Financial Experts: Don’t Take 15 Years to Payoff Credit Card Debt
Make the minimum payment on your credit card each month and it may take you over a decade to get out of debt.
WEAU 13 News reports:
Budgeting more than the minimum payment is key as well.
“Minimum payments are going to keep them paying for a very long time. I have calculated where some of the minimum payments on higher balances would literally take close to 100 years to pay off. Is that the average? It’s not the average but 15 years is not uncommon if you look at minimum payments,” Jennings notes.
If you’d rather not wait so long to become debt free, make more than the minimum payment each month or consolidate your high-interest cards into a lower-interest loan.
Remember: credit card companies aren’t looking out for your interests. Paying only the minimum could cost you thousands or even tens of thousands.
Thousands of New Layoffs Announced
Earlier today, several big-name companies announced thousands of layoffs due to the declining economy.
USA Today reports:
“Household names such as Caterpillar, (CAT) Home Depot (HD) and Sprint Nextel (S) said Monday that they are laying off a combined 35,000 workers in moves that stressed the severity of the worldwide recession and kicked off what is likely to be a week of gloomy earnings announcements, further job cuts and dismal data.”
As layoffs spread to even more sectors of the market, employees are making the most of the situation by beefing up their resumes, adding to their savings accounts, and taking out second mortgage loans as a backup.
Former Wachova Borrowers Given Access to Mortgage Modification
Wells Fargo recently announced that its mortgage modification program is available to Wachovia borrowers. Wells Fargo purchased Wachovia in December of last year and it was previously unclear what borrowers could expect in the transaction.
A recent Forbes.com article explains:
“Wells Fargo said 478,000 Wachovia customers, with loans totaling about $120 billion, will have access to the program, though San Francisco-based Wells Fargo said it was unsure how many customers would take part.”
A growing number of lenders are beginning to offer mortgage modification programs to help homeowners avoid foreclosure. These programs can be used to lower a homeowner’s monthly payments by decreasing the interest rate, extending the term of the loan, or even lowering the principle amount owed on the property.
Consumers Shop Smarter in 2009
Big losses are expected in this year’s retail industry, as consumers get smart about finances and use their money to payoff mortgage and credit card debt.
A new AP article reports:
“Retailers are expected to record a 0.5 percent drop in revenue in 2009, the first annual decline in three decades and perhaps much longer, according to a National Retail Federation forecast released Tuesday.
That’s well below the modest 1.4 percent gain they recorded for 2008.
Massive layoffs, slumping home prices and tight credit are keeping shoppers tightfisted.”
The losses are likely to hit retailers hard. But, consumers will benefit from paying more attention to their bank accounts and spending less frivolously.
Homeowners Take Out Second Mortgages in Response to Job Concerns
Massive layoffs have many Americans worried about their future. In recent reports, financial experts have even compared today’s problems to the Great Depression.
A Yahoo Finance article explains:
“An alarming half-million American jobs vanished virtually in a flash last month, the worst mass layoffs in over a third of a century, as economic carnage spread ever faster and the nation hurtled toward what could be the hardest hard times since the Great Depression…
Staring at 533,000 lost jobs, economists were anything but hopeful. Since the start of the recession last December, the economy has shed 1.9 million jobs, and the number of unemployed people has increased by 2.7 million — to 10.3 million now out of work.”
The numbers are discouraging. However, many homeowners have been preparing for the possibility of unemployment by saving money and taking out a second mortgage while they still qualify.
British Payoff Mortgage Debt Early
The American mortgage crisis has moved overseas, causing the UK and other areas to slash interest rates. Now, a growing number of British homeowners are committing thousands to payoff mortgage debt early.
The Press Association reports:
“The trend among homeowners to repay their mortgage early was reflected in figures released by the Bank of England last month, which showed that people had repaid a record £5.7 billion off their home loans during the three months to the end of September.
“For those who can spare the extra money, making overpayments is a smart move. Not only can it trim years off your mortgage term but, with house prices falling, overpayments will help to protect the equity in your home.”
Early payoff programs are also growing nationally as Americans have access to record low rates.
Foreclosures Drive Down Home Prices
Areas hit hard by foreclosures are now facing another challenge: declining home values due to banks sales. When banks sell their properties at discount prices, entire neighborhoods can suffer.
The San Francisco Chronicle reports:
“Fully half of all existing homes sold in the Bay Area in December were foreclosures unloaded by banks at fire-sale prices. Those sales sent median prices tumbling to new lows and attracted droves of buyers, according to a real estate report released Wednesday…
“There is a lot of foreclosure activity flushing through the system,” said Andrew LePage, a DataQuick analyst. “A significant share of what’s selling is distressed in one way or another, whether it is actually a foreclosure or being sold under the threat of foreclosure. It has a big impact on the median sales price.”
In recent months, banks have become more willing to work with delinquent borrowers. If more homeowners are able to avoid foreclosure prices have a better chance of stabilizing.
Credit Card Issuers Post Losses, Consumers Struggle
Credit card companies are struggling this year, as seen in recent reports.
The Washington Post recently explained the details surrounding Capital One’s first loss ever:
“Capital One Financial this afternoon reported the first annual loss in its history as the McLean credit card giant said a terrible fourth quarter resulted in a loss of $46 million for 2008.
The company joined a growing chorus of banks that have predicted that 2009 will be worse, in part because defaults on credit card loans are rising at a faster-than-expected pace.”
As delinquencies rise, a growing number of consumers are trying to get out of debt once and for all. The era of excessive spending and worry-free consumerism seems to be over.
Will the Stimulus Money Help You?
The government is about to release a whopping $825 into the economy by funding programs and infrastructure. Will you get a piece of the pie?
CNN Money reports:
“With our first glimpse into how the government wants to use $825 billion to juice the economy, it’s clear that some of the money will quickly and directly affect most Americans lives, while other spending is intended to produce either longer-term, less tangible benefits or is targeted at narrow segments of the population — like the unemployed.
Although the sum is huge, the money isn’t intended to turn the economy around, but to keep it from falling even further into decay.”
Although most of the money will be invisible, many citizens will be able to save through tax cuts, health care reform, and housing conservation tax credits. Overtime this money can add up, allowing homeowners to eliminate bills, payoff mortgage debt, and save for the future.
Congressmen Vote on Foreclosure Relief
The House of Representatives recently voted to designate some of the financial bailout funds into helping homeowners avoid foreclosure.
Bloomberg reports:
“The House voted 260-166 today to approve legislation that would require the Treasury Department to set up a foreclosure- relief program and direct banks getting money to report how the are using it. Senate Banking Committee Chairman Christopher Dodd has said the Senate won’t take up the bill, meaning Obama won’t be forced to accept the terms.”
Since the Senate will not be voting on the issue, it will not become law. But, many congressmen hope that the House vote makes the need for oversight and foreclosure help clear when the bailout money is released.