How do I clean up my credit when I am broke?
My husband and I are living paycheck to paycheck. I owe $14,000 in debt while my husband only owes $600. We are going to pay his off. We really want to get a house. Is there a way out of this mess and get past my mistakes from before?
Even married, you have seperate credit reports. He can apply for credit without my credit being an issue. So, please do not give me the “You Both Owe” talk.
Depends on what youre willing to do. First thing, get rid of all unecessary spending. That include eating out, cable, pampering, brand name foods etc. Then find cheaper alternatives to the necessities. Make a budget so you know where youre money is going. Put the rest in a savings account. Dont touch it.
Option 1: Negotiate interest, etc
Request a reduced interest rate, removal of fees, etc. There are programs for temporary suspension of payments. These let you to skip a few payments for no extra fees, some will reduce the min payment (never use long term), and some will reduce the total balance. Do this with ALL bills so you can save the extra money.
Option 3: Settlement
Start with the largest debt. Save 1/2 the balance even if you have to live without. Ask the creditor for a settlement. If you owe 3000, they may offer 2500. Counter for no less than 1250. You’ll probably settle around 2000. (I got 20,000 down to 4,000, Yay!) You have 3-6 months to pay it. Stick to the settlement plan or you may have to start over from scratch. Continue saving as before. Settle the next debt.
Option 4: Bankrupcy
This really is a last resort, I dont even recommend it. However, this is what to expect. New laws have made it harder to be approved. The judge will get a full financial disclosure, and will oder you to pay a certain amount to certain creditors. You will also have to attend financial counceling classes. If all else fails, you will have your debts wiped clean. However, your credit will still be awful… For the next 4-7 years. You wont be able to get a mortgage or any other loan.
To build good credit fast, ask your bank for a secured line of credit from your saved money. Make payments to creditors from it. When youre finished paying off the debt, have the bank nullify the line of credit with the saved money. Voilla, youve paid debt and established good credit history simultaneously.
Heres what I recommend, call all your creditors and make an organized chart of what you owe, when its due, interest rate, grace period, etc.
Cut out luxuries. Make a budget, determine how much can be saved and when youll be able to arrange your first settlement. Write it on your calendar. Stick to the plan.
When youre debt free for two years (and making good credit) start house hunting. A few tips: good credit = good interest rates. However, you can buy into a better rate. This will save 3-15 thousand over the life of the loan. Also, make your first mortgage payment on time, then make another the following week. Continue making payments at least 3 weeks early. This will reduce the accrued interest, allowing you to pay off the house in 1/3 to 1/2 the time. Double payments will pay it off within 10-15 years.
How do people pay for college with financial aid?
I have 2 semesters left at my community college before I transfer to a bigger school. I have Florida Pre Paid, and my current college is 15 minutes away from my house so, so far I haven’t had to worry about loans and/or financial aid. However, the University that is close to my house doesn’t offer a program for my major and the university I’m looking at going to now is about 4 hours away. So obviously I’d have to move away from home, into a dorm, etc.
Since my tuition will still be paid for by my Florida Pre Paid, could I still get loans or financial aid to help me pay to live on campus/dorm essentials/books? Or can you only get it if you have to pay for tuition as well? I’m really confused by all this and it really stresses me out, so if anyone could help explain how it all works or even offer some advice it’d be appreciated.
Also, it is possible to go to college without having to have a job? I have modest, hard working parents who can’t pay for everything nor do I expect them to, but, I’ve had a job since a couple months into college but I’ve found it really hard to juggle both things.. I went from being on the deans list when I didn’t have a job, to a plummeting GPA when I did start working. Any advice on that as well?
You said: could I still get loans or financial aid to help me pay to live on campus/dorm essentials/books
— yes, you can still get fin aid to cover things included in cost of attendance….. The problem is you might not get enough Fin Aid to cover the need… Unless your parents take out enormous amounts of student loans
did you fill out FAFSA this year to get an idea of what you might be eligible for? It might be a good idea to do this & indicate your current school so they process your aid.. When you get that fin aid award letter.. Look for Pell Grant (you probably won’t qualify because it is intended for households living at the poverty level) & then also look for Student Loans… This will give you an idea of what you are eligible for
the amount of pell grant money (if any) and the amount of dependent student loans will not change at the Uni… Even though the cost is higher – your parents would have to take out Parent Plus or Private Student Loans to cover the difference between what you can get & what you will need
working while in school can be hard… To make it work you have to get very good at time management & sacrifice your social life
ever member of my family has gotten their bachelor’s degrees working at/near/over full-time while in school full-time.. It is, like I said, difficult & exhausting…. But the only way to minimize your & your parents student loan debt
this includes my youngest brother & my son who are both currently in school (so what I am saying is based on today’s tuition prices not just “back then”) — my son is in a rigorous engineering program with an average of 18 credit hours per semester, my brother is working on his master’s degree —– even including both of them, every member of my family has graduated debt-free (and without any financial help from family)
Time to sit down with your parents to discuss these plans & find out how they feel about taking out student loans to cover everything beyond your tuition cost
I’m very scared to establish credit. How do I do so without a credit card?
I’ve just recently turned 20 and I live at home with my parents [hey, I’m not ashamed!]. They tell me I’m going to have to have Some credit, but the thing is, I’m utterly terrified to establish any, period. Like, I really don’t want it. Are there any loopholes to get around having credit, or am I destined for an adulthood filled with plastic and anxiety?
At 20, you don’t need credit, yet, but eventually if you ever want to buy a car or a residence for yourself, you’ll need to have an established line of credit that shows you are a good loan risk. Up until this mortgage meltdown, credit companies and banks were extending lines of credit to almost everyone (which is how they got into this situation, people couldn’t pay back the loans). The “loophole” to not having credit is to have huge amounts of cash–pay for a car in cash in full up front, pay for a residence in cash up front, take trips by paying for the airfare in cash and carrying around all the cash you’ll need while on vacation (could be risky and what do you do if you get robbed or lose all your cash?). You don’t necessarily have to have “an adulthood filled with plastic and anxiety” if you use your credit cards judiciously, pay for most things in cash and when you do use your card pay it off in full each month. Don’t overspend, make and keep to a budget. Only keep a minimum number of credit cards–you don’t need a card for every store you shop in, usually a Visa card works everywhere (and those “special offers for 10% off today’s purchases if you sign up for our card” really isn’t worth it in the long run) including overseas. Try to pay for most of your daily life with cash, if you don’t have the cash then you’ll have to thinking twice whether you really need that thing enough to go the ATM or not. Leave your checkbook at home and only use your checks when you absolutely have to. You can have a good line of credit, credit cards but still be mostly debt-free (well, if you take out a mortgage or car loan you’ll have that but you just budget your income to cover those expenses, you can even have your bank automatically pay them every month out of your bank account). You can have it all; you just have to have the discipline to not abuse your credit, to save in advance to buy big ticket items. It you have good money management, you’ll start perceiving your plastic as benefit.
Will people change their credit habits because of the credit crunch?
The credit crunch has highlighted the fact the majority of countries/people run and live on credit. Have or will you change the way you handle credit?
I don’t have credit cards or loans. Just a mortgage. How many people live like that?
I personally realized it a little over 2 yrs ago when I added up- all interest I was paying out in one month and realized not only was it a large sum of money but that it would be all mine without all the credit cards…At that time I put myself on a major debt reduction path…cash only…no major expenses/purchases without saving for them 1st…Cut out all meals out and such…aim was to pay off 1 credit card and then rollover the payments to another…I continued to do this until now I have only 1 card with a small balance which will be paid off about first of the year…at which time I will be totally debt free with no plans to fall into that trap again.
I believe we will have turmoil until others realize they are in same situation and take control (instead of blaming others and whining for help)…we have become to credit dependent and lived way past our means…time to pay the piper…in turn less spending will also contract the economy as it has become bloated from our overspending…it is tough medicine to swallow but we must for in the end we will all be much better for it.
How do I start saving money at age 35?
Ok so i am 35 years old and in bad financial debt. I am currently $68,000 in student loan debt. THe rest of my debt is like $13,000 from medical bills, my car loan, other stupid things like pay day loans. I have judgements, liens, and my wages have been garnished. I only make about $1800 a month. After child support and taxes and my garnishment I only make like $1300.00 a month. I have no saving, no retirement, nothing. Am I in deep trouble and is there anything I can do to start saving so that when I do retire i can atleast live comfortably. I don’t want to be working at age 80 if i even make it that far. I am just scared for my future. I made alot of dumb mistakes by dropping out of high school and not having a college degree. Only thing i have is a GED from when I went to job corps and got a trade. Anyone have any suggestions on what i can do to get out of debt and start saving before its to late. I have thought about filing for bankrupsty but my friends say its a bad idea.
You need to write down ALL your debts on a piece of paper, with the highest interest rate debt at the top, and the lowest at the bottom. Then, you pay minimum repayments on all the debts, and put all the extra money you can on the one with the highest interest rate debt. Most of your repayments are actually interest — that is how banks and lenders get rich. So if you pay extra, you’re paying off the principle, which saves you money because there is less borrowed money to accrue interest. You keep paying down that high interest rate loan until it is gone, and then move the payment you were making onto the next highest interest rate loan. Keep doing that until you are debt free. It will get you out of debt the fastest, and will literally save you the most money. You CAN get out of debt, you just have to stick to the plan. It’ll be hard at the beginning, but every dollar you repay off that high interest rate loan puts more money back into your pocket in the long term.
Forget about saving until the loans are clear. You should only have a couple of hundred in savings for an absolute emergency right now — car breaks down, fridge breaks down, you lose your job — real emergencies.
This is the extra repayments simulator from Yahoo’s Australian site. Put in the details of some of your loans and just see what a difference an extra $2 a repayment could do. Now, you need to focus on getting debt free. Put that piece of paper on the fridge, and every so often, cross out the old balance, and write the new balance on the paper. Keep motivated! I used to give financial counselling to women leaving domestic violence — I’ve seen people in worse situations than you are in get debt free and start saving, so stay positive. If you can sell anything on EBay to make extra cash to crush that high interest rate debt (I’m guessing it’d be the pay day loans — they are financial suicide!) that would be a huge advantage. You need to lower the amount of interest you are paying, so get rid of those high interest rate loans.
Now, you should hit your local library and get out some books on personal finance. I know, you think that sounds super boring, but it is actually not. It is really empowering. You just read the bits that are relevant to you and discard the bits that aren’t suitable. They are often very easy to read and are in very simple language.
Once you have crushed those debts and are debt free, then you can start saving. You simply put a minimum of 10% of your income into another bank account, one that earns high interest and is hard to get to, so that you can’t spend it impulsively. A passbook account without internet access works well. I would put more than 10% in your case, because right now you are starting with nothing. When you have a few thousand dollars in that account (which is enough to get you out of a lot of emergencies without having to resort to credit) you go to your bank and ask if they have a financial counsellor you can see. You often can see them very cheaply, just paying a tiny commission out of your investment as a once off payment when you set it up. Get them to set up a mutual fund (in my country we call them managed funds) and then get a direct credit from your bank account into the mutual fund set up so that you are continuously investing, and you don’t ever have to think about it.
You just need a plan of attack and to value yourself enough to do this. Please feel free to email me if you need any more help or information — I might be able to give more help if I have more information. Do not file for bankruptcy. That is insane — it will F*** your life up for no advantage. You can totally do this! It will seem slow at first, but the day will come when you look at your debts and go “Holy S***! I’m on top of this!” I paid a house off in 5 years on minimum wage. You can do this with one arm tied behind your back. You just need to learn how, and commit yourself to improving your life.
If all this repaying is really demoralising, set aside $3-5 a week for a little luxury — a block of chocolate, or a magazine, or a beer — as your ‘sanity allowance’. You’re allowed to spend all of that on something you really love, to remind yourself that you are worth it. Just kill the debt, one dollar at a time. Remember, the interest rates are the key information — they are telling you which debt is costing you the most per dollar owed, so that debt is the priority. You can do this, without consolidation or bankruptcy. It’ll seem slow to begin, but its definitely going to get easier.
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