KNS Financial

Personal Finance From a Biblical Perspective

5 Simple Ways To Take Advantage Of Low Interest Rates

By

Many people are disappointed because of the low interest rates available today. They look at the fact that their bank accounts are paying pennies per year in interest, and conclude that they cannot get ahead financially. However, there are things that you can do to take advantage of low interest rates.

Refinance Your Mortgage With Low Interest Rates

This is one of the most common ways to take advantage of low interest rates. This is because most mortgages involve hundreds of thousands of dollars and span across multiple decades. Even a small change in the interest rate of your loan can have drastic effects on your monthly payments.

The best time to refinance your mortgage is when you owe at least 20% less than the appraised value of your home. This way, you won’t have to worry about private mortgage insurance when you refinance.

Low Interest Rates

If you do decide to refinance, make sure you perform an analysis to see if the expected savings outweigh the points, fees, and other expenses associated with the refinance to make sure it is actually going to save you money.

A great way to pay off your mortgage early is to refinance at a lower rate, secure a lower monthly payment, but continue to pay the higher amount. This way you will be able to pay a few hundred dollars extra on your mortgage each month, without having to change your current budget. Just make sure that your additional payments are applied to the principle of your loan.

Negotiate Lower Rates

When you notice that interest rates are going lower, that should be a signal to you that it’s time to negotiate lower rates with your creditors. Give your credit card companies a call and ask them to lower your interest rate.

If you have an excellent payment history with that company and you have good credit, you should be able to get them to lower your interest rate. In fact, even if we aren’t in a low-interest-rate environment, you should be able to secure a lower rate if you have those credentials!

Consolidate High-Interest Debt

If your individual credit card companies and banks aren’t willing to give you a lower interest rate, a consolidation may be in order. Actually, depending on my situation, I may try to consolidate my debt first!

When dealing with high-interest credit cards, there are typically two ways in which you can consolidate your debt. First, you can apply for a consolidation loan. This is usually an unsecured, personal loan that you use to pay off all of your debt. The main benefit here is – hopefully – a lower interest rate, and only having to worry about making one payment each month.

The second way to consolidate your debt is to move all of your debt onto a single credit card. If you can find a card that has a balance transfer offer – such as 0% for the next year – then this can be a great move. Usually, you will have to pay a fee in order to process a balance transfer – just make sure that this fee is less than the money you plan to save by the reduced interest rate.

Refinance Your Car Loan

Many people only think of refinancing a mortgage when faced with low interest rates. However, with the price of a new car easily exceeding $30,000, you can save thousands of dollars by refinancing your car loan!

I would make the same recommendation to pay it off early. Refinance the loan in order to have a lower mandatory monthly payment, but continue to pay the same amount that you are paying today. If this amount is going directly toward the principle of the loan, you will finish paying it off much faster!

Make Prepayments To Secure A Lower Purchase Price

There are a number of financial agreements which we enter into, that will allow us to pay a reduced price if we pay the bill in full up front. The most common charge that I can think of which fits this description is car insurance. Most companies charge a fee for breaking your premium up into monthly payments; thus giving you a discount for paying the full charge up front.

Sometimes landlords will be willing to give you a discount on your rent if you pay up front. The discount may increase as you add more months to your initial payment. Paying your rent a year in advance can lead to real savings.

The same is true for many other arrangements where there is an option to pay over a long period of time versus paying the entire amount due in the beginning of the agreement.

You may be thinking to yourself, “I can make prepayments at any time! This has nothing to do with interest rates”. However, the reason why this is tied to low interest rates is because you have less incentive to put out $15 – $20,000 all at once, if rates are high.

If you can earn a high interest rate by putting your cash in a savings account or CD, then you will not be inclined to pay your rent a year in advance, unless the savings in rent are more than what you would earn in interest. Therefore, low interest rates make it financially feasible to make prepayments in order to secure a reduction in your purchase price!

photo by jscreationzs

A Few Questions About Low Interest Rates

  1. Do you take advantage of low interest rates to reduce your debt payments?
  2. Have you ever taken out a consolidation loan?
  3. Do you feel more justified in living above your means (borrowing money to pay for expenses) in a low interest rate environment?

 

Debt Is Not Forever

By

I have talked to hundreds of people about the topic of debt and their plans to pay it off. The one thing that I have found is common among most of them (probably 95%) is the belief that they will be in debt until they die, and all they can do for now is manage it.

I cringe every time I hear that type of thinking, because it implies that you are fine with living as a slave to your creditors with no hope of escape!

Debt Is Not Forever

My wife and I have been greatly impacted by our debt. I know what it’s like to feel like this is a normal part of life, but it isn’t. There are many reasons why I hate the attitude that our lives should be funded by debt and we shouldn’t work to get out of it, but here are three that really hit home for me.

Debt is not Forever

The Purpose Of Debt

The main purpose of debt is generally to buy something that you can afford, but don’t have the money at the moment. For example, let’s say that you have to buy groceries on Monday but you don’t get paid until Friday. A “good” (obviously, this is somewhat subjective) use of debt would be to buy your normal groceries on Monday using a credit card, and then paying that amount back on Friday when you get paid. Of course, there are other ways to handle this (moving money from savings would be ideal), but you get my point.

Another responsible reason that people go into debt is for an investment. If you are fairly certain that the rate of return on an investment will be greater than the rate of borrowing, then taking on debt in order to make or increase an investment may make sense.

The idea of investment doesn’t just mean stocks and bonds, but it also can mean an education, healthcare, or anything else where the return is greater than the cost of the debt.

Because of the short-term and strategic nature of debt, it is inconsistent with sound financial living to stay in debt for life, being satisfied with losing money month after month. Therefore, debt is not forever!

[Learn 4 benefits of using credit cards!]

The Bondage Of Debt

I’ve written before about the terrible bondage/slavery associated with debt. I am not able to do most things that I want to because of the cloud of debt which hangs over my head. Because so much of our paycheck goes toward debt repayment, we can’t just fly down to visit my wife’s parents whenever we want, for instance.

We would love to have a 2nd car so that my wife could take care of things and/or visit people during the day, but our master (debt) won’t let us. The same is true about our giving to church, investing, and even building up our business – we want to be free to pursue our ambitions/convictions in these areas, but then ‘Massa Debt’ tells us NO!

Because being in debt can, in many ways, be compared to being imprisoned or enslaved, it is unwise to take a cavalier approach to borrowing and owing money. To go through life never knowing the joy of financial freedom is a fate that many people accept, but you don’t have to be one of them! Tell yourself that debt is not forever!

The Testimony Of Debt

Even though a large amount of Americans have debt and many accept it as a normal, unavoidable part of life, they still look down on someone who has it. A person with massive debt often appears to be irresponsible, lazy, and undisciplined.

Oftentimes, it isn’t even a deliberate association, but more of a deep-rooted subconscious thought. Having debt – especially for a long period of time – makes it seem as though you are immature, and unable to fight the impulse to spend money that you don’t have.

Because of this, people with long-term (or excessive when compared to income) debt are turned down for financial opportunities, employment, and even places to live. You don’t want to live your life with that stigma hanging over your head. That’s why we have to live life as if debt is not forever!

What About You?

  1. What is your attitude concerning debt? Can you honestly say that debt is not forever?
  2. Are you prepared to live the rest of your life in debt or are you fighting to pay it off?
  3. If you have paid off your debt, what were some of the things you did to change your mindset?

This post is part of the debt is not forever movement started by Jackie at the Debt Myth. She is also holding a giveaway through the end of the month, so make sure you head over and tell her why you want to get out of debt, for a chance to win!

Four Student Loan Debt Options You May Not Have Considered

By

In our current society, it has unfortunately become the norm to graduate from college with a large amount of student loan debt. Then the student struggles to find employment, and if they are lucky enough to do so, the salary is way below the expectation of the degree they earned.

Student Loan Debt

Thankfully, there are a number of options out there to help alleviate this debt that goes beyond the six month grace period after a student graduates. Some people may be qualified without realizing it, since some are pretty new, and haven’t considered getting help with the burden.

The important thing to realize is that this isn’t easy or free. There are extremely specific qualifications that need to be met in many cases, such as: debt to income ratio, specific time frames, length of employment, and consistent payment of existing loans. Also, only certain loans are eligible for these options.

Student Loan Debt Repayment Help and Forgiveness Options

1. Becoming a teacher in a low-income area. If you have a Stafford or Perkins loan, some or all of your debt can be forgiven if you work in a designated school (the government provides a directory of schools that qualify) as a teacher for five complete and consecutive years.

2. Join the military. Each branch has their own student loan debt forgiveness information, so check with the specific branch of the military for options.

3. A Public Service or non-profit job. This Public Service Loan Forgiveness option only applies to a Direct loan. For this loan you must have 120 qualifying payments (keep in mind that these payments will take you at least 10 years) while working full-time in these areas. Since this option came about in 2007, you can apply for this in 2017. “You must be working for a qualified public service organization at the time you submit the application for forgiveness and at the time the remaining balance on your loan is forgiven.”

4. Pay As You Earn. This program caps payments at 10% of discretionary income and forgives remaining loans after 20 years. For this plan, you must be a new borrower as of 2007, and only certain Federal loans apply. You must have at least a partial financial hardship and your payment amount may increase or decrease each year based on your income and family size.

Other Options for Student Loan Debt

These are a few of the most common plans out there, but please research through the government’s website, your loan program, even your employer to see if more options are available to you.

This is an important thing to do, especially if your debt is taking up more than 10% of your income.

 

 Have you applied for, or benefited from any student loan debt forgiveness or help? Do you know of any other student loan debt options?

 

Photo by FreeDigitalPhotos.net

How to Invest Money and Combat Debt

By

[The following is a featured post discussing the idea of investing a small amount of money in order to pay off debt. This is something that I have done with mixed results so far.]

In days gone by, it was commonly believed that the specter of debt could only be overcome by reducing expenditure and committing to a frugal lifestyle. While this remains solid advice, however, it is not necessarily the most productive method in an age of technological advancement and advanced money making opportunities.

Although it may sound a little unorthodox, the prevailing contemporary theory requires individuals to invest capital in pursuit of greater returns. This money can then be used to repay debts more effectively, without forcing households to struggle against a back-drop of austerity and long-term uncertainty.

Debt Investing

How to Speculate and Accumulate: 3 Ways to Spend More and Generate Additional Income

With this in mind, how exactly can modern-day speculation inspire you to boost your income and stave off debt? Consider the following:

Embrace the Financial Markets

While access to the open financial markets was once exclusive to professional traders and large commercial institutions, the development of sophisticated online trading platforms and educational resources have removed many of the pre-existing barriers to entry. As a result of this, numerous markets are now within reach of independent traders with minimal dollars.

This has exposed everyday citizens to a diverse range of financial products and derivatives, from trading forex and currencies to exchanging carbon credits. While you will needs patience and knowledge to succeed, there is ample opportunity to build wealth through this method.

Understand how to Create a Stream of Passive Income

Passive income is a term used to describe capital can be generated without the completion of a direct action or the sale of a commodity. It allows you to speculate and accrue wealth that is entirely separate to what you earn through traditional working methods, which in turn can be used to clear a significant amount of your total debt.

There are several options of this type to suit alternative risk appetites, with the latest high yield checking accounts providing a low-risk avenue for growth and real estate investments available to those with more income and a desire to achieve greater returns.

Do not Underestimate the Rewards of Hard-work

While it may sound old-fashioned and overly simplistic, hard work remains one of the most effective methods of boosting your income and combating personal debt. This does not necessarily mean that you have to work for 12 hours a day in a number of physically demanding jobs, however, as those of you with a viable industry skill can use it to work from home and freelance in your spare time.

Website developers, content writers and software developers remain in constant demand in the current economy, and this has created opportunity for proactive individuals to market themselves as an independent contractor.

As a general rule, speculating to accumulate does require a certain degree of disposable income in order to generate any sort of return. This can be minimal, however, so as long as you are willing to commit this sum in the pursuit of reducing your debt then you can achieve outstanding results over time.

This Is Why I Hate Debt and Sher’s Blog Medley #2

By

It’s my fault. I am the one who relied on credit in the first place, therefore giving my lenders the power to determine my “worthiness”.

The other day, I got a letter in the mail saying that one of my creditors lowered my credit limit. They didn’t do it because I have been paying late (I have never ONCE in my adult life had a negative item on my credit report), and it’s not because something changed drastically regarding my credit.

They decided that I have too many cards that are close to the limit, so their solution is to lower my limit to right above what I owe them 😯 .

As a result, my credit score will be lowered.

I am upset about it, but as I stated in the first place, I am the one that put myself in this position. That’s why we are fighting so hard now.

The hard part about it is the emotional side. When I first opened the letter I was fuming, and Khaleef had to calm me down. I hate feeling de-valued. I hate feeling unworthy. Most of all, I hate giving someone/something else the ability to make me feel like that!

Debt Slave

When it comes down to it, I am striving to get to the point where my credit-worthiness will be the least of my concerns. Right now, it isn’t a big deal because we aren’t relying on a score for anything; but in the back of my mind is the idea that I could need a good score for some reason, and I want to make sure it is there.

I have considered calling the company and venting my frustrations, but the fact is they don’t OWE me anything. I am the one that became a slave to them, and now I am bound by what they say.

If you’ve ever let your debt affect you on a mental or emotional level like this, it’s time for us to liberate ourselves. Let’s work hard, fight hard, sacrifice, and stay committed so we can be free.

Now unto the great posts that hit the right notes throughout the past week!

Blog Medley

Lisha from UpGusto explains how our beliefs control our circumstances. This is a really motivating post that will get you up and moving on some of the goals you haven’t been actively pursuing.

Barbara gives us some tools and insights so you can decide if working part-time is best for your situation. A lot of my friends have small children, and this article hits many of the points they’ve considered.

Travis from Enemy of Debt writes about combining finances successfully after getting some flack feedback because he checked with his wife before a purchase. I always appreciate what Travis shares about marriage and finances since he seriously rocks in both areas!

H.D. Carver from Your Finances Simplified addresses the challenges Millenials face in saving for retirement. Social Security may not exist by the time they reach retirement age, and it is important to put a plan in place.

Eva from Teens Got Cents navigates the differences between a credit union and a bank. I agree with her that credit unions do offer benefits you won’t get at a larger bank.

 

I hope you enjoy the posts and the rest of your week 🙂 !

 

 

 

 

 

Connect With Us