Hope for your financial life and beyond

What to Do if You Fall Behind on Your Student Loan Repayment

So, the bills rolled in this month and you cannot afford to make your monthly payment on your student loans. You promise that you will catch them up next month, but then you can’t afford it again. Before long, you are trapped in a cycle of debt. No matter how hard you try you cannot get out.

Student Loan repaymentWhat do you do? Luckily there are some options if you fall behind on your student loan repayment. It’s important though that you take action immediately instead of waiting until your balances are seriously delinquent.

We all know that bills can be hard to pay, especially when you owe more than you make in a single month. The only way to save yourself is to explore some alternative options. This post will detail some of those choices when you fall behind on your student loan repayment plan.

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The Hidden Step to Pay Off Debt You’ll Not Want to Miss

If you are looking to pay off debt, the first place you’ll probably look is at your monthly expenses. That’s what my wife and I did when we wanted to pay off our mortgage early. We wanted to squeeze some extra money out of our budget. To do that we needed to cut expenses.

pay off debtWe looked long and hard at our budget and made some adjustments. While we were paying off our mortgage we disconnected our cable TV, ate out less, spent very little on things around the house (like landscaping and home furnishings) and pretty much stopped going to movies just to name a few things. The extra money we saved by cutting our expenses and changing our lifestyle we put towards the mortgage.

For us that was enough to speed up the process. We were overspending in some areas in the worst way. Believe me when the sacrifice was worth it to not have any debt following us around.

But for many others simply cutting expenses in the budget will not be enough to pay off debt at the pace the want. The reason is that you can only cut expenses so far. You’ll still need money to pay for food, housing, utilities, transportation and clothing. All those things cost money and you can’t eliminate them entirely from your budget.

That leaves many who want to pay off debt frustrated. They’d like to pay off their debt faster but they just can’t. There is too little money to go around and nowhere else they can cut expenses.

What they are missing is that there is actually a two-step process to find the money to pay off debt. Cutting expenses is only half the equation.

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This Is What Happens When You Don’t Pay Back Student Loans

Student loans have helped many pay for the expenses of a college education. Of course you need to pay back student loans those even if you don’t graduate. Fortunately student loans have what’s known as a grace period – a set time after you graduate, leave school or drop below full-time student status before the loan repayment begins. The grace period gives you time to find a job or deal with a difficult life issue before you have to pay back the student loan.

pay back student loansIf you can’t or choose not to pay back student loans, you risk going into default. To default on a loan means you did not pay it back on schedule according to the terms of the promissory note ­– the legal document you signed when you received the loan.

The good news is you don’t have to panic if you miss one payment. Going into default won’t happen right away. If you miss a few payments your student loan will first be tagged with a delinquent status. It won’t officially go into default until 270 days have passed without a payment.

At that point, you will face some serious consequences. The U.S. Department of Education’s Federal Student Aid office lists these possible actions that may be taken if you default on your student loan:

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How to Avoid a Foreclosure When You Are Struggling Financially

If home ownership is the American dream then a foreclosure is a homeowner’s worst nightmare. Thousands of people face this situation every day because they are struggling financially and have failed to pay the mortgage. It can definitely lead to some sleepless nights worrying over whether or not the bank will come take your home.

avoid foreclosureAvoiding foreclosure is extremely important for several reasons. For starters, it damages your credit score. You may see a drop of 200 points or more even if you had perfect credit beforehand. In addition, the information stays on your credit report for seven years. This makes it very difficult to secure a new mortgage loan or open other lines of credit in the future. It’s a stain on your personal financial record that takes years to overcome.

How to Avoid a Foreclosure

In the end you may have no choice but to foreclose. However, don’t assume all hope is lost because you may be a month or two behind on the mortgage.

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Check Your Debt Emotions at the Door

Getting out of debt and moving towards a cash based existence can create a lot of emotional turmoil. Today I’m guest posting at The Debt Myth about my experience with just such a move.

There is a door waiting for you to walk through. It leads to a land of contentment where you can live without fear of creditors dialing your number. There will be no late fees or interest payments in this land and the money you make will be 100% fully yours.

This place I speak of is known as Debt Free Land. It exists…it really is out there.

I navigated the path to this land and have been living peacefully here for the last year – 100% debt free, payments to no one.

But it wasn’t an easy journey. There were many obstacles and emotions I had to overcome along the way. In fact, the most difficult part was simply starting…

Click here to continue reading at The Debt Myth…

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The Best Solution For Those Buried in a Snowdrift of Debt

In the winter of 2004, we had the fortune/misfortune of visiting my parent’s house in Ohio just before a severe winter storm hit. We had arrived just as the snowfall began and it…just…never…stopped…falling. Snow, snow, snow for two straight days.

van buried in a snow driftBy the time the skies cleared their tiny little town had received over two feet of snow – a kid’s dream but an adult’s nightmare. It had blanketed and buried everything in sight, including our van as you can see by the picture to the right.

Walking through that knee-deep snow I kept thinking to myself, “How will we ever get out of this mess?” It’s not like it’s going to magically melt away. No one in town is going to come rescue us – they have their own snow problems.

In fact, some exacerbated our problem. Thank you snow-plow man for clearing the road and pushing another two feet of snow to our curb.

Even worse, as I started to look at the mountain of snow from different angles the situation seemed even more desperate. At least in the first picture I can still see the van. From this viewpoint hardly anything is visible…

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3 Tips to Boost Your Credit Score Before Getting a Loan

Getting a loan soon? In today’s guest post, Certified Financial Adviser Joseph Hogue shares some ways to boost your credit score before you apply for a loan.

The original title of this article was going to be, “3 Tricks to Boost Your Credit Score…,” but then I thought better about giving the impression that your credit score and lenders were something to be tricked into giving you a better interest rate. Like most things in life, there is no quick-and-easy solution to improving your credit score but with a little work and these three tips, you can save yourself thousands in interest over the life of a loan.

The graphic below shows the five credit score factors used by credit bureaus to determine your credit score and on which is based the interest rate you pay on loans. Using ways to manage each one of these will go a long way to boost your credit score and save big money.

boost your credit scoreMore than 5% of credit reports contain errors

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Does My Credit Score Affect My Spouse?

The following is a guest post from attorney Adam Black, a member of the ABA and New York State Bar Association.

Recently married? Have you been married for years? Either way, your spouse’s credit history can have an impact on you.

credit scoreOn many occasions, clients ask our firm if their credit scores, and overall financial situation, can affect their spouse. In regard to how your credit score will affect your spouse, there is some good news. The short answer is that it won’t – your credit score will not directly impact your spouse’s credit score. Although, in some instances, a spouse with a poor credit score can have an indirect effect on your ability to obtain new lines of credit.

Your Credit Score Remains Yours, Even After Marriage

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The Best and Worst Places to Save Money in the Budget When Getting Out of Debt

Lets assume that you’ve finally decided getting out of debt is a priority and are looking to save money in the monthly budget by cutting expenses. Where do you start?

getting out of debt

The Headache Factor Equation will help you determine which spending categories to cut first.

Not all categories are created equal. In some you can find money savings quickly. Others are going to take a little more time and effort. Some budget cuts will be easy to endure while others might lead to some family frustration at the lack of spending for that category.

In order to better identify the best places to save money in the monthly budget I’ve created the “Headache Factor Equation.” This formula takes into consideration three factors that are each scored on a scale of 1-5, with 1 being positive and 5 being negative. The lower the total cumulative score of the three factors the better when determining where to start saving money first.

The three parts of the equation are:

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Debt Begins When You Swipe a Credit Card

Today I’m guest posting and commenting at the Debt Free Guys. Join me there by following the link below. I’d love to hear your take on this topic.

credit cardsI often hear people justify their use of credit cards this way, “Well, I pay it off every month so it’s fine.” The implication imbedded in that statement is that they are not really going into debt if they pay the card off at the end of each month. The balance is zero so there is no and never has been any debt.

That mindset could not be more wrong.

Click here to continue reading at the Debt Free Guys…

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Is Your Credit Score Simply a Measure of How Much You Love Debt?

credit scoreIs a high credit score really just a measure of how much you love debt? Seems like a tough question especially when you put the words “love” and “debt” right next to one another. I’m sure you are cringing right now just reading that.

The financial services industry pounds the table on how to have a high credit score. In fact, I’ve read in multiple places online that a high score is “crucial” to one’s financial success. Without one you can’t get ahead and live the life you want. Hmmm…interesting.

So what does a high credit score look like?

Scores range from 300 – 850 with anything over 700 being considered a good rating. Excellent level ratings kick in around 750. The higher the score the more likely a lending institution will consider providing you with a credit card, mortgage or other loan.

In a credit driven society a high credit score seems like a must. The only problem is that to get a high credit score you HAVE to go into debt and stay in debt over time. There really is no way around that fact.

How Is A Credit Score Calculated?

Credit scores take into consideration five categories as this image from MyFico.com shows:

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