The question is the following: assuming that I receive a lump sum of money of approx. I shared this simple story in another thread to help illustrate interest, and it might be helpful to you (though it’s not biologically feasible The “big pond” is your higher balance account, and the small pond is your smaller balance with a higher interest rate: Think about it this way. The answer is that you are sacrificing the ability to put money toward your high interest debt now in order to do it later, which doesn’t help your cause. B = interest The bigger pond produced more fish in the first year, but the small pond grew faster and produced more fish at the end of the period. Thank you for the great article. 1 PayPal Credit is subject to consumer credit approval.. 2 Standard pricing applies. Now what if there was a bigger pond with 50 fish, but it only grew at a rate of 25%? Hi, I am looking to pay off my debt as fast as possible but I am not sure where to start. With the Online Payment Agreement, no paperwork is required, there is no need to call, write or visit the IRS. I have 2 credit cards, 1 has a balance of $6K and has 0% until Nov. 2017. Even if you do not have the money to pay the taxes you owe now, you should file a tax return on time or as soon as possible, or at least file a tax extension by Tax Day.. A = Level of inflation Question, I recently took a 0% transfer @ 3.99% for 18 months to payoff other existing debt. B = interest rate Our free credit counseling service can help you pay off debt and achieve your financial goals. We have a great article on all things related to student loan interest and you may find it interesting: https://www.clearpoint.org/blog/best-way-to-pay-off-student-loans/. This is keeping us from a home loan. A stable value fund is a type of investment available in 401(k) plans and other defined contribution plans as well as some 529 or tuition assistance plans. a) You are given a set of rules for this question: Should we buy a house or not? Will our credit scores go up? Is this a good idea? In both cases after the $6K is paid, I would pay about $350/month in total. Thank you for your time! Income Contingent Repayment. a) A grocery company decides on a sales promotion policy as follows: The other has $11.3K and has a 0% until July 2017. of 24.99 %. She has three loans around $3000 at 7.9% interest and on massive loan of $50,000 at 6.8% interest. Long story short–getting a clean slate can be a great idea. THEN housing prices are high. Student loans, on the other hand, accrue interest every day, so paying as often as possible is better. Plans differ on who receives the income. Your debt-to-income (DTI) ratio is another major factor affecting your credit score. For example, I have a student loan with a 6.8% interest rate that has a balance of about $8500 that accrues interest at a daily rate of about $1.50. Most of our readers are aware of these consequences. It’s great that you’re really starting to get a handle on this. Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor.Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. b) (20 marks) Awesome! (14 marks) Hi Lindsay, b) Clearpoint offers free credit counseling through Money Management International and you can reach us at 877-877-1995. Head of household $18,650 In the case of your loans, that higher interest rate is going to produce more debt and more quickly in the long-term. If you cannot pay off your balance within 120 days, setting up a direct debit payment plan online will cost $31, or $107 if set up by phone, mail, or in-person. Thanks for sharing! Good Luck! 1) Eliminate any non-essential expenses. My husband has $7000 in medical debt in 12 different accounts. Get help with debt today Hi!! R3: IF interest rates are unchanged, Determine rules with the same action and are also identical but for one condition and consolidate those rules. ... before they are due, but if this is not possible you may have several payment plans available to you. When we talked about how to pay off debt with the snowball method, we kept reiterating the psychological boost. Pay more than the minimum payment. How this affects your credit will vary based on your situation. …, rate hope this helps. R1: IF inflation is low, …, a) Using the Genetic algorithm approach – reproduction crossover and mutation technique, determine the number of guesses that will enable you arrive a ... You will have to pay regular income taxes, plus a 10% additional tax, on a portion of those funds. Which function on the Capital IQ platform allows users to receive notifications when there are any news or key developments entered for selected compa I wonder if it’s more beneficial to pay off my student loans in order of highest interest rate or by the amount of interest that accrues on it daily. Then, put any extra funds toward the account with the highest interest rate. • Preferred customers who do not order more than 2500 cedis receive a 30 cedis bonus coupon. We also just got a $3,000 loan (financing) that has %0.0 interest for 12 months, after which the rate increases to %29.9. D = invest in housing (the potential goal) Your case is different than most who ask this question. Or, they may have some different suggestions for you. Reject order X X X X X. Bank encourages back loading 30k credit line in case of emergency. Consolidating credit cards are different than, say, your house (which you might lose if you can’t pay). THEN bond prices will decline, a) Using Frames as a knowledge representor in artificial intelligence, identify at least four objects together with slots and facets in the following I have credit card debt on three accounts. Whether it makes financial sense for retirees or those nearing retirement to pay off their mortgage depends on factors such as income, mortgage size, savings, and the tax advantage of … ELSE buy a house And there’s one very important factor here–the interest rates. The government will also forgive your balance if you still owe money at the end of your term on an income-driven repayment plan, such as income-based repayment or Pay As You Earn. C) After the first year, it would add 12.5 fish, but after 10 years, there would be 466 total fish. It invests in shares and bonds, and the manager … Interest on student loans accrues daily. Others would only pay those who are below the poverty line, whether they are working or not. In fact, one of the reasons I’ve dragged my feet about making our final payment is that for a long time I wasn’t sure what to do when the house is paid off – so you’re not alone. Joe is a boy and therefore a human being. I also have a 6.21% interest rate loan of 18,500 that accrues interest at a daily rate of about $3.14. You can schedule payments up to 30 days in advance, and you can also cancel or change them up to two business days before you've scheduled a payment to remit. Best of luck. This post might help you out with any student loan-specific questions too, once you get to a point where that’s all you have left: https://www.clearpoint.org/blog/best-way-to-pay-off-student-loans/. The minimum monthly payments for their bills are as follows: Credit card 1: $50 Credit card 2: $60 Credit card 3: $20 Credit card 4: $15 Suppose credit card 1 is the highest priority. A Debt Management Plan is an agreement between you and your creditors to pay all of your debts. If you divide $1,500 by 12, that's $125, so instead of paying $1,500, you send in $1,625 each month. That program may help you have lower interest rate/monthly payments which will make your situation more manageable from month to month. If you have a high ratio, paying down your debt could help boost your score. I have four student loans and a new car loan. Utilities. How to Protect Your Finances from an Unexpected Disaster, How to Ask Your Creditors for Help During the Coronavirus Pandemic, How Deferred Interest Works and Why You Need to Be Cautious, Worst Financial Mistakes You Can Make During a Divorce, Protecting Your Credit During a Major Setback, https://www.clearpoint.org/blog/best-way-to-pay-off-student-loans/. You must pay your income taxes. i) A client has just observed that the dollar exchange rate is falling. You might pay the high interest accounts first and then, if you can, pay off the defrred account before September. We look forward to hearing from you. I have a debt (from 04′ and released in 09)’ with a dentist that I have not been able to pay due to serious health issue (now totally disabled). I struggled with this at first too, because the right answer feels so wrong! Because your payment is based on your income, your payment changes when your income rises (or falls). Income-contingent repayment bases the monthly payment … Long story short, for the most efficient repayment, use the method as described in the post and put all your extra funds toward the account with the highest interest rate, no matter what its balance is. ELSE interest rates are high Married, filing separately $12,400 818 359 2942. It’s an issue of opportunity cost (ie what are you sacrificing when you direct those funds away from the high interest account?). B. The most recent deferral request was from April of this year and neither my wife or I have made any contact to the school she attended or the Dept of Education since she graduated in 2011. Not only that, but we want to pay off our debt fast, in the quickest and most efficient way possible, so that we don’t waste any money on extra unnecessary interest. H e selected Artemis Monthly Distribution as one of the better monthly income funds available. Even though those loans might gain some interest, by paying off higher interest debt, you;ll be freeing up even more money to devote to those later. I ended up paying the debt out of my other bill money. Home ownership will never be worth it if you upgrade to a bigger home every time you get a chance — constantly growing that mortgage payment. In the past, receiving a monthly income from a portfolio could be problematic, as dividend payments were sporadic. While we have still been paying interest on other debts, we are doing so at a lower percentage than the Macy’s account, saving us money in the long-term. Waiver from credit Manager Y N Y N Y N Y N See the connection? C = housing prices If you're in your 50s and plan to live in your current home forever, try to pay off the mortgage before you stop working so you remove that big cost from your postretirement expenses. I was told consolidating the four student loans will not help me out much. Pay part of your taxes now. Please schedule a virtual presentation by calling 1-800-439-1653 or emailing [email protected] We will work with you to bring valuable information about STABLE Account to your staff and those you serve. The $3,000 loan has an interest rate of %0 and a monthly payment of $245 (assuming a 1-year lifetime), but should be paid off last according to the Ladder. As you can see, next month we will pay off the Macy’s account in full. I could be wrong, but either way it sounds like there is some sort of contractual arrangement between them and the collector that prevents them from dealing with you until this is paid. Which scenario is better? Does that make sense? Say you have $6,000 of credit card debt at an 18% APR. Ex: pay $3000 on the payment due date or $1500 on the 1st and 15th. Be sure to check out our post on balance transfers. A clean slate in general will likely be good, but you might consider opening a credit card to help increase your credit utilization (though it will also decrease the average age of your accounts). Ensure that during a public emergency, businesses will not have to provide notice or pay in lieu of notice when they lay-off staff if it is for a period of 12 weeks or less in a 16-week period. Come up with a plan to conquer your debt, whether by making extra payments or increasing your income by taking on a … Thank you for any help or direction you can offer us. The Best Way to Pay off Student Loans. I have a question… THEN do not buy a house, For example, you can add an extra $100 or so to subsequent payments until you pay off the balance. Marina. If those are high (say above 6 percent), then I would absolutely pay them off. My confusion lies with the fact that their hired agency never contacted me for payment and it has been over 4 years, Cant I just pay the dentist a settlement or even entire??? I had a quick question about this payment method. The total is $130,000 Stable value funds are capital preservation investment options available in 401(k) plans and other types of savings plans. A DRO (debt relief order) is a way to give yourself some breathing space as while the order is in place you don’t have to pay off most debts and any included debts will be written off after a year. If you didn’t make that request, then I would call the lender first to see what is going on/ Maybe they did that as a courtesy since they had not gotten payment from you? If you can’t pay the full amount this month, tell the landlord how you’ll make up the difference. 6. Each time you close an account, you’ve reached a milestone. When you fall behind on your income tax payments, the IRS may let you set up a payment plan, called an installment agreement, to get you back on track. 4. This is a very interesting scenario and you’ve raised some good points and questions. Alternate repayment plans are described in the regulations at 34 CFR 685.208(l) and in practice are similar to the income-contingent and income-based repayment plans. Think about it this way. 2: Payoff an existing 28.92%(apr, we know what that means) lending club loan @ 596$ a month ( although I pay $650 to try to get ahead), but I have to utilize one of my other cards and add $2200 to pay the loan off. The most advantageous way to do this would be to pay off the one with the highest interest accrued per month, not the rate. R5: IF the dollar falls, If you have another loan with, say 7.5 percent, you will want to pay that one first instead (to achieve efficiency). C = housing prices Lindsay. You could transfer that balance to a card that offers a 0% APR for 12 months. IRS Payment Plans. With the income-contingent plan, it would take you 11.5 years to pay off your loans, making payments of $245 to $282 per month. The interest rates on your CC debt are pretty high, much higher than a mortgage would be, and I think it’s likely in your best interest to pay those off (leave a little set aside as an emergency fund if you can)…and then start saving up for your house. Let’s take a look at those payment plans now. THEN buy bonds If not, and if high interest rates are part of the problem, you might benefit from a debt management program: Let us know if you have any other questions; we are here to help! The original loan I took, was for 5 years and its been almost 3 years. Put another way, the ratio is a percentage of your income that is pre-promised to debt payments. You can specify conditions of storing and accessing cookies in your browser. Step 1: List each of your debts in order from largest to smallest interest rate. R3 IF housing prices are high, We want to come down from that ladder and re-establish some firm financial footing. My problem is i make only $320, a week bring home, and my bills are over taking my income. R1: IF interest rates fall, $80,000, loan 2 is approx. His credit score is atrocious right now and we want to fix it. They are invested in a high quality, diversified fixed income portfolio that are protected against interest rate volatility by contracts from banks and insurance companies. 501(c)(3) nonprofit organization. You have to make sure you don’t have any money leaks. If you or your partner get Student Allowance, you could get the Income Relief Payment at the same time - but only at the part-time rate of $250 per week. Should monthly payment-to-loan lifetime ratio be considered? Under these plans, then, you may pay your loan off in full, or not, but the income-driven repayment plans are happy either way. Give a brief narration of the significance of Fuzzy logic in artificial intelligence. I am really depressed about all the interest i will end up paying. I encourage you to do this: Reduce payments with income-based repayment. If you are good with long-term planning and can accept delayed satisfaction, make sure you understand how to pay off debt with the ladder method—it’s probably a good option for you. It is up to you, however, to take that first step and make a request for the installment agreement, which you can do by filing Form 9465. You may wish to pay more than 50% to reduce the amount of interest you pay. Also once you can work them down as much as you can any difference of money saved will be put on your taxes as earned income. *we are planning to go buy a house in Spring 2017. Even though it’s growing less per day, it’s growing at a higher percentage in relation to its principal. While one card may have a higher interest rate, another card has a much higher balance and the interest charged, even though at a lower rate, is greater each month. Your debt-to-income (DTI) ratio is another major factor affecting your credit score. Of course, this situation is just an example, but Alyssa was able to pay off her debt in under two years versus the 12 years it would have taken making minimum payments. THEN interest rates are low, Using the payment-to-income ratio of 28%, we get $840. The card with the balance of $408 has an interest rate of 19.99, while the $667 one is interest deferred until September. Sometimes, though, the IRS will require you to sell or liquidate assets before you can qualify for this payment plan. Ultimately, you will end up paying less than the total amount you owed but expect to pay what equity is left in your assets and your disposable income (over the remaining statutory collection period). It’s essential to know what your income is and how this number impacts different areas of your life. If you can pay off your balance within 120 days, it won't cost you anything to set up an installment plan. A clean slate if you will. Also the Dept of Education has her graduation date wrong (listed as 2013, but graduated in 2011). b) Genetic algorithms are said to be similar to a biological process. In our monthly budget, we have $500 to pay off debt each month, and the total of our minimum payments is $230 (leaving us a $270 surplus): After the first month, we have almost closed the Macy’s account. But in the “ladder method”- also known as the debt avalanche method- the tables are turned. So I tend to take a conservative approach to these types of questions and I’m always on guard against the worst case scenario. With the ladder method, should I only be paying the minimum payment on my student loans that have the lower interest rates – even if it doesn’t cover all the interest accrued that month? Short-term payment agreement or payment extension. Just know that with the ladder method, this might not happen as quickly. THEN interest rates are low, You might be thinking; “Does the ladder method work better for certain types of accounts?”. Also, I have $1200 saved for a house right now. Being in debt has a lot in common with being on the top of a ladder—you know that tall, intimidating and unstable piece of metal you use to do dangerous things like clean gutters and cut trees. Hi Thomas, Would it still be best to pay off the three smaller loans at the higher interest rate with the extra money I can pay towards her loans? I’m not sure why they haven’t tried to contact you, and that does seem very odd. You can get in touch with them by using Google or contacting your local United Way 2-1-1 and asking for legal aid. If this is under 15%, you can probably use the snowball method or ladder method to pay off your debt. Once you have talked it over with both of these, you can make an educated decision. This all assumes that 6.8 is the highest interest rate you have, though. A 0% APR offer allows you a chance to pay off your credit card balance without incurring extra interest charges. Most of the amounts range from $50- $300 but there is one huge one in the amount of $50,000. Any advise is greatly appreciated. This is really just a mathematical fact, and one that took me a while to wrap my head around too. My question is, do I pay off the $6K first or pay down the $11K due to the 0% ending sooner? It's the official IRS app, available through the Amazon App Store, the Apple App Store, or from Google Play. Accept order X X X He wants to know whether to buy bonds. After the first year, it would add 12.5 fish, but after 10 years, there would be 466 total fish. I have a tax return on it’s way and it’s just over $6K. Table for the standard deduction The bigger pond produced more fish in the first year, but the small pond grew faster. I am currently in debt with a Credit Card with ab APR. In that case, it would seem that the higher balance card which is costing me more each month should take priority for my surplus payment. Before we go any further, let’s cover one distinction. I’m not fond of that idea. I have one student loan at 28000 with an interest rate of 6.8. Knowing where to start can be challenging. I plan to pay $150 weekly (I am figuring this method improves the biweekly method) It might not seem like it, but if we compared paying those loans first and then the Macy’s account vs. paying Macy’s first and then the loans, paying Macy’s first would save us the most money. One quick disclaimer, though: this method won’t work for people who are struggling to make monthly payments. I would like to pay over the mimum payment required Great site and informational, thanks! Conversely, if I paid off the $3,000 loan first (greatest monthly payment-to-loan lifetime ratio), I would only need to pay off $3,000 to gain $245 per month to add to other payments. I think this is a great idea for peace of mind and stability if nothing else. This means that even though you don’t allow a balance to roll over and gain interest, the credit bureaus see that you do have outstanding debt. Discuss. The IRS is even scarier when you realize that you owe them money. Consider the IRS' installment plan. Great question, and I’m totally with you on that: interest is a huge pain! I’m not sure exactly what the problem is. My question is this: Copyright © 2021, Clearpoint Credit Counseling Solutions, a Division of Money Management International, Inc. All Rights Reserved. So my husband has over 70,000 in medical bills that show on his credit report everything is from 2015. We’ve talked before about how to pay off debt using the debt snowball, a strategy that allows you to pay off small accounts quickly while maintaining a psychological edge over your debt. The answer is yes and no. These student loans are from our children’s education and my husband and I are working hard to pay them off Create a debt payoff table for all that you owe: …, scenario This means that it’s making your overall repayment more expensive at a faster rate than any loan with a lower interest rate. They have so much power over our financial lives. My student loans total 51000, car loan another 18000. My question is this: I have two student loans at 6.8 but one is substantially lower – 8773. THEN bond prices will decline To calculate your debt-to-income ratio, establish what your total monthly debt obligation is and divide that figure by your gross monthly income. While the snowball method works for many people, it’s actually not the most efficient. Run a forward and backward chaining and submit a report to him How to Pay Off Debt and Save Money . The debt ladder method is much different. Pay down your debt. The answer depends on the type of debt. Calculate Marco's income tax liability assuming the couple does not live in a community property state. THEN bond prices will increase Otherwise, by working to “free up” money on a loan with a lower rate, you (at the same time) wouldn’t be putting that available money to the higher rate, which is why it doesn’t help you in the long-term. Your income is a factor that can determine a number of things from your health insurance plan to the amount you receive for a personal loan. If you cannot pay off your balance within 120 days, setting up a direct debit payment plan online will cost $31, or $107 if set up by phone, mail, or in-person. Hi Donna, I would suggest seeking advice from a nonprofit credit counselor as well as a reputable bankruptcy attorney. But using the total debt to income ratio of 36% for this loan, we find: $3,000 (income) multiplied by 0.36, which equals $1,080. Credit Status is ok Y Y Y Y N N N N Step 2: Set aside the funds to make each minimum monthly payment. (12 marks), a) You are given a set of rules for this question: Should we buy a house or not? r 2020. Your income is the “x” factor, and we don’t know what will happen to it in the future. Hi David, Yeah, the two main drawbacks are that it can really hurt your credit by driving up your utilization rate, depending on exactly how you transfer, and lowering the age of accounts. For some reason the loans had been deferred for the past three years without either one of us requesting it to happen. 2020 Tax Table attached. I also have much more in student loans but all cards have a higher interest rate. ii) Run forward chaining with a high inflation rate as given It would take 2 months to gain $245/month, as opposed to 4 months to gain $193/month. Thus with the fact: Level of inflation as high Solution 3 – IRS payment plan. What are requirements for filing bankruptcy stable income is available to pay off payment plan debt is due to … Get the answers you need, now! Your total interest would be around $8,700. In my mind, this loan is an outlier since I am viewing it as a loan with a 1-year lifetime. Sam is a vice president and works for a company called Acme which is a subsidiary of Ajax. So it seems like the higher balance is costing me more to cary than the higher interest rate with a lower balance. You can file the form with your tax return, online, or even over the phone, in some cases. Is it wrong for the dentist to take payment directly from me??? You can even spread the payment over 12 months. And great question. The following variables are used I intend to use this method (as well as bi-monthly payments) to pay them down. Question 4 You are given an ES with the following rules: If you have the patience. Once we go past September the interest rate for $667 goes up to 23.99. The Parent PLUS loan is not otherwise eligible for an income-driven repayment plan. Yes, the car and private loan have more total interest, but they aren’t growing at a quicker rate. I think i am heading for chapter 7, as i see it as my only way to wipe slate clean, and regain my sanity. …, t the following secret string of genes: That’s a fair question, and it took me awhile to wrap my head around the math too. Student loans on the other hand, accrue interest every single day, so it is beneficial to pay on the 1st and the 15th. ii) Run forward chaining with a high inflation rate as given Once that’s out of the way, you could return to the student loans as normal, using the ladder method. When you say “released” I assume that is when the dentist gave up attempting to collect and then sold the debt to a third-party. But after 10 years there would be 576 fish! I have a dilemma that I would like to get your advice on. R4: IF the dollar rises (against other currencies), I just signed up for auto debit and I can afford to pay a bit over the minimum payment each month. With our recently received tax return, and the money we’ve saved so far, we’d like to pay off everything at once. R2: IF interest rates are high, I have a good amount of credit card debt I am working on… I am currently using the snowball method to eliminate a few small accounts, but am considering switching to the ladder method you mentioned above. If you owe less than $100,000 in combined tax, penalties and interest, you may qualify for a short-term payment plan of up to 120 days.