Tuesday May 22, 2012
Student loans are one of the most hated debts. It's not like a mortgage or a car loan where you get a direct benefit each month you pay the loan. You're paying for something - education - you've already consumed. So the monthly payments feel like a huge burden.
One Harvard Business School graduate decided he wouldn't spend the next 10 to 15 years paying off his loans, handing over an extra $42,000 in interest. So he made some drastic measures as chronicled in his blog, No More Harvard Debt. His goal was to pay off his $90,717 in student loan debt in 10 months (he graduated with $101,000). He did it in seven.
Some of the things he did to make it happen:
- Liquidated his IRA
- Stopped contributing to his 401K
- Sold his stock
- Got two new roommates
- Started a small landscaping business on the side
- Decided against going home for Christmas
- Skipped parties and weddings
- Stopped spending $1,300 a month on entertainment
Maybe you don't have an extra $1,300 to cut from your budget, but maybe you can cut $200. And you may not be able to pay off your debt in 7 months, but perhaps you can do it in 5 years vs. 20 years. Tax refunds, annual bonuses, cash gifts, any windfall can help you reduce your debt. Part-time work, money from a hobby, and selling off extra household items are other ways to generate income. Drastic results require drastic action.
Here's a Fortune article that summarizes Joe Mihalic's debt journey and a 4 minute YouTube video basically covering the same information.
Could you do something this drastic to pay off your debt?
Saturday May 19, 2012
If you have a bad credit score, you've probably been turned down for at least one credit card. It's tough to rebuild a bad credit score since few credit card issuers are willing to give out credit cards to people with bad credit history. Fortunately, there are a handful of issuers who have credit cards specifically for people with low credit scores.
For example, Capital One has two credit cards for people with bad credit - the Classic Platinum and the Standard Platinum. The two cards aren't that different, one has a higher annual fee and lower interest rate and the other has the opposite - a lower annual fee and higher interest rate. You'll get a minimum credit limit of $300, which is just enough to start rebuilding your credit.
Orchard Bank has a line of credit cards for people with bad credit. The one you're ultimately approved for depends on just how bad your bad credit is.
You can get a credit card with bad credit, you just have to know where to look. Don't be afraid to apply for a secured credit card. It requires a security deposit, but after 12 months of responsible use, you can often apply for an unsecured credit card.
Recommended Reading:
Thursday May 17, 2012
Can you imagine what your life would be like if you didn't have to send checks to creditors and lenders every month? How much money you'd be able to put aside for retirement, vacation, and other goals?
You can get out of debt and there are several ways you can do it. For example, you could knock out your debts one at a time by sending all your extra money to your creditors. Or, if you can't afford to pay your debt in full, you might settle your debts. Check out 10 Ways to Get Out of Debt for more ideas on paying off your debt.
More on Paying Off Debt
Image © Andy Dean/Fotolia.com
Wednesday May 16, 2012
Thanks to the ubiquitous use of credit scores, today's young adults might have a harder time getting started in the real world without a good credit score. And as a concerned parent, you probably wonder what you can do to give them a headstart.
Start teaching your child the basics of credit early, little by little, as soon as they're old enough to understand. Even basics like "Always return what you borrow" and "Never spend all your money" help instill good credit habits in young ones.
You can help your child build a good credit score, but be careful that you don't do it too soon and that you don't put too much of your own credit on the line.
Help your child open and use a bank account to establish a bank history. A positive bank history won't establish a credit score, but an relationship with a financial institution may come in handy when it's time for the first credit card.
After that, follow these tips on how to help your child build a good credit score.
Image © DreamPictures/Getty Images
