Summer is just around the corner. While many Americans are looking forward to time at the pool or the beach, they may not realize that summer is an ideal time to do something that they may have neglected so far in 2017.
Cleaning up your finances this summer can help you get rid of your debt and get back on track financially. So take some time before you head out for some fun in the sun to get your finances in order — and reap the rewards all year long.
Pay Off Credit Card Debt with a Personal Loan
Paying high interest on credit card debt and other forms of debt can make it impossible to set aside money for retirement, an emergency savings fund or any other type of savings. If you are looking to take control of your finances, consider a personal loan as a way to eliminate credit card debt and establish healthy financial habits.
With a personal loan, you can pay off all of your credit card debts with a single loan. As reported by LendEDU, loan interest rates are determined by your credit history and whether the loan is secured or unsecured, and are usually fixed for the life of the loan.
If you are approved for a personal loan, you’ll make fixed monthly payments for the loan term (usually two to five years). Making a single payment each month may be particularly helpful for anyone who has a hard time keeping up with multiple payments on different debts.
Credit cards tend to charge high interest rates, with compounding interest. This means that the interest charges are added to the principal and any accrued interest, and that you’ll ultimately be paying interest on top of interest.
Most credit card companies compound interest on a daily basis — meaning that each day that you have a balance, you are being charged interest. This makes it especially difficult to pay off your credit card balances.
In contrast, some personal loans have lower interest rates, and typically use a simple interest formula, which means that interest is charged only on the amount borrowed. This significantly reduces the amount of money you will have to pay to get out of debt. A personal loan with a lower, simple interest rate will likely result in significant savings on your high interest credit cards — and will help you get back on track financially. Be sure to review the terms of the loan to ensure that the interest is simple, the rate is fixed, and that any origination fees are low.
Refinance Student Loans
If you have private student loans, refinancing them can save you significant cash — particularly if your loans have a high interest rate or a variable interest rate. When you refinance, you apply for a new loan that will replace your old loans, typically with a lower, fixed interest rate and a shorter loan term. Over the life of your loan, you can save thousands of dollars through refinancing, but only if you are eligible.
You will generally need to have a credit score of at least 660 to qualify, plus a good income and a history of making regular, on-time payments. You can also refinance your federal student loans along with your private student loans, but should be aware that doing so will result in losing the benefits that are associated with federal student loans, such as income-driven repayment plans.
Automate Your Finances
In 2017, it’s easier than ever to make sure that you never have a missed or late payment. Setting up automatic bill payment through your bank or other bill payment service is a simple way to reduce the chances of getting hit with a late payment fee. In some cases — such as with student loans — making your payments on time can even result in a lower interest rate.
While you are setting up online payments, you should also be sure to set up automatic deposits for your paychecks — and have your savings automated as well. Having a certain percentage or amount of each check routed directly into savings, a retirement fund or other investment vehicle is a simple, painless way to make sure that you are investing in your future, and it’s easy to set up and forget that it. Over time, your savings will grow without you doing a thing.
This summer, take some time to clean up your finances. Devoting just a bit of time and energy to these tasks will make your 2017 a whole lot brighter!