Should I Stop Paying My Private Student Loans Now?

Question:

Dear Steve,

I graduated in 2006 with over $50k in private student loans. After I graduated, Citi wanted $400/month. Unable to make the payments, I went on years of deferment and forbearance as my loan was bought and sold by several banks and lenders. My loan reached a max of $110,000.

I am now 10 years removed from college, and my principal balance is over $106,00 with 12% interest accruing daily. My monthly payments are $636 and pay interest only. In 1 year, that payment will balloon to over $1,100/month for the next 10 years.

I have a well paying full-time job, but I have had to take on 2 additional jobs just to keep up with this massive loan along with my other bills. My wife, daughter and I have also cut out several “unnecessary” aspects of our lives in order to cut costs. Alone, I make nearly $75k. Together, my wife and I are over $100k. But we have less than $1000 in emergency money, $0 savings, and I have had to put a stop to my 401k since the bills became overwhelming. Not to mention my daughter’s college and savings accounts have also stopped.

Would it be worth it for me to stop paying my private student loans? I would like to stop right now, but the thought of 10’s of thousands of dollars being added to that massive loan literally makes me sick.

We are also trying to finally get out of an apartment and attempt to buy an affordable house that matches the rent we pay now. Will not paying my loans ruin that chance?

Antonio

Answer:

Dear Antonio,

Sadly your situation is very common among the people who reach out to me for help. The bad news is private loans are not required to offer the same flexible repayment plans which are available to those that have federal student loans.

Any time you are not making the minimum payment to cover at least the monthly interest charged, the balances will grow. If you become delinquent then the balances can grow by another 20% or so for added collection costs and penalties. I often see people who put loans in deferment or forbearance to make it through the month, only to later be shell-shocked by the exploding balances.

I have previously published the Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan and that information remains valid. But there is no easy way out of private student loans. It is truly a good news, bad news situation.

It is even possible to settle private student loans with some lenders for less than you owe but they tend to want the settled amount fairly quickly or over a few payments. You can read more about that here.

When you stop paying on your private student loans the balance will grow, you will be in collections, it will appear as a negative item on your credit report, you could be sued, and it could result in a wage garnishment.

Alternatively, you might be able to use the tips in this article, settle your private student loan debt, or find that your private student loans can be discharged in bankruptcy.

There is no doubt there are negative consequences for not paying at least the minimum amount you agreed to. But as you can see, there are some options. The options can be daunting and hard for the average person to wade through with any skill. If you want to talk to someone about this mess, you might want to contact my friend Damon Day and have a chat. He is an exceptional debt coach.

As you sit and ponder over the situation I think you have to consider the future cost to you for not doing anything. You’ve said your savings and retirement savings is abysmal. You have to ask yourself if the loss of this important time of retirement savings now is worth the pain you might have to face to deal with the private student loan problem.

The money you put away in your 401(k) today, will grow exponentially for when you retire. Time is the greatest asset you have to make your retirement account grow. You can see how much you will have by using my online calculator, click here.

I don’t think you should contemplate how to best deal with this situation as yourself today but as yourself 40 years from now.

When the day comes where you can no longer work but need money to live safely and care for yourself, would you rather retire poor and broke because you didn’t deal with the loans today?

If you are 30-years-old now and saved just $1 a day and retired at 70, you would have about about $190,000 in retirement income. If you saved $300 a month you’d have about $1,900,000 to care for you and your wife. Right now as things stand with your current strategy you’ll have $0.

About a third of people say they will only have Social Security to retire on. But you can barely live on the limited benefit Social Security offers and will Social Security even be there for you when you retire?

If you want a guarantee or magic wand to deal with your private student loans, there isn’t one. But if you want some strategies to use to attempt to deal with your loans, I’ve given you some good tips and links. What you ultimately decide to do is up to you.

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

Should You Pay Off Debt With Retirement?

The short answer is no. It hardly ever makes sense to pay off debt with retirement savings. If at all possible, you should use alternative savings or non-retirement assets to bring down your account balances and keep your retirement savings kept safely away.

Do Not Pay Off Debt With Retirement

There are number of penalties and income taxes associated from withdrawing funds from a 403(b) retirement account that can reduce the given wealth by at least 25%. Depending on your age and whether or not you are still employed you might also be subject to a 10% federal fee which is in addition to income taxes that would match your federal and state tax brackets.

Not only are you giving up money on the spot, but you are also giving up a great potential to make money in the future by choosing to pay off debt with retirement. The tax-deferred growth usually presents around a 5% return, so the more money you leave in your account, the better off you will be.

That sort of high interest rate benefits you, rather than using the money to pay off some low interest rate credit card.

The 10% federal penalty applies to workplace retirement plan holders under the age of 59, unless they fall under any of these specific categories:

You are older than 55 years old and are no longer with your employer.

An alternate payee receives a distribution (like an ex-spouse) due to a Qualified Domestic Relations Order.

You participate in an employee stock ownership plan that distributes dividends.
Certain cases of death, disability, and financial hardship

It all comes down to the amount you need to pay off debt with retirement, though. If the interest rate is high and you cannot pay it down with your current income, you might explore some other options before you pay off debt with retirement funds. Mutual funds and Roth accounts are better sources of money because Roth accounts do not penalize withdrawals as long as you take an amount equal to what you’ve contributed. In fact, once you are past 59 years old and the account has been opened for five years or more, you can use your Roth funds without owing any taxes on it at all.

With these alternatives in place, it is usually smart to make retirement savings a last resort for financial hardship. Leaving your money in those accounts is the safest bet, but of course be sure to talk to a financial specialist before making any major decisions.

This article by Michael first appeared on Debt Know More and was distributed by the Personal Finance Syndication Network.

This Month’s Complaint Report: Credit Reporting Issues

Does a Debt Collector Have to Send Me Statements If I’m Making Payments?

Most people aren’t thrilled to hear from a debt collector. But a reader, Marc, would like to hear from his a little more often. He asked us whether he’s entitled to statements if he is making payments.

It’s a great question. Over the years, we’ve heard from many borrowers who are experiencing the frustration of sending payments in and not knowing whether they were being properly applied, or whether late fees, interest or other charges were being added to their balances. Do debt collectors at least have to let you know payment has been received and applied to your balance?

We asked Michael Bovee, founder of the Consumer Recovery Network and a Credit.com contributor, and his answer was… it can depend on where you live. “New York and Florida require the documentation of payment plans, like sending out statements monthly or quarterly at a minimum,” he said. “And California’s Fair Debt Buying Practices Act requires collectors of purchased debt to provide detailed account information within 30 days of any payments.”

But what if you’re not covered by those? It’s best to get an agreement in writing, but if a collector presses you to agree over the phone, let them know you are recording the call to protect your own interests, and then do it, Bovee advised. That way, you have evidence of the agreement you made in case there is disagreement about the terms later. It’s also smart to make a note of the collector’s name and the time of the call. After that, regardless of the accounting sent by the agency (or not), he said it’s important to keep careful records of payment amounts and dates.

Bovee said he thinks statements will be required in all 50 states in the near future. The Consumer Financial Protection Bureau is looking into how debt collectors interact with consumers, he said, and “I expect that sometime next year we will see rules from the CFPB that could require collection accounts that are settled, or entered into monthly payment plans, be documented via mailed statements and/or available online through a customer portal. It will be a very welcome development in the fair treatment of consumers if collection attorneys are required to provide an accurate accounting when entering payment plans (whether collecting through the courts or not).”

If you’re getting calls now, and pressure to enter into a payment agreement, Bovee suggests countering with a lump-sum offer. “I am a huge fan of negotiating one-time lump-sum settlements …. Paying off an old debt for less than the balance owed, and in a single payment transaction, is an ideal way to get your finances back on track.”

You should be aware, though, that it’s not necessarily going to get your credit back on track. Paying or settling a debt doesn’t necessarily remove it from your credit report. In some cases, you may be able to negotiate that as part of the deal, but some companies have policies against it. Still, rebuilding your credit may be easier when you do not have the additional stress of dealing with a collector. If, like many people being pursued by collectors, you haven’t even wanted to know exactly how bad your credit has become, now’s the time to take a look. Some credit card issuers offer free scores on statements, and Credit.com offers a free credit report summary with two scores and an action plan for improvement.

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How to Pick the Right Mortgage Lender

Buying a home is probably the biggest financial purchase you will make in your lifetime — one you will be paying off for years to come. When you are calculating the details of your mortgage, or refinance, picking a lender can be one of the most complicated (but important) decisions in the process. Today, there are likely many mortgage lenders eager and ready to accept your application, but it’s important to search for the right deal to satisfy your needs. You can save thousands of dollars just by doing some extra research, planning and following these tips to pick the right mortgage lender.

Decide What Kind of Lender You Want

Check into how small and large lenders work and decide if you strongly prefer one over the other. You can look at different types of lenders, from a mortgage company to a credit union or a commercial bank. (But remember, you are looking primarily at the lender that will originate your mortgage; mortgages are commonly sold to a third party after the lender originates them.)

Shop Around

You can compare mortgage rates online, by calling or going into lenders’ offices in person. Once you have several quotes in hand, compare not only the cost but also what each source offers (closing fees, for example) and figure out what makes the most financial and personal sense for you. If your preferred lender and best quote don’t match, you can use this as leverage. You can also check with potential lenders if you can pay points to lower your rate. Keep in mind that rates can possibly change while you shop around and will be contingent on other underwriting standards as well.

Talk to Your Agent & Adviser

It’s a good idea to ask your real estate agent and financial adviser for recommendations on lenders. This can also be a good time to discuss with your financial adviser where you plan to get the money from for your upfront costs. You should also consider your credit score (you can get a free credit report summary, which includes two credit scores, updated monthly, from Credit.com) and get it in the best possible shape before the application process begins.

Investigate

It’s a good idea to get referrals from your friends, family and websites about which lenders have worked (or not worked) for them. Beyond that initial reputation check, you need to do a background check on your top contenders through reviews as well as the Better Business Bureau. If you want to be extra-thorough, contact the lenders and got through any other questions you might have regarding closing hurdles, credit standards, etc.

Read the Fine Print

Get to know the details of your mortgage. This includes not just the interest rate and down payment but estimated closing costs, points, loan origination fees, transaction fees and any other costs you may incur. (You will get a Good Faith Estimate from the lender.) Don’t be afraid to get clarification. Ask what each fee includes and ask the lender for an explanation if there is anything you don’t understand. Read the purchase contract thoroughly so you know how your behavior will affect the deal and learn about the exact finance terms to ensure you know what is going on and don’t get caught by surprise.

There are many options when it comes to securing a mortgage or refinance, so it’s important that you know what you are looking for and do as much research as possible to find the mortgage lender that best fit your needs and financial health.

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How Your Credit Score Could Rise Soon Without You Lifting a Finger

Big changes are coming to both credit scores and credit reports – some as soon as September. Thanks to a combination of state lawsuits, federal regulation and old-fashioned competitive pressures, the way Americans are graded on their ability to pay back loans is about to enter a bit of a Renaissance. The changes probably won’t come as fast as you’d like, but they are coming, so here’s a guide.

Credit Report Changes

Most of the changes to credit reports are the result of a settlement reached earlier this year between the credit reporting agencies and a group of state attorneys general. The biggest change: some events that would have been a blemish in the past will no longer appear on consumers’ reports, a welcome change for borrowers.

Unpaid medical debts – medical collections represent roughly half of all collection accounts on credit reports, according to the CFPB – will be treated very differently. The bureaus will institute a 180-day waiting period before they enter medical debt onto a consumer’s report. Many health-related debts are the result of insurance confusion and other innocent mistakes, so consumers will now be protected by this grace period.

In addition, medical debts that had been considered delinquent but have since been paid by insurance will be removed from credit reports. Ordinarily, “paid late” notations remain as blemishes even after consumers pay off a debt.

The AG settlement includes several other consumer-friendly changes too, such as a requirement that the bureaus do a more thorough job of investigating consumer disputes. Specifically, they must employ specially trained experts to handle disputes involving identity theft, mixed files or fraud; and they must allow for human intervention when a lender and a consumer disagree about a debt. The bureaus must also get better about sharing information with each other when consumer credit reports errors are discovered.

Some smaller, technical changes required by the settlement will take effect this September. Suppression of medical debt entries that were ultimately paid by an insurance company will be required by September 2016. Unfortunately, the most important changes — the 180-day delay in medical debt reporting and more thorough review of consumer disputes — aren’t required until June of 2018.

Credit Score Changes

Fortunately, changes to the way credit scores are calculated — many that directly reflect the issues raised in the attorneys general settlement — have already taken effect in the latest scoring formula published by FICO, known as FICO 9.

Unfortunately, FICO formulas are a bit like software upgrades, and it will take time — perhaps years — before banks adopt or integrate FICO 9 into their own scoring formulas.

Still, the adjustments in FICO 9 are good for consumers. FICO has changed the impact that unpaid medical debt has on scores, reflecting the firms’ research that unpaid health bills don’t typically equate to bad payment habits. Essentially, unpaid medical debt won’t have the same drag on scores as other unpaid debt.

“The median FICO Score for consumers whose only major negative references are medical collections will increase by 25 points,” FICO says.

The new formula will also help consumers who are digging their way out of debt. Bills sent to third-party debt collectors that are paid in full will no longer count as negative entries in the FICO 9 formula.

Meanwhile, there’s a continued drumbeat for credit scores to include other non-traditional factors. Credit bureaus TransUnion and Experian have both released studies in the past year suggesting that inclusion of payment histories from non-banking entities such as landlords or utilities would boost millions of consumers’ scores. Borrowers with “thin” credit histories, such as young adults or immigrants, could be heavily impacted by such a change.

Consumers can get their credit reports for free once a year from each of the three major credit reporting agencies through AnnualCreditReport.com — this can help you check your report for errors or other issues. There are also many ways for consumers to track their credit scores for free — including two monthly credit scores through Credit.com — to watch for any major changes that could signal a problem.

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This article originally appeared on Credit.com.

This article by Bob Sullivan was distributed by the Personal Finance Syndication Network.

7 Mistakes That Can Demolish Your Credit Score

It’s the irony of all ironies: Shortly after writing a story about the risk of paying a department store card late after the holidays, since it’s not in your usual list of bills to pay, I forgot to pay one of mine. To be fair, I did check online for my statement a couple of times, but it wasn’t ready yet. And somehow I missed the mail telling me when it was finally ready. Thankfully, the issuer called before the bill was 30 days late, I paid it immediately (with a late fee, ugh) and narrowly averted a black mark on my credit report.

We all make mistakes. But when it comes to our credit, we need to be especially careful because that one slip-up can damage our credit for years to come. Here are seven mistakes that can put your credit on a downward spiral.

1. You Forget to Make a Payment

Forgot about that bill? Your oversight can cost you a lot more than a late fee, it can also have a significant negative impact on your credit score. It feels very unfair to be saddled with a seven-year black mark on your credit reports for a single mistake, but it happens. (Fortunately, most lenders — though not all — won’t report a late payment until you are 30 days late. So if you remember to pay the bill before the next one is due you might be OK.)

2. A Medical Bill Slips Through the Cracks

Maybe you got a medical bill but thought your insurance was going to take care of it. Or maybe you never did get the bill. Either way, a medical bill that winds up on your credit report can wreak havoc on your score. At one seminar I gave not long ago, a participant told me a medical collection account triggered a drop in her score of more than 100 points! How medical bills impact your credit will change somewhat in the future as the result of changes in newer scoring models, along with an agreement reached by 31 state attorneys general and the credit reporting agencies that will help prevent these accounts from being turned over to collections prematurely. But still, try to be extra vigilant about getting, reviewing, disputing or paying your bills after you receive medical care.

3. You Refuse to Pay a Bill ‘On Principal’

Maybe you felt you were overcharged on a bill. Or you’re ticked off because you don’t feel a dentist/doctor/mechanic or other professional did a good job. Perhaps you had a run in with your landlord. Whatever the reason, you refuse to pay a bill. While it may feel good to stand your ground, if the provider you won’t pay reports to the credit reporting agencies, or turns the bill over to collections, you may not feel the same way when that same item keeps hurting your ability to get credit at a decent rate in the future. (Here’s how to remove collections from your credit reports, though it’s not necessarily easy — or guaranteed.)

Sure, there are times when it makes sense to withhold payment. But there are also times when the better strategy is to just pay the bill to protect your credit rating. If the amount of money involved is large, or you really want to fight it, consider taking the provider to small claims court or filing complaints with the Better Business Bureau, Consumer Financial Protection Bureau, your state attorney general, etc., after the fact. (Of course, at times it will make sense to discuss the appropriate strategy with a consumer law attorney first.)

4. You Get Talked Into Co-Signing

Most people who co-sign do so out of a sense of obligation (think kid’s or grandkid’s student loans) or kindness (think boyfriend’s car loan). And many times it’s not a problem. But we’ve heard so many co-signing horror stories in the Credit.com blog comments that we know things don’t always go as planned. Even if the bills are paid on time, the additional debt may affect the co-signer’s credit scores or debt-to-income ratio, and make it impossible to get a loan themselves. And when the bills aren’t paid, the co-signer is stuck with bad credit and bills to pay.

5. You Max Out a Credit Card

Maxing out a credit card could cost you as many as 45 points (sometimes more), according to FICO, even if the amount you owe is small. It’s not so much the amount that matters, as how close your balance puts you to your credit limit. Your debt usage ratio compares your reported balances to your credit limits, and higher ratios can affect your scores. Fortunately this one’s relatively easy to fix if you can come up with the cash to do so. Just pay down your balance, preferably a few days before the statement closing date, so the reported balance is lower.

6. You Close Out All Your Old Accounts

It’s a common instinct to want to close old accounts you don’t use any more. Though more and more people seem to be aware that doing so may have a negative impact on their scores, I still find that many people are worried these unused accounts could be used by credit crooks, or they just want to “tidy up” their finances. While closing an unused account you really don’t want (or that charges you an annual fee) every once in a while may be fine, resist the urge to close all the ones you don’t use. You’re more likely to see your credit scores go down than up if you do.

7. You Assume Everything’s Fine

This is perhaps one of the biggest mistakes we tend to make with our credit. I’ve been guilty of it, too. Because you pay your bills on time, you assume your credit is fine. In a survey by Credit.com earlier this year, 29% of those who had not checked their credit reports cited that as a reason why. (Or maybe you know it’s not good, and you’d just rather not take a look.) But of those who did review their reports, 21% found a mistake, 9% discovered a late payment they didn’t know about, and one in 10 found a collection account they weren’t aware of.

All of the mistakes we described here can cause a significant drop to your credit scores. It matters because consumers with the best credit scores can save significantly on auto and homeowners insurance, as well as on interest cost for their credit cards, auto loans and mortgages. And the savings can add up quickly. One recent study, for example, found that across the U.S. consumers with fair credit pay a little more than 30% more for homeowners insurance when compared to those with excellent credit, and those with poor credit can pay twice as much! You can use this lifetime cost of debt calculator to see how much you can save by boosting your credit scores.

This last mistake is the easiest to fix. It won’t cost you anything and will take a few minutes of your time. If you haven’t done so already, get your free credit reports from each of the major credit reporting agencies, and then review your free credit score (you can see two of your credit scores for free on Credit.com) on a regular basis so if problems do crop up, you’ll know. And if you’re wondering, “will checking my credit score hurt my credit?” the answer is “no,” as long as you get it yourself and don’t ask a lender to pull it for you.

As for me, I set up auto-pay on most of my accounts, and requested paper bills or set up online alerts for the rest. Hopefully, I’ve learned my lesson and won’t make that mistake twice.

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This article originally appeared on Credit.com.

This article by Gerri Detweiler was distributed by the Personal Finance Syndication Network.

Will Giving Your Kid an Allowance Make Them Better With Money?

Children who receive an allowance are much more likely to think they have a good understanding of basic financial topics, like budgeting, credit and student loans, than those who don’t get allowance, according to the 2015 Parents, Kids & Money survey from investment management company T. Rowe Price.

The report draws on data from an online survey of 1,000 parents of children ages 8 to 14, and those children (881 of them). The margin of error for the results is plus or minus 3.1 percentage points.

The survey asked children to rate their understanding of various financial concepts and answer some yes-or-no questions, like whether they think they are smart about money. Among kids whose parents give them an allowance, 32% said they are very or extremely knowledgable about managing personal finances, compared to 16% among those who don’t get allowance. On average, that gap between those who do and don’t receive allowance was a 15-percentage-point difference in very or extremely knowledgeable children (in their personal opinions) when it comes to budgeting, credit, student loan debt, taxes, investing, Social Security, mortgages and inflation.

The presence of an allowance doesn’t seem as influential as whether or not a child’s parents discuss money with them at all. Children whose parents frequently discuss finances with them are much more likely to feel like they are very or extremely knowledgable about financial topics. Among kids who talk about money with their parents, 46% feel they have a good understanding of managing personal finances, compared to 14% of those whose parents don’t talk to them about money. With credit, that difference in confidence is nearly just as wide: 39% to 9%. Given the huge impact student loan debt is having on American consumers and, by extension, the economy, it seems important that young people grasp this financial concept, but only 9% of kids whose parents don’t talk to them about money say they really understand it. Kids with parents who talk to them about money are much more likely to say they get it: 39% said they’re very or extremely knowledgable about student loan debt. It’s all related, anyway: Student loans can have a big impact on your credit score, setting the tone for your financial life long after college is over. (Credit.com offers two free credit scores plus a breakdown of how your debts and other factors are affecting your credit, which can be helpful for your own information… as well as for teaching your kids about finances.)

The survey is a self-assessment, but it could indicate a significant difference in financial confidence between kids whose parents introduce them to the lifelong responsibility of managing one’s money.

Beyond talking to kids about money, it helps when parents talk to each other about finances (this section of the results is based only on responses from married adults with children ages 8 to 14). They’re not just having casual chats about the household budgets, either — kids whose parents argue about money were much more likely to say they understand things about personal finance than kids whose parents don’t discuss or argue about money.

For parents wanting to raise financially informed children, it seems to come down to your own knowledge of and involvement with personal finance. The more you know, the more your kids will know — if you talk to them.

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How I Repaired My Own Credit

George M. knew his credit was bad. But how bad? He wasn’t sure. But in June 2014 he decided to find out, so he ordered his free annual credit reports and requested his free credit scores (available online as part of Credit.com’s free credit report summary, and elsewhere).

As he expected, it wasn’t good. Child support, a tax lien and collection accounts made up the bulk of his report, and a credit score of 520 reflected that.

But instead of just giving up, he decided to see what he could do to turn it around.

First he tackled the child support. His report listed a $168,000 child support case. Although there was a zero balance and it noted “paid as agreed,” he wanted it off his reports. Additionally, his driver’s license had been suspended for some time. He contacted the state, and a week later received a letter indicating that his driver’s license had been reinstated. Then he disputed the item with the credit reporting agencies (CRAs) and it disappeared from his reports.

Next up: a tax lien for $13,800. “I allowed time to pass with the IRS,” he wrote in a comment to the Credit.com blog. “…the IRS only has 10 years to collect a tax debt and after that they can’t collect a penny. There are a few scenarios to avoid but they only have 10 years. I requested a ‘Removal of Federal Tax Lien’ from the IRS and got one. I took that to the Clerk of Court, had it registered in the public system, disputed it with the CRAs and they removed the item.”

Next, he turned his attention to the collection accounts. He had several collection accounts on his reports, as a result of medical bills after a visit to the ER a few years prior. He says he reached out to the collectors and politely offered to settle them in exchange for getting them removed from his credit reports. There was some back and forth involved, and he refused to pay until he received confirmation in writing that the accounts would no longer be reported once he resolved them.

“Every one of the debt collectors accepted, and I paid them, and within 30 days all four were removed,” he wrote. (There was one exception — a collection account that appeared on only one of his reports. He didn’t believe it was legitimate and so he wrote to the credit reporting agency, insisting on proof that he owed the debt. It was removed.)

With these negative items off his reports, his scores jumped to 640.

He knew that removing negative information from his reports was only the first step; he needed to build some positive credit references, as well. He started by getting a secured credit card from Capital One. With a $300 deposit he got a card with a $300 limit. Six months later, they raised his limit by $300 and his credit scores rose about 35 points. He then applied for a Chase Freedom card. “I didn’t think I would get it,” he says, but he was approved, with a credit limit of $1,200, no annual fee and 15 months at 0% interest. (You can read our full review of the Chase Freedom card here.) Again his credit scores rose. Finally he applied for a Discover It card and was given a credit limit of $1,250. That card also carried no annual fee and no interest for 14 months. (This guide explains options if you are looking for credit cards when you have just fair credit.)

“I decided that’s enough,” he says with a laugh.

Less than two years into the process, his credit scores are in the high 600s and low 700s, depending on which report and score is used. (There is still an outstanding issue on one of his reports that he is trying to resolve.) He expects them to be at around 715 the next time he checks.

“I am living proof that you do not have to wait seven years for things to be removed once educated on how their system works,” he wrote. He’s a regular reader of the Credit.com blog, and more importantly, he’s applied what he’s learned. “Education is a parrot, knowledge is power,” he says.

He’s proud of what he has accomplished, as he should be. In just over a year he has gone from bad to good credit, and things are only looking up from here.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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This article by Gerri Detweiler was distributed by the Personal Finance Syndication Network.

How to Make Sure Your Dream Home Is a Good Investment Too

You’ve probably heard real estate can be safer than the stock market, while still yielding decent returns. This can be true, but adding real estate to your portfolio is very different from investing in stocks, bonds and certificates of deposit. Finding success in the housing market often requires being able to find good deals and ripe opportunities. Check out some tips below to help you launch your housing market investment career.

1. Assess Your Goals

It’s important to check your credit and have your finances in order before you get into the housing market. (You can get a free credit report summary from Credit.com to see where you stand.) If you are struggling to make your own mortgage payments, real estate investment might not be the right move. But if you are willing to put the time in to research a good location and deal, crunch numbers to test a property’s financial potential, and can manage the maintenance needed, then it might be a good fit for you. Just be sure you know what you are looking to gain from the experience and understand what it will take to get there.

2. Know the Market

It’s a good idea to spend some time learning about the process of real estate investing. Real estate rules vary by state, so it’s important to know about the state you are looking at. You can read books or ask a local real estate expert.

3. Consider Multiple Buying Sources

You can look beyond the local Multiple Listing Service (MLS) to find homes available for purchase. With your criteria set you can check the newspaper, Craigslist and real estate auction sites for properties that match what you are looking for. You can also find good opportunities through word of mouth.

4. Find a Good Real Estate Agent

Not all real estate agents have experience or know how to help investors find the right type of properties. Before the real estate crash, only a small percentage of real estate professionals would even work with housing investors. As the market slowed, more became open to the idea and some have even taken courses to understand the ins and outs. It’s a good idea to choose a real estate agent who has sold several investment properties and understand your goals as well as the ideal ROI (return on investment).

5. Play by the Numbers

If you are investing in real estate to increase your net worth, it’s a good idea to make sure it’s part of a balanced financial plan. Whether you are trying to build up a retirement fund or eventually replace income from a traditional job, it’s important to make sure the choices you’re making continue to fit into that plan. You may find you need to hold onto a home you intended to flip, if repair or closing costs were more than expected. In this case, you can consider renting it out until you are able to sell for the profit you are aiming for. Likewise, if you were planning to rent out the property, but someone offers you more than expected to buy it, you may want to sell and move onto the next property. It can be a good idea to let your goals and the numbers be your guide.

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This article originally appeared on Credit.com.

This article by AJ Smith was distributed by the Personal Finance Syndication Network.

5 Ways to Find Deals at the Farmers Market

Do you like fresh food? Of course. Do you want to get outside and meet some local people when the weather’s nice? I know I do. From May through November, farmers markets pop up in cities and towns across America. Farmers and artisans gather to sell everything they have to offer to eager members of the community.

Food costs are one of the most common budget breakers, and farmers markets can help you get fresh, local produce at low prices to help you stretch your grocery budget.

If you find yourself attending one sometime soon, be sure you get the most out of your experience by following these tips for shopping at farmers markets.

1. Scan & Plan

Unlike a trip to the supermarket where you know where the things you need are, it’s important to shop around at a farmers market to get the lay of the land. Make a pass through to check on quality and price before you start buying. Vendor location and product availability will vary even at your regular spot. Looking around also gives you the chance to think over your budget and meal plan for the week so you can make a more concentrated list.

2. Consider Your Timing

Your local farmers market selection may be limited to what is in season, so it’s a good idea to learn what grows in your area during every season ahead of time. You should also talk to the vendors about what will be coming to the market in upcoming weeks so you know what to expect. Also keep in mind that the earlier in the day you show up, the better the selection will be. While coming later in the day often means getting deals on the items vendors are looking to unload, you may not have the best selection. It’s a tradeoff.

3. Come Prepared

Being prepared can help big time when it comes to the farmers market. Try to bring cash, especially small bills. (Even though more and more vendors can accept credit and debit card payments.) It’s also a good idea to have some heavy-duty reusable shopping bags and even a cooler to keep your stash fresh. This is better for the environment, helps the farmers’ low profit margins, and helps you avoid spilling or crashing your items on the sidewalk on your way out.

4. Buy in Bulk

The best deals often come when you work in volume — meaning you can get the best flavors and prices by buying in bulk whatever is at its harvest peak. Even if you don’t like to can your produce, you can follow some new recipes and freeze (or dry) anything extra. You will thank yourself now for the low price and later for the ready-made meal.

5. Ask Questions

The same people who grew the produce and raised the livestock for the meat they are now selling usually staff market stands. They are the most knowledgeable people about where your food came from and can be a great source for new and interesting recipes or uses. Take a few minutes to chat and ask any question you may have.

Attending a farmers market is generally an easy way to shop locally, but if you’re not careful, you can leave dazed or frustrated with bags of too many items and having spent more than you intended. Check the USDA or Local Harvest website to find the local markets near you and be sure to follow these tips to maximize your experience.

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This article by AJ Smith was distributed by the Personal Finance Syndication Network.

The Average New Car Payment Is Inching Closer to $500 a Month

It seems logical that buying a used car would be generally more affordable than buying a new one, but that cost gap has grown recently, making used cars increasingly appealing to budget-minded consumers. The difference between the average monthly payment for a new car and that for a used car was $122 in the second quarter of this year, the largest that gap has been since Experian started publicly sharing those figures in 2008.

Consumers making loan payments on new cars paid an average of $483, compared to the $361 coming out of the pockets of used-car drivers. That difference adds up to a lot over the life of a loan, even when you consider the fact that used-car loans generally carry higher interest rates than new-car loans: The average interest rate for used-vehicle loans was 9.1% in the second quarter (up from 8.8% in Q2 2014), and the average interest rate for new-vehicle loans was 4.8% (up from 4.6%), according to the report.

Of course, used-car buyers generally finance a smaller sum than those buying new cars, which contributes to the payment difference, but new-car buyers are more likely to stretch their loan payments out over a longer period of time, which actually brings the average monthly payment figure down. In the second quarter, loan terms of 73 to 84 months (about six to seven years) made up 28.8% of all new car loans (a 19.7% increase from the same time last year), whereas terms of that length made up 16.1% of used loans (a 14.8% year-over-year increase). A lower interest rate won’t help you save much if you’re dragging repayment out for many years, racking up interest along the way.

“Used vehicles will save consumers in both overall financing as well as typically a lower monthly payment,” said Melinda Zabritski, Experian Automotive’s senior director of automotive finance, in an email to Credit.com. “The gap is primarily driven by vehicle price. Average MSRP (manufacturer’s suggested retail price) on a new vehicle is over $30K while average value of used vehicles is significantly lower.”

Car buyers need to consider a variety of factors when purchasing a vehicle, but affordability is huge: If you can’t make your car payments, not only will you damage your credit (which can make it more difficult for you to get a loan for another car, among other financial ramifications), you also risk having your car repossessed. Losing your main mode of transportation could cause you many other problems, so it’s important to prioritize affordability when car shopping.

Another key to saving money on a car loan is to improve your credit score as much as possible before applying for a loan. People with good credit tend to get lower interest rates, while bad credit can end up costing you a lot of money through the years you’re paying off the loan. It’s a good idea to go into the process knowing where your credit stands, and one of the ways you can get your credit score for free is through Credit.com. Checking your score regularly allows you to go into the carbuying process more prepared and gives you time to improve your score before buying a car, if necessary.

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This article originally appeared on Credit.com.

This article by Christine DiGangi was distributed by the Personal Finance Syndication Network.

Here’s How to Buy a House Without a 20% Down Payment

If you’re thinking about buying a home, you may need less money than you think. Here’s how to figure out the amount of cash you need to buy a home, and what you can do to buy a home using as little money down as possible.

Contrary to popular belief, you don’t need 20% down. The minimum down payment you need to buy a home is 3.5% down with an FHA loan on a 30-year fixed-rate mortgage. This 3.5% down payment is a factor of the home price on a loan size up to the high-balance FHA county loan limit – which in most places is $417,000. However, it can be higher depending on the area. For example, in Sonoma County, Calif., it’s up to $520,950, and in some higher-cost areas, such as Marin County or San Francisco County, that number goes up to $625,500 for a single-family residence.

Alternatively, on a conventional loan you need only a 5% down payment on up to a $417,000 loan size. Should your loan size exceed $417,000, another 5% down payment kicks in, for a total of 10% down needed all the way to the maximum conforming loan limit in your county.

What to Expect When Buying With Little Money Down

First, if you’re buying a home with less money down, know that your mortgage payment will be higher than if you put more down. The three drivers that inflate a mortgage payment are: interest rate, larger loan size, and private mortgage insurance.

You should have manageable monthly debts — including credit cards, car loans, and any form of payment obligations — in relation to your income. Your income will need to be high enough to include the proposed mortgage payment for the purchase price you are seeking, as well as being able to cover your other debt payments.

The down payment percentages are important to know, though it is significantly easier to work with the monies you have or have access to, than to get wrapped around the axle about down payment percentages. Make no mistake, the mortgage company can work this calculation out for you very easily, or you can do it yourself. You can take the amount of money you have and divide that number by the purchase prices in your area to determine the exact dollar percentage.

Let’s say you have $30,000 to spend on buying a home and you know that housing prices in your area are $450,000. That means you have a 6.7% down payment, enough for an FHA Loan. If your loan professional asks you how much money you have to spend on buying a home in terms of your own funds and possible gift funds, the answer should be some sort of dollar amount, not “How much do I need?” The reason is this: How much you’ll need to buy a home is going to be predicated on the purchase price of the property and is a continual variable until you get into contract. Start with the monies you have. Assuming you have $30,000 to spend on a $450,000 home example, closing costs on a $450,000 home will easily equate to $10,000, so of the $30,000, $10,000 would come right off the top for closing costs leaving you with $20,000 as a down payment, still meeting the cash to close requirements on an FHA loan.

No-Money-Down Options

• The VA loan program allows for no-money-down, 100% financing, for U.S. military veterans only.
• The USDA loan program also allows for no-money-down, 100% financing, as long as you are purchasing a home in a rural area and you meet the USDA’s annual low-income thresholds.

Other Sources of Money

Alternatively, gift monies can be used to purchase a home. Typically, lenders like gift monies to come from a blood relative, but check with your lender for specifics. Here are additional funds that can be used for the acquisition of a home, though they each come with their own individual downsides and may not be a good fit for you. Consider all of your options:

• Stocks, bonds, IRA and 401(k) monies can be pulled from these accounts to purchase a home, usually with special provisions.
• Gift money, as long as it can be documented in some form of a bank account can also be used, along with an executed gift letter.
• Selling of personal property — a boat or a motorcycle, for example, can be used for a down payment and/or closing costs — documented with a bill of sale and paper trailing of the funds.
• A security deposit refund on you current rental obligation can also be used, but needs to be planned for on the front end so as to properly communicate timeframe expectations with your landlord.
• Tax return refund.
• Cash can be used as long as the funds have been seasoned in some form of a bank account for the past 60 days.

If want to buy a home or want to get on the path of doing so in the future, here are some steps to consider to help meet this goal:

1. Identify what monies you have in the bank now, and from what sources.
2. Next, get “read” on what housing prices are like in your area, through online research or connecting with a good local real estate agent
3. Take the amount of cash you have and divide that figure by an estimated sales price range in your area so you can get a feel for how much cash you will need to purchase XYZ home. Closing costs become another crucial factor, but the main goal is determining if you have enough cash to play with. Based upon these action steps, talking with a mortgage lender about getting qualified or how much money you’ll need to save in the longer-term picture can be a prudent step in making your future home purchase a success.

Another factor that can affect how much home you can afford is your credit score, because that is a major factor in determining your interest rate. Checking your credit at least several months in advance of starting the home buying process can show you where you stand and help you consider whether you should take steps to improve your credit in the coming months. You can get your credit reports for free once a year from AnnualCreditReport.com, and there are many ways to get your credit scores for free, including through Credit.com.

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This article originally appeared on Credit.com.

This article by Scott Sheldon was distributed by the Personal Finance Syndication Network.

Easy to Start Pet Businesses

It’s a staggering number. The American Pet Products Association estimates that pet owners will spend over $60 billion on their pets in 2015. Owners love their pets and don’t mind spending money on them. If you need extra income, or a new career, you can profit from pet ownership.

As the former owner of a pet grooming business, I know how profitable it can be. Most pet businesses require little or no education, are easy to learn, and only require three things: a love of animals, a strong desire to learn, and dependability. If you have those traits, a pet business might be your solution to extra income or permanent employment.

From experience, I can say that pet owners are always looking for reliable, trustworthy individuals to care for their pets. Those traits can be parlayed into different types of businesses. Selling pet products can boost income, too. If this sounds interesting, check out these ideas:

Pet grooming – By shadowing other groomers and studying books and tutorials, pet grooming can be easily learned. By combining patience and practice, you can become a confident, trustworthy groomer. Get started by learning the basics and then practice, practice, practice. By practicing on pets of family members, friends, and those at local shelters, it’s easy to get plenty of practice. When you feel confident, open your own business. It can even be a great home-based business. Some states may require certification, fees, or special permits; check with yours.

Pet sitting – Many pet owners search for a dependable, trustworthy sitter. Pet sitting can be done in their home or yours. If you choose to sit in your home, it may require additional kennels, crates, and possibly outdoor fencing. If you already have existing fencing, that’s a plus. A safe environment is a necessity when pets are in your care. Just remember that all pets need proper vaccinations to ensure the safety of others. Once pet owners trust you, they will return for repeat business.

Pet bakery – If you love to bake, why not parlay that into homemade treats for your four-legged friends? While research is necessary to ensure safe ingredients, little else is needed. You can sell your yummy treats at flea markets, fairs, and festivals; you can even consider an online store. Only your imagination will limit the flavors and shapes you can bake.

Pet jewelry – Love making jewelry? Then customize jewelry to reflect different breeds. By creating necklaces, bracelets, and earrings of favorite breeds, you can profit from the public’s love of jewelry and pets. Just like pet treats, items can be sold at flea markets, fairs, festivals, and online. With a creative imagination and good skills, ideas are limitless.

Do-It-Yourself pet grooming store – Yes, these can be profitable. Some pet owners love bonding with their pet during the grooming and bathing process; however, they don’t enjoy messing up their home. Your facility would provide safe bathing options, grooming tables, clippers, cleaning products, etc. The pet owner pays a fee to use them. It’s as simple as that. You’re earning money without doing the hard work. Just know that it’s hard work keeping the facility clean and free of bacteria. Make sure to implement safe cleaning practices to ensure the safety and health of pets and pet owners.

Dog walking business – Many pet owners feel guilty leaving their pets for long hours each day. You can profit from that guilt. A strong leash, a good collar, and a good pair of walking shoes are all you need to get started. Post flyers everywhere to let folks know about your new venture. You can even distribute business cards to local vets, shelters, and pet stores. Charge by the hour or walk.

Dog training – Do you have unlimited patience? Are you good at training your own pets? Then you may want to consider being certified as a pet trainer. Once certified, many pet owners will request that you come to their home to train in the pet’s environment. Start-up cost is low and can be profitable if you’re able to rid pets of problem habits.

While start-up costs can vary, many pet businesses can start small and grow over time. Each state may require different permits and fees, so check with your county and state offices before moving forward. Be aware that you may need insurance and/or bonding, too.

Your love of pets can boost your income, while giving you great satisfaction. With little training and low startup costs, pet related businesses are booming. By choosing the right pet business for your personal needs, you can easily boost your income and possibly find a new career.

Kelli is a freelance writer who lives on a small horse farm in the North Carolina foothills. She lives with her husband, horses, dogs, and bossy cats; her hobby is saving money. Today she’s sharing her writing with TheDollarStretcher.com. Visit today for 10 ways to save on pets.

This article by Kelli Clevenger first appeared on The Dollar Stretcher and was distributed by the Personal Finance Syndication Network.

Will Taking a New Job Hurt My Homebuying Chances?

A reader asked us recently how much impact an unanticipated job change could have on his ability to get a mortgage.  “I found a better job,” he wrote. “How does this affect the loan?”

We asked Scott Sheldon, a senior loan officer in Sonoma, Calif., and a Credit.com contributor, and he said the answer could depend on what kind of job, and whether it involves a relocation.

The best-case scenario, Sheldon said, would be a job in the same field with the same pay structure. So, if you’ve been working as, let’s say an X-ray technologist at a hospital, and you take a similar job at a medical office, it’s probably not going to affect your mortgage. But if you’ve been working as an X-ray technologist and you get a new job as a kindergarten teacher, it might. By the same token, if you’ve had a regular, salaried job (with a W-2) with a hospital and you switch to a freelance (1099) position, your mortgage lender may have some concerns.

If you’re moving from a freelance to an hourly (or salaried) position, Sheldon said it would likely be no problem at all. What would likely be more of a challenge is getting a lender’s approval when you’re changing fields. Big changes or uncertainty can make lenders skittish.

Sheldon said the very most important thing is to keep everyone involved in the transaction aware of what’s going on. No one wants a surprise at the closing table. “What you should do is tell the loan officer when you get into contract or as soon as you know exactly what might happen so they can best position you for success,” Sheldon said.

Chances are, buying a home is no impulse decision, and you’ve worked long and hard to make it happen. You probably saved a down payment, and hopefully, you checked your free annual credit reports and were careful to maintain or improve your credit so that your mortgage application would be approved and you could qualify for desirable terms. (You can get your credit scores for free on Credit.com to see where you stand.)

And if a great job opportunity comes up near the end of the process, you don’t want it to jeopardize your chances at homeownership — nor do you want the pending closing to ruin a career opportunity. In the same way, you’ll want to be calm and deliberate about changing jobs or careers while you’re completing the final steps toward homeownership. Our reader indicated he had already accepted the better job and planned to start work soon.

Accepting a job before knowing how it could affect your loan approval carries risks, particularly if you are relocating, taking a pay cut (so that you might have trouble qualifying for a mortgage), changing fields, or moving into a job with an irregular income. So the very best course is to keep your lender informed every step of the way. They may tell you something you don’t want to hear, but they are also motivated to make the deal work and should be able to advise you accordingly.

Whether that results in your closing earlier or making the job switch later, you’ll want to be confident that closing will go smoothly.

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This article by Gerri Detweiler was distributed by the Personal Finance Syndication Network.

4 Credit Cards That Give Back

Rewards credit cards are incredibly popular due to the points, miles or cash back offered to cardholders. But ultimately, there is another type of compensation that some people will find even more rewarding: a donation to a cause they believe in.

There are three ways that cardholders can use their credit card to donate money directly to a charitable organization. First, there are some cards that are co-branded with charities, which raise proceeds for those organizations. Then, there are other cards that offer cash-back rewards that can be donated directly to select charities. Finally, you can always charge a charitable contribution to your credit card, but in most cases the charity will not benefit from 100% of your donation as it will have to absorb a roughly 2% to 4% merchant fee. Thankfully, at least one credit card issuer is now disbursing donations without imposing those merchant fees on charities.

So if you want to use your credit card rewards to give rather than to receive, consider one of these four credit cards that can help you give back.

1. Susan G. Komen Cash Rewards MasterCard From Bank of America

This card offers rewards for both the cardholder and the Susan G. Komen Foundation, the largest and most widely known breast cancer organization in the U.S. For each new Pink Ribbon BankAmericard Cash Rewards MasterCard, the Susan G. Komen foundation receives a $3 donation and a further 0.08% of the purchases made with the card. Komen also receives another $3 for each credit card renewed renewed each year that is in good standing and does not have a zero balance at the time of the renewal.

New cardholders earn $100 in cash back after making $500 in purchases within 90 days of account opening. Cardholders also receive 2% cash back at grocery stores and 3% cash back on gas purchases for the first $1,500 in combined grocery store and gas purchases each quarter, as well as 1% cash back on all other purchases. There is no annual fee for this card.

2. World Wildlife Fund From Bank of America

Bank of America will donate $5 for each new credit card account, and another $5 donation when a card is renewed. Furthermore, the World Wildlife Federation receives a donation worth 0.25% of all retail purchases. Cardholders themselves earn a $100 cash-back bonus when they make $500 in purchases within 90 days of account opening. In addition, customers also receive 2% cash back at grocery stores and 3% cash back on gas purchases, for the first $1,500 in combined grocery store and gas purchases each quarter, as well as 1% cash back on all other purchases. There is no annual fee for this card.

3. Discover it

Discover has partnered with several charitable organizations to allow cardholders to donate their cash-back rewards directly. Participating charities include the American Cancer Society, the American Red Cross, Junior Achievement and the Make-A-Wish foundation. In addition, Discover donates an additional contribution each year to the charity that receives the most donations from its cardmembers.

The Discover it card offers 5% cash back on up to $1,500 spent each quarter at select categories of merchants and individual retailers, as well as 1% cash back from all other purchases. There is no annual fee for this card. The card currently comes with two promotional offers — the first offers 0% financing on new purchases and balance transfers for the first 12 months, and the second offers 0% financing on new purchases for 6 months and balance transfers for 18 months. (You can read our full review of the Discover it card for more details.)

4. Capital One Quicksilver Rewards

Capital One offers its No Hassle Giving Site that allows customers to use their cards to make donations to nonprofits affiliated with The Network for Good, which includes more than 1.2 million verified charities. And unlike other charges to your credit card, these charitable organizations will receive 100% of your donations, without incurring the costly merchant transaction fees that other retailers must pay.

The Capital One Quicksilver Rewards card is one of their top cash-back reward credit cards, although it offers others. New applicants can earn a $100 bonus after spending $500 within three months of account opening, as well as 1.5% cash back on all purchases. There is no annual fee for this card. (You can read our full review of the Capital One Quicksilver here.)

All four of these cards require good to excellent credit. So even if your heart is in the right place, you will qualify only if your credit is also in the right place. (If you aren’t sure where you stand, you can check a free credit report summary from Credit.com.) It’s smart to apply only for credit you feel reasonably confident you’ll be approved for, because every inquiry made for the purpose of extending credit can temporarily knock a few points off your credit score. However, checking your own credit does not affect it.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

 

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This article originally appeared on Credit.com.

This article by Jason Steele was distributed by the Personal Finance Syndication Network.

What Exactly Is a Pension?

Pensions and retirement aren’t just for old people to worry about. Whether you are starting your first job or counting down the last few days in your office, understanding retirement account options can be the difference between the future you want and years of regret. The first step is getting a grasp on your needs and expectations — use a retirement calculator to see how much money you will need to save. Then you can make a plan and get to work, knowing both how much you need and what it will take for you to get there.

How Contributions Work

The main difference between pensions and retirement plans is who puts up the money. A pension is employer-funded and used to be the standard benefit for a lifetime of work, but now has been largely replaced by plans primarily funded by employees. Pensions are “defined benefit” programs, meaning an employer sets money aside into an investment vehicle that then pays benefits to retired employees based on a combination of how long you worked for the company, your income while working and your age. A retirement account like a 401(k) is a “defined contribution” program and you put your own money into these, sometimes with employer contributions and matches. You put in a certain amount but how much you get out will depend on how the market and your investments perform.

Pension Basics

Pension plans provide a set level of income in retirement from money that your employer has set aside and invested on your behalf. You may receive this income in a lump sum or regular payment through an annuity. Some plans allow benefits to transfer to surviving dependents in case of your death. With a pension program, you don’t participate in the management of your funds — which can be good because you don’t have to worry about it but bad because you are vulnerable to investing mistakes your employer might make. You also may not receive any benefits from your pension if you don’t stay with your employer until your benefits “vest,” so pay attention to your vesting form and schedule. You should also be aware that pension income is taxable because it grows tax-deferred during working years, and it could affect your Social Security eligibility.

401(k)s & IRAs

Pensions were very popular in the past, but defined contribution plans now dominate the landscape. In fact, the private sector has largely replaced pension plans with the 401(k). The money you and/or your employer put into your plan regularly accumulates and earns interest from investment, providing a nest egg. Like a pension, a 401(k) grows tax-deferred, but unlike a pension, a 401(k) does not guarantee a certain income in retirement. There are also individual retirement account options that you can open apart from your employer. Some employers now also offer Roth 401(k)s, which are funded with after-tax money.

When it comes down to it, the most important part of retirement planning is starting early and saving often. The last thing you want to do is to go into debt in retirement because you didn’t plan well. The more you know about your company’s plans as well as the best way to set aside and grow money on your own, the better you can get prepared and the happier you will be when the time for retirement finally comes.

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6 Things to Consider When You Start Paying Your Student Loans

If you’re like many recent college graduates, you live in fear for that day when your first student loan payment is due. Given that the average graduate has more than $30,000 in student loan debt, it’s understandable that you might worry about how you’ll pay it all back.

But paying back your student loans doesn’t have to be scary and you don’t have to lose sleep over it. To prove that, I asked Nate Matherson how he’s planning to tackle it. At just 21, Nate is the co-founder of LendEDU, an online marketplace of student loans and student loan refinancing providers. He says he started the business because both he and his co-founder had private and federal student loans and wanted to help other students by creating more transparency around student loans.

He shares with me six student loan repayment tips that recent grads should consider.

1. Get to Know Your Loans

The first tip that Nate has for recent graduates is that they get to know their loans. “Consider building a simple spreadsheet with each of your student loans catalogued,” he says. “You should figure out what type of loans you have, the interest rates, the term lengths, and the amount owed on each loan.” Knowing as much as possible about your loans is key because if you have federal and private loans at various different interest rates it will help you figure out which loans to allocate more money to so you can pay those down faster. Nate suggests that, “If you are able to make additional principal payments, start by paying off the high-interest loans first. And, make sure that your servicer is actually applying your additional principal payments correctly.”

2. Consider Auto-Pay

Auto-pay can be an easy way to save money. All you have to do is set up your student loans so that they’re automatically paid every month from your bank account. The key here, of course, is to make sure you have the money in your bank account to cover the auto-payments each month — otherwise you risk overdraft fees. Enrolling will save you up to 0.25% in interest. Over the life of your loan, that adds up. An added bonus, according to Nate, is that auto-pay, “will ensure that you won’t forget to make any payments.” Paying your loan late is the last thing you want to do since it will cost you in late charges and will negatively impact your credit score. (If you want to see how your loans and payment history affect your credit, you can get your credit score for free from many sources, including Credit.com.)

3. Understand Deferment & Forbearance

If you’re approaching your repayment period and you aren’t currently employed or if you are experiencing financial difficulties, you might be considering deferring or forbearing your student loans. Both deferment and forbearance are ways to pause payments on your student loans if you meet the criteria in order to qualify. “I can’t recommend that anyone choose to put their loans into deferral or forbearance unless they absolutely need to,” Nate says. “Depending on the type of the loan, interest will accumulate during periods of deferment and forbearance. In turn, the cost of your loan will rise.” If you’re considering one of these options, you can contact your loan servicer to see if there are other repayment options that can accommodate your current financial situation.

4. Look for Chances to Increase Your Payments

The longer it takes for you to pay your students loans, the more you’ll be paying in interest. That means that when you start making enough money that you can comfortably make your student loan payments, consider whether you can increase how much you pay every month. According to Nate, “If you have the ability to make additional principal payments each month, you should. If you find yourself paying 6%-9% in interest you can save yourself a lot of money by paying your principal off on an accelerated schedule.” If you want to pay off your student loans faster to escape the bondage of student loan debt more quickly, there are ways you can cut back on your expenses or start a side hustle to help.

5. Consider Refinancing

Refinancing your loans early in your repayment period can have the greatest impact in terms of reducing what you pay in interest over the life of the loan. It also can give you greater flexibility in terms of repayment terms and interest rates if you have a good credit score and can qualify for a better rate. Says Nate, “Most student loan refinance lenders offer five-, 10-, 15-, and 20-year term lengths in both variable and fixed rates.” It’s important to take time to figure out what terms or types of interest rates are right for you depending on how quickly you want to pay back your loans. It’s important to remember that extending the repayment period on your loan may raise your total cost in the long run too, even if it lowers your monthly payment right now.

If you’re considering refinancing federal student loans, make sure you know how that could affect your eligibility for government relief programs, and whether the refinancing lender offers any similar assistance if you encounter financial difficulties down the road. You might think that all student loan refinance lenders are the same, but that couldn’t be further from the truth. Be sure to read the fine print of any loans you’re considering.

6. Choose the Right Federal Repayment Plan

When it comes time to choose the right federal repayment plan, there are several different options. From Income Based Repayment to the Standard Plan, you might wonder which is right for you and will save you the most money. According to Nate, “at the end of the day, choosing a repayment plan is different for every borrower. Whether you are looking to pay back your loan quickly, or over a longer period of time, there is definitely a package that fits your financial objectives.” As a rule, payment plans that extend the length of your loan or reduce your monthly payments will end up costing more money over the course of the loan since you’ll be paying more interest. But having a lower monthly payment now might be worthwhile for you if you can’t afford a larger payment. Nate advises that you, “ask yourself what is important to you and your goals. Then, choose the repayment plan that aligns with those goals.”

Knowledge Is Power

Paying back your student loans doesn’t have to be a frightening process. While it can seem overwhelming, the more you know about the process the more confident you’ll feel about it. Before your repayment period begins, be sure to get all the facts and consider the tips above to ensure that you’ll be ready to pay off your loans as quickly and painlessly as possible.

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This article originally appeared on Credit.com.

This article by Amanda Reaume was distributed by the Personal Finance Syndication Network.

Can I Share a Credit Card With Someone?

We now have car sharing, house sharing and even job sharing via the so-called gig economy, so some people might be wondering if they can you share their credit card. There are ways you can share your credit card, but these options range from savvy to risky.

Adding an Authorized User

The easiest way to share a credit card is to add an authorized user to your account. All credit card holders have the ability to request additional cards for others to use, typically family members or employees. And with the exception of a few premium credit and charge cards, there is no fee for doing so. Once their card is received, authorized users will have the ability to make purchases (and authorize returns), but not to dispute charges, make changes to an account, or redeem rewards. Further, authorized users are not responsible for repaying the debts that they incur. They will, however, benefit from your credit history and score. And conversely, if you are late paying the bill or carry high debt on the card, their credit could suffer as a result. (If you’re not sure what your credit is like, you can check your free credit report summary at Credit.com.)

So by making someone an authorized user, you are granting that person the power to exhaust your line of credit, without any of the responsibility of repayment. That’s a risk some people find is worth taking and others don’t — you just need to understand what you’re signing up for when you add a user. As the primary cardholder, you are able to grant and revoke authorization of other cardholders in your account, but you will always be responsible for repaying their purchases. Thankfully, there are some small business credit cards that allow you to impose individual spending limits on your employee credit cards. (You can see our recent ranking of the Best Business Credit Cards in America here.)

Joint Account Holders

Another way to share your credit card is to become a joint account holder with another person, which is only offered by some banks and credit unions. Typically this arrangement is chosen by spouses who both wish to exercise all of the privileges of being a primary account holder. Being joint account holders means that both people’s credit is considered when applying for an account, and both cardholders are individually required to pay back all debt. This means that even if one person chooses not to pay his or her fair share, the other person is still responsible for making the entire payment, and both parties’ credit will be hurt in the event of a default.

Sometimes, people become joint account holders when one person cannot qualify for a credit card on their own, and another is asked to co-sign an application. This practice has become more common since the passage of the Credit CARD Act of 2009, which prevents card issuers from opening accounts for adults under 21 years old unless they can show a means to repay a loan. Unfortunately, some older college students will co-sign the applications of their younger classmates, and have therefore become joint account holders. Needless to say, this type of credit card sharing among friends is fraught with negative consequences as both people’s credit can be severely damaged if either does not make timely payments.

Loaning Out Your Card

Of course, the other way to share your credit card is just hand it to someone else and let them use it, which is especially problematic. First, the recipient may be asked to show primary account holder’s ID, or have his or her signature compared to the one on the back of the card. But even if successful, the signature on the receipt will be fraudulent. Finally, loaning out your credit card violates the terms of your agreement with the credit card issuer.

A better way to handle situations where you need to extend someone a little credit is to purchase a generic Visa, MasterCard, or American Express gift card. These cards are offered in several different denominations, or you can purchase a variable load card with up to $500 on it. You won’t put your credit at risk, neither will your friend, and you’ll be able to control how much you’re lending out.

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This article originally appeared on Credit.com.

This article by Jason Steele was distributed by the Personal Finance Syndication Network.

5 Reasons You Have a Bad Credit Score

A few questions for you: First, have you checked your credit score lately? If not, you might want to do that. It’s one of those habits that everyone knows they should do but often forgets to do until something bad happens — like how you only remember to floss after you already have a cavity.

If you haven’t checked your credit score recently, there are many ways to check your credit scores for free, including on Credit.com. It’s also a good idea to check your credit reports regularly for errors or other problems — and you can get those for free once a year from each of the major credit reporting agencies.

But if you have checked your credit score recently: YAY YOU. Did you like what you saw? If not, there are plenty of reasons your credit score may not be in as good of shape as you would like it to be. But that’s OK, because once you figure out what the issue is, you can get to work on taking care of the problem, and start to build stronger credit.

1. You & Your Spouse Never Talk About Money

If your finances involve more than one spender — i.e. you’re married, or you’re living with a significant other — you should talk about money things. When expectations are out of whack and there’s little communication about who’s handling what, things can get messy and expensive.

Make sure all your bills are paid, otherwise you may end up with collection accounts on your credit reports and damaged credit scores as a result. No matter how you share or divvy up financial responsibilities, you should still communicate about cash flow, because a lack of planning could put you in a situation where you fall into debt (or you’re already in it and haven’t started working your way out of it).

You each have your own credit scores, but don’t underestimate the impact the other’s habits could have on your credit file — if someone overspends, misses a payment or starts racking up debt, your efforts to find financial balance may have credit-score consequences.

2. You’re Disorganized

Tracking your spending is one of the best ways to stay out of debt. It’s easy to think you’re not spending beyond your means if you’re not budgeting, and maybe you are really good at estimating that stuff in your head, but more likely than not, you won’t realize how much things add up until you need to pay a credit card bill and you can’t afford it.

Even if you’re able to afford your spending, keep in mind that it’s ideal to keep your credit card balances as low as possible, relative to your credit card limit. That’s called credit utilization, and it has a huge impact on your credit scores.

Additionally, if you’re so disorganized you keep missing bill deadlines, you may find yourself with a collection account or two. It’s one thing to have a collection account if you really can’t afford to pay your bills, but it’s another if you can afford to pay but aren’t because you’re not paying attention to when they’re due.

3. You Just Don’t Care

Maybe you see your credit score, realize it’s not great and you’re reaction is, “Oh, well.” Perhaps it doesn’t seem worth the trouble of tracking your credit card’s balance-to-limit ratio or to minimize how frequently you apply for new credit, but in the long run, you may find yourself in a situation that requires you to have good credit.

Your credit score comes into play in your life more often than you might think. Yes, a good credit score is ideal if you’re applying for a mortgage or trying to buy a car, but it can also help you get lower insurance premiums, get a new smartphone or set up Internet without having to pay a large deposit. If you’re not sure what’s considered a good credit score, this guide can help you.

4. Someone Else Is Dragging You Down

This applies if you are an authorized user on someone else’s credit card or vice versa: The other person’s spending habits on that card also show up on your credit report as long as the issuer reports it. That can be good if that person is using the card responsibly, but if that changes, you may find yourself tangled up in their problems. It’s the same if you co-signed for a loan and the primary accountholder isn’t doing their part to keep the account in good standing. This is why it’s helpful to carefully consider the risks before you enter into such agreements.

5. You’re Underpaid

Income has no direct bearing on credit scores, but if you’re not making enough money to cover your necessities, it can put you in precarious financial situation. Even if you’re able to pay your bills right now, the slightest emergency or unexpected expense may leave you with little choice but to go into debt or let a bill go unpaid, which could lead to dealing with debt collectors.

People who receive small paychecks can have great credit, and plenty of wealthy people have bad credit, but it’s certainly easier to manage your finances if you have a steady, sufficient income.

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This article originally appeared on Credit.com.

This article by Christine DiGangi was distributed by the Personal Finance Syndication Network.

We’re Paying Off $47,000 of Debt. Here’s How

Steve and Jennie Silha ended up in debt the way a lot of young couples do: They had children.

Steve, 44, is a realist, and says the problem was pretty simple.

“It really came down to the fact that we decided that my wife would be a stay-at-home mom, but we spent like we had two incomes,” he said.

And after 15 years of raising two children, the Chicago-area couple found themselves with $47,000 of unsecured debt – most of it credit card debt — last year. That’s when they made a commitment to make a change.

“I’ll say that it came down to irresponsibility on the surface. We just made very poor decisions over the past 10 years,” Steve said. “We have decided to ‘grow up’ and take the debt on.”

That was the first step. Step two involved Steve taking a new job with a higher salary. That helped a bit. Step three involved changes to the way the family spends money.

“We cook at home more and haven’t taken a vacation like we usually do,” Steve said.

But the biggest step of all was Jennie, 43, deciding to return to the workforce. With a 15-year-old son and 11-year-old daughter, the timing was right. She began this month.

The couple has pledged that 100% of the income from her job in home health care will go toward reducing their debt.

So far, they have paid off about $7,000.

The new austerity measures haven’t left the family wanting more fun. Instead, their renewed commitment to paying off debt is a challenge that’s been good for their relationship, Steve said.

“Since June, we have drastically changed our lives — in many ways. Getting our financial life in order is one big way we are changing everything. It feels great. Paying off the first (credit) card was amazing,” he said.

The turning point came when the couple discussed declaring bankruptcy last year, Steve said. They had tried another debt reduction plan four years ago, but didn’t stick to it because they “hadn’t hit rock bottom” yet, he said.

“I think that was where we said, man, we are either going to destroy our personal financial life or we are going to fix this once and for all,” he said.

The key to success this time will be both increasing their income and lowering their spending, he said.   Doing only one or the other “is like trying to lose weight without lowering your intake of calories and working out to burn more,” he said. In addition to their new jobs, both Steve and Jennie have side jobs where they earn a little extra income. All that will go toward paying debt, too.

Steve hopes the positive changes will help teach his children about spending wisely and investing for the future.

“I talk to my kids every week — if not every day — about the dangers of personal debt,” he said. “While I hope they listen, I know the most powerful thing will be them watching Jennie and me pull ourselves out of this pit.”

There’s a long road ahead. Right now, Steve and his wife hope her income boost will make them debt-free within two years. But that will require sticking with the plan. Steve says he’s ready.

“I believe that so much of doing this … and anything else … is having the right attitude,” he said. “We finally decided that we had enough and are going to attack this debt with passion … we are both doing this as a team … this has brought us closer together. No doubt.”

Carrying a high percentage of credit card debt relative to your credit limits can have a negative impact on your credit scores. The poorer your credit, the more you tend to pay on interest rates which can cost you a lot more money over time. As you pay down your debt and build your credit, it can be helpful to track your progress. You can do that by getting your free credit scores – which you can do every 30 days on Credit.com.

Inset image courtesy of Steve and Jennie Silha

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This article originally appeared on Credit.com.

This article by Bob Sullivan was distributed by the Personal Finance Syndication Network.