Last updated 5 months ago
It doesn’t take much for an individual to find him or herself facing significant amounts of debt. While paying off debt is crucial, the method in which the debt is paid off is just as important.
In this video, a finance professional discusses tips anyone can follow to work themselves out of debt. First, it’s important to create a budget by subtracting expenses from the income. A budget helps you know where the money is going on a regular basis.
Another effective solution is to simply reach out to the businesses or individuals to whom you owe money. Many will work with you for a rate or term restructure. Finally, make a list of all the debts and begin paying them off one-by-one. While some individuals choose to pay off highest interest debts first, others initially eliminate the lowest bill.
A systematic approach to paying off debts will get you to a debt-free future faster. Staying on top of your finances will not only help you pay your debts, but also keep you from a financially unstable future.
Last updated 5 months ago
From credit cards to car loans, it seems like every major financial transaction necessitates a credit score. But, what factors contribute to that important number? While payment history and age of credit are weighty contributors, so is the debt-to-credit ratio.
What Is the Debt-to-Credit Ratio?
Simply put, the debt-to-credit ratio analyzes your credit utilization. The debt-to-credit score reflects your current credit card balance against your credit limits. For example, if your limit is $1000 and you have a balance of $200, then your debt-to-credit ratio is 20%. Generally speaking, the lower your balance, the more financially stable you are.
How Does it Impact Credit Score?
The debt-to-credit ratio accounts for 30% of your credit score. If you have multiple credit cards, then your score is determined by your average borrowing ratio across all lines of credit. In short, the higher the debt-to-credit ratio, the lower your credit score.
What’s a Healthy Debt-to-Credit Ratio?
Make sure to calculate your ratio on a regular basis. Those with excellent credit scores generally maintain a debt-to-credit ratio between 25% and 30%. While a low ratio alone won’t get you to a high score, a healthy debt-to-credit ratio will help improve your credit score.
How Do I Get a Healthy Debt-to-Credit Ratio?
The best way to get a good debt-to-credit ratio is to simply pay off your debt or increase your credit limit. Use a monthly budget to start systematically reducing the credit card balances. As soon as the credit card balances decrease, your credit score will increase.
The debt-to-credit ratio dramatically impacts your credit score. Watch those monthly statements to make sure that the balances aren’t slowly increasing towards the limit. With proper diligence, a low debt-to-credit ratio will lead to a high credit score to keep you in a financially stable position.
Last updated 6 months ago
Most people have thought of bankruptcy before as a financial “reset” button. While it is a viable solution to unmanageable debt, nobody should make this decision lightly. Declaring bankruptcy impacts your credit score and ability to make major purchases for years to come. Here’s your guide to better understanding the basics of bankruptcy.
Bankruptcy Definition
Bankruptcy is a term used by the courts when individuals and businesses are unable to eliminate their debts and pay their creditors through conventional means. Declaring bankruptcy involves filing extensive paperwork to prove that you are, in fact, unable to make payments. If you are eligible for bankruptcy, then the bankruptcy courts will begin the necessary proceedings.
Chapter 7 vs. Chapter 13 Bankruptcy
Most bankruptcies fall into two categories: liquidation and reorganizations. Chapter 7, also known as liquidation, is a type of bankruptcy where the debtor gives up all assets (save for a few notable exceptions) to pay off debts. You must be qualified under the “means test” to file for Chapter 7. Many individuals file for Chapter 7 when they hold few assets of value. Most unsecured debts are discharged after Chapter 7.
Commonly known as debt adjustment, Chapter 13 bankruptcy includes a payment plan that helps debtors repay some of their assets over the course of 3 to 5 years. Chapter 13 is best for those with regular income who are unable to make payments. Most individuals keep their property and suffer a less negative mark on their credit score.
Post-Bankruptcy Debts
Some debts do not disappear with a declaration of bankruptcy. The debts most likely to remain even after bankruptcy include:
- Child support payments.
- Alimony payments.
- Student loans.
- Criminal fines.
Bankruptcy Consequences
While bankruptcy can eliminate many existing debts, bankruptcy is paired with a variety of consequences, such as:
- Significantly lowered credit score for 7-10 years.
- Difficulty obtaining loans.
- Higher interest rates.
- Seized assets.
Bankruptcy is an effective way to escape debts that you simply can’t pay; yet, the consequences can be significant and long lasting. If you’re considering bankruptcy, then take the time to fully understand the implications of bankruptcy and carefully evaluate both the benefits and the drawbacks.
Last updated 6 months ago
Getting into debt is very easy—eliminating debts, however, is very difficult. With credit cards, car payments, school loans, and other kinds of debt, the number of financial obligations can seem overwhelming. Luckily, there’s no amount of debt that can’t be repaid with a little diligence and hard work. Follow these helpful links for more information.
- What is chapter 7 bankruptcy and how does it work? Find out at this page from USCourts.gov.
- If you incur debt, then it’s important that you know the difference between secured and unsecured debt. Learn more at this page from LawInfo.com.
- 2009 saw over 800,000 foreclosures. For more foreclosure statistics, head over to this page from ForeclosureDataOnline.com.
- If you’re faced with foreclosure, then it’s essential that you know your options. To learn about short sale and deed-in-lieu of foreclosure, check out Nolo.com.
- Have you been hit with a foreclosure notice? Discover ways to stop it with this guide from About.com.
Last updated 6 months ago
Whether from school, credit cards, or mortgages, most of us incur debt at some point in our lives. Even if your debt seems insurmountable, you should know that with some dependable help and strong dedication, you can regain financial stability.
With the Debt Payoff Planner Android app, you can get well on your way toward getting out of debt. As Debt Payoff Planner sets up a repayment plan, you’ll be able to answer difficult questions, such as, “Which debts should I pay off first?” and “When will I be debt free?”
With a poor housing market and millions out of work, debt in this country is incredibly high. Luckily, there’s plenty of help out there if you’re brave enough to ask for it.
Buy the app for your Android phone at the Android Market.
