Posts Tagged ‘Debt’
The following is a Guest Blog by Celina Jones.
Financial experts advise against accumulating debt unless there is a situation where it is necessary. In the current economic climate, it is more difficult than ever to get credit on decent interest rates and repayment is also hard to make on time. This is why you should avoid borrowing any amount, no matter how small, if you have any other option for getting the money. One type of debt which is unavoidable to a great extent is student debt. If you want higher education, you have to pay for it.
However, the cost of higher education has gone up over the years. Adding the expenses for books, tuition, stationery and all other things required increases the cost that you have to bear. You might also have to pay for accommodation while you are in college or university, making it more expensive for you. Since students don’t have the kind of jobs required to bear the cost, borrowing money is the only way they can get through college. Hence, student debt has been on the rise over the years.
The Convenient Choice for Students
It seems like a convenient option for students to borrow money and then pay it over a number of years. They can borrow the money they need now and then the repayment would be spread over 5 to 10, even more years. That way, the amount is broken down into smaller chunks making it easier to repay. However, the uncertain financial climate has made it hard for students to keep up with the repayment schedule and bear the costs associated with it.
In some cases, they require debt settlement services to find a way to deal with the debt if they are having a hard time paying back the money. When the students finally settle down and get married, they have to continue paying off their debt. At present, over 20% of all households are dealing with student debt. The sheer volume of total student debt has grown exponentially, nearing $1 trillion this year.
The problem which most borrowers are facing is that they aren’t aware of the terms and conditions which apply to their loans. Hence, they face trouble paying the amount back. The growing link between student debt and higher education means that debt is becoming a major part of the economic insecurity faced by students after graduation. They have to pay off the amount they have borrowed for the next few years which means it is going to affect a significant part of their lives.
The main issue here is that even students with degrees from known institutes are finding it extremely difficult to find a high paying job. There was a time when having a degree virtually guaranteed you a good job with a six figure salary. With the recession taking its toll on the economy, the number of jobs available to them upon graduation has been receding for the past couple of years. This is the reason why the unemployment rate for people aged 20 to 24 is around 25%.
Even those students who get good jobs after graduating have to pay hundreds or thousands of dollars every month as part of the repayment plan. On average, a student has to pay the lender $800 to $1,500 unless the amount borrowed is exceptionally high. Even if the student makes a decent amount of money, the repayment takes away a considerable chunk of it. This leaves a small amount for them to get by and have a family.
The students have a hard time making any major economic decisions. They have to think twice before opting to buy a home or investing some money in any asset as most of their money is going towards the student debt they have accumulated. Moreover, having a family is another decision which they have to put off so that they don’t have to get by on a meager income, especially if they have to raise children.
There is no doubt that student debt is contributing to the growing divide in the relationship between student debt and economic insecurity. If the economy doesn’t improve in the next year or so, it could be some time before students are able to graduate with economic security For information on debt consolidation companies, you are advised to visit ConsolidatedCredit.org.
- Student loan debt could be the next economic bubble (suntimes.com)
A Man aged 57 set himself ablaze after having accumulated more than £150,000.
While using a Credit Card you do not actually have the feel of the money slipping from your hand and this has a psychological effect of not being acutely aware of spending.
Judicious use of Credit card requires a skill and a strong will.
I have seen my daughter and Daughter in Law doing it without paying interest whatsoever at the same time earning points to buy some thing free!
Do away with Credit Cards.
Mr Omar was suffering from depression and had told his GP that he had trouble sleeping due to his anxiety over money – but Mr Omar’s family were unaware of the extent of his illness.
‘He was a much-loved father and grandfather and will be sadly missed’
Ibrahim Omar’s son, Imran
His son, Imran Omar, said: ‘It has been a massive shock to the family and the community. He was a very popular, happy and enthusiastic man. He was a much-loved father and grandfather and will be sadly missed.’
Deputy coroner Alan Walsh recorded a verdict that Mr Omar took his own life while suffering from depression. He said his debts were made for the family’s benefit but had escalated out of control.
There used to be a time when borrowing was considered to be a sin and it was treated as a Crime to delay payment.
Now, thanks to changing value systems and the Modern economy, if you do not borrow, you are not recognised and we are now used to a Lifestyle of wanting more than what we earn and in some cases what we deserve.
No point in suggesting people the safest and carefree Life is Not to Borrow.
Since there are no takers, the next option is to find out How To Borrow Intelligently.
- ‘As any smart borrower could tell you, it’s important to read the fine print when it comes to lenders. Sure, that balance transfer may sound appealing now, but what happens in 6 months when the interest rates sky rocket? Credit card companies are notorious for hiding their little tricks in the fine print so pull at the magnifying glass if necessary.
- Even if you choose to consolidate debt and borrow more, always make more than the minimum required payments. By consolidating your debt, you may be eligible for lower monthly payments, but they won’t help you get your debt paid off any faster. Smart borrowers even go so far as to pay off their entire balance each month.
- Do you only have one or two credit cards? Do yourself a favor and keep it that way. Trying to juggle too many lines of credit is the opposite of smart borrowing. It’s simply too difficult to keep track of a dozen different credit cards, with their different due dates and minimum monthly payments. It’s almost inevitable that those who have too many credit options end up putting themselves in debt.
- If you’re planning on taking out a new credit card or any type of line of credit, do your homework to find the best possible interest rate. By now, everyone should know how important their interest rates are. In essence, they represent the cost of borrowing money and if you get stuck with a high rate, you’ll end up paying a lot more over time.
- No matter how much debt you’ve accumulated or how much you still need to borrow, saving money is always important. While repaying borrowed money is probably your number one priority, do not neglect your savings. You just never know when something could happen, such as a car accident or hospital visit, that could require you to break out the savings.
- Finally, don’t fall for the idea that declaring bankruptcy will be an easy fix to your debt problems. While bankruptcy may be able to help some people in the right situation, it can be a disaster for many. Declaring bankruptcy will absolutely ruin your credit score for the next several years and making borrowing more money all but impossible.’
Tips to Save Money:
- Treat every purchase like it’s a major purchase. You have a few opportunities in life to save a lot of money, but it’s the small daily ones that will make or break you.
- Vacation close to home so you can drive instead of fly.
- Delay big purchases as long as possible. You may lose interest or find an alternate solution.
- Hang dry your laundry, indoors if necessary.
- Choose a hairstyle that does not require frequent trims.
- Repair instead of replace. This goes for appliances, furniture, clothing, whatever.
- Borrow infrequently used tools and supplies instead of buying. (Also make sure to lend.)
- Bank at a credit union instead of a corporate bank. You’ll most likely save on fees.
- Wear the clothes you already own instead of buying new stuff all the time.
- Cook from scratch and save restaurant meals for special occasions.
- Make sure you have a few easy meals on hand for those nights when takeout dinner is calling your name. There’s nothing wrong with serving scrambled eggs and toast for dinner.
- Use your library for books, magazines, movies and CD‘s. And then make sure to return them on time!
- Foster your relationships with like minded friends. They won’t make you feel bad about sticking to a budget.
- Pack your own work and school lunches.
- Replace expensive recipe ingredients with inexpensive options. Perfect example? Kale instead of basil in pesto.
- Don’t be a snob about older electronics. You will survive without the newest iPhone.
- Learn how to mend and de-stain your clothing. If half your wardrobe is out of commission, you’re missing out.
- Batch your errands whenever you drive.
- Drink water or homemade iced tea instead of soda.
- Choose social get togethers that do not include shopping.
- Cancel memberships that you do not use. Gyms, premium cable channels, and everything else.
- Pay attention to your household’s food waste. Eat what you have, and stop buying the food that you tend to waste.
- Be willing to own less stuff. There’s less to buy, organize, clean and look at.
- Wait until movies hit the second run theaters.
- Decline your friends’ shopping parties. You don’t need any more Tupperware, baskets, jewelry or candles.
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Rewards credit cards are usually marketed as a good way to get rewards like cash back or airline and travel miles. However, what most of the 80 million Americans who currently have a rewards card do not understand is that these cards come with negatives, like higher interest rates, additional fees, and sometimes a cap on the amount of points you can receive.
Because of these hidden downsides, you can actually end up paying more for your purchases than a regular card, unless you pay your bill in full every month.
With that as a basis, there are good cards out there, but it is imperative that you read the terms and conditions, and pick a card that provides rewards that are actually a bonus, and not something you pay for in interest.
To give an example, Howard Dvorkin writes that:
“Consider a cash back rewards credit card: You typically get around 1% to 5% cash back from various purchases. So let’s say you spend $5,000 on your 15% APR credit card in a year and get a generous 5% cask back on all purchases. That gives you $250 at the end of the year. However, if you pay only the minimum payment on your credit card, you end up paying more than $5,000 in interest before you pay your debt back. Even if you pay fixed payments of $475 per month to pay the debt back in a year, you pay just over $395 in interest. So in 12 months, you earned $250 and spent $395 in interest—creating a net loss of $145.”
He goes on to say that even with rewards cards where points are involved, the closer a person gets to reaching a milestone, the more they will likely spend to get there. This is called “purchase acceleration,” and will likely end up with the individual spending more money than they intend to, just to get a few extra points.
The most important things to remember when looking to get a rewards card are to read the terms and conditions, to make sure they do not meet a “points cap,” and to pay off your debt before any interest accrues. If you have already spent too much, work as fast as possible to get rid of that debt, as rewards credit cards tend to have a higher interest rate.