Your Questions About How To Pay Off Debt With Low Income

Maria asks…

How to pay off college loans/debt?

What are my options? I know there is something about loan consolidations. I know if you join the armed forces they usually pay off your debt. I know there are loan forgiveness programs for teachers, whereas they can teach at low income school districts and have their loans paid off. I am a sociology major who wants to work with children in the future.

If you took out loans while in collge, how did you pay off your debt?

richmama answers:

If you fit into the criteria, then you should move ahead to the next step, which is talking to the consolidation company and asking them to contact your creditors to reduce your monthly payments and interest rates. Just as with any other loan, student loan repayment affects your future prospects of loan-taking.

If student loan debt goes beyond eighty-five percent of your total income, it is seen as a negative score in your future credit assessment.

Susan asks…

Low credit score paying off debt?

I have a low credit score (567 +) and my debt to income is also very low. My total current debt is about $3,000 and I was thinking of bringing them down to $0 I don’t want to close the account but I figured if the credit companies see my cards are $0 for a couple month my credit score should go up. In reality, how much does a score go up for having the credit down to $0 with all available?
My score went low because some time ago their were a lot of lates on an auto loan I had but it was paid off already. I am now trying to restore my credit.

richmama answers:

Your FICO score is made up of:
35% Payment History
30% Amounts Owed
15% Length of Credit History
10% New Credit
10% Credit Mix

Therefore, reducing the amounts owed will boost your score. You do not want to close the cards as that will actually hurt your Length of Credit History.

567 isn’t good, but it’s not horrible either. I imagine you’ll see an immediate 5-10 point gain, additional gains throughout the year. There are some “tricks” we do, but without those, you may see 600 by December.

Without getting too much into it, a person with a $100 balance on a card with a limit of $5000 looks better than a person with a balance of $0 and a limit of $2500. So obtaining new credit helps, but it can also drop your scores a bit for a month or two.

David asks…

How long will it take to pay off $1850 paying $110/mo.? APR-Interest is 23.75%?

Am trying to decide which debt is better to pay off first. This one above I ask about is highest APR, but I have another with a low balance of $300+ debt with a 21% APR.

PLEASE TELL/SHOW ME HOW TO CALCULTE THIS SO I CAN apply this to other debts.

I’ve heard some schools of thought say to pay off the highest interest debt first, but also have heard to pay off lowest balance debt first and then apply that same amount to the next debt in line balance-wise.

I’m dealing with a 50%+ debt ratio and really want to pay down as fast as I can. My income is fixed and I’m not a high-liver.

My problems stem from being shut-in and a compulsive ebayer. It makes it really easy to have my needs delivered right to my doorstep since I can’t drive any more. I know…I have to get THAT PROBLEM under control SIMULTANEOUSLY ! I’ve got wonderful WILL POWER, NOW LET’S SEE HOW GOOD MY “WON’T POWER” IS

I KNOW I CAN DO THIS !!! JUST NEED YOUR HELP IN FINDING OUT THE BEST WAY!

richmama answers:

Handling money isn;t as mucha bout math as it is behavior…if it were math we’d all be rich (and would never borrow money at 25%)

Since we are dealing with behavior it is vital to reinforce the good behavior. This being said you should list out your debts from smallest to largest amount owed….pay the minimum on everything except the smallest debt to which you attack with as much money as you can. Paying off that first bill feels great, now you can snow ball tha tmoney toward the next smallest on the list….keep this going till they are all gone.
Right now you have an elephant of debt, you can’t eat an elephant all at once, you have to eat it a bite at a time. Focus your money (and energy) ont he smallest and work up…the snow ball grows bigger and bigger and the end will becoem cleaer and clearer.

It behavior….not math….change your behavior, reinforce the good behaviors.
Check out the Total Money Makeover for a detailed, PROVEN plan to becoming debt free www.daveramsey.com

Sharon asks…

Prop 13 and low income and how it relate to property taxes.?

Let me give you a few facts you need in order to answer. My mom is 55. She works full-time and earns about $18,000 gross a year. (This is about $1,250 a month NET or take home pay.)
She pays about $650.00 in property taxes in April and the same amount again in November. In order to make these two payments, she needs to save her money. With her low take home pay, she has a difficult time saving the money that she needs due to everyday expenses, car repairs, etc.
She is a widow. Her house is paid off due to 1. a life insurance policy 2.Her husband passing away in 2004 and she was the one that recieved the money.
Before anyone mentions a home loan or a reverse mortage:
She does NOT want to take out a home loan since she has credit card debt and making one debt to pay for another does not help her!! I read a little on Prop 13. It seems to do more HARM to low income families. She paid $81K for the home in 1997. It’s worth about $300,000 now. Is she paying too much per year?
To: Just me. I can see why you do not allow anyone to respond to your “answers” via email or IM. Well, I guess you FAILED to read that 1. my mom paid the house off already! 2. She was married. (you are not married are you? What gives you the crazy idea that my mom even WANTS to SELL HER HOME?? She and my step-dad BOUGHT this home! How cold hearted can you be?

richmama answers:

First, I’m sorry that your mother is having difficult with her cash flow. But your mom is not paying too much in property taxes, and Prop 13 was created to help people like your mother.

Prior to Proposition 13, the tax rate throughout California averaged a little less than 3% of market value, but there were no limits on increases either for the tax rate or property value assessments. Some properties were reassessed 50% to 100% in just one year and their owners’ tax bills jumped correspondingly.

Under the tax cut measure, property tax increases on any given property were limited to no more than 2 % a year as long as the property was not sold. Once sold, the property was reassessed at 1% of the new market value with the 2% yearly cap placed on this new assessment.

Prop 13 limits the degree to which property taxes can go up each year. The bottom line: the accessed value of your mother house is probably much lower than the market value of her house. If someone bought your mom’s house for a price of $300k, they would pay much more in property tax than your mom is now. Check with the County Accessors Office.

Http://assessor.lacounty.gov/extranet/default.aspx

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