How to Avoid Falling Into A Deep Debt Hole

This article originally appeared on Payment1.com

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Debt is a fact of life. From student loans to mortgages, it seems like every milestone of adulthood requires some form of debt. It’s no wonder that a majority of adults are buried in it, causing major anxiety for people. They dread the day their bills would come, fearful of the words “default” and “late fees”.

 

In today’s world of mounting debts, how can you avoid sinking into this deep dark hole? Here are few important things to remember to keep you off the path of debt.

Live within your means. It’s simple but smart. If you don’t want to be in debt, learn to live within your means. Only spend the money you have and can afford to part with. If you see something you want but cannot purchase yet because you lack the cash, assess if you really need to have it now or if you can wait until a little later to buy it.

Be frugal. Ask yourself: do you really need that overpriced latte? Or that new expensive phone? Do you have to eat out–for the third night this week? Always think twice before swiping that card or digging for cash. Make your own cup of coffee, prepare your own meals instead of ordering or eating at a restaurant, and do your research and opt for less expensive alternatives offering the same quality when purchasing something.

You don’t need all those credit cards. Stick to just one or two. And make sure that when you are choosing your credit card, you pick one that has low interest rates and great perks.

But what about when you already have debt?

Pay at least the minimum, but if at all possible, pay more than that. Credit card debts, especially unpaid ones, are very quick to get larger because of high interest rates and late fees. Make it a point to pay at least the minimum. If you can afford to pay more, then do so. This will go towards you slowly chipping away at your credit card debt and not just staving off defaulting on it.

Have a monthly budget. It is very important to operate on a budget. It will help you avoid overspending and even help you start on your savings. Having a budget will also force you to keep track of your expenses and your bills.

 

Try debt consolidation. This means consolidating all your debts from different institutions into one large debt that you can pay off. It would also mean that you can enjoy a smaller interest rate. But do make sure pay this off, too, which brings us to our next tip.

Pay your debts. If you owe something, pay it off. If you avoid paying debts, your bank will slap you with late fees that could compound your debt into something that would someday seem insurmountable. Not paying your debt will also bring your credit score down. Having a bad credit record can sometimes affect employment prospects as well as affect the approval of any future loans like mortgages.

When it comes to debt, having as little of it as possible is always a good thing. Never bite off more than you can chew and always pay back what you owe.

Possible Reasons Why Your Personal Loan Application Got Denied

This article originally appeared on Payment1.com

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When your personal loan application gets denied, it can be disappointing. Most people are also puzzled. Even people with strong credit scores can get denied, and it makes them wonder why. Below are a few common reasons why banks deny personal loan applications so the next time you apply for one, you’ll know what and what not to do.

 

  1.  Bad credit score

 

Let’s get the most obvious reason out of the way. When you have a bad credit score, lenders are most likely to deny your personal loan applications. Your credit score is what tells banks the likelihood of you paying them back for the loan. If your track record is not very good when it comes to paying what you owe, chances are your bank will be resistant to granting you loans.

 

  1. The loan amount is too high

 

Lenders will take into account your capacity to pay back when you apply for a loan. When you fill out that loan application form and put in too high of an amount in the “desired loan amount” field, banks will most likely deny your application. To avoid this mistake, use an online loan calculator. Loan calculators can tell you how much you can borrow given your current income.

 

  1.       Unstable employment record

 

Because banks consider your ability to pay the loan off in the long run, they will be looking at your employment record. So if you have an unstable employment record or worse, no employment at all, banks will be hesitant to grant your loan application. Lenders will require certain employment tenure or length of service, which is why banks typically require you to submit a certificate of employment.

 

  1.  Insufficient income

 

When you don’t make enough to apply for a loan, you will most likely not get approved. You need to be able to make the monthly loan repayments, and If you do not make enough money to pay them and at the same time address your basic needs as well, lenders will not grant you a loan. This is because you are most likely to use your income for your basic needs than to pay off the loan.

 

  1.  You have too much debt

 

When you apply for a personal loan, your bank will do a background check to see if you have any outstanding loans. This is so they are sure that you have the capacity to pay. If you meet the minimum income requirement and have a good credit score but have several outstanding loans, they will most likely be hesitant to grant you another one. The more loans you have, the less capacity you have to pay back an additional loan.

 

  1.  How you fill out the loan application

 

If you have any mistakes or inconsistencies in your loan application, lenders might not grant you your personal loan. Your data needs to be complete, correct, and consistent. Lying on your application will get you denial and could possibly land you on your bank’s bad side.

 

Consider the list above the next time you apply for a personal loan. Make sure you fill out the application completely and honestly, have a good credit score and enough income to make the payments, and make sure you’ve been employed a while.

Money-saving Tips for the Self-employed

This article was originally published by Uncapped Mortgage

Gone are the days when the American dream means climbing the corporate ladder. Over the last years, the mindset of the American worker has shifted to valuing flexibility and freedom over stability. Self-employment continues to be a rising trend as employees leave their day jobs to do freelance work or start their own business.

 

One of the major challenges self-employed individuals face is managing cash flow. Since you do not have the regular pay that a day job provides, not to mention health insurance and tax duties, it can be challenging when all these things fall on your shoulders. Saving and budgeting can be taxing, too, as there will be months when you’ll be flushed with cash, while there will be months when you’ll need to tighten your belt a little.

 

Below are a few money-saving tips for the self-employed.

 

Set a budget.  Whether you are a business owner or a freelancer, this is very crucial. Good financial planning can determine the success of your new venture. Total all your income sources. Make sure to list down all your expenses every month. Determine all the fixed costs such as monthly bills, subscriptions, and mortgage, which takes up a huge part of your budget. You may want to consider paying off your mortgage early to get it out of the way and have more room in your budget for other things like savings and retirement fund.  After listing down the fixed costs, add the variable expenses such as payment to freelancers if you hire some, and any other expense that vary month-to-month. By doing this, you’ll know the amount of cash you need every month to live comfortably. Stick to the budget as much as you can. There are plenty of budgeting apps and tools that can assist you with this.

 

Set your rate. Do not undersell yourself and do not be shy to increase your rates as you gain more experience. In terms of billing, it’s better to be billed in installments rather than in lump sum at the end of a project. It would be harder to budget your money if your cash comes in once every three months rather than having them sent in monthly installments.

 

Build your emergency fund. And maintain it. It is important to always save for the rainy days. An emergency fund can save you from high-interest debts in times of financial stress. Make sure you have a fund, ideally a 6-month cushion – for when something unexpected happens such as a big client backing out. This 6-month cushion cannot be built right away, but you must work towards building it as soon as you begin getting paid. Set a certain percentage of your income to be allotted to this fund every month.

 

Know your taxes. Now that you are self-employed, you no longer have your HR department’s compensation and benefits people to look after your taxes. You must do them yourself now. Be aware of the tax bracket you are in now that you have gone solo. If you are a business owner, seek the help of a financial advisor in determining the best entity type to register your business as.

 

Get help. Time is money. If you think it would be best to delegate some of your tasks to freelancers in order for you to focus on more crucial tasks, hiring help could be a great idea.