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Savings and Debt Update

1 Jun

It’s the first of the moooonnnnnth!! Wake up, wake up. Cash your checks and come oooooonnnn!

Incremental progress is progress nonetheless. On or about the first of every month, I will post an update of my savings and debt totals.
By Sunday, I will have opened an online high-interest savings account (I’m looking at American Express @ 1.15% APR, but ING Direct does offer subaccounts) where I will direct the payments from my Direct Loans which total $330.11 monthly. I am going to set up automatic transfers of $165.00 bi-weekly from my Chase Checking Account until my loans are out of forbearance in October. To date, I have been unable to really save any of the funds due to my bar exam expenses.

SAVINGS TOTAL @ Wells Fargo: $1456.12

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Online Bill Pay and Principal Reduction Payments

2 Dec

The fastest way to reduce debt is by having additional payments applied to directly reduce the principal amount owed. Previously I mailed in payments for my loans. For my Citibank loan I could easily check a box to have the additional money be applied to the principal rather than to advance the payments. Now that I have somewhat automated my finances, I don’t have this option. Seems like I am not the only person who has encountered such an issue with a loan. Check out an excerpt from a post on The Consumerist:

“This wouldn’t be a huge deal if the online bill-pay options allowed you to choose between early payment or principal reduction (although why anyone would choose early payment is beyond me), but instead special checks have to be mailed to Chase Auto Finance for any principal reduction to occur. ”
Several readers in the comments have the same issue as well.

I find it rather interesting Citibank, as do most student loan servicers, has an interest rate reduction incentive to induce its borrowers to sign up for automatic debit, but does not have an option on the website to have additional payments apply to principal reduction rather than early payment. Additionally when I view my statements online, there is a box that I could check to apply extra towards principal if I were mailing in my payment. I guess going green and getting out of debt quickly aren’t compatible.

I was told both by Citibank and Direct Loans, I could either mail in a separate payment for principal reduction or continue with electronic payments, but call every month to have the payment applied according to my instructions. The extra work to do this is why it has taken so long for me to reduce the balance of my loan. I have been merely making early payments every month.

In the Internet Age, it’s hard to come to any other conclusion than the banks want you to incur as much interest as possible. While I understand it is a business, we as consumers should at least have the option of online principal payment reduction.

Are you having a similar issue with any of your debt obligations? How have you chosen to deal with it?

To Forbear Or Not Forbear? That Is The Question….

2 Dec

The plan to relocate to New York is shaping up nicely. As I expected, reality has set in regarding just how much this is going to cost. Taking the Bar Exam is an expensive endeavor even with Mr. Terrific’s valued assistance.

He suggested a student loan forbearance a few weeks ago. He has used it in the past to save more money in case of a lay-off and has already applied for another.
I, Miss-Hurry-Up-And-Pay-That-Shit-Off, was a bit more apprehensive about it. I have finally started making headway on my Citibank Student Loan (read: I finally owe less than what I borrowed after THREE years of mostly more than the minimum payments). I mean, I am going to have to pay it back eventually why delay the inevitable?

Here’s where the EMOTIONAL side of money management is creeping in for me. I decided to stop being so cautious and spendthrift and actually had a LOT of fun this summer. So much so, I blew through most of my savings. My basic e-fund of $1,000 remained largely in tact. Then, I was blessed to begin a dreamy (did I just say that?) long distance relationship with Mr. Terrific, which DEMOLISHED my budget. LDRs and budget aren’t generally in the same conversation, although they should be. Now I’m relocating.

I would love to have enough money to save for emergencies, retirement, relocation and pay for my bar expenses, but there’s just not that much money to go around.

As a contingency planner, I usually start from a worse-case scenario point of view. For me that would be passing the New York bar, but being unable to secure employment there prior to my move in or around June 2011. In the meantime, I need to have a sizeable emergency and savings fund.

Currently I make payments totaling $441.61, which includes a debt snowball payment for $53.67 on my Citibank loan. I paid off one student loan with a monthly payment of $53.67 and rolled the payment amount to my next lowest balance loan for those unfamiliar with the snowball concept.

Obtaining a forbearance on my Direct Loans will free up $330.11 per month for saving. The potential saving for my Citibank loan is unclear because I believe I will still be required to make interest payments during that time. The minimum monthly obligation is only $57.83. In reviewing a past statement, it appears on a $57.83 payment, $16.99 is applied to interest. If this is indeed the case, a forbearance will free up $94.51 per month for saving (the difference b/w what I’m currently paying $111.50 and the interest of $16.99).

I am looking at saving $424.62 per month. I applied on 11/22. I’m not sure how long it will take to process, but I should know something for certain by January. If approved, I can project $2547.72 of savings from a forbearance alone.

What Is The Difference Between a Deferment and a Forbearance?

29 Nov

With the rising costs of higher education, many people turn to student loans to finance their degree(s). Generally there is a 6 month grace period after graduation before repayment begins. But there are two other options of repayment postponement:

Forbearance and Deferment. What exactly are the differences?

Deferment options vary depending on what type of loan you have and your specific circumstances. You may qualify for a deferment if, for example, you are enrolled in school, serving on active duty in the military, unemployed, or experiencing economic hardship. During periods of deferment, the federal government will make interest payments on any subsidized loan. Interest on unsubsidized loans will accrue during periods of deferment and forbearance.

Forbearance options also vary depending on what type of loan you have and your specific circumstances. They offer a temporary suspension of your student loan payments if you don’t qualify for a student loan deferment, your deferment options have been exhausted, or you are experiencing financial difficulties. You are responsible for all interest that accrues regardless of the type of loan you have.

The best source of information concerning each option is the lender. Your options can vary greatly with the type of loan(s) you have. Don’t be afraid to contact your servicer(s) to ask any and all questions.