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How To Achieve Financial Freedom and Pay Off Debt

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Debt can be overwhelming, especially if it’s in the double or triple-digits. Just ask Tiffany “The Budgetnista” Aliche who had around $300,000 in debt after the last recession.

“The first step really is forgiving yourself because almost everyone who has a lot of debt is already beating themselves up. We underestimate how important the emotional component of debt is. It weighs a heavy burden,” Aliche says.

After the last recession, Aliche accrued triple-digit debt from a $220,000 mortgage, $52,000 in student loans and $35,000 from credit cards. While she didn’t pay her mortgage and foreclosed on the home, she did pay off her student loans and credit card debt in full.

CNBC Select spoke with Aliche, financial educator and founder of The Budgetista, who shares how she paid off roughly $87,000 in debt and gives her advice on getting out of debt.

How to approach paying off debt

While there isn’t a best way to tackle debt, there are some guidelines you can follow to make paying off debt less expensive.

Aliche considers the number-one mistake people make as obsessing over the wrong debt, such as student loans, since they typically have single-digit interest rates. In fact, federal student loan interest rates are 2.75% for undergraduates for the 2020-21 school year and unsubsidized graduate student loans are slightly more at 4.30%. Those rates are significantly less than the double-digit average 15.78% credit card APR.

“Focus on that credit card debt. That’s the one that’s costing you an arm, a leg, a toe and a foot,” Aliche says.

She recommends you get aggressive with your double-digit credit card debt since it’s so costly. Then once you pay off your card debt and get to single-digit debt, like student loans, divide your money up between savings, earning/investing and paying off debt.

While it may seem strange to not focus on debt repayment 100%, Aliche urges people to see the bigger picture: “Debt-free is a goal, not the goal,” she says. “The goal is financial freedom.”

Focus on that credit card debt. That’s the one that’s costing you an arm, a leg, a toe and a foot.

Tiffany “The Budgetnista” Aliche

For Aliche, financial freedom included leaning into her business, The Budgetnista, so she could grow her wealth while also making consistent payments toward her student loans. After all, Aliche says being debt-free doesn’t equal wealth.

“If you just focus on being debt-free, that’s all you get. If you focus on learning to grow wealth, you get that freedom and the money,” Aliche says.

Debt payoff options

There are numerous ways to pay off debt, yet no one-size-fits-all answer. Here are a few options that may be right for you.

Use a balance transfer credit card

Completing a balance transfer can help you move debt from a high interest card to a card with an introductory 0% APR period up to 20 months. Balance transfer credit cards, like the U.S. Bank Visa® Platinum Card, allow you to save on interest payments and use what you would’ve paid on interest toward paying off your debt.

Be aware that good or excellent credit (a FICO score of 670 and greater) is often required for a balance transfer card, and lenders set limits on how much debt you can transfer. Plus many balance transfers are hard to get right now as lenders are trying to minimize the amount of debt and risk they take on.

Consolidate debt with a personal loan

Personal loans are a good alternative to balance transfers if you have a large amount of debt that won’t be transferable to a credit card. Through a personal loan, you receive a fixed amount of money that you can use to pay off your cards. 

You’ll repay it over a term ranging from about 12 to 72 months, and at a fixed interest rate (currently the average for a 24-month loan is 9.50%). This can help you consolidate debt that’s spread out across several credit cards.

However, Aliche warns that studies have shown people who pay off their credit card debt with a personal loan often wind up overspending on their card again. She recommends you cut up your cards to avoid falling into that pitfall.

Borrow money from family 

If you have bad credit (scores below 580) or simply struggle to be approved for a new or affordable financial product, you may want to consider asking a family member or close friend for a loan. This option isn’t possible for everyone, but may be an alternative for you.

You can save money on interest by borrowing money from someone close to you. Before you accept any money, set up a repayment plan and stick to it so you don’t risk damaging your relationship.

Consider new ways to make money

Since balance transfer offers are currently hard to find and lenders are making it harder to qualify for low-interest financial products, you should consider alternative ways to increase your income.

“These days, I feel like people have to really be open to side-hustles,” Aliche says. “Everyone’s not going to start a business, but ask yourself ‘Are there ways to monetize some of my skill sets? Are there things that I can do to bring income?”

For instance, Aliche brought in roughly $5,000 to $6,000 extra a year by tutoring and babysitting when she was teaching preschool. She explains that a side-hustle can be a temporary way to make additional income that can help you pay down your debt faster.

Additionally, if your company is doing well you can consider asking for a raise or jumping back into the job market to negotiate a higher salary somewhere else. Try to use judgement before making either move so you don’t put your current job at risk.

Remember you’re not alone

It’s easy to psych yourself out and get hung up on the amount of debt you have. But Aliche encourages you to remember that you’re not the only one in debt.

“There are people who make a ton of money who have a ton of debt. There are people who make a little bit of money who have a ton of debt,” she says. “What you’re experiencing is something millions of people are experiencing. Focus on the solution, not what you did wrong.”

If you find yourself in debt, take a moment to reflect on what caused it, then start working toward paying it off.

Information about the U.S. Bank Visa® Platinum Card has been collected independently by CNBC and has not been reviewed or provided by the issuer prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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Virginia Used Car Dealer Offers Local Drivers Reliable Pre-Owned Vehicles and Affordable Prices

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Used Cars Under $10,000 in Virginia

Karen Radley Volkswagen is offering local drivers a variety of used vehicles to choose from that are priced under $10,000, including capable SUV’s, versatile crossovers, fuel-efficient sedans and sporty coupes.

There are many ways for people to save money when shopping for the things they need and can’t live without. For many people, a vehicle that can offer them the reliability they need is incredibly important and something they require every day. Drivers in Virginia that are searching for affordable used cars under $10,000 now have a dealership they can turn to that will help them get behind the wheel of a reliable vehicle they can afford. Karen Radley Volkswagen is offering local drivers a variety of used vehicles to choose from that are priced under $10,000, including capable SUV’s, versatile crossovers, fuel-efficient sedans and sporty coupes.

With used car specials that offer affordable pricing and a large inventory of pre-owned vehicles that can be purchased for under $10,000, drivers will be able to find the vehicle they’ve always wanted to drive at a price that fits their budget. Karen Radley Volkswagen also helps make buying a reliable and budget-friendly used car easy by offering used car loans to drivers regardless of their credit score. Good or bad credit car loans are fast and easy to obtain and apply for when shopping at Karen Radley Volkswagen.

To learn more about how to get behind the wheel of an affordable used car in Virginia, or to view the current inventory of used cars under $10,000, drivers can visit the local dealership’s website by going to http://www.karenradleyvw.com. Questions can be directed towards the sales staff by calling 833-243-5895. Shoppers may also see all the used cars at Karen Radley Volkswagen by driving to 14700 Jefferson Davis Highway.

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Legislation to Combat Unfair Auto Insurance Rates Clears Committee

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Legislation to Combat Unfair Auto Insurance Rates Clears Committee

 

Trenton – In response to high automobile insurance assessments, the Senate Commerce Committee passed legislation sponsored by Senators Nia Gill, M. Teresa Ruiz, Nilsa Cruz-Perez, and Nellie Pou, which would prohibit the use of education, occupation, homeownership status, marital status, or credit score in certain automobile insurance determinations.

 

“The use of factors such as employment status and credit score in calculating insurance premiums carries a severe economic consequence for working-class families. A person’s income or education has no bearing on driver safety or risk and only serves to reinforce existing inequalities,” said Senator Gill (D-Essex/Passaic). “The pandemic has given new importance to how we determine eligibility. Millions of New Jerseyans are experiencing economic hardship; this will inevitably impact their credit scores, occupation, and employment status. This bill is critical to ensure people are not subject to increased premiums based on metrics that have nothing to do with driving, and it will ensure drivers are not subject to increased premiums based on unforeseeable consequences of the pandemic.”

 

The bill, S-111, would prohibit automobile insurers from assigning an insured or prospective insured person to a rating tier based on educational level, credit score, marital status, homeownership status, or employment, trade, business, occupation or profession.

 

“Newark has some of the highest car insurance rates in the country. Under our current laws car insurance companies are preying on New Jersey’s most vulnerable, charging low income customers significantly more regardless of their driving history. Every sponsor has done tremendous legwork to bring an end to this harmful practice. I am proud to have been a driving force in the final push to move this important legislation and to ensure it included prohibiting the use of credit scores,” said Senator Ruiz (D-Essex). “Insurers should be basing their rates on the likelihood that someone will be in an accident, not his or her ability to pay for those damages out of pocket.”

 

“It is absurd that someone with a bad credit score pays more for car insurance than someone who has been convicted of a DUI,” said Senator Cruz-Perez (D-Camden/Gloucester). “We cannot allow insurers to continue basing rates on credit history or socioeconomic status rather than someone’s driving record.”

 

“We must stop penalizing people for being poor,” said Senator Pou (D-Bergen/Passaic). “This legislation will hold insurance companies accountable and help to ensure that our most vulnerable citizens are given fair pricing for policies that are a requirement to drive.”

 

The bill would take effect 90 days after enactment.

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Reasons You Can Be Denied for a Bad Credit Auto Loan

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Everyone’s situation varies, but there are some circumstances that bad credit auto lenders simply don’t accept. To give you an idea of what to expect when you apply for a car loan, here’s what subprime lenders tend to require and what situations they don’t accept when determining your eligibility for auto financing.

Job Situations and Bad Credit Car Loans

First, it’s important to note that all lenders have different work, income, and even residency requirements. However, if you’re applying with a bad credit car lender, also known as a subprime lender, they tend to follow similar guidelines for who they’re willing to approve for auto financing.

When it comes to your work situation and what type of income you’re bringing in each month, there are some situations that subprime lenders simply don’t accept.

No Income at All

If you’re not bringing in any income from a job or any other type of assistance, expect to be turned down. Any car lender, bad credit or not, is going to need you to provide proof that you have a stable income.

Some subprime lenders can accept income such as alimony, permanent disability, pension, and even public assistance – if you can prove that you’re going to receive it for the entire duration of your auto loan term, that is.

To get into a car loan, you must have provable, consistent income that can support the auto loan the whole time you’re repaying it.

Sparse Work History

This requirement can vary, but borrowers who haven’t held down the same job for around six months to a year can often be turned down for a car loan. Auto lenders typically also require you to have consistent work history over the last three years.

Subprime lenders look for stability in your work history and employment. The longer you’ve held the same job in the same line of work, the higher your chances of getting approved for a car loan.

Brand-New Job

If you just started a job in a new field, then a subprime lender may be hesitant to approve you for financing. Subprime lenders prefer borrowers who’ve been at the same job for at least six months to a year.

However, if you recently switched employers but it’s in the same line of work, then they’re more likely to be understanding of that situation.

Living Situations and Bad Credit Auto Loans

Situations That Can Deny You a Bad Credit Car LoanAlong with having work and income requirements, subprime lenders also take a look at your residence history. While living situations can vary greatly, they are again looking for stability.

A stable borrower is one that is more likely to repay their auto loan. So, the longer you’ve been living in the same area, the higher your chances for an approval. However, just because you’ve lived in the same town for 20 years doesn’t always mean you meet the residency requirements.

Here are a few living situations that subprime lenders probably won’t accept:

You’re Not a Homeowner or a Renter

To meet residency requirements, most subprime lenders require that you’re a homeowner or a renter. If you’re a homeowner, you must prove your residency with a recent utility bill in your name, or maybe even a home title in your name if you don’t have any utilities in your name.

If you’re a renter, then your name must be on the lease. You should also expect to need a recent utility bill in your name to prove your residence. Some lenders may even require a copy of a lease agreement, a mortgage statement, or a copy of a house payment/rent check.

However, if you live with relatives or you live at an apartment where your name isn’t on the lease, then it could be more difficult to qualify for a car loan. Subprime lenders require that their borrowers have a permanent address, with documents that prove that you live there. If you don’t have any utilities in your name, or your name isn’t on a lease or mortgage statement, then you could run into trouble getting approved for auto financing.

You Don’t Have a Permanent Address

Some people live in RVs, or even hotels, to accommodate a nomadic lifestyle. While having the flexibility to move wherever you’d like at the drop of a hat suits many people, the sad news is that these unconventional ways of life aren’t likely to meet the requirements of a car lender. Since your address isn’t permanent, it can make a subprime lender hesitant to approve you for financing.

Other Requirements of Subprime Lenders

There could be many different reasons why a lender can deny you for an auto loan. To help you be best prepared, here’s a list of other common requirements of subprime lenders:

  • Must have a cell phone or landline phone in your name (no prepaid phones)
  • Have to make a down payment of at least $1,000 or 10% of the vehicle’s selling price
  • Bring a list of five to eight personal references with complete contact information
  • Must have a valid driver’s license with your current address

Subprime Lenders and Bad Credit Car Dealerships

If your credit is worse for wear, you’re likely to have a better chance of getting approved for a car loan if you apply with a subprime auto lender, since they consider more than just your poor credit score while they determine your eligibility for a car loan.

Where are subprime lenders? They’re signed up with special finance dealerships, and they are more prominent nowadays. Here at Auto Credit Express, we know what dealers are signed up with subprime lenders, and we can look for one in your area at no cost.

Fill out our free auto loan request form, and we’ll get right to work looking for a dealership near you with the bad credit lending resources you need.

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