5 Strategies for Paying Off Car Loan Early

Is your monthly car payment a burden to your budget? Paying off your car loan early can earn you much-needed financial freedom and save you potentially hundreds (or thousands) of dollars in would-be interest. 

You can pay off your car loan early using several effective strategies, but before you do, consider any potential penalties and effects to your credit score.

The True Cost of a Car Loan

It’s no secret that cars are our worst big-ticket investment. Unlike houses, which typically increase in value over time, and education, which theoretically opens the door to higher earning potential, cars lose their value over time. In fact, a new car depreciates in value as soon as you drive it off the lot and will lose 20% to 30% of its value in the first year.

That’s a big deal, especially given the average cost Americans are spending on new cars in 2021. According to KBB, that hard-to-swallow number is over $40,000, up more than 4% over 2020.

That means Americans are shelling out $40,000 for a car that, in a year, will be worth anywhere from $28,000 to $32,000, representing an $8,000 to $12,000 loss.

But there’s more than just the sticker price to consider. In addition to sales tax (average of 10.12% in 2020, though it varies by state), be prepared to pay interest on your car loan. Right now, the average car loan interest rate (also referred to as APR, the annual percentage rate, though there’s a difference) is over 4%.

APR includes the interest rate, in addition to other fees, like loan origination fees or mortgage insurance. You should use the APR, not the flat interest rate, when calculating what you’re paying.

Your APR will depend on the current market and your credit score. The better your credit score, the lower your APR. If you have a weak credit score and can put off buying a car, it is advisable to build up your credit score before applying for a loan.

For 2021, rates are expected to hover between 4% and 5% for 48-month (four-year) and 60-month (five-year) loans. 

Car Loan Calculator: An Example

Interest on a car loan adds up. Let’s take the $40,000 new car as an example, with a $995 dealer fee. Assume you put $2,000 down and have a tax rate of a clean 10% and an APR of 5%. You’ve agreed to pay off the loan over 60 months, or five years. (The typical car loan is anywhere from three to seven years; the shorter the loan period, the higher the monthly payment.)

In this scenario, the total cost of the vehicle after tax and dealer fees is $44,995, minus your $2,000 down payment. That leaves $42,995 to be financed. Given the 5% interest rate over 60 months, your monthly payment would be $811.37.

Over 60 months, you will end up having paid $50,682.20 (including down payment) for a car that, with taxes and dealer fees, cost just $44,995. That means, over five years, you’ve paid $5,687.20 in interest. 

And let’s just ignore the fact that, due to depreciation, that car that you’ve just paid $50,000+ on is now worth just $18,752.41 (average value of 37% of original cost after five years).

Use The Penny Hoarder’s car loan calculator to figure out how much you’ll pay with real-life numbers that match your scenario.

How Car Loan Interest Rates Work

Paying off your car loan early, if you can afford it, seems like a no-brainer then. However, before you start strategizing about how to pay off your car loan ahead of schedule, do some digging to determine what kind of car loan you have.

In an ideal world, your loan will be a simple interest loan. If you have not yet purchased your car, only consider lenders that will offer you a simple interest loan. This means the interest is calculated entirely on the principal balance of the loan.

But if your lender charges precomputed interest, that means they will calculate how much you will pay in interest over the life of the loan and include that in your total balance. That means, even if you pay off your car early, the payoff quote will include all the interest you would have paid had you kept the loan open. In this case, there are absolutely no financial savings in paying your car loan off early.

One other element of your loan to research is payoff penalties. Payoff penalties are legal in 36 states and allow lenders to charge you a penalty (usually a fixed percentage of the remaining balance) for paying off your car loan early. In this case, it may be more expensive than what you would have paid in interest over the life of the car loan.

Will Paying Off Your Car Loan Early Hurt Your Credit Score

It is not likely that paying off a car loan early will hurt your credit score, but it could be keeping you from growing your credit score. Regular, on-time payments account for roughly 35% of your FICO credit score, making it the most important factor. Making monthly payments on a car loan is a great way to show lenders you are responsible with repaying your debts.

In addition, lenders like to see a nice mix of credit (mortgage, car loan and credit cards are the big three). Keeping your car loan open also helps extend the length of your credit history. If you have no other open credit (like a credit card), keeping your car loan open may be advantageous in building up your score if you eventually intend to buy a house.

5 Strategies for Paying Off Your Car Loan Early

If you have a simple interest car loan, your credit is in good standing and your loan doesn’t have any payoff penalties, it may be wise to pay off your car loan ahead of schedule. Not only will you avoid spending heaps of money on interest, but it will also give you the financial freedom of hundreds of dollars back in your monthly budget.

The best advice for paying off a car loan early: treat it like a mortgage. If you are a homeowner, you have likely heard that making an extra (13th) payment toward your mortgage principal every year can shave years off your loan. If you pay even more toward the principal each year, you can easily get your 30-year mortgage down to 15 years—and you’ll be able to drop PMI (private mortgage insurance) costs much earlier.

Of course, home loans tend to be much bigger than vehicle loans, so the potential to save is much larger, but the logic works the same with your car loan.

These strategies for early payoff are all effective, if done right:

1. Make One Large Extra Payment Every Year

If you can count on your grandma slipping a fat check into your Christmas card every year without fail, don’t use that money to splurge on alcoholic eggnog (OK, maybe one bottle). Instead, apply it directly to your car loan as a lump sum.

If you have autopay scheduled online, you can log into your account and simply arrange to make a one-time payment. If you’re old-fashioned and pay by phone or mail, simply call your lender and let them know you’d like to make an extra, one-time payment toward the principal.

Apply this logic to any unbudgeted (aka, not-planned-for) funds, like a bonus at work or a tax refund.

2. Make a Half Payment Every Two Weeks

Talk with your lender to see if you can switch to biweekly payments, instead of monthly. If your lender allows you to pay half of your monthly loan amount every two weeks, you will wind up making 26 half payments. Divide 26 by 2, and you get 13 full months of payments, paid over 12 months. That means, by the end of the year, you will have essentially made an extra car payment.

Just check your budget first to ensure that kind of payment plan is feasible.

3. Round Up

Rounding up to the nearest $50 or even $100, if you can swing it, is a great way to add extra money every month to the principal. For example, if your monthly payment is $337, you could round up to $350 or even $400 to essentially pay an extra $13 or $63 a month. This will wind up knocking a few months off the life of your loan.

If you have autopay scheduled, log onto your loan platform and see if you can add the additional funds toward the principal each month so you don’t even have to think about it.

4. Resist the Urge to Skip a Payment

Some lenders may let you skip one or two payments a year. So kind of them, right? Wrong. They do this knowing it will extend the life of your loan, meaning they will rake in even more of your hard-earned cash in interest fees.

Unless you fall on very hard times, fight the urge to skip a payment. You will wind up paying more in the end if you do.

5. Refinance, but Exercise Caution

If you had a poor credit score when you bought your car and opted for a seven-year loan to keep payments low, it might make sense to refinance. Perhaps you’re two years into the loan, you’ve got a higher-paying job, and your credit score is in great shape. You could potentially refinance at a lower APR and build the loan out over 36 months, saving you two years and lots of money in interest.

But borrower beware: Don’t refinance to get a lower monthly payment by extending a loan, as you will end up just paying more in interest. 

When You Shouldn’t Pay Off Your Car Loan Early

As we’ve seen, it doesn’t always make sense to pay off your car loan early. But there are more reasons to hold your horses than just payoff penalties and precomputed interest.

Here are some other reasons not to pay off your car loan early:

  • Lack of emergency savings. Bankrate reported early in 2021 that most Americans could not afford a $1,000 emergency. Just 39% have enough to cover such an unexpected expense. If you are a part of that 61% without a well-padded emergency fund, prioritize adding funds to a high-yield savings account to protect yourself and your family should the unthinkable happen. And it’s not just your family’s medical emergencies; you may need to cover a deductible on your renter’s insurance in the case of a break-in, the cost of an unexpected car repair or even a terrifying trip to the vet when your dog eats something he shouldn’t.
  • Higher-interest loans. If you have a reasonable interest rate on your car loan but are drowning in credit card debt, focus on the debt that has the highest interest rate. Credit cards historically have interest rates in the high teens, so they make the most sense to pay off first. If you are free of credit card debt but have a mortgage or student loans, compare those interest rates to that of your car loan to figure out which makes the most sense to pay down with extra funds.
  • Lack of credit history. If you refuse to get a credit card and don’t yet have a house, a car loan is your best bet for building your credit score. Keeping your car loan open could positively affect your credit score.
  • Investments. For most drivers, car loan APRs are not terrible. If you have some extra funds and are thinking about paying off your low-interest car loan, consider instead investing in your retirement fund or even buying a few stocks on your own. The average stock market return is about 10%. Obviously, you could wind up losing money, but in general, if you invest and hold, over time, you should expect your money to grow.

Timothy Moore is a managing editor for WDW Magazine, and a freelance writer and editor covering topics on personal finance, travel, careers, education, pet care and automotive. He has worked in the field since 2012 with publications like The Penny Hoarder, Debt.com, Ladders, Glassdoor, Aol and The News Wheel. 

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How to Survive the Rent When Your Roommate Moves Out

Even if you intend to stay, your landlord could annul the lease entirely if your roommate decides to unceremoniously break the lease. However, a good landlord will likely let you attempt to survive paying the lease on your own or give you time to secure rental assistance. Even if your credit score needs work first, there’s no better time than the present to start improving your score. And you’ll find that the measures you take to improve your credit are good for your finances in general. If you’re looking for a flexible side hustle that could turn into your primary source of income, look into bookkeeping. It’s the No. 1 most profitable business, according to an article in Inc. And you can earn up to an hour, reports Intuit, the creator of QuickBooks. Thankfully, a free website called Credit Sesame will take a look at your credit report and let you know exactly what you need to do to improve your score.

1. Find Someone New

Like dating, finding someone new can do wonders for getting you back on your feet after a roommate breaks the lease. You’d probably still have a bit of a rough patch during the transition, but looking for a roommate to sublet the apartment from your previous roommate can completely resolve the problem. Ready to stop worrying about money? AmOne keeps your information confidential and secure, which is probably why after 20 years in business, it still has an A+ rating with the Better Business Bureau.

2. Get a Side Hustle Earning up to $69/Hour

You don’t have to be married to face some of the drama that comes with a messy divorce. Whether you have a roommate who’s been casually dropping hints that you should be looking for a new roommate or they’re downright spelling it out, the prospect of that person leaving can feel like you’re about to lose everything the two of you worked so hard to maintain. The benefit? You’ll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), you’ll get out of debt that much faster. Plus: No credit card payment this month. Ready to get to work? Without a roommate and the rent savings that person provided, you might lose interest in paying anything more than the monthly minimum on your credit cards. But if those credit cards bear gaudy interest rates, you might not be making the best use of your dollars.

3. Stop Paying Your Credit Card Company

You don’t have to be an accountant or good at calculus to start your own bookkeeping business, either. As long as you’re motivated, a company called Bookkeepers.com will teach you everything you need to know. It’s one of the leading training courses in the field, and it’ll even give you the first three classes for free. Along with looking for a roommate, make things easier on yourself by searching for a side hustle before your roommate makes their departure official. Even if you manage to convince them to stay, whatever factors urging them to bail in the first place could suddenly re-emerge — embarrassment could inspire them to slip away without warning. Source: thepennyhoarder.com Check out these tips for giving yourself a fighting chance of surviving a lease when a roommate gets cold feet and abandons the lease. Get the Penny Hoarder Daily

4. Have a Safety Net

Be sure to ask some critical questions. Can they reliably pay the rent? Do they smoke or drink? How do they feel about guests? Make sure you’ll be compatible as roommates. It takes two minutes to see if you qualify for up to ,000 online. Your credit score is like your financial fingerprint. Everyone’s is different — and for different reasons. That means everyone’s strategy to improve their credit score will look different… but how in the world are you supposed to know where to start? Privacy Policy <!–

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Remember: Sharing a space with a roommate isn’t about being best friends, though it’s nice when your best friend happens to be a great person to split living costs with. It’s more important to live with someone you can coexist with and rely on. If you’ve just learned this the hard way, we apologize for any salt that accidentally dusted that wound.

Dear Penny: Can We Retire in 6 Months With $190K of Student Loans?

Dear Penny,
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Unfortunately, there aren’t any great relief options if you have private loans. Selling your home and downsizing so that you can pay off your balance, or at least a large chunk of it to make your payments more affordable, may be your best option.
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If you could make a serious dent in your balance by working another year or two, that’s something to seriously consider. But the reality is that 0,000 is a lot of money. Delaying retirement by a couple years may not be enough to make significant headway.

Ready to stop worrying about money?
If you have federal loans, including Parent PLUS loans, Mayotte suggests looking into a program called income-contingent repayment. You’ll need to consolidate your loans to enroll. The advantage is that your payment will be 20% of your disposable income, which will presumably be lower once you retire.
If you incurred any of this debt for your children, it may also be time to look beyond relief programs and ask your kids if they can help you with the payments. “That’s a difficult conversation but sometimes that’s a conversation that needs to be had,” Moyette said.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].
I reached out to Betsy Mayotte, president and founder of the nonprofit The Institute of Student Loan Advisors, to discuss strategies for people approaching retirement with serious student loan balances. She’s advised thousands of student loan borrowers about the best way to deal with their debt. She emphasized just how common your dilemma is.
But if you have federal loans, you have several options. Instead of paying off your loans, a better alternative may be to get your monthly payment as low as possible, even if that means you’ll never be completely out of debt.


My husband wants to sell our home and pay off the debt. If we do that, we won’t have much for a down payment for another house, so we won’t have a low mortgage payment. If we don’t sell, we can afford the student loan payments. But we will be very limited with no extra money left to save for emergencies. 
Help. I have many sleepless nights trying to find the best solution to this.
Only in rare occasions are student loans dischargeable in bankruptcy. You probably wouldn’t be a good bankruptcy candidate since it sounds like you have decent home equity.
-H.
“They reapply every year and if their income goes down, the payment goes down,” Mayotte said. “If their income goes up, the payment goes up. If they still have a balance at the end of 25 years, the balance is forgiven.”
Dear H.,
Traditionally, the balance forgiven on all the federal student loan programs I mentioned has been treated as taxable income for the year the debt is forgiven. But thanks to COVID-19 relief measures, any balance that’s forgiven between now and 2025 isn’t treated as taxable income. Moyette wouldn’t be surprised if Congress eventually extends that tax break. But if you choose to enroll in a program that offers forgiveness, she suggests preparing for the worst but hoping for the best, since 20 to 25 years is a long way off.
You have even more options if you have federal loans that you took out for yourselves, including income-based repayment, Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE). These programs make your loan payments as low as 10% to 15% of your discretionary income, and they also offer forgiveness at the end of the repayment period, which is between 20 and 25 years.
About 20% of federal student loan debt is held by people 50 and older. Telling millions of people like you and your husband that they have to work forever simply isn’t a viable solution.
I am in big trouble. My husband and I have a combined student loan debt of 0,000 and we were planning to retire in six months. 
Assuming you have options to lower your monthly payments, it’s really about your personal preference. If you think you’d sleep better knowing that you don’t have this balance hanging over you, it may be better to downsize and pay it off, even if that means having a mortgage payment.

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The options you have available depend on a couple of factors. First of all, are these federal loans, private loans or a combination of the two? Second, if you have federal loans, is the debt from your own education, or did you take out Parent PLUS loans for your kids? While a lot of Baby Boomers are in debt because they paid for their children’s education, many have loans because they went back to school during the Great Recession, according to Mayotte.

Afraid of Burnout? Here’s How to Build Up Savings Just in Case

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You should shop your options every six months or so — it could save you some serious money. Let’s be real, though. It’s probably not the first thing you think about when you wake up. But it doesn’t have to be.
Think of all the times you’ve overpaid… and how much money you could have saved in your emergency fund, if someone had just told you before you swiped.

1. Figure Out Your Bare-Bones Budget and Start Saving

Let’s say you’re shopping for a new TV, and you assume you’ve found the best price. Here’s when you’ll get a pop up letting you know if that exact TV is available elsewhere for cheaper. If there are any available coupon codes, they’ll also automatically be applied to your order.
Enter your email address here to get a free Aspiration Spend and Save account. After you confirm your email, securely link your bank account so they can start helping you get extra cash. Your money is FDIC insured and they use a military-grade encryption which is nerd talk for “this is totally safe.”
But you don’t need to feel guilty about it anymore. Research companies will actually pay you to go down these video rabbit holes.
Just add it to your browser for free, and before you check out, it’ll check other websites, including Walmart, eBay and others to see if your item is available for cheaper. Plus, you can get coupon codes, set up price-drop alerts and even see the item’s price history.

2. Start Your Burnout Emergency Savings Account in a High Yield Interest Account and Earn 16x the Average Interest

So while we hope to never experience burnout, the possibility is very real — and making sure your finances will be able to handle the lack of income is super important. Here are the best ways to give your money a buffer while you give your mind and body a chance to heal.

If you don’t have an account for your emergency burnout fund, get one. Keeping cash under your mattress or in your sock drawer isn’t very safe at all, plus it’ll get you nothing in interest — which honestly isn’t much less than an average savings account.
Using Insure.com, people have saved an average of 9 a year.
Start with your car insurance. When’s the last time you even checked car insurance prices?

3. Stop Paying Your Credit Card Company

You can get started in just a few clicks to see if you’re overpaying online.
You just have to answer honestly, and InboxDollars will continue to pay you every month. This might sound too good to be true, but it’s already paid its users more than million.
We’ve all been there. You sit down at the end of the day to unwind on your phone, and suddenly it’s two hours later, and you’re in the weird part of YouTube again. How did I even get here?
There are some bills you can cut down now, without having to sacrifice anything.
In the last year, this has saved people 0 million.
People were working harder, but with zero work/life balance or space separation and fewer ways to relax and release stress. Burnout was almost inevitable for some.

4. Get Money Back Every Time You Go Grocery Shopping

If you owe your credit card companies ,000 or less, AmOne will match you with a low-interest loan you can use to pay off every single one of your balances.
It takes about one minute to sign up and start getting paid for your nightly zone-out.
If you’re burned out and quit your job (or take an unpaid leave), how long will it take you to recover? The answer is: You just don’t know. But a good rule of thumb is to have enough money stashed away for six months.
Ready to stop worrying about money?

5. Earn Up to $225 For Your Burnout Preparedness Fund Just For Going Down a Rabbit Hole on Your Phone

You could add up to 5 a month to your pocket by signing up for a free account with InboxDollars. They’ll present you with short video clips to choose from every day, then ask you a few questions about them.
And if you were to quit your job as you bottomed-out mentally, your cash flow would come to a screeching halt — likely adding more stress to your already frazzled self.
But don’t panic — it’s not six months of your usual expenses. It’s six months of covering your basic needs and giving you the freedom to chill out. Think of it as your mental health emergency fund.
Capital One Shopping compensates us when you get the extension using the links provided.
Once you’ve created this essentials-only monthly budget, multiply it by six. That’s what your savings goal should be. Hopefully it will give you enough time to relax, recharge and refocus your career if you ever need it.

6. Cut Your Bills Now to Help Save For Later

A website called Insure.com makes it super easy to compare car insurance prices. All you have to do is enter your ZIP code and your age, and it’ll show you your options.
So how much is that? It includes your essentials — groceries, rent, medical expenses, utilities and minimum debt payments — and ditches the things you can live without. You won’t need all of your subscriptions or a line item for clothing. Your mortgage company may have forbearance options, so that’s something you can take into consideration, too.
But a website called AmOne wants to help.
You know couponing is a guaranteed way to save more money when you go grocery shopping — but it’s downright time consuming. Instead, you could just get rewarded for buying what you already shop for. No clipping required, and you’ll still be able to add more money to your emergency fund every month.
By slimming down these monthly payments, you can save more money immediately and have less to worry about if you ever need to take a break from the daily grind. A win-win.
You don’t need a perfect credit score to get a loan — and comparing your options won’t affect your score at all.  Plus, AmOne keeps your information confidential and secure, which is probably why after 20 years in business, it still has an A+ rating with the Better Business Bureau.
Yup. That could be 0 straight into your emergency fund just for taking a few minutes to look at your options.

7. Find Out if You’re Overpaying

A free app called Fetch Rewards will reward you with gift cards just for buying toilet paper and more than 250 other items at the grocery store.
That’s exactly what this free service does.
The benefit? You’ll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), you’ll get out of debt that much faster. Plus: No credit card payment this month.
It takes less than a minute and just 10 questions to see what loans you qualify for — you don’t even need to enter your Social Security number. You do need to give AmOne a real phone number in order to qualify, but don’t worry — they won’t spam you with phone calls.
Your credit card company is ripping you off with insane interest rates — some up to 36% — making you pay extra money each month that could be going to your burnout emergency savings instead.
You can download the free Fetch Rewards app here to start getting free gift cards. Over a million people already have, so they must be onto something…
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Here’s how it works: After you’ve downloaded the app, just take a picture of your receipt showing you purchased an item from one of the brands listed in Fetch. For your efforts, you’ll earn gift cards to places like Amazon or Walmart.

Dear Penny: My Husband Quit Work for YouTube, but I’m Deep in Debt

Dear Penny,
I don’t want to tell him how bad it is because I’m embarrassed. I can’t stop spending. It’s like a mental illness or something. How do I stop it? 
Telling your husband about your debt is going to be hard. But ultimately, I think you’ll feel relieved once you’re no longer carrying the weight of this secret.
Before you go any further, I want to address the mental health element that you touched upon.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].
I hope you’ll discuss what you’re experiencing with your doctor. Compulsive spending isn’t an official diagnosis, but research suggests that a lot of people overspend when they’re dealing with negative emotions, like depression and anxiety. Treating any underlying disorders could be key to getting your behavior under control.
But I suspect your husband knows there’s a problem — and he doesn’t want to know how bad it is. His don’t-ask-don’t-tell approach makes things easy on him. He gets to pretend it’s your problem, not his.
Of course, part of me wonders whether your husband is a big part of the underlying problem. I don’t want to rush to judgment here without more details. But I wonder whether your current setup is more the product of your family’s child care needs or your husband’s desire for internet fame.


A credit counselor can help you determine how to address your debt. They can often work out a debt management plan. It won’t reduce the amount you owe, but it rolls your credit card debt into one lower monthly payment. While you may be able to keep one credit card open for emergencies, you’ll have to close your other accounts, which makes it harder to overspend.
Really, though, the details don’t change the fact that you need to tell him about your debt ASAP. I worry that your finances could implode soon given the current path you’re on. Once your husband depletes his savings, he’ll be even more dependent on you. Meanwhile, your overspending is no doubt pushing your monthly debt payments higher and higher. You can only stretch one paycheck so far.
It’s one thing if he’s a devoted stay-at-home dad who pursues his YouTube hobby on the side. But if your husband sees himself as a future YouTube star who just happens to watch his kid during the day, obviously, that’s much more problematic. The issues you’re dealing with will be incredibly difficult to address if everything’s all about him.
My husband knows I’m in debt. He just doesn’t know how bad. He quit his job last year. Now I’m the sole income earner. He’s using up his savings while trying to become a YouTuber and take care of our child full time. 
It’s hard to imagine who’s dreading the conversation that needs to happen more: you or your husband.
You may find that you being the sole earner isn’t enough. Your husband may need to get a job, even if that means budgeting for child care. This decision needs to be about what’s best for your family, not his YouTube channel.
Give your husband a head’s-up that you need to talk before having this conversation. Bad news is more palatable when the other person knows there’s something serious you need to discuss. Try something like, “I’m concerned about our expenses. Would you be able to talk about our bills tonight after dinner?”
Your spending is a sign of a deeper problem. You don’t want to disclose how much debt you’ve accumulated because you’re deeply ashamed.
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A good next step would be for you both to attend credit counseling. Look for a not-for-profit agency on the websites of the Financial Counseling Association of America or the National Foundation for Credit Counseling.
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Do whatever you can to make it harder to spend money. Delete shopping apps, unsubscribe from your favorite stores’ emails and only keep your debit card in your wallet.
More importantly, you and your husband need to schedule a time each week to go over your budget and spending each week. Look at all credit card and bank statements. Knowing that this check-in is coming may curb your spending.
-L.
Next, try to attend a Debtors Anonymous meeting or two. Plenty of chapters meet online. Just talking and listening to others with similar struggles may help you feel less alone.
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Before you tell your husband, make sure you know how much you really owe. Don’t rely on memory or guesstimates. A lot of people buried in debt drastically underestimate how much they owe. Look at every single credit card and loan statement to figure this out to the exact cent. Quantifying your debt may seem terrifying at first if you’ve avoided it. But you may feel better once you know exactly what you’re dealing with.

Dear Penny: Do I Sue My Brother-in-Law for $92K I Paid to Save His Home?

Dear Penny,
We have a signed agreement that he will pay me, but he has not paid me anything since last year. He still owes me over ,000. I basically gave him a 0,000 interest-free loan.
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I’m hoping you won’t actually have to sue here. But nothing in this situation will change unless your inlaws see potential consequences for not paying you back.

The classic rule for lending money to family and friends is don’t do it unless you can afford to make it a gift. You’re certainly not the first person to learn this lesson the hard way.
Unfortunately, you also need to prepare for family drama if a lawsuit is necessary. Hopefully, others will understand that this was not a gift, but rather, a loan that you were under no obligation to make. But some people will probably see you as the bad guy for suing your family, especially if your brother-in-law and his wife are still struggling.
Ready to stop worrying about money?


Source: thepennyhoarder.com
Think about it from the borrower’s perspective. Imagine if banks never sued anyone for failing to make payments. What if no matter how late you got, they’d never charge you a fee or interest on top of interest? How much debt do you think would go uncollected? 
You did an extraordinarily kind thing by saving your brother-in-law’s home from foreclosure. In a perfect world, your brother-in-law would be motivated to repay you out of gratitude. But in reality, a lot of people who lend money to family get the exact same thanks you’ve gotten.
That’s often how the situation looks from the borrower’s perspective when a family member lends them money. There are no consequences if they don’t pay it back. On top of that, because you’re well-off enough to offer financial assistance, it’s easy for the borrower to tell themselves that you don’t really need the money.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].
I think you need to plan as if you won’t be getting this money back. Lawsuits can take a long time to resolve. Also, collecting on a judgment could be difficult if your inlaws are dead broke. Getting them to agree to pay something each month, even if it’s less than what you agreed to, may be a better outcome than taking them to court.
-Unlucky in Kentucky
Present them both with a copy of the agreement. Tell them that you’ll have no choice but to take them to court unless they resume payments. If your brother-in-law is the sibling of someone you’re currently married to, your spouse needs to have this discussion with you. Hire an attorney to send a certified letter demanding payment if they still refuse to pay. 
The good news is that you had the foresight to make your brother-in-law agree in writing to pay you. But an agreement only has teeth if you’re willing to bite. If you have any hope of recouping this money, you need to flash your teeth. Your brother-in-law and his wife clearly don’t believe you’ll hold him to the agreement he signed.  <!–

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Taking your brother-in-law to court may be your only hope of getting that money back. You clearly care about your brother-in-law if you were willing to pay off his mortgage. If the relationship isn’t already damaged beyond repair, you’ll need to weigh how important the relationship is to you versus how much you want your money back. 

You Might Need a 12 Month Emergency fund — Here’s How to Get It

You just have to answer honestly, and InboxDollars will continue to pay you every month. This might sound too good to be true, but it’s already paid its users more than million.
Your credit card company is ripping you off with insane interest rates — some up to 36% — making you pay extra money each month that could be going to your emergency savings instead.
Yup. That could be 0 straight into your emergency fund just for taking a few minutes to look at your options.
You can get started in just a few clicks to see if you’re overpaying online.
Think of all the times you’ve overpaid… and how much money you could have saved in your emergency fund, if someone had just told you before you swiped.

1. Determine Your Bare-Bones Budget

That means detailing out a bare-bones budget that you can adjust if the need ever arises. Keep only the essentials and cut what you can live without. Food, shelter, medical expenses, utilities and minimum debt payments can stay; subscription services, extra debt payments and extracurricular activities get paused.
Ready to stop worrying about money?
She also details how to determine what your emergency fund should look like. Hint: It’s not 12 months of your take-home salary, but a bare-bones budget that is survivable for you and your family through four seasons.
Let’s say you’re shopping for a new TV, and you assume you’ve found the best price. Here’s when you’ll get a pop up letting you know if that exact TV is available elsewhere for cheaper. If there are any available coupon codes, they’ll also automatically be applied to your order.

2. Start Your Emergency Savings Fund in a High-Yield Account and Earn 16x the Average Interest

Once you’ve created this essentials-only budget, multiply it by 12. That’s what your 12-month emergency-fund savings goal should be.
You can also see if your utility companies and banks can offer assistance or reduce fees and check with your mortgage company about forbearance options.
That’s exactly what this free service does.
In the last year, this has saved people 0 million.

3. Cut Your Bills Now to Help Save For Later

Enter your email address here to get a free Aspiration Spend and Save account. After you confirm your email, securely link your bank account so they can start helping you get extra cash. Your money is FDIC insured and they use a military-grade encryption which is nerd talk for “this is totally safe.”
Not too shabby!
What seemed like a reasonable goal for an emergency fund — three to six months’ worth of expenses — no longer feels that way after Covid wreaked havoc on our economy.
You could add up to 5 a month to your pocket by signing up for a free account with InboxDollars. They’ll present you with short video clips to choose from every day, then ask you a few questions about them.
The benefit? You’ll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), you’ll get out of debt that much faster. Plus: No credit card payment this month.
But a website called AmOne wants to help.
If you lose your job, how long will it take you to get another one? It depends on your industry, but the average is around five months (and this was before the pandemic hit). You hope it will be less, but it could even be more, so you need to be prepared.

4. Get Money Back Every Time You Go Grocery Shopping

You don’t need a perfect credit score to get a loan — and comparing your options won’t affect your score at all.  Plus, AmOne keeps your information confidential and secure, which is probably why after 20 years in business, it still has an A+ rating with the Better Business Bureau.
By slimming down these monthly payments, you can save more money immediately and have less to worry about if you ever need to dip into your emergency fund. A win-win.
We’ve all been there. You sit down at the end of the day to unwind on your phone, and suddenly it’s two hours later, and you’re in the weird part of YouTube again. How did I even get here? 
A website called Insure.com makes it super easy to compare car insurance prices. All you have to do is enter your ZIP code and your age, and it’ll show you your options.

5. Earn Up to $225 For Your Emergency Fund Just For Going Down a Rabbit Hole on Your Phone

Start with your car insurance. When’s the last time you even checked car insurance prices?
You can download the free Fetch Rewards app here to start getting free gift cards. Over a million people already have, so they must be onto something…
Source: thepennyhoarder.com
You should shop your options every six months or so — it could save you some serious money. Let’s be real, though. It’s probably not the first thing you think about when you wake up. But it doesn’t have to be.
Using Insure.com, people have saved an average of 9 a year.

6. Find Out if You’re Overpaying

Here’s how you can figure out how much to put in your emergency fund — and how to come up with the extra cash.

Here’s how it works: After you’ve downloaded the app, just take a picture of your receipt showing you purchased an item from one of the brands listed in Fetch. For your efforts, you’ll earn gift cards to places like Amazon or Walmart.
Financial expert Suze Orman thinks people with stable jobs should be aiming toward a 12-month emergency fund after seeing millions of people blow through their savings last year. If you thought it sounded ridiculous to save that much money before, maybe this perspective changed your mind.
If you owe your credit card companies ,000 or less, AmOne will match you with a low-interest loan you can use to pay off every single one of your balances.
Capital One Shopping compensates us when you get the extension using the links provided.
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But you don’t need to feel guilty about it anymore. Research companies will actually pay you to go down these video rabbit holes.

7. Stop Paying Your Credit Card Company

It takes about one minute to sign up and start getting paid for your nightly zone-out.
It takes less than a minute and just 10 questions to see what loans you qualify for — you don’t even need to enter your Social Security number. You do need to give AmOne a real phone number in order to qualify, but don’t worry — they won’t spam you with phone calls.
You know couponing is a guaranteed way to save more money when you go grocery shopping — but it’s downright time consuming. Instead, you could just get rewarded for buying what you already shop for. No clipping required, and you’ll still be able to add more money to your emergency fund every month.
But an account with Aspiration lets you earn up to 16 times the average interest on the money in your account. And it will earn you up to 5% back every time you use the debit card.
Just add it to your browser for free, and before you check out, it’ll check other websites, including Walmart, eBay and others to see if your item is available for cheaper. Plus, you can get coupon codes, set up price-drop alerts and even see the item’s price history.
TPH Senior Writer Nicole Dow dug into the pros and cons of a year-long emergency fund, including who needs it and who doesn’t. <!–

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Dear Penny: Can I Dump My Deadbeat Boyfriend and Keep His House?

Dear Penny,
A year and a half ago, he purchased a food truck, which he hasn’t operated. He’s been paying storage fees to park the truck for a year. He later decided to open a food truck restaurant and lounge about six months ago. With that decision made, he quit his full-time job to pursue his dream of being his own boss. 
I don’t think I want to remain in the relationship. Is there any way that I can take over the mortgage on our home since it’s in his name? We tried to refinance the house about a year ago when the rates started dropping, but his credit score was in the low 500s so that did not work. 
Shortly after he signed a lease and paid over ,000 a month for an empty building, the city told him he can’t operate the food truck at that location without adding some features to the inside of the building (the lounge). He has been fixing and renovating the building, which still does not have a kitchen. He has not received approval from the city to start operating the restaurant. I don’t see him being successful with the restaurant due to the high cost of rent and overhead expenses that he cannot afford. 
My main problem is that he has not made any attempt to work while the lounge is closed for renovation. He sleeps all day and when I get home he expects me to cook, clean, baby him and complete my studies. 
-T.
Source: thepennyhoarder.com
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You don’t have any easy options for keeping the house unless your boyfriend would be willing to transfer the deed to you. That seems highly unlikely here, but on the off chance he agreed to it, you’d need to qualify with the lender based on your own credit and income.
What he can do is contact the lender about his options. If he bought a food truck a year and a half ago, it’s hard to imagine that the pandemic didn’t throw a wrench into his plans. If he experienced financial hardship directly or indirectly as a result of COVID-19 and his mortgage is federally backed — more than half of mortgages in the U.S. are — he can still request forbearance.
The deadline to apply if he has an FHA, VA or USDA loan is June 30. If his mortgage is backed by Fannie Mae or Freddie Mac, there is no deadline for requesting forbearance. Even if his loan isn’t backed by the government, he can still ask his lender about his options. But he’s going to need to be the one to sort this out, not you.
It sounds like you have three children: two kids plus a manchild. Not being in this relationship anymore sounds like a very good goal.


The situation you’re in sounds enormously stressful. I’ll be honest: Navigating this breakup will probably only add to the short-term pressure. But focus on what you want your life to look like in a year or two. How much less stressful do you think life will be once you’ve closed this chapter?
All the housing expenses, including the mortgage and utilities, are covered by me, which is becoming stressful as I’m picking up per diem work, as well as trying to find time to study.
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I’m not married but have been with my boyfriend for 16 years. We have two children and a home that was purchased seven years ago in his name. He is very irresponsible with his credit and spending. 
But there’s a bright side: Your name isn’t on the mortgage, so your credit score won’t be affected if you stop paying.
I get that it’s frustrating to walk away from this home, especially if you’ve made a lot of the mortgage payments. But that money is gone, so don’t let it cloud your judgment going forward. It’s clear that you want out of this relationship. Consider the money you’ve spent a sacrifice you’re making in exchange for a fresh start.

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Ready to stop worrying about money?

Americans Are Finally Paying Off Credit Card Debt — How to Join Them

If you’ve got credit card debt, you know how painful it is. It’s the most expensive kind of debt you can have, and your credit card companies are just getting rich and fat while they gouge you with high interest rates.

Wouldn’t it be great to turn the tables on them? Well, now a lot of people are. More and more Americans are simply paying off their credit card balances, and that’s making credit card companies like Capital One, Citibank and Chase really, really nervous. That’s because their whole business model is based on gouging you.

“Americans are paying down their credit card debt at levels not seen in years. That is good news for everyone but credit card issuers,” reports The Wall Street Journal. “Many card issuers rely on growing card usage and balances for their revenue, and they are wondering if the pandemic trends will turn into a long-term shift.”

Wouldn’t it be nice to get a little revenge and make your credit card companies sweat for a change? Now you can, and it’s easier than you think.

Credit cards charge you harsh interest rates that routinely rise north of 20% APR. But if you owe your credit card companies $50,000 or less, a website called AmOne will match you with a low-interest loan you can use to pay off all your balances.

The benefit? You’ll be left with one bill to pay each month. And because personal loans have significantly lower interest rates (AmOne rates start at 3.49% APR), you’ll get out of debt that much faster.

Plus: No credit card payments for you this month!

They’re Getting Awfully Nervous

These days, credit card companies are sweating bullets because Americans’ credit card balances are falling. They shrunk by a whopping $49 billion in the first quarter of 2021 compared to the previous quarter, according to data released last week by the New York Fed,

Overall, credit card balances are down nearly 15% compared to a year before, according to the credit reporting firm Equifax.

For big credit card issuers like Capital One, Discover and Synchrony (the largest issuer of store credit cards), balances are down by 17%, 9% and 7% compared to a year ago, those companies reported.

Why is this happening?

When the COVID-19 pandemic hit, banks expected delinquencies to surge, forcing borrowers to rely on their credit cards to make ends meet, The Wall Street Journal reported. But then the government stepped in with stimulus checks and expanded unemployment benefits. It allowed borrowers to pause payments on mortgages and student loans. So that surge of delinquencies never happened.

Now, “it appears that many households are working to reduce their revolving debt balances, and this is happening across the board,” the Fed wrote.

How to Beat Your Credit Card Company

If you’re interested in getting a personal loan to wipe out your credit card balances, it helps to have a good credit score.

A free website called Credit Sesame makes it easy to put your credit score on track to reach your goals. Within two minutes, it’ll give you access to your credit score, any debt-carrying accounts and a handful of personalized tips to improve your score. You’ll even be able to spot any errors holding you back (one in five reports have one).

Now, with AmOne, you don’t need a perfect credit score to get a loan — and comparing your options won’t affect your score at all.  Plus, AmOne keeps your information confidential and secure, which is probably why after 20 years in business, it still has an A+ rating with the Better Business Bureau.

It takes less than a minute and just 11 questions to see what loans you qualify for — you don’t even need to enter your Social Security number. You do need to give AmOne a real phone number in order to qualify, but don’t worry — they won’t spam you with phone calls.

Stop shoveling money into high-interest credit card payments. Cackle along with the rest of us as credit card companies express deep concern in earnings calls, sweating over their plummeting profits.

Revenge is sweet.

Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. He paid off all his credit cards, and wow did it feel good.

Source: thepennyhoarder.com

Dear Penny: Can I Get a Refund on My Kids’ Student Loan Payments?

Dear Penny,

I have been paying down my federal parent student loans during the pandemic and haven’t missed a payment. I currently owe about $100,000 for two children to attend college. 

I am also retired with income coming from my pension, savings and Social Security. Should I not have been paying these loans during the pandemic and wait until Oct. 1 to pay? Should I still pay? Postpone payment? I hope there is some cancelation. 

-L.

Dear L.,

It’s tough to say whether in retrospect you should have stopped paying these loans. When federal student loans were placed in automatic forbearance — meaning payments and interest were suspended — it was March 13, 2020, which now seems like a lifetime ago. It was the beginning of a very dark chapter that had no end in sight.

You made the best decisions you could with the information you had. I’m guessing you kept making payments because you want to be rid of that debt as soon as possible, but now with talk of forgiveness, you’re kicking yourself.

I think you made the right call to keep making payments, provided that you don’t have interest-accruing debt. Over the past 14 months, your payments have gone 100% toward the principal.

But if you still regret this decision, this is one of the rare times in life where you get a do-over. You can request a refund for any federal student loan payment that’s in forbearance by contacting your loan servicer. If you don’t believe me, check out the Coronavirus and Forbearance Information page on the U.S. Department of Education’s Federal Student Aid website.

Asking for a refund could be a good option if you have other high-interest debt, like a credit card balance. You could put those loan payments toward the interest-accruing debt first and then resume paying off the student loans. But I don’t think student loan forgiveness should be a major factor in your decision-making here.

Yes, President Joe Biden has supported canceling $10,000 of federal loans per borrower. But he has yet to get on board with proposals for forgiving up to $50,000 of debt, as a handful of progressive Democrats have called for. Even the $10,000 isn’t close to reality.

I certainly wouldn’t bank on $50,000 of forgiveness, which is essentially what you’d need to wipe your slate clean. But if you’re more optimistic than I am, the best solution is simply to stop making payments for the next five months to see how things shake out.

I wouldn’t spend that money or invest it, though. Put it in a bank account so that it’s safe. If Sept. 30 comes and goes without forgiveness in sight, then you can make those five months of payments in a lump sum before interest starts accruing again.

You don’t say whether making these loan payments is a strain on your retirement budget. If you struggle to make payments, you need to have two conversations.

The first is with your student loan servicer. Depending on your income, you may be able to lower your monthly payments through an income-contingent repayment plan. You’d need to consolidate your Federal Parent PLUS loans into a Federal Direct Consolidation loan first.

But the bigger conversation you need to have is with your kids. You took on this debt to finance their education. So if they’re in a position to help you out with payments, please ask them. If your kids are still in school, be honest with them about how much debt you have. They may not be able to give you money for payments right now, but at least you can put it on their radar that you expect them to chip in once they graduate.

Maybe a degree of student loan forgiveness will happen someday. But for now, you need to plan as if it’s never going to be a reality.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].

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Source: thepennyhoarder.com