Speaker 1: The problem right now is that they've actually frozen the
IDR programs, which is the income repayment program directly based
on your income. Right. So that's a good thing. If
you were making more money four or five years ago
and you're to pay it was one hundred dollars, you're
making less money today, they might knock your payment down
to fifty dollars.
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Speaker 4: And welcome.
Speaker 3: You are listening to the Financial Survival Network. I'm your host,
Carrie Lets.
Speaker 4: Well. Are the walls now tumbling down? That's the question.
Speaker 3: If there is a theme song my next guest, thing
that should be it for today? Paul Austerbetter Qualified dot com. Paul,
so you're the credit expert. Two things fifty basis point
cut in the Fed funds rate and a new student
loan rules on forbearance.
Speaker 4: Does it matter?
Speaker 3: Is it too late? Does anybody really care. What do
you think, how do you think it's affecting your clients?
And you have a lot of them who will be
affected by it.
Speaker 1: Yeah, So unfortunately, you know, this first cut is not
going to you know, even make a dent for the
average consumer. A lot of people were hoping that they
would directly impact mortgage interest rates, which is really you know,
has had the housing market kind of paralyzed for a
couple of years here, but it's indirectly tied to the
mortgage industrate. Most banks had already had it baked in
expecting that fifty point basis cut, so those are unchanged.
What it does start, that is our credit card interest
rate will drop a little bit. That's always a good
thing I tell people all the time. Even though the
interest rate drops and your payment the minimum ountd may drop,
you should continue to make the higher payments, even if
it's only a couple of bucks more.
Speaker 4: That is how you're going to accelerate getting out of debt.
Speaker 1: So if you kind of just follow this thing down,
hopefully they make at least one more rate cut before
the end of the year, your credit card interest rates
will drop again, your minimum payments will drop again, but
if you can afford to keep making those higher payments,
it's kind of an easy way to just start to
pay down your principal balances. So certainly a good thing.
Hopefully the trend continues in a downward motion. The FED
certainly seems to be pointing in that direction, so that's
that's always a good thing.
Speaker 3: Well, it definitely looks like rates are coming down more,
the dollar is going down, right, all these things that
are having what's a good rule of thumb for ever,
Let's just say, if rates come down half a point,
maybe you should up your payments to match the rate cut.
Speaker 4: Yeah, that's exactly right.
Speaker 1: Just look at what your existing payment was, you know,
the last couple of billing cycles, and just try and
maintain those payments. Look, if you're struggling to make those
payments in the first place, you might want to reach
out to a credit management company, a credit counseling company,
and try and get into a credit management program where
these companies leverage the credit card companies, the creditors by
having pools and lots of people where they say, hey, listen,
Paul Auster can no longer afford to make these minimum payments.
We have to maybe lowers interest rate to zero. Obviously,
the cards are frozen and sometimes canceled during these types
of programs, But again, the overall goal was.
Speaker 4: To get out of credit card debt.
Speaker 1: Even though the rates came down a little bit, the
average is still close to twenty percent, and people on
the higher end of the spectrum were paying close to
thirty percent interest on that debt. It's really really difficult
to pay off debt at thirty percent interest.
Speaker 3: Right, I see your point. I see your point, Like
you can never get out from under that. So what
is when you've got these carrying all these balances, what
is the best way to pay them down in the
systematic fashion that gives you the most benefit.
Speaker 4: How do you do that?
Speaker 1: So there's a couple of different options, the two most popular.
One is called the avalanche, where you're focusing on one
credit card with the highest interest rate at a time.
So if you have an extra fifty bucks a month,
you don't split that between two or three cards and
pay them all down. It's actually a psychological thing. It
makes people feel great, I paid you know, I paid
down three or four cards more than the.
Speaker 4: Minimum payment that was due.
Speaker 1: Mathematically speaking, the best way to do this is to
take that entire fifty dollars apply it towards the card
with the highest interest rate until that's paid off. So obviously,
hopefully you're not continuing to add onto the balances while
you're trying to pay them down. It's kind of counterproductive.
The other way is called the snowball method, where you're
going to try and roll up the accounts with the
lowest balances and get them out of the way. It's
a great psychological win for people to have a card
paid off in full. Obviously you need to put that
card away so you do not use it anymore. Both
of those will work, okay. The idea is that you're
making the minimum payments on all the other cards, focus
on one, whether it's the lowest balance or the highest
interest rate, and then you move on to the next card.
Do not open any new cards, do not pose any
of those cards. Believe it or not, posing a credit
card can have a serious negative impact on forty five
percent of your overall credit score. It's the combination of
your utilization ratio, which is the difference between your balances
and credit limits, and your credit history. So unfortunately, the
moment that you close a credit card, You've now lost
all of the credit history associated with that card, so
you're gonna it'll it could skew all of the averages
for the other cards, and you will now have lost
whatever available credit you had on that card. So the
idea for the utilization ratio is to keep that number
thirty percent or below. So if you have a balance
of if you have a credit limit of one thousand dollars,
you would never want the balance on that card to
be above thirty percent. The other option, and this is
still a really good option, but it comes with a
tremendous amount of trepidation and hesitation because if you use
a zero percent balance transfer option, it will work.
Speaker 4: Right. We were talking before.
Speaker 1: It how difficult it is to pay off debt at
thirty percent. So they're giving you the option to put
it to transfer a balance to a new card and
pay it off at zero percent. The problem is, if
you haven't figured this thing out mathematically, if you do
not pay it off in eighteen twenty four months, you
will now have cost yourself that much more money because
you paid a transfer fee somewhere between two and five
percent and it hit with all of the deferred interest
so it's really like you know, credit card sabotage. You
do not want to sell babetize yourself. So if you're
going to do a zero percent trader, just make sure
mathematically and somewhat confidently that you're going to be able
to pay off the balance in that timeframe.
Speaker 3: Yeah, okay, so you've got to have a planned most importantly, right,
you got to have a yep.
Speaker 4: Yeah.
Speaker 1: And then for these you know, for the younger people
and sometimes older people. You know, September thirtieth, it will
be a really tough day for thirty million.
Speaker 4: Student loan borrowers. Thirty million.
Speaker 1: And the problem is that we have been somewhat foddled
for the past four years. They've used defferments, they've used
for bearances, they've used this ramp up period, and that
was all a good thing during the pandemic. But we
need to get back to business here. We need to
get back to people being held accountable for the monies
that they borrowed. And you have to come up with
a payment plan. So unfortunately, if you've waited it and
you haven't gone to studentaid dot gov. By the way,
there's only one website, and one website only that barers
should or have to go to studenta dot gov. Don't
answer solicitations via text message, social media, phone calls, commercials.
Speaker 4: Go to studenta dot gov and.
Speaker 1: You will be able to figure out a plan that
can help you pay off your student will. The problem
right now is that they've actually frozen the IDR programs,
which is the income repayment program directly based on your income.
Speaker 4: Right So that's a good thing.
Speaker 1: If you were making more money four or five years
ago and you're to paint it was one hundred dollars,
you're making less money today, they might knock your payment
down to fifty dollars twenty five dollars. But again, right now,
those programs have actually been frozen until they figure out.
There's all sorts of Unfortunately, this has become a political
hot potato football. It's getting kicked back and forth. The
bar ers are left holding the bag, so to speak.
So no one understands rially what's going on. But there
have been some actual Supreme Court injunctions, and this is
you know, this is a matter of the courts at
this point in time, so we have to wait to
see how those are going to play out. But in
the interim, it is imperative if you have a student
loan and you anticipate struggling making these payments coming September thirtieth,
you have to take some prow active steps right now.
Don't wait, because if everybody tries to do it at once,
it's just not going to be as beneficial for the
people that get involved earlier, sooner than later. So be proactive.
Go to studentate dot gov. Figure out what you're going
to be able to, you know, be qualified for and
approve for as of September thirtieth, and this might be
the biggest piece of what's going to happen. If you
miss a payment now fourth September thirtieth, most of the
time they were not reporting it to the credit buros.
Really okay, after September thirtieth, if you go thirty days late,
which means you have a payment due today twenty six,
if you paid a couple of days, they're now reinstating
late fees, by the way, but that's not a thirty
day late payment. That won't get reported to the credit buros.
If I sailed to make the payment before October twenty six,
that's a thirty day lay payment. Then that can easily
drop your scores fifty to one hundred points, which then
in turn costs you more money for every other financial transaction.
Speaker 3: Wow, that's amazing. Yeah, well, I'm glad that we had
you on here to clarify that because that could be
a real bad mistake. And then try to get it
off your report once it's reported by the federal government.
That's probably like the hardest one to get off.
Speaker 4: Huh Yeah.
Speaker 1: I mean, especially if they're federal student loans, they're excluded
from banks. There's no way out from under paying back
those student loves. If they're private, you have a little
bit more wiggle room, but they're gonna you know, they're
coming after the barers and saying listen, you've had plenty
of time to figure this out.
Speaker 4: You know.
Speaker 1: Yeah, Well, the pause started back in March of twenty twenty,
believe it or not. It's just amazing here, you know,
here we are four years later, so people and I
sympathize with them. I empathize with them. I feel bad
for them. But you borrow the money, and now you've
had four years to try and figure out how you're
going to start making those monthly payments. So it started
back it's been going on for almost a year now.
They reinstated it back in September October of twenty three,
but there was a ramp up period. There were still
some built in flexibilities where they weren't keenalizing the bar
wars that all goes away on the thirtieth. I hate
to be the doom sayer. I hate to be the
bear of bad news, but it's really imperative that you know,
your listeners and viewers understand what's going to happen on
the thirties.
Speaker 4: Yep, yep, yep.
Speaker 3: And like you said, they had four years to figure
this thing out. It should have been enough time. The
interest that they haven't paid that continued to build up
on these loans. They owe this right, so the balance
just gotten higher.
Speaker 1: Absolutely, absolutely, And there's lots of other things that are
going to change.
Speaker 4: But you know, we could talk about it for days.
Speaker 1: That's why I always direct people to go to studentaid
dot gov. Start plugging your information in there. You know
a lot of students don't even realize what kind of
loan they have. There are different binds of products loans,
and but most barbers don't even understand what kind of
financing and loans that they took out. So figure that
out first and foremost, be very proactive with the servicer,
which might not be the bank who owned you the money.
There are big, big, big servicers out there. If you
think of Sallymay dot com they're one of the biggest.
For sure, you have to reach out to them. They
can help you figure this out also, but you're much
better off going to studentaid dot gov.
Speaker 4: Got it, studentad dot gov.
Speaker 3: That's the go to place you want to be and
better Qualified if you've got questions or need information or
need some assistance managing your managing your credit and your
credit score. Right, it's one and the same and right
better qualified dot com. Is there a phone number that
can call you at?
Speaker 4: Yeah, well, Carrie, because there is, and I'll give the
phone number out.
Speaker 1: But more importantly, because most people don't want to call anybody,
so we have a texting platform and now is a
really good time to contact us. Because we launched our
artificial intelligence, our AI driven credit reporting service about a
year and a half ago. This thing is it's a
work of art. You know, I've been doing this for
twenty years. This is by far the greatest thing we've
done for our clients because well, kind of what you
were saying before, it's all tied together. And the reason
that people are in the position or in if they
have lower credit scores, if they have credit card debt,
is because they didn't kind of have a plan. They
have no idea how much gas is left in the tank.
They have no idea. They basically limit a crisis mode
every thirty days. So you have to be able to
plug all this stuff in and you can do that
with our We call it BI Better Intelligence, but it's
an AI driven credit report that can tell you check
this out. We have paydown dates. It will tell you
in the in the billing cycle, the exact amount, the
exact day on what credit card you should pay to
get the highness jumps in your credit scores. That's really
really important when you're talking about financing a new card,
buying for any type of financing. There's not another credit
report in the world that does it, by the way,
so that paydown date is really really important for us
and our and our clients. And the other thing is
that all of the creditors are plugged into this now
and we can communicate with your creditors directly. And electronically,
so we're getting results within days as opposed to waiting,
uh you know, weeks and months for the for the
credit bureaus, which are terrible right by the way, so
we don't have to wait for them anymore. We're going
directly to the creditors through this electronic dispute portal, and
it really has changed the way time and the turnaround time.
It's it's in days. So if you're gonna you're gonna
send a text message to the number for zero six
nine one, send a text message to the number for
zero six nine one, and your message is BI like AI,
but ours is better intelligence. So your message is BI
and text at the four zero six nine one. The
consultation and analysis is absolutely free. I can't stress that
it up. Okay, sounds great. Hey, got a question for
Paul or myself, Just shoot me an email KL at
Carrie Lets dot com. And the link to all site is.
Speaker 3: In the show notes to this interview on Financial Survival
Network dot com. Just click it take your right to
a site you could get started. And while you're there,
please sign up for free newsletter aall oh is a
pleasure and we will talk to you again real soon
Thanks having back on Kerry, Thanks.
Speaker 2: For listening to Carrie Lets's Financial Survival Network, your solution
to today's trying times. For the latest, go to Financial
Survivalnetwork dot com. Financial Survival Network now more than ever,