Dear Penny: Can My Boyfriend Sue Me for His Big Sacrifice if We Break up?

Dear Penny,

I am going to be starting nursing school in January 2022 and have a question about potential future obligations to my boyfriend. He has offered to drive me to all of my school obligations until my license is restored in May 2022. My alternative would be to pay for a ride-share which could cost $2,000 or more per month. 

This is obviously very generous and I am deeply appreciative. He will be making large sacrifices of his time to help me with this.

Our relationship is great, and I don’t see that changing. We’ve even talked about getting married, but that would not happen until after nursing school. (We both graduate at almost the same time.) 

I know that pre-written agreements in a marriage can be helpful in situations like this in case of separation. I’m trying to be responsible not knowing the future. If he and I do break up, would I have any legal responsibility to compensate him for his help? If so, is there an agreement we can make beforehand to avoid that unlikely scenario?

-Nervous Nursing Student

Dear Nervous,

It’s impossible to plan for every nightmare scenario that could occur during a breakup. I think you’re on pretty safe turf accepting your boyfriend’s generosity, though.

Typically, couples need a written agreement when significant assets or debt is involved. For unmarried couples buying a house together, for example, a legally binding agreement is a must. You’d want a domestic partnership agreement that spells out who would get to stay in the home and how you’d manage any related debts if you broke up. But unless your boyfriend has asked you to sign a contract spelling out his compensation for being your chauffeur, it would be tough for him to sue you for his services in the event that the two of you split.


What I’d worry more about is the toll that this arrangement will take on your relationship. It sounds like you’re going to be spending a lot of time in the car together if paying for ride-shares would cost you $2,000 a month. That may sound peachy right now. But it may be a different story after a couple of months, particularly if you’re both exhausted from studying.

In deciding whether to accept this offer from your boyfriend, think about what it will cost him not just in terms of money, but also time. If he wouldn’t be going that far out of his way, riding along with him seems like a no-brainer. But if he’d be spending a couple hours each day driving you around while trying to complete his own studies, relying on him for 100% of your transportation needs probably won’t be a great option.

Fortunately, this doesn’t seem like an all-or-nothing decision. You can accept your boyfriend’s offer, but also set aside some money so you can give him a break when he needs it.

Instead of budgeting $2,000 a month for ride-sharing, maybe you can set aside several hundred dollars a month. You can use that money to pay for an Uber or stay in a motel that’s close to your campus from time to time. Once you start school, you might also want to ask around to see if any classmates live near you. Perhaps they’d be willing to let you hitch a ride in exchange for gas money. Regardless, be sure to throw some gas money your boyfriend’s way.

Your boyfriend sounds like a good guy, given his willingness to sacrifice for you. It also sounds like you’re appropriately grateful to him. Whenever possible, try to show that gratitude by freeing up his time in other ways. For example, you could cook for him or do extra household chores if you live together.

This situation may be tough, but it’s only temporary. But if you communicate clearly and find alternative options so your boyfriend can prioritize his needs when he’s short on time, I think you’ll be able to make this work.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected] or chat with her in The Penny Hoarder Community.

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Source: thepennyhoarder.com

Using a Coborrower on Your Loan

Qualifying for a loan is sometimes easier said than done. Just because you need a mortgage to buy your first home, or a personal loan to consolidate and pay off credit card debt, doesn’t mean a lender is going to magically understand and give you the exact loan and interest rate you want.

Thankfully, if you’re struggling to qualify for a loan, you might be able to ask a friend or family member to step in to help. If they agree, essentially, you leverage their income, credit score, and financial history to help you get a loan that’s right for you.

The downside is that this type of borrowing (as in, borrowing money with another person) can get a little jargon heavy. “Coborrower,” “co-applicant,” and “cosigner” are all terms that are going to come up. Let’s dive into the details.

What is a Coborrower?

A loan coborrower basically takes on the loan with you. Their name will be on the loan with yours, making them equally responsible for paying back the loan. They will also have part-ownership of whatever this loan buys — for example, a coborrower will own half of the home if you take out a mortgage together.

Spouses, for example, might coborrow when buying property, or if they are taking out a home improvement loan for a remodel. You and your coborrower may qualify for a larger loan or better loan terms than if you were to take out a loan solo, and this way you both own the investment and are equally responsible for loan payments.

Another quick piece of jargon: A co-applicant is the person applying for the loan with you. Once the loan is approved, the co-applicant becomes the coborrower.

Coborrower vs. Cosigner

A cosigner, on the other hand, plays a slightly different role than that of a coborrower.

A cosigner’s financial history and credit score is factored into the loan decision, and their positive financial history can be a boon to the primary applicant’s loan application. But they do not have ownership of any property the loan might be used to purchase, they do not receive any loan proceeds, and would only help make your loan payments if you were unable to make them.

Cosigning helps to assure lenders that someone will be able to pay back the loan. Typically, a cosigner with a stronger financial history than you have, which can help you get a loan you might not qualify for on your own (or for better terms than you may qualify for on your own). Lenders might be more comfortable lending to you if your cosigner has a strong credit score and a dependable income, but loan underwriting criteria (that is, the personal financial factors used to determine who gets a loan at what rates and terms) differ from lender to lender.

For an example, let’s go back to our hypothetical home-buying experience. A parent with a strong credit history might cosign their child’s mortgage, allowing the child to get a lower interest rate on their home loan than they would have on their own. The parent wouldn’t own the home, but they would have to make mortgage payments if their child couldn’t.

Benefits of a Coborrower

Having a coborrower can help two people who both want to achieve a financial goal — like homeownership or buying a new car — put in a stronger application than they might have on their own. Because the lender will have double the financial history to consider (and two borrowers to rely on when it comes to repayment), the loan is a potentially less risky prospect for them, which could translate to more favorable terms.

Basically, having a coborrower has the potential to improve the borrowing power for both partners involved — whereas having a cosigner is generally more beneficial to the primary applicant than it is for the cosigner.

When Does Having a Coborrower Make Sense?

Applying with a coborrower makes the most sense when you’re working as a team toward some financial objective. Spouses buying a house together is a common example, but a joint personal loan with a partner might also be considered in order to fund home improvements or consolidate debt to get your finances in better shape before getting married. Business partners also sometimes coborrow loans to help get their ventures up and running.

Many companies, including SoFi, now allow qualified individuals to coborrow on personal loans. That means you and your coborrower (whether they’re your spouse, friend, or a member of your family) may be able to qualify for an even better interest rate and fund your financial goals that much more easily.

The Takeaway

It’s a big decision to take out a loan, so it may be a good idea to make sure both coborrowers are 100% ready to take on this financial commitment. Both of you will be responsible for making monthly loan payments.

Thinking about coborrowing on a personal loan? Check out your rate on a SoFi Personal Loan in minutes.


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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Source: sofi.com

The Cost of Living in St. Louis

St. Louis consists of family-friendly communities and boasts beautiful, historic architecture that leaves visitors and residents alike in awe. The Gateway to the West is a vibrant metropolis that’s attracted thousands of new residents in 2020 alone.

As a staging post for western expansion in the U.S., St. Louis has a rich history. It’s an eclectic city with a major blues music scene and made up of fiercely loyal sports fans.

Between 2019 and 2021, thousands of new residents moved into the city. If you like the idea of living in a city with beautiful architecture, a cool vibe and kind neighbors, St. Louis might be a great place to put down roots.

To find out if the cost of living in St. Louis fits your budget, we’ve dissected the cost of living in multiple categories. Overall, it looks like this city is one of the more affordable cities in the country with a cost of living that’s 12.2 percent lower than the national average, falling 0.1 percent in the past year.

Being as informed as possible about things like the cost of food and the average rent in St. Louis will help you feel confident about making the move to a new city.

St. Louis housing

St. Louis housing

Housing costs in St. Louis

If you’re looking for an affordable city to move to, you should definitely consider St. Louis. Overall, housing in this city is 24.7 percent less than the national average. The average rent in St. Louis is $1,961 per month, which is 17.4 percent lower than the previous year.

Of course, how much you pay will depend on the neighborhood in which you call home. For example, if you love the Central West End Historic District, your dream apartment will cost around $3,095 per month. On the other hand, if you like the neighborhoods of Florissant and Lakewood, you’ll pay $846 and $724, respectively — a significant difference in price from the average rent in St. Louis.

Average rent prices in cities near St. Louis

Another way to keep the cost of living in St. Louis on the affordable side is to find rental properties in surrounding cities and suburbs. Here are a few you might want to consider.

Home prices in St. Louis

If you’re not happy with the average rent in St. Louis, you have another option: purchase a home. The average cost of a home in this city is $210,000, up a little over 5 percent from last year. An important note: the housing market is very competitive right now, according to Redfin. Homes tend to get multiple offers and sell for 1 to 7 percent above the listing price.

On a positive note, though, buying a house can keep your cost of living in St. Louis rather low. If you only put 5 percent down on a $210,000 home, you’ll pay around $902 per month. If you put the recommended 20 percent down, your monthly mortgage payment will average $760.

St. Louis ribs

St. Louis ribs

Food costs in St. Louis

Besides housing costs, food is your next greatest expense. And depending on the area in which you live, food prices can make the cost of living in St. Louis affordable or too expensive.

Grocery costs in St. Louis are on par with the U.S. average, only slightly below it by 1.7 percent. A half-gallon of milk, for example, will run you approximately $1.76 in St. Louis. The national average is $2.10. The national average for a dozen eggs is $1.47. In St. Louis, they cost $1.31.

Don’t forget about eating out! As Americans get busier, they tend to eat out more often, either visiting the restaurant or ordering takeout or delivery. Eating out is fun and makes life so much easier when you’re taking care of everything on your plate.

The average cost of a meal for one person in St. Louis is $17. And you’ll have plenty of options to choose from. Despite the pandemic, the St. Louis food scene is on the rise. There are several restaurants that opened within the last year that will make a foodie’s heart soar, like:

  • Edera Italian Eatery
  • BEAST Butcher & Block
  • Terror Tacos
  • Taqueria Durango
  • Fortunate Gooseberry

You’ll find an abundance of eatery options to delight every mood and palate. From pizza and Mexican to Chinese and Southern comfort food trucks, you’ll have plenty to choose from.

Utility costs in St. Louis

Utility costs can quickly drive up the cost of living in St. Louis, including the average rent in St. Louis if your landlord includes those fees in your rent.

Fortunately, utility fees are around 5.3 percent lower in this city than the national average. This is 3 percent lower than 2020, too.

Utility fees include:

  • Electricity and other energy costs
  • Water and sewage
  • Garbage and recycling pick-up
  • Cell phone service
  • Internet
  • Cable

In normal circumstances, you can expect to pay $148.54 per month for energy expenses. The national average is $161.20.

Some things that can drive up utility costs include:

  • Extensive use of heaters and air conditioners (which is sometimes hard to control given the weather extremes in this part of the country)
  • Leaving all the lights on throughout the day
  • The package you choose for internet/cable/cell phone

St. Louis highway

St. Louis highway

Transportation costs in St. Louis

Another important factor in determining the cost of living in St. Louis is how much you’ll spend on transportation. Considering the average rent in St. Louis, how much you have to pay toward getting around the city can even determine where you decide to live.

There are four ways to travel in and around St. Louis: walking, biking, public transit and your own vehicle. Transportation costs in the city are 13.5 percent lower than the U.S. average.

St. Louis has good walkability and bike scores (60 and 52, respectively). The public transportation score is 46.

The Metropolitan Saint Louis Transit offers four ways to get around the city:

  • Call-A-Ride curb-side pick-up
  • Bike & Ride
  • Park & Ride
  • MetroLink (light rail)
  • MetroBus

Bus fare for a 1-way trip is $1.00, while a ride on the light rail is $2.50. A weekly pass on the light rail is $27. You can also invest in a monthly pass, which is $78.

If you own your own vehicle, you’ll pay regularly for fuel, maintenance, registration and parking. Gas prices are currently $2.57 per gallon and maintenance like tire balancing is $38.97. Parking fees vary. The average in Downtown St. Louis is $2 per hour for a spot in a lot or parking garage. Metered parking on the street costs $0.25 for 15 minutes.

Healthcare costs in St. Louis

While it’s difficult to get an accurate reading of healthcare costs, on average, residents of St. Louis pay 12.9 percent lower rates than the national average.

It’s difficult to get an accurate estimate because your healthcare needs might be drastically different than those of your neighbor or even others in your immediate family. If you’re single and healthy, your monthly healthcare costs will be lower than married couples, those who have children/dependents and those with special healthcare needs.

Still, we can break down the costs of some basic healthcare services in the city so you can see how they differ from the national average.

  • Doctor visit: $77.70 in St. Louis; $112.81 – the national average
  • Eye exam: $73.88 in St. Louis; $105 – the national average
  • Dental check-up: $92.78 in St. Louis; $99.44 – the national average
  • Chiropractic adjustment: On average, an initial examination with a chiropractor (which often includes an adjustment) is $71.42 in St. Louis. The national average is $111.

Regarding medication costs, over-the-counter medications are around 16.57 percent higher than the national average, while prescription costs are 2.05 percent lower.

St. Louis botannical garden

St. Louis botannical garden

Goods and services costs in St. Louis

Every month, quite a bit of a person’s budget goes to the cost of paying for various goods and services. These are “non-essential” items but are still important enough to purchase regularly. Things like:

  • Haircare products
  • Oral healthcare products
  • A trip to the salon
  • Regular hair cuts
  • Clothing
  • Paper products (toilet paper, napkins)
  • Dish soap
  • A massage

On the whole, the cost of miscellaneous goods and services in St. Louis is 8 percent lower than the national average. Let’s say you’re running errands. You decide to go to a yoga class, head to the salon and then pick up your dry cleaning on the way home. You’ll pay about $68.13 (national average = $67.03).

Another day, you might pick up some toothpaste ($2.32) and shampoo ($1.15) before going to a movie ($10.33) and getting some pizza and beer ($19.19). You’ll spend an average of $50.02. The national average for these items comes to $32.99.

As you can see, these costs can quickly add up and will impact the cost of living in St. Louis.

Taxes in St. Louis

While most people don’t like talking about taxes, it’s important to know what you’re paying toward them as they can directly impact the cost of living in St. Louis.

The income tax rate in Missouri is between 0 percent and 5.4 percent. In 2014, the Missouri legislature decided to cut income taxes from 6 percent to the current rate. People who live or work in St. Louis also pay a 1 percent earnings tax.

Other taxes to consider are sales tax and residential property tax (if you decide to purchase a home).

The sales tax rate in St. Louis is 9.679 percent, which is a combination of the city and state tax rates. The Missouri state sales tax is 4.23 percent. The St. Louis tax is 5.45 percent. If you buy a product with a price tag of $1,000, you’ll pay nearly $100 extra in sales tax.

The St. Louis County tax rate on residential properties is 1.05 percent. If you purchase a $210,000 home, you’ll pay $2,205 annually in taxes.

You might be able to save money on taxes by donating your furniture when you move. Furniture donation to a charity is something you can deduct from your taxes. Just make sure to ask the charity for a tax receipt.

How much do you need to earn to live in St. Louis?

One of the most important questions you can ask yourself before deciding to move is whether your current income (or income from a new job) will support the cost of living in St. Louis.

To help you figure this out, let’s look at the average rent in St. Louis. You’ll pay $1,961 per month or $23,532 per year. The median household income in St. Louis is $43,896. The average rent in St. Louis comes to nearly half the median income for people in this city.

Most financial professionals recommend paying no more than 30 percent. However, you have some wiggle room. You can:

  • Find a more affordable neighborhood
  • Find an apartment in a St. Louis suburb
  • Purchase a home
  • Cut costs by eating out less and walking, biking or taking public transportation
  • If possible, get a higher paying job

If you’re unsure of whether your current budget allows for a move to St. Louis, use our free rent calculator to investigate the matter further.

Understanding the cost of living in St. Louis

Knowing as much as you can about the cost of living in St. Louis can help you determine whether it’s really an affordable city in which you can move. And you know what they say: Knowledge is power.

Taking some time to figure out the cost of living in a city — like food, transportation and the average rent in St. Louis — will help you see if the city meshes with your unique budget. That, in turn, can give you the confidence you need to make the transition to a new city.

If you’re ready to make the move to Missouri, be sure to check out our listings to find apartments for rent in St. Louise that are affordable and have all the amenities you need.

Cost of living information comes from The Council for Community and Economic Research.
Rent prices are based on a rolling weighted average from Apartment Guide and Rent.com’s multifamily rental property inventory of two-bedroom apartments as of August 2021. Our team uses a weighted average formula that more accurately represents price availability for each individual unit type and reduces the influence of seasonality on rent prices in specific markets.
The rent information included in this article is used for illustrative purposes only. The data contained herein do not constitute financial advice or a pricing guarantee for any apartment.

Source: rent.com

Bad Debt vs Good Debt

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It’s almost impossible to get through life without taking on debt at some point or another. Between using student loans to go to college, taking out an auto loan for your first car or qualifying for a mortgage your first house, debt seems to be a part of most people’s lives. That’s not to say that you have to live with debt forever, but just you will likely be in debt at sometime.

Check out our mortgage calculator.

Unfortunately, it seems too many people have let debt become the norm and in general, people are no longer phased by carrying around a few thousand dollars of consumer debt or having student loan payments until they retire.

While having debt is never really a good thing (as in you owe someone money and are thus somewhat beholden to them), in the personal finance world, there are debts that are sometimes referred to as “good debts,” while others are considered to be “bad debt.”

In general, good debt is when you use it to buy something you need but can’t afford to pay for all at once, while bad debt is used to get something you don’t need and can’t afford. Good debt is also often associated with appreciating assets (things that go up in value) that add to your net worth. On the other hand, bad debt is often associated with depreciating assets (things that go down in value).

But sometimes figuring out the category for your debt and why can be confusing. Here are three types of debt commonly considered to be good debt and why:

Student Loans

The first debt many of us take on in our lives is student loan debt. Luckily, most people consider student loans to be good debt because taking on student loans to obtain a higher education often results in your landing a better career and therefore increasing your earning potential.

Try our student loan calculator.

It’s common knowledge that people with a college degree tend to earn more than those without a college degree, but what you decide to study can also have a huge effect on your earning potential. For people who study things that have a set career path, student loans may indeed be good debt and an investment into their future, but for those who choose to study something without many potential jobs, student loans may end up being just another payment they have to make each month. It’s a good idea to consider how long it will (likely) take you in your chosen field to pay off those student loans to see if it is really worth it.

Mortgage

Buying a home is often thought of as an exciting step toward becoming an adult, and for most that means taking on a mortgage. Mortgages are considered good debt because buying a house is usually seen as an investment. If the real estate market rises, you might be able to profit when you sell your home down the road. Plus, in the meantime real estate mortgage interest is tax deductible.

Business Debt

Starting your own business can be a very costly endeavor no matter what industry you are going into, and taking on business debt to start your own money-making operation is another form of good debt. Similar to student loans, business debt is supposed to be taken on to help you increase your future earning potential.

Bad Debt

Meanwhile, some examples of bad debt include credit card balances, auto loans and personal loans. These traditionally carry higher interest rates and so will cost you more in the long run. Sometimes you will hear (or read) people who don’t carry a balance on their credit card say (or write) that they are debt-free. Of course, if they have student loans or a mortgage, this isn’t technically true. But if you are prioritizing which debts to pay off first it is a good idea to start with the bad debt. Just keep in mind that all debt has to be paid back eventually!

Do you believe in good debt and bad debt? Why or why not?

Photo Credit: flickr

Kayla Sloan Kayla Sloan is a writer with an expertise in debt, budgeting and saving money. She is focused on paying off her consumer and student loans, while simplifying her life and closet. Kayla’s work has been featured across the web, including on The Huffington Post, Time, credit.com and AOL. You can follow her as she blogs about her journey out of debt at www.kaylasloan.com.

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Source: smartasset.com

Partial Payments for Debts

Whether you’re paying for college, buying a house, or starting a business, it’s common to take on debt at some point in your life. Repaying that debt typically involves making a fixed or minimum monthly payment by a certain day each month.

But what happens if money is tight and you don’t have enough to make that monthly payment?

It might seem like making a partial payment is better than paying nothing at all. However, that’s not necessarily the case. Depending on the lender or creditor, a partial payment may be looked at the exact same way as a late or missed payment.

Though partial payments might help lower your balance and reduce the interest that accrues on your debt, lenders and creditors generally don’t see them as on-time payments and may still consider your account as in default.

If you’re thinking about making partial payments, here’s what you can expect to happen — and what you can do instead.

Recommended: Prepayment Penalties: Why They Exist and How to Avoid Them

What is a Partial Payment?

A partial payment on a debt is any payment smaller than the minimum amount due, as specified by the creditor.

Credit cards have minimum payment amounts, which can vary depending on your balance and annual percentage rate (APR). Other types of debt, such as car loans and mortgages, typically have set monthly payments that don’t vary as much.

Partial payments typically do not typically satisfy a creditor’s payment requirements for loans, credit cards, and other debt. And, not paying the full amount could be treated the same as a missed payment.

Why Do Customers Make Partial Payments?

Generally, customers make partial payments if they’re dealing with financial hardship or other money issues that make them unable to cover all their monthly expenses.

Even a sound budget can go off the rails when emergency expenses, such as medical bills or car repairs, arise. When bills are due, paying for necessities, like food, housing, and utilities, are usually a higher priority than long-term debt.

People who are out of work due to the pandemic (or other reasons) and collecting unemployment benefits may also consider making partial payments on debt for a period of time.

Recommended: How to Start an Emergency Fund (and Why You Should)

Does a Partial Payment Affect Your Credit Score?

It could. If you pay less than the minimum amount due on a credit card or loan, it likely won’t satisfy your creditors and they will still consider it a missed payment. In addition to hitting you with a late fee, they may also report to the credit bureaus that your payment is late.

By law, creditors can’t notify credit bureaus of a late payment until it’s 30 days past the due date. Paying the remainder of what you owe for that month prior to the 30-day mark can keep a late payment from showing up on a credit score, though you could still be liable for fees and penalties set by the creditor for making a late payment.

Because your payment history makes up 35% of your FICO® Score, having a late payment on your record can cause your score to drop.

Lenders consider a borrower’s repayment track record as a primary indicator of their ability to pay back future debt, which is why payment history is the largest component of most credit scores.

The impact of late and partial payments on your credit score will vary based on your existing credit history and how far behind you are on payments. Accounts that go unpaid for several months will do more harm to a credit score than a single late payment.

Over time, the impact of a late payment on your score will diminish and, after seven years, it will be removed from your credit report.

Recommended: How to Build Credit Over Time

Other Downsides of Making a Partial Payment

Falling short of what you owe can create other issues besides putting a dent in your credit score. Creditors may impose fees and take additional measures to secure repayment.

Here’s a closer look at what could happen if you only make partial payments on these common types of debt.

Auto Loans

What happens to your auto loan will depend on your agreement and history with the lender. If you’ve never missed a payment before, they may be willing to accept a partial payment for now.

Depending on the state, defaulting on your car loan can mean vehicle repossession, which can involve selling the car at public auction or electronic disabling the car to prevent it from being used. It can be a good idea to check the contract terms to learn what the lender is authorized to do and when.

Credit Cards

Unless you’ve come to a prior agreement with the credit card company, partial payments likely won’t satisfy your account’s minimum payment requirements.

Even if you pay something towards the bill, your account will likely still become delinquent, and the credit card company may report the late payments to the credit bureaus.

Failing to pay the minimum amount on a credit card bill also typically comes with late fees. Delaying payment further can result with additional consequences, such as freezing your credit card and sending your debt to a collection agency.

Recommended: How Do Credit Card Payments Work?

Mortgages

Making partial payments on a mortgage can be considered defaulting on the loan and even trigger the foreclosure process.

Prior to foreclosure, borrowers will likely incur late fees and receive a notice of default when the mortgage payment is a few months past due.

In general, a foreclosure can’t begin until 120 days after the first missed mortgage payment. That means you have some time to pay the amount that’s past due before the lender starts the foreclosure process.

Student Loans

Partial payments on student loans could cause them to become delinquent one day after the payment due date unless alternative arrangements are made with lenders.

With federal student loans, your loans typically enter default when you miss or only make partial payments for 270 days. The lender can then report the default to the credit bureaus. In addition, the government can garnish your wages, and even keep your tax refund.

A possible exception: If you have an income-driven federal student loan repayment plan, your monthly payment could be as low as $0 if your income dips low enough.

With private student loans, the rules will depend on the lender. If you remain delinquent for 90 days or more, the delinquency may be reported to the credit bureaus. If the account continues to be delinquent, you could fall into default, at which point private lenders can take legal action.

Recommended: How to Get Out of Student Loan Debt: 6 Options

Alternatives to Making Partial Payments

Before making a partial payment, you may want to consider some alternatives:

Reaching Out to Your Creditor

It can be a good idea to contact the creditor or lender before the payment is due to explain your situation and what you can afford to pay that month.

You may also want to ask about a “hardship repayment plan.” This type of plan could potentially allow you the option of minimal or no payment, a temporary reduction or suspension in account interest, or interest-only payments. You may want to keep in mind, however, that interest-only payments won’t decrease your principle — or the size of your loan. Some programs last a month, and others up to six months or so.

Contacting a Nonprofit Credit Counseling Agency

These agencies can help by negotiating lower interest rates with your current creditors. This can often result in lower monthly payments. If you are able to work out a plan, the payment you make may no longer be considered a “partial payment,” but instead an agreed-upon amount.

Considering Debt Consolidation

If you have multiple credit cards with high-interest rates and you’re having trouble paying the minimum on each, you may want to look into whether a debt consolidation program might help. The process involves taking out a personal loan at a bank or other reputable lender and then using it to pay off your credit cards.

You then end up with one loan to pay back, ideally at a lower interest rate. Typically, a closed-end loan like a personal loan means higher monthly payments, since personal loans have fixed terms. This is great news for borrowers who want to pay down their debt sooner, but it might not be the right choice for everyone.

Recommended: 6 Strategies for Becoming Debt Free

The Takeaway

If cash flow is tight, you might consider making a partial payment on a debt, hoping that paying something will prevent a late fee or a late payment from showing up on your credit report.

However, borrowers don’t typically get any extra credit for making a partial effort. If the monthly minimum or fixed payment hasn’t been paid in full, the lender will likely mark the payment as missed.

While partial payments may help chip away at your account balance, you can still end up facing fees, a reduced credit score, and potentially loan default.

If you’re unable to make full payments on your debt, it can be a good idea to contact your creditor as soon as possible to let them know about your financial situation first. In some cases, they may be able to offer alternative payment plans, forbearance, or postponement.

Setting up — and sticking to — a monthly spending budget can help you avoid having to make partial payments.

Looking to keep better tabs on your money, so you always have enough to pay your bills? With a SoFi Money® cash management account, you can spend, save, and earn competitive interest all in one account. And, you can easily track your weekly spending (and make sure you’re not overdoing it) right in the dashboard of the SoFi app.

Learn how SoFi Money can help you stay on top of your personal finances.

Photo credit: iStock/mapodile


SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’swebsite .
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

With Credit Sesame, He Raised His Credit Score Nearly 170 Points

“It’s embarrassing,” he says. “I realized there were definitely some things I needed to address.”
His goal was to raise his credit score to 700 by the time he turned 24, and he’s nearly there. More than a year after joining Credit Sesame, he’s about to turn 24, and his credit score is 691 — a huge improvement.*
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That’s when he found Credit Sesame, a free website that helps people manage their credit better.
When you sign up with Credit Sesame, it immediately shows you what your credit score is. It shows you why you have the score you do, and it gives you personalized tips to steer you in the right direction.
It’ll even show you if there’s a mistake on your credit report that’s holding you back. (One in five reports has a mistake.)
Following Credit Sesame’s advice, Frias took the following steps:
So how did Frias raise his credit score by 168 points?1 What’s the secret?
He’s been driving what he calls “a little bucket” — an old Honda Civic that he’s nursing along, even though it needs a new ignition and is likely on its last legs. Now he’s in a position to change that.

How Your Credit Affects Your Life — and How You Can Raise Your Score

But all of that came to a screeching halt when he found out his credit wasn’t good. In fact, his credit was so poor that he couldn’t even get a credit card — let alone a car loan or a mortgage, which are harder to get than a credit card. It turned out his goals were way out of reach.
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With his shiny new credit score, Frias just signed a lease on an apartment in the San Francisco Bay Area. He’s moving there from Los Angeles with his girlfriend and their two dogs, so he can live closer to work. Like many of us, he’s been working remotely, but that likely won’t last forever.
Once you’ve paid off your loan, you get all your payments back, minus a little interest. So you’ve started a little savings stash.
Late payments to an American Express card had pretty much ruined his credit. Your credit score is like your financial fingerprint, and a score below 600 makes you ineligible for most loans or credit cards.
Like Frias, 60% of Credit Sesame members see an increase in their credit score; 50% see at least a 10-point increase, and 20% see at least a 50-point increase after 180 days.2
Now that Frias has a better credit score, he and his girlfriend are packing to move to the Bay Area.

What’s the Secret?

Each month, you make small payments toward the loan. Those payments get reported to the three credit bureaus. They see that you’re making payments, and your credit starts to reflect that.
He took out a ,500 credit-builder loan that was recommended to him. It’s a loan that’s specifically designed to help you build your credit. You borrow money, but the bank holds onto that money until you’ve paid off the loan.
Your credit score isn’t just some pointless three-digit number. It influences major parts of your life, like where you live and what you drive. The higher your score, the better deal you’ll get on big things like a mortgage, a car loan, a credit card, a car rental or an apartment lease.
Ready to stop worrying about money?
Lorenzo Frias has specific financial goals in life, including buying a better car and someday buying his own home.

1. Credit-Builder Loan

Once you review your credit report, you can dispute certain negative marks that are dragging you down. You send dispute letters to the three major credit bureaus: Equifax, Experian and Transunion.
As for buying a house, the Federal Housing Administration has pre-approved him for a 0,000 mortgage. “So there’s that to look forward to — I can buy a home.”
Frias and his partner share a number of different credit cards that they use for different purposes.

2. Secured Credit Card

Frias had a company named Lexington Law doing this for him, but he quickly decided that was too expensive and started doing it himself.

3. Other Credit Cards

How was he able to boost his score by nearly 170 points?1 By following the website’s tips and using its free tools. Now he’s about to lease a better apartment, and he’s hatching plans to buy that car and house he’s dreaming of.

If your credit is bad, it’ll show you steps you can take to help fix it. If it’s good, it’ll show you ways you could make it even better. And if it’s excellent, well, it’ll show you how to keep it that way.
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. He’s a Credit Sesame member and finally got his credit score above 700, woo hoo!1
2Credit Sesame does not guarantee any of these results, and some may even see a decrease in their credit score. Any score improvement is the result of many factors, including paying bills on time, keeping credit balances low, avoiding unnecessary inquiries, appropriate financial planning and developing better credit habits.

4. Disputing Negative Items

What was his credit score? “It was 523, to be exact,” he says. “To be honest, it was pretty bad.”
The percentage of your overall credit limit that you’re using is one of the factors that your credit score is based on, along with your payment history, length of credit history and diversity of credit.
“I’m always paying off my credit card bills every month,” he said. “I don’t leave an unpaid balance.”

‘We’re Doing So Much Better’

“We’ve got a U-Haul ordered for the end of the month,” he said. “I recommended Credit Sesame to my girlfriend, and it benefited her as well. Financially, we’re doing so much better.”
Once his credit started improving, Frias applied for traditional credit cards. It actually can help your credit score to have credit that you’re not fully using.
Frias puts it bluntly.
Source: thepennyhoarder.com
Getting approved for the lease was no problem. “I had flying colors across the board,” Frias said. “I was really happy to see that.” <!–

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1 60% of Credit Sesame members see an increase in their credit score; 50% see at least a 10-point increase, and 20% see at least a 50-point increase after 180 days.

Should I Pay Off Debt Before Buying a House?

Ready to buy your own home? There’s a lot to consider, especially if this is your first time applying for a mortgage and you’re carrying debt. Debt is not necessarily a dealbreaker by any means.

Is it a good idea to pay off debt or save for a house? Is it possible to do both? Understanding how the home loan process works could help you make those decisions—and avoid mistakes that could keep you from getting your dream home.

When a lender considers you for a mortgage, you can expect debt to be a factor when it comes to how much you’ll be able to borrow, the interest rate you might pay, and other terms of the loan.

Understand Your Debt-to-Income Ratio

When lenders want to be sure borrowers can responsibly manage a mortgage payment along with the debt they’re carrying, they typically use a formula called the debt-to-income ratio (DTI).

The DTI ratio is calculated by dividing a borrower’s recurring monthly debt payments (future mortgage, credit cards, student loans, car loans, etc.) by gross monthly income.

The lower the DTI, the less risky borrowers may appear to lenders, who traditionally have hoped to see that all debts combined do not exceed 43% of gross earnings.

Here’s an example:

Let’s say a couple pays $600 combined each month for their auto loans, $240 for a student loan, and $200 toward credit card debt, and they want to have a $2,000 mortgage payment. If their combined gross monthly income is $8,000, their DTI ratio would be 38% ($3,040 is 38% of $8,000).

The couple in our example is on track to get their loan. But if they wanted to qualify for a higher loan amount, they might decide to reduce their credit card balances before applying.

That 43% threshold isn’t set in stone, by the way. Some mortgage lenders will have their own preferred number, and some may make exceptions based on individual circumstances. Still, it can be helpful to know where you stand before you start the homebuying process.

Consider How Debt Affects Your Credit Score

A mediocre credit score doesn’t necessarily mean you won’t be able to get a mortgage. Lenders also look at employment history, income, and other factors when making their decisions. But your credit score and the information on your credit reports likely will play a significant role in determining whether you’ll qualify for the mortgage you want and the interest rate you want to pay.

Typically, a FICO® Score of 620 will be enough to get a conventional mortgage, but someone with a lower score still may be able to qualify.

Or they might be eligible for an FHA- or VA-backed loan. The bottom line: The higher your score, the more options you can expect to have when applying for a loan.

A few factors go into determining a credit score, but payment history and credit usage are the categories that hold the most weight. Payment history takes into account your record of making on-time or late payments, or if you’ve filed for bankruptcy.

Credit usage looks at how much you owe in loans and on your credit cards. An important consideration in this category is your credit utilization rate, which is how much revolving credit you have available compared with how much you’re using. The lower your rate, the better. Most lenders prefer a utilization rate under 30%.

Does that mean you should pay off all credit card debt before buying a house?

Nope. Debt isn’t the devil when it comes to your credit score. Borrowers who show that they can responsibly manage some debt and make timely payments can expect to maintain a good score. Meanwhile, not having any credit history at all could be a problem when applying for a loan.

The key is in consistency—so borrowers may want to avoid making big payments, big purchases, or balance transfers as they go through the loan process. Mortgage underwriters may question any noticeable changes in your credit score during this time.

Don’t Forget, You May Need Ready Cash

Making big debt payments also could cause problems if it leaves you short of cash for other things you might need as you move through the homebuying process, including the following.

Down Payment

Whether your goal is to put down 20% or a smaller amount (the median down payment for recent buyers was 12%, according to a 2021 National Association of Realtors® report), you’ll want to have that money ready when you find the home you hope to buy.

Closing Costs

The cost of home appraisals, inspections, title searches, etc., can add up quickly. Average closing costs are 2% to 5% of the full loan amount.

Moving Expenses

Even a local move can cost hundreds or even thousands of dollars, so you’ll want to factor relocation expenses into your budget. If you’re moving for work, your employer could offer to cover some or all of those costs, but you may have to pay upfront and wait to be reimbursed.

Remodeling and Redecorating Costs

You may want to leave yourself a little cash to cover any new furniture, paint, renovation projects, or other things you require to move into your home.

Be Aware of Housing Market Trends

Trends in the housing market may help you with prioritizing saving or paying down debt. So it’s a good idea to pay attention to what’s going on with the overall economy, your local real estate market, and real estate trends in general.

Here are some things to watch for.

Interest Rates

When interest rates are low, homeownership is more affordable. A lower interest rate keeps the monthly payment down and reduces the long-term cost of owning a home.

Rising interest rates aren’t necessarily a bad thing, however, for buyers who’ve been struggling to find a home in a seller’s market. If higher rates thin the herd of potential buyers, a seller may be more open to negotiating and lowering a home’s listing price.

Either way, it’s good to be aware of where rates are and where they might be going.

Inventory

When you start your home search, you may want to check on the average amount of time homes in your desired location sit on the market. This can be a good indicator of how many houses are for sale in your area and how many buyers are out there looking. (A local real estate agent can help you get this information.)

If inventory is low and buyers are snapping up houses, you may have trouble finding a house at the price you want to pay. If inventory is high, it’s considered a buyer’s market and you may be able to get a lower price on your dream home.

Price

If you pay too much and then decide to sell, you could have a hard time recouping your money.

The goal, of course, is to find the right home at the right price, with the right mortgage and interest rate, when you have your financial ducks in a row.

If the trends are telling you to wait, you may decide to prioritize paying off your debts and working on your credit score.

Have debt? See how a credit card consolidation
loan can help get you on track to pay off your debt.

Remember, You Can Modify Your Mortgage Terms

If you already have a mortgage, you can make some adjustments to the original loan by refinancing to different terms.

Refinancing can help borrowers who are looking for a lower interest rate, a shorter loan term, or the opportunity to stop paying for private mortgage insurance or a mortgage insurance premium.

Consider a Debt Payoff Plan

If you decide to make paying down your debt your goal, it can be useful to come up with a plan that gets you where you want to be.

Because here’s the thing: All debt is not created equal. Credit card debt interest rates are typically higher than other types of borrowed money, so those balances are more expensive to carry over time. Also, lenders generally look at loans for education as “good debt” and credit card debt as “bad debt,” which means they might be more understanding about your student loan debt when you apply for a mortgage. (Car loans are usually categorized as somewhere in the middle of the two.)

As long as you’re making the required payments on all your obligations, it may make sense to focus on dumping some credit card debt.

The Takeaway

Should you pay off debt before buying a house? Not necessarily, but you can expect lenders to take into consideration how much debt you have and what kind it is. Considering a solution that might reduce your payments or lower your interest rate could improve your chances of getting the home loan you want.

When you consolidate your credit card debt, you pay off each one of your credit cards with a single fixed-rate personal loan with a set term. The interest rate may be lower than the rates on your credit cards.

Taking control of your debt can bring you one step closer to owning a home. View your rate on a SoFi Personal Loan.


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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Source: sofi.com

House or Condo: Which is Right For You? Take The Quiz

There’s something to be said for having peace of mind, even if it might cost you. For many, that can easily take the form of having a place to truly call your own—space that gives you privacy and the ability to customize it to your dream preferences.

Maybe you’re already picturing your deep sunken tub, eye-catching fireplace, and garden with its organically-grown fresh vegetables and bright, sweet-smelling flowers that will attract and support the honeybees.

Or, maybe the idea of having a place all your own appeals to you, but you sure don’t want to get tied down with all the upkeep that goes along with a home purchase—and the need for privacy doesn’t rank very high on your list, at all. What really matters to you is a sense of community.

If you find yourself nodding when you read the first paragraph, then it’s very possible that buying a house could be the right move for you; if you have that same type of positive reaction when reading the second paragraph, then a condo may be the better choice.

But, is it really that simple? To find out what might be right for you, we invite you to take our House or Condo Quiz—and, unlike many quizzes, this one can help to answer two important questions for you:

•   Does it make sense to purchase a home or condo, or should I stay where am I for now?
•   If it does make sense to buy, which one could be better for me? Condo or house?

Let’s get started with the quiz!

Buying a Condo vs. House

Now that you’ve taken the quiz, what do you think? Are you clear about which direction you want to take? If so, consider checking out our home affordability calculator to get a better understanding of how much house you can afford.

If not, it may be because there are several pros and cons to each choice (aren’t there, always?) and you may just need to mull them over a bit more.

Pros of Buying a House Typically Include More:

•   privacy
•   space, including storage space
•   yard
•   ability to customize your home
•   room to garden and create a pleasing outdoor space
•   control, including but not limited to having pets
•   typically no homeowners association (HOA) or HOA dues

Another pro of buying a house is that they are generally considered better investments overall.

Cons of Buying a House Typically Include:

•   higher cost
•   more work to maintain inside
•   more work to maintain outside

If, after taking the quiz and weighing the pros and cons, buying a house feels like the right choice for you, you can start brainstorming about your dream house, including its size, number of rooms, location, style and more.

Attend open houses to help decide where you could see yourself putting down roots and to see what home layout really grabs your attention. It can also be a good idea to check home prices for the type of home (size/layout) and area you are drawn to and see if it is in your price range.

Plus, SoFi offers some great home ownership resources to help you along your journey. Including a first-time home buyers guide.

Now, let’s dive into the pros and cons of buying a condo.

Check out local real estate
market trends to help with
your home-buying journey.

Pros of Buying a Condo Typically Include:

•   more affordable
•   lower expenses
•   more ease of maintenance
•   amenities included
•   less expensive homeowners insurance
•   covered maintenance
•   security
•   community activities

Cons of Buying a Condo Typically Include:

•   less privacy
•   no yard
•   rules and restrictions (noise levels, style/colors, pets and more)
•   less overall space
•   HOA fees
•   limited parking
•   slower appreciation in value
•   easier to outgrow

Plus, the mortgage interest rates might actually be higher on a condo vs. a house, and condos can be harder to sell. Lenders sometimes charge more for loans on condo units because of the strength of the condo association financials and other factors are taken into consideration and evaluated for risk.

If, after reviewing pros and cons you decide the benefits of a condo are right up your alley, then you can start creating a list of what you definitely need in yours, along with what you’d like to have, and then start looking at your options.

When to Buy

You may know what you’d like to buy (condo vs. house) and where (in what neighborhood), but do you feel as though now is the right time? If so, fantastic!

You might decide, though, that you want to rent for a while longer under certain circumstances, which can include:

•   wanting to pay down debt first, whether that’s credit card debt or student loan debt, as just two examples
•   wanting to save more money for the down payment and any associated expenses
•   needing to boost your credit score first
•   wanting more time to look at houses/condos before deciding

Renting is typically the cheapest option available for housing, because rent can be less than typical mortgage payments in certain areas of the country. Plus, there isn’t a down payment to pay (just a one-time security deposit), and the landlord usually covers repair and maintenance costs. Renting also gives you more freedom to move and, when you decide to live somewhere else, you haven’t invested your capital into the property.

Pro tip: If you want to buy a house or condo but don’t feel financially ready (or have other reasons to wait), consider putting the decision on hold while you reconfigure your budget and get ready for home ownership. You may discover that, in a relatively short time frame, your decision has changed.

Making Your Dream Home or Condo a Reality

At SoFi, you can make your home owning dreams come true with as little as 10% down on mortgages for qualified borrowers and properties. We’ve been named a 2019 award winner for the Best Mortgage Lenders for First Time Home Buyers.

Potential benefits of choosing SoFi for your mortgage loan include a more affordable down payment that allows you to buy more house, the fact that we charge no application fees or origination fees—and that we have no prepayment penalties. The pre-qualification process is painless and you can conveniently apply online.

Find out more about applying for a mortgage loan at SoFi today!


IMPORTANT: The projections or other information generated by this quiz regarding the likelihood of various outcomes are purely hypothetical, do not reflect actual results and are not guarantees of future results. The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com/eligibility-criteria#eligibility-mortgage for details.

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Source: sofi.com