Manage Your Student Loan Debt Better in 2015

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It is usually seen that most of the students fail to manage their student loan debts efficiently after their graduation. The reason is quite simple. Most of the students spend their earnings on comfort and luxuries instead of repaying their student loan debt. It has become comparatively easy to acquire student loans. However, each one of us should keep in mind the fact that repaying loans are not easy as borrowing it. This is why there arises the need of a proper strategy when it comes to managing your loans. It is desirable to formulate these strategies while you are still in college instead of waiting until you get a good job. If you are one of this kind, here are some easy tips for you to manage your student loan debt better:

1) Go for financial counselling

It is better to go for a financial counselling session before signing the loan agreement papers to the lender. The more knowledge you have about the borrowing and repayment, the better you will be prepared for paying it back.

2) Set up automatic payments

You will never end up missing a payment if you set up automatic payments. Some of the lenders also offer discounts on the interest rate if you do so.

3) Calculate your debt

Once you complete your college education and when it is time to start repaying your debts, calculate how much money you have to pay every month. Keep aside the loan amount without fail even if you have to cut out certain luxuries in order to do this.

4) Look for other options

If you find the minimum loan amount to be repaid is not affordable, you can also look for another repayment plan such as a consolidation plan.

5) Set bi-weekly payments 

Pay your loan debt every other weak instead of adding it to the month end. This helps to cut your loan debts faster.

6) Student loan consolidation 

Student loan debt consolidation will be effective only if you owe several lenders. Debt consolidation ensures that you repay loans at cheaper rates and this option is effective if you have student federal loans. Making your payment automated will help you because you don’t have to remember the dates of repayment. You should only consider this option if your debt amount exceeds $10,000 or if the interest rate is higher than the current rate in the market. You should never combine government loan and private loans at any cost, otherwise you will not be able to claim any federal benefits like subsidized rates or deferment.

7) Consider refinancing

In case of student loans, you will always want to get the lowest interest rates possible. This will reduce your total loan payment and also the monthly payment. The best ways to save money in terms of student loans are to refinance your loans at a low interest rate. Refinancing is an option when you have an increased income or a better credit. The lower the new interest rate, the more you can save on interest.

The repayment term for your loan depends on the amount you have taken as a loan from the lender. If you are not financially responsible, it can even take more than 30 years to close the loan. So it is important to be responsible for the amount you have borrowed and to clear off the debt amount at the shortest time possible. If you clear your debt sooner, your interest rate will definitely go low. Finding out a lender who gives you favorable interest rates and better terms and conditions is not really easy. So before choosing a lender, do your own research by searching online and asking your friends and neighbors.


Author Bio: The author is an established freelance writer who is currently working for several websites that deals with finance, insurance, car dealership and travel. She has been working in the industry for the last 5 years. She is also a writer at essaypro.com.

Let's Talk Money

Anything For Money

 Money, good or bad, moves people. When I was young, I did not want to spend my time studying. But when there's money involved, boy did I work hard to push my grades up to Bs and As. One thing for sure though, it's a rather unsustainable motivator. It didn't build any positive habits in the process (for me at least) and a burden for parents to pay up.

 It's a relationship that I don't want to build with my kids, though my wife had promised my daughter a toy of her choice if she can read the Quran and she's almost there. I haven't offered my daughter, seven years old, anything in return for any achievement.  I want her to discover her emotions of being proud of herself and any other positive outcomes from her experiences.

 The relationship that I do want to build on, and what I think every Muslims should, is to talk about money rather bluntly with their kids depending on their level of understanding. A survey done by Visa found that families in Brazil and Mexico (38 and 42 days respectively) spends most time talking about money, Asians are best savers, young people aren't learning about money but Brazilians get an early start at the age of nine. These are very key things that as a parent should do, talk and teach about money and how to save.

“God commands you as regards your children’s (inheritance): to the male, a portion equal to that of two females; if (there are) only daughters, two or more, their share is two-thirds of the inheritance; if only one, her share is a half.  For parents, a sixth share of inheritance to each if the deceased left children; if no children, and the parents are the (only) heirs, the mother has a third; if the deceased left brothers (or sisters), the mother has a sixth.  (The distribution in all cases is) after the payment of legacies he may have bequeathed or debts.  You know not which of them, whether your parents or your children, are nearest to you in benefit; (these fixed shares) are ordained by God.  And God is Ever All-Knower, All-Wise.” 4. Surat An-Nisa (Women; 11)

 The ayat focuses mainly on the distribution of wealth. But underneath, I think highlights an importance in communication of wealth. Most people will find it appalling, offensive or taboo to talk about distribution of wealth after death while still alive, but I think it's a must. Especially since debt can be passed down. Money becomes a family affair. If you choose to take on debt, know that your family might take on it as well if you die in debt.

And, DEBT!

Moving Without Transgressing

Transgressor!

Believe in Allah and His Messenger, and spend of that whereof He has made you trustees. And such of you as believe and spend (in Allah's Way), theirs will be a great reward. 

57. Al-Hadid (The Iron; 7)

And We said, "O Adam, dwell, you and your wife, in Paradise and eat therefrom in [ease and] abundance from wherever you will. But do not approach this tree, lest you be among the wrongdoers."

2. Surat Al-Baqarah (The Cow; 35)

Since the beginning, we have been given limits that we could not cross. Like a board game, those limits become rules in which we must abide to, it is still possible to come out a winner. However, board games like Monopoly doesn't really teach the complexity of how money is spent monthly.  It doesn't have charity or monthly expenses. The sole purpose of the game is to spend all the money we have, as quickly as possible, to win.

The game of life (not the board game) has its limits. The limits within personal finance is our income. If we spend our money on a cash basis, it would be impossible to step over the limits. The only way to step over is to use debt instruments, like credit cards, then falling into debt.

O you who have believed, do not prohibit the good things which Allah has made lawful to you and do not transgress. Indeed, Allah does not like transgressors.

5. Surat Al-Mā'idah (The Table Spread; 87)

I have to underline that debt itself is not forbidden (credit cards, however, is a wider discussion which needs to be saved for a later time). It is possible to have debt but not transgress. From my previous post, by dividing our budget into present, future and past needs, we can set either the future or the past as our limits to debt.

We can also switch our focus to our limitation, income. It is possible to raise the limit by having a bigger income. Find a job that pays higher or negotiate it. And that is probably the only way we can move within the limits, with Allah's blessings (getting an increase in income or a job with one).

4 Mistakes you can make in Your Relationship with Banks

Although it is a necessity, working with banks can prove to be extremely exhausting and confusing at the same time. It is true that banks are there to help you when you cannot help yourselves. They give you a hand when you need it, but they also take everything from you when you cannot pay your debt.

There are two ways that your relationship with your bank works. On one hand, things work out smoothly, and your relationship is based on trust and respect. On the other hand, each of you tries to cheat on the other one and misunderstandings occur. Either way, here are the mistakes you should avoid when it comes to bank/client relationship.

Let the Bank Think for You

The health of your personal finance should be in your hand. No matter if you talk about your personal finance, or your businesses’ finance, you are responsible for your earnings and your expenses. Before signing any contract, even an account opening contract, make sure you read and understood all the terms, commissions, and risks involved. Once you signed the contracts, you cannot go back. And you all know how many times people have regretted not having read the contracts carefully before putting their signature on them.

Not Negotiating

It is true that some costs or terms cannot be negotiated under any circumstances. However, if the bank is trying to impose some conditions you do not really agree on, it is time you started negotiating. If you know how to address the problem, and if your character is strong enough, you will be able to negotiate even the simplest details. If your business grows and it works better and better, negotiation with your bank is a must.

Standing in Long Lines and Wasting Time with Cumbersome Bank Procedures

It is amazing how some people like to stay in line. No matter if they want to buy a shake, or if they are waiting at a red light, they just love to stay in line. However, when you have to run a business, time is money, and you cannot waste it standing in lines at your bank.

This is the reason why internet banking was invented. Internet banking allows you do any financial operations you want from paying your utility bills to sending money to your business partners and ordering your employees’ paychecks.

Keep a Destructive Relationship

No matter if you think about personal or professional relationships, people tend to like to be in a destructive one. The relationship with your bank is not an exception. If you do not like how your bank treats you, why do not you change it? It is your money, your time, and your nerves that have to suffer.

You can choose to have a bank to manage your personal accounts and another bank to take care of your businesses’ finances. Each bank focuses on something: profitable loans, low commissions, lower interests, etc. Think about your needs and choose the banks that fulfill them most suitably.
insurance claims.

Financial Team Assemble!

Financial Team Assemble! Image: Marvel Avengers

 The one thing I've learned from past experiences of working in teams is that the best team assembled are those that include diverse talents. Step 28 suggests your team should consist of a tax advisor, credit counselor, financial planner and lawyer. Kiplinger suggests a dream team of a financial planner, investment adviser, estate-planning lawyer, and an accountant. The two only showing a slight difference depending on where you are with your money, one being in debt and the other with solid finances and ready to invest.

 It all sounds good when personal finance books suggests that you should build a team as if we're all Tony Stark's with money to burn, thus often forget to mention the costs associated with it.

 Spoiler: it's not cheap.

 Now, don't take this the wrong way. I'm not trying to sell the idea to readers that they should spend their hard-earned money on professionals. I'm having a hard time to convince myself to do that actually. So, this is actually me, trying to convince myself.

 According to the article from Kiplinger, financial planners come at a cost of $200-300/hour. There are online financial planners such as LearnVest offering combined services of financial planning plus technological support that starts from $89 one time fee, plus a $19 monthly fee. If I take the "5-year planner" plan, it would be $299 + $19/month, or about $527. That's probably the cost of a "free phone" plus a year contract phone plan or maybe a gadget. So, gadget vs financial planner.

I'm going to consider my happiness on making this decision. I'll categorize this financial planning purchase as a one-time, one-year subscription experience purchase. Am I sold on it? Not yet. I think I'll focus on how I budget my first year and what I achieve.

Not Sure If I'm Going Into Debt Or Just Using My Credit Card

Philip J. Fry (Futurama) thinking.

 We all use credit cards differently. Some use it like a charge card, borrow then pay in full when is due. Some use it as a loan, borrow then pay in installments. Sometimes, we have "pain" and "reward" signals when using plastic cards. Some people feel a rewarding experience from using their credit cards. I have a "pain" signal for myself that by using an ATM card pose a security risk by having to enter a pin. A risk of my card being hacked and a whole lot of "pain" and possibility that I may not be able to get my money back. I have that signal because it'd happened to me once, my ATM was copied, hacked, and used. But for credit cards, I lack a "pain" signal and have always treated it like cash. The pain comes much later when it gets me into debt.

Step 27 takes the financial literacy approach by educating the cost of taking on debt. We need to understand the terms such as interest or APR, length of loan, finance charge, credit limit, minimum monthly payment, grace period, over the limit and late fees associated with the debt. A much more easier approach is to just avoid it completely so that we would not need to understand it at all. When we use our card, we have to know exactly whether we are falling into debt by making that swipe purchase, since credit card increase purchasing power, but not increasing our income. If we avoid it completely, we know we are not falling into debt when we are making a purchase with cash.

 An interesting part is how debt affects us not just financially, but also emotionally and physically. Are we really ready to take on a burden of back pain, migraine, anxiety and depression by getting into debt? Debt is for the financially and mentally prepared.

Or do you, [O Muhammad], ask of them a payment, so they are by debt burdened down?

52. Surat At-Tur (The Mount; 40)

4 Things to Ask Yourself before Purchasing Anything on Finance

Finance is a tempting option when faced with a purchase you might not normally be able to afford, however it comes with a few serious consequences. While it will definitely appeal to your impulsive side and tempt even the savviest shopper, it pays to be aware of the risks. Here are 4 important things to ask yourself before purchasing anything on finance.

Why Finance?

Before you go any further, ask yourself why you would need finance to complete your purchase. If it is a large item which you have planned to buy for a while, finding a good finance package can be great. However if you’re turning to finance because it is an impulse buy and you can’t quite afford it, you could be leaving yourself open to difficulties with debt down the track.

What About the Interest?

Always take the time to consider the interest offered with the finance, and calculate how much you will be repaying in total if the loan runs to the full term. High interest rates that kick in after an initial ‘interest free’ period can become crippling to your finances, so it pays to be aware of exactly what you are up for.

What Are the Fees and Charges?

Important parts of any finance package are the fees and charges. Always read the fine print, and take into account any administration fees, late payment charges, early payout fees and anything else that could apply to your loan.

Could There Be Long Term Consequences?

While buying on finance often seems like a very attractive short term solution, it can have devastating repercussions in the long term. Never commit to any finance that is more than you can comfortably repay, and always consider what would happen should you suffer from a loss of income. Being unable to meet your repayments can leave you with an ever increasing debt, as well as serious damage to your credit rating.

Asking for Advice

If you feel like you are struggling financially, or are tempted to resort to finance to purchase the things you need, it might be time to seek some professional advice. Before making any big decisions, why not consider consulting with a professional company such as Fox Symes debt solutions. You may be able to rework your budget or find other strategies that help you to strengthen your financial position and achieve your goals through savings, rather than slipping further into debt by purchasing anything on finance. 

It’s important to consider these important questions before making any big decisions regarding purchases on finance. While it might seem tempting at the time, you always need to keep in mind the long term consequences of relying on credit, and the possibility that you could find yourself in more debt than you can comfortably handle. After considering all of these points, you should be in a well informed and clear frame of mind to decide whether or not purchasing on finance is truly the right option for your financial situation.

Spend 'Til You Drop

Broke Monopoly

I had always been taught and told to save. Save for the things I want to buy. Save for my goals. I did exactly just that. I became proficient at saving. Once, I brought a bag of pennies to Toys R Us to buy a handheld game. You can imagine the horror that the clerk went through of counting pennies. By the time I was a young adult, I had developed a habit of saving and spending it all at once. But my spending was of useless spending and brought me to my financial demise. It is like a winning poker player who chooses to go all-in at his last hand and game, then ends up losing it all and being a loser. So, for a long time, I never saw the real lesson of spending when I always feel like a loser in the end.

And spend of your substance in the cause of Allah, and make not your own hands contribute to (your) destruction; but do good; for Allah loveth those who do good.

2. Surat Al-Baqarah (The Cow; 195)

And [they are] those who, when they spend, do so not excessively or sparingly but are ever, between that, [justly] moderate

25. Surat Al-Furqān (The Criterian; 67)

The focus should be balanced. Saving is important but, spending is equally as important. But the word that we all should be more focused on is "spend". The reason is, only through spending can we actually realize a benefit (or destruction!). Think about it. What benefit is there through saving if no spending actually occur? Even the money that WE SAVE in the bank, the BANK SPENDS for benefit. Benefit to the people working for the bank and society. It is the purpose of banks to gather money and redistribute them as loans. The bank profits, and those who borrow for purpose of business profits from income. Or if it is a car loan for example, the bank, the car dealership or person receiving the money benefits. The reminder of excessive spending is, as we all know, what happens on a bigger scale when everyone stretch themselves too thin.

Going back on the topic of step 17, saving for our goals. If you remember "The Priority Pyramid" teaches us the foundation and goals that we should build on; spending less than earned (no additional debt), consumer debt free (no credit card debt or car loans), and building an emergency fund. They are part of what Dave Ramsey calls "The Seven Baby Steps". All of these require spending, than actual saving. Now, there's nothing wrong with spending all your monthly income, if you spend it all your required expenses and the seven baby steps. Once you receive your paycheck, you automate yourself to start spending money to pay for your emergency and future expenses fund, debt, investment fund, college fund, a home, retirement fund and charity. In the end, you're left with nothing. You have spend 'til you drop. But this time, it's okay.

What benefits can you actually get from hoarding and not spending money anyway?

O you who have believed, indeed many of the scholars and the monks devour the wealth of people unjustly and avert [them] from the way of Allah . And those who hoard gold and silver and spend it not in the way of Allah - give them tidings of a painful punishment. | The Day when it will be heated in the fire of Hell and seared therewith will be their foreheads, their flanks, and their backs, [it will be said], "This is what you hoarded for yourselves, so taste what you used to hoard."

9. Surat At-Tawbah (The Repentance; 34-35)

Yikes! Okay, okay. That ayat is about embezzlement of funds, and not redistributing it. But, hopefully the importance of proper spending stands.

In Every Debt That Must Be Repaid...

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Mary Poppins © Disney. All Rights Reserved

There once was a beautiful lady that floats down from the clouds with an umbrella to answer the call of people who are in a financial mess. She help their households by being firm and lay the ground rules for them to succeed financially. But, she doesn't forget that in all of us, their lies a child who yearns of play. She reminds us that  "in every debt that must be repaid, there is an element of fun. You find the fun, and -SNAP- repayment's a game!"

I wish such lady or at least a reality show called financial literacy nanny exists. Would it be possible to find the fun in repaying debt? Sure! In order for it to be a game, you must divert your attention from it being a burden to being an activity that is a challenge waiting to be conquered.

Let's call the game "ZERO!" The race to zero debt.

The Rules of ZERO! :

1. To win, players must have zero debt.
2. Players start with a certain amount of debt. Players must know the outstanding balance, interest rate and minimum monthly payments required.
3. Players must assign a person as witness/supporter making sure that you play the game until it's finished.

Strategy I recommend on winning the game :

• Make niyyah to win the game!
• Don't accumulate new debt.

• Repay from debt with highest interest, but put an effort into negotiating a reduction on your interest rate. You can spice up the game by assigning a number to each of your card, and your spouse or friend acting as a witness and supporter rolls the dice to see which card you get to repay first.
• Know what is required of you in terms of monthly payments.
• Stick with the plan!

Regardless whether you prefer in repaying debt with smaller outstanding balance or based on the highest interest rate, the most important thing is to stick to whatever strategy chosen to win the game. The focus should be on the necessary steps needed to be taken. Taking the thirteenth step is about the step to be free of debt, especially consumer debt. Remember, it's all a game. A game you can win.

And the worldly life is not but amusement and diversion; but the home of the Hereafter is best for those who fear Allah , so will you not reason?

6. Surat Al-'An`ām (The Cattle; 32)

How To Pay Off Credit Card Debt

Debt is a horrible master. Nothing saps wealth like being in debt. Just take your monthly payments, add them together, then times it by twelve.

How much do you spend on debt?

Once you get the number go to this compound interest calculator. Set as the interest rate a reasonable rate (try 6%). Then set the years to the average length of a car loan (5 years), then take your monthly amount you spend on debt and add it to the calculator. Select the compound interval to yearly. What is the number you get? Image what you could buy or save if you paid off debt!

How do you pay off debt? Follow these simple steps:

1. Get the current balances for your debt accounts.
2. Throw the amounts and list in excel or Google spreadsheets.
3. Sort the list from smallest to greatest.
4. Add due dates, minimum monthly payments
5. Pay off the smallest amount ASAP
6. Take the minimum payment you were paying for the smallest balance and add it to the next smallest balance. Ex: Visa minimum is $50 per month, Master Card is $100. After VISA is paid off, apply th $50 to the Master Card monthly payment making it $150
7. Keep doing this until you reach your mortgage.
8. At this point I would apply half of what you were spending on consumer debt to pay off your mortgage faster!
9. Celebrate!!

Achieving Goals Through Habits

Image source: topsecretwriters.com

Taking the next step, step 11, is to make SMART goals.

Goals need to be:
Specific: (for example) I'd like to save 20% of my monthly income
Measurable: by saving 20%, I'd have achieved the goal
Achievable: I make sure 20% of income is realistic
Rewarding: it gives a feeling of achievement or self-fulfillment
Trackable: tracking my spending on how I can improve my savings.

Before making SMART goals, more importantly, we need to know how we can make things a habit so any realistic goals made are achievable. James Clear calls it "identity-based habits". We start by planting an identity who we'd like to be, believe it, then truly become the person. For example, I create a new identity that I am a person who lives without debt whilst my current situation is being in debt with five credit cards. I must prove to myself that the new identity is who I am by creating "small wins". A person who lives without debt, surely has a savings account. So, I create a habit that after I receive a paycheck, I separate 2.5% for savings to create small wins. Raise it by 100% to 5% on next month's paycheck and so on. At the same time, I make it a habit to pay down my debt (and stop using the card), starting with the smallest outstanding balance until it is paid off. Shred the credit card. Win.

If you'd like to start with the highest interest and the highest balance, that's also fine. There are two ways to walk up a very steep and tall hill; walk with your head looking up at the highest point of the hill, or you can keep your head down. It is physically and mentally exhausting to look up and constantly saying to yourself that "you're almost there", where in truth you're still quite far. However, if you keep your head down and just keep walking, it might be a little bit easier. Don't focus on how much debt is left to be repaid, just keep focused on paying down the debt. Negotiate with the credit card company on freezing the card and interest because you've made a commitment to pay it off. You can also use services such as those provided by Islamic Debt Solutions.

The key is not in setting the goal, but in creating the healthy habits to actually become the person able to meet the goals made.

The Things We All Need

I need this. Really! Image from green.autoblog.com

If you have kids and gone for a stroll with them at the supermarket, you'd notice how they use the words want and need. I think, in their brains, they know the impact of each word. Saying "I need this" vs "I want this" has its own weight. So, "need" will come up more often than "want". I barely can resist their puppy eyes and mellow voice as they longingly look at the toy that has been strategically placed eye-level with seated shopping carts.

Maslow's Hierarchy of Needs

Maslow's hierarchy of needs breaks down needs into three parts; basic needs, psychological needs, and self-fulfillment needs. Basic needs are the foundation of the triangle, consisting of physiological and safety needs. Physiological consists of food and water. Safety needs, like shelter. The psychological needs are love/belonging like friendships and esteem for feelings of accomplishment. The last part is self-actualization, fulfilling one's potential.

Maslow's hierarchy is a perfect formula for marketing purposes. For example; A commercial showing a boy waiting in hunger as he licks his lips while he watches his Mom make a peanut butter sandwich for breakfast. The boy finishes his breakfast then heads off to school for a test, A+! The boy returns home to see his Mom very proud of her son's achievement, giving him a great big hug. Meaning, advertisers/marketers try to make the item attractive physiologically (hunger, then leave for school feeling full from the peanut butter sandwich), a feeling of love, safety (mom's hug), self-esteem, and sense of self-fulfillment. So, within these needs, companies are trying to categorize or push their products as the I-need-to-haves. I need to have all (physiological, safety, love, esteem, self-actualization) that, just from a jar of peanut butter.

Step 10, is all about identifying needs, wants, and prioritizing. What are our financial needs and wants? Using Maslow's hierarchy of needs, we start from the foundation; our basic needs, the need to eat, drink, sleep safely in a home and so on. We should start tackling down things that might harm our basic needs, debt. We should prioritize to repay any debt on time, because it may harm the very foundation and basic needs. A mortgage, car loan, consumer debt. If we don't have a home, save for a down-payment.

The second is psychological, the need for happiness. Plan for a refreshing trip to the beach, watch a good movie, buy a book that you will enjoy reading accompanied with hot cocoa on a rainy day, and things that will give you positive experiences. Also spend on others, giving out to charities so that you will become much happier. Being happier will help you in avoiding foolish money decisions. Those who withhold from giving (productively) are only withholding themselves from happiness.

"Here you are - those invited to spend (what Allah has provided) in the cause of Allah - but among you are those who withhold [out of greed]. And whoever withholds only withholds [benefit] from himself; and Allah is the Free of need, while you are the needy. And if you turn away, He will replace you with another people; then they will not be the likes of you." 

Surat Muĥammad 47:38

The final part, self-actualization, is supported by our actions from the foundation. We believe in our abilities and will fulfill our potential to make the right financial decisions and goals.

We will continue next week for step 11 in setting SMART financial goals.

Debt solutions: IVAs vs. DMPs

Photo courtesy of abcdlish (flickr)

If you are struggling with unresolved debt, it may be difficult to envisage a future free from financial strain and overdue payments. Bankruptcy may often be considered the only viable option by those so overwhelmed by debt that it feels impossible to escape, but there are less drastic alternatives available.

For example, an Individual Voluntary Arrangement (IVA) is a legally binding insolvency agreement made on behalf of the debtor to their creditors to arrange affordable regular repayments. IVAs are obtained through insolvency practitioners, who will make the necessary arrangements with your creditors regarding what you can afford to repay and how long the term of your IVA will last.



An Individual Voluntary Arrangement is not to be confused with a Debt Management Plan (DMP). Although the two are similar in that they offer an alternative solution to bankruptcy, a DMP is an informal agreement that is more flexible to an IVA in that repayments can be negotiated and there isn’t a minimum amount of debt required to set up a DMP.

Your situation will depend on what solution is best for you; this can range from how much you can afford to pay to how much you owe. If you are considering taking action against your outstanding debts, it is important to consult a professional debt solution service first to explore all avenues available to you.

What are the key differences between an IVA and a DMP?

• You can administrate a DMP yourself free of charge, you can’t with an IVA

As an IVA is a legal form of insolvency, it needs to be processed by an Insolvency Practitioner which will incur administration fee, and also further handling fees whenever a payment is made. A DMP can be set up by the debtor discussing the repayment plan directly with their creditor, or via a debt charity which is usually free of charge.

• An IVA can write off some of your debt, but a DMP cannot

As an IVA is a legal form of insolvency, an arrangement is made to make regular and affordable payments towards clearing debt over a set period of time (usually 5 years). If at the end of this period there is still debt outstanding, it will be written off. As a DMP is set up for the debtor to repay all, not some, of their debt, there is a no set time period. If reasons occur that delay repayment, the agreement will be extended until all debt is cleared.

• An IVA will protect you from creditors, a DMP may not

Once an IVA has been administered, your creditors should no longer contact you regarding the amount owed. However creditors can continue to chase you for extra payments and continue with debt recovery proceedings if you are part of a DMP.

• An IVA will freeze charges and interest, but a DMP may not

When you enter into an Individual Voluntary Arrangement, all charges and interest from creditors will be frozen to allow you to pay back the amount owed without adding to it. A Debt Management Plan will not necessarily do the same, as creditors are not obligated to agree to freeze these charges. This therefore means that as your DMP starts, you may notice that your monthly payments are higher than usual due to interest being charged, but this will reduce as your creditors see that you are making regular payments.

• Repayments for an IVA are not very flexible, whereas they can be for a DMP

An Insolvency Practitioner will be issued to you when you apply for an IVA to calculate what you can afford to pay a month. These payments aren’t that flexible, but can sometimes be paid within a 15% margin of the fixed amount. As a DMP has no set time period, payments have more scope to vary as the repayment term can be extended until the debts are cleared. However, you will need to inform your creditors of any changes to your repayment plan, and they are not obligated to accept them.

Rosie Percy writes for a diverse range of topics and industries including education, health and finance. Rosie has written for the Guardian and other lifestyle blogs, and now lives and works in Brighton.

Budgeting Your Debts Away

As consumers, we are often driven to create debts for ourselves. We have a built in desire for a house which, more often than not requires a mortgage. The same for cars which require loans and other great items that we simply can't pay for right now. When we go to the store, we are often asked if we would like to save 10% on our purchase today by signing up for a store credit card. Our answers, “Well, of course I would!” The simple fact is, our country and economy is based on debt. But, what if we really want to live debt free? Is it even possible? Well, I believe it is and I'll explain how I believe it can be done below!



The Budgeting Debts Away Concept

More often than not, consumers live just within their means. Therefore, the pay check to pay check lifestyle has become a reality for many! But, I believe that it doesn't take a pay raise to change the pay check to pay check habit. If you think about how much money you take in and, how much money you spend each month, you've probably come to the conclusion that it's not possible. But, I'm going to challenge you to think again!

This time, let’s really calculate this out. First, add up all sources of income that you have. This could be salary, side job, alimony and any other source of income that you receive consistently. Now, make a list of all payments you are required to make every month. This should include rent/mortgage, auto loans, credit card payments, utility bills, medical bills and any other bill you get every month. Add up all of the payments required and subtract the total payments from your total income.

Now, we have to think about food. From what's left, subtract the amount of money you spend every month on food. This does not include going out to eat. This amount should only include how much money you spend at the grocery store. Once you've got a new total, subtract the amount of money that you spend on gas for your car every month.

Your Total Is Monthly Leverage

The total that you come up with at this point is leverage that you can use toward your debts. But, how can you take advantage of this leverage and, get the most bangs for your buck? The best way to do this is to come up with a plan that pays off your highest interest rate first. No matter if you have only $50.00 at a high rate or if you have thousands at high rates, paying off the highest interest rate debt that you have first will save you the most money. With that said, to really use the extra funds you have to their fullest potential, you are going to have to do a bit of work. It's time to really start understanding your debts.

To understand your debts, it's best to make a debt portfolio. This is very simple. All it is, is a simple list. Make a list of all your debts in order from the account that charges you the highest rate the the one that charges you the lowest. Make sure to include all information that you can about your debts. Of course, the most important information to include is the lender, interest rate and balance. However, it's also important to include things like account numbers, pay to addresses and available credit.

Once you've created this list, you know that the lender at the top of the list is your target. This is the lender that gets the most out of you. Therefore, you are going to fight back by paying that debt off early and cutting off those high interest payments. Here's how it's done

There Is A Snowballs Chance In Debt!

As a matter of fact, one of the best ways to target the highest interest rate debt and get out of all of your debts quickly is by using the debt snowball! This concept is based on the fact that as you pay off debts, more and more liquid assets become available to you. Assets that can be used to pay off other debts. Under this idea, the total that you spend in payments for debts today is the total amount of money that you should pay until all of your debts are completely paid off. When using the debt snowball concept, you will pay minimum payments to all of your debts. Well, with the exception of one of them! The debt that charges you the highest interest rate should receive all extra funds you are willing to use to pay off your debts. By doing so, you will pay off your highest interest rate faster. That leverage we talked about earlier can be used for this!

And The Snowball Debt Rolls

Once you've paid off your first debt, use the extra money that has now been freed up to pay off your next highest interest rate balance. Now, you have even more money available to send so, you will be able to get this one paid off even faster than the last. Continue the process until all of your debts are paid off and, save tons of money and time when repaying your debts!

About The Author: This article was written by Joshua Rodriguez, proud owner and founder of CNA Finance and avid personal finance journalist. Join the conversation about this article on Google+!

Top Ten Tips for Getting Yourself Out of Debt

Unchecked debt can snowball, and before you know it, it can feel like there’s no way out. Here are a few tips to get you started on regaining control of your finances:

1. Get motivated.

Setting yourself an end goal and reminding yourself of it every day can help and give you that extra push. Promise yourself a reward each time you reach a milestone, such as paying off credit card debt or sticking below your budget. If you feel negative all the time it can feel like a losing battle and you’ll fail before you even start.



2. Work out how much you actually owe.

It’s a common mistake to think that you only owe what you borrowed. That $1,000 on your credit card can soon double if left to accumulate interest. Make sure that interest rates for each creditor are accounted for: it will probably shock you into taking action.

3. Understand your debts.

As well as thinking about the interest rates and factoring these in to your budget, you need to understand all of the terms and conditions on any contracts and credit agreements that you have. All of your creditors may have different rates and rules so this can sometimes be quite complicated. A loan to consolidate debt can reduce your monthly payments and give you fewer creditors to worry about.

4. Know your options.

The best option for you can take some research but there are many ways to get out of debt, including consolidation loans, a moratorium, a debt agreement or bankruptcy.

5. Negotiate with your creditors.
If you don’t ask, you don’t get - so try asking for a lower interest rate or negotiating lower, more manageable repayments. Often, some smaller level of repayment is better than no repayment at all, and many creditors favour this option. If they say no, re-evaluate - there’s nothing lost.

6. Prioritise your debts.

Pay off the most important debts with the highest levels of interest or for the greatest amounts before focusing on smaller loans and lower rates.

7. Set a realistic budget.

Log every penny you spend and it will help you realise where you are spending unnecessary cash. However, make sure that you budget for emergencies and don’t leave yourself short each month or it will drive you back to the money lenders.

8. Use cash instead of credit cards.

Go to the ATM once a week, only take the cash you have budgeted for and leave your bank cards at home. Physically seeing the cash fly out of your wallet will make you realise how much you’re spending and what you’re spending it on. It will also give you a good idea of where you can make cuts. Credit cards aren’t money - if you don’t have the cash in your wallet, you can’t afford it.

9. Take action against those unnecessary expenditures.

Your log of expenses and those disappearing dollars will soon make you rethink that fancy restaurant reservation. A little expense here and there will soon add up – know when to say no.

10. Don’t be too hard on yourself.

If you give yourself an unrealistic budget and change your lifestyle completely, the chances of you succeeding are pretty slim. Make sure you have room for a treat every now and then to keep you motivated: depriving yourself of everything you love is a recipe for disaster - especially when combined with the existing stress of debt.

Reasons that Justify Your Decision of Refinancing Your Mortgage Efficiently

Refinancing a mortgage involves disbursing off the current loan and replacing the same by taking another one. This new loan can be brought through different means such as from bank or authorized institutions such as Network Capital Funding Corp. However, the cost of refinancing can range from 3% to 6% of the principal amount, and that it calls for appraisal, application fees, and other formalities demanded by the original mortgage. Therefore, it becomes vital for a homeowner to justify her or his decision of refinancing for reaping its benefits. There are several reasons why refinancing is found to be useful, and that each of them has a unique set of pros and cons. So, let’s check them out now!

For Reducing the Term of the Loan
The homeowners often find it useful to refinance an existing loan when there is a chance of getting a shorter loan term. For example, refinancing 25-year mortgage on a $200,000 property at a fixed rate from 8% to 5% can bring down the term to 12 years. Herein, the monthly payment may or may not change.

For Obtaining a Lower Interest Rate
One of the ideal justifications for refinancing mortgage is to enjoy a lower interest rate on the current loan. Reduced interest rate is certainly the most desired benefit because it not only aids in saving money but also helps in boosting the rate at which one can create equity in home as well as reducing the pay that is given on a monthly basis. In the past, the common rule was that it was beneficial to refinance if one would obtain a lower interest rate by a minimum of 2%. However, the current experts are of the opinion that 1% savings is a good motivator to opt for refinancing. For instance, a 25-year mortgage with an interest rate of 8% on a $200,000 property can be refinanced at 5% interest rate, which also reduces your monthly payment.

For Shifting between Fixed-Rate and Adjustable-Rate Mortgages

It is true that adjustable rate mortgages begin by providing you lower rates than the fixed-rate ones. However, intervallic adjustments typically lead to an increase in rate that is higher than the fixed-rate mortgage’s rate. In this case, it is better to convert the adjustable rate mortgage into to a fixed-rate one for reaping the benefits of lower interest rate and prevention of interest rate hike in future. However, even the converse can be a beneficial decision, especially when the interest rate is falling. When the interest rates tend to fall, the intervallic rate adjustments on an adjustable rate mortgage lead to reducing rates as well as smaller payments per month. As a result, the need to refinance consistently is eliminated gradually.

Moving to an adjustable rate mortgage is a sound decision particularly for those who do not wish to stay in their house for more than some years. When the interest rates fall, these people can bring down the rate as well as monthly payment without worrying about the interest rate hikes in the future.

For Dealing with Debts

There are several homeowners who refinance for consolidating debts. It is ideal to change high-interest debt with a low-interest mortgage at face value. Sadly, refinancing does not come with an automatic spell of financial cautiousness. As a fact, a considerable number of people who have high-interest debt simply end up raising the debt after mortgage refinancing liberates them to do so. As a result, an immediate loss is experienced in terms of wasted refinancing fees, equity in the house, and extra interest payments on the new loan. So, one should not take this undue advantage of mortgage refinancing for it to be successful.

About the Author: Mary Carnegie is a senior broker who is working at a famous American mortgage company. Currently, she is working hard to be a part of a recognized finance company such as Network Capital Funding Corp. She is available on twitter @maryjcarnegieor or https://twitter.com/maryjcarnegie.

5 Ways to Avoid a Bad Credit Record

Having a bad credit record can severely impact on your life in a range of ways. You can experience difficulty finding a place to rent, as well as having applications for credit cards, loans and even phone contracts constantly knocked back. Preserving your credit record is particularly important if you are considering a home loan in the next few years. Here are 5 simple ways to avoid a bad credit record.

Create a Budget

Making sure that you have an accurate and detailed budget will help you to stay on track with all of your payments and expenses. You may need to spend several hours assessing your income and expenses in order to have a clear idea of what you have available for savings and bill payments. Try and allocate a saving account for emergency situations, and aim to have 3 months of your expenses saved at all times. This will cover you in case you temporarily aren’t able to earn your normal income.

Keep Your Details Up-to-Date

Ensuring that you stay up-to-date with any change of address and contact details will allow creditors to contact you directly. You can inadvertently damage your credit record by forgetting to update your change of address, and as a result miss any bills and outstanding payment notices that are being sent to your old residence. It also allows any creditors to contact you promptly in the event of a problem, which can save your credit record from receiving any unnecessarily damaging records.

Don’t Max out Your Cards

Try and stick to the minimum spending on your credit cards, and always pay it back as punctually as possible. Try not to max out your cards, as it increases the risk that you may not be able to make a repayment if your circumstances change.

Contact Your Creditors

If you’re experiencing issues making a payment, make sure you contact your creditors directly. You’d be surprised just how understanding they can be when given plenty of notice. Quite often they will make special allowances for cases of financial hardship, especially if you can present them with a structured plan of when you will be meeting your payment obligations.

Don’t Ignore the Problem

The worst thing you can possibly do is to ignore any credit issues. Being late on payment or worse, not paying at all, will do almost irreparable damage to your credit record. As soon as you are struggling to make your payments, you should contact your creditors to organise an alternative arrangement. If you aren’t comfortable doing this, an experienced debt solutions provider such as Fox Symes can negotiate with your creditors on your behalf. They will also assist in all kinds of debt help, from consolidation to personalised budgeting advice.

Preserving your good credit record should always be a financial priority. With the devastating impacts that a bad credit rating can have, your quality of life can be seriously reduced from even the smallest indiscretion. If you think you might have trouble meeting your repayment obligations, consider enlisting the help of professional debt solutions specialists.

How to Avoid Sliding into Debt after an Expensive Honeymoon

Going on your honeymoon should be about spending quality time relaxing with your partner as you start your married life together. Nothing spoils the romance faster than a mountain of debt awaiting your arrival back home! It can be hard, but here are the best ways to avoid sliding into debt after an expensive and luxurious honeymoon.

Stick to Your Budget

This is one of the toughest yet most vital ways that you can ensure your honeymoon doesn’t turn into a financial horror story. Coming home to increasing debts is no way to remember your special time together, so draw up an accurate budget and stick to it! Allocate your funds clearly between accommodation, meals, activities and shopping so that you always know how much you have to spend. Don’t let yourselves get carried away, as the guilt of overspending is guaranteed to follow you home, and can put disastrous pressure on your relationship.

Organise Your Bills Before You Leave

Some service providers and lenders will allow you to pay in advance when you are leaving on a holiday. Take advantage of this option for ultimate peace of mind on your honeymoon, where you can relax in the knowledge that everything is up to date. If pre-payment isn’t an option with the provider, many financial institutions will allow you to set up an advance payment to a specified biller? Talk to your bank to find out the full range of options available to you.

Consider Consolidation

Trying to keep track of your debt can be exhausting, with many couples having several credit cards, personal loans and a home loan on top of their normal bills and expenses to try and budget for. If you’re feeling like your debt could become out of control after your honeymoon, consider a debt consolidation loan. The way it works is that a debt consolidation company will give you a loan that covers all of your current unsecured debt.

This allows you to focus on paying off your debt with one monthly payment, often saving you hundreds of dollars when compared to your current repayments. In addition, the interest rate tends to be significantly lower than your existing loans and cards. With a consolidation loan, you will notice that it’s much easier to not only keep up with repayments, but make additional ones as well, which greatly increases your chances of becoming debt free sooner.

Save a Little Extra

It always helps to have that little bit extra in the bank just in case. There are a range of scenarios which could see your already expensive honeymoon become exorbitant, so being prepared for emergencies is essential. Having some spare savings will give you a buffer zone for the worst case scenario.

Don’t let your beautiful honeymoon drag you into insurmountable debt. Once you have strengthened your financial position and created a great budget, you can feel free to relax and enjoy your very special holiday with your partner. With these simple tips, you can ensure that expensive doesn’t become excessive, and that your honeymoon is one to remember for all of the right reasons.

About the Author: Emma Jane is a freelance finance writer and a frugal mom of two kids.