Is It Worth Refinancing my Student Loans?

You may have asked yourself this question before, wondering if it is truly worth the time and effort associated with a refinance to save what may amount to a few hundred dollars or more. There is really only one way to find out whether and how much a refinance can save you, and that is to input your information and get a rate quote based upon your credit. I’m not sure about you, but the thought of saving several thousand dollars over the next 5-10 years excites me.

For many individuals student loans can be in excess of $50,000, with some going into the hundreds of thousands of dollars. If you have loans in this range, or even the tens of thousands of dollars, then you truly should review your current interest rate and financial situation and find a way to attack and get rid of those loans. A refinance to a lower interest rate and possibly even a shorter repayment period can save you thousands potentially. If you can afford it, or will commit to getting rid of those loans fast (suck it up short term and enjoy the benefits long term).

Click the Picture Above to Get an Exact Quote and See What Your Savings Will be.

As an example, let’s say one has $50,000 in student loans and is presently locked into an interest rate of 7% with 15 years left to repay. Your current monthly payment is about $449 per month for the remaining 15 years. With a refinance through Social Finance (SOFI), you could be looking at a shorter loan term of 10 years at an interest rate as low as 4.5% with a slightly higher payment of $550 or so, but would save up to $18,711 for the life of the loan. This is a car you could save for, or $18,000 you could use to invest, put a down payment on a home, etc. This is no joke, now we are talking about serious money. This is not something that you should simply overlook.

Picture what the savings would be if you have student loans of $100k (a 20 year loan, 7% interest rate). With SOFI you could possibly refinance at a rate as low as 4.5% to 6.5% (usually the shorter the repayment period the better the interest rate, which means you would need to pay more principal each month and thus have a higher payment, but it can be worth it). This could equate to almost $300 more each month for your monthly payment (going from $775/month to over $1k/month), but you would save almost $62,000 over the life of the loan. Are you kidding me? That’s incredible! Imagine saving $62,000 just by making one little change and sucking it up (forgoing a few extras for a number of years) so that your financial future can benefit as much as possible.

As you can see, it’s worth taking the time and effort to consider whether a refinance would help you save thousands over the course of your loan repayment, and whether you can speed up your loan repayment for that matter for a limited additional amount each month. In some cases you may simply refinance with the same term, get a better rate, and lower your payment. I would recommend giving up something wasteful you spend $100 or so on each month and going for the shorter repayment period to help jumpstart your financial future, it will be worth it long term.

Click on the links on this page to get a special $100 cash back reward as my referral (this comes directly from SOFI as my referral). The $100 will be rewarded if you decide to refinance your loan through them and are approved and the loan funded*. The larger reward of course is the long term savings you will get through the refinance. Prioritize payment of those student loans, forgo some extras, and make it happen. Imagine your life 5-10 years from now with no student loan payment, and having saved thousands in interest. You could go from paying $1000 each month in student loans, to saving $1,000 each month or investing that money. You had to borrow to get the degree, now get your financial future back on track by getting rid of those loans. Don’t keep paying the government 7% interest for the next 15-20 years. Get rid of those loans, pay them down, its the equivalent of investing and making a 7% return if you are paying down a 7% loan, and as you can see, it ends with guaranteed long term savings and your increasing your net worth, by reducing your liabilities.

 

*The party and or parties behind this site may have relationships with the listed companies/advertisers above and may receive compensation related to any offers.

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China Announces Tariffs on 106 U.S. Products in Response to U.S. Tariff Changes

The tariffs are designed to target up to $50 billion of U.S. products annually including soy, chemicals, and cars. The Chinese announcement was in response to President Trump’s unveiling of an extensive list of Chinese imports that are being changed or applied more heavily now to change what he has referred to as an unfair trade balance. China leaders seem to be referring to the situation as a lose-lose scenario, but must make a move in response.
China announced additional tariffs on 106 U.S. products in response, which seems to have heightened the fear of a global trade war, which is threatening the stock markets (Dow Jones Implied Open is -582.36 points at the time of this writing).

The effective start date for the new charges will be revealed at a later time, though China’s Ministry of Commerce said the tariffs are designed to target up to $50 billion of U.S. products annually, which will have a huge effect.

President Trump’s proposed tariffs include products used for things such as robotics, information technology, communication technology and aerospace, among others. The potential for a large scale trade war between the U.S. and China fueled market fears leading to what looks to be a large market decline for the day.
Based upon the prospect of a full blown trade war it may be time to start raising some cash to sit on the sidelines for a bit, or thinking about putting a bit of money in an inverse ETF such as SPXU (which rallies when the market declines, as its goal is to do three times daily the opposite of what the S&P 500 does). Therefore, if a full blown trade war is to develop and the U.S. markets to fall a decent chunk, SPXU would rise. It is presently at $12 per share pre-market. In my humble opinion, it has much room to run. However, be aware as should the market turn and begin to run up again it could end up with a reverse split (reducing the number of shares you own and putting those shares at a higher price, then falling in price further due to the run up of the market). i am not a financial advisor or investment advisor and this is not intended to be financial or investment advice, but is solely this author’s humble opinion. You should always understand and be aware of the risks of investing and make your own decisions, ones that you can live with and never risk more than you are willing to lose in its entirety.

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How Much of a Difference Does an Additional 5% Interest Per Year Make on My Investments?

Does Investment Performance and Fees of Only a Few Percentage Points Have a Significant Effect Over Time?

The Effect of an Additional 5% Per Year in Interest Compounded Over Time Can be Huge
The most commonly cited average historical performance over an extended period of time for the stock market is 7% (this includes both the up and down periods over an extended period of time 30 years or more). This is commonly cited as a benchmark for performance in stock market investing and mutual fund investing. However, there are many mutual funds at this time which cite 5 year and 10 year performance in excess of this, many by 5% or more for the more limited period of time of 5 to 10 years.

My question then becomes: How Much of an Effect on Your Investment Does an Extra 5% Make Over an Extended Period of Time?

To determine the answer to this question, I will use the free future value compound interest calculator at money chimp.com to calculate the future value of an investment of $10,000 over a 30 year period while adding $100 per month, earning an interest rate of both 7% (the historical average) and at 12% (5% per year higher and a number which many mutual funds are presently beating with their 10 year average). The lower future value for the investment earning 7% per year will then be subtracted from the higher interest earning investment to show us how much of a difference 5% makes on this investment for a 30 year period of time. The idea behind this exercise being, does investment selection make a large difference over time.

The first scenario shown includes $10,000 invested over 30 years, adding $100 per month. As you can see the overall investment when compounded one time annually at 7% interest would grow to $85,568.63 at the end of 30 years. This is quite a substantial sum considering the addition of only $100 per month. Imagine if you were to add $250 per month (this would equate to more like $99,000 or so).

Now let’s see what happens when you achieve a higher rate of return (just 5% more per year) over the 30 year period. How much of a difference do you believe it will make? A few thousand, five, ten thousand? Wrong, as you can see from the picture below, rate of return has an exponential impact on overall future value, which compounds and gets larger over time, as your investment grows. Therefore it pays to focus on and pay attention to investment performance and to invest in mutual funds and companies with a solid track record for performance and which charge low fees. This can have a tremendous effect on the overall amount of funds you eventually have to withdrawal in retirement.

In the scenario here, $10,000 was invested for 30 years, adding only $100 per month, but the money earned a higher 12% rate of return on an annual basis. As you can see, the future sum (at the end of 30 years) grows to a substantially higher sum of $323,732.49. This equals an amount which is greater than the above investment by $238,163.36. Over $230,000 difference by earning 5% more on your investment over time. As you can see, investment selection, and saving a few interest percentage points on annual fees each year, can make a significant difference. To illustrate further two more scenarios are shown below. They are meant to illustrate the difference when you start with $20,000 and add $350 per month over a 30 year period earning 7% in one scenario and 12% in the other.

Here you can see that a $20,000 investment with an addition of $350/month earning 7% per year over a 30 year period would grow to $185,306.38. in this scenario you started with twice the amount you started with in the above scenarios (which started with only $10,000) and added $250 more on a monthly basis (more than double what you were adding in the above scenarios). As you can see, this allowed the investment to grow to a sum greater than in the first scenario, but less than the investment of only $10k which grew at a rate of 12% (still ending up with $100k less than the 12% investment, a substantial difference).

Now let’s take a look at what 12% interest on a $20,000 investment, with $350 monthly additions would turn into. As you can see, quite a deal more, ending at $683,664.88. This is all from a $20,000 initial investment with an addition of $350 per month. As you can see, investment performance over time and reducing fee expenses on an annual basis are much larger contributors to future account value than anything else. Therefore, one should wisely research investments and avoid laggards or those which perform in a substandard way for years on end, those which have much higher fees than other investments, to avoid missing out on thousands or even hundreds of thousands in future account value.

Finally, just out of curiosity…..How much of a monthly contribution would it take to have a million dollars at the end of 30 years if I started with an investment of $10,000 and added on a monthly basis earning 12% interest per year? How much of a monthly contribution would it take if I were to start 10 years earlier in time and invest $10,000 at 12% for 40 years? The results are shown below.

In the first scenario, as you can see, it would take $2,900 per month over 30 years earning 12% per year to accumulate $1,000,000 at the end of 30 years. This is an extraordinary sum for anyone to invest on a monthly basis. Now, let’s extend the time period for investing by a 10 year period to 40 years. For example, someone who started investing at 25 aiming for a 65 year old retirement age.

As you can see, the amount invested is still $10,000 but the monthly contribution needed for one to reach $1 million at the end of the 40 years is significantly lower at only $100 per month (a staggering difference), This illustrates the extreme power of starting investing as soon as possible even if you feel you don’t have enough as it can grow tremendously over time and the sooner you start, the better. Additionally, getting your kids started as soon as possible is best. For a 25 year old, if you were able to get $10k together and add $100 on a monthly basis, you could be a millionaire by 65 or sooner. The power of investment returns and time have the most significant impact on your long term wealth and should not be ignored. Get started with automatic mutual fund investing, the sooner the better and see what you can accomplish.

 

 

 

 

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How to Improve Your Credit Score

Boosting a Credit Score Takes Time, but can be done through some very simple steps and financial habits you can build with a bit of knowledge and discipline.

Below are some important financial habits and steps you can take to get started.

 

  • Pay Bills Timely (This is the most important thing)
  • Utilize the Appropriate Amount of Credit (it is better to use 30% or less of your credit card limits)
  • Don’t Carry Balances (Pay your cards in full each month)
  • Monitor Your Credit Report and look for tips on your unique situation from free services

Paying Bills Timely

Timely payment of bills is one of the largest factors impacting your credit score and credit. Lenders want to see a history of reliability in making payments and good financial habits. This is shown through using credit responsibly and making timely payments on loans and bills (auto insurance, loans, credit cards, rent, cable, telephone, etc.). Make certain you are responsible and timely pay all bills, avoid having late payments reported on your credit and you will position yourself well to continue building your credit and score.

Utilize the Appropriate Amount of Credit

major factor in your credit score is how much revolving credit you have versus how much you’re actually using. The smaller that percentage is, the better it is for your credit rating.

The optimum: 30 percent or lower.

To boost your score, pay down your balances, and keep those balances low.

If you have multiple credit card balances, consolidating them with a personal loan could help your score.

What you might not know: Even if you pay balances in full every month, you still could have a higher utilization ratio than you’d expect. That’s because some issuers use the balance on your statement as the one reported to the bureau. Even if you’re paying balances in full every month, your credit score will still weigh your monthly balances.

One strategy: See if the credit card issuer will accept multiple payments throughout the month.

Don’t Carry Credit Card Balances

Paying off credit card balances or paying them in full each month is a great way to boost your credit score. You do need to utilize credit to build your score to show you can use credit responsibly, but pay it in full.

The reason this strategy can boost your score: Having multiple cards with balances can hurt your score and your financial ratios like debt to income, and thus a lenders consideration as to your ability to pay a certain debt load out of your income (with a higher debt to income, higher balances, you are a more risky loan).

It is therefore recommended to carry a balance on one card or not at all and to consolidate loans and pay them down if possible.

Monitor Your Credit Report

One of the ways to improve your credit score is to monitor your credit report and score and by leaving old loans or your past credit history showing a positive repayment history on your report. They are positives and show your history of repayments. By focusing on and paying attention to your credit report and score you may learn new ways to improve your credit from free services such as Credit Karma.com.

Use the above to improve your credit score.

 

 

 

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How to Build Your Credit

Follow the Below Tips to Build Credit

Building your credit and obtaining a good credit score can be important for a variety of reasons. Most importantly, it can provide you with favorable loan terms for big ticket items including a mortgage for a home, investment property, or even a vehicle loan, or student loan refinance. This can save you thousands of dollars over the years and therefore should be a priority. Lenders use your credit score to evaluate your ability to and prior behavior as to paying bills and loans timely.

The good news is that building credit is not hard and can be done with focus on a number of key factors outlined below.

How to Build Credit Starting From Zero

Banks and financial institutions/lenders like to see that you can manage your money and pay your bills timely. To begin building credit, consider some of the following strategies.

Get a Cosigner for a Loan or Credit Card.
Having a co-signer with a positive credit history can allow you access to a loan (guaranteed by your co-signer in addition to yourself) that you might otherwise be unable to get. It can give you the start you need to building a credit history and showing you can make timely payments and manage money well.

Make your rental history count.
Ask your property management company if it reports your payments to Experian RentBureau. If it doesn’t, you can sign up for a rent payment service that works in partnership with RentBureau and have your rental payment history reported. This is a great way to add to your ability to show that you manage money well and make timely payments. This can really build your score.

Open a Secured Credit Card Through a Bank or Other Lender.
Secured credit cards are secured with a deposit you make in an amount anywhere from $500 to $10,000 or more. You basically deposit the money in advance to secure the card (ensure payment; if you fail to pay the creditor will retain your deposit in an amount to cover the deficiency and fees). This is one way for those with zero credit history to obtain a first credit card if they do not have a co-signer and have no other way to build a credit history. The downside is the tied up funds securing the card, but these are a great offering for those with no credit history and no other way to build credit. Think about whether this can benefit you long term and if so, this may be a good fit.

Tips for Building a Positive Credit History

In order to build a positive credit history and thus increase your credit score, it is very important to do the below:

  • Pay your bills on time (this is a large component of your overall credit score and your way to show lenders that you will pay on time).
  • Utilize any existing credit cards up to 30% and pay them off each month in full (do not carry a large balance on your cards and pay them in full each month if possible to show lenders you are responsible with credit and a good risk).
  • Monitor your credit report and score (each year you can get 3 credit reports for free, one from each reporting agency at myfreecreditreport.com)
  • Take out a car loan and pay it timely
  • Take out a mortgage loan and pay it down faster

Do the above to build your credit score either from scratch or expand upon your existing score. Doing so can benefit you financially going forward.

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