Can You Apply Mortgage Accelerator Principle to Credit Card Payments?

Using a mortgage payment trick, you can cut the time it takes to pay off your credit card by months and even years. The mortgage accelerator principle is not unique to real estate, it just relies on the fact that paying a bill as soon as possible is the fastest method to eliminate a debt. Also, this method forces you to pay down a credit card you might otherwise let sit.

Mortgage Acceleration

The mortgage accelerator principle states that you should make a payment on your account every two weeks instead of one payment a month. Some months have more than four weeks so you end up making 13 regular payments instead of 12 each year. Also, interest on mortgages and credit cards accrues daily, so making payments sooner reduces the balance on which the bank can charge interest.

Does It Work on Credit Cards?

The mortgage accelerator principle works with credit card payments because it exploits how credit works in general. The lower your average balance, the less you pay in finance charges. One minor difference is that some mortgages come with the option of bimonthly payments, whereas this may not be an option on your credit card. On the other hand, some mortgages come with prepayment penalties, so the mortgage accelerator principle may work better with credit cards when a card allows it.

Warning

Not all credit card companies accept multiple payments a month. Some banks and credit card companies may charge a fee for extra monthly payments, which negates the entire purpose of this strategy. Alternatively, some banks allow partial payments as long as you send at least one payment equal to the minimum charge. If you fail to make at least one minimum payment, the bank might consider you in default, despite paying more than the minimum due.

Tip

Using the mortgage accelerator principle works best with credit cards when you do not add to your balance. Ideally, you should employ the accelerator principle -- assuming your credit card company and bank allow it -- until your balance reaches zero. If you must spend on credit, put purchases on a separate account if it has a lower interest rate.

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Can You Get Unemployment for Reduced Pay?

Unemployment benefits help support workers who have been laid off while they search for new work. These benefits help them maintain an adequate lifestyle while they line up another job. Although unemployment benefits are mainly meant for those who have lost their jobs altogether, workers who have had a drastic cut in pay or hours sometimes qualify for partial unemployment.

Reduction of Hours

If your employer drastically reduced your hours, you may be able to get unemployment even though you are still working. Each state's laws are slightly different when it comes to reduced hours. Most states have some type of unemployment plan for "partially unemployed" workers -- workers who accepted a severe cut in hours and therefore are making far less money than they used to. These workers will not get their full unemployment benefits, but will get a partial benefit each week until they find new employment.

Disciplinary Action

Workers cannot get partial unemployment if their employers cut their hours in response to poor job performance or for other disciplinary reasons. For example, if a worker's hours were cut because he was always late or called in sick at the last minute too many times in a month, the worker cannot get partial unemployment due to the reduction in hours.

Work Search Requirement

If you receive unemployment due to reduction in hours, you must look for a new job each week unless your unemployment representative tells you that you are exempt from this requirement. The work search requirement obligates you to find a new job that gives you adequate hours and compensation to survive without unemployment. You will not continue to be eligible for unemployment if you reject a new job offer unless you have sufficient reason, such as the job paying less than your current job or being too far away to reasonably expect you to commute.

Quitting Your Job

If you quit your job because of a drastic reduction in pay for reasons not related to discipline, you may still qualify for unemployment. Although voluntarily quitting your job disqualifies you for unemployment, you can get unemployment after quitting if you had to quit because of poor working conditions, including drastic cut in pay or in hours, especially if the cuts were made in violation of your contract with your employer.

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Utah Garnishment Laws

Utah saw 8,906 bankruptcy filings in the first 10 months of 2010 alone, according to statistics from CreditCards.com. While incomplete, this shows a picture of the debt crisis in Utah, where the bankruptcy rate of 6.4 per 1,000 people is among the highest in the nation. Utah's garnishment laws are part of the blame for the high bankruptcy rate, according to a Brigham Young University study cited in the "Daily Herald." The laws offer little protection for debtors, according to the study, so more folks are motivated to file for bankruptcy in order to stop creditors from taking money from their paychecks. No matter what your level of debt, you should be aware of Utah garnishment laws.

Time Limits

Garnishments come after a judge rules that part of your wages should be withheld to pay creditors directly. A debtor has time limits on when they can collect debt owed. After this period, they may no longer legally collect the debt and you need no longer fear garnishment.

A credit card company may continue to collect debt owed for up to four years after the debt was accrued. A written contract gives a debtor six years to collect the money, while domestic and foreign judgments are good for eight years. Garnishment judgments -- rulings from a judge that your wages are to be garnished -- last 120 days and are renewable.

Monetary Limits

Utah state law restricts the amount of your wages eligible for garnishment. The most a debtor can garnish your wages is the lowest amount of one of two formulas. First, the debtor can either take away 25 percent of your disposable earnings in a single pay period -- that is a quarter of your net earnings that do not go toward essential bills such as rent. The other formula is any amount of your earnings that exceed the federal minimum wage by a factor of 30.

Writs of Garnishment

A writ of garnishment is a legal document obtained by a creditor to obtain money or property from a debtor. Utah state law has two different writs of garnishment, one for money and the other for property. Creditors are expected to do due diligence before obtaining a writ of garnishment against property to ensure they are filing a writ of garnishment against the right person. In the event a creditor files a writ against the wrong party, that party has the right to sue for damages in civil court totaling up to $1,000, as of 2010.

Interest

Utah state law does not provide any specific provisions limiting the interest rate on a garnishment. The interest rate is determined at the garnishment hearing in court and is enumerated specifically in the judgment.

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About Home Equity Loans & Credit Card Debt

Some people will use a home equity loan to pay off large credit card debts. The thinking is that they can save money by consolidating debt into a lower interest rate loan. If equity loans are standing at low interest rates--around 5%, that is true. However, you do need good credit to get low-interest equity loans. Most people that have a lot of credit card debt will not be able to get a home equity loan, because their credit score is low. If you have good credit, and still have a lot of credit card debt (which is possible), a home equity loan might be a good idea to consoldiate and save more. However, this could back fire, especially if home values drop and you want to sell your home. Also, if you can't make the equity payment and your mortgage payment, you risk a foreclosure. If you are forced to make a larger mortgage payment, you may run up your credit cards just to pay the bank.

Misconceptions

Paying off credit card debt with a home equity loan is a always good idea. If you can get a low interest rate on the home equity, paying off your credit card will save you money over the long run. It will also result in lower monthly payments, since the home equity is stretched out over 10 to 15 years, and even as much as 30 years. However, you will pay a lot of interest to the bank over those years. You also put more risk on yourself. Missing your equity payments could result in foreclosure, while missing a credit card payment can only result in a lower credit rating.

Risk Factors

Taking on a home equity loan puts the risk of losing your home onto your shoulders, in the form of an extra monthly payment. Missing this payment can result in foreclosures. The other risk is a higher interest rate on a car loan or personal loan, should you need one. When you stretch out your credit among credit card balances and your home, it affects your credit score. Carrying large balances on a credit card, or home means a lower score.

Benefits

A home equity loan can consolidate your credit card debt. Putting all your credit cards into a home equity loan means you only have one payment to think about. Typically, since this payment is stretched out over many years, it is lower than your credit card payments. Credit cards typically have a high interest rate. This means you are paying more each month to the credit card company and less towards your debts. A home equity with a lower interest rates means you could end up paying a little less each month towards your mortgage debt, and free up some cash for other expenses.

The Facts

A home equity loan gives you a lower payment each month so you have more time to pay down your debt. Credit card paybacks are based on a shorter time period, so they typically cost more each month and have a higher interest rate. You might still pay more interest overall on the debt with a home equity loan, because you are making more total payments over a longer period of time. However, if your credit card interest rate is very high, a home equity loan might make sense.

Expert Insight

If you are considering getting a home equity to pay off credit card debt, seek alternate debt reduction methods first. A home equity loan requires good credit and involves extra risk. Debt reduction experts can help you reduce your credit card payments through several legal means. You could also try to find offers for balance transfers with low, lifetime balance transfer rates that hover around 4 percent. This could be lower than the rate you would pay on a home equity loan, and it involves less risk. Always read your credit card offer terms and conditions. Some rates are only introductory, and increase in as little as 6 months.

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What to Do When There is Too Much Debt?

Lowering debt can provide a measure of peace and, in the long run, paying down balances increases FICO credit scores. There are several tips for dealing with too much debt. Some people ignore their debt and continue to accumulate balances. Smart consumers, however, understand the importance of careful debt management and keeping debt low.

Personal Sacrifices

Not everyone has extra income to pay down balances quickly, which is one reason consumer debt can linger for years. Getting serious about eliminating your debt and reducing your balances may call for personal sacrifices. This can include a sacrifice of your free time as you take additional employment to help reduce debt. You also may sacrifice shopping and dining out in an effort to reduce your expenditures and put more money toward paying down your balances.

Consolidation

Consolidation can help manage your consumer debt better, and with a lower interest rate on your debts, you can possibly pay less interest every month and bring down principal balances faster. Methods of consolidation include credit card balance transfer offers, debt consolidation loans or working with a credit or debt counselor that consolidates all your accounts into a single bill.

Use Less Credit

An accumulation of debt only worsens as you continue to use credit cards to purchase items. Stopping credit card use helps you eliminate and manage your debt. Thus, you're able to pay down balances without re-accumulating charges, which is counterproductive to progress. Carry cash in your purse or wallet, or save for items instead of using credit for instant gratification.

Debt Payments

Timely payments help with debt management because you avoid interest rate increases and late fees, which are typical with late or missed payments. To help reduce the amount of interest you pay on the account, ask your creditor to reduce your rate either temporarily or permanently; or start making half payments every two weeks instead of once of month. Bi-weekly payments reduce the amount of interest charged by your creditor and helps lower your balance quicker.

Modify Lifestyle

Depending on the amount of debt you owe, managing excessive balances might call for a complete lifestyle overhaul. Living way beyond your means can contribute to debt problems because there isn't enough income to pay your living expenses. Assess how much you spend on housing and transportation, and look into ways of cutting these expenses to save money each month and pay down debt. Move into a cheaper home or apartment, or trade-in your automobile to save money on the monthly payments. Saving $500 a month with a lifestyle change could possibly pay off $15,000 in credit card bills in approximately 30 months.

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Will a Student Loan Deferment Affect a Credit Score?

Student loans can be a gift and a curse. Many students are unable to afford college without the help of loans, but after graduation learn that monthly loan payments may be higher than they can afford. Luckily, there are deferment options available depending on your personal circumstances. Student loan deferments can help or harm your credit score, depending on how the debt is managed.

Deferments

Student loan deferments happen for a variety of reasons, including military service, unemployment or economic hardship. During a period of deferment, you are not obligated to repay your student loan debt as agreed. "You are responsible for paying your education debt even when granted deferment. Deferment is temporary and limited to specified time frames," explains Sallie Mae. There are also limits to the amount of times you can defer your student loans. The impact your deferment has on your credit is contingent upon the type of loan deferment you request.

Interest

While your loans are in deferment, the interest on your loan continues to accrue. However, whether you are responsible for the interest depends on whether you have an unsubsidized or subsidized loan. On subsidized loans, the government pays the interest during your deferment period. You are responsible for the interest that accrues during your forbearance if you have an unsubsidized loan.

Payments During Deferment

Some students request the option of making these interest payments each month while their loans are in deferment to help mitigate the added loan balance. If you are not sure which option works best for your circumstances, contact your lender. Alleviating the debt as soon as possible is a priority, but selecting the wrong option on your own after rushing through the application can lead to delinquency.

Pay any agreed interest payments by the the assigned due date. Falling behind on your interest payments can result in a decrease in your credit score.

No Payments

If you choose not to make any payments during your deferment period, or if your loan package does not offer this option, your credit score will not be negatively affected. During a deferment period, your account is reported in good standing with the credit bureaus, which can help to increase your score. Make a note of the date your deferment ends. If you miscalculate the length of your deferment, you could miss a future statement and fall behind on your payments. Late payments lower your credit score.

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How to Respond to a Writ of Garnishment in Maryland

If you fail to repay a debt, your creditor can sue you in civil court to recover what is owed. If the court issues a judgment against you, the creditor can then take steps to garnish your wages or bank account. In the state of Maryland, writs of garnishment are issued by the district court. If you've been served with a garnishment order, learn how to respond properly, while protecting your rights.

Instructions

1

Carefully read the writ of garnishment to determine which type of garnishment order you are being served with. The state of Maryland permits creditors to seek garnishment of your wages under Rule 3-646 of the legislative code or garnishment of your bank account under Rule 3-645. The garnishment order will notify you of the date the judgment was entered, the name and address of the judgment creditor, the amount of the judgment and the requirements for submitting a response.

2

Choose your defense. For example, if your bank account contains deposits of income that are exempt under federal law, you may use this defense to prevent these funds from being seized. You can also claim financial hardship as a defense if a wage or bank account garnishment would place an undue burden on you and/or your family members.

3

File a motion for hearing with the district court to object to the garnishment if your wages are being garnished. State law allows you to file this motion within 30 days of receipt of the original garnishment order. You can obtain a general motion form from the Maryland district court website. On the form, you must include your name and address, the name and address of the judgment creditor and your reasons for objecting to the garnishment.

4

File a motion to exempt property from execution if your bank account contains exempt deposits. You also have 30 days from the date of receipt of the original garnishment order to file this motion. Under federal law, you may claim an exemption for Social Security benefits, veterans' benefits, Supplemental Security Income, student assistance, federal retirement or disability benefits, military survivors' benefits, FEMA disaster assistance and railroad workers' benefits.

5

Attend the scheduled court hearing. When you attend the hearing, you may present evidence to support your claim for exemptions or financial hardship, e.g. direct deposit receipts, pay stubs, copies of your monthly bills or a monthly expense statement. If you cannot prove your claim, the court will deny your motion and the garnishment will proceed.

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