Connect with us

The Daily Digm (News)

Student Loan Delinquencies Going Up + How to Start Repaying Your Student Loan

Published

on

Student loans that are at least 90 days delinquent or in default ballooned to a record $166.4 billion in the final quarter of 2018, according to Bloomberg analysis. That means the “seriously delinquent” debt continued to rise even as the unemployment rate fell below 4% — a sign that the robust job market hasn’t generated enough wage growth for recent graduates to make payments. “If you have a choice to pay your student loan or for food or housing, which do you choose?” asked a Bloomberg Intelligence strategist. Warren Taylor, Executive Vice-President at BankMobile, says it is time to start paying off your student loans. 

This blog post will not address all the various types of student loans (Federal, State, the private sector, etc.) and their repayment terms – as that would be a very long blog! This article is more about how to pay off your loans as quickly and as cheaply as possible.

Should You Consolidate?

First, you may want to explore loan consolidation. This is where all your student loans are reviewed, with their different interest rates and repayment terms, and then paid off by consolidating them into just one new loan with one monthly payment. For many, this is a good way to go. Your overall interest rate may be reduced, thereby saving you money. It helps that you have one payment to make each month, instead of five loan payments all with different due dates. The only real danger to consolidating loans is that you may lose some benefits that some of your loans may have – like loan forgiveness, loan forbearance, etc.

Choosing the Best Loan Term for You

When choosing a loan term, picking the shortest repayment time in order to get the lowest interest rate may not make sense. Your rate will be lower, true, but your required monthly payment will also be very high. This high monthly payment may hurt your chances of getting other loans – like a mortgage because your “back end” ratio is too high (see my first blog on budgets for an explanation). Picking the longest term may not be wise either. True, your monthly payment will be low, but because you are taking so long to pay off the loan, you will pay the most in interest since the term is longer and your rate will be higher (typically the longer the repayment term, the higher the interest rate). Just when you thought you were “getting” how this loan repayment term thing worked, I need to add another complication. It’s based on rewards. If a ten-year repayment term has a 5% rate, and a 15-year term has a 10% rate, it may be in your best interest to take advantage of the shorter loan term because your interest rate is cut in half.

How to Repay Your Student Loan Off Faster

Let’s get to repaying your loan – and sharing some “tricks” on how to repay a loan faster. The average college student graduates owing $27,000 in debt. This is the amount of the loan in our example. Most loan program terms range from 10 to 25 years – consolidated loans have some shorter terms as well. Your monthly payment for a ten-year loan, at 7% interest, on $27,000 would be $313.49. If you pay an extra $24.18 a month, you will shave a full year off your loan – paying it off in 9 years instead of 10! Making this slightly higher monthly payment will save you over $1,150 during the life of the loan. I use the iOS app “Loan Calculator – What If?” to calculate loan payments.

Using the same example above, I could get a ten-year loan @ 7% interest, or they offer me a 15-year loan at 7.5% interest. I might be inclined to go with the 15-year offer at 7.5% interest. Why? Well, my mandatory monthly payment would drop from $313.49 to $250.29. This lower payment might help keep me under my 36% back-end ratio, thereby allowing me to get a mortgage or other financing if needed. Second, if my spouse or I got laid off, if we had an emergency repair, a health crisis, having a required loan payment of $250.29 would allow me to keep my loan current and take the extra money to pay for the emergency. If you do take the longer term, and here is where you need this discipline, I would still recommend you pay the higher monthly payment of $337.67. By paying this extra $87.38 per month, you would pay off the loan in 9 years and four months.

General Guidelines

So what is the right choice?  Without knowing your ratios, income, debt levels, and other factors, it is very hard to tell you what to do.  However, here are some general guidelines to follow:

1. I would probably suggest going with a fixed rate loan instead of a variable rate loan. Why? Interest rates are at historic lows. There’s a greater likelihood that rates will go up than come down. So taking on a variable rate loan now will likely lead to higher interest rates, hence higher monthly payments, shortly. On a fixed rate loan, your payments will not go up if interest rates go up. Again, choosing the right loan depends on your income, debt, and discipline.

2. Whatever your required loan payment is, pay more. Think about it, in the example above, paying $24.18 more a month (that’s basically 80 cents a day), cuts a whole year off your loan term! Imagine if you paid an extra $54.62 a month (that’s $1.80 a day), you would shave two years off your loan term – paying your student loan off in 8 years instead of 10 years. Isn’t that worth not having one Starbucks coffee a day? Trade in a cup of coffee per day, shave two years off your loan repayment! Perhaps I’ll write another blog on easy ways to save $20 to $200 per month.

3. Always pay your debts on time – even paying them a day late or $1 short can hurt your credit rating. But, if you do want to pay off debt quicker than normal, start with paying the extra money on your highest rate loan. This means you use the extra money you have saved from not going to Starbucks anymore to pay off your credit cards first, student loans next, and your car loan will probably be your lowest interest rate loan. It’s amazing what an extra $1 a day can do to reduce a loan balance!

Maintaining a low level of debt is key to creating a successful financial life for yourself.  Now, let’s shed the debt!

Ash Exantus aka Ash Cash is one of the nation’s top personal finance experts. Dubbed as the Financial Motivator, he uses a culturally responsive approach in teaching financial literacy. He is the Head of Financial Education at BankMobile and Editor-in-Chief at Paradigm Money. The views and opinions expressed are those of Ash Cash and not the views of BankMobile and/or its affiliates.

The Daily Digm (News)

T-Mobile’s Dream of Telecommunications Domination Is Almost Complete + How to Create Mental Toughness While Pursuing Your Dreams

Published

on

T-Mobile received verbal approval from the Federal Communications Commission for its $26 billion deal to buy Sprint but still awaits the blessing of the Justice Department. FCC Commissioner Ajit Pai said he’ll back the merger based on concessions by the third- and fourth-largest U.S. telecommunications companies, which include pledges to invest in new wireless broadband service in rural areas and to sell Sprint’s prepaid cellphone brand. While the FCC is expected to make a formal announcement within weeks, the Justice Dept. has yet to weigh out antitrust concerns.

Dream chasing isn’t for the faint at heart. It can take years before one sees the financial payoff of what was once an idea. T-Mobile is probably patient on the outside, but internal it is jumping for joy. It took them a few years to get to this point, but I’m sure they will be relieved at the fruits of their patients.

When building a business, your goal has to be more than money, or you will ultimately fail. Your drive has to be based on principle, change, and something greater than yourself. Here is how to stay mentally tough while pursuing your dreams.

Personal Development. The road to success is paved with character and growth. Personal development is one of the key drivers that sustain you on the path of your dreams. Trustworthiness, keeping your word, and dependability are imperative to any industry. It doesn’t matter if you’re a musician or painter, lawyer or doctor, these traits and non-negotiable and forever transferable to success.

Take Breaks. To get there, you must rest one mile at a time. The grind is overrated. Reflecting on how far you’ve come energizes you for the road ahead. Burnout is a danger to your accomplishments and leads to a failure by default.

Stay Hungry. Stay Foolish. Steve Jobs popularized this quote from an ad in The Whole Earth Catalog. It read Stay Hungry. Stay Foolish. We come to a point when we are happy with a level of progress and think we’ve learned everything. Accepting the truth that we never stop growing, and there is no limit to our success gives us the ability to keep going. To continue, you must never settle. You must always seek new ways of fixing things and solving problems. Discover new opportunities and be open to learning more.

Faith. Steve Jobs also mentioned faith throughout his journey. Believing so deeply in an idea that you make it come to life. Belief takes ideas and materializes them; and when you realize you can actually make something come to life, the sky becomes your launching pad, not the limit.

Continue Reading

The Daily Digm (News)

Retail Wars Are Getting Real Competitive + How to Stay Competitive in the Marketplace

Published

on

Walmart has announced plans to offer next-day delivery on about 220,000 of its “most frequently purchased” online items, after rival Amazon promised free one-day delivery for Prime members. The retail giant says the offering, which applies to orders over $35, will reach about 75% of the U.S. by the end of the year. The more limited inventory makes Walmart’s offer more of a competitor to Target’s Restock than Amazon, says TechCrunch. But retailers need to get a better handle on their inventory and demand for fast delivery before making such moves, execs and analysts told The Wall Street Journal.

Competition is fierce no matter what the genre is and as it relates to these entrepreneurial streets, you have to make sure that you are staying ahead of the competition so you won’t get Walmart’d by your Amazon… So what can you do? Luckily, Marketing Donut has come up with Ten ways to keep ahead of the competition:

  1. Know the competition. Find out who your competitors are, what they are offering, and what their unique selling point (USP) is. This will identify the areas you need to compete in, as well as giving you a platform for differentiating yourself.
  2. Know your customers. Customer expectations can change dramatically when economic conditions are unstable. Find out what matters to your customers now – is it lower prices, more flexible or premium service, the latest products? Revise your sales and marketing strategy accordingly.
  3. Differentiate. It’s essential to give your customers good reasons to come to you rather than a rival. Your USP should tap into what customers want, and it should be clear and obvious – no-one should have to ask what makes you different.
  4. Step up your marketing. Improve your market positioning statement. Make more effort to tell people who you are, what you sell, and why they should buy from you. It doesn’t have to be expensive; marketing can range from posters in your window and leaflet drops through to viral campaigns on social media.
  5. Update your image. Simple steps such as painting the front of your premises can make your business look more modern and inviting. But also look at business cards, social media presences, your website, branded packaging, clothing and so on. Does your image reflect your USP?
  6. Look after your existing customers. They will be your competitors’ target market. Provide better customer service by being more responsive to their needs and expectations. If feasible, consider offering low-cost extras such as improved credit terms, discounts or loyalty schemes – remember, it’s cheaper and easier to keep customers than to find new ones.
  7. Target new markets. Selling into a greater number of markets can increase your customer base and spread your risk. Consider whether you can sell online or overseas, for example. Are there groups you’ve never targeted before who might be interested in your offer? Remember the benefits of market segmentation and don’t waste time marketing to people who won’t be interested.
  8. Expand your offer. What related products or services might your customers be interested in? You might even consider diversifying into another area – many bars and restaurants have successfully offered business networking events, for example.
  9. Be the best employer. Skilled, motivated staff underpin vibrant, growing businesses. But attracting them means more than paying a competitive wage – people are often more impressed by a good working atmosphere and benefits such as flexible working and structured career development.
  10. Look to the future. Businesses that plan for growth are more successful than those that are happy to stay still. Keep up with developments in your sector, follow consumer trends, invest in new technology and – crucially – have a clear idea of where you want to be in one, three and five years’ time.
Continue Reading

The Daily Digm (News)

Negotiating Better Pay May Be Getting Easier + How to Easily Stay Ahead of the Game

Published

on

Salaries were once a taboo thing to discuss. Yet, with unemployment at a five-decade low and the gig economy requiring people to compare salaries, attitudes are shifting in the conversation, according to The New York Times. Keeping salary information secret favors managers who want to pay people less, say experts. More information about salaries may benefit workers, giving them wider room to negotiate better pay.

This is great news for those who in the past have been cheated out of a fair wage because they didn’t understand how to play the negotiation game. But it doesn’t only take negotiation to get top dollar; there are other tricks to the trade. Here are four ways anyone could use to get ahead of the career game:

  1. Know Your Strengths and Capitalize off of Them. Don’t try to be something you’re not or learn new tricks overnight. Stay in your lane and become stronger. The stronger you become, the more value you will have in the workforce.
  2. It’s Never Too Late to Intern or Volunteer. As adults, these can be such humbling terms, but it can still get your foot in the door. Just look at Chris Gardner. Not only did he become wealthy, but his rise to riches also led to a movie based starring Will Smith & Jayden Smith
  3. Building Your Connections. Who you know is just as if not more important than what you learn. Being authentically connected to others in your field of interest can open up a world of opportunities. One rule of thumb is never settled or compromise for relationships but do, however, seek to build solid ones.
  4. Create Your Own Platform. Don’t underestimate your ability to build an empire. Many successful entrepreneurs and professionals created their own jobs. Combine all of the above and consider investing them in your own enterprise.
Continue Reading

Trending

Copyright © 2019 PARADIGM.MONEY, All Rights Reserved. PARADIGM.MONEY is owned/operated by BankMobile, a Division of Customers Bank. The opinions/Views expressed on PARADIGM.MONEY are not considered opinions/Views of BankMobile, a Division of Customers Bank.