Wells Fargo Discovers 1.4 Million More Fraudulent Accounts

Source: iStock

Wells Fargo’s fraudulent practices have put the company in the public spotlight once again. The bank announced Thursday that employees wrongfully created up to 1.4 million more unauthorized accounts, on top of the discovery last year that employees falsified more than 2 million bank accounts without customer permission. 

According to a company statement released Thursday, an expanded analysis of new accounts opened between January 2009 and September 2016 revealed a total of 3.5 million “potentially unauthorized consumer and small business accounts.” That’s almost 70% more fraudulent accounts than previously thought. 

The company said Thursday it will provide customers with $2.8 million in total refunds—in addition to the $3.3 million the company pledged last September after the initial scandal was unearthed.

How we got here

After the original news broke in September 2016, Wells Fargo revealed it had fired 5,300 employees in recent years for behavior related to the creation of unauthorized bank accounts. Employees who created the accounts did so in order to increase their earnings and boost sales, a motivation that was later attributed to the hypercompetitive corporate culture at one of the worlds largest banks 

So how did Wells Fargo find more fraudulent accounts almost a year later? The bank says it learned about the additional fraud by studying a total of 165 million accounts created since the beginning of 2009, an expansion on the 93.5 million examined last September. The study also found more of these unauthorized accounts incurred fees and charges than originally thought—190,000 versus the 130,000 initially reported last year. 

Unauthorized accounts aren’t the only damaging news the company has dealt with recently. In the past year, the bank has been accused of scamming mom-and-pop shops, admitted to charging up to 570,000 customers for auto insurance they didn’t need, and settled a $108 million lawsuit for concealing loan and mortgage fees from veterans.

What to do if you are a Wells Fargo customer

To determine whether or not you’ve been a victim of these unauthorized accounts, check your credit score and your bank’s website, which will show every account opened in your name.

Those who had accounts opened in their name without their permission should inform Wells Fargo immediately, as filing a complaint will put them in the pool of customers who will all split the bank’s $6.1 million of promised restitution. These customers will also receive a portion of the $142 million the company has agreed to pay as part of a class-action suit finalized in April. 

Wells Fargo’s response

Wells Fargo CEO Tim Sloan apologized Thursday in a press release for the San Francisco-based company’s failings and attempted to reemphasize some of the bank’s key values.   

“Our commitment has never been stronger to build a better bank for our customers, team members, shareholders and communities,” Sloan said in the release. 

Despite expressing remorse, the company has fought privately to avoid dealing with the repercussions of its actions. Currently, Wells Fargo contracts contain a provision that forces customers to settle disputes with the bank through arbitration, as opposed to through class-action or individual lawsuits.   

This essentially means that any customer who believes they have been treated unfairly is forced to settle with the company on its own terms, rather than on a level playing field in court. While the Consumer Financial Protection Bureau (CFPB) recently drafted a bill that would prevent this practice, Congress may vote to overturn this measure before it becomes law, thus allowing Wells Fargo to continue dodging class-action suits, says Amanda Werner, an attorney for the Washington, D.C.-based Americans for Financial Reform and Public Citizen. Werner specializes in combatting forced arbitration rules.

Ways to avoid fraud

In order to prevent your bank from getting away with similar practices, Werner suggests checking your credit score at least a few times each year. The credit score may indicate if any unauthorized accounts have been opened in your name. You can also get a free annual credit report (which contains more detail than a credit score) from each of the major credit reporting agencies at AnnualCreditReport.com.

Additionally, Werner recommends taking any problems you may have with your bank directly to the CFPB, because its complaint process is typically much faster and more efficient.    

“I’ve heard a lot of stories from people who spend hours on the phone with customer service trying to settle something, and then they file a complaint with the CFPB and suddenly the bank is ready to listen to them,” Werner says.  

How will other banks respond?

Beyond negative press, Wells Fargo has suffered few consequences for its recent scandals. While speculators are concerned about the company’s reputation hurting its overall value, the bank’s stock has continued to grow, albeit a bit more slowly than expected

Werner worries this, along with the overall lack of legal action against the company, will send the wrong message to other banks dealing with similar fraudulent practices.

“If I’m another bank and I’m doing something shady—but maybe it’s not as bad as 3.5 million accounts—then I feel like I can get away with it because Wells Fargo got away with something worse,” Werner says.

The post Wells Fargo Discovers 1.4 Million More Fraudulent Accounts appeared first on MagnifyMoney.

Understanding the FHA 203k Loan

Finding your dream home is hard.

Unless you have an unlimited budget, just about any home you buy will require compromise. The house that’s move-in ready might have fewer bedrooms than you’d like. The house that’s in the perfect location might need a lot of repairs.

Sometimes it feels like you’ll never be able to afford the house you truly want.

This is where the FHA 203(k) loan can be a huge help.

The FHA 203(k) loan is a government-backed mortgage that’s specifically designed to fund a home renovation. Whether you’re buying a new house that needs work or you want to upgrade your current home, this program can help you do it affordably.

Part I: Understanding the basics of 203(k) loans

What is a 203(k) loan?

The FHA 203(k) loan is simply an extension of the regular FHA mortgage loan program. The loan is backed by the federal government, which provides two big advantages:

  1. You can qualify for a down payment as low as 3.5 percent.
  2. You can quality with a credit score as low as 500, although better credit scores allow for better loan terms.

The additional benefit of the 203(k) loan over regular FHA loans is that it allows you to take out a single loan to finance both the purchase and renovation of a property, giving you the opportunity to build your dream home with minimal money down.

How a 203(k) loan works

A 203(k) loan can be used for one of two purposes:

  1. Buying a new property that’s in need of renovations, from relatively minor improvements to a complete teardown and rebuild.
  2. Refinancing your existing home in order to fund repairs and improvements.

The maximum loan amount is determined by the general FHA mortgage limits for your area, and the minimum repair cost is $5,000. But as opposed to a conventional loan, in which your mortgage is limited to the current appraisal value of the property, a 203(k) loan bases the mortgage amount on the lesser of the following:

  • The current value of the property, plus the cost of the renovations
  • 110 percent of the appraised value of the property after the renovations are complete

In other words, it enables you to purchase a property that you otherwise might not be able to take out a mortgage on because the 203(k) loan factors in the value of the improvements to be made.

And it allows you to do so with a down payment as low as 3.5 percent, which can be especially helpful for first-time homebuyers who often don’t have as much cash to bring to the table.

All of this opens up a number of opportunities that would otherwise be off limits to many homebuyers. For Pamela Capalad, a fee-only certified financial planner and the founder of Brunch & Budget, it was the only way that she and her husband could afford a house in Brooklyn, N.Y., which is where they wanted to live.

“Finding out about the 203(k) loan opened us up to the idea of buying a house that needed to be renovated,” Capalad said. “It was by far the most budget-friendly way to do it.”

Of course, the opportunity comes with some additional costs.

According to Eamon McKeon, a New York-based renovation loan specialist, interest rates on a 203(k) loan are typically 0.25 to 0.375 percentage points higher than conventional loans.

They also require you to pay mortgage insurance. There is an upfront premium equal to 1.75 percent of the base loan amount, which is rolled into the mortgage. And there is an annual premium, paid monthly, that ranges from 0.45 to 1.05 percent, depending on the size of the loan, the size of the down payment, and the length of your mortgage.

Additionally, McKeon cautioned that unlike conventional loans, this mortgage insurance premium is applied for the entire life of the loan unless you put at least 10 percent down. The only way to get rid of it is to refinance.

What renovations can be financed through a 203(k) loan?

Source: iStock

A 203(k) loan allows you to finance a wide range of renovations, all the way from small improvements like kitchen appliance upgrades to major projects like completely tearing down and rebuilding the house.

The U.S. Department of Housing and Urban Development provides a list of eligible improvements:

The big stipulation is the work has to be done by a contractor. You are not allowed to do any of the work yourself (though there is an exception to this rule for people who have the skills to do it).

According to McKeon, this is the most challenging part of successfully executing a 203(k) loan. He said the vast majority of the projects he sees go south have contractor-related issues, from underestimating the bid, to being unresponsive, to not having the correct licenses.

On the flip side, one of the benefits is that the bank helps you manage costs. They put the money needed for the renovations into an escrow account and only release it to the contractor as improvements are made and inspected.

For Capalad and her husband, this arrangement was one of the draws of the 203(k) loan.

“I liked knowing that the contractor couldn’t suddenly gouge us,” she said. “He couldn’t quote $30,000 and then come back later and tell us we actually owed him $100,000.”

Capalad suggested using sites like Yelp and HomeAdvisor, as well as references from friends, to find a contractor. She said you should interview at least four to five people, get bids from each, and not necessarily jump at the cheapest bid.

“We made the mistake of immediately rejecting higher estimates,” said Capalad. “We realized later that their estimates were higher because they were more aware of what needed to be done and how the process would work.”

Who can use a 203(k) loan?

A 203(k) loan is available to anyone who meets the eligibility requirements (discussed below) and is looking to renovate a home.

It’s often appealing to first-time homebuyers, who are generally younger and therefore less likely to have the cash necessary for either a conventional mortgage or to fund the renovations themselves. But there is no requirement that you have to be a first-time homebuyer.

The program can also be used to finance either the purchase of a home in need of renovation or to refinance an existing mortgage in order to update your current home.

3 reasons to use a 203(k) loan

There are a few common situations in which a 203(k) loan can make a lot of sense:

  1. Expand your opportunity: In a hot market, move-in ready homes often sell quickly and for more than asking price. A 203(k) loan can open up the market for you, allowing you to choose from a wider range of properties knowing that you can improve upon any house you buy.
  2. Upgrade your current home: If you want to add a bedroom, redo your kitchen, or make any other improvements to your current home, a 203(k) loan allows you to refinance and fold the cost of those upgrades into your new mortgage with a smaller down payment than other options.
  3. Increase your home equity: McKeon argued that anyone taking out a regular FHA loan should at least consider turning it into a 203(k) loan. With the right improvements, you could increase the value of your home to the point that you have enough equity after the renovations to refinance into a conventional mortgage and remove or reduce your monthly mortgage insurance premium.

What it takes to qualify for a 203(k) loan

Qualifying for a 203(k) loan is much like qualifying for a regular FHA mortgage loan, but with slightly stricter credit requirements.

“FHA may allow FICO scores in the 500s, [but] banks/lenders have discretion or are required to only go so low on the score,” McKeon said.

Here are the major criteria you’ll have to meet:

  • You have to work with an FHA-approved lender.
  • The minimum credit score is 500, though McKeon said a credit score of 640 is typically needed in order to secure the smallest down payment of 3.5 percent.
  • You have to have sufficient income to afford the mortgage payments, which the lender determines by evaluating two years of tax returns.
  • Your total debt-to-income ratio typically cannot exceed 43 percent.
  • You must have a clear CAIVRS report, indicating that you are not currently delinquent and have never defaulted on any loans backed by the federal government. This includes federal student loans, SBA loans and prior FHA loans.
  • The current property value plus the cost of the renovations must fall within FHA mortgage limits.

The 203(k) loan application process

McKeon said the process of applying for a 203(k) loan generally looks like this:

  1. Get preapproved for a mortgage by an FHA-approved lender.
  2. Find a property you want to buy and submit an offer.
  3. Find an approved 203(k) consultant to inspect the property and create a write-up of repairs needed and the estimated cost.
  4. Interview contractors, receive estimates, and select one to be vetted and approved by your lender.
  5. Obtain an appraisal to determine the post-renovation value of your house.
  6. Provide other information and documentation as requested by your lender in order to finalize loan approval.

Property types eligible for 203(k) loans

A 203(k) loan can be used for any single-family home that was built at least one year ago and has anywhere from one to four units. You can use the loan to increase a single-unit property into a multi-unit property, up to the four-unit limit, and you can also use it to turn a multi-unit property into a single-unit property.

These loans can be used to improve a condominium, provided it meets the following conditions:

  • It must be located in an FHA-approved condominium project.
  • Improvements are generally limited to the interior of the unit.
  • No more than 5 units, or 25 percent of all units, in a condominium association can be renovated at any time.
  • After renovation, the unit must be located in a structure that contains no more than four units total.

A 203(k) loan can also be used on a mixed residential/business property if at least 51 percent of the property is residential and the business use of the property does not affect the health or safety of the residential occupants.

It’s worth noting that the property must be owner-occupied, so a 203(k) loan is not an option for a pure investment property.

Within those limits, a wide variety of properties could qualify. McKeon noted that when he writes these loans, he doesn’t care about the current condition of the property. Everything is based on the renovations to be done and the future condition of the property.

Part II: Types of 203(k) loans

Standard vs. streamline 203(k) loans

A streamline 203(k) loan, or limited 203(k) loan, is a version of the 203(k) loan that can be used for smaller renovations. While there is no limit to the renovation costs associated with a standard 203(k) loan — other than the general FHA mortgage limits — a streamline 203(k) can only be used for up to $35,000 in repairs. There is no minimum repair cost.

In return, you get an easier application process. While a standard 203(k) loan requires you to hire a HUD-approved 203(k) consultant to help manage the renovation process, a streamline 203(k) does not.

However, there are limits to the kind of work you can have done with a streamline 203(k) loan. You can review the list of allowed improvements here and the list of ineligible improvements here, but here’s a quick overview of what isn’t allowed with a streamline 203(k):

  • The improvements can’t be expected to take more than six months to complete.
  • The improvements can’t prevent you from occupying the property for more than 15 days during the renovation.
  • You cannot convert a single-unit home into a multi-unit home, or vice versa.
  • You cannot do a complete teardown.

So when does a streamline 203(k) loan make sense over a standard 203(k) loan? Here is when it’s worth considering:

  • The property requires less than $35,000 in repairs and otherwise falls within the requirements for an eligible renovation.
  • You are comfortable scoping the work, gathering contractor estimates, and supervising the renovations without the help of a consultant.
  • You don’t expect the renovations to require an extensive amount of time.
  • You like the idea of minimizing paperwork and otherwise shortening the entire process.

Part III: Is a 203(k) loan the best option for you?

Alternatives to a 203(k) loan

Of course, a 203(k) loan isn’t the only way to finance a renovation. Here are some of the alternatives.

Fannie Mae HomeStyle Renovation Mortgage

The Fannie Mae HomeStyle Renovation Mortgage is a conventional conforming mortgage that, like the 203(k) loan, is specifically designed to finance renovations.

The biggest drawback is that it requires a 5 percent down payment as opposed to 3.5 percent. That can potentially require you to bring a few thousand dollars more in cash to the table.

But McKeon says that if you can afford it, it’s usually a better option. The biggest reason is that your monthly private mortgage insurance (PMI) is typically less, and it automatically drops off once your loan-to-value ratio reaches 78 percent, as opposed to a 203(k) loan where the PMI generally lasts for the life of the loan.

Home equity loan

If you’re looking to renovate your current home, one option would simply be to take out a home equity loan that allows you to borrow against the equity you’ve already built up in your house.

The advantages over a 203(k) loan would generally be a potentially lower interest rate and fewer restrictions around what improvements are made and who makes them.

The big downside is that your loan is limited to your current equity. If you purchased your home relatively recently, or if your home has decreased in value, you may not have enough equity to finance a sizable improvement. And if you are looking to purchase and renovate a new home, the 203(k) loan is likely the better option.

Title I property improvement loan

Like 203(k) loans, Title I property improvement loans are backed by the federal government. They allow you to borrow up to $25,000 for single-family homes, and up to $12,000 per unit for multi-unit properties, to improve a home you currently own.

This loan could be preferable to a 203(k) loan if the improvements you want to make are relatively small, you don’t want to refinance or don’t have the money for a down payment, and/or you’d like to avoid some of the requirements and inspections surrounding a 203(k) loan.

Personal savings

If you have the savings to afford the renovations yourself, or if you can wait until you do have the savings, you could save yourself a lot of money by avoiding financing altogether.

Of course, this may or may not be realistic, depending on the type of project you’re considering. For smaller projects that aren’t urgent, this is a worthy candidate. For larger projects or those that need to be addressed immediately, financing may be the only way to make it happen.

203(k) loans open up new opportunities

The FHA 203(k) loan isn’t for everybody. As Capalad found out the hard way, the money you save is often more than made up in sweat equity.

“I was making calls during my lunch break, and my husband was regularly stopping at the house to check in on things,” she said. “It really felt like our lives stopped for those 10 months.”

But McKeon said that if you have a creative eye and you’re willing to put in the work, you can end up with a much better home than you would have been able to purchase if you limited yourself to move-in ready properties, especially if you have a limited amount of cash to bring to the table.

In the end, it’s all about understanding the trade-offs and doing what’s right for you and your family. At the very least, the 203(k) loan expands the realm of possibility.

The post Understanding the FHA 203k Loan appeared first on MagnifyMoney.

The States Most (and Least) Likely to Have Underwater Properties

Real estate or home mortgage crisis concept, copy space. Please check out my other real estate concept images in my portfolio. Thanks!

More than 5.4 million homes in the United States are “seriously underwater”—meaning the loan amount is 25 percent higher than the property’s market value. But which state has the most (or fewest) underwater homes? Is it yours?

Using the ATTOM Data Solutions property database, you can see the top 15 states in the US with the highest percentage of seriously underwater homes, as well as the 15 states with the lowest percentage.

See if your state made the top 15 with the most (or fewest) seriously underwater properties.

#15 Most Underwater Properties

Pennsylvania: 10.3% of properties are seriously underwater.

#14 Most Underwater Properties

Georgia: 11.2% of properties are seriously underwater.

#12 (Tie) Most Underwater Properties

Arkansas: 11.4% of properties are seriously underwater.

#12 (Tie) Most Underwater Properties

Connecticut: 11.4% of properties are seriously underwater.

#11 Most Underwater Properties

New Jersey: 12.1% of properties are seriously underwater.

#9 (Tie) Most Underwater Properties

Florida: 13.1% of properties are seriously underwater.

#9 (Tie) Most Underwater Properties

Maryland: 13.1% of properties are seriously underwater.

#8 Most Underwater Properties

Michigan: 13.3% of properties are seriously underwater.

#7 Most Underwater Properties

Delaware: 13.4% of properties are seriously underwater.

#6 Most Underwater Properties

Missouri: 14.2% of properties are seriously underwater.

#5 Most Underwater Properties

Indiana: 16.4% of properties are seriously underwater.

#4 Most Underwater Properties

Ohio: 16.5% of properties are seriously underwater.

#3 Most Underwater Properties

Illinois: 16.8% of properties are seriously underwater.

#2 Most Underwater Properties

Louisiana: 17.1% of properties are seriously underwater.

#1 Most Underwater Properties

Nevada: 17.4% of properties are seriously underwater.

#15 (Tie) Least Underwater Properties

Hawaii: 5.5% of properties are seriously underwater.

#15 (Tie) Least Underwater Properties

Texas: 5.5% of properties are seriously underwater.

#13 Least Underwater Properties

Wyoming: 5.4% of properties are seriously underwater.

#12 Least Underwater Properties

Montana: 5.0% of properties are seriously underwater.

#11 Least Underwater Properties

Colorado: 4.9% of properties are seriously underwater.

#10 Least Underwater Properties

Washington: 4.8% of properties are seriously underwater.

#9 (Tie) Least Underwater Properties

North Dakota: 4.7% of properties are seriously underwater.

#9 (Tie) Least Underwater Properties

Idaho: 4.7% of properties are seriously underwater.

#7 (Tie) Least Underwater Properties

Minnesota: 4.6% of properties are seriously underwater.

#7 (Tie) Least Underwater Properties

Massachusetts: 4.6% of properties are seriously underwater.

#5 Least Underwater Properties

Mississippi: 4.5% of properties are seriously underwater.

#4 Least Underwater Properties

Utah: 4.4% of properties are seriously underwater.

#3 (Tie) Least Underwater Properties

Oregon: 4.3% of properties are seriously underwater.

#3 (Tie) Least Underwater Properties

Vermont: 4.3% of properties are seriously underwater.

#1 Least Underwater Properties

Alaska: 4.0% of properties are seriously underwater.

Image: DS011

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How to Save Big on Your Back-to-School Shopping

It's easy to overspend at World Market but with these ways to save, you can breathe a sigh of relief when checking your receipt.

Back-to-school season generally starts around two months before the beginning of school—so if you haven’t started yet, you’re already behind. What once required a few Dixon Ticonderoga pencils and a notebook now requires carts full of supplies. In 2016, the National Retail Federation estimated that families with children in grades K–12 would spend an average of $673 on clothes, accessories, school supplies, electronics, and shoes during the back-to-school season. Based on robust wage growth, I expect that number to increase for 2017.

While most parents will take advantage of some sales during the back-to-school season, you can save more by identifying the right time to buy. As an industry insider, I can give you the tips you need to save on back-to-school shopping.

Back-to-School Clothes

A lot of people are shocked to learn that clearance sales aren’t necessarily the best time to buy clothes. When the items go on clearance, the first markdown will generally be in the neighborhood of 20ؘ%–30%. On the other hand, retailers will regularly mark down items 40% during a one- to two-week sale.

The only clothes you want to buy on clearance are those that will go beyond a store’s first markdown. Unfortunately, markdown rates are set on a store-by-store basis according to inventory levels and can be difficult to predict. As a result, I don’t risk waiting for deep clearance discounts.

Instead, take advantage of seasonal sales for the best results. The deals vary by category, so I give some specific guidance of finding the best clothing deals.

Uniforms

Major clothing retailers will often advertise an annual “uniform sale.” This sale takes place a few weeks before private schools reopen in your area. Start watching weekly ads the week following the Fourth of July to be sure you catch the deals.

During their uniform sales, major retailers (especially Kohl’s, Macy’s, Target, and Walmart) offer huge discounts on khakis, polos, and black pants. You’ll want to buy enough during the sale to last the whole year.

When I worked in retail, savvy parents with kids in private school would often buy two to three different sizes during uniform sales. That way, they didn’t have to pay full price when their kid inevitably grew during the school year.

By the way, public school parents should pay attention to these sales, too. They are the people who get caught paying full price for Dockers when their kid has to wear black pants for a holiday band performance.

Summer Styles

Summer styles typically go on sale in May and June, and they tend to go to clearance by early July. After the first day of school, your kids will probably spend weeks or even months going to school in shorts and T-shirts (depending on where you live), so you may want to supplement your school wardrobe with summer fashion choices that go on sale during those earlier months.

You won’t find sales on summer styles during back-to-school shopping, but you might find some decent clearance items. Remember, the first markdown on clearance is usually in the 20%–30% off bracket.

That’s not a great deal, and you’ll probably find fall fashion sales with lower-priced options. However, if you see an item for 50%–60% off the original price, it’s a good deal and worth buying if it fits your clothing needs. An item for 70%–75% off retail will generally be out of the store in a week or two, so snap that deal up immediately.

Steep discounts on clearance items don’t mean the product has quality issues. It just indicates that the product didn’t sell well at that particular store. Most stores have limited return policies on clearance items, however, so be sure you know the policy before you buy the item.

Fall Styles

Fall styles typically start to go on sale in mid-July. Kids and teens who like shopping at name-brand stores should watch out for “annual denim sales,” which typically happen in early August. Certain denim styles stay on the market year round, making this the best time of the year to buy jeans.

In general, it’s best to skip most other “fall style” pieces until winter. The most popular fall styles will stick around until November, when you can scoop them up at significant discounts during the holiday discount season. The exception to this rule would be any BOGO (buy one, get one) deals that make sense for your kids’ fashion needs.

Backpacks and Lunchboxes

The new school year means a new backpack and lunchbox, right?

If your kid is still young enough to want cartoon characters or superheroes on their backpack and lunchbox, then a back-to-school sale will yield the best prices. These backpacks usually won’t stick around after September.

Likewise, you can find deals on insulated lunchboxes (which are also appropriate for adults who brown-bag). Buy during the back-to-school sale, and you’ll thank yourself later. While most retailers will stock a few extra lunchbox styles during the peak season, you shouldn’t expect to find these on clearance. Most stores stock just enough lunchboxes to get through the back-to-school rush.

However, teen and adult backpacks are a totally different story. Sporting goods stores will put these on a steep discount during the November and December holiday season. You also may see deals on camping backpacks in April and May. This is one purchase that is worth putting off if you can.

Electronics

One thing I can’t stand is when I see parents buying new electronics for the upcoming school year. Yes, retailers will discount computers, calculators, and the like for the “back to college” rush, but waiting just a few months can save huge coin. So when should you buy?

Calculators

If you’ve got a middle or high school student, they will probably need a TI-83+ for their math class. This is something that you should buy used, preferably in May or June when college graduates are unloading theirs for rock-bottom prices.

If you must buy new, June is the time to do it. Some online retailers will try to compete with the used market by dropping their prices. Set up a notification on CamelCamelCamel.com, and you’ll find deals around $75.

Laptops

College students who want to buy Apple products should shop online or at the Apple Store for the best deals. Usually, Apple will provide student warranties, extra software, or other bonuses during late July and August. Apple doesn’t usually drop its prices, but the bonuses can be worthwhile. Netbooks and other lower-capacity laptops tend to see rock-bottom prices during Black Friday sales in late November.

Generic School Supplies

Ten-cent folders and crayons for a quarter? Deals like these will start rolling in about four to five weeks before schools start. Watch weekly ads to find the local loss leaders (a pricing strategy where a product is sold at a price below its market cost to stimulate other sales of more profitable goods or services), and buy them right away. If you’re feeling extra generous, stock up on generic school supplies and donate them to your local school. The teachers will thank you for saving their pocketbooks.

Back-to-school shopping doesn’t have to deplete your bank account. In fact, some credit cards will even offer rewards for back-to-school shopping. But before you apply for a card—which could ding your credit when the card provider checks your score—make sure you’ve got the requisite credit by checking your credit report for free at Credit.com.

Hannah L. Rounds is a contributor at CentSai, a financial wellness community for millennials and Gen Xers. She loves talking and writing about the counterintuitive intersections between marriage, family, money, and careers. In addition to “geeking” out over personal finance, she loves cooking, reading to her son, snowboarding, and watching superhero shows on Netflix.

Image: Eva-Katalin

The post How to Save Big on Your Back-to-School Shopping appeared first on Credit.com.

5 Things to Consider Before Paying Off Your Student Loan Debt

Credit cards are a super convenient financial tool, but they can often be confusing.

Paying off debt is often a top priority. Not only can too much debt hurt your credit score, it can impact your ability to achieve other important milestones in life, such as buying a home.

But when it comes to student loan debt, obsessing over repayment and devoting every spare penny to paying down balances can actually have negative consequences, particularly when you become so focused on repayment that you ignore all other elements of a sound personal financial plan.

“I’ve seen a number of individuals who have devoted unhealthy amounts of time and money towards paying down their student debt, people who are pinching every penny,” says Michael Lux, founder of The Student Loan Sherpa, a website focused on student loan education, strategy, and borrower advocacy. “You can’t just look at your student loan debt in isolation. You need to consider all of the things that paint the complete financial picture.”

As Lux indicated, there’s a variety of reasons why devoting too much of your hard-earned income to repaying student loans can be an unwise approach. Here are the top five.

1. It’s Not Sustainable in the Long Run

Denying yourself all of the day-to-day extras that you enjoy in order to pay off your student loan is not likely to work forever, says Lux.

“The key to success is making it sustainable for years,” he explains. “First, you have to know yourself. When you make a budget, you have to make a realistic budget. If you’re someone who loves the movies, you have to budget money to go to the movies.”

Another tactic that helps create a more balanced and manageable approach is to create milestone repayment goals for yourself and then reward yourself in small ways when attaining those goals, says Lux. For example, when a loan is half paid off, treat yourself to a fancy dinner. Or, when one loan is completely paid off, find another affordable and meaningful way to indulge in some positive reinforcement. 

2. Retirement Savings Should Also Be a Top Priority

Paying off student loan debt should not come at the expense of getting started on a retirement plan. But unfortunately for some, that’s exactly what’s happening.

“Many people put paying off student loans ahead of retirement saving,” says Ryan Farnung of New York–based GPS Financial. “So while they are saving some interest on student loans, and ultimately freeing up some monthly cash flow, they may also be . . . missing out on the potential to tap into the power of compounding interest.”

Carrying some student debt is all right, says Farnung, if it means using your money elsewhere in ways that will provide a greater long-term benefit.

3. Establishing an Emergency Fund Is Also an Important Part of a Healthy Financial Plan

A sound personal financial plan also includes establishing emergency savings accounts, ideally two separate accounts—one with six months of living expenses and a separate liquid emergency fund.

“Student loan rates are so low right now, under 4 or 4.5%,” says Oliver Lee, owner of Michigan-based The Strategic Planning Group. “So I always recommend my clients pay the very bare minimum. Then, create a six-month or one-year living expense shelter so if something goes wrong when you get out of school or you can’t find a job, you have the money you need. And once you have that, you also need a liquid emergency fund—in case the tires go bad on the car or the transmission goes. This account should have $1,000 to $3,000.”

Those who don’t have such emergency funds are likely to rack up costly credit card debt in order to pay for life’s unexpected expenses. And the interest on a credit card is almost always far more than the interest on a student loan.

“You could have your student loans completely paid off and yet have $10,000 to $15,000 in credit card debt because you had no emergency funds,” says Lee. Making savings a priority can help prevent unnecessary credit card debt.

4. Real Estate Is a Better Investment

Devoting too much money to student loan repayment often leads people to put off other investments that come with valuable rewards of their own. Home purchases are a prime example.

Real estate has historically given returns far above the interest rate of student loans, says Lyn Alden, founder of Lyn Alden Investment Strategy. So it’s beneficial to prioritize building these sorts of investment assets, even if it means keeping low-interest student loan debt around for a while. 

5. Missed Life Experiences

There are many variables to consider when deciding how much money to devote to student loan repayment, but according to Farnung, they revolve around one primary question: what are you giving up today in order to improve cash flow tomorrow?

It’s easy to measure how much it costs to carry student loans by determining how much interest you pay annually and what that looks like after taxes. But what’s far more difficult to measure is the experiences you may miss out on or the opportunities for real financial growth you may be overlooking when focusing solely on student loan repayment.

“If you’re postponing funding and maintaining an emergency fund, contributing to your retirement savings, getting married, buying a home, or any number of other life goals and aspirations, you need to take a step back and really think about what the interest on your student loans is costing you,” says Farnung.

To learn more about smart strategies for managing debt, visit our Managing Debt Learning Center.

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