interest Archives - Page 8 of 1396

Apache is functioning normally

October 18, 2024 by Brett Tams

Though mortgage interest rates rose this past week, the relatively small increase may be a sign things are settling down. After a surprisingly strong Oct. 4 jobs report drove rates rapidly upward, interest rates are beginning to normalize. In the week ending Oct. 17, the average 30-year fixed-rate mortgage rate rose six basis points, averaging 6.46%. A basis point is one one-hundredth of a percentage point.

Mortgage interest rates in the mid-sixes don’t feel great. The current average is about half a percentage point higher than it was a month ago. But remember also that today’s interest rates are more than three-quarters of a percentage point lower than the highs we saw back in spring.

So here’s the $415,000 question — since that’s roughly the median sales price for an existing home, according to data from the National Association of Realtors. Where are mortgage interest rates headed?

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Regular folks think rates will fall

Consumers are feeling darn good about where mortgage interest rates are headed. In September, the Fannie Mae Home Purchase Sentiment Index saw record levels of optimism, with 42% of consumers expecting mortgage interest rates to decline over the next 12 months.

As noted above, mortgage rates have fallen over the past six months or so. But especially for folks who aren’t rate watchers, widespread anticipation of Federal Reserve action was likely spreading the positive vibes. In September, after holding steady for more than a year, the Fed dropped its federal funds rate — the one interest rate the central bankers actually control — by 50 basis points.

The Fed finally moving into a rate-cutting cycle may have shifted consumer perceptions more than mortgage rates falling on their own. A NerdWallet survey conducted by the Harris Poll in July — when mortgage rates were already falling — found that 15% of Americans planned to purchase a home once rates go down. Coupled with likely future Fed cuts, that rate positivity could turn more homebuying hopefuls into serious shoppers.

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Housing economists temper expectations

While consumer surveys don’t get into specifics, housing economists most certainly do. And while there’s a broad consensus that mortgage interest rates will trend lower throughout the next year, these are not drop-everything-and-start-house-hunting numbers.

Government-sponsored enterprise Fannie Mae, which supports the housing market by purchasing and securitizing home loans, updates its interest rate predictions monthly. As of September, Fannie Mae anticipates 30-year fixed interest rates to end this year at 6.2%. Its overall 2025 forecast currently calls for the gentlest slope, with rates falling from 6% in the first quarter to 5.7% in the fourth quarter of 2025.

Another monthly forecast comes from real estate finance industry group the Mortgage Bankers Association. The MBA’s September forecast is nearly identical to Fannie Mae’s, with rates ending 2024 at 6.2%. But the MBA predicts even less of a drop next year, with rates ending 2025 at 5.8%.

The National Association of Realtors, which is the country’s largest trade association, updates its rates forecast less frequently. But in fresh numbers from the beginning of October, NAR expects a similar trend: Rates would close this year at 6.1% and wrap up 2025 at 5.8%.

Overall, there’s consensus among both consumers and industry economists that mortgage interest rates are headed down. But a decline of roughly 10 basis points per quarter (just a tenth of a percentage point) is probably not what regular people are thinking when they say they’re expecting rates to fall. Remember, though, that even the most well-informed expert predictions are just that — predictions. We’ll all have to wait and see what actually happens.

Source: nerdwallet.com

Apache is functioning normally

October 18, 2024 by Brett Tams

All college students are required to declare a major, but what about a minor? This is a question many students find themselves asking halfway through their college curriculum.

Knowing about what a minor is, what it entails, and if it’s something that can bolster your career can help determine if it’s really right for you.

Keep reading to learn more about what a college minor is, how it differs from a major, and the pros and cons that come with it.

Defining a College Minor

A college minor, sometimes referred to as a “mini major,” is a group of courses you take in a certain discipline. Minors in college can complement your chosen college major or be totally unrelated.

While most colleges don’t require a student to declare a minor, some do. Schools may have a definitive criteria about your choice of minor. For instance, you may not be able to pursue a minor in the same department as your major.

For the most part a college minor is voluntary, and a student may not feel it’s important enough to take on the additional coursework in addition to their main area of study. Instead, they may want to have complete freedom to use those class credits for electives that may not be as labor intensive.

Differences Between a Major and Minor

Your major is the main area of specialty that determines the type of bachelor’s degree you’ll earn. It’s the field of study you’ve chosen based on your professional aspirations. One way to think of it is that your major is your primary job and your minor is more of a side gig.

When you’re finally awarded your college diploma, it will be for your major, not your minor. That’s because a college minor is typically considered optional and not a requirement for your core curriculum. Even if your school is one that does require you to choose a minor, it won’t be reflected on your degree unless your school is one with an exception to that rule. However, it will most likely be included in your college transcript.

Another key distinction between a college major and a minor is the amount of coursework you have to complete and how much it counts toward your final credits. Depending on your school, a major will make up one-third to one-half of the school’s credits needed to graduate, which is typically 120 credits for a four-year program.

In general, a college major will require you to complete at least 10 courses compared to five to seven classes for a minor. A minor typically requires anywhere between 16 and 30 credits.

Recommended: Credit Hours: What Are They & Why They Matter

Benefits of Pursuing a College Minor

There are many upsides to tacking on a college minor. If you’re wondering whether or not it’s worth pursuing, consider these pros:

Explore Complementary Interests

A college minor related to your major allows you to expand your expertise in that related field. For instance, if you’re a biology major and decide to minor in chemistry, you’re already familiar with the basics of science and look at things from a scientific perspective. There are similar analytical skills you can apply.

But even if your minor is in a different area, there are still ways it can positively impact your major. An example is if you’re majoring in political science, you may want to minor in public speaking, which can be helpful if you have any ambitions to run for elected office.

You may even find your minor is more exciting and decide to change your major to that area of interest, or decide to combine the two disciplines and pursue a double major.

However, before making any big changes, it’s a good idea to talk to your academic advisor. Depending on when you decide to do a change-up, it could add extra time toward getting your degree. This can translate into additional costs and more student debt.

Develop Secondary Skill Sets

Regardless of whether your minor directly corresponds to your major, you’re acquiring and polishing both hard and soft skills. Those more technical hard skills can be directly applied to the type of work your career requires. Soft skills, on the other hand, are more of a social and interpersonal nature. Both are important to employers and offer skills they want their prospective employees to have under their belt.

Enhance Marketability and Job Prospects

Homing in on a subject offers you the opportunity to develop more of an in-depth knowledge and expertise. A minor shows your well-roundedness, flexibility, and the ability to wear other hats. For example, a marketing major who minored in communications can be an asset in the areas of advertising, journalism, and public relations.

A complementary minor can also give you a more solid base and deeper understanding of some issues you may deal with in your occupation. If a nursing major chooses to minor in psychology, it can help them better understand patient behavior.

Overall, a minor shows a level of seriousness and willingness to challenge oneself. These are qualities that can go a long way and put you at an advantage when applying for your first job out of school, graduate school, or even for a college internship.

Recommended: 6 Ways to Save Money for Grad School

Popular College Minor Options

There are certain college minors that attract more students than others. Here are some popular ones:

STEM Minors

STEM, which stands for science, technology, engineering, and math, consists of natural, physical, and life sciences; computers; electronics and other types of tech; all kinds of engineering; mathematics; and areas that rely on the principles of math. Examples of STEM minors include computer science, kinesiology or exercise science, civil engineering, and statistics.

Deciding on a STEM subject for your minor can give you a leg up in the job market. According to the U.S. Bureau of Labor Statistics, job opportunities in the STEM field are expected to grow 7% by 2032, compared to 2% for all occupations.

Business Minors

With a business minor, you can take classes in accounting, marketing, human resources, and e-commerce. Choosing business as a minor allows you to learn the fundamentals of business, which can be extremely valuable and practical out in the real world.

Knowing more about how business is conducted and becoming more savvy about finance benefits you both professionally and personally. Career-wise, it can come in handy if you’re applying for a job that may require a deeper understanding of certain business practices. In your own life, you may even get a better handle on your own financial situation when it comes to managing private student loans and staying on top of how to pay for college.

Recommended: 4 Student Loan Repayment Options and How to Choose the Right One for You

Liberal Arts Minors

Liberal arts is a field with a broad range of disciplines, including creative arts, social sciences, humanities, and more. People who decide to minor in liberal arts may choose sub-studies in English, psychology, sociology, anthropology, philosophy, or communication.

For someone with a very demanding major, a liberal arts minor can offer a less taxing curriculum. Instead of being geared toward technical skills, liberal arts classes give students an opportunity to focus on critical thinking, collaboration, creativity, and verbal and written communication skills.

Language and Cultural Minors

Minors specializing in different aspects of cultural heritage and language can expose a student to different world views, beliefs, and practices.

A foreign language minor allows you the ability to become bilingual or multilingual, which is a huge asset in the workforce where there’s an increasing demand for people who speak other languages. You may want to expand on your high school language classes or minor in a completely new one.

A language minor may also be one in linguistics, which is the study of language structure, including phonetics, syntax, semantics, and the history of how language has changed over time. Students may also find there’s an option at their college to minor in American Sign Language.

Cultural studies minors are designed to study all types of cultures, their histories, and perspectives. These can include groups based on class, gender, ethnicity, race, religion, and geographical location. Classes in popular culture, women’s studies, world religions, and African-American or Asian studies are some examples of cultural studies minors.

Choosing a Complementary College Minor

Picking a minor in general adds extra knowledge and allows you to build more expertise in another subject. Minoring in a complementary course of study, however, shows you’re serious about exploring an area that closely aligns with your major.

Regardless of whether your minor directly corresponds to your major, you’ve decided to use a portion of your credits toward another group of required classes, and that indicates a commendable level of focus and commitment.

Potential Drawbacks of a College Minor

There are some cons that can come with declaring a minor. For one, a minor can take up a lot of time, so you’ll want to make sure it’s an area you’re genuinely curious about and have a real interest in. Consider the amount of work you’ll have to do, such as writing papers, studying, and taking exams. These additional classes could end up adding unnecessary stress to your major’s workload.

A minor could also end up costing you more money, especially if you declare a minor late in the game. You may not be able to get all the necessary classes before graduation, which means you may have to extend your education by a semester or more.

The Takeaway

A minor is, in most cases, an optional supplementary course of study that can broaden your knowledge, expand your skill set, and open up more career options after graduation. Having a college minor can also make your undergrad studies a lot more fun, especially if it’s a topic where you have a strong personal interest.

Ways to finance your minor include cash savings, scholarships, grants, and both federal and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

What’s the difference between a minor and concentration?

A minor can be a secondary course of study in any area, while a concentration is a sub-group of structured classes that directly relate to your major. For example, if you’re an English major, your concentration may be in creative writing, made up of poetry, fiction, nonfiction prose, and dramatic writing classes.

Do minors appear on your diploma or transcript?

Minors will appear on your transcript, but the mass majority of colleges and universities don’t include it on your diploma. The standard practice is to list only the student’s major on their bachelor’s degree.

How late in your college career can you add a minor?

Most colleges ask students to choose their major by the end of sophomore year or beginning of their junior year, which can also be an ideal time to choose a minor. You could declare it before you start your senior year, but it’s important to consider the fact you’ll have to cram all of that minor’s classes into one year’s time. This could impact your graduation date if you need to carry your studies over to another semester in order to fulfill your minor’s requirements.

Do minors impact financial aid eligibility?

It depends. Federal financial aid rules mandate only courses required for your major and degree program are eligible. However, classes required for a minor may be eligible for financial aid if they also satisfy major, core, or elective requirements for your degree. Otherwise, financial aid will be reconfigured or removed to reflect eligibility based on qualifying courses.

Photo credit: iStock/Drazen Zigic

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Apache is functioning normally

October 17, 2024 by Brett Tams

The transaction will be funded through a mix of $1.8 billion in cash and $3.7 billion in Ares shares. A long-term incentive plan for GLP’s leadership could see an additional payout of up to $1.5 billion by 2027, with Ares likely using stock to fulfill part of that payment. Ares’ growth strategy has been heavily … [Read more…]

Apache is functioning normally

October 17, 2024 by Brett Tams

As winter approaches, it may make sense to prepare for the cold weather by sealing cracks and holes around doors and windows no matter where you live. Proactive steps like these may help cut down on your heating bills.

If you’re bracing for a big chill, or worse, a blizzard — predicted to become more intense in the coming years, despite shorter winters — you’ll be glad you protected or checked the pipes, roof, chimney, heating system, and water heater. Your wallet and physical well-being may benefit from the following ways to winterize a house and how to finance the projects.

Ways to Winterize a House

There are numerous ways to winterize a house beyond sealing cracks in doors and windows. And while the steps to winterize a home may differ in Alaska than in Texas, it still helps to get ahead of any issues that may arise.

You should also know that the timing of the first frost can vary from state to state. It may help to check the National Weather Service’s data that forecasts the first frost for each state to assist in your winterization preparation timeline.

The following tips to winterize a house may help you reduce future repair costs and heating bills. And figuring out ways to lower your heating bills is something to pay attention to due to the potential rise of the price of natural gas, which is often used to heat homes.

Protect Pipes or Pay the Piper

When deciding how to winterize a house, you may first consider how to address plumbing leaks and other issues.

Burst pipes can cause $5,000 or more in damage, according to Consumer Reports , citing information from the Insurance Institute for Business and Home Safety , which has a page of recommendations to help prevent frozen pipes.

Pipes in unheated places inside a home, including basements, attics, and garages, are among the most likely to sustain damage. But pipes running through exterior walls can also freeze in certain conditions, and so can those running through kitchen or bathroom cabinets.

Protecting the plumbing is clearly a situation where being proactive may save a homeowner money.

Pipe insulation can be as inexpensive as 50 cents per linear foot. Compare that to the $5,000 figure above, and the rewards of winterization can quickly become clear.

Adding insulation to attics, crawl spaces, and basements can help to keep those areas warmer, which can also help to keep pipes from freezing.

If sinks are located on exterior walls, it can help to keep the cabinet doors open during frigid temperatures (after removing any dangerous chemicals, including cleaners, if there are children or pets in the home).

Allowing cold water to drip can also help prevent pipes from freezing, making sense in frigid temperatures.

Address HVAC Maintenance and Repair

Nobody wants the heating system to perform poorly during the winter — much less have it break down.

It’s a good idea to schedule a professional maintenance appointment, including a filter change before freezing temperatures arrive. (Then it’s best to change the filter at least every 90 days.)

Additionally, maintenance and repairs to the heating, ventilation, and air conditioning (HVAC) system and cleaning out vents can improve airflow in your home.

It may be time to consider a new HVAC system for some people. The U.S. Department of Energy’s Energy Star program provides tips to homeowners to decide if replacing an HVAC system makes sense.

Signs that it might be time to replace the unit include:

• The heat pump is more than 10 years old.

• The furnace or boiler is more than 15 years old.

• The system needs frequent repairs, and energy bills are increasing.

• Rooms in the home can be too hot or too cold.

• The HVAC system is noisy.

If people in a home are away during reasonably regular times of the day, it can make sense to ask the HVAC professional about a programmable thermostat to save on energy costs.

The Environmental Protection Agency’s Home Energy Yardstick can help a homeowner determine if replacing an HVAC system makes sense.

Check the Roof, Gutters, and Chimney

Before winter hits, clearing the roof and gutters of leaves and other debris will help prevent snow and ice from building up and damaging the gutters — or, worse, the roof.

If ice or snow gets beneath roof shingles, it can lead to leaks and interior water damage. You may want to ask yourself if you need to replace your gutters. Do any shingles need to be glued down or replaced? Do any small leaks need to be repaired before they become big ones?

Plus, a chimney inspection can make sense before winter arrives. A chimney could have an animal nest lodged within, and there can also be structural problems. If the home has a wood-burning fireplace, creosote buildup can create a fire hazard. With a gas fireplace, a blocked chimney could lead to carbon monoxide backup, which can be life-threatening.

Addressing all these issues before winter comes can help you prevent future damage, reduce future repair costs and energy bills, and avoid a potential accident.

Examine the Water Heater

You want to check your water heater before temperatures plunge to avoid a chilly shower during winter.

Are areas of the water heater rusting or corroding? If so, this can lead to a leak. A professional can examine it, bleed the system to remove trapped air and mineral deposits, clean the pipes, and recommend and do repairs.

Think About Outdoor Equipment and Plants

Preventive winterization isn’t just about your home. You want to winterize your outdoor equipment, like a lawn mower or other power tools, to protect them as well.

Draining the oil from the appropriate equipment and taking it to a local recycling or hazardous-waste site can be your first step.

You also want to take care of general maintenance on equipment, including replacing old parts. That way, when spring rolls around and you need to mow your lawn or trim your bushes, you should be ready to go.

Additionally, inspect gas caps to ensure O-rings are intact; if not, get replacements from the manufacturer. Also, replace filters and lubricate what needs lubricating.

You may need to bring in the plants you initially placed outside to enjoy the summer sun when temperatures drop. Before doing so, check the plants for mealybugs, aphids, and other insects. Remove them, so they don’t spread to other plants.

Some people prefer to prune plants before transitioning them back into the house. If so, prune no more than one-third of each, pruning an equal amount off the roots. When repotting, pick a container that’s two or more inches bigger than the current one.

Gradually transition your plants to the new environment, which has different light and humidity levels. For a few days, bring the plants inside at dusk and put them back outside in the morning.

Over a period of 14 days or so, increase the indoor time until the process is complete and they’ve become indoor plants again, finishing the transition before temperatures go down to 45 degrees.

What’s the Cost of Winterizing a Home?

Pipe insulation, as noted earlier, can be relatively cheap, perhaps 50 centers per linear foot.

If a homeowner decides to insulate further, perhaps an attic, costs can range between $1.50 and $7.00 per foot, or a total of $1,700 to $2,100.

On average, an attic insulation installer may charge $70 an hour. If electrical work needs to be done for safe insulation around cables or junction boxes, you may expect to pay $80 an hour.

To hire someone to clean gutters and downspouts, you may pay an average of $119 to $227. An HVAC inspection might cost $325 and up, while the cost to replace an HVAC system could run between $5,000 and $10,000, depending upon the size of the home, among other factors.

What each of these services costs will depend on the locale, what types of repairs or unusual circumstances exist, and so forth.

Additionally, there are websites that allow a homeowner to enter a ZIP code and get an estimate of what a winterizing activity may cost. It makes sense to get quotes from local professionals to get an exact price.

Financing Winterization Projects

Some people pay for their home winterization costs out of pocket, while others may decide to get a home improvement loan. If you’re leaning toward a loan, comparing a home equity line of credit (HELOC) and a personal loan can make sense.

Recommended: How Do Home Improvement Loans Work?

A HELOC uses your home as collateral; for this to be an option, there needs to be enough equity in the property to borrow against it. If there is, and the loan amount required is large, it could make sense to apply for a HELOC.

Interest rates may be lower than those for a personal loan. Also, you can typically take draws from a HELOC up to the loan’s limit.

So if winterizing is coupled with indoor projects done through the cold season, for example, this might be a practical solution. In some cases, interest payments could be tax-deductible.

Recommended: The Different Types Of Home Equity Loans

A personal loan can make sense for recent homebuyers who haven’t built enough equity or for people planning smaller projects. Home winterization often fits into this category.

Applying for and receiving money from an unsecured personal loan is typically much faster than with a HELOC, partly because no appraisal is required for the loan.

Having an excellent credit score and cash flow can help a borrower get approved or receive better loan terms.

The Takeaway

Preparing your home for the harsh weather of winter can be one step you take to protect your house and potentially reduce your energy bills. However, many homeowners don’t take steps to winterize a house due to the upfront costs. Fortunately, there are ways to finance any home improvement projects.

If taking out a home improvement loan for home winterization projects makes sense, then here’s more about the fixed-rate unsecured personal loans offered by SoFi:

• Personal loans have no origination fees and no prepayment penalties.

• Qualifying borrowers may be eligible for loans up to $100,000.

• Applying online can be quick and easy.

• Customer service is available to help seven days a week throughout the process.

Winterize and protect your home with SoFi home improvement loans.

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Apache is functioning normally

October 17, 2024 by Brett Tams

While paying off your credit cards often helps improve your credit, this isn’t always the case. Depending on the strategy you use to wipe away your debt, you could (inadvertently) do some damage to your scores. This could make it harder to get a mortgage, car loan, or even a rental agreement in the future. Here’s what you need to know to pay down your credit obligations while protecting your credit.

What Not to Do: Ignoring Credit Card Debt

When it comes to credit card debt, the consequences of avoidance and procrastination are steep, both to your financial well-being and to your credit scores. Here’s a look at the potential fallout.

• Interest charges will pile up: Generally, the longer you avoid paying down your debt, the more interest will accrue. The average interest rate on credit cards as of September 2024 is 27.64%. This means that even if your debt isn’t growing through new purchases, interest alone can make your balance balloon over time.

• Late fees and credit damage: Credit card issuers usually charge fees if you don’t make the minimum payment by the due date. After 30 days of no payment, your issuer will likely report the missed payment to the credit bureaus, which can do significant damage to your credit scores. Maintaining a balance also keeps your credit utilization (how much of your available credit you’re using) high. Credit utilization plays a large role in your credit rating. As your balance grows, your credit score will generally decline.

• Debt collection and legal consequences: Ignoring credit card debt for too long could lead to the debt being sold to a collection agency, who can be aggressive in pursuing repayment. In extreme cases, your creditors might sue you, potentially leading to wage garnishment or seizure of personal assets.

What You Should Consider: Paying off Credit Card Debt Using a Planned Approach

If you have a significant amount of credit card debt, it may be tempting to bury your head in the sand. But you’ll be far better off coming up with a clear, actionable plan to start whittling down what you owe. The following steps can help you feel more in control over your debt, as well as your overall financial situation.

• Assess your debt. A good place to start is to list out all of your credit card balances, along with their interest rates and minimum payments. This will give you a full picture of what you owe.

• Create a basic budget. You don’t have to come up with a detailed line-item spending plan. Simply go through your last few months of financial statements and assess what’s coming in and going out, on average, each month. Then comb through your discretionary (unnecessary) monthly spending and look for places where you can cut back. Any money you free up can go toward credit card payments.

• Pick a debt payoff strategy. Here’s a look at two popular approaches that can help you gradually pay down your balances.

• Avalanche method: Here, you make extra payments on the credit card with the highest interest rate first, while making minimum payments on the others. Once the highest-rate card is paid off, you funnel those extra funds toward the card with the next-highest rate, and so on. This strategy minimizes the amount of interest you’ll pay over time.

• Snowball method: With this method, you put extra payments toward the card with the smallest balance first, while making minimum payments on the others. When that card is cleared, you focus on paying off the next-smallest balance, and so on. This gives you quick wins and a psychological boost, which can help you stay motivated.

• Take advantage of windfalls: If you get a bonus, tax refund, or any extra income, consider applying it toward your credit card debt. This can help you reduce your balance faster and lower the total amount of interest you’ll pay.

• Automate your payments: It’s a good idea to set up automatic payments for at least the minimum payment due each month. You may be able to pay more, but having this set up in advance helps you avoid missed payments, which can harm your credit score, as well as late fees.

• Keep paid-off accounts open. As you pay off your cards, you may think it’s a good idea to close those accounts — but not so fast. When you close a credit card, you lose that account’s available credit limit. That means any balances remaining on other credit cards will then account for a higher percentage of your total available credit. This increases your credit utilization, which can hurt credit scores.

Negotiating and Settling Credit Card Debt

If you’ve been struggling to make payments on your credit cards, there’s a good chance your credit score has been negatively affected. Before the debt is sent to collections, you may be able to negotiate with the credit card company.

Like any business, the primary goal of a credit card company is to make a profit. When it becomes apparent that a cardholder is unable to pay their bills, companies are sometimes willing to find an arrangement that will enable the customer to make payments based on their situation. Here’s a look at some options a credit company may be able to offer.

• Workout agreement: With this arrangement, the credit card company may agree to lower your interest rate or temporarily waive interest altogether. They may also be willing to take additional steps to make it easier for you to repay your debt, such as waiving past late fees or lowering your minimum payment.

• Debt settlement: In a debt settlement, the credit card company agrees to accept less than the full amount you owe, forgive the rest, and close the account. While this might seem appealing, a debt settlement can negatively affect your credit scores and stay on your credit reports for seven years. As a result, it’s generally considered a last-resort option for those facing severe financial difficulties.

• Hardship agreement: Some card issuers offer a hardship or forbearance program for borrowers who are experiencing a temporary financial setback, such as a job loss, illness, or injury. Under these programs, the company may agree to lower your interest rate, even temporarily suspend payments. However, your credit can be negatively affected, since the issuer may report negative information to the credit bureaus during the forbearance period.

What Is the Statute of Limitations on Credit Card Debt?

The statute of limitations governs how long a creditor or collection agency can sue you for nonpayment of a debt. The statute of limitations on credit card debt varies from state to state, but is typically between three and six years. Once the statute of limitations has passed, debt collectors can’t win a court order for repayment.

Even if your credit card debt is past the statute of limitations, however, it doesn’t magically disappear. Unpaid debts can remain on your credit report for up to seven to 10 years from the date of your last payment. That negative mark can lower your credit scores, making it hard to qualify for new credit cards and loans with attractive rates and terms in the future.

Say Goodbye to Credit Card Debt with a Personal Loan

Consolidating credit card debt with a personal loan (often referred to as a debt consolidation loan) can be an effective way to lower your debt and simplify repayment.

To do this, you essentially take out an unsecured personal loan, ideally with a lower interest rate than you’re paying on your cards, then use it to pay off your balances. Moving forward, you only have one payment (on your new loan). An online personal loan calculator can show you exactly how much interest you could save by paying off your existing credit card (or cards) with a personal loan.

Initially, debt consolidation can negatively impact your credit score. This is because the lender will do a hard pull on your credit, which can decrease your score by a few points. However, this decline is temporary. Making consistent, on-time payments on your personal loan can help boost your credit profile over time. Payment history makes up 35% of your overall FICO® credit score.

If, on the other hand, you make any of your loan payments late, or miss a payment entirely, credit consolidation can end up having a damaging impact on your credit.

Recommended: FICO Score vs Credit Score

The Takeaway

Credit card debt can be a major financial burden, but it doesn’t have to ruin your credit or your financial future. By avoiding the temptation to ignore your debt and adopting a planned approach, you can gradually reduce what you owe. Whether you choose to use a paydown strategy (like avalanche or snowball), negotiate with creditors, or explore a consolidation loan, there are various strategies to help you regain control of your finances while protecting — and ultimately building — your credit.

Ready for a personal loan to pay off credit card debt? With low fixed interest rates on loans of $5K to $100K, a SoFi Personal Loan for credit card debt could substantially decrease your monthly bills.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOPL-Q324-039

Source: sofi.com

Apache is functioning normally

October 16, 2024 by Brett Tams

Yes, a business loan may impact your personal credit score. If you run a sole proprietorship or partnership, or if you personally guarantee the business account in any capacity, your personal credit score may be affected.

Read on to learn the different ways in which a business loan can affect your credit scores, and what you can do to keep business financing separate from your personal finances.

Key Points

• A business loan can affect your personal credit if you personally guarantee the loan.

• Sole proprietors are more likely to see a direct impact on personal credit than LLCs or corporations.

• Missed or late payments on the loan may show up on your personal credit report.

• You can protect your personal credit from business debts by structuring your business as an LLC, S-Corp, or C-Corp, opening a business bank account and business credit card to keep funds separate, and understanding how defaults are resolved.

What Is Business Credit?

Business credit is based on your business’s credit history and is expressed in the form of business credit scores. Both your business credit profile and business credit scores give credit agencies, lenders, vendors, and suppliers an indication of how you handle your debts and your likelihood of paying them on time.

Building your business credit profile can pay off by giving you access to small business loans and other types of financing with favorable rates and terms.

How Does Business Credit Work?

In order to establish credit for your business, you need to first legally register it as a business entity. Once your business is registered, your business credit reports will be created when vendors, suppliers, or creditors report your company’s accounts and activity to a business credit bureau. This activity helps to generate the information that informs your business credit scores.

Difference Between Personal and Business Credit

While business and personal credit are two separate entities, the lines can sometimes get blurred.

Your personal credit score is linked to you through your social security number and uses information drawn from your personal credit reports. Your score reflects your funding and payment history, such as your use of credit cards or your record of paying off a student or personal loan, and can affect your access to future credit and what interest rates you pay. It may also be looked at by landlords and potential employers.

A business can have its own credit score, so long as it is a separate legal entity with a federal employer identification number (EIN). If you’re trying to get a business loan, some lenders may examine only your business credit history, which is reported by three major business credit bureaus: Experian, Equifax, and Dun & Bradstreet. Others may look at both your business and personal credit scores.

Recommended: Personal Loan vs Business Loan: Which Is Right for You?

What Types of Business Activities Can Affect Personal Credit?

In some cases, your business credit can affect your personal credit. Let’s take a closer look.

Business Credit Card Use

When you apply for a business credit card, the lender will typically perform a hard credit inquiry into your personal credit. Any hard credit pull can potentially lower your personal credit score by a few points, so you may see a small, temporary dip in your personal credit scores.

Once you’re using your business credit card, some activities will impact only your business credit, while others may affect both personal and business credit scores. It all depends on what the credit card issuer chooses to report and which credit agencies they choose to report to.

Some business credit card issuers report all of your account activity to the three major consumer credit bureaus (TransUnion, Equifax, and Experian), while others will only report negative information to those bureaus, such as being more than 30 days late on a payment.

Most Business Debt

Any type of business loan could impact your personal credit if you personally guarantee the business account or your social security number is linked to the debt. The lender will likely report a defaulted business loan to both the business and consumer credit bureaus in these cases.

How Can Business Loans Affect Personal Credit?

A business loan can affect your personal credit score in a variety of different situations.

If your business doesn’t have an EIN and the loan is tied to your social security number, for example, you would be personally liable for any debts if your business fails and is unable to repay them. Failure to make timely payments would affect your personal credit score.

Another scenario in which business loans can affect personal credit scores is when the borrower signs a personal guarantee. With a signed personal guarantee, both your credit score and your business’s credit score may be affected by missing payments. A personal guarantee also puts your personal assets at risk.

Recommended: Can Personal Loans Be Used to Start a Business?

5 Ways to Protect Personal Finances From Business Debt

If you’d prefer to keep your personal credit score separate from any business debts, there are some actions you can take to help make that happen. Below are some options you may want to look into.

1. Select the Right Business Structure

How your business is structured affects how banks and lenders interact with you. For example, if you’re a sole proprietor, it’s your name that will appear on every debt owed by your business, and your business and personal credit will be one and the same. Thus any late payments and defaults you accrue can have a negative effect on your personal finances.

If you want to sever ties, you would need to become a Limited Liability Company (LLC), S-corporation, or C-corporation. Each setup comes with a unique set of tax burdens and benefits, so when choosing a business structure, it can be a good idea to consult with a tax professional or business organization lawyer.

2. Open a Business Bank Account

Establishing a separate bank account for your business bank is one of the most important steps you can take to keep your company’s finances separate from your own.

When looking for the right bank to open a business checking account, you’ll want to consider services you need now and might need in the future (such cash flow management tools or merchant services), as well as fees for business accounts (which can be different from fees for personal accounts). Also, check the documentation requirements for opening a business bank account.

3. Consider Getting a Business Credit Card

It can be hard to get a business credit card right out the gate, especially if your credit rating is not excellent or close to excellent.

However, you may be able to find a business credit card that does not routinely report activity to the consumer credit reporting agents. Keep in mind, though, that you need to make all payments on time. Most major small business cards will report if you default on the card.

Another option may be to get a secured business credit card. A secured card uses money that you yourself deposit as collateral. This refundable deposit protects the card issuer in case of default.

Like a regular credit card, you make payments on any amount you use each month. After your business has proven to be financially responsible, you can request to upgrade to an unsecured business credit card.

4. Understand How Defaults Are Resolved

How a default is handled will depend on how the loan was set up. If you personally guarantee the loan, your lender may collect any collateral you put up to secure the loan, meaning you could lose your car or house. Likewise, all missed payments will show up in your personal payment history, which can lower your credit score and make it harder for you to get a personal loan or credit card.

If you or your partners did not personally guarantee the loan, then the business itself may be sued and any business assets you used to secure the loan might be seized. You can also expect fees, interest, and penalties to accumulate, as well as your business’s credit score to take a hit.

5. Communicate With Your Lender

When applying for a business loan, it can be a good idea to ask the lender whether it will look at your personal credit report and score before approving you for the loan. If so, this means the lender will be doing a hard credit check on your financial history, which could temporarily lower your score by several points.

It can also be smart to review any documents and contracts that accompany the business loan. If any of them request a personal guarantee and require your signature instead of your business’s, then you know you will be held personally liable for the loan or line of credit.

You may be able to challenge the personal guarantee, but if you do, the lender may deny your loan request or increase your interest rate, meaning you’ll pay more for the same product.

Personal Finances Affecting Business Loans

There are three scenarios where your personal finances might impact your ability to get a small business loan:

1. Your business is structured as a sole proprietorship or partnership.

2. Your business has a limited credit history.

3. Your business has a low credit score.

If any of the above are true, the following may impact your ability to get a loan or your loan terms:

Personal Credit Score

If your personal credit score is low, it can have a negative impact on your business loan. It may not prevent you from getting approved, but it could keep you from getting strong loan terms.

Personal Debt

Personal debt also has the potential to lower your prospects for being granted a business loan. If you have a lot of debt in your name, it may give lenders enough of a reason to charge you high interest rates, fearing you may one day default on payments.

Recommended: No Money Down Business Loans

The Takeaway

Whether a business loan affects your personal credit depends on a few factors, including the type of loan you’re applying for, how you’re obtaining the credit, and your business structure.

Applying for a business loan or credit card can lead to a small hit to your personal credit score because of the hard inquiry from the lender. If you personally guarantee a business loan, your personal credit can also be affected. Finally, if you run a sole proprietorship or partnership, your personal credit could be affected by a business loan if you put your name on the loan documents.

However, business debts don’t impact personal credit if the company and the owner are two separate legal entities and the loan isn’t connected to your name or social security number.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

With SoFi’s marketplace, it’s fast and easy to search for your small business financing options.

FAQ

Are business loans based on personal credit?

In some cases, yes. A business loan will likely be based on your personal credit if your company is structured as a sole proprietor or partnership, if your business’s credit history is thin, or if your business has a low credit score.

Can a business loan show up on my personal credit report?

Yes, a business loan can show up on your personal credit report if you personally guarantee the loan or if the lender reports it to credit agencies. This typically occurs in cases of sole proprietorships or small businesses where personal and business finances are closely linked.

Do small business lenders check personal credit?

In some cases, yes. Lenders will likely check your personal credit if your business doesn’t have an Employer Identification Number (EIN), meaning the loan will be in your name, or if your business is new or has a low credit score.

Can a business loan affect getting a mortgage?

If your name is attached to the business loan in any way, then yes, it can affect your ability to get a mortgage.

When applying for a mortgage, your lender will likely look at your debt-to-income ratio. Your business loan (and any other debt you already have) combined with a new mortgage could potentially push you past the threshold that lenders like to see.

If your business is a separate entity, then a business loan will not likely impact your ability to get a mortgage.

Can my LLC affect my personal credit?

Yes, your LLC can affect your personal credit if you personally guarantee loans or credit for the business. In such cases, defaults or late payments could be reported on your personal credit report. However, if the LLC borrows without a personal guarantee, your personal credit may remain unaffected.

Photo credit: iStock/Rockaa

SoFi’s marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOSMB-Q324-054

Source: sofi.com

Apache is functioning normally

October 15, 2024 by Brett Tams

Accounts payable are bills and other short-term debts that a business needs to pay. It includes all of a company’s current liabilities (due within one year), making it a key component of small business accounting.

Understanding accounts payable and having a dependable accounts payable system is essential to running a successful small business. Here’s what you need to know.

Key Points

• Accounts payable (AP) represent a company’s short-term obligations to suppliers for goods or services received but not yet paid for.

• AP appears under current liabilities on the balance sheet.

• Examples of accounts payable could include licensing costs, leasing costs, subscription services, and installment payment plans.

• The four steps of the accounts payable process include capturing the invoice, approving the invoice, payment authorization, and payment execution.

• Investors and lenders may look at accounts payable when deciding whether to invest in your company or approve you for a small business loan.

What Is Accounts Payable (AP)?

When a business buys goods or services from a vendor or supplier on credit that needs to be paid back in the near term, the accounting entry is known as “accounts payable.” On a balance sheet, accounts payable appears under current liabilities.

Accounts payable differs from a loan payable in that accounts payable does not charge interest (unless payment is late) and is typically based on goods or services acquired. Loan payables, such as balances on various kinds of small business loans, generally charge interest and are based on the prior receipt of a sum of cash from a lender.

In a company, the term “accounts payable” is also used as the name of the department responsible for handling vendor invoices and bills — from recording them in the general ledger to making payments to suppliers and other third parties.

Recommended: Guide to Vendor Financing

Is Accounts Payable an Asset or Liability?

In small business accounting, accounts payable is a liability since it is money owed to vendors and creditors. The account grows larger when more money is owed to vendors. When accounts payable increases, a business will typically have more cash on hand because of the delay in paying amounts owed. This typically results in a temporary increase in liquidity.

The short-term debt in accounts payable can help keep cash on hand to pay for other items, but eventually creditors will require payment.

Accounts payable differs from business expenses in that accounts payable is shown on a business’s balance sheet, whereas business expenses are shown on the income statement.

Recommended: Small Business Balance Sheets with Examples

How Accounts Payable Works

When a business purchases goods or services from a supplier on credit, also known as trade credit, payment isn’t made immediately. Typically, it will be due within 30 or 60 days, sometimes longer.

Here’s how it works:

A business will send the supplier a purchase order. The supplier will then provide the goods or services the business purchased, along with an invoice requesting payment by a certain date. The person or department responsible for accounts payable will verify the invoice against the purchase order and ensure the goods or services were received before issuing payment to their vendors.

If amounts owed to suppliers and other third parties are not paid within the agreed terms, late payments or defaults can result.

The sum of all outstanding payments owed by a business to third parties is recorded as the balance of accounts payable on the company’s balance sheet. Any increase or decrease in accounts payable from one accounting period to another will appear on the cash flow statement.

Recommended: How to Calculate Cash Flow

4 Steps of the Accounts Payable Process

Managing business finances is one of the most important aspects of running a small business. The accounts payable process has four key steps. Going through this defined process helps avoid errors and missing a payment deadline to a vendor.

1. Invoice Capture

The accounts payable process generally begins when a supplier or third party submits an invoice to the accounts payable department. After receiving the invoice, the accounts payable clerk will verify the invoice is valid and not a duplicate, code the invoice to the general ledger, and, depending on the company’s process, conduct a two-way match (in which invoices are matched to purchase orders) or a three-way match (in which invoices are matched to purchase orders and receiving information).

2. Invoice Approval

Once all the data is entered, an invoice must be approved. This involves an individual from the accounts payable department routing the invoice to the appropriate person (or people) in the company to get the necessary approval(s).

3. Payment Authorization

After an invoice is approved, the accounts payable clerk may need to get authorization to make a payment. The authorization will typically include the payment amount, method of payment, and date the payment will be made.

4. Payment Execution

Once payment is authorized, the invoice can be paid. Payment should be processed before or on the bill’s due date and may be done by check, electronic bank-to-bank payment, or credit card. Once the invoice is paid, it can be closed out in the accounting system.

Recommended: Debt-to-EBITDA Ratio Explained

Internal Controls and Audits

Internal controls are standardized operating procedures used by companies in their accounts payable process to reduce the risk that a business will pay a fraudulent or inaccurate invoice, pay a vendor invoice twice, and/or fail to pay an invoice on time.

These controls often include:

• Purchase order approval

• Invoice approval

• Two-way matching (in which invoices are matched to purchase orders) or three-way matching (in which invoices are matched to purchase orders and receiving information)

• Auditing for duplicates (which involves checking files manually or with an accounts payable automation platform to make sure duplicate payments aren’t made)

Accounts Payable Examples

Generally, any items bought on short-term credit fall under the accounts payable umbrella. This includes:

• Licensing costs

• Leasing costs

• Subcontractor bills

• Amounts owed for raw materials and fuel

• Products and equipment received but not paid for

• Subscription services

• Installment payment plans

Accounts Payable vs Accounts Receivable

Accounts receivable is basically the opposite of accounts payable. While accounts payable is the money a company owes to suppliers and vendors, accounts receivable is the money that is owed to the company, generally by its customers. If two companies make a transaction on credit, one records it to accounts payable, while the other records it to accounts receivable.

Here’s a side-by-side comparison of accounts payable vs accounts receivable:

Accounts Payable	Accounts Receivable
Money you owe to a vendor or other third party	Money owed to you from customers
Recorded as a current liability on the balance sheet	Recorded as a current asset on the balance sheet

When a business owner needs an influx of cash, accounts receivable financing is a type of financing that enables them to receive early payment on outstanding invoices. The owner must then repay the money (plus a fee) to the financing company when they receive payment from their customers.

Recommended: GAAP Explained

Trade Payables and Accounts Payables

Though they sound similar, trade payables are actually slightly different from accounts payables.

Trade payables are amounts a company owes its vendors for inventory-related goods, such as business supplies or materials that are part of the company’s inventory. Accounts payables, on the other hand, includes trade payables, as well as all other short-term debts.

The Takeaway

Accounts payable is a current liability on a company’s balance sheet. It includes all of the short-term credits extended to a business by vendors and creditors for goods or services rendered but not yet paid for. Accounts payable also refers to the department or person in a firm that records and handles purchases and payments.

Lenders and potential investors will often look at a company’s accounts payable, as well as their accounts receivable, to gauge the financial health of a business. Mismanagement on either side of the equation can have a negative impact on your business’s ability to get credit or get approved for a small business loan, and could also put your business at risk.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

Get personalized small business financing quotes with SoFi’s marketplace.

FAQ

What are examples of accounts payables?

Any good or service that is purchased by the company on short-term credit should be listed as accounts payable on the balance sheet. Some examples include:

• Leased vehicles

• Subcontractor services

• Equipment

• Materials

• Business supplies

• Subscription services

What is the purpose of accounts payable?

The purpose of accounts payable is to accurately track what’s owed to vendors and suppliers and to ensure that payments are properly approved and processed. Having accurate accounts payable information is essential to producing an accurate balance sheet.

What is accounts payable reconciliation?

Accounts payable reconciliation is a process in which the accounts payable department verifies that the detailed total of all accounts payable outstanding matches the payables account balance stated in the general ledger. This is done to ensure that the amount of accounts payable reported in the balance sheet is accurate.

Photo credit: iStock/Panuwat Dangsungnoen

SoFi’s marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOSMB-Q324-051

Source: sofi.com

Apache is functioning normally

October 15, 2024 by Brett Tams

If you have Medicare, you know that the Annual Notice of Change (ANOC) you receive every fall describing upcoming changes to your Part D prescription drug plan isn’t usually scintillating reading. But this year’s ANOC might be more action packed than most — there could be big coverage changes in store for 2025.

Here are five Medicare Part D changes coming next year and what you need to know about them to be an informed shopper during open enrollment (Oct. 15 through Dec. 7).

1. Many plans are merging or ending

Medicare Part D plans for millions of members are being discontinued or merging with another plan in 2025 — especially for people with Aetna, AARP/UnitedHealthcare and Mutual of Omaha plans.

For example, if you had a low-cost Aetna SilverScript SmartSaver plan in 2024, you could be automatically moved into SilverScript Choice in 2025. You could see monthly premiums rise by as much as $35 unless you change plans.

It’s even possible to end up with no Part D coverage unless you act during open enrollment. Mutual of Omaha is leaving the market, for example, and its members will need to enroll in a new plan for 2025.

What to do about it: Check your ANOC to see whether Section 1 has a title starting with “Unless You Choose Another Plan.” If so, read the rest of the ANOC carefully to see whether the new plan is a good fit. Consider shopping around for alternatives during open enrollment.

If your Section 1 is titled “Changes to Benefits and Costs for Next Year,” then you’re not being automatically switched to a different plan — but it’s still a good idea to read the rest of your ANOC and confirm that you have the coverage you need.

Medicare will have big changes in 2025. Shop around and Compare Medicare Part D Plans

2. Premiums are all over the place

The average member will pay $40 per month for a stand-alone Medicare Part D plan in 2025, down from $41.63 in 2024, according to September estimates by the Centers for Medicare & Medicaid Services (CMS).

While the average premium isn’t projected to change much, your own costs for Medicare Part D might be significantly different next year.

Monthly premiums for Wellcare’s Medicare Rx Value Plus plan, for example, are going up by nearly $28 in 2025, on average. But the Wellcare Classic plan is about $17 less expensive each month in 2025 than in 2024.

What to do about it: The “Summary of Important Costs for 2025” and “Changes to Benefits and Costs for Next Year” sections of your ANOC show how your plan’s premiums and other costs compare from 2024 to 2025. During open enrollment, shop around to see whether a better deal is available.

3. A new $2,000 out-of-pocket cap

Out-of-pocket costs for Medicare Part D are capped at $2,000 in 2025. That means once you’ve spent a total of $2,000 in 2025 on Part D deductibles, copays and/or coinsurance, you’re done paying out of pocket for the rest of the year.

And you might spend even less if you’re one of the roughly 75% of Part D members with an “enhanced” Part D plan, which could provide extra credit toward the out-of-pocket cap. (When enhanced plans have benefits that reduce your out-of-pocket spending, the value of those benefits can count toward the $2,000 total.) As a result, you might reach the cap before paying $2,000 in out-of-pocket costs, a CMS spokesperson confirmed in an email.

What to do about it: The new cap takes effect even if you stay in the same plan — you don’t need to do anything to get it. You also won’t need to do the math yourself: statements from your plan will show your progress toward the cap.

4. No more “donut hole”

The Medicare Part D “donut hole,” or coverage gap, will go away after 2024. Through 2024, the donut hole is a phase of Part D coverage when you owe up to 25% of the cost of medications rather than your plan’s copays and/or coinsurance.

Starting in 2025, there will no longer be a Medicare Part D coverage gap. You’ll pay your plan’s deductible, copays and/or coinsurance until you reach the new annual cap ($2,000 in 2025), then you’ll owe nothing out of pocket for the remainder of the year.

What to do about it: Nothing — the donut hole is gone for everybody in 2025, even if you stay in the same plan.

5. A payment plan for prescription drugs

The Medicare Prescription Payment Plan is a new, optional way to pay out-of-pocket costs over time rather than all at once. It works like a “buy now, pay later option” for Medicare Part D deductibles, copays and/or coinsurance.

The payment plan is a potential budgeting tool, not something that will save you money. Your total costs remain the same, and plans can’t charge fees or add interest because you participate.

What to do about it: Consider whether the Medicare Prescription Payment Plan would be a good fit for your budget. It might help if you have expensive medications and incur high out-of-pocket costs early in the year, for example.

All 2025 Medicare Part D plans will offer the Medicare Prescription Payment Plan, so there’s no need to change plans to enroll in the program.

Plans will be required to reach out to you if they identify you as someone who’s likely to benefit from the program. You’ll be able to sign up through your insurance company by mail, by phone or online.

Source: nerdwallet.com

Apache is functioning normally

October 15, 2024 by Brett Tams

A debt instrument is a contract that enables one party to loan funds to another party, who promises to repay the loan plus interest. Debt instruments are also referred to as fixed income assets because the lender receives a fixed amount of interest during the lifetime of the instrument.

Debt instruments come in many forms. Some are obvious, such as mortgages and different types of small business loans; while others are less so, such as rental leases, bonds, and treasuries. With some debt instruments, you are the borrower, such as when you take out a mortgage or open a credit card. In other cases, you are the lender, such as when you purchase a bond or treasury.

Here’s what you need to know about debt instruments, the different types of debt instruments, how these instruments work, and the pros and cons of debt financing.

Key Points

• Debt instruments are financial assets that represent a loan made by an investor to a borrower, typically involving fixed payments over time.

• Common types of debt instruments include mortgages, small business loans, bonds, U.S. treasuries, and leases.

• Debt instruments come with a defined maturity date when the principal amount must be repaid.

• All debt securities are debt instruments, but not all debt instruments are securities.

What Is a Debt Instrument?

A debt instrument is a fixed income asset that legally binds a debtor to pay back any amount borrowed plus interest. Debt instruments can be issued by individuals, businesses, local and state governments, and the U.S. government.

Businesses often use debt instruments to raise capital to purchase additional assets (such as manufacturing equipment) or to raise working capital, while local governments may do so to fund the building of infrastructure (such as a new highway or a bridge). Debt instruments also give participants the option to transfer the ownership of debt obligation (or instrument) from one party to another.

Debt instruments can be short-term (repaid within a year) or long-term (paid over a year or more). Credit cards and treasury notes are examples of short-term debt instruments, while long-term business loans and mortgages fall into the category of long-term debt instruments.

Recommended: 10 Steps to Starting a Small Business

Debt Instruments vs Debt Securities

Debt instruments are broad financial tools representing a loan made by a lender to a borrower, including mortgages, business loans, and leases. They may or may not be tradable.

In contrast, debt securities are a specific subset of debt instruments that are tradable on financial markets, such as government and corporate bonds. Debt securities provide liquidity, allowing investors to buy or sell them before maturity.

The key difference is that all debt securities are debt instruments, but not all debt instruments are tradable securities, emphasizing market accessibility and liquidity for debt securities.

How Do Debt Instruments Work?

If you’ve ever taken out a loan or opened a credit card, you probably already understand the basics of how debt instruments work. Debt instrument contracts include detailed provisions on the deal, including collateral involved, the rate of interest, the schedule for interest payments, and the term of the loan (or timeframe to maturity).

While any type of vehicle classified as debt can be considered a debt instrument, the term is most often applied to debt capital raised by institutions, such as companies and governments. In this scenario, the investor is the lender: You issue money to a business, municipality, or the U.S. government. In exchange for capital, you are paid back the amount you loaned over time with interest. Examples of this type of debt instrument include U.S. treasuries, municipal bonds, and corporate bonds.

Recommended: Lease or Purchase Equipment

Types of Debt Instruments

Below is a breakdown of some of the most common debt instruments used by individuals, governments, and companies to raise capital.

US Treasuries

U.S. Treasury Securities (also called treasuries) are government debt instruments issued by the U.S. Department of the Treasury to finance government spending as an alternative to taxation. Treasury securities are backed by the full faith and credit of the U.S., meaning that the government promises to raise money by any legally available means to repay them.

U.S. treasuries tend to be more affordable than many other debt instruments. Investors can buy them in increments of $100 either through brokerage firms, banks, or the U.S. Treasury website. There are three types of treasuries: treasury bills, treasury notes, and treasury bonds. Each treasury comes with its own maturity option.

Municipal Bonds

Municipal bonds are offered by various U.S. government agencies (towns, cities, counties, or states) to fund current and future expenditures. Programs often funded by municipal bonds include the building of schools, roads, and bridges. Think of a municipal bond as a loan an investor makes to a local government.

There are two types of municipal bonds: general obligation bonds and revenue bonds. General obligation bonds are not paid back by any revenue resulting from the completion of the project. Instead, they are paid back to investors through property taxes or overall general funds.

Revenue bonds are paid back by the issuer through either sales, taxes, or some other type of revenue generated by the project.

Municipal bonds are attractive to many investors because they are tax-exempt bonds — meaning the investor doesn’t have to pay taxes on any interest received.

Recommended: How to Buy Bonds: A Guide for Beginners

Corporate Bonds

A corporate bond is a debt security that a corporation can use to raise money. Funding is typically available to anyone who is interested. As with other bonds, corporate bonds are essentially an IOU from the company to the investor. It differs from stock in that, instead of being paid dividends when the company is profitable, investors are always paid regardless of whether the company is doing well.

Typically, corporate bond investors are paid interest until the bond matures. When it matures, the entire principal is paid back. For example, a $1,000 corporate bond with an interest rate (or coupon rate) of 5% would bring an investor $50 every year until the bond matures. This means that, after 10 years, the investor would see a gross return of $500.

With secured bonds, the company puts up collateral (such as property or equipment) as security for the bond. If the company defaults, secured bond holders can foreclose on the collateral to reclaim their money. With an unsecured bond, a holder may or may not be able to fully reclaim their investment.

Alternative Structured Debt Security Products

There are many types of structured debt security products on the market, many of which are issued by financial institutions. A common occurrence is for these institutions to bundle assets together as a single debt security product. By doing this, they are able to raise capital for the financial institution while also segregating the bundled assets.

Recommended: What Are the Different Types of Debt?

Leases

A residential or commercial lease is a legally binding contract between an owner of a property and a tenant, where the tenant agrees to pay money for a set period of time in exchange for use of the rented property. A lease is a type of debt instrument because it secures a regular payment from the tenant, thus creating a secured long-term debt.

Mortgages

Mortgages are a type of debt instrument used to purchase a home, commercial property, or vacant land. The loan is secured by the property being purchased, which the lender can seize if the borrower defaults on the loan.

As with many other consumer loan products, mortgages are amortized, meaning the borrower makes a series of equal monthly payments that provides the lender with an interest payment (based on the unpaid principal balance as of the beginning of the month) and a principal payment that will cause the unpaid principal balance to decrease each month so that the principal balance will be zero at the time of the final payment.

Recommended: What Is a Financial Instrument?

Pros and Cons of Debt Instruments

Understanding the pros and cons of debt instruments helps borrowers make informed decisions about their financing options.

Pros

Debt instruments can be mutually beneficial in that both parties become better off as a result. If a company takes out a small business loan and invests those funds wisely, for example, it can increase its profitability. Ideally, the increase in profits exceeds the cost of the loan, a concept known as leveraging in business. Borrowing money also allows a company to raise capital without losing equity.

Debt instruments also benefit individuals and governments. Without mortgage debt, many people would never be able to buy a house; without student loans, many individuals would not be able to go to college. For governments, debt instruments allow them to build infrastructure for the public good.

On the lender’s or investor’s side, debt instruments can provide a regular and guaranteed source of income and are considered a safe investment, provided the loan is secured.

Cons

But there are downsides to debt instruments, as well. Loans often come with restrictions on how they can be used and, if you don’t have good credit, interest rates can be high. Borrowing money also involves risk. Most commercial institutions will require you to put up collateral in the form of a property asset. If you lose your income or your business hits hard times and you cannot repay your loan, the lender can reclaim its debt by liquidating whatever you proposed as security, which means you can lose a valuable asset.

On the lender’s or investor’s side, debt instruments also come with risk. Unless you purchase a secured bond, you may not receive your principal back as the investor. Also, during periods of high inflation, bonds can actually have a negative rate of return. And, if you invest in corporate bonds, there is always the possibility that the issuer will default on payment.

Pros of Debt Instruments	Cons of Debt Instruments
Allows companies to expedite their growth	If a borrower has poor credit, interest rates can be high
Allows companies to raise capital without diluting equity	Loans often come with restrictions on how they can be used
Enables individuals to buy a home or pay for college	Loans often require collateral, which can be lost if debtor defaults on loan
For lenders/investors, secured debt is a safe investment	Investors can lose money if bond value declines
For lenders/investors, debt instruments provide steady income	Bond investors can lose money during periods of high inflation

The Takeaway

A debt instrument is a way for an investor to get a return on their money by loaning to either an individual, business, municipality, or the U.S. government. If you have a credit card or mortgage, or you own any bonds or treasuries in your investment portfolio, debt instruments play a role in your life.

Small business owners can also take advantage of debt instruments. You might not be able to issue corporate bonds at this stage of the game, but you may be able to access an affordable small business loan.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

With SoFi’s marketplace, it’s fast and easy to search for your small business financing options.

FAQ

What are some examples of debt instruments?

Common examples of debt instruments include personal loans, business loans, mortgages, leases, bonds, treasuries, promissory notes, and debentures.

What is the difference between a debt instrument and an equity?

With a debt instrument, the investor does not own any portion of the company. With equity, the investor is buying a portion of the company.

What are the features of debt instruments?

Debt instruments have three characteristics: principal, coupon rate, and maturity. Principal refers to the amount that is borrowed. The coupon rate is the interest amount paid by the borrower to the lender. Maturity is the end date of the debt instrument. It refers to when the debt is completely paid off with interest.

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

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Source: sofi.com

Apache is functioning normally

October 14, 2024 by Brett Tams

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Well, it looks like we’re here in another US election year already.

As Advanced Mustachians, we already know that the ongoing battle of Harris vs. Trump should not be consuming much of our time. Sure, we do our research and cast our votes but after that we move right on to focus on other things within our own circle of control.

But out of all the things the politicians like to bicker about, there’s one area where MMM does need to set the record straight, and that area is of course money. Your money, the economy in general, and the overall wealth of the nation.

Politicians are already not known for being the sharpest tools in the shed when it comes to technical stuff like science, technology, or economics. But this year the discourse has become particularly dumb, as our candidates try to manipulate undecided voters in swing states with ideas that are based on irrational emotions rather than sound economic sense.

For one particularly funny example, you may have noticed that the competing party (Trump in this case) is attacking the incumbents (Biden/Harris) over the “bad economy.” When in fact the US economy is stronger than it has ever been, with the lowest unemployment we’ve ever seen as well.

It’s hard to imagine a better situation than we have right now, and in fact the recent bout of higher inflation is a sign that things have been going too well, and we needed to step on the brakes with the help of higher interest rates.

But somehow the people still seem to believe that we have a “bad” economy. Take a look at this Gallup poll showing that while most people (85%) are doing really well right now, they assume that it’s just their own good fortune – only 17% believe the economy is doing well.

This is mathematically impossible, because if most people are doing well, that’s the definition of a good economy! And suspiciously enough, this widespread wrongness correlates quite nicely with the rise of social media misinformation.

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So the politicians and the news have been doing the opposite of what they should be doing in an ideal situation (sharing accurate information). And sure, we can always just ignore their speeches and go on with our lives. But when it comes to economics, knowledge is power (and money). The more accurately we understand how things really work, the wealthier we will all become.

So with all that in mind, I hereby present you with my list of the…

Top Dumb Things Politicians Want You To Believe About The Economy

1: The President Controls the Economy

If there’s a recession, the opposition party likes to blame it on the current president. If the economy is booming, the current president likes to give himself (or possibly soon herself) credit for all of that success. But really, the US economy is way too big – and thankfully way too free – for the president to control or really even influence all that strongly.

In reality, our economy is a gigantic machine which converts labor and materials into things like iPhones, hospitals and pumpkin pies. And although we’re the biggest economy at 26% of the planet, we are still heavily influenced by that much bigger 74% of economic activity that the other 7.6 billion people on Earth are busy producing everywhere else.

When we have our inevitable little boom and bust cycles, they are mostly caused by the normal cycle of irrational exuberance (and greed) like the 2007 housing boom, followed by brief periods of extreme fear and pessimism like the 2008-2012 financial and housing crash.

The government does play a role too, by setting tax rates and other rules. But the effects of these policies are usually so delayed and unpredictable, that you can’t draw a straight line between today’s president and today’s economy. In other words, the government does its best to adjust the rudder on our giant ship, but in the short term our economy lurches around on the waves and storms of the ocean.

2: The President Controls Interest Rates

This one is especially funny to me, as our candidates feign sympathy for the hard life of middle class Americans, who now face higher borrowing costs on their credit cards and car loans and mortgages. They claim they will fight to bring the interest rates down. Trump even goes as far as bullying our Federal Reserve board members (who can only do their jobs if we allow them to function as independent experts) and suggesting that he would take over the whole department, if elected.

The real story is that while monetary policy would be a terrible tool to leave in the hands of a sitting president (see Argentina), it does function as an excellent set of gas and brake pedals for the economy if used properly. When things slow down and unemployment gets too high, a cut to the interest rates will produce a boost in everything from new jobs to stock prices. But if things get too hot, you get rapid inflation which can mess up the system.

3: Inflation has Made Life Harder for Americans (and the President Can Magically Reverse it)

This line of reasoning is even dumber than the last one. For a couple of years after the Covid era, we had rapid inflation. It was caused by a rare combination of a goods shortage caused by things like factory closures and remote work, plentiful demand from government stimulus spending and low interest rates. These factors have since ironed themselves out, and inflation is back down to an ultra-low 2.4%.

Steve Ballmer explains the inflation vs wages debate in his useful new video series called USA Facts (see note below)

But most significantly, wages have still risen faster than inflation so we are all better off than before! Since 2019, overall prices are up 19% and our wages are up 21%. So even after all that inflation, we are still doing just fine. But the candidates are still bickering over inflation as if it’s an actual problem, and even worse promising to “bring prices back down”. And they’ve managed to convince the electorate that “higher wages and prices” is the same thing as “a bad economy”. Which is just plain wrong.

Bonus dumbness: politicians also occasionally blame “greedy corporations” for increasing prices to hoard profits. While price increases are totally acceptable in a market system (as a business owner you are free to set prices wherever you like), in reality it doesn’t usually happen because our markets are too competitive. For example, a recent deep analysis from NPR showed that no, grocery stores haven’t made any windfall profit at all off of this recent bout of Covid-fueled inflation.

4: The President Controls Housing Prices

One important thing that has changed over the past ten years is that US house prices and rents have both risen much faster than general inflation and even wages. On the positive side, interest rates have also risen which tends to make houses feel more expensive and is supposed to help bring house prices down. But it hasn’t happened yet which means we have the double whammy of higher prices and higher interest costs for mortgage borrowers.

The dumb part is that our candidates are proposing things that would make the problem even worse, like subsidies for first-time homebuyers or schemes to reduce the interest rates. When really the solution is to increase the supply of housing, which I personally think will happen if we stop putting up roadblocks for homebuilders (myself included) to build housing.

Things like faster and cheaper permits, less onerous and expensive building codes, eliminating suburban-style zoning and setback and car parking rules, and changing laws so that NIMBYs no longer get any say over what other people do with their own land could all help reduce the cost of building a house by about 50%, quickly and permanently.

5: The President Controls Gas Prices, and They Are Currently “High” and We Want Them Lower

Ahh, gasoline! The most ridiculous of things to worry about and the fuel for many of MMM’s rants since 2011.

First of all, on an inflation-adjusted basis, gasoline is still about the same price as it was in 1950: in the $3-4 range per gallon, in today’s dollars.

Secondly, it is so cheap that even with our huge inefficient American vehicles, the average household is still only spending 2.5% of their disposable income on the stuff! (The funny part is that they spend many times more on the rest of the car ownership experience while thinking gas is the part that is expensive)

Third, gasoline has been obsolete for almost a decade now. You can get a used electric car for less than the price of a comparable used gas car, or if you’re a fancypants money waster like me, new EVs are also cheaper than their gas counterparts. You get a faster, nicer car that almost never needs maintenance OR gasoline, and save money.

So why are we even still talking about this antique fuel of a previous era? Why aren’t the candidates also arguing over the price of Kodak film or typewriters or fax machines?

6: The Economy is Something We Should Even Worry About

The funniest part about all this economic talk is that we’re focusing on the wrong thing. While hard work and business and advancing the frontiers of human knowledge are all fun things, the reality is that we passed the point of having “Enough” decades ago. When the American middle class complains about how hard we have it these days, it’s like a bunch of overfed people at a buffet wishing they could just have one more flavor of donuts stacked onto the table.

Yes, we have income and wealth inequality so that the rich tend to get richer more quickly. And yes, we should keep that in check with a somewhat progressive tax system because a more equal society tends to be a more peaceful and happy one.

But have you noticed that as the rich people get richer, they don’t get any happier? It’s because after you pass the point of “Enough”, adding more money doesn’t really help much.

And “Enough” is much more defined by your mindset (and your collection of life skills) than your paycheck. So if the politicians really cared about improving our happiness and wellbeing, they’d be preaching the Principles of Mustachianism rather than pandering to the specific requests of coal miners or billionaires.

But alas, winning an election is a very different thing than proposing stuff that is actually best for the country. And for that reason, we cast our votes for the best party and then tune back out until the next election.

Happy voting!

In the Comments: Has the election season been getting you down, pumping you up, or just giving you a thorough dose of “Meh”?

Further Reading/Watching:

While researching economic stats for this article, I came across a quirky but informative series of videos called USA Facts by none other than Microsoft co-founder Steve Ballmer. It seems that he had the same frustration as me: Americans are fighting over a bunch of opinions and misinformation without even bothering to look up the actual facts. So he made a well-produced series of videos that just share the facts without the baggage of political hype on top of them. I wish our politicians could do the same thing!

Bonus Podcast based on this article!
Thanks to the magic of AI, you can direct the wizardry within Google to generate a custom-made podcast on almost anything on the Internet. A reader just emailed me this take on this episode – remarkably human-like and even entertaining!
https://notebooklm.google.com/notebook/0e1d0af8-8888-466c-abe4-8b1da8986773/audio

Source: mrmoneymustache.com