How is credit card interest calculated?

How is Credit Card Interest Calculated

If you’re like most people repairing their credit card debt, your credit card’s annual interest rate is a mystery to you. You might even avoid thinking about it or looking at it, because it’s such a large number. Interest rates can make it difficult to get out of debt quickly, because you’re working against a large percentage—as much as 16% or even 20% annual interest.

Credit card interest is calculated using a complicated formula that can be confusing to many people. So it often remains a puzzle to borrowers. But it’s important to understand the basics of credit card interest, because it will help you to repair your credit card debt quicker—and to be a smarter credit card user. Here’s how credit card interest works.

How Is Credit Card Interest Calculated?

credit card interest calculation

If you’ve watched your interest rate closely, you may have noticed that it has changed since you first opened your credit card. Many credit cards offer a low introductory interest rate that increases after the period is over. But even after that, your annual interest rate will often go up and down. That can be confusing, and even a bit unsettling.

Your interest rate changes

The first thing you should understand is that your credit card uses a variable interest rate. That means that the interest rate can change over time. A variable rate is tied to a base index—usually the U.S. prime rate. As the U.S. prime rate goes up or down, so will your credit card’s interest rate.

Right now, the U.S. prime rate is 4.25%. But your credit card’s interest rate is probably closer to 18.25%, or even more. That’s because credit card companies charge an additional amount above the U.S. prime rate—perhaps 14%, but it varies from card to card. So your total interest rate will be closer to 18.25%, annually. If the U.S. prime rate raises or lowers, your annual interest rate will also go up or down by the same amount.

The factors that influence the U.S. prime rate are reviewed every six weeks. The prime rate could stay the same for years, or it could change every six weeks. It all depends on current federal economic conditions and forecasts.

Your interest rate is annual

It’s also important to understand that your credit card’s interest rate is an annual rate. So if your annual rate is 18.25%, that amount is applied per year—not per month. But since you’re billed monthly, your interest is calculated each month, using an average daily balance method.

Calculating your interest rate

Here’s how the average daily balance works:

  1. Determine the daily periodic rate (DPR)—the interest rate you pay each day. DPR is your current interest rate (it varies, remember) divided by 365. So, 18.25 / 365 = 0.05%.
  2. Determine the average daily balance for the month. This is done by adding up the balance for each day of the billing period, then dividing that sum by the number of days (either 30 or 31 days—or 28 in February!). If you had a balance of $0.00 for 10 days, then $500.00 for 10 days, then $1000.00 for the last 10 days of the month, your average daily balance would be $500.00.
  3. Multiply the DPR by the number of days in the billing cycle, then multiply that total by the average daily balance. This is your interest for the month. So, a DPR of 0.05% * 30 days = 1.5%. 1.5% * $500.00 = $7.50.

That might not sound like much, but if you’re an average cardholder in the United States, you’re carrying a credit card debt of $16,000.00. That means you’re paying $2,880.00 per year in interest alone, in this scenario.

How Can I Avoid Paying So Much Interest?

When you’re working hard to repair your credit card debt, it can be frustrating to be fighting against a high interest rate. But there are ways you can reduce—or even eliminate—the amount of credit card interest you’re paying each month.

Pay more than the minimum balance due

Your credit card statement lists a minimum amount that you must pay each month. Your interest for the month is rolled into that minimum payment. But if you pay more than the minimum, every dollar above that minimum goes towards your principal balance. There’s no interest charged on it.

In other words, if your minimum payment is $500.00 and you pay $600.00, that extra $100.00 is applied to the amount you borrowed—it’s interest-free. And that benefits you in two ways:

  • You’re paying off debt without paying interest
  • You’re lowering the dollar amount of interest you’ll have to pay next month, because your average daily balance will be smaller.

Open a balance-transfer credit card

credit card interest

A balance-transfer card can be a very helpful way to repair your credit card debt. A transfer credit card has a very low introductory interest rate—often as low as 0%. The card lets you transfer your balance from other debt onto the new card. You can then make monthly payments on the transfer card to pay down your existing debt.

But the low interest rate is only valid for a limited time—usually six to 18 months—so you’ll need to pay off the debt before the introductory rate expires. You should also do your homework: some transfer cards charge a transfer fee. And some charge a penalty APR, which allows the credit company to charge you a high interest rate if you miss a payment.

Pay off Your Credit Card Debt Faster

Your credit card’s annual interest rate doesn’t have to be a confusing mystery, and you don’t need to know everything there is to know about interest rates. But when you understand the basics of variable interest rates and how they’re calculated, you can use that information to repair your credit card debt faster and easier. Paying more than the minimum balance due and using a balance-transfer card can be very helpful ways to use interest rates to your advantage.


A reputable credit repair specialist can help you find other ways to successfully get out of credit debt. If you’re tired of struggling on your own, find out how our advisors can help you repair your credit debt. Contact us today.

Carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Source: lexingtonlaw.com

Seven New Year’s Resolutions for First-Time Homebuyers

Perhaps the three most serious mistakes most first-time homebuyers make are failing to give themselves enough time to put together a down payment, failing to improve their credit and not paying down as much debt as possible before they start shopping for a home. These can take months to complete, and should they find their dream home, they won’t be in a position to make an offer or get a mortgage.

Many buyers also not give themselves enough time to make a budget for the purchase, including down payment and closing costs and a budget for monthly living expenses afterward to determine what they can reasonably afford. Before they can realistically house hunt, they will need to decide on a list of “must-haves” that includes location, find an excellent real estate agent and find a lender.

If 2020 is to be the year you want to become a homeowner, here are seven New Year’s resolutions that will help you not only buy your first home, but be able to do so comfortably and happily.

Resolution #1. Save for a Down Payment and Closing Costs

Unless you are a veteran who qualifies for a VA mortgage, which requires no down payment, you will need enough cash on hand for a down payment and closing costs. A recent survey found that nearly half of millennial renters who want to become homeowners have not saved a penny towards a down payment, even if you choose a 3% low down payment loan like those offered by Fannie Mae and Freddie Mac, you are going to need $6,000 for a down payment on a $200,000 home. Most young families will need six months or more to save that much. A few lenders offer “zero down” mortgages to first-time buyers, but only to borrowers with excellent credit.

Photo of cheerful loving young couple using laptop and analyzing their finances with documents. Look at papers.Photo of cheerful loving young couple using laptop and analyzing their finances with documents. Look at papers.

Some first-time are turning to their families for gifts to get them over the down payment hump. These must be gifts, not loans. But lately, the “bank of mom and dad” has been drying up. In 2019, 17.4% of millennials were expecting support, down from 19.1% in 2018. Those who expect help in 2019 are expecting less ($8,928) than they did last year ($9,878).

If you haven’t started saving yet, reduce your living expenses as much as you can and put away as you can with every paycheck. Pay yourself first to make sure you are putting away enough to reach your goals. Don’t save cash by using your credit cards to pay living expenses. You will quickly increase your debt load, which will lower your credit rating. You will also increase your debt-to-income ratio, which could kill your chances of getting a mortgage. Even if you do get approved, you will be offered a higher interest rate.

Closing costs like title insurance, appraisal, settlement fee, home inspection, and lenders’ expenses are beyond your control and are required to be paid at settlement. Most closings these days take place six weeks or so after the seller accepts your offer. Closing costs are generally 5% of the home price, but they vary significantly by state. Here’s a state-by-state list of average closing costs in 2018.

Resolution #2. Reduce your Debt

Lenders look at debt-to-income ratios to see if you will have enough each month to handle a mortgage payment in addition to your monthly debt payments. Your debt-to-income ratio is the of all your monthly debt payments divided by your gross monthly income. The average debt-to-income ratio (DTI) for all recently approved mortgages is 24/37.

You can improve your DTI either by making more money or paying off some of your debt. Review your current debt load and pay off those that have the smallest balances.

Resolution #3. Improve Your Credit Rating.

Your credit score and credit history will also determine whether or not you will get a mortgage and how much interest you will pay. Lenders to whom you apply will pull your credit and carefully review your record. The average credit score for all mortgages is currently about 736.

Credit scores change every month, and you should monitor yours and review your credit history on each of the three major credit bureaus: TransUnion, Experian, and Equifax. If you need to improve your credit, then it should be at the top of your resolution list to do so– here are some tips on improving your credit. Like saving for a down payment and reducing your debt, it takes months to improve your credit. However, you can keep working on your credit until you find a house to buy and apply for a mortgage.

Resolution #4. Get Pre-approved by a Lender.

When you’ve done the best job on your credit and debt, ask a lender to pre-approve you before you to home shopping. With a pre-approval in hand, you will be in better shape to make an offer. If your credit or DTI continues to improve, you may be able to get a new pre-approval for a larger loan.

Resolution #4. Decide Where You Want to Live.

It’s no secret that first-time buyers are facing the worst affordability crisis in decades. Supplies of all homes improved slightly last year, but most economists don’t expect it to get much better and hotter markets may have even fewer homes than last year. Unfortunately, smaller starter homes popular with first-time buyers are harder to find than larger homes.

deciding where to buydeciding where to buy

Inventories and prices vary greatly. Larger coastal metros are the most expensive, but properties in smaller cities are generally more affordable.

If you live in a high priced market, is relocating a possibility? Could you find an excellent job in your field or work virtually? If so, you might surf locations that appeal to you. Check out prices and the supply of affordable homes. You might be surprised at how much reasonable some markets are.

If relocating isn’t in the cards, try to enlarge the areas you would like to live in your current metro. The larger the area you consider, the more listings you will find. If you are moving from an urban rental to am exurb, you might a longer commute will make to become a homeowner faster than staying where you are,

Resolution #5. Make a Realistic Budget for Living in the Home You Buy.

Nearly two-thirds, 68%, of millennial homeowners said they had regrets about their home purchase, and 18% cited unexpected maintenance or hidden costs as their greatest pain point, a Bankrate survey found last year.

Your monthly mortgage is just one of several costs of homeownership. Many first-time buyers fail to plan for insurance, maintenance, taxes, utilities and homeownership association fees are some of the expenses that can strain your family budget. When you decide to make an offer on a home, ask your home inspector for rough estimates of significant repairs or upgrades you will have to make soon. (Better yet, ask the seller to lower the price of the home to cover major expenses, or require him to make the repairs himself). Plan to set aside 1% to 2% of the value of your home each year for upkeep. These expenses, as well as your monthly mortgage payments, will increase with the cost of the home you buy.

If your budget comes in at a level for more than you can comfortably afford, you will have to reduce your mortgage and the amount you can spend to purchase a home.

Resolution #6. Stick to Your Budget.

By making a good budget and sticking to it religiously will save your family from years of living “house poor.” Promise yourself and your family that you will stick to your budget. Don’t assume that the maximum amount that a lender will lend you is the maximum you can afford. His number does not take into account all the expenses you have listed in your budget. It’s merely a number based on your credit score, your debt and don’t get caught in a bidding war for your “dream house” and offer more than you can afford. You may lose the deal but find another house next week that you will like just as much and can also afford.

Resolution #7. Don’t Give Up Easily.

There is no question that these are tough times for first-time buyers. A recent survey found that 12.3% of millennial renters who would like to become homeowners have given up homeownership and plan to rent forever.

After you have given your best effort and can’t find the right house at a price you can afford by the late summer or fall, this might not be your year. Pack it in until 2021. As you continue to save, improve your credit, and reduce your debt, you will be in a better position to buy a home.


Steve Cook is the editor of the Down Payment Report and provides public relations consulting services to leading companies and non-profits in residential real estate and housing finance. He has been vice president of public affairs for the National Association of Realtors, senior vice president of Edelman Worldwide and press secretary to two members of Congress.

Source: homes.com

Is a Business Degree a Waste?

Is a business degree a waste? Is a business degree worth it? Is a business degree good? Is a business management degree worth it? I'm sure these are all things that you are wondering!

Is a business degree a waste? Is a business degree worth it? Is a business degree good? Is a business management degree worth it? I'm sure these are all things that you are wondering!Is a Business Degree a Waste?  Is a business management degree worth it? I keep hearing people/news outlets arguing at opposite ends of what seems to be a common question. Short answer – NO! I don’t think a business degree is anywhere near being a waste. A business degree is worth it in many cases.

EDIT: Please read my post about how I paid off $40,000 worth of student loans shortly after I turned 24.

Recently, I read an interesting article about whether a business degree is a waste or a good decision.

I read the article multiple times (and unless I missed it), I’m pretty sure it means business schools as a whole (and the various degrees that are offered), and not just specifically a “business degree.

So when they say business degree, I’m assuming this includes Finance, Economics, Accounting, etc.

Personally I think a business degree is a great choice.

It can open many doors and in some instances make you well rounded because of the wide range of classes which are usually available.

There are also many jobs and careers out there that involve a business degree. And as I said in the paragraph above, there are so many majors: finance, economics, accounting, management, health administration, marketing, operations, strategy, international business and so on.

As long as you are realistic about getting your degree and what you plan on doing with it, I don’t think there are many instances in which a degree can be a bad choice or a waste. Read my post How To Pay for Graduate School if you haven’t yet. Today’s post somewhat relates to that.

If you know what you want to do and also see value in it, then go for it. If you are unsure and question every move you make, then you might want to stop and think about what you truly want.

Also, most of my friends who graduated with business degrees have found jobs, whereas some of my friends who have other majors are having a much harder time.

Now, I’m not saying it’s easier to find a job for everyone, but with my friends and the area we live in, it has worked out well. And many of my friends who have degrees in other areas (such as anthropology) have even told me “I wish I went to school for business instead.”

I would never say that getting a business degree is a complete waste.

Of course I am biased when it comes to this post, as my undergraduate degrees are a B.S. in Business Administration and a B.A. in Management. And then I also have a Finance MBA.

So yes, I have THREE business degrees. I do like/enjoy the life I live, so that is probably another reason why I am biased. I am sure that if I couldn’t find a job, that I would question whether having a business degree is truly worthwhile to me.

Here’s the main statement of the article:

The biggest complaint: The undergraduate degrees focus too much on the nuts and bolts of finance and accounting and don’t develop enough critical thinking and problem-solving skills through long essays, in-class debates and other hallmarks of liberal-arts courses.

However, I think most majors are similar to this. I started off as a Psychology major in the beginning, and I definitely wouldn’t say it was that much different. Everything is mainly there for you to break into the subject, and then I think you should pursue some sort of emphasis or focus for yourself. This can include getting a job internship or focusing on a particular study within your degree.

According to the article, business majors account for around 20%, social sciences and history account for 11%, health professions at 8%, education at 6%, and the list goes on and on. For information about a masters of business administration, click here.

There are multiple ways to analyze whether or not your degree is worth it:

1. Do the professors have “real” experience?

I think this is extremely important. In classes where my professors had no actual business experience (there were very few of these professors at the schools I attended), I found the classes were just boring.

It’s hard to listen to someone when you have more experience than them in the subject that they are trying to “teach.” I like to know how I can apply what I learn to REAL situations and how a professor has applied it in the past.

2. Does the student work?

This can include volunteering, a part-time or full-time job, etc. I think real world experience is important. If you work while you go to school, you are most likely applying what you learn as you learn it.

I am more able to remember things if I  can apply it as I learn. Or if you worked in the past, then you will be able to analyze your past behaviors. I worked full-time all throughout undergraduate, and had a full-time career during my MBA program (same job I have today). You have a lot more to contribute to your classes when you have some experience.

3. What school are you attending?

Of course some schools are harder than others, and this might make it more “worth it.” There are different tier levels for school. Are you going to the best value? Or are you just going to the cheapest or the most expensive?

4. What do you see yourself doing in the future? 

Is this degree worth it to you and what you envisioned for your life? If you want to be a veterinarian but go to school for social work, well, that’s just a tad confusing. Make sure it lines up with what you want to do.

One commenter below the article referenced above said:

“When relatively few went to college, a college degree was a sign of accomplishment. Majors were limited, so you had to conform to the college’s needs. Then colleges started catering to everyone, backed by Federal loans to students. Degrees became watered down or meaningless, as students would keep changing majors (engineering – communications, math – psychology) just to get any degree.”

I somewhat agree with this. If getting a degree is now becoming the “norm,” then what’s next? Obviously individuals are going to have to up the ante somehow. I do think that a business degree is mainly a stepping stone, and college degrees are becoming the norm. Many things need to be done to differentiate yourself from the tons of other individuals out there.

What I’m doing (and did) to differentiate myself:

  1. Worked full-time and earned great experience all throughout undergrad as a retail manager.
  2. I now have a great career in the financial services industry.
  3. Have my Finance MBA.
  4. Finishing up with my financial certification this year (it’s a process that takes a couple of years to earn and I’ve been working on it since the Summer of 2010).

What is/was your major? Do you think it was worthwhile?

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Source: makingsenseofcents.com

Should I Ruin My Retirement By Helping My Child Through College?

Should I Ruin My Retirement By Helping My Child Through College?

Should I Ruin My Retirement By Helping My Child Through College?Today’s topic will probably be a touchy one and it’s all about whether or not parents should start (or end) saving for children’s college expenses. Ever since I paid off my $38,000 worth of student loans last year, I have received many e-mails from parents who are interested in seeking help for their children.

These e-mails are all related to whether or not parents should risk or sometimes even ruin their retirement by helping their child pay for college.

There is usually one common theme in these e-mails – the parents are usually not on track for retirement, they have debt, or they cannot afford to help their child in college.

Here are some of the stories I have heard in these emails:

  • The parents have over $100,000 in student loans that they took out in THEIR name so their child could go to school. These parents are not on track for retirement and they have a lot of other debt besides student loans.
  • Their child is in medical school and the parents are paying for all of their college expenses plus food, car, rent, etc. These parents are not on track for retirement and they have debt.
  • Their child is in law school and the child said that if his/her parents don’t continue paying for their expenses, that they would hate their parents. This child was even more mad when the parents printed out every single blog post of mine and gave it to them (I did not tell their parents to do that, it was entirely their idea). The child said I was ruining his/her life (yup, that actually happened). These parents are not on track for retirement and they are afraid of losing their child now as well.

I know I’m not a parent.

I’m not a parenting or child expert either.

I know I don’t know what it is like to have a child and the feelings that go along with that. However, I do know that I raised my younger sister after my father passed away and her attending college did make me want to help her so that she wouldn’t have to worry about money as much.

The other day I was talking to my sister and she was bringing up different ways she could possibly side hustle so that she could make extra money. It sort of made me feel bad, and for a moment I thought about helping her financially. Luckily, she snapped me out of it and told “You’ve helped me enough already. Do not worry.”

Her saying that really made me happy. I actually had tears in my eyes!

Instead of just giving her money, I helped her with her budget, I have supported her, I helped her find side hustles so that she could make extra money, I helped her make a plan, and more.

I know all of these other things I am doing have shaped her into an awesome young lady. Yes, she has to learn things the hard way but in the end she will be just fine.

Quick note: If you are looking for information on college funding, I recommend attending the webinar 6 Steps To Quickly Secure Scholarships For College. Jocelyn Paonita Pearson, Founder of The Scholarship System, secured over $125,000 in scholarships and funding by following this system!

Alarming information about student loans.

According to the Federal Education Budget Project, around $100 billion was borrowed by students in fiscal 2014 alone. Also, the default rate on student loan debt averages around 13% to 14%. 90% of student loans in recent years are co-signed by others (mostly parents), and that is a big burden falling on parents.

That’s a lot of debt, and that’s a lot of debt that isn’t being paid for. If you are a parent cosigning on student loan debt, I hope you understand the consequences that can come from it.

Should parents help their children go to college?

Okay, before anyone thinks this is a post bashing all parents who help their children, I should say that I have no problem with parents helping their children pay to go to college. However, that’s AS LONG AS THE PARENTS CAN AFFORD IT.

I have plenty of friends who went to college where a lot of it was paid for by their parents. These parents could afford it, and that is key. If you are on track for retirement, you are not struggling, and so on, and you want to help your children attend college, then by all means go for it.

I also have plenty of friends who went to college where everything was paid for yet their parents clearly could not afford it. Some of these parents took on a second or even a third job so that their child could go to school. They racked up credit card debt and student loan debt as well. Some of these students never paid a cent towards their student loans and their parents were forced to in the end. They risked their retirements, their happiness and more. While I understand that these parents care for their children, they need to realize they are putting their retirements at risk.

Like Shannah said above in the tweet, you can take out loans for student loans, but you can’t for retirement.

When we have children, as long as we are on track for retirement then we will most likely help our children attend and afford college.

I know that my story is not the average story, but I went to college with no help at all. I paid for all three of my degrees on my own, lived on my own, worked full-time, paid for all of my food, and more, all starting just days after I turned 18 and graduated from high school.

It was tough, but I do think it is possible.

For other students, it may take longer to graduate, or it may take less, they may take on more debt, or they may take on less. Everyone’s story is different, but it does not mean it is not possible.

One great story I recently read was How I Graduated College With $100k… in Savings on Budgets Are Sexy. Many say my story is impossible, but just wait until you read this great story. You will be amazed at how awesome Will is! I’m jealous but I know he worked hard for his accomplishments.

How can parents help but not risk their retirement?

Instead of risking your retirement, you can do other things to help your child go to college. Below are some of my tips if you have children who are about to attend college:

You don’t need to help in every way possible. For some reason, there is this myth out there that helping your child go to college means you need to pay for everything for them. Instead of paying for their tuition, textbooks, food, dorm, car, and everything else, set limits. You might help by giving them emotional support, letting them stay in your home while they are in college, helping them find ways to save money for college, helping them cut their college expenses, and more.

Help them get a job. If you don’t have the money to help your child, you may want to help them find a job. This way they can pay for their own expenses. Just a little bit can go a long way.

Help them create a budget. If your child doesn’t have a budget, help them create one now. Read Does your budget suck? – Budget Categories. A budget can go a long way and help someone overcome many financial difficulties.

Related articles:

There are quite a few questions for you today, because I think this topic is an interesting one. I know that not everyone will have the same opinion so I want everyone to chime in! 🙂

Do you think parents should risk their retirement and pay for college? What if the parents are on track for retirement? How much should they help, if anything at all? Will you help your children go to college?

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Source: makingsenseofcents.com

My $38,000 Student Loan Payoff Plan


My $38,000 Student Loan Payoff Plan$40,000.

That’s the total amount of student loans that I accumulated while I was getting my undergraduate and graduate degrees. The amount that is left is still at $38,000 now, mainly because I haven’t really bothered with student loan repayment (even though I should have!) and interest has stupidly been building up. I would have taken out more in student loans but the last couple of semesters I wised up and paid for in cash instead.

It is a lot of student loan debt, but I don’t feel completely horrible about it, I did earn 2 undergraduate degrees and a Finance MBA all for that amount. If I wouldn’t have earned scholarships or paid some of it, it would have easily been 3 or 4 times that amount.

I’ve been talking a lot about my plan to payoff my student loans as fast as possible. Back in February of 2012, I started my action plan for them to be gone. For me, it’s almost to the point where I am obsessing a little too much about my student loan repayment plan. I am constantly trying to figure out my cash flow and budget to see if I can get there any more quickly. I’m really focused on my extra income efforts and it’s an obsession now.

Luckily, I was able to graduate and find a great job back in 2010 and it helped me pay back student loans a little bit and start my student loan repayment plan. So many people told me that I wouldn’t find a job though. They were probably just trying to help me out by telling me what most kids my age didn’t know back then, but I wasn’t listening.

Now that I am done with graduate school (which I am extremely happy about being done with), I really need to start focusing and finally starting to aggressively pay back my student loans and start my student loan repayment. I’ve been paying down my student loans a little bit here and there but not enough where you can actually notice it.

My goal with my student loan repayment plan.

My goal is to have my student loans completely gone by April of 2013, or even possibly March of 2013. I know any sooner is most likely not possible since my plan is already pretty strict. Learning how to pay student loans faster is not easy though. Yes, you can read about how to pay student loans faster, but you really need to sit down and make an action plan.

In order to complete my goal, I need to pay around $7,000 per month on my student loans for around 6 months (which would make the payoff date April of 2013). This most likely sounds insane, but I know it’s possible. No, I will not be living off of Ramen noodles. I will still have the same quality of life and be doing nearly everything the same.

My main thing is that we have really ramped up our income in the past couple of months. W is currently making more than three times what he used to make at his old job, and I’m making more as well. This extra money definitely helps make this goal more attainable.

So, as long as our income continues to remain the same, then my plan should work perfectly. And if we start to make anymore money, then hopefully I will be able to fully pay off my student loans in March, however, a one month difference will not kill me.

Here’s what I have done so far and what you should start with when learning how to pay student loans faster. Also, the below can also help you if you are wanting to learn how to pay for college without going into debt.

Related content: How Do Student Loans Work?

1. Add up your total student loan debt for your student loan repayment plan.

Your very first step with your student loan repayment is to add up your total student loan debt. Use a student loan calculator if you need to.

This may sound stupid, but have you ever truly added up your total student loan debt, down to the exact cent? Enter reality and figure out how much you actually owe. I have a couple of friends who still can’t really say how much they owe, because they aren’t sure. I can understand this because some of the loans that you’ve taken out might have been from 4 or more years ago.

When I added up my total student loan debt, I wasn’t completely sure of the exact dollar amount. YES I REALLY JUST SAID THAT, I’m a bad personal finance blogger. I did know of the general area, but I was off by around $2,000. When I finally sat down and realized the exact dollar amount that I owed, reality really set in.

Once you know that exact number, it’ll help you realize that you need an student loan repayment action plan to pay it off.

Also, using a student loan calculator can help if you want to figure out your monthly student loan payment. You can find several student loan calculators online with just a simple Google search.

Related tip: I highly recommend Credible for student loan refinancing. You can lower the interest rate on your student loans significantly by using Credible which may help you shave thousands off your student loan bill over time.

2. Decide which student loans you’ll pay off first.

It’s really up to you personally. Different people prefer to attack their debt in different ways. With me, I’m trying to get rid of my student loans which have the highest interest rates. A large amount of my loans are at 6.8%.

I prefer to pay the highest so that I am gaining the LEAST amount of interest on my loans that I possibly can. If I stared by knocking out a loan than gets 0% (which none of mine do, just hypothetically), then I would still be gaining interest on my other loans and that, in the end, would not be worth it to me at all.

However, some choose to pay off the loans that have the highest or lowest amounts. This way you can really feel like you are accomplishing something when you knock out loans one by one. If you knocked out the student loans with the lowest amounts first, then you will probably feel like you’re accomplishing more and be more motivated with each student loan that you eliminate.

3. Find extra money to apply towards your student loans.

I’ve really been working hard on finding ways to earn extra income for help paying student loans. I’ve been doing great with this, but it hasn’t always been this easy. In September I made $3,275 and in October I made $3,700 (both after fees but before taxes) in extra income. Before September, I wasn’t making nearly these amounts, and I am still very surprised.

EDIT (February 8, 2013): In the month of January, I made over $6,000 in extra income. I do many things in order to reach this level, read further on my extra income page. I’m a freelance writer, a virtual assistant (read further on how to become a virtual assistant and what exactly a virtual assistant does), and blog owner in my spare time.

For me, the main thing I do to make extra money is blogging and freelancing. If you are interested in starting a blog of your own, I have a tutorial that will show you how to easily make a blog of your own in just minutes. You can find the tutorial here.

My goal right now is to throw nearly all of my extra income towards my student loans so that I can pay off my student loans fast. Now, why am I not saying “ALL” instead of “nearly?” It’s because I am being realistic. I know for a fact that I will not put all of it towards student loans, in fact, I’ve already spent some of it (not a lot though).

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4. If you can or want to, then ELIMINATE expenses!

There are probably a couple of things out there that you do not absolutely need. Or maybe there are things in your life that you can get for cheaper. Try calling any of the companies that you do business with and see if they can lower their prices at all. This can be your gym, cell phone, internet and so on. Getting a cheaper price can make student loan repayment attainable.

There are also many other things that you can do. Lowering your auto expenses, lowering your utility bills, eating at home more often, cooking from scratch and so on are all great things you can do to lower your expenses.

We are really working on eating at home as much as we can. We used to go out to eat way too much. What’s the point of eating out at a restaurant every single day? We were being stupid, it’s that plain and simple.

Cutting your expenses can help you pay off your student loans fast and reach your student loan repayment plan with a little less stress.

If you are still in college, I recommend you read my post How To Save Money On Textbooks + Campus Book Rentals Review. I have a coupon code in there as well, so if you are interested in saving money on your textbooks, it can be a great post to read.

What are you doing to pay off your student loans quicker?

 Answer these questions:

1. How much do you owe?

2. How much have you paid off?

3. How long do you think it will take you to pay your student loans off completely?

4. What are you doing to pay them off more quickly?

UPDATE: My student loans are gone (click here to read all about it)! 🙂

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Source: makingsenseofcents.com

How to Finance Financial Freedom and Independence

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.shape behavior:url(#default#VML);If you want to grow a small nest egg into a million dollars in 10 years, real estate investing is an independent business that you need to seriously consider. What beginning investors often fail to understand is that real estate investing is about controlling properties rather than paying for properties. The less of your own money that you invest in each property, the more properties that you will control for no money down or small investments.

© Davi Sales - Fotolia.com

© Davi Sales – Fotolia.com

The Paper Buy Out

If you think zero or low down deals are difficult to come by, you’d be correct. But that doesn’t mean they are impossible to come up with. I know of one investor that arranged a deal to purchase a $66,000 house for zero down. Of course, the seller was desperate. The seller was out of state and didn’t live in the house. He had repeat problems keeping a tenant in the house because he couldn’t afford a professional management company. Because he lacked steady tenants, he had gotten behind on the property taxes and the house was no longer insured. All he wanted was to get out from under the house without losing it for the cost of back taxes. The seller agreed to carry a second mortgage of $36,000 for no interest and no payments for five years. Based on that, the buyer found a lender willing to issue a first mortgage for the balance of the purchase price. The seller was full owner of the property and walked away from the closing table with $30,000 in cash. The buyer owned a low mortgage property that he could easily pay to have managed professionally. He could pull a profit out of the house for five years before having to make payments to the seller.

As an investor, your primary goal is finding a way to deal with the seller’s equity in the property. When you can leverage the seller’s equity, you can typically find a lender that will payoff any outstanding mortgage on the property if the lender can be in first position with a spread of 30% or more between the money loaned and the fair market value. That’s what makes short sales so difficult to close. The seller has no equity in the property.

Many Ways to Structure a No Money Down Deal

Sellers always want to maximize their equity in a deal. However, the market is what determines how much equity they actually have at any given time. Some insist on holding out on a sale until they receive the high end of what they perceive to be their equity in the deal. Others are more anxious to sell and will trade part of their equity for cash today. You number one secret to putting deals together is learning what is motivating the seller.

If the seller wants cash now, you make a low ball offer that leaves plenty of meat on the bone for a new lender willing to put up money based on the loan being well below the market value of the property. If the seller wants the high end of the fair market value, it becomes a question of how long they are willing to wait for the money. As an investor, you can offer them premium dollar if they will owner finance and take the full value in installments over the next 20 years. If the property cash flows sufficiently, you can take over their existing financing and make a second mortgage payment to them that pays off their equity over multiple years.

Of course, the majority of sellers want to sell at full market value and receive the highest price at the closing table. As a no-cash or low-cash investor, these are not the sellers you should even be talking to. Your strategy is finding the 5 percent of the market that is either willing to sell at a discount or take their full equity over time.

PhotoAuthor bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

Source: realtybiznews.com

Is Home Staging a Waste of Time?

Staging may not be important and may not raise residential sales prices, according to researchers at the College of William & Mary.

The study, reported by Bankrate.com, polled 820 home buyers who were shown a series of six virtual tours of a single property, each focusing either on wall color or furnishings. The tours showed the property without furniture, with “ugly” furniture, with “good” furniture, and with wall colors such as neutral beige and an “unattractive” shade of purple.

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photo credit: boulderite via photopin cc

As it turned out, neither wall color nor furnishings made much of an impact on the potential sale price. According to the study, buyers were willing to pay the same price, about $204,000, regardless of how the property was staged. However, the same potential buyers thought that other buyers would spend more on the properties in the tour, which may explain why we don’t question the wisdom of staging.

“These results stand in stark contrast to the conscious opinion of both buyers and real estate agents that staging conditions significantly impact willingness to pay for a home,” the researchers concluded. Study co-author Michael Seiler, professor of real estate and finance at the College of William & Mary, speculates that today’s buyers are savvy and recognize that staging involves cosmetic changes that are not expensive.

However, while sellers may not like hearing that money spent on staging won’t yield a higher price, Seiler says, “I am definitely not ready to say spending money on staging would be a waste.” For one thing, the study found that staging does give buyers a more favorable impression of the home’s livability, something Seiler believes may help the property sell faster. He says the study might not be applicable to all price points and locations.

“It seems plausible that different clientele might be differentially influenced by staging,” he says. “It also seems reasonable to suspect different staging looks would appeal to different tastes and preferences of people.”

Source: realtybiznews.com

Housing affordability is increasing — here’s where it’s up the most

Reports show improving affordability

Homebuyers are enjoying increased affordability — at least according to two new reports released last week. Affordability is up most notably in some of the nation’s higher-priced markets, including many along the West Coast.

Verify your new rate (Feb 28th, 2021)

Housing is more affordable than buyers think

According to the latest Housing and Mortgage Market Review released by Arch MI, “housing isn’t as expensive as you think.”

“Housing affordability is actually better now than its historic norms in most states and remains far better than the worst point for each state since 1990,” explains Ralph DeFranco, Arch MI’s global chief economist. “This may be surprising because we tend to focus on home prices rather than affordability. Affordability accounts for the offsetting factors of low interest rates and a 28% increase in median household income since 2012.”

Analysis in the HaMMR shows the majority of U.S. states require homebuyers to spend less than the recommended 30% of their monthly income on housing costs. In states like Arkansas, Iowa, Oklahoma, and West Virginia, it’s less than 20% — the all-time most affordable level for most of them.

Affordable housing: These cities take the smallest salaries to buy a house

Top cities for affordability

But housing affordability hasn’t just improved in the long run. According to a second report from title insurance firm First American, there’s also been serious movement over the last year.

Buying a house in 2020? Here’s who you’re up against

The improvements were biggest in three cities in California: San Jose, Riverside, and San Francisco. It also became considerably more affordable to buy a house in Baltimore and Denver as well.

House-buying power jumped 22% in Baltimore and 21% in Riverside. It also improved in Los Angeles, Portland, Dallas, Boston, and Washington D.C. Overall affordability improved in all 44 markets tracked by First American.

Verify your new rate (Feb 28th, 2021)

Get today’s mortgage rates

Are you looking to buy a house in today’s affordable housing market? Then shop around and see what mortgage rates you qualify for today.

Verify your new rate (Feb 28th, 2021)

Source: themortgagereports.com