Money Management

Find out how to manage your debt better and get back on track financially. Learn the four options that can help make repaying your personal loan easier. 

Personal loans are an excellent way to get quick cash to fund a big purchase or pay off debt. But they can also put you in financial distress if you’re struggling to make payments. If you’re finding yourself unable to make your personal loan payments, you’re not alone. The delinquency rate (60 days or more past due) has increased by about 7% from the previous year.

Falling behind on loan payments can impact your credit score and make it harder to qualify for credit in the future. Fortunately, there are a few solutions to help you get back on your feet. Here are four options to consider if you’re struggling to pay back a personal loan.

1. Loan deferment

One path to consider is loan deferment. Loan deferment gives you the ability to temporarily pause your personal loan payments for a certain period. The lender may also agree to lower your interest rate during this time.

Deferment doesn’t hurt your credit score, but interest will continue to accrue during the deferment period, which will increase the total cost of your loan. If your financial hardship is temporary, or you have an upcoming cash infusion, like a bonus or tax refund, loan deferment may be an excellent option for you.

2. Loan modification

Loan modification entails modifying one or more loan terms to reduce your monthly payments. Your lender may agree to permanently lower your interest rate, extend your loan term, or change your payment due date, depending on your financial situation and loan agreement.

Loan modification can both reduce your monthly payments, making them more manageable, as well as help improve your credit score if executed correctly.

3. Refinancing

Refinancing your loan involves taking out a new loan to pay off your existing personal loan. The new loan typically comes with a lower interest rate, which reduces your monthly payments.

Refinancing can also help you get a longer loan term, which reduces your monthly payments further. However, refinancing may involve a hard credit inquiry, which can negatively affect your credit score in the short term.

4. Debt consolidation

Debt consolidation combines all your debts into one loan with a single monthly payment. If you have multiple high-interest loans or credit cards, debt consolidation can help lower your overall interest rate, making your monthly payment more manageable.

Combining your debts into one payment can also save you time and reduce stress, as you won’t have to worry about making multiple payments to different lenders.

Being unable to pay your personal loan can cause anxiety, stress, and have long-term negative effects on your credit score. If your personal loan debt is high and you find yourself unable to make your loan payments, try not to panic. You have options that can help you get back on track. The key is to communicate with your lender as early as possible and be transparent about your financial situation. By doing so, you may be able to find a solution that works for both you and your lender.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More 

It’s a good thing to tip service workers. But read on to see why you might get stuck double tipping by accident. 

Dining out and ordering takeout and delivery are luxuries not everyone can afford. And even people who like to prioritize restaurant meals may be struggling to do so these days given that the cost of food away from home is up 7.1% on an annual basis, according to July’s Consumer Price Index. Add tipping fatigue into the mix, and it’s a wonder more of us don’t just cook at home.

Tipping has long been a mainstay of dining out. But since the pandemic, the pressure to tip restaurant and food service workers has intensified.

These days, it’s pretty much impossible to pick up a coffee or pre-made sandwich without being asked to add a tip after you’ve swiped your credit card. And while it used to be that a 20% tip was generous, nowadays, it’s basically become the minimum.

Compounding the issue is that some businesses are using tactics that could result in double tipping. Whether that’s intentional or not is up for debate. But it’s important to be aware of these tricks that could cause you to spend more money than you bargained for.

1. The pre- and post-pickup tip prompt

Sometimes, it’s easier to just pick up food than to wait to have it delivered. You’ll often be given the option to place an order online in advance and include a tip should you choose to do so. But then, when you go to pick up your order, you may be asked to sign something (either a receipt or screen) that includes an additional tip option.

Some people will argue that if you’re fetching your own food, you shouldn’t be tipping in the first place. Others will say that there’s still work that goes into preparing your takeout order, and restaurant workers should be tipped because of that.

Tipping on takeout is a nice thing to do. But you really should not feel compelled to do it twice. So pay attention when tipping upfront so you don’t wind up accidentally doing so again when you check out.

2. The automatic service charge

It’s long been common practice to include a gratuity for larger parties at restaurants. In fact, if you’re a group of six or more, you might see a tip added to your tab automatically.

You may decide to tip beyond that point if you feel you received outstanding service. But if you don’t pay attention, you might end up tipping 40% if the restaurant automatically adds a 20% gratuity and you tip 20% on top of that.

What’s more, some restaurants add an automatic gratuity for all tables, regardless of party size. Dining establishments are required to tell you when they’re doing this. But they might hide that information in small print at the bottom of their menus. Pay attention to the fine print and check your receipt carefully before adding a tip so you don’t wind up spending more than planned.

Don’t get stuck tipping twice

Restaurant work isn’t easy. Servers have to be on their feet for hours on end, often dealing with demanding customers at the same time. So if you’re in a position where you can afford to dine out, then it really does pay to do the right thing and tip regularly.

But that doesn’t mean you should get stuck tipping twice. So always pay close attention to the different fees you’re being charged, whether it’s delivery, a sit-down meal, or a takeout order.

You no doubt work hard for your money, and dining out may be an occasional treat that’s hard for you to swing. You don’t want to make it even less affordable by tipping double by accident.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More 

Rich people use debt as a tool and focus on making smart investments to help get ahead. Here’s what else you can learn from them. 

If you want to be rich, it can be helpful to do things that millionaires and other wealthy people are doing. Fortunately, identifying the habits of financially successful people doesn’t have to be hard. Here are four rich people habits you should copy.

1. Use debt as a tool

Wealthy people are not afraid of debt. They understand that it can be used as a tool to help them use their money as wisely as possible and increase their net worth.

Many wealthy people borrow money to do things like start businesses or invest in real estate. They also borrow when they can do so at a low rate, rather than tying up their cash in something that doesn’t provide a very good return on investment.

For example, Warren Buffett got a mortgage when he bought his home even though he could have paid cash — because he wanted to invest his money instead. He borrowed about $120,000 in 1971 (in the form of a mortgage loan) and invested the money instead of paying cash for the home. The invested funds ended up being worth around $750 million.

Rather than being afraid of borrowing, be smart about when and how you use debt. For example, it makes sense to take out a mortgage to buy a home rather than paying cash because your home is an asset that should increase your net worth, and the mortgage interest rate will usually be lower than the return you could get with other assets like stocks.

But it does not make sense to put a vacation on a credit card, as you’ll just be incurring interest for something that doesn’t increase your wealth in the long run.

2. Prioritize investing

Research has shown wealthy people save at higher rates. This doesn’t apply to people who were born rich either. Wealthy people with “new money” tend to have even higher savings rates and earn higher returns.

When you prioritize investing, you can grow wealthier much more easily because your money is working for you. You don’t have to earn every $1 that grows your net worth. Your money can earn returns, which can be reinvested and earn even more for you.

If you invest $10,000 today and earn a 10% average annual return, that $10,000 will be worth $174,494 in three decades even if you never add another dollar to your account. That’s a lot of money you didn’t have to personally earn.

The more you invest, the more you benefit from compound growth and the easier it is to get rich — since less effort is required from you to make money. Open a brokerage account today if you want to build wealth. If you’re not sure what to invest in, an S&P 500 index fund is a pretty smart bet.

3. Develop multiple income streams

Many rich people have multiple sources of income. Their money may come from a job, but also from investment income or other sources. If you are dependent solely on one job, unemployment could leave you without funds and the ability to build wealth. You’re also limited in how much you can earn since you only have so much time to work.

But if you develop multiple income streams, your finances are less precarious and you can also earn money in multiple ways. You can develop multiple income streams by:

Taking on a side hustleTurning your hobbies (such as crafting or dog walking) into a source of incomeInvesting in assets that provide dividendsBuying investment real estate

Consider where your interests are and how you can make money outside of work to help your wealth grow.

4. Set long-term goals

Finally, many wealthy people look toward the future when deciding on spending decisions. While a vacation or impulse purchase today may seem fun, it’s better to look at the big picture, consider what you want to accomplish, and prioritize it.

When setting your own goals, employ the SMART principle. Your goals should be specific, measurable, achievable, relevant and time limited. For example, you could set a goal to save $500 a month toward retirement over the next year and track your progress throughout the year.

By adopting these four habits, hopefully you too can become wealthy. I’ve tried them all, and they’ve made a noticeable difference in helping my net worth grow.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

 Read More 

Think homeownership is your only ticket to growing wealth and being financially secure? Read on to see why that’s wrong. 

I was talking to a friend of mine recently who was bemoaning the fact that she and her partner would, by her estimates, never be able to own a home. She pointed to sky-high property values and mortgage rates as primary reasons why homeownership seems perpetually unattainable, so I reminded her that today’s housing market conditions are really only temporary.

This isn’t to say that home prices will fall and mortgage lenders will lower their rates in a year or two. Rather, today’s real estate market conditions might persist for a number of years.

But my friend is only in her late 30s, and her partner is around the same age. So owning a home might eventually be in the cards for them — if they decide they actually want to go that route.

See, I have a sneaking suspicion that my friend isn’t really eager to own a home, but rather, feels like it’s the financially sound thing to do. And even though I own a home, I’m here to tell you that this line of thinking is horrendously skewed.

You can be financially secure as a renter

Around 66% of Americans own their own homes, according to recent Census Bureau data. And it’s easy to see why the idea of homeownership is appealing from a financial perspective.

As you pay down your mortgage, you get to build equity in an asset that you can eventually own outright. For many retirees, their home is their greatest source of wealth. You might have someone in their 60s with a $100,000 IRA and a $750,000 home they own outright.

When you rent, you don’t eventually get to own a home. So you’ll often hear that renting is throwing your money away.

Except it’s not. Just as you’re not wasting money when you buy medication that keeps you healthy or food that keeps you nourished, so too are you not wasting money by paying rent because you’re fulfilling an essential need — housing. And if you pay your rent while also managing to save money month after month, you can build yourself a nice emergency fund and nest egg to gain the financial security you need.

Renting might even be a more financially sound choice

It’s true that when you rent a home, you don’t get to eventually own it. But you know what you might get to own instead? A $100,000 savings account balance, or a $500,000 IRA.

When you rent a home, your monthly housing costs are fixed and predictable during the term of your lease. And if your rent increases, you can always move to a new rental. (And yes, there can be a cost involved, but there are also many steps that can be taken to make a move relatively affordable.)

Meanwhile, when you own a home, there’s nothing to stop you from having to shell out $10,000 on a whim to get a new air conditioning system, or from having to spend $20,000 on a new septic system. Owning a home means grappling with ongoing financial surprises — expenses that can limit your ability to save in a very big way.

So if you’re of the impression that homeownership isn’t in the cards for you, or you just plain don’t want it to be in the cards, don’t worry about it. You’re not in any way doomed to financial failure because you intend to rent for the rest of your life. Quite the contrary — renting could set you up to meet your financial goals with ease because you’re not constantly spending extra money just to keep a property standing.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More