Latest news with #delinquency
Yahoo
2 days ago
- Business
- Yahoo
Should I sell my vacation home that I dream of living in when I retire to pay off $50K in credit card debt?
Total credit card debt in the US stands at $1.18 trillion this year, with 4.3% of debt in delinquency, according to the Federal Reserve Bank of New York. With these near record-high numbers, many Americans are feeling the pinch and want to find ways to dig themselves out. But should you allow your debt to disrupt your retirement plans? Don't miss Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 6 of the easiest ways you can catch up (and fast) Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Let's look at the example of Gavin, a 40-year-old married man with two children. He bought a home in the Caribbean in 2019 with the goal of eventually making the house his retirement home. The house is worth $400,000 now, with a $120,000 mortgage balance. Unfortunately, the mortgage loan has a variable interest rate, which is currently at 10.5% with no possible options for refinancing. The home currently generates $700 per month in profit as a short-term rental, but makes less during off off-season and managing it is stressful. Worse, the neighborhood may soon prohibit short-term rentals in the area, so that would be the end of this revenue stream. Additionally, Gavin might also be on the hook for local property taxes and, as a foreign investor, other possible fees and taxes too. On top of this, the buyer is a renter in the US where he currently lives and he has $50,000 in credit card debt. Does it make sense for him to sell the vacation property to pay off what he owes? He's considering buying a home locally and using the rest of the money to invest, build up an emergency fund, or start a college fund for his kids. Selling the vacation home could be a great solution Selling the vacation home in this particular case seems like an easy answer. While it is currently generating a small profit, earning $8,400 per year on a $400,000 asset isn't a great return, especially given the hassle of being the host and the substantial interest he is paying on his mortgage. But losing the short-term rental income would be a major downside. Read more: Nervous about the stock market? Gain potential quarterly income through this $1B private real estate fund — even if you're not a millionaire. Aside from the poor ROI of the home, the interest on $50,000 in credit card debt that he currently has is an absolute financial killer, given that the average credit card interest rate is 21.16% as of May 2025. The $700 per month he is earning from his rental most likely is not even enough to cover the interest that his credit card debt accrues each month. With a home worth $400,000, and assuming closing costs are around 4% (the average is 2% to 5%), this homeowner would still end up with about $384,000 after paying for the transaction fees from the sale of the home. Now, since the home isn't his primary home, it's possible he could owe capital gains taxes if his profits exceeded $250,000 as a single person or $500,000 as a married joint filer. However, since Gavin is married and the home isn't netting in excess of $500,000, he'd likely be spared this tax. He may also need to pay additional sales taxes to the government of his host country. If he doesn't, he could pay off the $120,000 still remaining on the mortgage he owes, as well as his $50,000 in credit card debt and still walk away with around $214,000. That would be a good start to make a down payment on a home in the US for his family (in which he can retire), or to start investing for his future. He could save for his two kids to go to college, start an emergency fund and best of all, free up a lot of income by eliminating his credit card debt and the interest he would be paying on that into the future. In fact, if he uses the money wisely, he could not only set himself up for financial stability, but he could also choose to save to buy another retirement home down the road, when it makes more financial sense. Are there downsides to selling? While Gavin's circumstances make a strong case for selling the home, it's worth looking at whether there are any downsides to doing so, beyond losing the $700 in rental income. Since the home he owns doesn't have a great mortgage, isn't generating a big profit and there's no reason to believe it is a one-of-a-kind home, there's very little downside in cashing out now and using the proceeds to create some more financial stability. The only real risk would be that real estate values skyrocket in his chosen Caribbean retirement destination. This would either price him out of buying his dream retirement home later on or prevent him from earning more on the possible future sale of his vacation home. However, it's unlikely the ROI on Caribbean real estate would exceed the returns he'd get by investing in the stock market in the states or that the increase in the value would be worth paying the interest on the credit card debt and the mortgage combined. There are likely wiser ways to make that money work. So, if he's investing wisely over time, he should likely be able to buy a comparable home as a retiree if he wants to. He could also end up changing his retirement plans if he decides he'd rather stay in the US and be close to his potential grandchildren — and if that happens, it would have been a poor investment to pay for a house that's costly to keep only to end up not retiring there anyway. Selling now with the chance to rebuy later seems like a much better bet. In fact, all signs point to the fact that selling the home seems like the best move in this situation and it could be the start of a much more financially secure — and less stressful — future. What to read next Robert Kiyosaki warns of a 'Greater Depression' coming to the US — with millions of Americans going poor. But he says these 2 'easy-money' assets will bring in 'great wealth'. How to get in now Here are 5 simple ways to grow rich with real estate if you don't want to play landlord. And you can even start with as little as $10 Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Yahoo
4 days ago
- Business
- Yahoo
Klarna buffs results ahead of IPO
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. Dive Brief: Klarna, the European buy now, pay later behemoth that paused its initial public offering earlier this year, said Thursday in its second-quarter earnings report that its active BNPL users rose by nearly a third and consumers remain resilient with declining delinquency rates. Revenue rose 20% over the year-ago quarter to $823 million for the quarter, while Klarna's net loss increased to $53 million, from $18 million a year ago, based on restructuring costs and stock-based payments. On an 'adjusted' operating basis, Klarna recorded a $29 million profit, about 3% above the year-earlier period last year. 'There is a lot of discussion around the state of the consumer, and I'm pleased to share that a record number of Klarna transactions have been paid on time or early in Q2'25 and that credit losses remain low,' CEO Sebastian Siemiatkowski wrote in a letter to investors. Dive Insight: The Swedish-based company reported second-quarter earnings results Thursday, as it prepares to become a public company. Klarna suspended its planned IPO in April amid severe market volatility caused by U.S. trade tariffs, but could stage the offering as soon as September, Bloomberg News reported last month, citing people familiar with the discussions. The number of active Klarna users increased 31% to 111 million in the second quarter from the same period last year, the company said in its report. The company also added 202,000 new merchants over the past 12 months, including its OnePay Later partnership with Walmart, the letter said. Klarna has also announced partnerships with Stripe and the online retailer eBay. The BNPL services provider finished the quarter with 790,000 merchants using its BNPL solution, a 34% increase from 2Q of 2024. Klarna is among the largest of BNPL providers, which provide installment loans that merchants offer at checkout. The company was founded in Stockholm, but listed its main corporate office as based in London in its IPO filing. The company filed its IPO plans with U.S. regulators in March, but then abruptly reversed course the following month after the U.S. announced sweeping tariffs on trade partners. That move by the Trump administration led to a sharp selloff in stocks and higher market volatility as investors feared higher inflation and a potential U.S. recession. In recent months, however, stocks have returned to record highs and Klarna has resumed preparation to move forward with the stock offering, according to the July 31 Bloomberg report. The company is also working to increase its banking activities. Last month, Klarna received permission from the UK's Financial Conduct Authority to operate as an electronic money institution. That will let Klarna customers hold and manage funds in a company account, including the ability to purchase and receive refunds into the account. Klarna has also begun rolling out a debit card for U.S. consumers. 'As the card becomes a primary payment method for more users, it represents a significant growth opportunity to deepen engagement and drive transaction frequency,' Siemiatkowski wrote Thursday. Klarna said the global delinquency rate for BNPL loans dropped to 0.89% in the second quarter from 1.03% a year ago. Recommended Reading Klarna whittled workforce via AI ahead of IPO 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
Forbes
6 days ago
- Business
- Forbes
5 Key Student Loan Repayment Updates As Defaults Rise, Backlogs Grow
Federal student loan borrowers are struggling as the repayment system remains mired in turmoil. Hundreds of thousands of applications for repayment plans and student loan forgiveness programs remain stuck in backlogs. At the same time, huge changes imposed by the courts, the Trump administration, and Congress are reshaping the landscape for borrowers and making it more confusing than ever to figure out what their options are. The result of this confluence of events is a surge in student loan delinquencies. According to the Federal Reserve Bank of New York, student loan delinquency rates have steadily risen this year. 'In the second quarter of 2025, 10.2% of aggregate student debt was reported as 90+ days delinquent,' said the bank in its quarterly report released this month. 'Transition into early delinquency held steady for nearly all debt types; the exception was for student loans, which saw another uptick in the rate at which balances went from current to delinquent," although the bank noted that this uptick was also related to the resumption of credit reporting following a nearly five-year pause. Nevertheless, the Department of Education has acknowledged the fact that millions of borrowers are falling behind on their student loan payments. And the Trump administration anticipates that student loan default rates could double by the end of this year. 'More than 5 million borrowers have not made a monthly payment in over 360 days and sit in default—many for more than 7 years—and 4 million borrowers are in late-stage delinquency (91-180 days),' said the department in a statement in April. 'As a result, there could be almost 10 million borrowers in default in a few months. When this happens, almost 25 percent of the federal student loan portfolio will be in default.' Here are the latest updates for student loan borrowers struggling with repayment and loan forgiveness, and what they should know. Student Loan Interest Resumes For SAVE Plan Borrowers One of the biggest recent changes impacting the federal student loan system is the resumption of interest charges for borrowers in the SAVE plan forbearance. For more than a year, borrowers who selected SAVE (an income-driven repayment program launched by the Biden administration in 2023) have been in an involuntary administrative forbearance, which paused payments and interest. The forced forbearance is the result of a court injunction that blocks the program following a legal challenge brought by a coalition of Republican-led states. The Trump administration justified the restarting of interest accrual by pointing to a recent court ruling in the ongoing SAVE plan litigation. But critics point out that nothing in that court decision explicitly required the department to resume interest. Regardless, many borrowers who have been stuck in the SAVE plan forbearance now feel pressure to apply to switch to a different repayment plan, given that interest is accruing again as of August 1 and the forbearance period still doesn't count toward student loan forgiveness for income-driven repayment plans or Public Service Loan Forgiveness, or PSLF. Backlogs And Denials For Student Loan Borrowers Applying To Switch Plans But student loan borrowers applying to switch to a different repayment plan are encountering a different problem: a massive backlog of applications. According to a court filing submitted by the Department of Education last month, more than 1.5 million applications remain in the queue, and many borrowers have been waiting months for a decision. To make matters worse, the department indicated that it would be denying nearly a third of these outstanding applications (close to 500,000) as soon as this month. Specifically, borrowers who used an earlier version of the IDR application and selected either SAVE (which remains blocked) or the option to allow their loan servicer to pick the most affordable repayment plan option will be rejected. These borrowers will then have to reapply for an income-driven plan using an updated version of the application, essentially adding themselves back to the queue. If there's any good news here, it's that borrowers who apply (or reapply) for an income-driven repayment plan online at and consent to using the newly restored IRS data retrieval tool to import their income data directly from their federal tax return, should experience relatively fast processing, potentially within a few weeks or so. 'Providing consent eliminates much of the time-consuming work of filling out an application,' says Department of Education guidance. 'By electronically importing your financial information, you ensure your application has the most up-to-date data. Plus, having your consent on file means your IDR plan will be automatically recertified each year, if eligible.' Student Loan Forgiveness Under IBR Remains Paused Historically, borrowers who repay their student loans under an income-driven repayment plan would be able to qualify for student loan forgiveness for any remaining balance after 20 or 25 years in repayment, depending on the plan. But loan forgiveness under the SAVE, ICR, and PAYE plans has been blocked for much of this year following a court order in the ongoing SAVE plan litigation saga. All three of these plans were created through the same underlying federal statute, and the authority to provide student loan forgiveness under that statute is now being scrutinized. But student loan forgiveness through IBR, which was created separately by Congress, is not blocked by any court. And the Department of Education concedes that student loan forgiveness under this plan is legally authorized. Nevertheless, student loan forgiveness under IBR remains blocked following a department announcement in July. The department indicated that loan forgiveness is temporarily suspended under IBR 'while our systems are updated to accurately count months' that can qualify toward a borrower's IBR repayment term. But the department has provided no further details, including whether there will be an attempt to claw back previously-awarded loan forgiveness credit, or when student loan forgiveness under IBR will resume. Student Loan Forgiveness Problems Mount For PSLF IBR isn't the only program experiencing problems with student loan forgiveness. PSLF borrowers also face headwinds. Many borrowers who have applied for PSLF Buyback, a program that allows for a lump-sum payment to cover periods of otherwise non-qualifying forbearance periods so that they can count toward student loan forgiveness, have been stuck in a massive and growing backlog. According to Department of Education data, Federal Student Aid staff have been successfully processing two to three thousand PSLF Buyback applications per month, but the application backlog has nevertheless skyrocketed from around 49,000 in April to more than 65,000 in June. Many borrowers have been waiting months for determinations. Meanwhile, the Trump administration is moving forward with steps to impose new rules on the PSLF program that would restrict student loan forgiveness for entire organizations if they engage in what the administration refers to as 'substantial illegal activity.' Critics have argued that this loosely-defined term could be used to weaponize PSLF by punishing nonprofit organizations and Democratic state and local governments simply for engaging in activities that run afoul of Trump administration policy goals. The regulations are still under development and shouldn't be implemented until next summer; many observers expect there to be legal challenges. Big Changes Coming To Student Loan Repayment Under Big, Beautiful Bill As if these issues aren't enough, President Trump signed legislation passed by Congress in July that will make substantial changes to the federal student loan repayment system. These reforms may put additional strain on an already-buckling Department of Education, which was hit by mass layoffs earlier this spring that effectively cut the department's workforce in half and likely has contributed to the existing backlogs. Under the student loan provisions of the so-called 'Big, Beautiful Bill,' IBR would be preserved for current borrowers. But the ICR, PAYE, and SAVE plans will all get phased out by July 2028, if not sooner. And any borrower who consolidate their federal student loans, or takes out a new federal loan, on or after July 1, 2026 would be cut off from IBR and would only be able to access the Repayment Assistance Plan, a new income-driven option that will force borrowers to remain in repayment for 30 years before they can qualify for student loan forgiveness. A major student loan advocacy organization has warned that RAP could be a debt trap for many borrowers.
Yahoo
7 days ago
- Business
- Yahoo
The share of US student loans entering ‘serious delinquency' surged to 21-year high — how to climb your way out of debt
Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. It's no secret that America's household debt has been climbing — but the latest data on student loans is still startling. According to the New York Fed's latest Quarterly Report on Household Debt and Credit, student loan balances rose by $7 billion in the second quarter to $1.64 trillion. More concerningly, the share of loans entering serious delinquency — defined as 90 or more days past due — jumped to 12.88%, the highest level in 21 years of data. As the chart shows, the surge was sharp. Delinquencies have been rising since the start of the year, when the government ended a years-long payment pause for student loans and missed payments began hitting borrowers' credit reports again. Don't miss Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 6 of the easiest ways you can catch up (and fast) Robert Kiyosaki warns of a 'Greater Depression' coming to the US — with millions of Americans going poor. But he says these 2 'easy-money' assets will bring in 'great wealth'. How to get in now Still, student loans represent only a portion of the financial pressure facing American households. In Q2, total household debt rose by $185 billion to reach $18.39 trillion. Mortgage balances surged $131 billion to $12.94 trillion, credit card balances climbed $27 billion to $1.21 trillion and auto loan balances rose by $13 billion to $1.66 trillion. All of this is unfolding against the backdrop of high interest rates and a cooling job market. The Bureau of Labor Statistics recently revised its data, cutting U.S. employment figures for May and June by a combined 258,000 jobs — a sign that households may be more financially fragile than they appear. With debt levels climbing and financial stress mounting, it's more important than ever to keep a close eye on your spending. Even small savings on everyday essentials can add up — and help free up cash for paying down debt or building a financial cushion. Cut waste from your spending If you want to improve your finances, the first step is understanding where your money goes each month. But trimming waste isn't just about skipping lattes or takeout. Even in essential categories, you may be spending more than necessary. The good news? With a bit of research, those costs can often be significantly reduced. For instance, car insurance is a major recurring expense and many people overpay without realizing it. According to Forbes, the average cost of full-coverage car insurance is $2,149 per year (that's $179 per month). However, rates can vary widely depending on your state, driving history and vehicle type and you could be paying more than necessary. By using you can easily compare quotes from multiple insurers, such as Progressive, Allstate and GEICO, to ensure you're getting the best deal. In just two minutes, you could find rates as low as $29 per month. Meanwhile, home insurance is another major expense where smart shoppers can save big. With OfficialHomeInsurance, comparing home insurance rates is fast and hassle-free. Just enter a few basic details and the platform will instantly sort through over 200 insurers to find you the best deals available in your area. You'll be able to review all your offers in one place and quickly find the coverage you need for the lowest possible cost, saving an average of $482 a year. Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. Put your spare change to work One of the easiest ways to cut financial waste is by putting your spare change to work instead of letting it idle. That's where micro-investing apps like Acorns come in. When you make a purchase on your credit or debit card, Acorns automatically rounds up the price to the nearest dollar and invests the difference. The coins that would wind up in your pocket if you were paying cash are automatically invested in a diversified portfolio of ETFs. Buying a coffee for $3.40? The app rounds it up to $4 and invests the extra $0.60. Over time, those small amounts can add up — especially if you're consistently spending and saving. It's a simple, set-it-and-forget-it way to build wealth from money you might not even miss — and, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey. What to read next Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Here are 5 simple ways to grow rich with real estate if you don't want to play landlord. And you can even start with as little as $10 Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? This article provides information only and should not be construed as advice. It is provided without warranty of any kind. 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
Yahoo
09-08-2025
- Business
- Yahoo
Young Americans drowning in credit card debt as delinquency rates climb near 10% in Q2
Young Americans continued to make up the largest share of those transitioning into credit card delinquency in the second quarter, according to a report released by the New York Federal ticking down slightly from the previous quarter, the report showed that nearly 10% of credit card balances held by Americans aged 18-29 became 90 or more days overdue in the second quarter. New York Fed researchers said credit card delinquency rates for Americans under 40 have been "unusually elevated," adding they are keeping a "close eye" on the trend. The rate of balances transitioning into serious delinquency for 18-29-year-olds has hovered around the 10% mark since 2023. Before then, the last time the rate eclipsed 10% was in 2010. Americans' Credit Card And Household Debt Reach All-time High The report comes after data painted an increasingly shaky picture of the financial security of members of Gen Z. A separate report by the New York Fed found that the unemployment rate for recent college graduates aged 22-27 had spiked from post-pandemic lows, and is 0.7% higher than the national rate as of June. Excluding the pandemic, the unemployment rate for recent college graduates in March 2025 was the highest in more than a data shows that members of Gen Z are becoming increasingly spread thin by both new and traditional credit services. A Bank of America Institute Report from June 2025 found that "buy now, pay later" (BNPL) usage among members of Gen Z accelerated in the last year after three years of slowing growth. What Would Be The Impact Of A Credit Card Interest Rate Cap? Read On The Fox Business App Though most BNPL lenders do not report payments to credit bureaus, New York Fed researchers said that usage of BNPL was much higher among younger borrowers compared to those in other age groups. Affirm has begun reporting payment history to Experian and said their findings suggest typical BNPL purchases were fairly small, ranging from $600 to $1,000, though, "from what we're hearing … now it's extended to even smaller purchases, like even a cup of coffee."Original article source: Young Americans drowning in credit card debt as delinquency rates climb near 10% in Q2 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
