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Yahoo
a day ago
- Business
- Yahoo
The 3 Best Ways for Boomers To Use Personal Loans To Stretch Their Retirement
Personal loans can serve many functions, from starting a business to buying a new car — even helping in retirement. While it's always important to exhaust other options first that don't require paying interest, there are some situations where a personal loan can make a difference for boomers in retirement. Financial experts offer the best ways for boomers (or any retiree) to use a personal loan to help fund some aspect of their retirement. Find Out: Read Next: One instance when a personal loan can make sense is to bridge a short-term cash need — like delaying Social Security to maximize benefits or covering a one-time emergency without disrupting long-term investments, according to Christopher Stroup, a CFP and owner of Silicon Beach Financial. The key is using it strategically, not as a recurring income source, he said. See More: If you've got debt that's earning very high interest, such as credit cards or high-interest medical debt, a personal loan can offer you 'breathing room,' Stroup said, 'especially when the new loan has a lower fixed rate and shorter term.' It can also simplify payments and reduce interest. However, Stroup said, 'Know that it only works if spending habits also change; otherwise, debt can pile up again.' While personal loans should not be a go-to for most expenses, Stroup said that when the expense is unavoidable and aligns with a broader financial plan, it can be a good idea. 'For example, a medically necessary home renovation or dental procedure may justify a personal loan, especially if it avoids tapping tax-deferred retirement accounts in a high-income year.' Robert Gabriel a financial specialist and creator of Vosita, said these can include things renovations that improve safety or accessibility (like installing grab bars or a stairlift) and allow a retiree to age in place comfortably. 'Similarly, for unexpected but necessary medical expenses that aren't fully covered by insurance, a personal loan could provide a way to manage the cost over time,' Gabriel said. However, in both these scenarios, the retiree needs to be confident in their ability to repay the loan without jeopardizing their essential living expenses. Credit score also plays a huge role in determining personal loan interest rates, regardless of age, Gabriel said. He said that retirees with excellent credit scores (typically 720 and above) will qualify for the most favorable interest rates, which are currently averaging around 13% to 14% according to recent reports. A good credit score (690-719) will still yield reasonable rates, but they'll likely be a bit higher. 'To improve their odds, retirees should ensure they have a good payment history on all their debts, keep their credit utilization low (the amount of credit they're using compared to their credit limit) and avoid opening new credit accounts unnecessarily,' he said. Even small improvements in credit score can lead to significant savings on interest payments. Using loans to cover everyday expenses is a red flag, however, Stroup warned. It often signals that a retiree's spending is outpacing their income plan. 'Over time, this can create a cycle of borrowing that drains savings, increases financial stress and limits future flexibility,' Stroup said. If you're finding yourself turning to loans for repeated borrowing to cover basic expenses, minimum-only payments or juggling multiple loans without a payoff plan, you could have a problem. 'These patterns can signal deeper cash-flow issues and should prompt a review with a financial planner before debt becomes unmanageable,' Stroup advised. More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 7 Things You'll Be Happy You Downsized in Retirement 5 Cities You Need To Consider If You're Retiring in 2025 This article originally appeared on The 3 Best Ways for Boomers To Use Personal Loans To Stretch Their Retirement Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CBS News
26-05-2025
- Business
- CBS News
How to escape the payday loan debt cycle, according to experts
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. There are strategic steps to follow to escape a payday loan debt cycle. RabiaPayday loans can trap millions of people in expensive debt cycles, even as economic conditions improve. With many Americans living paycheck to paycheck, these high-cost loans offer quick cash when emergencies strike. But interest rates can exceed be exorbitant and fees make full repayment nearly impossible. Unfortunately, the pattern works by design: borrowers can't repay in full, so they roll over loans or take new ones to cover old debt. This isn't necessarily personal failure — it's a structural problem built into the payday lending system. If you're caught in this situation, breaking free requires strategic action and expert guidance. Below, financial experts share actionable ways to pay off your pay day loan debt — along with the benefits and drawbacks of each approach. Start exploring your debt relief options here. How to escape the payday loan debt cycle, according to experts Christopher L. Stroup, a certified financial planner and founder of Silicon Beach Financial, recommends starting with negotiation. "Many borrowers don't realize that some payday lenders will agree to a structured repayment plan if you explain your financial hardship," he says. "While there's no guarantee they'll say yes, it's a low-risk move that can stop the debt from snowballing." Beyond negotiating with your lender, experts suggest taking these steps: Work with a professional who deals with debt "[Consult] a professional [at] a credit counseling agency or debt solutions company," Howard Dvorkin, chairman of says. "They've seen the worst payday loan emergencies you could imagine, so they know how to deal with them." A qualified financial counselor can help you come up with money in your budget to escape the debt cycle. Andi Wrenn, founder of Coaching Capability and board member of the Association for Financial Counseling, Planning Education (AFCPE), regularly helps clients find hundreds of dollars per month in their spending without giving up enjoyable activities. She points to one client who went from overspending to paying all debts and saving money within three months of working together. While working with a professional costs money, Wrenn says clients usually find more savings than they pay in fees. Get started with a professional debt relief company today. Stop using high-interest loans Cutting access to expensive borrowing can help you get out of a payday loan debt cycle. Wrenn suggests trying the following alternatives: Ask your bank about a personal loan Request a reduced interest rate on existing credit cards Transfer high-interest debt to lower-rate cards Ask family members for help Sell unused items around your house These strategies can make a positive impact quickly. For example, Wrenn points to one couple who raised $750 in one month by selling items online and hosting a garage sale. The downside to these approaches varies. Personal loans require good credit, family loans can strain relationships and selling belongings takes time and effort. But even modest progress helps break your dependence on payday lenders. Build a small emergency buffer with a side gig "Building a small emergency buffer — just $250 to start — can prevent future reliance on payday lenders," Stroup emphasizes. The fastest way to build this buffer is through side gigs. Wrenn recommends focusing on services with minimal start-up costs. Dog walking, pet sitting, babysitting and tutoring are some worth considering. The main drawback of this pursuit is time, but you can capitalize on existing skills and work on your schedule. Explore debt consolidation options Debt consolidation combines several debts into one monthly payment at a much lower interest rate. Stroup recalls working with clients who refinanced a few payday loans into a single personal loan through a credit union, cutting rates from over 300% down to 11% to 18%. Qualifying for debt consolidation can be challenging, though. You may need good credit, a co-signer or collateral. Another concern is choosing the right debt consolidation organization. Wrenn warns that many charge fees to manage your debt, but sometimes make late payments. This can further hurt your already struggling credit score. Enroll in a debt management plan (DMP) A debt management plan (DMP) through a nonprofit counseling agency can be a lifeline when payday loans get overwhelming. According to Stroup, it consolidates unsecured debts into one monthly bill while reducing interest rates and late fees. DMPs aren't without consequences, however. Creditors close accounts you include in the plan, and you can't open new credit during the three to five-year timeline. This temporarily lowers your credit score. Dvorkin says this shouldn't be your primary concern, though. At this stage, "worry more about debt and less about credit score," he advises. Because without debt help, it's likely your score will plummet further. The bottom line Overcoming payday loan debt is within reach, but you need to change the spending habits that created the problem in the first place. Wrenn encourages looking at your wants versus needs and coming up with a plan for how to spend, save and eventually invest. It may also help to discuss debt relief options with a financial counselor, who can work with you to create a sustainable plan. Get started with a debt relief plan now.
Yahoo
25-05-2025
- Business
- Yahoo
5 Ways Trump's Suggested Income Tax Elimination Could Hurt the Middle Class
Income taxes may seem like one of those unchangeable facts of life that you just have to deal with as long as you work. However, one of President Trump's tax reform proposals is to consider doing away with income tax altogether for people who make less than $150,000 per year. Trump has also proposed eliminating taxes on overtime pay, Social Security Benefits and tips. Find Out: Learn More: While the initial result might seem positive — keeping more of your earnings — Christopher Stroup, CFP and president of Silicon Beach Financial, warned that there could be financial downsides that might actually hurt middle-class wallets down the line. While it's unclear if and when any of these proposals might move beyond theory, Stroup explained what might come of eliminating income taxes for this segment of American workers. If income tax disappears, expect higher sales taxes, property taxes and other fees to make up the difference, Stroup said. 'Middle-class households, who spend a greater percentage of their income on essentials, would bear the brunt.' A 10% national sales tax, for example, would make everyday necessities significantly more expensive while benefiting wealthier Americans with lower tax burdens. Be Aware: Income tax plays a major role in funding Social Security and Medicare. Without it, where does that money come from? Stroup explained that 'a tax overhaul could lead to benefit cuts, delayed eligibility or even privatization.' Middle-class workers and retirees who rely on these programs the most could face financial instability just as they need guaranteed income the most. If there's no income tax on a certain level of earnings, then some entrepreneurs and small-business owners who benefit from income tax deductions on expenses like health insurance, retirement contributions and home offices would not have these deductions. 'Without an income tax, these deductions disappear,' Stroup said. 'This could increase net tax burdens and make it harder for self-employed professionals to reinvest in their businesses while larger corporations find new loopholes.' Most states rely on federal funding for infrastructure, education and public safety — much of which comes from income taxes, Stroup explained. 'If those funds dry up, states would likely increase property and local taxes, disproportionately affecting middle-class homeowners. The result? Higher costs without the benefits of improved public services.' Eliminating income tax primarily benefits high earners who derive most of their wealth from investments rather than salaries, Stroup said. 'Middle-class professionals who rely on wages would still face taxes in other forms, whether through consumption or payroll taxes.' This shift could exacerbate income inequality, making it harder for working families to build long-term wealth. These are all just speculations at the moment, as no official tax reforms have been passed either by executive order or through an act of Congress. More From GOBankingRates 6 Hybrid Vehicles To Stay Away From in Retirement 7 Luxury SUVs That Will Become Affordable in 2025 This article originally appeared on 5 Ways Trump's Suggested Income Tax Elimination Could Hurt the Middle Class
Business Insider
24-05-2025
- Business
- Business Insider
The very first thing to do if you want to spend less, according to financial planners
Even if you know you need to spend less, it can be hard to know where to start. Learning how to budget can be overwhelming without guidance, and not going in with a strong plan can lead to frustration and difficulty sticking to your goals. Business Insider asked CFP® professionals what their first response would be if their clients asked them how to spend less. Their responses fell into three major groups, all focused on understanding how you can make your budget work for your savings goals. Understand your motivation to spend less When asked the first thing they'd say if a client wanted to know how to cut spending, multiple financial planners said they would first want to dive into the client's motivations. Understanding your motivations will not only keep you dedicated to spending less, but it will also help you determine what cost-cutting steps you should take going forward. "I think understanding the why is really important, right?" says Christopher Stroup, CFP® professional, founder and financial advisor at Silicon Beach Financial. Stroup says the cause could be credit card debt, a dwindling bank balance, or just wanting to be more proactive about saving. "Ask what's behind their reason for that, so we can better understand what to do next." Once you have a firm grasp of why you want to save, you can start diving into your current spending habits. See if your current spending matches your priorities Before you can start cutting down on expenses, you need to know what expenses there are to cut. "The first thing I tell them is to understand what they're spending now; to really get clear on, OK, what are you currently doing? Let's make a list," says Angela Moore, CFP® professional, financial guide at Fruitful. She says that doing this can help you spot easy places you can save, whether by cutting subscriptions you aren't using or negotiating bills down. Valerie Rivera, CFP® professional, founder of First Gen Wealth, says it's important to review your spending and make sure it's aligned with your priorities. "So I ask them, do you feel like, now that you've reviewed your spending, that your money is going to where you prioritize? And a lot of times, what I hear is, 'Oh my goodness, no, I had no idea that I was spending this much on takeout.'" If you're struggling to know where to start on sorting your spending, a budgeting app can help. Apps like Rocket Money, Monarch Money, or the YNAB App can auto-sort your expenses and categorize them for you. You'll probably have to go through and manually sort your expenses afterward, but budgeting apps give you a place to start if you're overwhelmed. Apps like Rocket Money even offer concierge services, which will do things like cancel subscriptions or negotiate bills for you. These services come with fees, so you'll have to decide whether those fees are worth the money you'll save. You'll also want to consider whether you're willing to pay money for a budgeting app, or if you'll want to use a free one. Free budgeting apps are hard to find, but many apps, including the YNAB App and Monarch Money, offer free trials. If you just need help getting started, you could start a free trial with one of these apps and copy the information into a Microsoft Excel sheet before the trial is done. Choose one or two areas to focus on cutting spending in your budget Once you know what you're spending on, you'll need to actually start cutting spending. Adrianna Adams, CFP® professional, head of financial planning at Domain Money, says that once you know what you're spending on, it's time to choose one or two places to cut spending. "The very first thing is you have to do a deep dive of where your money is going, because you need to pick one or two things to focus on," says Adams. "When clients just try to pare back everything, it's very hard to really make any habitual changes," she adds. Choosing budgeting areas to concentrate your energy on also lets you keep discretionary expenses that are meaningful to you while cutting spending in areas that aren't as important.
CBS News
15-05-2025
- Business
- CBS News
4 home equity borrowing rules to follow this May, according to experts
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Borrowing from your home equity should always be done strategically, even in today's cooler interest rate today's high-interest rate environment, borrowing remains an expensive option, especially with credit cards and unsecured loans. Lingering inflation continues to underpin high interest rates and the Federal Reserve's most recent decision to pause its benchmark rate to curb consumer spending. While inflation has cooled from its peak, the latest Consumer Price Index data shows prices are still rising at an annual rate of 2.3% as of April 2025, short of the Fed's 2% target rate. Still, if you've built up significant equity in your home, you have two lower-interest borrowing tools worth exploring: home equity loans and home equity lines of credit (HELOCs). Both typically come with lower interest rates than unsecured loans and credit cards, and you can use the funds for virtually any purpose. However, borrowing against your home isn't something to rush into. You'll want a well-thought-out plan to get the best results. Below, we'll detail some proven rules to follow this May if you plan to tap into your home equity. Start by seeing what home equity borrowing rates you'd be eligible for here. 4 home equity borrowing rules to follow this May Here are four important rules to remember if you're embarking on your home equity borrowing journey this month: Shop and compare rates and terms Interest rates on home equity products can vary widely from lender to lender, so it's a good idea to get quotes from several financial institutions, including traditional banks, credit unions and online lenders. Pay special attention to a loan's annual percentage rate (APR), which accounts for fees and the interest rate. That will give you a more accurate estimate of the true cost of borrowing. "Look beyond just the interest rate," says Christopher Stroup, certified financial planner and founder of Silicon Beach Financial in Santa Monica, California. "Compare APRs, repayment terms, draw periods (for HELOCs) and whether the rate is fixed or variable. Ask about rate caps and introductory 'teaser' rates." Stroup also recommends requesting detailed loan estimates and calculating total repayment costs to get the full picture. Shop for HELOCs and home equity loans online today. Understand the fees Be on the lookout for fees that can drive up the cost of a home equity loan or HELOC. Depending on the lender and loan type, you could face costs like origination fees, appraisal fees or prepayment penalties. However, many lenders reduce or waive fees in certain situations. "In many cases, these fees are waived on HELOCs and some short-term home equity loans, typically if the loan is using a primary address as collateral," says Cami Anderson, mortgage lending manager at Wasatch Peaks Credit Union. "If you are using your primary home as collateral, you can often find no-fee or very low-fee options," she says. Choose the right term Home equity loans usually have repayment terms between five and 30 years. For HELOCs, the term is typically 10 to 30 years, split into a 10-year draw period and a 10- to 20-year repayment period. Choosing a shorter term may save you money in interest but it'll raise your monthly payments, while a longer term could make monthly payments cheaper but cost more in interest over time. Anderson says she advises borrowers to choose a slightly longer repayment term when rates are similar, there's no early repayment penalty, the lender allows extra principal payments and the borrower has a higher debt-to-income ratio. "A longer term generally means you have more money in your pocket monthly to use for everyday expenses and emergencies. This means you're not 'locked' into a higher payment and a shorter term, but you can often make extra payments or pay off the loan earlier," she says. Know when to borrow One of the biggest questions homeowners are asking right now is whether to borrow now or wait for rates to drop. But trying to figure out which way interest rates will go is difficult for even the most seasoned economists and rate-watchers. "Trying to outguess the Fed is like trying to outguess the market—occasionally right, rarely repeatable," says Mark Stancato, founder and lead advisor at VIP Wealth Advisors. Instead, focus on what you plan on using the funds for to guide your decision. "If the need is real—think home improvements, consolidating high-interest debt, or bridging a cash flow gap—borrowing now might make sense," says Stancato. He adds that you should pause if there's no clear need for the funds, since a loan should fund something with lasting value, not a short-term want. The bottom line You might consider tapping into your home's equity to fund a home renovation, college tuition or just about any other goal. If used in the right ways, this low-interest alternative to credit cards and personal loans may help you improve your financial health. You may even be able to deduct the interest charges if you use the funds for eligible purposes. For optimal results, follow the above rules and make sure your loan aligns with your overall financial plan, both this May and in the months and years to come.
