Category Archives: get out of debt

What Is A Student Loan?

Posted on May 3, 2012 by admin

Getting an education is a very important part of preparing for a successful future. Apart from having to invest at least four years (or more) of your life for that college degree, there is also going to be a lot of cost involved. Knowing what is a student loan is a crucial step in that education.  Many students take out student loans to pay for their education which can be paid back after graduation. There are two main types of student loans available – the subsidized and the unsubsidized. Student loans may come from the Federal government (offering both subsidized and unsubsidized) and the other ones come from the private sector – which may also offer both types. A subsidized student loan is one which accumulates interest only after graduation and an unsubsidized loan charges interest during the entire time of the loan. Student loans can be used to pay for most school expenses, including the tuition and fees, the room and board, your books, supplies and even your transportation. After graduation, it will be necessary to start repaying back the loan you took out for your education. With a Federal student loan, you do not need to begin repayment for six months after you complete your schooling. The Department of Education says that the government also provides a number of repayment options, which could make repayment easier than with other options. The advantage of getting Federal student loans to get your degree is that these loans have lower interest than any other kind. This can enable you to save many thousands of dollars if you borrow most or all of the money needed to go through college. Eligibility for student loans is usually based on your financial need and some other considerations. The official student aid website provides several qualifications, which includes: Being a US citizen, or an eligible noncitizen. Possess a valid Social Security number. Males who are between 18 and 25 must be registered with the Selective Service. Have completed high school. Maintain academic standing (good grades). All applicants of Federal student loans have to fill out the Free Application for Federal Student Aid (FAFSA) forms. This form can be filled out online. Once completed, this will determine the amount of eligibility a student has for a loan and it will also determine how much can be borrowed. The amount of money that can be borrowed partly depends on whether you are considered a dependent or an independent. It also will depend on whether you are taking undergraduate or graduate classes. Charts are available that show the amounts and limits of Federal student loans . Several different types of education loans are available from the government. Some of these loans (Direct PLUS) are also available to parents who want to help pay for their child’s education. Interest rates are determined by the government. After graduation, government loans can be consolidated with other government loans for better terms, but they cannot be combined with any private loans. Before applying for any student loans, a student should try to get as much free money for education as possible. This can come in the form of grants and college scholarships. By getting available free money first, the amount of money that needs to be borrowed in student loans with interest can be minimized – allowing the graduate to get out of debt faster after graduation.  Understanding what is a student loan may, in fact, help you find an answer to the meaning of life. Continue reading →

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Ready for a Debt Snowball This Winter?

Posted on February 8, 2012 by admin

Winter is the time of snowfall and snowball fights, but it may also be the time for another important activity as well: a debt snowball. Unlike a snowball fight or a first snowfall, a debt snowball isn’t just a fun way to pass the time, but is instead a time-tested method of repaying your debt that has helped countless people to become debt free.  If you’re struggling to pay off your debt and become more financially fit, the debt snowball may be just the solution you are looking for. What is a Debt Snowball? A debt snowball is a term coined by financial advisor Dave Ramsey, who is an advocate who helps people to get out of debt and live a debt-free life.  A debt snowball involves using a specific method to repay debt that will keep you motivated and on-track. When you create a debt snowball, you begin by listing your debts from the lowest balance to the highest balance.  Typically, you should include all consumer debt except for your mortgage and high-balance student loans.  You should also take note of the monthly minimum payment for each of the debts on your list. You then begin the process of putting extra money towards the lowest balance debt. For instance, if you owe $500 on one credit card, $1000 on another card and $2000 on a third, you would start by putting extra money towards repaying the $500 debt. At a minimum you should make a commitment to pay more than the minimum payment. For instance, if the minimum payment is $20, you might make a commitment to pay $40 every single month. In addition to setting yourself a new “minimum” payment,  any extra cash that you can allocate to this debt should be put towards it so you can pay it off as quickly as possible.  The key is to pay down your first debt as aggressively as you possibly can by making extra payments towards it. Advancing Your Snowball Once you pay off your first debt, the next step is to take that minimum amount you were paying and take it onto the minimum payment of your next highest debt, working to pay that one off as fast as you can.  For instance, in the above example, you would next work on paying off your $1000 debt. Your new “minimum payment” for this debt would be equal to whatever the original minimum was, plus the $40 that you have freed up since your smaller debt is now gone.  Just like a snowball rolling down a hill,  the monthly payments you are paying towards the debts get bigger and bigger as you move forward and gain momentum. You keep going until all of your debt is paid off.   When you paid off the $1000 debt, you would put the total amount of money you were paying towards it each month towards the $2000 debt, along with the original minimum. The Psychology of Debt Repayment Notice that the process does not involve starting with your highest interest debt, as most financial experts recommend.  Instead, the debt snowball starts from the smallest debt.  The theory behind this is you will feel inspired as you can actually see your progress and see the debt paid off, which will encourage you to keep going and actually follow through with the entire debt repayment plan. The debt snowball works to build up your payments and it works to help you pay off your debt.  It’s worth trying so you can achieve your financial goals this winter. Continue reading →

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Freeze Your Credit Cards in a Block of Ice and Four Other Tips for Keeping Your New Years Resolution to Get Out of Debt

Posted on January 5, 2012 by admin

For many Americans, New Years resolutions revolve around one of two things: losing weight or paying off debt.  Achieving either of these resolutions requires a lot of self control, and many people who enter the New Year with the best of intentions will be back to their old ways before the month of January comes to an end.  To avoid having this happen to you this year, here are a few tips to help you get out of debt and stay out of debt. 1)   Hold yourself accountable Simply saying that you want to get out of debt is a vague goal, and vague goals are more likely to fall by the wayside.  Instead of making this your resolution, set very specific goals for yourself.  The goals might be something like paying an extra $100 to your credit card every month, stopping the use of credit cards, or paying off $5000 of debt by March.  Whatever your goals are, they should be concrete and measurable to make sure you are living up to them. Once you have your goals, find some way to hold yourself accountable.  Find a buddy that you have to check in with periodically to report how you are doing, start a blog to track your progress, or use an online goal tracking website to keep track of how you are doing. 2)   Set a budget You cannot realistically pay off your debt unless you budget money to do so.  While you don’t have to sit down and detail where every dollar is going, for some people, setting a budget is the best solution to money management problems.  Setting a budget can be as simple as allocating how much to spend and how much to pay to debt or save, and then paying yourself first the money you want to save and put towards debt.  When you pay yourself first, all the money you have left over is yours to spend and you won’t have to worry about not meeting your goals or about budgeting every dollar.  Make sure you never spend more than you allocate to the spending category. 3)   Stop digging yourself deeper You cannot get out of debt if you keep digging yourself deeper into debt.   End your reliance on the credit cards if you are going to pay them off.  Don’t cancel accounts, because this can cost you in terms of your credit score, but do make it difficult or impossible for you to use your credit cards.  If cutting up the cards is too drastic a move, consider freezing the cards into a block of ice .  You’ll have to wait several hours for them to defrost before you can use them, which will cut impulse spending out entirely. 4)   Look for ways to make debt repayment cheaper Call up your creditors to try to negotiate a lower interest rate, or consider a balance transfer offer to move your higher interest debt to a lower interest loan to repay. Anything you can do to make paying off your debt faster and easier, and to make sure more of your money goes to the principle instead of the interest, will help you to accomplish your goal. 5)   Remember your motivation For most people, there is a specific reason or series of reasons that they want to get out of debt.  Some people want to have money to buy a family home, for example, or to put money into their kids college fund.  Whatever your goal is, remember it and let it motivate you when times get tough.  Put a picture of your dream home in your wallet where your credit cards used to be, for example, or a photo on your screen saver of the school you hope your kids will some day attend. These constant reminders will help you to remember what the sacrifice is for and will help to keep you motivated towards getting your debts repaid and your resolution fulfilled. Continue reading →

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