consolidation work. It may come down to how committed you are to eliminating debt.
Consolidate Using A Line Of Credit Or Overdraft
Before the recession hit, it seemed as though banks were giving out lines of credit for $5,000 to $20,000 to almost everyone they could. Now that the global economy has changed, a line of credit may be much harder to qualify for. You can check with your bank or credit union to see what their criteria is. Usually they want you to have a very good credit score, a good income and hopefully a good, positive net worth .
Lines of credit and overdrafts can be secured or unsecured. It depends on your situation and the bank’s lending policy at the time .
A line of credit and an overdraft are essentially the same thing. They both turn your bank card into a credit card so you can spend money you don’t have up to a predetermined limit. Just like a credit card, you only have to make a minimum payment each month.
Interest Rates for a Line of Credit or Overdraft
Advantages of using a Line of Credit or Overdraft to Consolidate Debt
Disadvantages of using a Line of Credit or Overdraft to Consolidate your Debt
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What Is A Debt Consolidation Loan
If you take out a debt consolidation loan, you use the loan to pay off all of your credit card providers, meaning that youll have paid off all your existing credit card debt. Youll then work to pay off the loan in order to get yourself completely debt-free.
Opting for a debt consolidation loan means that youre trading one type of debt for another the benefit of doing this is that debt consolidation loans may have better interest rates than those of multiple credit cards. This allows you to save money on interest payments, and many people find it easier to manage one debt consolidation loan rather than several credit card debts.
Of course, you should always check the terms and conditions of any debt consolidation loan first. Make sure its financially preferable to how you were previously paying off your credit cards, and that any interest on the loan is lower than that of your cards.
Protect Your Home Or Other Assets
This means that if you can’t pay off the new loan, the home or car that you put up as security may be at risk. The lender can sell it to get back the money you borrowed.
Consider all your other options before using your home or other assets as security.
Advantages Of Joint Consolidation
You can use combined income from both spouses on your application
If one partner has a poor credit score, the application may benefit from the other spouses higher credit
If your combined credit and/or income improves your overall creditworthiness, you could qualify for a lower interest rate or better terms
It simplifies your financial life
Its one symbol of financial commitment to one another
Overall, the main benefit is that sometimes couples may qualify for better terms when they combine forces. This isnt always the case it depends on each partners credit score and .
Look For Lower Interest Rates
A lower interest rate allows for a higher portion of your payments to go towards paying off the principal of the loan, so you can pay off the debt faster. Here are a few ways to get a lower rate:
- Request a lowered interest rate from your credit card provider
- Open a lower interest credit card, and make a balance transfer
- Move balances off of cards with especially high interest rates, and onto cards that can minimize these charges
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Withdraw From Your 401
If your credit is in poor shape and you either don’t own a home or you don’t have much equity in your house, you may look to other assets, such as your retirement plan.
It’s possible to take money from your 401 plan as a withdrawal or a loan and use it to pay down credit card debt. However, things can get complicated and costly if you’re not careful.
If your plan provider offers 401 loans and you take one out, the interest you pay goes to your account and there’s no tax penalty, so it’s a better option than an early withdrawal. That’s because you’ll pay a 10% penalty on an early 401 withdrawal and owe taxes on the amount you withdraw. But if you have a 401 loan and leave your job for any reason, the loan may become due immediately, and if you can’t pay, it’ll be treated as an early withdrawal.
Make A Monthly Credit Review Date
Planning for the future isn’t exciting, but living in the future with your wealth will be.
Set aside one day a month to pull out your account statements, credit card statements, and credit report and take stock of your accounts. By reviewing your credit report, you make sure that no errors are cheating you out of credit score points. By looking at your accounts, you can detect and document trends that can help you build an updated budget and plan for the future. And when you check out your credit card statements, you can gain insight into how credit cards make money off of you and begin to flip the script to start earning rewards from them instead.
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Avoid Adding Any More Debt
Finally, the one thing you dont want to do when consolidating credit card debt is to continue to use those cards. A zero balance on a card is not a green light to start spending freely.
If you cant commit to buying only things you can afford going forward, youll be on a fast path to ending up in even more debt than youre already in.
Feeling stuck and not sure what to do? Contact our free Consumer Action Center.
Create And Stick To A Budget To Avoid Future Financial Trouble
One of the best ways to avoid financial trouble is to create a budget and stick to it. Your budget should prioritize repaying your debts and cutting back on unnecessary expenses.
You may also want to consider increasing your income by finding a better-paying job or taking on extra work like a side hustle. By increasing your income without increasing your spending, you can avoid future money problems.
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Consolidate Debt With Loans Or Lines Of Credit
Not only will debt consolidation help you better organize your monthly payments, but it should also allow you to pay less in interest than all your previous rates combined. Here are just a few ways you can combine and manage your debt:
- Apply for a debt consolidation loan, and then pay just the single monthly payment on your new loan
- Open a line of credit rather than taking out another loan, then repay the line of credit as you use it
Disadvantages Of Joint Consolidation
Both partners become legally obligated to pay off the new loan, regardless of whose responsibility the original debt was
One or both partners credit scores may fall if the other partners credit history negatively impacts them
Debt cannot be allocated in a divorce or separation agreement debt is legally binding for both partners
The main disadvantage here is that consolidation makes both partners legally liable for each others debts. In a separation or divorce, both parties can be held liable for those debts by creditors.
Consolidating debt also shares financial risks with both partners. If one partner loses their job, for example, that could create significant financial strain and both partners would still be liable for the combined debt payments.
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