An inspector general’s report spotlighting talent challenges at the government-sponsored enterprises administering federal home loans Thursday, found that while competition for people remains tight, factors like mission and workplace flexibilities have helped address them.
The white paper, published Thursday by the Federal Housing Finance Agency’s OIG, evaluated the human capital risk trends facing the regulatory agency and the components it oversees — including GSEs Fannie Mae and Freddie Mac, Federal Home Loan Banks and Common Securitization Solutions, LLC — finding common challenges in recruiting and retainment in areas like tech talent demand and compensation constraints.
Agency officials told the OIG that those challenges, combined with external factors like a robust labor market and low unemployment, helped drive a period of higher turnover at some of the regulated entities between 2021 and 2022, though it began to decline at Fannie Mae and reached “historic lows as of mid-2023.”
“Specifically, Fannie Mae reported vacancies in its 2021 and 2022 annual reports—an average of 8 percent to 9 percent of total positions and 10 percent to 12 percent of its technology-related positions,” the report said. “A Freddie Mac document shows its September 2022 overall voluntary turnover was three times its turnover level in 2020.”
Likewise, at the 11 FHLBanks overseen by FHFA, the people risk of turnover was higher for specialized skillsets such as information technology and risk management staff.
The report notes that this is not surprising, given the competition for tech talent nationally and its importance to the regulated entities’ IT operations and data modeling, but noted that market pressures had led Fannie Mae — who reported that 41% of its workforce are in technology-related jobs — to expand its campus hiring of critical skills in IT, modeling and analytics.
Other recent departures in the regulated entities have come from senior leadership positions. Among the factors driving that attrition within the C-suite of Fannie Mae and Freddie Mac were compensation limitations imposed by FHFA’s conservatorship of the two entities, which began in 2008 at the onset of The Great Recession, though the conservatorship itself was not a contributing factor to turnover.
The senior leadership attrition at the regulated entities led them to make adjustments to their succession plans to help mitigate losses.
“One enterprise told us that bolstering its senior level ranks elsewhere in the company exhausted its succession talent pool. In response, this enterprise said it changed its succession planning approach,” the report said. “It now focuses on mitigating people risk for the most critical roles and piloted an effort to strengthen the talent pool for positions below the officer level. The other enterprise says it enhanced its succession planning efforts, too. Its divisions can identify talent below the most senior levels and craft specific development for ‘high potential’ employees.”
Positives from the report also noted that diversity and inclusion efforts have helped talent recruitment and retention, while workplace flexibilities like hybrid work were a mixed bag,
One enterprise told the OIG that hybrid work contributed to its recruitment and retention challenges, but Fannie Mae, CSS and the FHLBanks all cited it as a factor in mitigating turnover and recruiting talent.
Factors like agency mission continue to be a draw for recruiting talent, the report said, but it noted that economic and labor factors will continue to challenge the regulated entities. That makes it important for them to focus on areas like succession planning, while being cognizant of other determinants like workplace flexibilities, organizational size and geographic location.
Buying a house is a dream for many Americans, but it can feel very out of reach for some people. To qualify for a mortgage, you’ll need an adequate credit score and down payment, which many people just don’t have.
That is where the Neighborhood Assistance Corporation of America (NACA) comes in. The NACA has helped hundreds of thousands of people find affordable housing with no money down and no minimum credit score. NACA also provides financial assistance for approved homeowners that encounter financial difficulties.
If you’ve been struggling to figure out how you’ll afford to purchase a home, then the NACA program could help. This article will explain how the NACA mortgage process works and how the organization could help you find your next home.
What is the NACA mortgage program?
The Neighborhood Assistance Corporation of America (NACA), a non-profit organization established in 1988, is dedicated to providing affordable housing options to Americans. Its mission is to combat discriminatory and unjust lending practices. With 45 branches across the United States, NACA assists borrowers with low credit scores in securing affordable mortgages.
NACA offers various solutions such as property improvement and foreclosure avoidance to help achieve this goal. Additionally, the organization helps homeowners reorganize their existing mortgages, preventing them from losing their homes to foreclosure. Nevertheless, NACA’s signature mortgage program remains the most sought-after offering among its services.
How does the NACA program work?
The NACA is known for its purchase program, which it calls the Best in America Mortgage Program. This program is designed to make homeownership more affordable for everyone.
If you applied for a mortgage through a bank or credit union, you would undergo an extensive credit check. But the NACA makes it possible to buy a home with:
No down payment requirement
No closing costs
No requirement for perfect credit
No limits on your income
No fees – The lender pays the appraisal costs, attorney fees, title insurance, transfer tax, settlement agent fees, and buyer closing costs.
All of this is available at a below-market interest rate. Currently, the NACA is offering a 30-year fixed-rate mortgage of 2.125% APR and a 15-year fixed-rate mortgage of 1.75% APR. You’d be hard-pressed to find a better deal anywhere else.
Bank of America stands as NACA’s largest and most significant partner, providing a major portion of the funding for the loans.
NACA Requirements and Qualifications
Before you assume the NACA mortgage program is too good to be true, there are certain requirements you’re going to have to meet to qualify. Unlike traditional lending practices, NACA evaluates creditworthiness based on character, rather than solely relying on credit scores.
For instance, NACA members won’t be penalized for financial hardship caused by an injury or illness. But you must demonstrate that you can afford to pay your monthly housing expenses.
These expenses include your mortgage payments, property taxes, homeowners insurance, and HOA dues. And your income can’t fluctuate from month to month.
While there are no income restrictions in the NACA purchase program, earning higher than the median income could limit your home buying options to specific regions. It’s also worth noting that owning another property while closing on a NACA mortgage is strictly prohibited.
Furthermore, as a NACA mortgage recipient, you are expected to engage in a minimum of five membership activities annually. These activities include volunteering at NACA offices, participating in protests, or offering support to other members during the home buying process.
Eligible States
Unfortunately, the NACA mortgage program still isn’t available everywhere, though the organization is working hard to expand across the U.S. It’s currently available in the following states:
Alabama
Arkansas
Arizona
California
Colorado
Connecticut
District of Columbia
Florida
Georgia
Hawaii
Illinois
Louisiana
Massachusetts
Maryland
Michigan
Minnesota
Missouri
Mississippi
North Carolina
New Jersey
Nevada
New York
Ohio
Pennsylvania
South Carolina
Tennessee
Texas
Virginia
Wisconsin
NACA Program Pros and Cons
Here are some of the biggest advantages and disadvantages of taking out a mortgage through the NACA.
Pros
Buying a home with no down payment or standard closing costs
Snag a below-market interest rate on a 15-year or 30-year mortgage
No credit requirements or income limits to apply
Receive extensive borrower education and training
Cons
Time-consuming application process
Program isn’t available in all 50 states
There are limits to how much you can borrow
You’ll have to pay for property taxes and homeowners insurance
NACA Loan Limits
The NACA home buying program has loan limits that cap your mortgage amount. The purchase price of a home cannot exceed the conforming loan limit, which is $647,200 for a single-unit property in most states. The conforming loan limit for a single-unit home in Alaska and Hawaii is $970,800.
Who qualifies for the NACA program?
The NACA mortgage program is very generous, but there are several steps you’ll need to take before you can close on your home. Here are the seven steps you’ll take to complete the NACA loan qualification process.
1. Attend a free homebuyer workshop
If you’re considering applying for a NACA mortgage, you’ll first have to attend a homebuyer workshop. During this free workshop, you’ll learn more about homeownership and how to qualify for the NACA mortgage program. Then, you can register on the company’s website to reserve your spot.
2. Meet with your housing counselor
Once you’ve completed the homebuyer workshop, the NACA will assign you a housing counselor to guide you through this process. Your housing counselor will help you determine an affordable monthly mortgage payment and help you come up with a reasonable monthly budget. You’ll continue to meet with your counselor until you’ve qualified for the NACA housing program.
3. Attend a NACA purchase workshop
Once you’ve qualified for the mortgage program, you must attend a purchased workshop at the NACA office. During this workshop, you’ll review the home purchase process and work with a real estate agent to help you find the right home.
4. Receive a property qualification letter
Once you’ve chosen the home you plan to buy, you’ll have to get in touch with your housing counselor again. They will help you secure your qualification letter.
This letter states that you are qualified to purchase the home you’re interested in. Your NACA counselor and real estate agent can also help you draft an offer on the home.
5. Get your home inspected
Before you can purchase a home, it must pass a NACA home inspection and pest inspection. If the inspection reveals any problems with the home, you must resolve those issues before you can close on the home.
6. Meet with your mortgage consultant
Throughout this entire mortgage process, you should be saving money, maintaining your income level, and paying your bills on time. At this point, you’re going to meet with your mortgage consultant to prove that you’ve met the required guidelines and are ready to move forward with the mortgage application.
7. Close on your mortgage
Now it’s time to close on your home! There are no closing costs for a NACA mortgage. Additionally, NACA members do not pay private mortgage insurance (PMI).
Instead, your NACA membership provides you with a post-purchase assistance program through NACA’s Membership Assistance Program (MAP). But this is the final step that allows you to close on your new home and finalize the process.
Alternatives to the NACA program
The NACA program may not be suitable for everyone, or you may not qualify. If this is the case, consider other mortgage programs that may be available to you.
FHA Loans
For low-to-moderate income borrowers who may not meet the stringent requirements of conventional loans, the Federal Housing Administration offers the FHA loan program. With lower down payment needs and more lenient credit score standards, these loans provide a viable option for those looking to finance their first home.
USDA Loans
The U.S. Department of Agriculture extends its support to those seeking to purchase a home in rural or suburban areas through its USDA loan program. These loans offer attractive terms such as low or no down payment options and competitive interest rates, with the aim of fostering home ownership in less densely populated regions.
VA Loans
As a way to show appreciation for the sacrifices made by military service members, veterans, and their surviving spouses, the Department of Veterans Affairs provides VA loans.
These loans, exclusive to eligible individuals, boast features such as no down payment requirement, no private mortgage insurance, and interest rates that are often more favorable than those of traditional loans.
First-Time Homebuyer Programs
For those entering the housing market for the first time, many states and local governments offer programs tailored to their needs. First-time homebuyer programs often provide financial assistance in the form of lower interest rates and down payment assistance, as well as other incentives, making homeownership a reality for those who may not have the funds for a down payment otherwise.
Down Payment Assistance
To help alleviate the burden of the upfront costs of buying a home, down payment assistance (DPA) programs are available from government agencies, non-profit organizations, and private lenders.
These programs provide homebuyers with the necessary funds to cover their down payment, allowing them to get one step closer to affordable homeownership.
National Homebuyers Fund
As a non-profit organization, the National Homebuyers Fund offers down payment assistance to low-and moderate-income homebuyers in the form of grants that do not need to be repaid. Their mission is to provide a helping hand to those who may not have the resources to make a down payment on their own.
Chenoa Fund
The CBC Mortgage Agency’s Chenoa Fund is a down payment assistance program that provides low-and moderate-income homebuyers with up to 3.5% of the home’s purchase price. This support is provided through either forgivable or repayable second mortgage loan options.
Bottom Line
If you’re concerned that you don’t have the down payment or credit requirements necessary to apply for a traditional mortgage, a NACA mortgage may be a suitable option. Borrowers that qualify could receive low-interest mortgages with no down payment, closing costs, or fees. The application process is tedious, but the benefits can help you achieve the dream of homeownership.
Frequently Asked Questions
Is there a minimum credit score requirement for the NACA program?
No, NACA does not consider credit scores for mortgage approval. Instead, they look at your payment history and ability to make future mortgage payments.
Is there an income limit to qualify for the NACA program?
There is no strict income limit to qualify for the NACA program. The program is designed primarily to assist low- to moderate-income individuals and families, but it does not set an upper limit on income. The focus is more on your ability to afford the mortgage payments, and whether you meet other program criteria.
How long does the NACA mortgage process take?
The time frame can vary depending on individual circumstances, but generally, it takes several months from attending the initial workshop to closing on a home. The more promptly you can provide the required documentation and fulfill program requirements, the quicker the process will likely be.
How does the NACA mortgage differ from a traditional mortgage?
NACA mortgages typically offer more favorable terms compared to traditional mortgages. They come with no down payment, no closing costs, and no requirement for private mortgage insurance (PMI). The interest rates are often below market rate as well.
Can I use a NACA mortgage to refinance my existing loan?
No, NACA mortgages are designed for the purchase of a primary residence only. They cannot be used for refinancing existing loans or for investment properties.
The Philadelphia suburbs stand as beacons of charm, history and modern sophistication. Each suburb featured below paints a picture of life that’s equal parts enchanting and enviable. Whether it’s the academic air of Swarthmore, the historic tales of Doylestown, or the sweet treats of Ambler, the Philadelphia suburbs have something for everyone.
Population: 5,611
Average age: 26.7
Median household income: $71,397
Average commute time: 20,5 minutes
Walk score: 67
One-bedroom average rent: $1,870
Two-bedroom average rent: $2,320
In the picturesque landscape of Philadelphia suburbs, Bryn Mawr stands out as a gem of the Main Line. Famous for its prestigious Bryn Mawr College, this suburb offers an eclectic mix of historic charm and modern appeal. From its tree-lined streets to the iconic Bryn Mawr Film Institute, this town offers residents a refined yet relaxed environment just a stone’s throw away from the hustle and bustle of Philadelphia.
Three great apartment complexes in Bryn Mawr
Bryn Mawr’s unique blend of top-notch educational institutions, chic boutiques and great eateries make it a top choice for those seeking a touch of sophistication amidst the Philadelphia suburbs. Add to that the easy accessibility to the city and surrounding scenic spots, and it’s no wonder Bryn Mawr has become synonymous with the best of suburban living.
Population: 13,567
Average age: 38.9
Median household income: $107,087
Average commute time: 28.7 minutes
Walk score: 91
One-bedroom average rent: $2,743
Two-bedroom average rent: $3,678
Ardmore stands tall with its distinctive allure. As part of the renowned Main Line, Ardmore boasts a blend of historic significance and contemporary attractions. The iconic Suburban Square, one of the nation’s earliest shopping centers, gives residents and visitors a taste of upscale retail, mouth-watering restaurants and open-air entertainment. Yet, it’s the community spirit and tree-canopied streets that truly underscore its desirability among the Philadelphia suburbs.
Three great apartment complexes in Ardmore
Ardmore’s winning combination includes excellent schools, parks brimming with greenery and a bustling music scene anchored by the legendary Ardmore Music Hall. Proximity to Philadelphia means urban amenities are within reach, while still preserving that cherished suburban ambiance.
Population: 49,391
Average age: 40.5
Median household income: $144,205
Average commute time: 28.2 minutes
Walk score: 10
One-bedroom average rent: $1,901
Two-bedroom average rent: $2,535
Haverford shines brightly as a beacon of refined suburban living. Notably home to Haverford College, an elite liberal arts institution, this suburb exudes an air of academic excellence blended seamlessly with historic charm. The serene walking trails of the Haverford College Arboretum provide residents with an oasis of tranquility, while the high-end boutiques and cafes add a little something extra to this Philadelphia suburb.
Three great apartment complexes near Haverford
One of Haverford’s standout qualities is its commitment to preserving green spaces, evident in the beautifully maintained Haverford Reserve. Here, locals enjoy everything from sports to serene nature walks, bringing the community together in active camaraderie.
Population: 4,496
Average age: 41.1
Median household income: $128,889
Average commute time: 26.3 minutes
Walk score: 88
One-bedroom average rent: $1,800
Two-bedroom average rent: $2,100
Narberth emerges as a captivating pocket of charm and community spirit. This borough, smaller than many of its suburban counterparts, has an undeniably magnetic appeal. Its downtown, often likened to a scene from a Hallmark movie, is packed with quaint shops, inviting cafes and the unmistakable charm of the Narberth Train Station, making it a hub for locals and visitors from other Philadelphia suburbs.
Three great apartment complexes near Narberth
What really sets Narberth apart is its unparalleled sense of community. Events like the legendary Narberth Dickens Festival transport residents to Victorian England right in the heart of the Philadelphia suburbs, creating enchanting memories for families year after year.
Population: 7,425
Average age: 48.5
Median household income: $106,590
Average commute time: 25.0 minutes
Walk score: 37
One-bedroom average rent: $2,522
Two-bedroom average rent: $2,410
On the coveted Main Line, Wayne boasts an impeccable streetscape dotted with historic buildings, trendy boutiques and beloved restaurants ranging from cozy coffee shops to upscale dining experiences. The Wayne Art Center offers classes and exhibitions, making it a beacon for creativity within the Philadelphia suburbs.
Three great apartment complexes in Wayne
Wayne’s appeal isn’t just skin deep. This suburb is renowned for its events, like the Wayne Music Festival, which fills the air with melodies and draws crowds from all corners of the Philadelphia suburbs. With the added convenience of the Wayne Train Station, city amenities are just a short ride away.
Population: 5,858
Average age: 43.2
Median household income: $77,750
Average commute time: 26.0 minutes
Walk score: 60
One-bedroom average rent: $1,500
Two-bedroom average rent: $1,575
Media proudly declares itself as “Everybody’s Hometown,” and for good reason. This suburb takes charm to a whole new level, from its historic courthouse to the renowned Media Theatre, which stages some of the region’s most sought-after performances. As the only suburban town in the area with a bustling trolley running down its main street, State Street, Media is a nod to yesteryears and a testament to the conveniences of today’s world, making it stand out in the spectrum of Philadelphia suburbs.
Three great apartment complexes near Media
Beyond the trolley tracks, Media’s community-driven spirit shines brightly. Monthly events, like Dining Under the Stars, where diners savor meals alfresco in the middle of the street, encapsulate the strong communal vibe this suburb restlessly champions.
Population: 6,595
Average age: 37.0 minutes
Median household income: $128,995
Average commute time: 23.6 minutes
Walk score: 77
One-bedroom average rent: $990
Two-bedroom average rent: $2,400
Within the panorama of Philadelphia suburbs, Swarthmore emerges with an intellectual sparkle, thanks in part to the renowned Swarthmore College. This suburban gem, with its sprawling college grounds, features the breathtaking Scott Arboretum, an expansive garden that invites contemplation and leisurely strolls. Residents enjoy this verdant retreat, making Swarthmore a green oasis among the Philadelphia suburbs.
Three great apartment complexes near Swarthmore
But Swarthmore isn’t just for the academically inclined. The town center, home to the delightful Swarthmore Co-Op, brings a communal warmth that’s hard to resist. The community’s commitment to sustainability and local engagement, combined with its picturesque surroundings, ensures Swarthmore’s place as a premier destination within the Philadelphia suburbs.
Population: 18,630
Average age: 24.9
Median household income: $65,027
Average commute time: 22.7 minutes
Walk score: 74
One-bedroom average rent: $1,947
Two-bedroom average rent: $2,382
Brimming with well-preserved 18th-century buildings, West Chester has a delightful downtown that’s been recognized as one of the best main streets in the country. From gourmet restaurants to boutique shopping, West Chester is a hub of activity, making it a solid option in the large realm of Philadelphia suburbs.
Three great apartment complexes in West Chester
It’s not just the aesthetics, however, that define West Chester’s appeal. The suburb hosts a range of events, including the whimsical West Chester Restaurant Festival and the annual Christmas parade, which rivals those in much larger cities.
Population: 8,250
Average age: 48.1
Median household income: $139,270
Average commute time: 28.7 minutes
Walk score: 95
One-bedroom average rent: $1,760
Two-bedroom average rent: $2,237
As the seat of Bucks County, Doylestown boasts architecturally significant buildings, like the Mercer Museum and Fonthill Castle, which stand as reminders of its rich past. But Doylestown isn’t just about looking back. Its downtown pulses with contemporary energy, making it a favorite among Philadelphia suburbs.
Three great apartment complexes in Doylestown
Beyond its brick-lined streets, Doylestown has a lively arts scene anchored by the County Theater, where classic films and indie hits find an enthusiastic audience. Add to this mix, the engaging festivals that pepper its calendar year-round, and it’s clear that Doylestown isn’t just another name on the list of Philadelphia suburbs.
Population: 6,803
Average age: 35.6
Median household income: $74,868
Average commute time: 23.7 minutes
Walk score: 71
One-bedroom average rent: $1,269
Two-bedroom average rent: $1,579
Ambler stands out with a mix of small-town charisma and cosmopolitan flair. Known for its revitalized downtown, Ambler teems with indie theaters, like the Ambler Theater, and a range of eateries from cozy bistros to trendy bars. This zest for local arts and eats positions Ambler as a foodie’s paradise and an arts enthusiast’s haven in the lineup of Philadelphia suburbs.
Three great apartment complexes near Ambler
But what truly elevates Ambler is its community spirit. The annual Ambler Fest, with its street vendors and live music, is a great example of this and showcases the suburb’s commitment to camaraderie and local talent.
Find the Philadelphia suburb for you
The Philadelphia suburbs featured above offer a captivating blend of the old and the new, from tranquil streets to contemporary hotspots. As this exploration has shown, there’s more to these suburbs than just their proximity to the City of Brotherly Love.
Each town described above promises a life of richness, community and endless discovery. For those considering a move or simply looking for an excursion, the Philadelphia suburbs extend an open invitation to experience their magic firsthand.
When you’re ready to find the perfect apartment in the ideal Philadelphia suburb, start your search with Rent.
A native of the northern suburbs of Chicago, Carson made his way to the South to attend Wofford College where he received his BA in English. After working as a copywriter for a couple of boutique marketing agencies in South Carolina, he made the move to Atlanta and quickly joined the Rent. team as a content marketing coordinator. When he’s off the clock, you can find Carson reading in a park, hunting down a great cup of coffee or hanging out with his dogs.
There is a sinking feeling in your gut that comes with credit card debt, especially when it starts to feel unmanageable. While negotiating a credit card settlement might not sound like a fun solution, there are scenarios when it may make sense. Let’s dive in.
The Difference Between Secured and Unsecured Debt
First, let’s talk about the type of debt a credit card typically is. When a credit card company issues a credit card, it’s taking a big chance on getting its money back, plus interest. It’s more than likely that the credit card you have is considered “unsecured.”
All that means is that it isn’t connected to any of your assets that a credit card company can seize in the event that you default on your payments. Essentially, the credit card company is taking your word for it that you are going to come through with the monthly payments.
Secured debt works a bit differently. They’re backed by an asset, like your car or home. If you default on a secured debt, your lender could seize the asset and sell it to pay off your debt. Mortgages and auto loans are two common types of secured debt. 💡 Quick Tip: With lower fixed interest rates on loans of $5K to $100K, a SoFi personal loan for credit card debt can substantially decrease your monthly bills.
Credit Card Debt Negotiation Steps
The process of negotiating credit card debt usually begins when you have multiple late or skipped payments — not just one. A good first step is to find out exactly how much you owe, and then research the different options that may be available to you. Examples include a payment plan, an increase in loan terms or lowered interest rates.
Once you have that information, you’re ready to negotiate. You can start by calling your credit card company and asking for the debt settlement department. Or, you can send a note by email or regular mail.
You may have to go through a number of customer service reps and managers before striking a deal, but taking the initiative can show creditors that you are handling the situation honestly and doing what you need to do.
When you do reach an agreement, be sure to get the agreed-upon terms in writing.
Types of Credit Card Debt Settlements
Lump Sum Settlement
This type of agreement is perhaps the most obvious option. Essentially, it involves paying cash and instantly getting out of credit card debt. With a lump sum settlement, you pay an agreed-upon amount, and then get forgiveness for the rest of the debt you owe.
There is no guarantee as to what lump sum the credit card company might go for, but being open and upfront about your situation could help your cause.
Workout Agreement
This type of debt settlement offers a degree of flexibility. You may be able negotiate a lower interest rate or waive interest for a certain period of time. Or, you can talk to your credit card issuer about reducing your minimum payment or waiving late fees.
Hardship Agreement
Also known as a forbearance program, this type of agreement could be a good option to pursue if your financial issues are temporary, such as the loss of a job.
Different options are usually offered in a hardship agreement. Examples include lowering interest rate, removing late fees, reducing minimum payment, or even skipping a few payments.
Why a Credit Card Settlement May Not Be Your Best Option
Watching your credit card balance grow each month can be scary. Depending on your circumstances, a settlement may be the best solution for you.
However, it’s not without its drawbacks. For starters, a settlement may result in your credit card privileges being cut off and your account frozen until a settlement agreement is reached between you and the credit card company.
Your credit score could take a hit, too. This is because your debt obligations are reported to the credit bureaus on a monthly basis. If you aren’t making your payments in full, this will be noted by the credit bureaus.
That said, by negotiating a credit card settlement, you may be able to avoid bankruptcy and give the credit card company a chance to recoup some of its losses. This could stand in your favor when it comes to rebuilding your credit and getting solvent again.
Solutions Beyond Credit Card Debt Settlements
Personal Loan
Consolidating all of your high-interest credit cards into one low-interest unsecured personal loan with a fixed monthly payment can help you get on a path to pay off the credit card debt. Keep in mind that getting a personal loan still means managing monthly debt payments. It requires the borrower to diligently pay off the loan without missing payments on a set schedule, with a firm end date.
For this reason, a personal loan is known as closed-end credit. A credit card, on the other hand, is considered open-end credit, because it allows you to continue to charge debt (up to the credit limit) on a rolling basis, with no payoff date to work towards. 💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.
Transferring Balances
Essentially, a balance transfer is paying one credit card off with another. Most credit cards won’t let you use another card to make your payments, especially if it’s from the same lender. If your credit is in good shape, you can apply for a balance transfer credit card to pay down debt without high interest charges.
Many balance transfer credit cards offer an introductory 0% APR, but keep in mind that a sweet deal like that usually only lasts about six to 18 months. After that introductory rate expires, the interest rate can jump back to a scary level — and other terms, conditions, and balance transfer fees may also apply.
Credit Consumer Counseling Services
Credit consumer counseling services often take a more holistic approach to debt management. You’ll work with a trained credit counselor to develop a plan to manage your debt. Typically, the counselor doesn’t negotiate a reduction in debts owed. However, they may be able to have your loan terms increased or interest rates lowered, which would lower your monthly payments.
A credit counselor can also help you create a budget, offer guidance on your money and debts, provide workshops or educational materials, and more.
Many credit counseling agencies are nonprofit and offer counseling services for free or at a low cost. You can search this list of nonprofit agencies that have been certified by the Justice Department.
The Takeaway
When credit card debt starts to become unmanageable, negotiating a credit card debt settlement may be an option to consider. There are different types of settlement options to consider. Understanding what’s available to you — and what makes sense for your financial situation and needs — can help you make an informed decision. If a settlement isn’t right for you, there are other solutions, such as a personal loan or credit counseling services, that may be a better fit.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.
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Somewhere between the timeless allure of traditional and the clean lines of contemporary, we find transitional style.
As spaces evolve with modern times, so too does the desire for a balanced blend of the old and new. We’ll delve into the nuances of the transitional design style, an embodiment of sophistication and simplicity, harmoniously woven together.
Keep in mind, transitional style is all about finding that sweet equilibrium, where curated antiques meet minimalist modern, creating a unique and welcoming space that ultimately feels like home. Here’s how you can spot the look in real life and recreate it in your own spaces.
Transitional style 101
What are some basics of the transitional interior design look? Not every transitional space will check every box, but you’re likely to find a medley of the following features.
Neutral color palette: One of the hallmarks of transitional design is a largely neutral color palette. Think beiges, grays, creams and tans, which serve as a base. This doesn’t mean color is absent; rather, pops of color are introduced sparingly through accessories, art and accent pieces.
Clean lines with curved profiles: Furniture in transitional spaces combines the straight lines seen in more contemporary pieces with the curves and detailing of traditional designs. For instance, a sofa might have clean, minimalist lines but be upholstered in a classic fabric or have tufted details.
Mix of materials: You’ll often see a mix of materials in transitional design. This might mean a glass coffee table with an ornate wooden base, or a modern metal light fixture above a traditional dining set. The juxtaposition of these materials creates visual interest.
Texture and fabric: With a neutral color palette, texture plays a big role in transitional style. Think tufted rugs, linen drapes and textured cushions. A variety of fabrics from leather to velvet can be used — in moderation — to bring depth, warmth and drama to any space.
Less ornamentation: Unlike traditional design, which might include heavy moldings or detailed woodworking, transitional spaces tend to be on the simpler side. However, they’re not as stark or minimalist as traditional Scandinavian or Japanese interior design styles.
Art and accessories: Transitional apartments might showcase modern art in ornate frames, or traditional art in sleek, minimalist frames. Accessories, like vases or lamps, should strike a balance between the contemporary and traditional. It’s all about toeing the line between styles without leaning too far in one direction.
Functional and uncluttered spaces: While the look is balanced, transitional design embraces functionality. This means adequate storage solutions to ensure spaces are free of unnecessary items, which is especially important in apartment settings where space may be at a premium.
Natural light: Embracing natural light is key in transitional design. Light and airy window treatments that allow for plenty of sunlight help make the space feel open and welcoming without requiring additional accessories or loud colors.
Area rugs: To define spaces, especially in an open-concept apartment, use area rugs. This helps to visually break up the space while also adding warmth and texture.
Consistency: Even though transitional style is about blending, it’s important to maintain a sense of consistency. This means not every piece in a room should be a mix of modern and traditional. The goal in transitional design is that the room — as a whole — achieves this balance.
Transitional design style in action
If you want to apply the transitional style to your apartment, start with a neutral foundation, incorporate modern and traditional elements carefully and remember to keep it functional and uncluttered. With a keen eye for design and balance, you can create a space that feels equal parts fresh and timeless.
Soft transitional design: a 2023 trend
In 2023, the soft transitional interior design style gained significant popularity for its harmonious blend of traditional and contemporary elements. This style is characterized by its emphasis on creating a warm and inviting atmosphere while maintaining a clean and streamlined aesthetic.
While both soft transitional and OG-transitional interior design styles share common transitional elements, the former distinguishes itself through its heightened emphasis on comfort, a subdued color palette with subtle pops of color and a strong focus on textures that contribute to a warm and inviting atmosphere. With this in mind, you might see more cozy blankets, stacks of pillows, soft textures and more handmade keepsakes to embrace your best “soft life” and remind you of what you value most.
Transitional design: A how-to guide
Transitional style strikes a delicate balance between the timeless elegance of traditional designs and the sleek minimalism of contemporary style. This design approach merges the best of both worlds to create a harmonious space that feels cozy yet sophisticated. For apartment renters, mastering the transitional style can result in a home that is functional and uniquely personal.
Transitional design tips for renters
Need a few starting tips to implement this design in your home? Start by trying a few of these.
Start with the basics: For apartment renters, it’s best to start with the essentials. Invest in key pieces like a versatile sofa, a neutral rug or a functional dining set. These foundational items set the stage for the rest of the decor. With the larger pieces out of the way, you can add small artifacts and accessories over time to fully round out your design and make your place feel fully like home.
Modular furniture: Given the sometimes limited space in apartments, opting for modular furniture can make a big difference. These pieces can be easily rearranged or adapted to fit different spaces, making them perfect for transitional stylists who love to switch things up every few months.
Layered lighting: Lighting plays a crucial role in transitional spaces. Incorporate different light sources – from ambient and task lighting to accent lights. This layered approach not only provides functionality but also adds depth and warmth to the apartment.
Temporary touches: Renters often face restrictions when it comes to permanent changes. But that doesn’t mean you can’t achieve the transitional style. Removable wallpapers, peel-and-stick tiles and adhesive hooks can transform spaces without compromising the apartment’s original state.
Personal artifacts: Just because it’s transitional doesn’t mean it can’t be personal. Integrate family heirlooms, personal artworks or cherished collectibles. These items add warmth to any room and tell a story, making even the most cookie-cutter apartment unit feel like home.
Remember to rely on balance
Transitional style is about balance. It embraces change while respecting tradition. This approach offers apartment renters the flexibility to evolve their decor over time without straying too far from the foundational elements that make their space feel like home. With careful planning and a keen eye for design, any apartment can radiate the effortless elegance of transitional style.
Traditional and modern meet in transitional design
The beauty of transitional style lies in its innate ability to resonate with a wide range of audiences. It’s a symphony of eras, harmonizing the classic charm of traditional pieces with the sleek essence of contemporary design. As we’ve explored in this article, mastering this style isn’t about strict rules or rigid definitions; it’s about embracing fluidity, adaptability and a keen eye for balance.
As spaces continue to evolve and reflect the multifaceted personalities of their inhabitants, transitional style stands out as a testament to timelessness, bridging the past and the present in an expertly choreographed dance of design perfection.
Still looking for that perfect space to showcase your style? Browse our available apartments for rent here.
A native of the northern suburbs of Chicago, Carson made his way to the South to attend Wofford College where he received his BA in English. After working as a copywriter for a couple of boutique marketing agencies in South Carolina, he made the move to Atlanta and quickly joined the Rent. team as a content marketing coordinator. When he’s off the clock, you can find Carson reading in a park, hunting down a great cup of coffee or hanging out with his dogs.
The proliferation of special-purpose credit programs should help increase homeownership rates among Black households, but it won’t happen without specialized expertise and intentionality, according to industry leaders.
The products have gained traction in the aftermath of 2020 racial justice protests following the death of George Floyd as businesses attempt to address wealth disparities between Blacks and whites. Since the end of the Great Financial Crisis, the difference in homeownership rates between Black and white households has widened, with the 2020 gap exceeding the difference that existed in 1960.
But offering SPCPs is not about doing “a good thing,” according to Nikitra Bailey, executive vice president of the National Fair Housing Alliance. They ought to be a business priority moving forward as well.
“We know that seven out of 10 future borrowers are going to be families of color,” she said at a September roundtable discussion organized by four government regulating agencies. “This is actually about the health and the financial safety and soundness of our mortgage market.”
Financial institutions that have taken the initiative to introduce SCPCs in the past two years say that success depends not only on having more minority loan and banking officers. Desired outcomes can only occur by bringing to the table historical knowledge and sensitivity to enable effective communication with the stakeholders they’re meant to serve. Those types of efforts may require a shift in the typical approach to customer acquisition and originator compensation.
“We’re building the trust within the community, recognizing that there’s still a level of mistrust with banks amongst minority communities,” said Michael Innis-Thompson, senior vice president and head of community lending and development and fair lending center of excellence at TD Bank, which has offered SPCPs since early 2022.
Recognizing the need to have professionals who both look like and can relate to their likely clients, TD created a network of community mortgage loan officers serving as “credible intermediaries” to help build that trust, Innis-Thompson said.
With community loan officers focused on outreach to low-to-moderate income people of color, “their payment structure is designed, so that they have a salary to compensate for the additional community work they do on top of loan commissions, versus a standard loan officer that’s on pure commission,” he said.
“There’s an incentive for them to continue to develop these relationships, and we designed it specifically that way.”
Much of the work involved with strengthening SPCPs entails finding partnerships in neighborhoods. With a great deal of nuance in each program as well as differences between individual SPCPs, there’s a fair amount of education required before the first transaction can take place, according to Dale Baker, president of home lending at KeyBank.
“We do sit down with Realtors, we do work with various community groups, trade associations, affinity groups, faith based organizations, to provide education. And, in exchange they help us with getting the information out to their members, constituency, et cetera, in order to take advantage of this funding,” he said. Baker also added that KeyBank has received interest from loan officers themselves who want to join the company as a result of their bringing SPCPs to the market.
The most constructive partnerships make the work for lending officers simpler, thanks to the backing of influential sources.
“When you’re dealing with community organizations, for example, those are trusted intermediaries that potential homebuyers go to. When they’re sharing the information, they consider it credible.” Innis-Thompson said.
The work behind special-purpose credit programs don’t end once the loan closes, but require regular monitoring to improve upon them. While the fine details may seem complicated, having analysts who can examine processes and identify missed opportunities is vital toward fulfilling the mission SPCPs were created to address. Even after their programs rolled out, lenders continue to sort through their data to see if they failed to offer the program to an eligible borrower.
“That’s a key point about any special-purpose credit programs — monitoring to see if it’s really having the effect that it was designed to have,” Innis-Thompson noted.
As borrowers gear up for federal student loan bills resuming this fall, they face a revamped landscape that includes a new repayment plan, servicer switches and long call wait times. Another imminent concern: scammers who want to take advantage of the moment.
“Whenever there’s confusion in the marketplace, that’s when the criminal fraudsters get active,” says Clayton LiaBraaten, senior executive advisor at Truecaller, an app that blocks spam calls.
Borrowers need to protect themselves, even as regulators crack down on scammers. In August, the Federal Trade Commission (FTC) caught a group of scammers who brought in roughly $8.8 million with false promises of “Biden Loan Forgiveness” in exchange for hefty upfront fees. The group claimed to be affiliated with the U.S. Department of Education and primarily targeted borrowers via calls and texts, the FTC said.
If you receive an unsolicited call or text about your student loans, it’s probably a scam. Here’s how to spot and avoid a student loan repayment scam — and what to do if you think you’re a victim of one, according to experts.
What to watch out for
Student loan scams vary widely, but they often contain a few key ingredients. Here are some common red flags.
Advertising from the ‘government’
Scammers will often use the word “federal” in their communications, LiaBraaten says. They might claim federal or government affiliation, or they could claim to be connected with the Education Department or your student loan servicer.
Aggressive advertising language can also indicate that communication isn’t from the government.
“If you are a student loan borrower, you need to be aware that the federal government isn’t soliciting you,” says Leslie Tayne, a financial debt attorney. “If it sounds like a sales pitch with guarantees and promises, that’s not coming from the federal government.”
Relief that costs money
If someone asks you to pay an upfront or monthly fee to access debt relief, it’s a scam.
It’s always free to enroll in or benefit from any legitimate federal student loan relief, such as income-driven repayment (IDR) plans, borrower defense to repayment, Public Service Loan Forgiveness and the IDR account adjustment.
And if you have questions about your loans or repayment options, you can call your servicer for free guidance.
Promises that are too good to be true
Keep your guard up if you receive calls with promises of instant student loan relief. Most federal relief programs require at least a decade of payments to qualify — and no company or person has the ability to negotiate a special deal with your loan servicer or the government, warns the Education Department.
“Legitimate loan forgiveness programs usually have these strict eligibility criteria, so any sort of instant forgiveness is a red flag,” says Ally Armeson, program director of the nonprofit Cybercrime Support Network. Scammers see an opportunity with people panicking around repayment and try to position themselves as saviors, she says.
How scammers reach you
Student loan scammers can get creative with their contact methods. Here are a few to watch out for.
Robocalls
Think twice if your phone rings with an unknown number. In the first half of September, scammers placed more than 350,000 student loan-related robocalls, according to Transaction Network Services, a financial infrastructure firm.
“Beware of unsolicited calls or communication,” Armeson says. “That is the number-one way that a scammer will weasel into your life.”
Snail mail
Scammers may also send letters through the mail. Read them closely. Even if it seems official or formal, a scam letter will often include grammatical or spelling errors, the Education Department says.
Texts and social media
Increasingly, scammers are also targeting borrowers with texts and social media messages, Tayne says. Scams that began on social media have accounted for $2.7 billion in reported losses since 2021, more than any other contact method, the FTC said earlier this month.
Official Education Department text messages will only come from the numbers 227722 or 51592.
Email
Scammers may try to sneak into your inbox. If an email looks suspicious, double-check the sender.
Legitimate emails from the Education Department will only come from these senders:
Protecting yourself from a student loan scam
Don’t engage if you receive a call about your student loans out of nowhere. Hang up if it’s a robocall; if a person is on the other side, quickly end the call.
“If someone says they are from a specific agency, department or loan servicer, just say, ‘you know what, let me hang up and do my research, and I’ll go from there by myself,'” Armeson says.
If you get an email or text about your student loans, don’t click on any links.
Use strong passwords and enable two-factor authentication on all of your online financial accounts, including your StudentAid.Gov and student loan servicer accounts, LiaBraaten says.
Never share your login information. With just your username and password, scammers can sign legally binding student loan documents electronically and make changes to your federal student loan account.
The Education Department and your servicer will never ask for your password.
What to do if you’re a student loan scam victim
If you believe a scammer has targeted you, immediately stop communicating with them. Then, take the following steps to get help and protect yourself from any further harm:
Contact your student loan servicer. Call your servicer and tell them what happened. Check the status of your loan and ask if the scammer did anything to your account.
Call your bank and credit card company. Ask them to stop any payments to a scammer.
Change your passwords. Change all passwords associated with your financial accounts and student loans, like your StudentAid.gov and servicer accounts.
Monitor your finances. Check to see if anyone has opened an unauthorized account or line of credit in your name.You can check your credit report for free each week on AnnualCreditReport.com.
Consider freezing your credit. If you think the scammer may have personal information, like your Social Security number, freeze your credit to prevent identity theft and fraud.
Save all communication records. If the scammer has texted or emailed you, save these records to send the information to the FTC and other law enforcement agencies.
Report possible scams to the FTC, which may use the report to spot trends, educate the public and bring cases against fraudsters in partnership with more than 2,800 law enforcement organizations.
If scammers took your money, the FTC will also give you advice on how to recover it. “The quicker you act, the better your chance of getting your money back,” the FTC website says.
You can also report the student loan scam to your state’s attorney general’s office or the Consumer Financial Protection Bureau for further assistance and investigation.
The mere thought of filing for bankruptcy is enough to make anyone nervous. But in some cases, it really can be the best option for your financial situation. Even though it stays as a negative item on your credit report for up to ten years, bankruptcy often relieves the burden of overwhelming amounts of debt.
There are actually three different types of bankruptcy, and each one is designed to help people with specific needs. Read on to find out which type of bankruptcy you might be eligible for. We’ll also help you determine whether it really is the best option available.
What are the different types of bankruptcy?
In general, bankruptcy is the process of eliminating some or all of your debt, or in some cases, repaying it under different terms from your original agreements with your creditors.
It’s a very serious endeavor but can help alleviate your debt if you calculate that it’s unlikely to you’ll be able to repay everything throughout the coming years.
The two most common for individuals are Chapter 7 and Chapter 13. Chapter 11 is primarily used for businesses but can apply to individuals in some instances. Let’s take a look at some bankruptcy basics and the other details that set them apart from each other.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is designed for individuals meeting certain income guidelines who can’t afford to repay their creditors. You must pass a means test to qualify. Then, instead of making payments, a bankruptcy trustee can sell your personal property to help settle your debts, including both secured and unsecured loans.
There are certain exemptions you can apply for to keep some things from being taken away. It all depends on which debts are delinquent. If your mortgage is headed towards foreclosure, you might only be able to delay the process through a Chapter 7 delinquency.
If you’re only delinquent on unsecured debt, like credit card debt or personal loans, then you can file for an exemption on major items like your home and car. That way they won’t be repossessed and auctioned off.
Eligible exemptions vary by state. Usually, there is a value assigned to your assets that are eligible for exemption. You may keep them as long as they are within that maximum value. For example, if your state has a $3,000 auto exemption and your car is only valued at $2,000 then you get to keep it.
Most places also allow you to subtract any outstanding loan amount to put towards the exemption. So, in the situation above, if your car is valued at $6,000, but you have $3,000 left on your car loan, then you’re still within the exemption limit.
Chapter 7 bankruptcy is the fastest option to go through, lasting just between three and six months. It’s also usually the cheapest option in terms of legal fees. However, keep in mind that you’ll likely have to pay your attorney’s fees upfront if you choose this option.
Chapter 13 Bankruptcy
A chapter 13 bankruptcy is the standard option when you make too much money to qualify for a Chapter 7 bankruptcy. The benefit is that you get to keep your property but instead repay your creditors over a three- to five-year period. Your repayment plan depends on several variables.
All administrative fees, priority debts (like back taxes, alimony, and child support), and secured debts must be paid back in full over the repayment period. These must be paid back if you want to keep the property, such as your house or car.
The amount you’ll have to repay on your unsecured debts can vary drastically. It depends on the amount of disposable income you have, the value of any nonexempt property, and the length of your repayment plan.
How long your plan lasts is actually determined by the amount of money you earn and is based on income standards for your state. For example, if you make more than the median monthly income, you must repay your debts for a full five years.
If you make less than that amount, you may be able to reduce your repayment period to as little as three years. You can enter your financial information into a Chapter 13 bankruptcy calculator for an estimate of what your monthly payments might look like in this situation.
To qualify for Chapter 13, your debts must be under predetermined maximums. For unsecured debt, your total may not surpass $1,149,525 and your secured debt may not surpass $383,175. However, unlike Chapter 7 bankruptcy, you may include overdue mortgage payments to avoid foreclosure.
Chapter 11 Bankruptcy
Chapter 11 bankruptcy is usually associated with companies. However, it can also be an option for individuals, especially if their debt levels exceed the Chapter 13 limits. A lot of the characteristics of Chapter 11 and Chapter 13 are the same, such as saving secured property from being repossessed.
Having to pay back priority debts in full and having a higher income bracket than a Chapter 7 bankruptcy are also common characteristics. However, unlike Chapter 13, you must make repayment for the entire five years with a Chapter 11. There is no option to pay for just three years, no matter where you live or how much you make.
Another reason to pick Chapter 11 is if you are a small business owner or own real estate properties. Rather than losing your business or your income properties, you get to restructure your debt and catch up on payments while still operating your business, whether it’s as a CEO or as a landlord.
One downside to be aware of with a Chapter 11 bankruptcy is that it’s usually the most expensive option. However, you can pay your legal fees over time so you don’t have to worry about spiraling back into debt.
What are the long term effects of bankruptcy?
It should come as no surprise that going through bankruptcy causes your credit score to plummet. Depending on what else is on your report, your score could drop anywhere between 160 and 220 points.
Those effects linger. A Chapter 13 bankruptcy stays on your credit report for seven years. And a Chapter 7 bankruptcy remains there for as many as ten years. Their effects on your credit score do, however, begin to diminish as time goes by.
You’ll probably have trouble getting access to credit immediately following your bankruptcy. Eventually, you’ll start getting approved for loans and credit cards, but your interest rates are likely to be extremely high.
A new mortgage will probably be out of reach for at least five to seven years from the time you file for bankruptcy. Additionally, any employer performing a credit check can see all of these items on your credit report.
Government agencies can’t legally discriminate against you because of your bankruptcy, but there is no specific rule for privately-owned companies. It could be particularly damaging if the job you’re applying for deals with money or any type of financials. No matter where you work, though, you can’t be fired from a current employer because of a bankruptcy.
Should I file bankruptcy?
There’s no correct answer to this question. It’s ultimately something you’ll need to decide on your own. However, there are a few things you can do to make sure you’re making the best decision possible. Start by finding a licensed credit counselor to help analyze your individual situation. They’ll help you review the guidelines for each type of bankruptcy and determine if you’re even eligible.
At first glance, filing for bankruptcy may seem like a great way to settle your debts and move on with your life. Unfortunately, the process isn’t as simple as filling out a form. The effects of bankruptcy will stick with you for years.
As you begin the evaluation process of whether bankruptcy is right for you, there are several considerations to consider. This overview will get you thinking about your situation. It will also point you in the right direction for more in-depth resources when you need them.
Is your current status temporary or permanent?
You should also look at your expected future and compare your potential earnings to your amounts of debt. If you don’t see how you’ll ever pay off that debt, then bankruptcy may be a wise option. Also, understand the types of debt you owe. Tax payments, student loan debt, and liens on your mortgage or car will not be discharged even when you file for bankruptcy.
Once you figure out which specific options are available to you, it’s time to contact a bankruptcy attorney. You’re certainly able to represent yourself, but the process is complicated. It’s usually best to have a professional work on the case on your behalf. Just be sure to interview a few different lawyers to get multiple opinions and prices to compare.
Evaluate Your Situation
Even when your bankruptcy is underway, it’s smart to spend some time evaluating how you got there. Was it due to a one-time financial hardship, like a long bout of unemployment? If that’s the case, then you know that you have a brighter future ahead of you with the promise of work and steady income to pay your bills.
However, if you’re on the path to bankruptcy because of reckless spending, you really need to look inward and address your overspending habits. Otherwise, it becomes too easy to put yourself in the same situation a few years down the road. Use your bankruptcy as a second chance to start fresh with a clean financial slate.
Why Consider Bankruptcy?
If you’re considering bankruptcy, then you’re most likely feeling overburdened with debt and other financial obligations. You probably have a tough time paying your bills each month and may even worry about how you’ll ever pay off some of your outstanding balances.
If you’ve already exhausted your other options, like working overtime and cutting back on your non-necessities, it might be time to seriously think about potentially declaring bankruptcy. Some signs that you might be ready include:
Increased interest rates because of late payments or bad credit
Using credit cards for daily purchases without paying off the balance each month
Already downsized things like house, car, and other assets
Working multiple shifts or jobs
Paying off debt with retirement funds
Wages are being garnished
If one or more of these situations apply to you, then you should probably continue your research into bankruptcy. If not, try finding other ways to improve your financial situation. For example, you could rework your budget if there are easy places to cut back on.
You can also try negotiating with your lenders, particularly if you’re experiencing just a short-term setback. Most lenders are willing to work with you. They would much rather set up a new payment plan than have the debt discharged or settled through bankruptcy.
Bankruptcy Alternatives
If you want to file for bankruptcy it takes careful planning. Due to the long-term legal and financial consequences of bankruptcy, there are many rules that must be followed before you’re eligible.
For example, it’s necessary to show the bankruptcy court that you have obtained credit counseling and considered debt relief options like debt settlement or debt consolidation. Bankruptcy is controlled exclusively by the federal judicial system, which strongly recommends hiring an attorney before attempting to file.
If you need help finding a bankruptcy lawyer, contact the American Bar Association. They offer free legal advice, and you may qualify for free legal services if you are unable to afford an attorney.
Creating a Checklist to Avoid Dismissal
Before you file for bankruptcy, there are several important questions you should ask yourself. There are also several key steps that you need to take. First, it’s necessary to ask yourself if you really need to file for bankruptcy.
If you don’t, you probably won’t be approved anyway. You also need to calculate income, expenses, and assets, find a trustworthy attorney, and select a credit counseling program.
It’s helpful to be methodical and to use a checklist. Failure to take the right steps and find the right credit counseling could result in more wasted money and a bankruptcy dismissal where they throw out the case.
Reasons to Delay Bankruptcy
Even if bankruptcy is the best choice for you, there may be some situations where it’s smart to delay the process so you can maximize your benefits. First, if you had a high income within the last six months that no longer applies to your situation, then you might want to wait.
That’s because the bankruptcy court weighs your last six months of income to determine your eligibility for Chapter 7 bankruptcy. If you had a nice monthly salary a few months ago but have been laid off since then, that means test isn’t going to reflect your current situation accurately.
Another reason to delay bankruptcy is if you are anticipating an upcoming major debt. New debt isn’t allowed to be discharged once you file for bankruptcy.
So, for example, if you’re about to have a major medical surgery, you might consider waiting until it’s over to include the medical bills as part of your bankruptcy plan. Talk to a professional to see the eligibility requirements. Luxury items charged right before a bankruptcy filing, for example, likely won’t be included as part of your debt discharge.
Changes in Bankruptcy Law
Before getting started, it’s important to note the changes that went into effect in 2005 under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). While the changes don’t affect some people applying for bankruptcy, they may affect others.
Federal bankruptcy laws require mandatory credit counseling to make sure you fully understand the consequences of declaring bankruptcy. It also created stricter eligibility requirements for Chapter 7 bankruptcies. For Chapter 13 bankruptcy filings, the law requires tax returns and proof of income.
An informed decision begins with understanding bankruptcy laws, the bankruptcy process, and what has changed. It’s essential to better understand these changes before you make any final decisions.
Filing Under Chapter 7 or Chapter 13
Understanding how bankruptcy works means understanding the process and laws related to Chapters 7 and 13 of the Bankruptcy Code. Depending on the details of your situation, you might be eligible to file under Chapter 7 or Chapter 13. Which route you choose has a lot to do with your income and what assets you want to keep.
Your debts can either be resolved quickly or over a several-year period. It’s helpful to read up on in-depth frequently asked questions related to each route.
Calculating Chapter 7 Means
To have all your unsecured debts eliminated under Chapter 7 bankruptcy, you must qualify under the Chapter 7 means test. Using your personal information, or a basic estimate, an online calculator can help determine this for you. When filing bankruptcy, you must also fill out an appropriate form in which you enter your income, expense information, and data from the Census Bureau and IRS.
If you don’t meet the income level requirements to file for Chapter 7 bankruptcy, you can still file for Chapter 13. A Chapter 13 will settle many of your debts after you successfully complete a three to five-year repayment program.
Qualifying and Qualifying Debts
Your debts qualify for bankruptcy relief when you can prove you are unable to pay them, but a great deal depends on your situation and which chapter you are filing bankruptcy under. Debts can be either unsecured or secured. Secured debts include mortgages, cars, and debts related to a property you’re still paying for.
Unsecured debts include credit card debt, bills, collections, judgments, and unsecured loans. It’s important to know which debts qualify for bankruptcy. But, it’s even more important to know whether your situation makes you eligible for this major step. To determine this, a full financial assessment is necessary. You can start by reading more about debts that qualify.
Defaulting on a Student Loan
If you have defaulted on a student loan, there are several options open to you. Bankruptcy is one of them, but if your goal is to have a student loan discharged under Chapter 7, this can be very difficult.
Nevertheless, taking certain steps as soon as possible can help prevent wage garnishment. Knowing your options can help you make the best choice before matters become more difficult. Under Chapter 13, your defaulted loan can be consolidated with your other bills. This will give you a better payment plan or a temporary reprieve from making payments.
If you have a federal student loan, check out your repayment options, especially if you are facing financial hardship. Otherwise, read more to figure out how to pull yourself out of student loan default.
What Assets You Can Keep During Bankruptcy
Depending on how you file for bankruptcy, there are certain assets you can keep. Different states have different exemptions, and in certain states, you can choose between state and federal bankruptcy exemptions.
If you need to have debts discharged, are out of work, and cannot afford a repayment plan, some assets might be lost. In most cases, however, people who declare bankruptcy can keep their homes and cars and much of what they own while they repay their debts under a modified plan. It all depends on your unique circumstances and how you file.
Get a FREE Credit Evaluation Before You File Bankruptcy
A bankruptcy can affect your credit for 7 to 10 years and should be considered a last resort option when all other options have failed. Many times, people file bankruptcy when it is completely unnecessary. A credit professional can help you fix your credit and deal with your creditors so you can avoid filing for bankruptcy.
Before filing bankruptcy, talk to a credit specialist:
Visit the website and fill out the form for a free credit consultation with a professional credit repair company.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
Unsecured debts are loans or credit lines without collateral. This includes credit card debt, medical bills, personal loans and student loans. Failure to pay unsecured debt can result in collection efforts and damage to credit.
Are you overwhelmed by all the different loan options? Are you searching for a sustainable debt solution? Depending on your financial situation, unsecured debt may be the right option for you.
You can make informed financial judgments by understanding unsecured debt and its implications. This article will delve into the world of unsecured debt, explain its definition and give examples, explore the differences between secured and unsecured debt, shed light on the impact of bankruptcy and more.
Let’s explore unsecured debt and how it can impact your finances.
Key takeaways:
Unsecured debt refers to loans or credit lines without collateral.
Credit card debt, medical bills and personal and student loans are common examples of unsecured debt.
Failing to pay unsecured debts can lead to collection efforts and hurt your credit.
Prioritizing debt repayment is crucial, and understanding the differences between secured and unsecured debts can help you make strategic decisions.
What is an unsecured debt?
Unsecured debt is a financial obligation that does not require collateral. Unlike secured debt, backed by specific assets, unsecured debt relies solely on the borrower’s creditworthiness and promise to repay. Examples of unsecured debt include credit card debt, medical bills, personal loans and student loans.
Credit card debt: When you make purchases using a credit card, you accumulate unsecured credit card debt. The credit card company extends you a line of credit without requiring collateral.
Medical bills: Unforeseen medical expenses can result in significant unsecured debt. These bills typically arise from medical procedures, treatments or hospital stays.
Personal loans: You can obtain these from banks, credit unions or online lenders. They have various purposes, such as debt consolidation, home improvements and unexpected expenses.
Student loans: Student loans are used to finance education expenses. The government or private lenders offer them, and they can have long repayment terms.
What happens if you don’t pay an unsecured debt?
If you fail to pay your unsecured debt, there may be significant consequences. While specific actions may vary depending on the creditor, here are some potential outcomes to beware of:
Collection efforts: Creditors may employ collection agencies or pursue legal action to recover the debt. These efforts can involve phone calls, letters or even lawsuits.
Negative impact on credit: Unpaid unsecured debt can harm your credit. Late payments, defaults and charge-offs can contribute to a lower credit score, making obtaining future credit or loans more challenging.
Legal proceedings: In extreme cases, creditors can file lawsuits to obtain a judgment against you. This can result in wage garnishment or liens on your property.
Secured debt vs. unsecured debt
Understanding the differences between secured and unsecured debt is crucial for effective financial management. Simply put, secured debt is backed by specific collateral, such as a car or house, while unsecured debt lacks collateral. In the event of default, secured creditors can seize the specified assets, while unsecured creditors do not have this option.
Additionally, secured debtors usually need fewer eligibility requirements, their interest rates may be lower and they can qualify for higher loan limits since there is less risk from the lender’s point of view. But there can be a few disadvantages, like dealing with foreclosure, repossession or losing assets if the borrower cannot pay.
For unsecured debtors, the loan limit is usually lower, and interest rates tend to be higher. Still, there are a few advantages of unsecured loans, like there is no risk of losing assets, your credit can improve over time and you can set up the loan to require smaller payments for a more extended period.
What happens to secured and unsecured debts during bankruptcy?
Bankruptcy affects secured and unsecured debts differently. According to Chapter 7 of the United States Bankruptcy Code, unsecured debts are typically discharged, meaning you no longer have to repay them. However, secured debts may require surrendering the collateral or restructuring the debt through a reaffirmation agreement.
In Chapter 13 bankruptcy, often called “reorganization bankruptcy,” you create a repayment plan to gradually pay off your debts over a specific period, usually three to five years. Both secured and unsecured debts are included in this plan, with priority given to secured debts.
Remember that bankruptcy laws and procedures can vary by country, and the chapter designations mentioned above specifically apply to bankruptcy filings in the United States. It’s always advisable to consult with a legal professional or consultant knowledgeable about the bankruptcy laws in your specific jurisdiction.
Is secured or unsecured debt better?
Whether secured or unsecured debt is better for you depends on different factors, including your financial situation and credit, what you can or cannot risk and your goals. It is generally advisable to prioritize secured debts due to the potential collateral loss. Falling behind on mortgage or car loan payments can lead to foreclosure or repossession. However, neglecting unsecured debts can still have significant consequences, including damage to credit scores and collection efforts.
It is also important to see it from the lender’s perspective—secured debt tends to be better for them since it is less risky. Lenders can always claim the collateral so they can regain the lost funds. This makes secured debt riskier for borrowers since they can lose their assets if payments are impossible.
Unsecured debt FAQ
As you continue to explore the world of unsecured debt, we want to address some frequently asked questions.
What is an example of unsecured debt?
An example of an unsecured debt is credit card debt. When you make purchases using a credit card, you incur an unsecured debt with the card issuer without requiring collateral.
What are two types of unsecured debt?
Two other types of unsecured debt are personal loans and medical bills. Personal loans are funds you borrow from a lender without collateral, while medical bills accumulate when you receive healthcare services and don’t require collateral.
What is an unsecured debt called?
Unsecured debt is commonly referred to as personal debt. It is a financial obligation that is not tied to specific assets.
What happens if an unsecured debt is not paid?
If you don’t pay an unsecured debt, the creditor may employ collection efforts or pursue legal action to recover the debt, and your credit will likely take a hit.
Can unsecured debts harm your credit?
Defaults, collection actions and late or unpaid payments can harm unsecured debtors’ credit scores. Prioritizing timely debt repayment is crucial to maintaining healthy credit. On the other hand, your credit rating can improve if you pay on time regularly since that shows your commitment.
In conclusion, understanding unsecured debt is essential for making informed financial decisions. By grasping the concept, differentiating it from secured debt and recognizing its implications, you can strategize debt repayment and protect your credit.
Unsecured debts and credit repair
If you’re concerned about your credit, see if the team at Lexington Law Firm can help. Empower yourself with the knowledge to make informed decisions and work on your credit with our services. Reach out to Lexington Law today to get a free credit assessment and learn more about how we could help.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Reviewed By
Vince R. Mayr
Supervising Attorney of Bankruptcies
Vince has considerable expertise in the field of bankruptcy law.
He has represented clients in more than 3,000 bankruptcy matters under chapters 7, 11, 12, and 13 of the U.S. Bankruptcy Code. Vince earned his Bachelor of Science Degree in Government from the University of Maryland. His Masters of Public Administration degree was earned from Golden Gate University School of Public Administration. His Juris Doctor was earned at Golden Gate University School of Law, San Francisco, California. Vince is licensed to practice law in Arizona, Nevada, and Colorado. He is located in the Phoenix office.
Editor’s Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.
While on the work grind at the office, you get an email from the HR department, inviting you down to pay them a visit. Uh-oh. What could possibly be up? You’re a rock star on the job, so you cannot imagine what the trouble could be.
The good news: you’re not getting fired. The bad news: they tell you that part of your wages are going to be garnished in order to pay back your outstanding school loans.
What Is Student Loan Wage Garnishment?
Student loan wage garnishment is a tough thing to face; what makes it doubly troublesome is the official letter from the U.S. Department of Education that notifies your employer that a percentage of your paycheck will now go directly to paying back your outstanding student loan balances.
This may be something that would be a big enough bummer when you’re the only one who knows about it. When your employer is let in on the secret, and ordered by the government to reconfigure your paycheck, the awkwardness knows no bounds.
Student loan wage garnishment does not make it easy for you or your employer . Your company’s payroll department generally executes (and sometimes calculates) the student loan garnishment amount, and forwards the payments to the correct agency or creditor. In some cases, your employer can be held liable for the full amount or a portion thereof for failure to comply with the garnishment. This can include interest, court fees, and legal costs.
If it’s any consolation, you would not be alone in this situation. Let’s start with the macro: according toCNBC , more than one million people default on their student loans each year. By the year 2023, nearly 40% of borrowers are expected to default on their student loans. Outstanding debt in the U.S. has tripled over the last decade and now exceeds $1.5 trillion. That number far exceeds the traditional debt of autos and credit cards.
Now for the micro: according to a study by the ADP Research Institute , 7.2% of employees had their wages garnished in 2013 (the latest research we could find on this). Of that total, 2.9% of those garnishments were from student loan and court-ordered consumer debt garnishment.
Defaulting on your student loan is not ideal. We’re going to share some details on federal student loan garnishment, and how you can avoid defaulting on your loans. 💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.
How Does Federal Student Loan Garnishment Work
Your wages can’t be garnished out of nowhere. It starts with your loan becoming delinquent, which happens the first day after you miss a payment. Your loan will remain delinquent until you pay back everything you owe.
If you are more than 90 days delinquent on your payment, your loan servicer reports the missed payments to the three national credit bureaus (Equifax, Experian, and TransUnion). This will negatively affect your credit, as payment history makes up 35% of your score.
Eventually, if you still fail to repay your debt, the government may resort to garnishing your wages and/or withholding your tax refund, which they can do without a court order. Legally, they can garnish up to 15% of your disposable pay. Disposable income is calculated by taking your gross income, and then subtracting your tax obligations and other withholdings such as Social Security, Medicare, state tax, city/local tax, health insurance premiums, and involuntary retirement or pension plans.
The good news is that there is a temporary exception to this process. To help financially vulnerable borrowers transition to making their student loan payments after an automatic, three-year pause that ended in October, the Biden administration implemented an “on-ramp” period. From Oct. 1, 2023 through Sept. 30, 2024, borrowers who miss payments will not be considered delinquent or in default, have missed payments reported to the credit bureaus, or have their loans referred to collections agencies.
Ways To Help Prevent Your Student Loan From Becoming Delinquent
If you are concerned about wage garnishment for your federal student loans, there are proactive steps you can take to keep your account from becoming delinquent in the first place:
Scheduling automatic payments. You can have the monthly obligation automatically and electronically deducted from your checking or savings account.
Building an emergency savings fund. You can save at least six months of backup funds that you can use specifically to make your monthly payments. This may come in handy should you be without income for a time.
Ways To Help Prevent Your Student Loans From Going Into Default
Based on your financial circumstances, there are a few options available that may allow you to make your student loan payments more affordable or even put them on a temporary hold:
Income-Driven Repayment (IDR) Plans: With these plans, your student loan payments are adjusted based on your discretionary income. Depending on the plan you choose, the government typically extends your repayment terms and readjusts your monthly payment, and may eventually forgive the balance of your loan. The newest IDR plan, the SAVE Plan, will provide the lowest monthly payments once it’s fully implemented in July 2024.
Forbearance or Deferment: If making payments is becoming or has become nearly impossible, you can ask your lender to defer your payments or request forbearance. If they agree and you qualify, you can delay your payments and avoid default.
Student Loan Refinancing vs Consolidation
If student loan wage garnishment is the nightmare that comes true, here are two options that may be able to stop it: consolidating or refinancing your student loans. First, know the difference between the two (and it’s a pretty big one):
When you refinance student loans, you’re actually paying off your existing loans with a new loan from a private lender. In this process, you can possibly reduce your payments and make them more affordable. (You may pay more interest over the life of the loan if you refinance with an extended term.) Or you may be able to lower your interest rate. However, you also will lose out on certain benefits that come with federal student loans, like deferment and forbearance, and lose your eligibility for all other federal student loan programs.
When you consolidate your federal student loans with the federal government, you essentially “bind” them all together into one, big loan. Sounds like a plan, but there can be a few downsides; this could result in you paying more in interest over the life of your new, consolidated loan because the interest rate on your consolidated federal loan will be the weighted average of all your loans, rounded to the nearest eighth of 1%. You can also only consolidate your federal loans under a Direct Consolidation Loan, which has its own requirements if you’re already in default, and isn’t available for private student loans.
Consolidating a Defaulted Loan
According to the U.S. Department of Education, if you want to consolidate a defaulted loan, you must make “satisfactory repayment arrangements” on the student loan with your current loan servicer before you consolidate.
If you want to consolidate a defaulted loan that is being collected through garnishment of your wages, or that is being collected in accordance with a court order after a judgment was obtained against you, you may only do so if the garnishment order has been lifted or the judgment has been vacated.
Refinancing Your Student Loans
You may be able to combine your private and federal loans into one brand-new, private refinanced loan.
You may be a good candidate for student loan refinancing if you have a steady income, a consistent history of on-time debt payments, and you don’t have need for federal student loan benefits—among other important personal financial factors. (When you refinance your federal loans with a private lender, you can no longer access any federal loan benefits.)
A lender will most likely offer you a few choices for your refinanced student loan: fixed and variable interest rates, as well as a variety of repayment terms (this is often based on your credit history and current financial situation). If you qualify for refinancing, your new loan should (hopefully) come with a new interest rate or a new loan term that can lower your monthly payments.(You may pay more interest over the life of the loan if you refinance with an extended term.)
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
Student Loan Refinancing If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) Please note that once you refinance federal student loans, you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as the SAVE Plan, or extended repayment plans.
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