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A common question asked by people looking for student debt help is “Should I pay off my credit cards or my student loans first?”

This is a tricky question, and the answer depends upon a number of factors, including;

* The rate of APR on your credit card and your student debt

* The repayment terms

So lets look at a typical student debt help example. Let’s say your credit card debt costs you 7.9% APR, while your student loan costs perhaps 3% APR.

In that situation it makes sense to pay the minimum towards your student loan and put the rest of your money towards repaying your credit card debt. As long as the interest rate on your credit card debt is higher than on your student loan, focus on clearing your credit card debt first. Over the long run, that will reduce the total amount of interest that you have to pay on your debt.

But what if the situation changes?

What if the interest on your student debt starts to creep up, and you find an amazing credit card deal? What do you do if your credit card costs 2.9% APR while your student debt stands at 4.9% APR?

Let’s look at the advantages and disadvantages of the various student debt help options;

1) Focus on the credit card debt

IDEA: Continue paying both debts individually, making the minimum payment to your student debt while putting the rest of your cash towards your credit card. Once the credit card is repaid, use all of your income to repay your student loan.

REALITY: As long as the interest rate on your student loan is higher than your credit card, this option will cost you slightly more interest in the long run. But this remains the safest option. As you’ll see below (option 4), it’s generally much safer to owe money on a student loan than it is to owe money on a credit card.

2) Focus on both debts equally

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IDEA: Continue paying both debts individually, but focus on repaying both of them at an equal pace.

REALITY: This is similar to option 1 above, the only difference being that it will cost you slightly less interest while the rate on the student loan is higher than the credit card debt.

3) Focus on the student debt

IDEA: Continue paying both debts individually, making the minimum payment to your credit card while putting the rest of your cash towards your student loan. Once your student loan is repaid, use all of your income to repay your remaining credit card debt.

REALITY: This option is just the reverse of option 1, but takes advantage of the fact that in our new example the student debt suffers interest at a higher rate. It will help you to save money on interest payments for as long as the rate of interest on your student debt is higher than on your credit card deal.

But it will remove more of your debt from the relatively save environment of a student loan at the same time as leaving more of your debt at the mercy of the commercial lending sector (this isn’t always the best option, as shown below).

4) Consolidate

IDEA: Transfer the entire balance of your student loan to your credit card to take advantage of the lower APR. Using our new example, this would reduce the rate of interest on your student loan from 4.9% APR to the 2.9% APR offered by your credit card deal.

REALITY: This could be a risky option. Okay, at present is might allow you to save a small amount of interest on your total debt, but you have to consider the differences between credit card companies and student loan providers.

Most student loan schemes are run by government agencies or educational authorities. This might sound hard to believe but outright profit is not their number one aim. And because many of these schemes are government subsidised, they often have extremely good repayment terms. Often far better than the best credit cards on the market. And they don’t usually impose such harsh penalties if you are late with a repayment.

In contrast, credit card companies exist to make money. The more money that they can draw out of their customers the happier their shareholders. So before you transfer your student debt to a credit card, you must think long and hard about it, because it’s a one time only decision. In most countries, once you’ve repaid a student loan, you can’t re-borrow the money.

How long will this low rate of 2.9% APR on your credit card last? Is it just an introductory offer that will last a few months and then revert to a much high rate of interest? Are there any penalties or restrictions in the small print.

And what if you miss a repayment? Most credit card companies will charge you a hefty fee if make a late repayment. And as if that’s not enough, some will even transfer your debt to a much higher rate of interest just because you miss a repayment. So if either of these things happen it would wipe out all your potential savings immediately. And there would be nothing that you could do about it.

Other issues to consider; Filling up your credit card with student debt could affect your credit rating. In some countries, interest paid on student loans can be used to reduce your income for tax purposes (you can’t do that with a credit card). The psychological issue – would you rather have two smaller loans or one large loan? Some people find it harder to get motivated when the task ahead of them appears to be larger.

Transfering student debt to a credit card could help you to save money but only if you make sure every payment is made on time and that you are committed to paying off the debt before the special offer interest rate ends. But it’s a big risk and there’s no way back if you run into problems.

Of all the options, when you have to choose between repaying credit card debt or a student loan, it’s usually cheapest and almost always safest to focus on repaying your credit card debt first.

by Stuart Laing

Copyright (c) Get Out Of Debt.

Have you been struggling with debt for as long as you can remember? Are you ready to do something about it? Visit http://www.icanhelpyougetoutofdebt.com for free, impartial information on how to reduce debt.

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There are an increasing number of new cars on the road every year and as a result the second hand market is also expanding. Many people now change their car regularly, so the car finance industry is now huge and can be confusing. When you start looking at cars, whether used or brand new, you should also think about how you will finance your purchase. The key to finding car finance appropriate for your circumstances is to do your research thoroughly and shop around. While it may seem easier to accept the car loan offer from the dealer, this may not be the best option. It is best to make sure you get a written quote from the dealer then you can then look at other sources, such as internet companies, for competitive deals. When comparing loan offers check that you are looking at similar loan products. Headline interest rate or monthly repayment figures do not always tell the whole story when it comes to getting a loan.

The Annual Percentage Rate (APR) is usually the first thing to look at when comparing loans. However it is also important to look at the total amount payable. This will take into account all the additional arrangement fees, costs and interest to give you the total amount you will have to pay before you own the car.

In general a shorter repayment period will mean higher monthly payments but lower interest charges overall. It is recommended that the repayment period should be no more than 4 years. If you do not plan to keep the car that long try to reduce the loan period accordingly. You should also check what will happen if you want to repay the loan early. There may be a discount on the amount you will pay, or you may have to pay as much as if you had continued to the end of the agreed period. You may even have to pay a penalty fee but this is unlikely.

The main options available to finance your car are outlined below. Internet sites may be useful to help with searching for and comparing loan products.

Hire Purchase Agreements

Hire purchase schemes are traditionally offered by car dealers but you can also go direct to a finance company. The price of the car is divided into equal payments over 3 or 4 years with interest charged on the amount borrowed. With this type of deal the car will belong to you at the end of the agreed period but not before. Therefore you cannot sell the car before the end date. The minimum deposit is usually from around 10% and interest rates can be lower than other options. However the monthly payment will be more than for a personal contract plan.

As the loan is secured on the car, if you have difficulties with the repayments the car will be repossessed. This can happen after as little as two missed payments. The finance company will then sell the car cheaply at auction in order to recover some of the debt quickly. You will still have to pay the difference between the price the company gets for the car and the amount outstanding on the loan. There will also be some costs to pay.

Cars over 2 years old are usually excluded from hire purchase deals. This is because the value of the car will be too low by the end of the loan period.

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Personal Contract Plans (PCPs)

This is a particular type of hire purchase agreement which involves paying monthly instalments and a final lump sum payment. This specialised deal is offered by many different companies, for example Ford Options and Peugeot Passport but it is only appropriate for new and nearly new cars.

PCPs are particularly suitable for people who want to change their car regularly and whose priority is low monthly payments. However, although the installments are lower you should note that the total interest payable tends to be higher than other products.

If you opt for a PCP scheme you pay an initial deposit, possibly up to about 20%, and a balloon figure know as the ‘Guaranteed Minimum Future Value (GMFV)’ is agreed at the start. You then have low monthly payments for 2 or 3 years at the end of which you have 3 choices.

If you decide to pay the set ‘balloon’ payment you keep the car. Alternatively, if you have kept the car in good condition and stayed within set mileage limits, you can return the car and the deal is closed. None of you deposit or payments will be refunded but the advantage is you will not have to make up the shortfall if the car is worth less than the GMFV. Finally you can use the difference between the balloon figure and the value of the car as a deposit on a new car. This is only possible if the car is worth more than the balloon payment. Although this is usually the case you should be aware that it is not guaranteed.

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Interest free deals may be available from the manufacturer or dealer. This may tempt you into making a purchase but there are likely to be strict conditions. Initially you may have to pay a large deposit – possibly 50% of the value of the car and the loan period could only be 1 year. If you do not or cannot repay the loan on time, within the interest free period, you might well incur hefty penalty payments.

Personal loans

A personal loan could be a good option when buying a car as there are many deals available from banks, building societies and loan companies. You are free to buy a car anywhere you like and it belongs to you immediately. Competitive rates can be found by shopping around and the loan is not secured on the car. This means that you do not have to repay the loan if you sell the car and the car will not be repossessed if you do not keep up with the payments. Monthly payments can seem high compared to a personal contract plan but the total amount of interest you pay will be lower.

People often think they will get a better price on the car they want by offering cash. This may sometimes be the case but dealers also earn commission by selling finance packages. Therefore they may actually be more likely to reduce the price of the car if they are also arranging the finance. Always get the dealer to provide a written quote which you can compare with other options. You can then confirm later if you wish to accept the offer.

Remortgaging

If you are are remortgaging your home you could use this as a way of financing a car. However although the rate and monthly payment is likely to be low, the total amount of interest will be high as the loan is likely to be over 15 to 20 years. There will be legal costs and other fees when remortgaging so this option is really only worth considering if you are remortgaging anyway for other purposes. Remember the car will probably not last for as long as the repayment period.

Jack Curtis is a writer and publisher of advice and information on finance in the motor industry. He provides constructive advice on finding the best car loans and vehicle finance. His latest initiative on car loans can be found at http://www.drivingloans.co.uk

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If you’re in debt, you may find that one of your problems right now is not so much lack of information as it is too much information! There are tons of sites online offering all kinds of debt solutions. Many of them call themselves debt consolidation, but that term is used so loosely it sounds like it could mean almost anything. Maybe you don’t care about terminology. After all, a debt plan that works is all that matters, right?

The fact is that you need to know all about these things in order to choose the right option for your situation. Picking the wrong one can cost you money (the last thing you need right now), hurt your credit, and keep you stuck in debt. Picking the right one can get you out of debt.

Let’s start with the one not on the list: bankruptcy. Believe it or not, Americans have a Constitutional right to go bankrupt.

Bankruptcy is a legal proceeding. You can’t declare bankruptcy in the U.S. without getting a lawyer and judge involved. The proceeding becomes part of public record. Bankruptcy is extremely intrusive in that outsiders will now determine how your money will be divided up to pay off debt and what you must sell.

Bankruptcy offers an advantage many debtors really love. A court has the power to issue “bankruptcy protection.” You may be allowed to write off certain debts. That means some debts just go away; you are no longer obligated to pay them. Furthermore, once you have “bankruptcy protection,” bill collectors can no longer pursue you for those debts.

The problem with bankruptcy is that it all but ruins your credit. It stays on your credit report for seven years, and it has a way of cropping up even after that. It makes it very tough to get new loans or buy a house. The loans you will be able to get will be at very high rates of interest because you’ve suddenly become a high-risk borrower.

Bankruptcy will turn your life upside down. If you have secured loans (like car notes or loans to buy electronic equipment), those things can be repossessed. The court may seize or order you to sell certain assets and take the money to pay off other debts. Another requirement is attending money management classes, kind of like being forced to go to debtors’ rehab.

While bankruptcy does have its place, it is definitely the “last resort.”

Debt settlement and debt negotiation mean roughly the same thing: you or somebody representing you sits down and talks to your creditors to work out a solution.

The principle is that you work out (negotiate) a way to end (settle) your debt. You may be able to get the interest rate reduced or the terms of payment changed (such as getting a couple of months off or extending the terms of the loan). Sometimes you negotiate to try to get the balance reduced. As an example, assume you owe $10,000. You would negotiate with your creditor to try to get him to accept less, say $5,000, and mark the debt paid in full.

Why would anyone do that? The main reason a creditor will negotiate a debt is that they suspect you are flirting with bankruptcy and they are fearful that if you go bankrupt, they won’t get anything. From their viewpoint, $5,000 may be better than nothing.

Debt settlement and negotiation plans will almost assuredly make it all but impossible to get future loans at reasonable interest (if at all).

A debt management plan (DMP) is a formal plan where you hand your problem off to a company which then negotiates your debt. You make one monthly payment to the DMP and they handle your problem.

While there are legitimate DMP programs out there, these are very treacherous waters. Do your homework and check with the Better Business Bureau as well as a certified credit counselor (nfcc.org) and maybe your bank or credit union. There are programs out there that are outright frauds and a few that are not dishonest but not exactly advantageous to the customer.

The last approach is something called debt consolidation. Ironically, many debt settlement, debt management plans, and debt negotiation companies will call their programs “debt consolidation.” That is not inaccurate, but it’s a bit misleading.

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Debt consolidation simply means lumping all your debts together. In one way, that is what all debt plans do at first, whether it’s bankruptcy, a DMP, or some other program.

But pure debt consolidation involves lumping your debts together and then taking out one big loan to pay them off.

Why would anyone do that?

If you have a lot of high-interest loans, you may be able to take out lower-interest loans to pay them off. For instance, if you owe $10,000 at 22% on a credit card and you can borrow $10,000 at 10% from your bank, you would be smart to borrow $10,000 at 10% and pay off the credit card. You still owe $10,000, but you owe it at less than half the interest rate. If you keep making the same payments, you’ll pay the debt off much sooner.

If you own a house and can refinance it or get a home equity loan or second mortgage, you can use that to consolidate your debt. Let’s say all of your debts together came to $100,000 and you owed them at varying interest rates from 22% down to 10%. If you own a house and take out a second mortgage (or use another refinancing option), you can borrow $100,000 and pay off all of your debt. You can structure this second mortgage as a 30-year loan and probably get it at 7% or even lower. The result is a significantly lowered monthly payment and a boatload of individual loans you can stamp “paid in full”.

Debt consolidation offers a lot of advantages. (That’s why so many programs like to call themselves debt consolidation!)

It is the only debt solution that can actually help your credit score (your credit score goes up whenever you pay off loans in full). If you are willing to take the time to learn a few things, you can do it yourself (no fees or other people to pay). It’s not intrusive; in fact, if done properly, no one would ever guess you did it. Even if your bank or a lender figured it out-they would probably think you’re smart to handle your debt that way.

If you can figure out how to do a pure debt consolidation on your own, you don’t need to bother with hiring a company (or a lawyer), entering financial rehab, or paying off agents to “manage” your money.

In the interest of fair disclosure, however, it must be stated that debt consolidation in its pure form will not work for everyone. Some people will not qualify for it. There are others who might indeed qualify for debt consolidation, but will find another plan is more to their advantage. It’s important to learn what you can to find out if debt consolidation is right for you.

For straight talk about debt consolidation from a site that sells no financial services or programs, click to http://www.MyDebtConsolidationAnswers.com – Every day you stay in debt is costing you and your family money and future prosperity. Get the facts today.