Student Line of Credit Payment Options

Paying off lines of credit is a major concern for many college graduates. With tuition fees skyrocketing and living costs remaining high, a college education can often come with a steep price tag, sometimes running students up to six figures in debt. Although professional and student lines of credit often have the option of deferred payment, the grace period for payment is rarely more than a year. Thus, college students with lines of credit should look into structured payment options before they graduate.

Structured Payment Plans

A structured payment plan is a payment schedule arranged between you, your bank and your lender. With a structured payment plan, you pay a set amount of your loan off every month. The monthly payments are arranged to be larger than the monthly accrued interest, so each payment chips away at the principal as well as the interest. Payments are made through your bank and are deposited from your checking or savings account to the accounts of your creditors. To set up a structured plan, speak with the financial services department at your bank.

Automatic Payments

Automatic payments go directly from your account to those of your creditors, without you having to authorize each payment. These payments are are taken directly from your bank account on your payday and continue until you decide to cancel them. To set up automatic payment, you must arrange to be paid by direct deposit, which generally requires that you give banking information or a voided check to your boss. Then, you may speak with your bank about setting up the payments. They will require the account information for your account with the loaning institution.

Loan Consolidation

Loan consolidation is the act of taking out one large, low-interest loan to pay off several smaller loans. Loan consolidation can be an appropriate strategy if you have a high interest line of credit and/or several credit cards from a private bank. To arrange for a consolidated loan, speak with a financial advisor or debt counsellor; these types of services are usually offered by smaller institutions rather than large banks. If you intend to consolidate your loans, make sure that your new loan will have a lower interest rate than the average rate of your existing loans.

Bank Payments

If you are comfortable with your ability to manage your debt on your own, conventional bank payments may be the best repayment option for you. A conventional bank payment is similar to an automatic payment, except instead of pre-authorizing a schedule of deductions from your paychecks, you simply set up your lender as a payee on your account and make payments as you are able to make them. This can be an attractive option if your debt burden is not overly daunting or if you are paid on an irregular schedule.

Read More

How to Compute Interest

Personal debt is a fact of modern American life. Basic savings tools including bonds, savings accounts and money market accounts are the bedrock of any personal financial plan. Using either of these types of accounts properly requires a sound understanding of how both simple and compound interest work.

Instructions

1

Recognize that there are two standard forms of interest: simple and compound. The basic form of interest is simple interest. This is computed only on the principal.

2

Compute simple interest as an annual rate multiplied against the amount owed. For example, if you borrowed $25,000.00 at a simple annual rate of 8 percent, the annual interest would be computed as 25,000 times .08, for a sum of $2000.00.

3

Recognize that even computing simple interest is rarely so simple. Although interest rates are announced based on an annual rate, your payments are almost never made once per year. Once per month is more common, especially for credit cards. To arrive at this computation, add the extra step of dividing the interest rate by the number of payment periods. For example, if you owed $2000.00 on a credit card with 20 percent interest, to figure your monthly interest you would divide .20 (the annual rate) by 12, for a monthly rate of .016. Multiply 2000 by .016 for a monthly interest of $32.

4

Computing compound interest is similar, but adds the extra step of adding unpaid interest to the principal. For most of us, compound interest becomes an issue in interest-yielding bank accounts. If you have a CD which compounds its interest quarterly, that means your interest is added to the principal investment after three months.Most loans and credit cards in America actually operate on the basis of compound, rather than simple interest. The Annual Percentage Rate displayed on your bills is not the same thing as a true, simple annual interest rate. Rather, it is an estimate on the part of your bank or credit card company of what your compound interest rate looks like on an annual basis.

5

Determine whether you have a fixed or variable interest rate. A fixed rate is exactly that--all legal circumstances having been met, the rate never changes throughout the duration of the account. A variable rate will change, and it is important to understand the circumstances that will cause and set those adjustments.

Read More

Tips on Credit Card Consolidation

If you're not careful, credit-card debt can eat you alive. Exorbitant rates make it impossible to meet even the basic monthly payments. If you've rung up huge debts on a number of credit cards, consider consolidating the payments. With just a single monthly payment, you can reduce your debt much more readily and keep better track of the money you owe. A few simple tips make the process much more effective and will get you out of debt faster.

Check Interest Rates

When consolidating credit-card debt, carefully examine the interest rates of each one. Lower rates save you money, though if a given card offers a particularly low balance-transfer rate, you may want to consider it as well. You can apply the money you save on lowered interest toward the principle of your debt, getting you out of the hole more quickly. Some credit cards even offer 0 percent introductory rates, which can't be beat provided you pay close attention to the specific terms and know when the rates are going to shoot up again.

Stop Spending

Once you've shifted your debt to a single card, cut up all of your other credit cards. You can't get out of debt if you immediately start racking up new charges, and consolidation won't work if your payments don't go down. Spare yourself the temptation and cancel your cards as soon as they're paid off. Along those lines, make a harsh assessment of the charges you make on your cards and work on reducing the number of things you buy. Cut out anything that isn't absolutely necessary, and start paying for things with cash rather than with your cards. It may hurt in the short term, but you'll see the difference when the bill arrives.

Take Out a Loan

If your credit-card interest rates are eating you alive, consolidate them through other means. If you own your own house, think about a home-equity loan or a restructured mortgage. Banks may also offer a personal loan for those without home equity. Interest rates on such loans are often lower than the cards, and set terms mean you know how much you need to contribute every month. You can also establish automatic payments through your banks so that the money is automatically deducted from your account every month. When seeking a loan, make sure you go through a reputable institution with a solid history and good terms. Fly-by-night institutions offering quick-fix loans often end up being worse than the credit cards themselves.

Read More

Do You Still Owe Debts When You Die?

The death of a loved one is a tragic circumstance that creates a number of complications. One of the issues family members deal with is the debt of the deceased, including judgments, taxes, mortgages, liens, loans and credit cards. Since debts are agreements signed by the deceased, it is tempting to think that liability for a debt ends upon death, but this is not the case.

Estates and Probate

When a person dies, all of their financial liabilities and assets become an "estate." This estate is subject to a process called probate, during which a court examines the estate and distributes it. The court takes into account all of the property and assets and uses them to pay off all of the liabilities the estate owes, including debts. If there is any money left over, the court dispenses it to the beneficiaries, according to the stipulations spelled out in a will or state probate law.

Insufficient Assets

If the assets in an estate are not great enough to cover the liabilities, then any debt that remains after the court distributes the assets disappears, unless there is another party the creditors can look to for payment. The beneficiaries get nothing, but are not responsible for the remaining debt. This does not stop some creditors from attempting to get the money from family members, however.

Shared Liability

The elimination of debt because of insufficient estate assets only applies to debt that is solely in the name of the deceased. Debt that is held jointly with another holder who is not deceased is not settled during probate. For example, if a husband and wife sign for a credit card and the husband dies, the wife becomes personally responsible for the debt. This is also true for any loans that are co-signed.

Community Property

There are some exceptions to this. In states that have community property laws, such as California, all property and liabilities created during a marriage belong to the "community" of both spouses, whether both parties signed for them or not. This means that after the death of a spouse, the surviving spouse becomes the owner of all liabilities and a creditor could choose to pursue him for the debt.

Read More

How do I Get Rid of Massive Credit Card Debt?

Being massively in debt can be very daunting. For many reasons, people suddenly find themselves owing more on their credit cards than they can possibly repay. You don't have to worry about losing your home just because you've missed a few card payments, because credit card debt, unlike other forms of debt, is unsecured. But the debt will hang over you unless you do something about it. Wiping out a large amount of debt has long-term consequences, but it can also give you, more-or-less, a clean slate.

Instructions

1

Calculate how much you owe to credit card companies. Include interest and late-payment penalties.

2

Stop making monthly payments. This has a huge negative impact on your credit score.

3

Put the money you would have used to make the repayments in a high-interest savings account. The account should be one that lets you withdraw the money at any time without a penalty.

4

Wait for your credit score to drop below 500. You can get your credit score from the three main credit bureaus: Experian, TransUnion and Equifax.

5

Calculate how much money you've saved up in your savings account.

6

Contact the credit card companies and explain that you cannot repay everything you owe. You will need to provide evidence of this, such as payslips and account statements.

7

Offer to make a partial payment equal to the amount you've saved up, in exchange for the remainder of the debt being erased.

8

Wait for the credit card companies to reply. They will either agree, refuse or make a counteroffer. More often than not, they will agree because a partial payment is better than none at all. They know that a person with an extremely low credit score is unlikely to repay their debt. They would rather have some of their money back than have you default on the full amount.

Read More

How to Avoid Creditors From Taking Money From My Account

In some instances, creditors seek bank account garnishment in order to get the money you owe. If this happens, your account is frozen temporarily. You can put money into the account but cannot take money out. This freeze continues until the debt is paid. Because a frozen bank account can cause such financial difficulty, and because garnishment sometimes means creditors take funds from the account to which they really aren't entitled, anyone with a debt should understand how to slow down or stop the bank account garnishment procedure.

Instructions

1

Send a written request to your creditor for validation of debt. If the creditor cannot prove you owe the debt, write another letter requesting that garnishment procedures be stopped due to the lack of evidence supporting the fact you owe. If there is no evidence you owe and you are sure you don't, state that you are not claiming responsibility for the debt asserted and that you intend to close your account with the creditor if they do not correct the account errors. You always may request such validation from a collection agency under the Fair Debt Collection Practices Act, but you do not have this protection against regular creditors.

2

Make a list of all the monies in the account and gather all receipts and statements that verify the source of those monies. Often, people co-mingle funds in a bank account -- for example, they'll use the account for both Social Security and wages. This creates problems because some funds are exempt from garnishment, while others are not.

3

Contact your creditor. Ask the creditor if it will accept a repayment plan in lieu of garnishing your bank account. If you can verify to the creditor in writing what funds in the account are exempted, what your circumstances are and that you can afford to make a regular, small payment every month, the creditor may decide that the partial payment is easier and less expensive to obtain than the garnishment order. Hire an attorney to assist with the construction of your hardship letter and assist in negotiations with the creditor.

4

File the official Notice of Exemption forms with your local court. The exemption forms make a case that, should the creditor pursue garnishment of the account, or if it already has, the creditor is not entitled to all of the money in the account. The judge will review these forms to determine what the creditor can take from you. These forms are on the websites for most courts or via the county clerk.

5

Open a new, separate bank account. Contact all individuals or agencies associated with exempted direct deposits and change the bank to which the individual or agency routes your funds. You may request changes to the route of non-exempt funds, as well, but this will not stop the creditor from going after those funds. It merely slows the creditor down, as the creditor must request a new garnishment order for each bank account it wants to levy. It's better to request checks you can cash for non-exempt funds.

6

File a lawsuit against the creditor for unlawful garnishment if you can show that the bank account was levied without due process -- that is, if you can show the creditor can't prove you owe or didn't follow the proper legal procedure to get the garnishment. File a lawsuit against the creditor if the creditor took exempted funds from the account, as well.

Read More

How Can I Consolidate My Debts Without Paying Fees?

Debt consolidation means going from having many creditors to having one. This way, you have just one payment to make each month instead of several. Many people find this makes keeping track of their bills easier. Depending on how you consolidate your debt, you may be able to reduce the total amount you pay on your bills each month or the interest you pay on your debts.

Debt-Consolidation Methods

Several methods are available for consolidating your debt. For example, you could decide to entrust a credit counseling organization to pay your bills each month; for a fee, you pay them a monthly payment which they distribute to your creditors. In some cases, your creditors will lower your interest rate or waive certain fees because of your involvement with such an agency. Alternatively, you could take out a loan through a debt-consolidation agency. However, either of these methods will require that you pay fees for the administration of your funds.

Debt Consolidation Fees

If you use a company to help consolidate your debt, even a nonprofit, you will have to pay fees for its services, fees that can be exceptionally high in some cases. According to Bankrate.com, you could pay as much as $8,000 to a debt management agency for the administration of $20,000 of debt. Luckily, you do not have to use a debt-consolidation or debt management company to consolidate your debt; you can do it yourself. By consolidating your debt on your own, you avoid the necessity of taking on this extra cost.

Using your Credit to Consolidate your Debt

To consolidate your debt on your own, you have two basic options. First, you could use credit cards. By using a combination of balance transfers and a low annual percentage rate, you could consolidate your debt within a matter of days if you have adequate credit available. For example, you could open a 0 percent introductory rate credit card and transfer all your debts there. Alternatively, if you have an existing credit card with a lower interest rate, you may want to talk to your credit card company about extending your credit limit to allow you to consolidate all your debt on the one card. If using credit cards is not an option, you could take out a loan instead, such as a home equity loan or line of credit. While you will have to pay an upfront loan origination fee in doing so and secure the loan with your home, the interest rate will almost always be considerably less than you are currently paying, especially if most of your debt is credit card debt. Moreover, the interest you pay on such a loan is tax-deductible.

Working With Your Creditors

Most creditors will be willing to work out some sort of repayment plan with you to avoid transferring the debt to a collections agency. Further, if you are able to pay a lump sum, such as if you get a home equity loan or increased credit line, you may be able to settle your debt with your creditors for less than you owe.

Read More