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The Most Effective Strategies for Eliminating Credit Card Debt

The Most Effective Strategies for Eliminating Credit Card Debt

Credit card debt is a significant problem for many consumers. If you’ve ran up a large balance on one or more credit cards, then the sooner you take action, the better. And that means making more than just the minimum monthly payments. Not only will your credit score suffer if you have too much debt, but it can take years or even decades to pay off credit card debt when you’re only paying the minimum.

When you’re dealing with credit card debt, having a game plan to pay it off is crucial. Here are strategies that can help you manage those balances and bring them back down to zero:

Set a Budget

It’s a simple step, but it’s one that so many people miss or carelessly skip over. If you don’t have a budget, it’s going to be difficult or impossible to implement any other debt repayment strategies. Even if you are able to pay off your debt, you’re likely to run into the same issues without a budget.

Creating a budget is simple and doesn’t take long. Start by listing your income, along with all your monthly bills. Then, assign a portion of your income to paying down your debt. Stick to this budget no matter what, and don’t dip into your debt income for other purchases that you don’t need. If you aren’t making enough to cover your bills, then you need to either find a way to generate more income, or cut back on your spending.

Pay High-Interest Cards First

If you have debt on multiple credit cards, pay the minimum on the cards with lower interest and pay more on the card with the highest interest rate until you’ve paid it in full. Repeat this process with each credit card, so you’re paying the lowest possible amount in interest.

Consolidate Your Credit Card Debt

There are two popular methods of debt consolidation: paying the debt with a loan or transferring your balances to one credit card. By consolidating your debt, you only have to worry about one monthly payment. You may also be able to secure a lower interest rate through the loan or credit card you choose.

Debt Consolidation with a Loan

You can obtain a debt consolidation loan through several different types of lenders or debt consolidation programs, with the most common options being banks and credit unions. Interest rates may be lower than your current credit card interest rates, but it is important that you check for any hidden fees. Make sure you also verify that the low interest rate lasts throughout the term of the loan and doesn’t increase after a short period of time.

If you often spend too much on revolving lines of credit, such as credit cards, then a loan is a good option to pay off your debt. You’ll get a set amount, and then you’ll have to pay it off in monthly payments.

Debt Consolidation with a Credit Card

For this method, you need to find a credit card with a low interest rate and low or 0-percent interest on balance transfers. Fortunately, there are several credit cards on the market that fit this description. Keep in mind that these offers are almost always for the card’s introductory rates, which go up after a certain period of time (often one year). If you’re confident in your ability to repay your debt within that time frame, then it may be smart to consolidate all your debt onto one of these low-interest credit cards.

Since you’ll have a revolving line of credit, resist the temptation to put any new charges on the credit card until you’ve paid off all your debt.

Credit card debt is something that can follow you for all of your adult life if you don’t take care of it. It doesn’t go away on its own, and you need financial discipline to get yourself out of that hole. Taking the time to build your debt repayment strategy, and committing to it 100 percent, goes a long way towards making yourself debt free.

Best College Student Credit Cards of 2017

Best College Student Credit Cards of 2017

College students are happy people because they are finally getting the opportunity to exercise their freedom. Many of them get to live on campus and meet new friends during this exciting time. A student credit card can help such people to become even more independent than ever. It can provide them with a unique sense of financial power and start them off on a positive note in the credit world. The following are five of the best college student credit cards of 2017. They all offer unique benefits that can help the student to succeed in life:

Discover It for Students

Cash back cards are a popular type of credit cards because they give back to the consumers. The Discover It is an amazing cash back just for students who want to have access to credit. The main benefit that the Discover It card offers is a 5 percent cash back offer on some of the purchases. The categories that qualify for the 5 percent discounts change every quarter. Items that do not fall into those categories are still eligible for a 1 percent cash back return. Other features that this card offers are features such as $20 cash back for good grades, mobile account freeze, $0 fraud liability, FICO credit score, US-based customer service and so much more.

Citi Thank You Preferred Card for College Students

Points are another type of reward that some credit cards offer their cardholders. The Citi Thank You Preferred Card for College Students is an option for students who will travel frequently. It’s perfect for those who have to take trains or planes home for the holidays, The card offers benefits such as 2x points back on dining and entertainment expenses. All other expenses earn 1x points per dollar spent. Other features of the card are EMV technology, gift cards, ticket discounts and more.

US Bank Secured Visa

Not all students enter the college world with positive credit. Some students have to rebuild their credit profiles. The US Bank Secured Visa is perfect for that situation. The card provides a credit line of $300 to $5,000 once the student sends a security deposit. The US Bank is different from other secured cards in that cardholders can transfer to unsecured cards if they exercise a positive payment history for no less than 12 months. The company will report all of the payments to the credit bureau.

Journey Student Rewards From Capital One

The Journey Student Rewards Card is an option for students who would like to earn a little bit of cash back. It is different from some of the other cash back cards because it does not require the cardholder to have perfect credit. This card provides the cardholder with an even 1.25 percent cash back on all purchases instead of focusing on categories. Other benefits that this card yields are benefits such as credit scores, $0 annual fee and timely credit line increases with timely payments.

BankAmericard Credit Card for Students

The BankAmericard option is good for students who are not concerned with earning cash back. Instead of offering cash back as a feature, this card offeres one of the lowest APRs on the market. Other benefits that the card has are options such as free FICO score, account alerts, digital wallet technology, mobile banking, no annual fee and increased credit profile. Cardholders get to esacpe thier APRs on balance transfers for the first 18 months of owning the card, as well.

Picking the Best Card

Students have a broad range of options when it comes to getting credit cards. The credit score does make a differnece when choosing a card becuase some of them do have specific requirements. Otherwise, the student should always choose the card according to his or her needs. Some studnets travel frequently and other students shop frequently. Some students would rather have a lower APR than than anything else. It all depends on the student’s desire. Once the student decides which card is the very best, he or she can then click the “apply” button and request the desired credit card. A decision will come back in about 60 seconds, and then the approved cards will be shipped out ASAP.

No Matter What its Breed, All Dogs Deserve a Chance

No Matter What its Breed, All Dogs Deserve a Chance

Everyone knows the saying “Don’t judge a book by its cover.” The phrase can be applied to many things, including dog breeds. So called “bully” breeds in particular tend to get a bad rap, such as pit bulls. However, there are plenty of loving dog owners who make a point to ensure people that their four legged friends are among the sweetest, most affectionate animals you could ever meet. In addition, dog owners and dog lovers everywhere insist that all dog breeds, including those deemed as “dangerous,” deserve a chance to live happy and healthy lives with their families. At the same time, it may be more difficult to get pet insurance for your dog if you happen to have a “risky” breed.

What are the Riskiest Dog Breeds?

Surprisingly, small dogs are the ones who are generally the most nippy to strangers. However, insurance companies don’t seem to care and are far more likely to give you a hard time getting coverage for your sweet pit bull. This is because there are certain dog breeds that are deemed to be risky. Generally, there are 11 breeds that fall under the risky category. These are: Pit Bulls and Staffordshire terriers; Doberman Pinschers; Rottweilers; German Shepherds; Chows; Great Danes; Presa Canarios; Akitas; Alaskan Malamutes; Siberian Huskies; and Wolf hybrids. In addition, any mix of these dog types is also considered to be risky.

How Do You Choose the Right Insurance to Cover Your Dog?

Most often, insurance companies tend to deny coverage for the first four breeds on the “riskiest dog” list, according to experts. Other companies will offer a free dog liability insurance quote and subsequent coverage, even if you have a dog that is of one of the so called risky breeds. It is important to really do your homework when you are a dog owner so that you can find the best insurance for your pet. One such company is Einhorn Insurance Agency, which provides dog liability insurance throughout the United States and is based in San Diego, California.

Know Your Insurance Company’s Policies

Einhorn Insurance owner Dori Einhorn states that many insurance companies deny dog owners homeowners’ or renters’ insurance coverage just because of the breed of dog they have as a pet. This, in turn, leads to people searching for a carrier that will cover their dog, which can be costly, especially because it can lead to the need to switch carriers for your auto insurance as well.

If you have had insurance with the same company for many years but suddenly adopted a dog that falls under the category of the 11 riskiest breeds, don’t automatically assume your new pet will be covered. Many insurance companies modify their policies and can change your coverage or even deny it if you have a “dangerous” dog breed.

Not All Dog Claims are the Same

It is also important to keep in mind that not all dog claims occur because a dog attacked or bit someone. Sometimes, they can come about because a large breed dog was very friendly and greeted someone to the point where they jumped up on the person and caused them to fall and subsequently get injured.

Additionally, even insurance companies that will provide coverage for you when you have a “risky” breed dog may charge you a higher premium. This is generally because of the supposed extra risk that is associated with these dog breeds.

As with any type of insurance, it’s best to shop around before settling on one company. Read all of the fine print and learn about each company’s rules regarding the 11 riskiest dog breeds if you have one of them or are planning on bringing one of those types of dogs into your home.

Why Real Estate Investors Choose Hard Money Loans Over Conventional Mortgages

Why Real Estate Investors Choose Hard Money Loans Over Conventional Mortgages

Many professional real estate investors avoid using conventional mortgages and choose to use hard money loans for their investments. Instead of a bank issuing the funds to secure an investment, private investors issue the funds on hard money loans. Also known as short-term bridge loans, hard money lenders are more concerned with the value of the investment property than they are with the borrower’s credit score.

Conventional Mortgages vs. Hard Money Loans

There are several key differences between conventional mortgages and hard money loans. First of all, hard money loans carry repayment terms that can last anywhere from two to three months up to 12 months, which is why they are commonly referred to as short-term bridge loans. The interest rates hard money lenders charge are usually far higher than what traditional banks charge for conventional mortgages. Since borrowers of hard money loans are using the funds for real estate investment purposes, hard money lenders take on more risk than traditional banks. However, many borrowers are willing to pay higher interest rates and fees on hard money loans because of the benefits of the loan.

Hard Money Loan Benefits

Professional real estate investors and wealthy investors often forgo conventional mortgages and use hard money loans despite the higher interest rates and fees. Here are a few reasons why investors often choose hard money loans:

  • Hard money loans are convenient. Qualifying for a conventional mortgage is a challenging and time-consuming process. Many real estate investors are working on tight schedules and often do not have the time to wait on the approval process to close on a real estate deal.
  • Hard money loans offer flexible repayment terms. Since hard money lenders are private investors, borrowers have more room to negotiate repayment terms. For example, some hard money lenders will approve financing based on the appraised value of the subject property after repairs, which is known as the after repair value (ARV).
  • Many hard money lenders approve financing based on the value of the real estate investment alone. When borrowers apply for conventional financing, they must meet specific debt-to-income ratios, credit scores, income requirements and several other qualifying factors. Hard money loans allow real estate investors to close quickly on their investments.

The bottom line is that hard money loans and conventional mortgages serve two different purposes. Although real estate investors can secure financing using conventional mortgages, first-time homebuyers cannot use hard money loans to secure financing on their first home. The takeaway is that private investors provide the funds for hard money loans while traditional banks and mortgage companies provide the financing for conventional mortgages.

Rolling Credit Card Debt into Your Mortgage Refinance is An Expensive Decision

Rolling Credit Card Debt into Your Mortgage Refinance is An Expensive Decision

Any time the Federal Reserve lowers interest rates, consumers become excited. They refinance their mortgages for lower rates, they buy a new home, and they change their financial habit to adjust to the new changes. It’s not a bad thing to refinance so long as it’s for the same timeframe or less to take advantage of a lower rate. Refinancing a home you’ve been paying your mortgage on for a decade for another 30 years just to take advantage of the lower rates and a significantly lower payment isn’t always cost-effective. Other consumers take advantage of low interest rates to refinance their mortgage to roll their credit card debt into the mortgage. It’s still a lower payment, and now they have no debt. It’s something many consumers feel is a great concept, but it’s not. There are several reasons rolling your debt into your refinance makes no financial sense.

You’re Not Changing Habits

For most consumers, debt is a habit. Very few are in debt because of an emergency or other horrible situation. Most are in debt because they spent too much time shopping for things they could not afford. It’s a bad habit, and rolling credit card debt into your refinance only makes that situation worse for many consumers. When the easy way to get rid of debt is simply to refinance, you’re learning nothing. You’re learning there are easy ways to handle debt, so you continue to purchase items you can’t afford and assume you’ll be able to roll it into another refinance in a few years. Additionally, these consumers feel they are debt-free. They’re not debt-free when their credit cards are now part of their mortgage.

You Pay Credit Cards Longer

Even if you see the overwhelming amount of money you pay to your credit card over the years making only the minimum payment, it’s still lower than the amount you’ll pay for your credit cards when they’re part of your new mortgage. It’s cheaper and faster to pay off debt one minimum payment at a time than it is to roll it into your mortgage for most consumers.

Here’s a situation that might help you see how you’re now paying your credit card debt. Let’s say you roll your credit card debt into a new mortgage for 30 years. You just used that card the night before to order a $20 pizza delivery for your family knowing the amount on that card would go into the mortgage and that pizza would basically be free since it’s eliminated the next day. First, your pizza debt is not eliminated. Your pizza debt is now part of your mortgage. That $20 pizza is now something you’ll spend the next 30 years paying off.

Think about that. Your pizza is now a 30-year debt. Does that make sense? It doesn’t, and that’s what many consumers fail to realize when they refinance. Every pair of shoes, ever tank of gas, every trip to the store or flight for vacation they roll into their mortgage is now being paid for over the course of three decades. Suddenly those things seem a lot less worthwhile.

Retirement

Consider your retirement. No one wants debt in retirement, and that includes a mortgage. Financial experts believe you should have zero debt when you retire, which means you’re doing yourself no favors when you spend money on refinancing right now. Do you want to retire with a larger mortgage on a home that should have been paid off years ago? And will you ever recoup the money you spent on that house as you refinanced it for more than it was worth? It’s akin to paying for your house twice and still only selling it once.

Think twice before you roll your credit card debt into a mortgage refinance. Yes, the rates are as low as they’ve been in a long time. You can still take advantage of that by refinancing your home for the same term just at a lower rate, but don’t add your credit card debts to the mix. It’s a bad habit, and it’s a very expensive decision over the long-run.

Finding the Best Credit Card to Use After Purchasing a Home

Finding the Best Credit Card to Use After Purchasing a Home

Becoming a new homeowner is an exciting experience, and it’s one that comes with ample financial obligation. Aside from a down payment and closing costs, you’ll worry about other financial ventures from buying new furniture to making other upgrades at home. If you’re in a position to make these purchases, you might want to see how you can maximize your income by buying each item with a credit card and earning cash back, travel rewards, or other rewards to enhance your homeownership experience.

The best way to use a credit card to make purchases as a new homeowner is to pay off the balance of each card you use in full each month. This allows you to maximize the amount of your rewards while minimizing the effect your spending habits have on your credit score. Paying the balances of your cards in full each month allows you to maintain a great credit score in addition to staying out of debt. These are five of the best credit cards on the market for new homeowners.

American Express Blue Cash Preferred

Grocery stores are important for new homeowners, since you do have to feed your family. You earn 6% cash back up to $6,000 each year on your supermarket purchase. Gas earns you 3% cash back, as do all your department store purchases. Since department stores are great for home décor, furniture, dishware, and many more things you use around the house, it’s great for new homeowners.

Discover it

This card is great for new homeowners because it allows you to spend up to $1500 each quarter on specific categories that earn 5% cash back. These revolving categories are common places homeowners shop, and this allows you to maximize the amount of income you earn when shopping for home décor and supplies. New cardholders get one year to pay off all purchases without paying interest.

Citi Simplicity

It’s a simple card, and that’s why so many homeowners love it. This card doesn’t have revolving categories for cash back or other options. You won’t earn any cash back or rewards with this card, but you also don’t pay late fees, overage fees, or interest for 21 months on anything you purchase or transfer. There’s no annual fee, either. It’s a simple card in that you know what you’re paying, what you’re getting, and that you’re taken care of.

Wells Fargo Home Rebate Visa

Use this card and apply all your rewards to your home mortgage. You get to pay off your mortgage debt with your rewards, which is why so many people prefer to use this card and this method of spending. It’s one of the best possible cards on the market for those who own a home and wish to make the best financial decisions regarding their home purchase. You won’t regret the money you earn with this card.

US Bank Cash+ Visa

You get to choose two categories each quarter to earn 5% cash back on all purchases up to $2,000. As a new homeowner, you can choose to use this at home décor stores, furniture stores, and even stores such as Lowes and Home Depot where you might go to purchase your new appliances or yard equipment. It’s a great offer. Additionally, you can earn 2% cash back on gas and groceries. It’s a winning card for anyone who owns a home.

There’s no right or wrong card for anyone who has a new home. You might be in complete disagreement with this list because you prefer to use your Lowe’s card to purchase your appliances and other home needs. It’s not about anything more than your personal preferences when it comes to finding the best card for your homeownership. It is about maintaining a good credit rating, using your finances wisely, and staying out of debt. You’re a homeowner now, so making wise financial decisions is what your life is all about. These cards, when used correctly and paid off in full each month, are highly beneficial to cardholders and homeowners alike when it comes to your credit and earning rewards.

Making Your Budget Adventures Easier in the New Year

Making Your Budget Adventures Easier in the New Year

The New Year is an exciting time for all because of the change it brings. Consumers are motivated in the New Year to make positive changes in their lives, and to make it the best year they’ve ever had. It’s easy to feel the motivation to make positive changes when positive change is in the air, and that often means creating a new budget and working hard to stick to it. If you’re in the market for a new start in the New Year, it’s not too late. You have the power to learn to budget your money effectively. There are numerous complicated budgeting systems, apps, and websites out there for you to use, but sometimes it’s the simplest plan that works the best.

Get to Know Your Money

A simple list of your take-home pay each month and your outgoing money each month is where you start. Know what you make versus what you spend. Write it down. Divide it into categories, such as the dates you’re paid and the dates your bills are due. Now break that all down into two of each. Assuming you’re paid biweekly, you have income every two weeks. If you break your bills down into two-week due dates, you’ll find it’s much easier to pay them.

For example, if you’re paid on the 1st and 15th of each month, break down your due dates to pay each expense on those dates, too. It helps you stick to the budget and stay on track. You can also break down your shopping trips to the grocery store around your pay periods to further stay on track.

Minimize Expenses

Now you know what you owe and to whom each month, it’s time to minimize those bills. Can you apply for a new credit card with a great 0% APR introductory period on all balance transfers so you can pay off that debt quickly and without paying more than necessary? Can you call your cable company and cancel your contract since you use Netflix instead? Can you call the cell phone company and lower your plan, or call the internet company and ask for a discount so you aren’t forced to switch to a new company? You have options, and now is the time to take advantage of those. You might be surprised how much you can save.

Create Necessary Funds

If you’re not already paying yourself, you’re doing yourself a great disservice. It’s time to create a savings account to which you transfer money each month before you pay anything else. You’ll also need to create an emergency fund for emergencies. You’ll also want to create savings accounts for all the other little things you want to save for this year. This does work to make life much in terms of budgeting.

Budget for Others

Now that you have a budget for your expenses, you’ll need one for other things. The best way to stick to a budget is to determine how much you’re comfortable spending on any given item at any given time. Sit down and really break down what you feel comfortable spending on entertainment, clothing, personal items, and other things throughout the month. These are the least important things in your life, so they should be the last things you budget for to make room for all the other things you budget for. Perhaps you can use a cash method for these things, or you can track your expenses with an app so you know when you’re over your budget or getting close to it.

Creating a budget and sticking to it is much easier when you are able to do it for a month or two. It’s always easier when it becomes a habit. Habits take approximately 21 days to form, so don’t be too hard on yourself if you struggle for a while. It’s also important to remember not to deprive yourself. Your budget should be strict, but it shouldn’t deprive you of your favorite things or from enjoying your life on occasion. If you love Starbucks, create room in the budget to enjoy a coffee once or twice each week so you don’t feel you’re missing out on your favorite life moments.

The Pros and Cons of Cashing Out Structured Settlement and Annuity Payments

The Pros and Cons of Cashing Out Structured Settlement and Annuity Payments

There are many reasons why you might receive annuity payments, such as if you were involved in an accident and are paid a certain amount each month. For many, receiving monthly payments is a good thing. However, if you have been doing your research about cashing out structured settlements and annuity payments, it might be something that you are interested in; however, you might just be wondering if it’s something that you should do. There are both advantages and disadvantages that you should consider before making this type of big move; these are some of the pros and cons tat you should know about.

The Pros of Cashing Out Structured Settlement and Annuity Payments

The most obvious benefit of cashing out your structured settlement is the fact that you can receive a lump sum at one time. If you are dealing with a financial emergency, for example, your monthly payments might not be enough to cover what you are dealing with, and you might feel that you will be able to get yourself in a better situation if you have more money at one time. In some situations, you might not feel as if you have much of a choice in the matter, since cashing out your annuity might be your only option for getting yourself out of the financial emergency that you are dealing with.

For some, cashing out a structured settlement can be a good idea because they want to use the money to invest in something. For example, you might like the idea of paying off your home or buying another home in cash rather than making monthly mortgage payments, or you might be thinking about starting up a business that can help you bring in an income. In these situations, it can pay to cash out your annuity, even if you will be receiving less than the full value of it. This can be a good option, but you’ll want to compare how much you will be receiving for your annuity and how much you could make or save by having this lump cash sum. This should help you determine if it’s the right answer.

The Cons of Cashing Out Structured Settlement and Annuity Payments

However, even though it can certainly be appealing to sell your annuity so that you can cash it out and get a lump sum of cash at one time, it’s important to understand that there are some disadvantages of doing so as well. For example, one big problem is the fact that you will not receive as much as you would receive over the lifetime of the annuity. Depending on how you choose to cash out your annuity, you could lose a large chunk of money by doing this. In some situations, it’s worth it. In others, it isn’t. It’s important to shop around to make sure that you get as much as possible for your annuity before taking this big step.

Some people also find that they have a tough time budgeting a larger sum of money. For someone who is not used to having a large amount of money in the bank, it can be easy to spend too much and to lose track of how much you are spending. This is not something that you have to worry about as much when you receive a monthly annuity payment. If you feel that you have trouble being financially responsible and if you are worried about how you will be able to pay your bills, then you may want to think twice before taking this type of step.

As you can see, there are both pros and cons of cashing out structured settlements and annuities. If this is something that you are thinking about, you’ll definitely want to make sure that you do as much research as possible. This can help you make the right decision for you.

Refinancing vs Consolidation for Student Loan Debt

Refinancing vs Consolidation for Student Loan Debt

An estimated 40 million Americans hold some form of student loan debt, with over 70 percent of individuals earning a bachelor’s degree accumulating debt before they even graduate. This staggering number can leave a person powerless as they graduate from school already owing a significant amount of money. Oftentimes, students get locked into a high interest rate that makes payback virtually impossible. The loan may not have to be paid back until graduation, but the amount you’ll eventually be coughing up is almost too difficult to bear.

Consolidation and refinancing can help your loans become less daunting and more affordable. You might be curious to know which option is the right choice for you. Because there are significant differences between consolidating and refinancing, it’s important to know what both mean before choosing your strategy.

Refinancing Your Loans

Refinancing refers to taking out a brand new loan to pay off older ones that you’re holding. You do not consolidate what you already owe, but just switch the amount over to a different lender. If your credit score has improved since first taking out the initial loan, you may qualify for lower interest rate options. Look for interest rates that fall between the 3 to 5 percent range, which will lower your monthly payments further.

The whole point of refinancing your student loans is to lower payment dues, shorten your loan term and save money on interest. For those still struggling with bad credit, you can lengthen the term of the contract as well, lowering payments because you have more time to pay it off. Refinancing enables you to choose a variable loan rate, too, which can help lock you into an agreement you’ll find affordable and worthwhile.

With refinancing, you enjoy the benefit of consolidation, where you have one easy-to-manage monthly bill. You can lump a number of loans onto one, making it easier to manage your finances and get yourself back on track monetarily. Unlike consolidation, student loan refinancing can only be obtained through private lenders. You’ll need to go to banks or loan departments in order to begin the process.

Consolidating Student Loans

Consolidating your loans means to lump them all into one large sum, providing you with one monthly bill that makes it easier to pay off. Federal loan consolidation is provided by the Federal Government for all student loans obtained through this method. If you took out a private loan through a bank, you will not qualify for federal loan consolidation. Consolidating with the Federal Government will take all older loans and put them onto one convenient bill, but your interest rate will be comparable to your old one.

Many find consolidation to help with lowering their monthly bills, but the only reason for this is because you’re lengthening your term. Let’s say that you only had five years to pay off your old loans and you choose to consolidate. You may now have 10 or more years of loan payments, but your bills will be lower as a result. This is ideal for individuals struggling to make ends meet and who don’t mind a longer term as long as payments are more affordable, but it can hurt you financially long-term.

Just because you have a private student loan does not mean that you aren’t able to consolidate. Most private lenders will offer student loan consolidation at variable rates. The only difference between the Federal Government and a private lender, like a bank, is that your credit score will be a deciding factor. If you have a poor score or no credit at all, don’t expect to be approved for consolidation and, if you are, you’ll be locked into a high interest rate.

Knowing What’s Best for You

You need to weigh out the good with the bad when choosing between refinancing and consolidation. Both options help to lower monthly bills and make suffocating student loans more bearable, but they also have their drawbacks. Longer terms, higher interest rates and refinance denial are all factors to consider before signing on the dotted line. If your student loans are five years or older, you could benefit from either option just because of the change in interest rates over the years.

Best Debt Consolidation Options and Your Credit Score

Best Debt Consolidation Options and Your Credit Score

One of the most important things any adult can do for their persona life is get their financial life in order. Creating a good budget, sticking to it, and getting rid of debt is the best start. Financial freedom is priceless, and it’s not something many people understand. It doesn’t happen to those who aren’t focused on their finances, and that’s why it’s imperative consumers learn how to manage their debt. You know you must pay it off, but how do you do it in an affordable manner? Many consumers turn to debt consolidation for the answers, but it’s not always found in that situation. Here’s some information regarding how debt consolidation changes your financial future by affecting your credit. Learn what it means for you before you consider it as an option.

Know the Differences

Not all debt consolidation is created equal. There are several forms of consolidation, and many of them have very little effect on your credit score. You can apply for a loan to consolidate your debts. Some consumers choose to apply for a new credit card with a long introductory period with no interest on balance transfers to give them the boost they need. Others take out a home equity line of credit. Some people even choose to consolidate their debt into another loan.

Each of these methods affects your credit, but not typically by much. There’s the hard credit check inquiry that might drop your score a few points. There’s added credit to your profile, which might drop your points. There is a higher credit limit available to you with this option, which could improve your score by dropping your credit utilization percentage a bit. These are methods that typically have little to no negative effect on your credit score. It’s why so many consumers choose these to consolidate their debt and live their lives.

The other type of debt consolidation is through a debt consolidation company. This is typically a last resort. These companies only work with clients who have missed payments, severely delinquent accounts, and other issues. If you’re already in trouble with your debt, your credit score has already taken a major hit, which isn’t good.

Debt Consolidation and Your Credit Score

Consumers who work with a debt consolidation company to settle their debts are going to see their credit score drop significantly. This often requires making no more payments to creditors while companies negotiate settlements. These settlements are for less than the amount you owe. You’ll make one lump sum payment to the credit consolidation company each month, and your cards are paid off in as your account allows. This takes approximately 5 years, and it can have a very negative effect on your credit.

One reason is your creditors are not obligated to work with the company, which means you are still paying some cards without the help of this company. Late and missed payments, and accounts you simply stop paying do remain on your credit report for 7 years. You’ll suffer with a less than perfect credit score at least this long before negative items are pulled and your score rises significantly. If you’re willing to wait this long or you haven’t a choice, it’s an option that could work in your financial favor.

Making the effort to find best debt consolidation company you can will greatly help your credit score. If you have good enough credit to apply for a new loan or credit card, do that first. Turning to professional companies should be a last resort for anyone looking to pay off debt. The cost is high, and the effect on your credit can stop you from securing a loan to buy a home or even a new car. It could cause your score to drop enough you no longer seem like a good hire to new companies when you seek a new job, and there are always those who end up regretting using companies like this. Of course, the decision is yours alone and knowing what you might see in terms of your credit score helps you make the most educated decision.

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