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Debt Snowball Method

When you took out loans for your education, you were likely laser-focused, hurdling goal after goal to finish the race as quickly as possible and get that diploma. You may have even used that vigorous momentum to land your first job out of school. When the vicious cycle of bills begins to eat away at your paycheck, you may feel like your financial life is freezing in time. Now buried in student loan debt, all you can move is your eyes, and all you can see is an avalanche of credit card debt, car payments, and maybe even a mortgage, coming straight for you.

 

Debt Snowball Method

While researching the quickest way to dig yourself out, you may have heard of the ‘debt snowball method’ as prescribed by financial expert Dave Ramsey. While other methods advise tackling your biggest debts with the highest interest rates first, the debt snowball method is that you pay down your smallest debt first and use that momentum to carry into the next.

 

The makings of a perfect snowball

 

As eager as you may be to start chipping away at even your smallest debt, it should be noted that having a rigorous monthly budget with a comfortable emergency fund is the cornerstone of Ramsey’s entire philosophy. Without them, the smallest bump in the road to repayment can cause serious setbacks.

 

After you assign every dollar in your budget and gather an emergency fund buffer around your finances, list your debts from smallest to largest. Don’t pay any mind to interest rates or due dates; the only figure that’s important right now is the total loan balance on each account.

Staging a successful siege

 

Next, to avoid racking up more debt, make minimum payments on all your debts except the smallest. Then use every spare dollar in your budget to pay as much as possible on your smallest debt. The more you can pay at the beginning, the bigger your snowball will become. The psychological victory from having a few quick wins will boost your confidence and help you gain momentum.

 

By the time you start making payments on the bigger debts, you have much more cash freed up from the absence of your smaller debts. At this point, the momentum you have will encourage you to stick with the changes in your financial behavior. Those changes have the power to get you out of debt and keep you from falling back into it.

 

Even though it may cost more money than paying off your highest interest rate debts first, the snowball method allows you to make short (but immediate) strides towards a debt-free life. As tempting as it may be to kick down the door and come in guns blazing, you can really set yourself up for a much more successful siege with a little bit of planning and a whole lot of discipline.

 

Refinancing your snowball

 

Another great way to position yourself for success is to look into refinancing your student loan debt. Like the debt snowball method, the proper planning and smarter borrowing associated with refinancing enables you to proceed through the repayment process in the most efficient manner. Student loan interest rates are nearing all-time lows, and consolidating your multiple student loans into a single loan with a fixed rate secures the notion that you’ve done everything you can do to simplify that particular part of your finances.

 

Our customers have reported that they are saving an average of $309 every month and should see an average of $20,936 in total savings after refinancing their student loans with Education Loan Finance.* Consider the impact refinancing could have just by applying those savings to your other forms of debt. With proper planning and smarter borrowing, you can avert the threat of avalanche and most efficiently summit the mountain range of your financial goals.

 

See Our Simplest Guide to Student Loan Refinancing Part 1

 

* Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.

Refinancing Your Student Loans With Confidence

You’re out of school and thinking through your financial life more clearly, you’ve hopefully looked into refinancing student loans. Whether you’re looking for a lower monthly payment, lower interest rate, or even if you just want to consolidate multiple loans into one. Refinancing is a great way to get some serious traction on the long journey to being student loan debt-free.

With dozens of lenders enticing you with the ‘lowest interest rates’ on the market, how do you know which one to trust?

When a lender says they can offer you a lower rate, perhaps you suspiciously scan the room for conspirators hiding in the shadows waiting to stab you in the back. Sound dramatic? It happens to thousands of unknowing borrowers every day. “Et tu, Brute?”

The Street Cred of Credit Ratings

It is important to find a student loan refinance company that has credibility in the marketplace and you can trust. Fortunately, credit rating agencies who evaluate the creditworthiness of a student lending company and its operations can provide an independent assessment of the lender. A credit rating agency conveys the creditworthiness of a company and its debt financing with a letter grade. The grading system is similar to the way your credit score numerically reflects your own borrowing history.

Credit ratings are awarded by independent rating agencies, like Standard and Poor’s and DBRS. Rating agencies are hired to analyze a lender’s financing and operations. Since the rating agency’s reputation is on the line, they scrutinize every possible detail of a lending company. These agencies can be quite difficult to impress.

AAA is the highest rating a lending company can be awarded, and subsequent ratings drop in value (and confidence) – AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, and so on, all the way to lowest rating – D..

‘AAA’ Straight Out of the Gate

Because of the premier quality of an AAA rating, it frequently takes a lender several years to earn. But we, at Education Loan Finance, recently became the first student loan refinancing lender to receive the AAA rating with our inaugural financing in the market.

This recognition from both Standard & Poor’s and DBRS (two of the nation’s top rating agencies) is a testament to the stability of our platform and the high quality of service and products we offer.

We believe that knowledge is power, and providing you with comprehensive refinancing and consolidation options enables you to step forward on your financial journey with confidence. That is why we created a state-of-the-art loan application platform and a customer service delivery model (through our Personal Loan Advisors) that provides you with personalized service throughout the refinancing process.

High Credit Rating Means Lower Interest Rates

Our AAA credit rating means that we attract responsible borrowers and bring a high credit quality to the market. We take pride in our ability to save our borrowers an average of $280 per month and more than $26K over the life of their loan*.

Empowering a Brighter Future

We want to help you make educated financial decisions and offer practical advice for achieving balance in life, business, and finances. In just a few minutes, you can find out how much we can save you per month, as well as explore repayment terms and interest rates that best fit your budget.

 

10 Facts About Student Loans That Will Save You Money

* Member Lifetime Savings – Average member lifetime saving calculation of $26,215.92 total savings is based on information provided by Education Loan Finance customers who refinanced their student loans between 08/16/2016 and 10/07/2017. While these amounts represent average amounts saved, actual amounts saved will vary depending upon a number of factors.

 

Refinancing vs. Student Loan Grace Period

April showers bring May flowers, but what do May flowers bring? Millions of college grads who will enter the workforce with an average of $37K worth of student loan debt. Fortunately, the government has your back (at least for six months, anyway) in the form of the student loan grace period. But before you lower your poolside lounge chair down a couple notches and nap through the sunny afternoon, take note of the late summer storm brewing on the horizon.

It’s grace, you just have to pay for it

It’s true that you are NOT required to make repayments on your federal loans for six months. What you may not know is that, in most cases, interest still accrues during this grace period. Furthermore, you may not be aware of how much you could save by taking advantage of early repayment rather than the grace period.

An article on studentloanhero.com puts it this way:

“Let’s say you have $30,000 in student loans at 6% interest. Make just one extra payment of $500 dollars this summer and you could cut $1,120 in interest from the lifetime cost of your loan. If you really want to get serious about putting extra payments towards your student loans, contribute $1,500 before payments become due and reduce the time it takes to pay off your debt by two years – plus earn $3,188.29 in interest savings.”

If you consider how much interest is going out the window, it’s important to remember you are, in a sense, paying for that six-month buffer. By putting in a couple weeks’ worth of work, you can stretch your hard-earned summer dollars quite a long way and reel in the length of time you’ll have to stare at your student loan debt out of the corner of your eye.

Steps to repaying your student loan debt

Regardless of whether or not you choose to take ‘advantage’ of the grace period, you will eventually have to start making payments. An excellent article on cnbc.com outlines the steps you might consider in order to avoid common mistakes many recent grads make.

1)    Know your loans

2)    Update your contact info

3)    Monitor your cash flow

4)    Register for autopay

5)    See if your employer will chip in

6)    Consider consolidating or refinancing

We encourage you to read the article and explore the options therein, but we implore you to seriously consider Step #6 by refinancing your student loans (maybe even bump it up to, let’s say – Step #1 or #2 because it actually encompasses the others). It’s free and will help you in virtually every sense – a low, fixed interest rate with a single monthly payment and a repayment term that best fits your budget. The only way refinancing could be considered a disservice is if you’re planning to hang your hat on one of the federal loan forgiveness or repayment programs, as refinancing will automatically forgo many of those options. Though, if you do your research on those programs, avoiding them might be the most graceful step you can take.

Borrow Smart, Save Smarter

Refinancing with a reputable lender like Education Loan Finance can save borrowers an average of $280* per month and more than $26K over the life of their loans. The smartest move you can make after school would be to lock yourself into historically low-interest rates while simultaneously paying down your loan balance over the summer. Besides, you can still relax by the pool (on the weekends, of course), only instead of avoiding the impending storm of student loan debt, you can daydream of being free from the burden of student loans years before the rest of your graduating class.

 

 

* Member Lifetime Savings – Average member lifetime saving calculation of $26,215.92 total savings is based on information provided by Education Loan Finance customers who refinanced their student loans between 08/16/2016 and 10/07/2017. While these amounts represent average amounts saved, actual amounts saved will vary depending upon a number of factors.