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Loan Defaults and 5 Ways to Get Out of It

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In layman’s term, loan defaults are simply debt that you weren’t able to pay. Loan defaults apply to any type of loan – car, home, student, SBA, 401K, payday loans, and the most common – credit cards. Defaults will be incurred once a consumer fails to pay the borrowed amount to their lender, and once a certain period of time has elapsed, your debt will be recorded and will forever be a part of your credit history – which is what you want to avoid. Credit history can be used to formulate a consumer’s credit score, which can negatively affect your future loans.

So, how do you get rid or get out of loan defaults? There are ways, for sure, and you can abide by these tips to make sure you do not incur loan defaults:

Make a budget and stick to it

Never go out of your budget as this can cost you your good credit score, a decent car, and the good relationship with your lender. Once you’ve set a budget, stick to it and make damn sure not to overspend – as you definitely will be sorry for it soon enough.

Choose a lender or can finance company that you can trust

You will be working with them for the next couple of years, so take the time to choose one wisely. Every country has their top lender, Bank of America (USA), Sainsbury’s Bank (UK), Alpha Finance (AU), etc. Whichever lender you choose, be sure to go with the best in the industry. Not just because they can provide car finance with affordable repayments, but also they have excellent customer service that will remind you whenever a payment is due so you can avoid defaults.

Contact your lender ASAP

Anything can be resolved through constant communication. If you know that you cannot pay your loan any further, or you can but you are going to be a bit late, then it’s best to talk it out with your lender. Ask if you have any other option, and if there is any way you can reduce the penalty or default. Ask nicely and surely, you will get an answer that you want to hear.

Consider looking into a debt repayment agency

If you know that you are going to have problems with paying your loans, then don’t sit around and just wait for your lender to chase you down the road – instead, talk to them and a debt repayment agency. Consumer credit agencies will work with you and your lender to come up with alternative payment plans. All you have to do is have your repayment plan approved by the lender, put the money into an account through a debt repayment agency, and the agency will be the one to make the payments for the consumer.

Agree to have your car repossessed

If you do not want to incur any more debts and you have no other options left, then it’s better to have your car repossessed by the lender, rather than having loan defaults that will last for at least 7 years on your credit history. The downside to this is that you will lose all of the previous payments that you have made, but hey, at least, you do not have a bad credit history to your name.

Good luck with your loans, and make sure to follow this list to avoid being caught in an unpayable debt!


“Fun” Little Freak Out

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Let me share with you a story about an all-out “FREAK OUT” moment I recently had regarding my pay.

In terms of back-story, I am on a 9-month contract which ends May 19. When my new contract goes into effect I’ll be switching to a 12-month contract. But that contract does not go into effect until the start of the fiscal year, July 1st. In the interim (May 20-June 30), I will be receiving pay designated as “supplemental compensation” at my current rate of pay (my raise doesn’t go into effect until the new contract).

Since the academic year is soon ending, I emailed our business manager last week asking if I needed to complete any paperwork/what I need to do to get the supplemental compensation to kick in. There was a bit of a process involved last summer and I can’t remember the exact steps.

The business manager replies back basically saying (paraphrasing), “I have no record of you receiving supplemental compensation this summer. Your new contract starts July 1st.”

And I’m like, “WHAT THE WHAT?!?!?!?!” (insert the Scream emoji face)

I’m instantly reviewing old emails and re-living old conversations in my mind. Is it possible that I misunderstood? That I simply thought I would be receiving supplemental compensation but that I’ll actually be going AN ENTIRE 6 WEEK PERIOD WITH NO PAY WHATSOEVER?!?!?!

I call my husband in a panic. How are we going to survive? Here, I was just saying how these next two months are going to be super tight…I didn’t realize we’d literally have NO INCOME during this entire time period! We (stupidly, in hindsight) sent our entire $5,500 emergency fund to the IRS when we were setting up/establishing a payment plan for our 2016 taxes. What were we thinking?! The IRS felt like an emergency at the time, but with the gift of hindsight, I now realize we never should’ve entirely wiped out all liquid savings. What are going to do?!

Deep breath in. Deep breath out.

I allowed my heart-rate to come down. I emailed my boss to gently inquire into this issue. Was I mistaken? Or am I supposed to be working for the next 6 weeks, as I had planned (not to mention, I’ve got work meetings piled a mile high on my calendar, and all kinds of tasks to accomplish over that time).

My boss was at a conference at the time so it took what felt like an eternity for her to respond. My initial email was sent around 2pm in an afternoon and I didn’t hear back until nearly noon the next day. It was just a simple clerical error. YES, I am supposed to be working (as planned). And YES,  I will be receiving supplemental compensation under my current rate of pay until my new contract goes into effect on July 1st (at which point my nice raise will go into effect).

Just breathe.

I have taken a couple lessons from this experience. First and foremost – we made a horrendous mistake in completely wiping out our EF. We need to get back to at least a “baby” $1,000 EF ASAP!!! Not sure how that’s going to happen given that we’re still grappling just to tread water and not lose ground over the summer. Either way, regardless, we need to have at least a starter EF to help us if, heaven forbid, we face a similar crisis in the future.  Second, rather than rushing to panic – maybe just reach out to my boss immediately and try to save the panic for later. In this case, I would’ve been able to sort out the situation and no panic was needed at all. Also, I’m glad I was proactive in reaching out to the business manager BEFORE the semester ended. It would’ve been a terrible surprise to have the semester end and then all the sudden have NO MORE PAYCHECKS when I was depending on them to pay our bills and feed our family! Yikes!

 

Have you had any financial “close calls” recently?


Ashley’s April 2017 Debt Update

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Hi All,

May the fourth be with you! (heh, get it – May 4th? okay enough of that.)  : )

It’s another month and another opportunity to put a little bit of debt behind us.

Here we are and I feel a bit at a crossroads. I haven’t included the IRS in our debt spreadsheet because – honestly – I’m still so embarrassed that we owe so much!!! I’ve worked out a payment plan and we will be paying a hefty sum – $1,000/month – until the debt is fully resolved. It will be a large household expense over the next several months (year+). Maybe I’ll eventually add it to the spreadsheet just so it can be properly acknowledged but, honestly, I just can’t add it yet. It would push us back up over the 1/2 way milestone and just causes so much emotional distress by increasing our debt numbers that I just can’t fully face it yet. I mean – it’s been “faced” as far as the IRS goes (in terms of admitting the debt, establishing payment plan, etc.), but for some reason I can’t “face” it here with you guys. Not yet, anyway.

So that’s my one disclaimer. My debt spreadsheet remains with all our old/pre-IRS debt numbers and our monthly payments are going to be negatively impacted because the monthly payment indicated in the debt tables will NOT include our IRS payment.

With that caveat, check out April’s debt progress:

PlaceCurrent BalanceAPRLast Payment MadeLast Payment Date Original debt, March 2014
Navient - Federal 2 (unsubsidized)$11,0565.8083April$82,433 (all school loans, combined)
Navient - Federal 3 (subsidized)$86225.8025April
Navient - 2 (subsidized)$85026.5533April
Navient - 7 (subsidized)$72026.5528April
Navient - 8 (subsidized)$63766.5525April
Navient - 9 (subsidized)$85026.5533April
Navient - 10 (unsubsidized)$97686.5571April
Balance Transfer Student Loan #2$6000% (through Sept 2017)$400April$7650
Balance Transfer Student Loan #3$43690% (through October 2018)$75April$4594
Medical Bills$00%$1215Paid off in April 2017$9000
Balance Transfer student loan #1$00% -Paid off in March 2016$5937
PenFed Car Loan$02.49%-Paid off in January 2016$24040
License Fees$02.5%-Paid off in April 2015$5808
BoA CC$07.24%-Paid off in June 2014$2220
Mattress Firm$00%-Paid off in May 2014$1381
Wells Fargo CC$013.65%-Paid off in May 2014$7697
Capital One CC$017.9%-Paid off in March 2014$413
Totals$64,997 (March balance = 68,714)$1,988Starting Debt = $145,472

So as you can see, we “only” paid $1,988 in debt in April. I say “only” in quotations because obviously that’s a huge sum of money. But we’ve been trying to pay closer to $3,000ish/month, so it’s a big decrease from our goal number. Though, again, this does not take into consideration the $1,000 payment to the IRS. I’ll do a goal update post soon just to check-in with numbers and take a pulse of how we’ve been doing so far this year in our financial goals. With the IRS hit, some of our goals are going to have to be re-thought. But I’m optimistic overall. Our biggest/most central goal is to pay $30,000/year toward debt and I think there’s still a good chance we can hit that number. We’re aiming for it!

I’ve also been re-working our budget to account for the changes in salary and expenses that are coming up. My part-time job officially ends this month. I have about another week worth of work, but my last paycheck was received last month (womp, womp!) My new rate of pay (from my big raise) doesn’t go into effect until July. So May and June will be TIGHT!

This is probably the first time in my debt-repayment journey (of 3+ years now!!!) that I’m a little bit nervous about the possibility of moving backward. I mean….these two months are going to be really rough. I’ll be writing a post soon to talk about different savings strategies and ways we’re going to try to reduce spending to only absolute necessities, etc. Be thinking about it because I could certainly use all the tips I can get!!!

I’ll be back soon! In the meantime, have a great week!

 


Medical Debt Collection Update

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Back in January I wrote about how I’d accepted a settlement offer to pay off an old medical bill for less than what we really owed (we paid $3,647 and they forgave the remaining balance of the $5,610 debt). So for the past 3 months we’ve been making huge ($1215/month) payments.

The last payment was April 17th. I did a little happy dance, and celebrated with hubs about how the last of his medical bills from his mystery illness (which occurred in the fall/winter of 2013) was finally paid in full. Every time a bill has been paid in full, I always like to reflect back on the item that caused us to go into debt, and to be thankful to move on from having it be a part of our lives. In this case, the “item” that caused us to go into debt was emergency medical care. Hubs was hospitalized off-and-on for a 2 month period (longest stay was 10 days). We traveled around to see specialists, only to come up empty-handed as no one seemed to have any answers. Hubs has long since recovered, but the medical bills continued. We had insurance coverage at the time (thank goodness – as we literally bought his insurance only 3 months prior to the mystery illness’ onset). But even with insurance, we had to pay co-pays and deductibles. Our medical bill originated at $9,000 (read more about it in my first ever debt post, from back in 2014). Moving on past that debt is definitely symbolic in our lives – putting behind us a scary time and moving forward with faith and hope. Like the effort to move forward in hope, brandishing the metaphorical bruises and lessons learned of the whole IRS debt situation. It parallels how I feel about my dad’s current medical situation. The past couple years have had some heavy burdens but I feel hopeful about the future, even with the inherent challenges of moving a parent to a live-in care facility (my dad has FTD and is soon moving to a dedicated memory-care facility).

So I feel hopeful. That’s my underlying feeling these days.

That is….until I just received a phone call from the medical debt collector (referenced in this post). They called and asked how I planned to pay the remaining $1963 balance. You know, that balance I have in writing that would be forgiven as part of the debt settlement agreement? After explaining the settlement situation, I was told that the account would be forwarded to the business department to be straightened out. I pray this was a one-time mishap and not signs of a battle-to-come. I do have the full settlement letter, so hopefully that should be enough to make the problem go away easily. Cross your fingers for me!

Happy Monday!


Happy Easter!

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For those who celebrate, I hope you had a great Easter yesterday! It was the first year that the girls really got it on their own. In the past, we’ve held hands and more-or-less led them to eggs, coaxing them to pick them up and place in their baskets, etc. Not this year. We went to our neighborhood’s egg hunt and as soon as they gave the command, the girls RAN to get eggs. It brought me so much joy to watch their excitement, but it also made picture-taking a bit challenging since I could only get shots of their backs as they RAN away to find more eggs. : )

IMG_5512

This was our “before” shot. Excuse my wild hair fly-aways! It hit 90 degrees that day so I had to throw my hair into an unplanned pony – it was too hot to keep down!!!

I know I’m late this year, but I wanted to share one of the Easter crafts we made that we sent to family. We have a long history of mailing kid crafts in lieu of “real” gifts for many different holidays (e.g., Mother’s Day, Valentine’s Day, Easter, etc. – see my Year-in-Review posts for links to various crafts: 2015 and 2016). This year was no different. Here’s one of the crafts we made to send out to loved ones:

IMG_5494We got some kid’s crafts from Michael’s for 50% off (I LOVE that they do sales PRIOR to the holiday and not just as a clearance after the holiday has passed). There was one day during Spring Break that we’d gone in and just happened to be there during a kid craft hour. The girls were able to make two crafts (one was a painting on actual canvas, the other was a whole Spring Break scrapbook that was absolutely adorable). The class only cost $2 per child, and killed a solid 2 hours worth of time (= WIN!!) and then I picked up a couple Easter crafts to take home (which was the whole point of our trip). The girls LOVED the crafts (both in-store and the ones we bought to take home), and with the 50% off sale, the crafts only cost $2.50/each (we bought two different craft packages:  the egg pictured above, and a bunny rabbit craft, unpictured – both packages came with enough to make 2).

We mailed the crafts out about a week or so ago and when we made the rounds of phone calls to family to wish everyone a Happy Easter, the great-grandmas were tickled pink over the little crafts they’d received. Each boasting about where theirs was hung or displayed. It was pretty sweet.

I hope everyone had a great weekend! Have a great start to your Monday!


Our New Life in Full Affect

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The last month has been a blur.  Today is my one month anniversary on my new job.  It is going great, and I am LOVING what I do. The wait was worth it to find the perfect position and the perfect company. I am so grateful.

Let me fill you in on what has been happening:

  1. Worked 40 hours per week in the office at my new job.
  2. Continued to work 25 hours a week for one of my part time jobs.
  3. Continued to work approx. 10 hours a week for my other part time job.
  4. Continued to school the kids – we are meeting twice a week (Sundays and one night a week) with intermittent study times together at night when the kids get stuck. It is definitely not ideal.  I’m going to have to re-evaluate our curriculum for the fall. But we will finish the school year in the next month and move on to a lighter schedule for the summer.
  5. Gymnast is going to gym (1 hour away) twice a week and soccer less than a mile away, 3 days per week.  He needs the energy outlet.  He is gone for the week with cousins to FL — this is why I wanted to move near family.
  6. Princess is playing basketball and has gotten involved with the youth group (that’s a first for her.)
  7. Sea Cadet continues to work at the movie theater he transferred with from Virginia, and looks forward to returning to VA the first week of June where he will spend the summer working as the Senior Boys Counselor at the same camp he worked at last year.

If you have done the math…I’m putting in upwards of 70 hours a week at work.  Oh, and I forgot, I’m starting every day with an hour in the gym.  It’s been life changing.  It’s been a whirlwind!  But I do have some exciting news…

We have rented a house!!!!  And you will not believe my rent…it is only $650 per month!!!!  I can’t believe it.  It is exactly the reason I wanted to move here.  We have not moved in yet, because frankly we don’t have furniture. Sea Cadet is staying there now on some old furniture family gave us, but we don’t have any beds.  Our stuff will be delivered by Upack on Tuesday so we can start making it home.  I have decided to move all the way in (we haven’t unpacked our stuff in over 2 1/2 years) and make it home.  We are all excited.  But it’s going to be a while before Gymnast, Princess and I move in while I watch for good deals and save money to get beds.

Our new home is 3 bedrooms, 1 1/2 bath, small manageable yard with just enough space for the kids to play.  Really, the only two things I am going to miss right now are 1) a dishwasher and 2) being able to have pets.  But all in due time.

A monthly budget is on the horizon.  I’ve just gotten my first full paycheck so I have a better idea of what my take home will be.  I did use every bit of my savings to get into the house.  I have to pay a $500 deposit, $650 first month’s rent, $250 to the city to turn on utilities and about $100 for a few odds and ends to get us started (toilet paper, broom, mop, cleaning supplies and a shelving unit to create a pantry in the laundry room.)

Princess and I return to Virginia this weekend for her to get her braces off.  It will be a quick turn, and it is the last trip we have planned. My new job has already agreed to let me work remotely while I travel, which thrills me to no end!


Car Repair Bill

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As if we don’t have enough bills to worry about between our normal debts and the new tax debt, I’ve got another new bill to foot this month as well.

Remember when I wrote about my power steering suddenly going out without any advance warning (and in the absence of any collision or other obvious cause) while I was driving home from work?

Well, it’s been quite the inconvenience over the course of the last 2 weeks. It happened on a Tuesday night (2 weeks ago). It took probably 4 hours out of my day on Wednesday for me to sort everything out. I had the car towed to the dealership, arranged for a rental company to come pick me up and get into a rental, and then had to talk to the dealership about the repair issues.

In the end, the car had two separate issues. One was covered by the Ford dealership as a safety recall (this is what actually caused the power steering to go out), but there were some secondary issues covered by my extended warranty I had purchased.

The problem is, the extended warranty only covered a maximum of 7 days in a rental car and they had my car for a full 10 days to do the work. I was able to talk Ford into covering the other 3 days of my rental, but it wasn’t just easy-peasy, because I had to return my current rental and switch into a different rental (the Ford dealership said they would only cover Ford-brand rental vehicles). So the following Wednesday I spent probably another 4 hours dealing with the car drama. Dropping off the old rental, switching to a new rental, trying to arrange the first rental to be covered through my warranty (phone calls to them, phone calls to rental company), and to get my second rental covered through the dealership (phone calls to rental company, phone calls to Ford). Just a lot of busy-work that took a ton of time.

Last time I had work done through my extended warranty, they had only charged a $250 deductible, but this time they were trying to charge me $300. It took a couple phone calls to clear that up and, in the end, they agreed to come back down to the $250 price (the problem is that they only charge $250 if the work is done at the place where the warranty was purchased – from CarMax. But CarMax had a 3 week wait for them to even look at my car, so I had to go to the dealership because I couldn’t go that long without a car!! In the end, the warranty company did honor the $250 price).

BUT – while at the dealership, the service people called to say I needed new tires STAT! My husband has said the same thing and I’ve just been brushing it off, but then the service folks sent me pictures showing the threads in my tires and saying they could not allow me to drive it off without signing a waiver to remove any legal responsibility from them. I guess it was bad. Another $400 added to the bill.

Add tax, and our final bill came to $679.00.

If you think about the fact that we don’t have a car payment (we own the car outright!!!), it doesn’t seem too terrible. But on the back of all our other April-related bills I’m just like, GEEZE!! Cut it out, April!!! No more surprise charges for anything, mkay?!

Oh, and then here’s something fun. Remember how literally the month after I paid off the car this random little piece of it broke off while I was driving? I wrote about it here. It ended up costing a couple hundred bucks to fix. WELL, the same piece flew off the day after I got my car back from the dealership. It’s been over a year, so I don’t think it’s still under any warranty of any kind, but isn’t that just some crap!?? Last time I fixed it pretty quickly but this time I’m not in any big hurry. I’ll just deal with a piece of my car missing. Money is tight right now and we can’t just be shelling out hundreds of dollars for something cosmetic that doesn’t impact the actual functionality of the vehicle. It just sucks.

Man, oh man, I’m on the countdown for summer! For the first time ever, I’ll actually have a bit of a break from teaching. In the past, I’ve been teaching year-round for my part-time place so even if I’ve had a break from my full-time place, I’ve always had at least 2-3 classes from my part-time place still going strong. But not so this year. I’m leaving my part-time job at the end of the current semester (recall I had to sign a noncompete for my new raise to go into effect). I do teach one summer class for my full-time work place, but it doesn’t start until July. That means I’ve got a couple weeks in May and ALL of June “off” of teaching! OHMYGOSH I cannot even express my excitement! Don’t get me wrong, teaching is my passion. But my load the past 2 years has been so heavy that it’s been hard to keep up with my administrative responsibilities and there has never been a time where I’ve felt truly caught up and on top of things. I mean, I do my job. But I’m excited to be able to dedicate myself more fully toward some of the work-related projects I’ve just had on the backburner and to revamp some of my old course materials for the Fall. Plus, just a chance to catch my breath! I just cannot wait!

I’ve got so much more to share – summer plans, Easter-related stuff, fun/cheap things we’ve got up our sleeve. But the time is short so that must wait for another day.

Have you had any financial set-backs lately? When is the last time you had major car repair work done? Our last time was almost exactly a year ago, so I guess we were “due.” Ugh!


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