As we near the end of another year, something that’s probably high on a lot of people’s minds is paying down debt. Escalating credit card debt may keep you up at night for fear that you’ll never be able to pay it off — but that doesn’t necessarily need to be the case.
Getting out of credit card debt requires three things. First, you need to fix your spending problem and live within a budget. That will prevent the debt from getting larger. Second, you need to put as much money as possible towards your debt every month to get out of debt faster. To accelerate repayment, you might want to live an especially frugal life, cutting all non-necessities and perhaps indulging in rice and beans. And third, you want to reduce the interest rate on your credit card debt as much as possible.
A simple solution to reducing your interest rate may be a personal loan, especially now when interest rates are so low (or at least lower than the interest you’re currently paying on your credit card).
Here’s what you need to know.
How It Works
Personal loans provide a simple way to borrow money. What we love most about this process is how many times we can use the word “fixed” to explain it. For personal loans, a bank will lend you money at a fixed interest rate, with a fixed payment and over a fixed period of time.
The problem is that banks don’t make a lot of money off of personal loans (at least not the way they do with credit card interest rates), so loans have not been widely available. But that’s where marketplace lenders can help.
Check out this video for more information on whether or not a personal loan is right for your specific financial situation.
How to Find One
You do not need to have perfect credit to get a personal loan. Although the best loans are available to people with scores above 700, you can still find good rates with a score as low as 600. Many personal loan providers use a soft pull, which doesn’t harm your credit score, to determine how much you can borrow and what your interest rates and fees will be for the loan. To get approved, you might need to need to provide paystubs, 1040s and tax returns to prove your income and employment. You’ll want to compare a couple different companies for fees, interest rate and APR (or the combination of interest rate and origination fee) to find the lowest/best option. If you think you might be able to pay off the loan earlier than the original term, you will want to get a loan with no origination fee and no pre-payment penalty.
As with most things in life, there are some things to consider before getting a loan. First, the cheapest way to pay off credit card debt in general is with a balance transfer to a card with 0% interest. However, if your credit is less-than-stellar or you have a lot of credit card debt, this may not be an option.
When you get a personal loan, you will pay off your existing credit cards. That means you could go out and spend again on those credit cards. If you don’t have the self-discipline to refrain from spending on the cards, you might want to cut them up.
It is impossible to borrow your way out of debt. Only use a personal loan if you have already fixed your budget and your spending.
I’m Ready for a Personal Loan, Now What?
Start with this tool. Input some of your personal information upfront (your credit score level, loan amount and whether or not you have a college degree) for immediate access to information about the best personal loans on the market today.
Taking positives steps towards paying down debt sure does feel good — and it doesn’t have to be hard. Check out personal loans today to see if they’ll work for you.
Suffice it to say 2015 was a big year for money — not just in terms of how we spend it, but how it’s managed by other entities, namely online dating services, healthcare providers and Uncle Sam. Here’s a look at the year that was in America’s finances.
1. Ashley Madison Gets Hacked
When millions of cheaters were exposed online, infidelity dating site Ashley Madison found itself in hot water. Most users weren’t worried about their credit cards being stolen, but their fidelity was broken and so was their reputation. Many couples wound up filing for divorce and other users even committed suicide. High-profile celebrities like Josh Duggar were also caught in the scandal. Said Lisa Sotta, a cyberlaw expert at Hunton & Williams: Extortion demands, which forced victims to pay for their valuable data, became noticeable during this hack and things will only get worse.
2. Gay Marriage Is Legalized
It was history in the making when the Supreme Court declared same-sex marriage was constitutional in June 2015. But as LGBT couples rushed to their local courthouse to file marriage certificates, they began to ask themselves the same questions straight couples have been asking for years: Can we afford to get married? Many in the LGBT community had never believed they’d ever get married, so the idea of planning a wedding took a major mind-shift — and a budget adjustment.
3. Anthem & Premera Are Hacked
Computer criminals stole a treasure trove from health insurer Anthem in February, putting consumers on edge. Not only did the info include names, birth dates and medical IDs/Social Security numbers, street addresses, email addresses and employment info were also taken. It was a recipe for serious identity crimes, wrote consumer advocate Bob Sullivan, including creating new accounts in a victim’s name, bypassing security measures, or in a worst-case scenario, resetting passwords. Not more than three months later, Premera Blue Cross suffered a similar cyberattack.
4. Startup Bros Post Ad for $500-a-Month Crawlspace
The world’s creepiest crawlspace hit the Internet by way of Craigslist on Dec. 15, marking a new low in San Francisco rental prices. For $500 a month, an eager startup employee could live with two 20-somethings — so long as he was willing to sleep an uneven dirt floor and keep his dresser “in the garage.” With median rent in San Francisco topping $4,354, per Zillow, it’s no wonder Craigslist took the post down.
5. Card Issuers Switch to EMV Chips
Okay, so this may have not been a money moment, but card issuers’ decision to eliminate cards with magnetic stripes for cards with fraud-fighting computer chips was still a pretty big deal. On Oct. 1, new rules went in effect making merchants not equipped to accept chip cards responsible for fraud. Of course, not everyone fell head over heels for the new cards. Some consumers were so annoyed, they began avoiding stores that require them.
Another New Year is upon us. Bring on another raft of resolutions I say! I mean, what would a New Year be in the absence of resolutions? As Aldous Huxley wrote in Time Must Have a Stop, “Hell isn’t merely paved with good intentions; it’s walled and roofed with them. Yes, and furnished too.” This year, I am advocating something simple: It’s high time we (as in all of us – business, government and consumers) stop making it so easy for scammers, phishers and identity thieves.
The best intentions can’t really stop these guys, but adopting a best-practices approach to data security can make your online world more secure. Here are some of the things you can do in 2016 to help avoid the living hell of identity theft and other identity-related crimes.
1. Change Is Healthy, Especially When We Are Talking Passwords.
A growing consensus in the data security community believes that passwords will be a thing of the past in the next decade or so, with new forms of authentication being developed and becoming main stream. But until that joyous day when you can throw your increasingly complex password recall system out the virtual window, please change your passwords regularly: Once a month at the minimum. Make them long and strong, develop your own system (perhaps using a favorite phrase at the core) or use a password manager!
2. Change Your User Names
Too many sites still allow (or require) you to use your email address as your user name. The problem with this is that the (arguably) most public piece of your personally identifiable information is, by very definition, not the most secure way to confirm to a site that you are the right person to gain access to your sensitive information. By using your email address (or name) as your user ID, you’re giving the bad guys one half of the front door key. Consider using a complex user name as part of your security protocol.
3. Tighten Your Privacy Settings
If you haven’t revisited your social media privacy settings in a while, you may be surprised how much has changed. Did you realize you were sharing your love of Michael Buble, profile pictures and birthdate with anyone and everyone? You can change that, and you definitely should.
Check (and tighten at every opportunity) your privacy settings on every site you use! Make sure only trusted contacts can see your posts.
4. Purge Your ‘Friends’
Having a ton of friends is one indication that you might be an awesome individual, but for those who believe more is better consider the possibility that someone you don’t know might be looking at you as their day job. Since most of us don’t (or at least shouldn’t) invite strangers to stay in our homes, why would we friend them online? (And yes, as I detail in my book, Swiped: How to Protect Yourself in a World of Scammers, Phishers and Identity Thieves, it can amount to the same thing when a skilled fraudster gets access to personal details about you.)
5. Tell a Few Lies
One way to throw a would-be scammer off the trail of your personally identifiable information is to be less than truthful. Here’s where you can truly benefit by making yourself seem younger or using any of the many things people lie about: Change your birthday, your hometown, schools attended, etc. (You get the picture—and by fibbing “they” won’t.)
6. Check Your Bank & Credit Accounts Daily
One way to stop (or at least to contain) fraud is to stay on top of things, and there is nothing easier these days than this so-called chore of monitoring your financial accounts. Set up daily reports and transaction alerts with your bank and credit card accounts. This makes checking your accounts part of the morning grind—or whenever you choose to have reports sent. You can also set up alerts that let you know about every transaction, big or small, or only monitor transactions above a certain threshold—all of it sent to a smart device or your email, thus making it easy to know what’s what at a glance.
Another option to help strengthen your identity defenses is the credit freeze. You can actually lock your credit, but don’t forget that you will need to unlock it every time you want to open a new line of credit or (for example) allow a current creditor to review your account for a limit increase. There can be a charge for freezing and unfreezing your credit, depending on your state’s laws.
9. Stop Using Public WiFi
Sure it’s convenient, but do you really need to pay your bills when using public WiFi? You truly never know who might be looking over your shoulder (actually, as well as literally) and is able to see the traffic on those accounts. The solution here is simple: Conduct sensitive business on a secure network because, unfortunately, “free access” could end up becoming very expensive.
10. Stop Clicking the ‘Remember Me’ Box
Let’s say your computer is lost or stolen. Do you have a security code protecting the device? Is it a long and strong password? Can you erase or disable the device using a user name and password entered from another device? Even so, there’s a chance that whoever finds (or takes) your computer can gain access to what it contains—including the various ways into your financial affairs. So, always type in all user names and passwords for financial accounts. Don’t let your computer auto-fill unless you’re absolutely certain it’s secure, and you use a good password manager.
11. Turn Off Geotagging
Several of us in the security community have been warning about this for years. Unfortunately, lots of people still leave location services enabled when using cameras, and it’s still a good way to provide a North Star for those who are looking to figure out how to better identify you, or where they can find you, your family or your valuables. Thieves spend hours every day on social media looking for things to steal, and if you post pictures of your prized possessions online, without disabling geotagging, you are handing a would-be thief all the information they need to show up at your door when you’re not at home and rob you blind.
12. Sharing Is Not Necessarily Caring — Share Less
No one really needs to see pictures from your vacation in real time, except of course the burglar looking to empty your home of its most valuable contents.
But that is not the only reason to avoid oversharing. A study in Science Magazine found that anonymized metadata sets used for research were re-identifiable with specific people using just a few data points provided by the people being re-identified. If you guessed that those data points came from social media, you’re right. Every meal you post from a favorite restaurant, or article of clothing from a must-have designer, is potentially correlated with a credit card transaction—from there it’s just a matter of the amount of time it takes a computer to find a transaction on a metadata set of purchases that matches your Instagram post.
Identity theft and other identity-related crimes are no longer something you need to think about from time to time. There is no avoiding every scam and fraudster out there, but you can make yourself a harder target. Only through a paradigm shift in the way we view data security will things change. Please consider and put into practice some of these suggestions and maybe in 2016 you can better avoid becoming a fraud statistic.
For many, New Year’s Day is time to take stock in the year that was and focus on how to make the coming 12 months even better. One way to do that is take a few minutes from the day and examine your finances. Here are five tips that can help you do the most to ensure a happier financial new year.
1. Make a Plan Pay Down Debt
If you’re among those carrying a balance on your credit cards, you may want to increase the amount you pay each month — especially if you’re only paying the minimum amount due. Credit card interest can add up quickly.For example, if you’re carrying a $5,000 balance on a credit card with a 16% annual rate and make only the minimum payment required to get out of debt eventually ($117 in this case), you will be debt-free in April 2021, paying $7,541 over the life of the debt. But by kicking in an additional $25 a month to that payment, you can be debt-free 1 year and 4 months earlier and pay roughly $750 less in interest (a total of $6,802 vs. the aforementioned $7,541). You can see how your current credit balances are affecting your credit scores by viewing your free credit report summary updated each month on Credit.com.
2. Review Your Retirement Savings Plan
If you have a 401(k) plan through your employer, consider increasing the percentage of your income you’re setting aside each pay period — especially if you recently received a raise. A 1% increase could help speed you toward your savings goal, and you won’t likely miss the funds. Also, take a look at how your funds are invested. If they’re in mutual funds with a high expense ratio, consider a lower cost option, such as an index fund or target date fund. If your employer doesn’t sponsor a 401(k) plan, consider opening a traditional or Roth IRA through a low cost provider. If you contribute to a traditional IRA before April 15, you may be able to deduct the amount of the contribution from your 2015 taxes.
3. Boost Your Emergency Savings
Scrambling to find cash when your car breaks down or the roof springs a leak is no one’s idea of fun. One way to alleviate the stress is to automate your savings. Ideally, you should have about six months’ worth of household expenses set aside, but, at first, you can start with a less lofty goal, say, $1,000. Then, set up an automatic transfer from the account where your paycheck is deposited into a savings account specially designated for emergencies. Alternatively, many employers allow you to deposit your pay into different accounts on payday, eliminating the need to set up a transfer. However you do it, you can start small and then increase the amount incrementally as you’re able.
4. Assess Your Regrets
Have a few? While it doesn’t pay to dwell in the past, taking few minutes to see how you could’ve better managed your money in the past year can help you think about better ways to manage your money in 2016. Changes could be something as simple as being better organized when you go grocery shopping. Compiling a list and searching for coupons, for instance, could help eliminate needless trips that waste both time and money.
5. Plan, Plan, Plan
We all have projects we’d like to complete in the new year, and now’s the time to think about which ones to get done. The beginning of the year can be a good time to find deals on any Do-It-Yourself supplies you may need for spring or summer projects. And it’s also a great time to reach out to home-improvement contractors for those plans that are beyond your skills — in a few months, they may be too busy to return your calls.
Between paying monthly bills and trying to dig out of debt, it may be hard to imagine an extra $100 lying around right now. But the truth is, at some point throughout the year, most of us will have a spare $100 to spend, whether it’s from a gift, a work bonus or some extra cash we’re bringing in from a side job.
Now — what to do with that $100?
Instead of throwing it away on something frivolous, MagnifyMoney’s co-founder Nick Clements — who spent years working in banking before launching his own small business — suggests some more financially gratifying things to do with it.
1. Open an emergency savings fund
If you don’t already have one because you never felt like you had the money to spare to open one, here’s where that $100 can come in handy. An emergency savings account is there to bail you out of a pickle (which we all get into) so that you don’t have to put stuff on your credit card and go into debt. Plus, some of the Internet-only bank savings accounts have decent interest rates, which means your money will earn you additional savings while you sit there and do nothing. Some might say it’s like turning down free money not to open one. (Check out this table for savings account options with the current highest interest rates.)
2. Put it towards credit card debt
Credit card debt is often surveyed to be thousands of dollars for the average American household. With such a high level of debt hanging around, you might not think that $100 makes a dent, but it does. With average consumer credit card interest rates around 17.55 %, every little bit you can pay off counts, and chipping away at it will help you feel better emotionally, as well. If a big goal this year is to really pay down a good chunk of your debt, check out this page for more helpful advice on how to do just that.
3. Treat yourself to a night with a friend
Much different than purchasing the latest PlayStation game or a buying yourself a fourth pair of brown boots, splurging to spend time with a friend is something that you’ll remember for years to come, not just for a short period of time. After all, studies have shown that experiences make us happier than possessions, so keep that in mind the next time you’re at the mall. So, if you have a fully funded emergency fund and no credit card debt, create an experience that you will remember.
4. Put it in an IRA
When all else fails, it never hurts to throw all the extra money you can into an IRA retirement account — it’s the gift that keeps on giving. For example, in 30 years, that $100 could become $1,000, and you’ll be more than happy to thank your younger self for such a generous gift.
5. Give the money to someone in need
When you give, you often get much more in return. And rather than just writing a check, find an organization where you can give and get involved. You just might be surprised at how good it can feel to give.
Sharon Rosenblatt had been living away from her parents for a while. Until recently she was sharing an apartment with two friends in Silver Spring, MD, but then one of her roommates moved in with his fiancée. Rosenblatt and her other friend didn’t want to find a new third roommate, nor did they want to stay in their apartment, which needed some TLC. After researching the prices of shared two-bedroom apartments in the pricey Washington D.C. suburbs, moving back in with her parents started to seem like a good idea.
A Mounting Pile of Debt
Not only was rent uber expensive in the area, but Rosenblatt was saddled with about $2,000 in medical bills from a surgery she’d had over the summer, as well as about $6,000 in credit card debt. “Like most millennials, I spent unwisely in my early 20s, and I’m paying off credit cards and interest now at the wiser and more frustrated age of 27,” she says.
It was another financial kick in the teeth when she aged out of her parents’ health insurance and had to purchase coverage on the Maryland Health Exchange. “I fall just out of the financial range for a federal subsidy,” she said. “I’m lucky that my job includes a stipend for health insurance, though, and that helped a lot.”
So Rosenblatt decided not to sign a new lease with her previous roommate, and instead reclaimed her childhood bedroom in New Haven, CT for the short term. Now she telecommutes to her job as an IT specialist, and when she’s at home she makes space for herself among her high school knick-knacks. “I just finished cleaning out all the old binders I kept,” she said. “I was still keeping physics notes from high school.”
Rosenblatt still has a car payment and other expenses, but living rent-free has definitely made it possible for her to make real financial strides. “I have one more payment on the surgery,” she says. “Rent is a huge thing I’m happy I don’t have to factor in.” She’s also nixed about $1,000 of her credit card debt so far.
She pays $150 a month to rent a space in a local co-work facility three blocks from her father’s office, and they carpool. “I like having a place to go,” Rosenblatt says. “I need that structure.”
She considers herself lucky to be able to move back in with her mom and dad. “I’m fortunate that my parents are wonderful people who don’t mind cooking for a third person now,” she added.
Rosenblatt plans to be out of her parents’ house in a year, and perhaps find new roommates. She’s even thought about saving up for a house. “It would be nice to be in a position to own property instead of renting,” she says. “I would love to get back on my own.”