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Government Money to Reduce Credit Card Debt

When the Obama administration took over, one of its main initiatives was to help put the economy back on stable ground. Strategies for accomplishing this goal included the establishment of grants to help Americans get out of credit card debt. The overall American economy is made up of many parts, but when individuals and families are on steady ground, it contributes to the good of the overall economy. Find out how grants work and how these funding sources may help you to get out of the debt you are in.

Finding a Grant

The first step, and probably the trickiest part for most people, is knowing where and how to find a government grant to pay off debt. Start by contacting your county government, local associations and local organizations to find out what grants are available and for what purposes. The U.S. Department of Health and Human Services helps manage Grants.gov, a site providing information on a wide variety of federal government grants (see Resources).

Applying for the Grant

Grant applications can be long, labor intensive and tedious. When you obtain information on a grant you are interested in applying for, be sure to read the requirements carefully to make sure that you are eligible to apply. Once you pass the eligibility test, follow the instructions for completing the grant application very carefully and line by line. Grant application review committees tend to be sticklers when it comes to awarding grant money, which means it’s imperative that you complete the application completely and correctly. It’s also important to know the deadline of the grant application. Depending on the deadline, you may have a limited amount of time to complete what can be an arduous process.

Types of Grants

While most grants are not earmarked specifically to help you get out of debt, you may be able to find grants based on a personal need, business need, ethnicity, religion and more. You can also look to local organizations and associations. These organizations receive money from the federal and local governments to fund specific projects or support specific initiatives.

Debt Consolidation

While you probably won’t locate a grant with the title “Grant for Debt Consolidation,” you may be able to locate available government money based on how you got into credit debt in the first place. For example, if you funded the opening of an art gallery and backed a local artist and this is what put you in credit card debt, then the local art council may offer grants for local art projects. While some grants require that you apply for the grant before funding the project, other grants will allow you to pay in reverse order—you pay first and pay off the debt with grant money later. You’ll only be able to pay off expenses directly related to the project and you will have to provide evidence of what you spent and what the outcome of the spending was, but it is a way to use grant money to consolidate existing debt.

Tips

Register on websites such as Grants.gov to find and apply for possible grants. You can signup to receive email announcements when new grants are added to the database. this helps to ensure you meet the grant application deadlines.

10 Steps to Financial Recovery

Getting control of your finances is within your reach Take these ten proactive steps to get yourself on the road to financial recovery.

1. Budget and save
Systematically add funds to a savings or emergency fund. Whether it's 10% each paycheck or $100 per month, automatically put a certain amount of money into a savings vehicle and forget you have it unless an emergency arises.

2. Cut spending
There are a multitude of ways you can cut back on expenses. It may require big cutbacks such as downsizing to a smaller and less expensive place to live or taking on a roommate, or less drastic costs such as buying ground beef instead of steak at the grocery store.

3. Track spending
Write down everything you spend money on. It's easy to see how much you're spending and where you're spending your money when it's all in writing. This is a quick and easy way to identify where you're overspending and cut back and cut out unnecessary spending.

4. Set goals
Set some short and long-term financial goals. Start with small goals you can accomplish such as paying off the $1,000 credit card balance you have. Work up into bigger financial goals such as having all of your credit card debt paid off in five years or less.

5. Earn more
There are plenty of ways you can earn some extra money. Take on a second part-time job, work from home freelance writing on the side or start a business selling your craft item. Use all of this extra cash to pay down and get rid of your outstanding debt such as credit cards. It's amazing how quickly this can help you gain control of your finances again.

6. Pay off bad and high interest debt first
Bad debt and high interest rates typically go hand-in-hand. Concentrate on paying off this debt first.

7. Check your credit score
Credit scores of 720 and higher typically bring borrowers lower interest rates and better terms on loans. Find out what your credit score is and if it's low, take some steps to improve it.

8. Dispute and correct credit errors
If there are items that are incorrect or do not belong to you, it may be bringing your credit score down. Work with the credit agencies to dispute any erroneous items and it can improve your score.

9. Use automatic payments
Pay your bills online or setup your bills for automatic payments. It ensures your bills are always paid on time, which reduces late fees and improves your credit score.

10. Do financial check-ups
Set a schedule once a quarter or a couple times a year where you check on your financial situation and make repairs and fixes where needed.

The Psychology of Spending Money

A report released by the Journal of Experimental Psychology reveals people tend to spend less when:

1. Paying in cash rather than using a credit card or gift card

2. Carrying bigger bills such as $20s, $50s or $100s rather than $1s, $5s and $10s

So the moral of the story is pay in cash but carry big bills.

How to Leverage Real Estate Equity

Some homeowners turn to the equity they have built up in their home as leverage for other purposes. Some of the common ways homeowners leverage their equity funds is by obtaining a home equity loan. A home equity loan allows homeowners to pull out the equity they have built in the home, which is the difference between the current value of the home and the balance of their existing mortgage.

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3-step Approach to Refinancing Your Home

Especially at a time when interest rates are low, refinancing your home loan can be beneficial to your financial situation by saving you hundreds of dollars on your mortgage payment each month. Refinancing a mortgage is a process though—a process that can be tedious and frustrating at times. Before you sign your refinance mortgage application, take this 3-step approach to refinancing and make sure that it’s the right move for you and that you approach the process in the right way.


Start with your current mortgage lender. The most logical place to start with your refinance investigation is to start with your existing mortgage lender. Since you have an existing relationship with the lender, it may be faster and easier to refinance with them. First, the cost of refinancing (closing costs) may be reduced, depending on how old your loan is. Credit report checks, escrows and appraisals may all be waived if your loan is less than two years old an you have a positive payment record with the lender (always make your payments on time). The existing relationship may also equate to a lower interest rate than borrowing from a lender you don’t currently have a relationship—especially if it means they may lose your business to a competitor.

Compare current lender with other lenders. Shopping for the best deal does not only occur on car dealership lots and the local mall. Refinancing a mortgage is a major financial decision and you need to shop and compare at least three other mortgage lenders to your current lender. It’s almost a guarantee that if you shop four different lenders, you’ll walk away with four different closing costs, interest rates and annual percentage rates.

Once you have your facts and figures together, it’s important to compare the right items to each other before deciding the offer is the right one for you. Many refinance shoppers find the lowest interest rate and decide this is the lender offering them the best deal. This, however, may not be the case. The number you really should be comparing is the annual percentage rate (APR). the APR is the annualized cost of credit, so it give you a true picture of how much the refinance is costing you because it includes the closing costs in the percentage rate.

After comparing the APR, it’s also important to compare the terms and conditions of the new loan. For example, you can’t really compare a 30-year fixed rate mortgage to a 15-year and say that one lender is better than the other. You need to compare lenders based on the same types of mortgages.

Apply for the mortgage refinance. Once you have chosen the lender, the next step is submitting your mortgage application and any supporting documents the lender needs to process you application. Most mortgage companies have stepped into the 21st century so you can speed up the application process by submitting everything online from the comfort of your own home or office. Even if you don’t complete the application yourself, the loan officer you’re talking to on the phone is submitting the information into her computer and everything is done electronically. This also opens up your lender options so that you’re not bound by geography. Expect a mortgage application processing time of anywhere from three to six weeks from the time you submit the application until the time you close on the mortgage refinance

Interest rates are low, so refinancing your home loan may be on your list of things to do before the end of the year. When you chunk the mortgage process down into these three easy steps, it can be a faster, easier and more beneficial way to refinance your home, save you money and make your overall financial situation a little bit brighter.

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How to Invest in Real Estate Using Your 401k

Are you interested in purchasing real estate but don’t have the immediate capital to make the investment? Have you begun planning for retirement by opening a 401k? If the answer to both questions is “yes,” you might be in luck. Consider using the capital of your 401k to invest in the real estate by borrowing against the retirement account to fund the real estate loan. Any investment includes some risk, but with careful planning you will be on your way to utilizing the money that is sitting in a retirement account and profiting from a wise real estate investment.

Step 1: Assess the value and rules of your 401k. The amount of your loan will be based on the value in your retirement account, and while the 401k provides guaranteed funds, you will still be unable to borrow more than you can be expected to pay back. Additionally, your 401k might have rules that make borrowing against it difficult or subject to certain conditions. Be sure to check on this before beginning the process of acquiring a loan against the account.

Step 2: Research the different options available for investing in real estate using a 401k. One of the safest options is the real estate investment trust (REIT), which is composed of other companies that purchase and dispose of property. By investing in the REIT, the investor is allowing others to make the actual real estate investment, and while limits the investor to the decisions of others it also takes some of the load off the investor’s back.

Step 3: Research the option of the individual retirement account (IRA) for your investment. The IRA is not always a feasible option for some holders of a 401k, but it is something to consider when planning for a real estate investment with a 401k. Bear in mind that relocating money from the 401k to the IRA could impose a financial penalty, and this might or might not be worth the cost for your investment.

Step 4: If you are planning to use a loan for your investment, research and select a lender. With a conventional loan, you are essentially borrowing against yourself and ultimately pay yourself back with the loan. But this is considered a valid option for the 401k, so be sure to look into it closely. Each lender will have different rules for this type of investment, so ask around, and be sure to check on the specific requirements of the lender. Fees, interest rates, and so forth will vary, and these can have a significant impact on the value of the investment.

Step 5: Select the type of investment that you will use. Be sure that you have consulted a financial advisor, and particularly one that is familiar with real estate investments before you make your ultimate decision.

Tips and Warnings:

Many investment professionals will advise against taking out a loan against the 401k, due to the inevitable risk that ensues. As a result, the REIT might be the only option, because it is usually considered the safest.