Latest news with #debtrepayment
Yahoo
16-07-2025
- Business
- Yahoo
What is the U.S. credit rating, and how does it impact you?
Just as individuals have credit scores, countries are also graded on their ability to repay borrowed money. And recently, the U.S.'s credit rating dropped. This May, Moody's downgraded the U.S. government's Aaa rating for the first time since 1949, lowering it to the second-highest available rating of Aa1. Moody's also changed the country's credit outlook from "stable" to "negative." For anyone unfamiliar with national credit ratings, that might sound pretty bad. But to give you a sense of comparison, it's sort of like seeing your personal credit drop from a perfect 850 score to an excellent 830. A change like that wouldn't be terribly consequential for you, unless the trend continued. This embedded content is not available in your region. Similarly, the U.S. downgrade may not make big waves by itself. However, there's some speculation that the nation's new rating is still too high and will continue to drop. And that could come with negative consequences that impact your bottom line. Here's what you need to know about how the U.S. credit rating works, what it means, and why it matters to you. Read more: This map highlights the average credit score in every state A national credit rating, also known as a sovereign credit rating, represents how likely a country is to repay its debts on time. Moody's, Standard & Poor's (S&P), and Fitch issue national credit ratings based on factors such as national debt and economic growth. For more than 70 years, the U.S. had an Aaa rating from Moody's, which signified to anyone who wanted to invest in the U.S. by buying bonds that the government was highly likely to repay that debt on time. But as of May, the U.S. government has an Aa1 rating from all three credit-rating agencies. The downgrade from Moody's is a reflection of economic problems in the U.S. — namely, increased tax cuts and spending are contributing to the growing national debt, which is now at over $36 trillion. Read more: How rising national debt can affect your finances Just like with personal credit, it becomes more expensive for governments to borrow money when their national credit rating drops. As a result of the downgrade, you may eventually see any number of these outcomes: Interest payments increase on the national debt and take up a larger portion of the national budget Cuts are made to government-supported programs Interest rates increase on new loans and credit cards Decrease in the value of the U.S. dollar For many Americans, the fiscal problems that led to the downgrade have already hit home. For example, you may have noticed higher interest rates on mortgages in recent years, or you've seen your retirement savings balance take a dip. In other words, the downgrade reflects both economic changes that have already happened and those that are anticipated to happen. If the U.S. fails to take measures to reduce the deficit, the fallout could be accelerated. Note: A rating lower than Baa1 by Moody's means the country's government debt is considered speculative, or "non-investment grade" — commonly referred to as "junk" status. Over the last 14 years, S&P, Fitch, and Moody's have all downgraded the U.S. from an Aaa to an Aa rating. Here's an overview of the three downgrades: 2011: S&P lowers the U.S.'s rating, stating that fiscal policies have become less effective and more unpredictable. 2023: Fitch downgrades the U.S. rating, citing the government's growing debt, as well as repeated standoffs related to the debt ceiling and last-minute resolutions. 2025: Moody's makes a downgrade in May 2025, stating that "federal spending has increased while tax cuts have reduced government revenues." Credit downgrades can set off a chain of events that eventually impact you as an individual. As a result of a downgrade, the government will pay higher interest rates on debt, which can increase the national deficit and, ultimately, cause more inflation. That's why it's important to be thoughtful and cautious about what you do with your money when the country's credit rating is downgraded. Instead of making impulsive moves, there are a few things you can do to prepare for the possibility of more economic instability: Make sure you're in a position to maximize your interest earnings on savings and investments. By doing so, you can minimize the effects of inflation on your finances. Here are a few ways to do that: Long-term savings: Invest in assets that are likely to earn interest or appreciate over time, such as real estate and a diverse portfolio of stocks. Mid-term savings: For money you don't need to spend for the next two years or more, look for fixed-rate assets to invest in, such as CDs and long-term Treasury bonds. Emergency savings: For funds you may need in case of emergencies, keep the money in a high-interest-earning account, such as a high-yield savings account, that you can access at any time. If you have debt with variable interest rates — meaning the rates can fluctuate according to market conditions — try to pay it off before rates increase. If you can't pay off the full balance, aim to reduce it by as much as possible. Accounts that typically have variable rates include credit cards and home equity lines of credit. If you're not sure how to tackle credit card debt and other variable-rate debt, consider using the debt avalanche method, which involves paying extra toward your debt with the highest interest rate until it's fully paid off, and then rolling your free funds to your account with the next-highest rate. Alternatively, you can consult with an NFCC-certified credit counselor to discuss strategies and programs that can help you eliminate debt.
New York Times
15-07-2025
- Business
- New York Times
Student Loan Repayments Are About to Look Very Different
The safety net for federal student loan borrowers is about to be sharply overhauled. The domestic policy bill that was signed into law recently makes radical changes to the way Americans will pay for college, and could make access to higher education more difficult. It will also fundamentally alter the way borrowers repay their debts, which can easily spiral into tens of thousands of dollars, sometimes more. Starting next summer, borrowers taking out fresh loans will have two new repayment plans to choose from, while at least a half-dozen existing programs will be extinguished, including the most affordable option, the Biden-era plan known as SAVE. The nearly eight million people in that plan will soon need to figure out their next-best option. The system is being restructured at a crucial moment in the ongoing student loan saga. Only 44 percent of the nearly 35 million borrowers who should be making payments actually are, according to calculations by Mark Kantrowitz, an expert on student loans. And nearly six million borrowers were reported to the credit bureaus as being late at the end of April, according to TransUnion, sending their credit scores plunging. The new repayment plans are unlikely to resolve those issues on their own, but they will, at the very least, give borrowers a sense of what their options are — an assurance they've gone without for more than a year. The loan system has been in a state of flux for the past six years, and borrowers have been swept up in the confusion. At the end of a 42-month pandemic-related pause on payments, the Biden administration opened the SAVE plan in August 2023. But less than a year later, Republican-led legal challenges halted the plan, and borrowers' payments were frozen. This year, a related court ruling questioned the legality of other longstanding income-driven plans, temporarily halting all applications. Now, the current repayment plan menu is being dismantled and replaced. Further complicating the situation, the overhaul will begin not long after the Education Department's staff has been cut in half as part of the Trump administration's slashing of the federal bureaucracy. Want all of The Times? Subscribe.
Yahoo
14-07-2025
- Business
- Yahoo
Don't Wait Until End of Year To Review Your Finances, Warns This Money Expert — Use This Midyear Checklist
We're more than halfway through 2025. You might be looking at your financial goals and feeling a little off target. Or maybe, you're feeling completely lost. It's not too late to change course. Chloe Moore is a Certified Financial Planner and runs the Instagram Financial Staples, which gives advice to those looking to improve their relationship with money. Trending Now: Consider This: Here are the steps Staples said to take now to help fix your finances by the end of the year. You can't repair what you don't know, so Staples' first suggestion is to review your expenses in detail. She said to look at your bank account and credit card statements from the past six months and evaluate where you might be overspending. 'Be honest with yourself about bad habits you may have developed and what adjustments you need to make to get back on track,' Staples advised. Explore More: The aspirations you had at the beginning of the year might need to shift — and that's okay! Create new goals that align with what you found in your cash flow. Staples said to think about what's coming up in the latter half of the year and plan for expenses. She also said to start making plans to pay off any debt you may have accrued. 'After you have your big list of goals, set smaller, achievable tasks that you can do each week or month to stay on track,' Staples shared. 'What gets measured gets managed,' Staples reminded her followers. She suggested using a finance app, a spreadsheet or some other way to track your financial goals' progress, and setting a regular time every week to check in with your status. Every time you achieve a goal, you're building better habits. Instead of looking at setbacks as failures, Staples said to determine how to avoid those pitfalls in the future and continue to grow. Achieving your weekly or monthly goals are worth toasting to! If you promise to set aside $20 a week and you do it all month, remember to treat yourself. It doesn't have to be extravagant, but maybe save a few dollars from your discretionary spending to reward yourself at the end of each month for the progress you've made. No matter how small a step forward you've taken, you have to recognize that you're not stepping backward. 'Developing a foundation of good habits gives you the discipline you need to weather future storms,' Staples said. More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 4 Housing Markets That Have Plummeted in Value Over the Past 5 Years 6 Popular SUVs That Aren't Worth the Cost -- and 6 Affordable Alternatives This article originally appeared on Don't Wait Until End of Year To Review Your Finances, Warns This Money Expert — Use This Midyear Checklist Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13-07-2025
- Business
- Yahoo
Centrelink issues ATO tax refund warning: ‘Repay it'
Australian taxpayers waiting for tax refunds to hit their bank accounts have been warned about one reason it might be lower than expected. Services Australia has reminded Aussies that it can use your tax refund to repay any debts owed to it. Services Australia, which is the body in charge of Centrelink, is legally obligated to recover money that's owed to it. That means it will sometimes use your tax refund to reduce the amount you owe. 'If you have a debt with us at tax time, we may use your tax refund to repay it,' Services Australia said. 'We may do this if you're not actively making repayments towards your debt or you don't have a repayment arrangement in place.' RELATED Centrelink alert for 240,000 Aussie families as some see popular payment stopped ATO tax return warning for 2 million Aussies over dangerous act Warning for working from home Aussies over common practice Services Australia said it could use your tax refund to repay your debt at tax time if you receive a Family Tax Benefit or Child Care Subsidy, you're a former customer and not making any repayments on your debt, or you have an overdue Child Support debt. It will avoid recovering debts with tax return refunds if your debt repayments have been paused due to a disaster or emergency event, or a pending formal review. Services Australia said it will check for overpayments or existing Centrelink debts when it balances your Family Tax Benefit and Child Care Subsidy. Services Australia starts balancing Family Tax Benefit in July and Child Care Subsidy in mid-August. It will then recover any overpayments or existing debts you owe before paying you any top ups, Family Tax Benefit supplements or lump sums. For people who owe child support, or have been overpaid child support, it will use a tax refund to pay any outstanding amounts directly. It has urged parents who would experience hardship to contact it on the Child Support enquiry line before they lodge their tax returns. Former Centrelink recipients who haven't made an arrangement to repay their debt will be sent a letter if money is taken from their tax refund. It will also appear on your Notice of Assessment from the ATO as a 'Credit Offset to Centrelink'. You can find out more about repaying money owed to Centrelink in to access your portfolio
The Sun
13-07-2025
- Business
- The Sun
Major update on future of iconic high street chain with 281 shops as store closures loom
A MAJOR update has been issued on the future of an iconic high street chain with 281 shops. Claire's, the popular jewellery and accessories chain, is facing mounting financial troubles that could spell disaster for its UK high street stores. 1 The retailer, which has 281 stores across Britain, is scrambling to address a looming £355million debt repayment due in December 2026. Advisers have been hired to look into ways to save the company. Restructuring specialists at Interpath are seeking investors to salvage parts of the UK business, while American advisers are considering bankruptcy protection for the chain's US operations, according to The Telegraph. The appointment of Interpath has sparked fears of widespread store closures and possible withdrawals from some countries as the company tries to cut costs. Globally, Claire's operates over 2,300 stores and is well-known for its ear-piercing services. Claire's UK arm has struggled financially, racking up £25million in losses over the past three years. In the year to March 2024, it reported a £4.7million loss, slightly better than the £5million loss the previous year, with turnover slipping to £137million. The company blames inflation, rising costs, and supply chain issues for its struggles. It has also been hit hard by US tariffs on Chinese imports, as much of its low-cost merchandise comes from China. Claire's was contacted for comment. Why are so many shops going bust? What's happening at Claire's? This isn't the first time Claire's has faced financial difficulties. The chain filed for Chapter 11 bankruptcy in the US in 2018 in a bid to restructure its debts. It emerged years later under the control of creditors, including hedge funds Elliott Management and Monarch Alternative Capital. The company is also reportedly exploring a sale of its North American and European operations, with bankers searching for potential buyers. However, there's no guarantee a sale will go ahead, and for now, Claire's UK stores remain open and trading as usual. Retail experts say Claire's is struggling to stay relevant in a competitive market. Budget-conscious shoppers now turn to online platforms like for affordable jewellery and accessories. Julie Palmer, partner at Begbies Traynor, said: "Claire's low-price offering is clearly not strong enough to win over its core customers – teens and young adults – as they now have access to a vast array of affordable and convenient products online through platforms like Amazon and Temu. "So, with fewer reasons for its customers to visit their stores, the retailer has struggled to stay relevant." Why is the retail sector struggling? The retail sector has struggled in recent years due to the onset of online shopping and lockdowns during the coronavirus pandemic. Higher inflation since 2022 has also hit shoppers' budgets while businesses have struggled with higher wage, tax and energy costs. Last month, Polish owner Pepco Group sold Poundland to US investment firm Gordon Brothers for £1 after a downturn in trading. The new owners are now asking the court for permission to close 68 stores and negotiate lower rents on others, with up to 82 more stores potentially shutting in the future. Both Hobbycraft and The Original Factory Shop are also shutting branches as part of restructuring efforts. Higher inflation since 2022 has also hit shoppers' budgets while businesses have struggled with higher wage, tax and energy costs. The Centre for Retail Research has described the sector as going through a "permacrisis" since the 2008 financial crash. Figures from the Centre also show 34 retail companies operating multiple stores stopped trading in 2024, leading to the closure of 7,537 shops. RETAIL PAIN IN 2025 The British Retail Consortium has predicted that the Treasury's hike to employer NICs will cost the retail sector £2.3billion. Research by the British Chambers of Commerce shows that more than half of companies plan to raise prices by early April. A survey of more than 4,800 firms found that 55% expect prices to increase in the next three months, up from 39% in a similar poll conducted in the latter half of 2024. Three-quarters of companies cited the cost of employing people as their primary financial pressure. The Centre for Retail Research (CRR) has also warned that around 17,350 retail sites are expected to shut down this year. It comes on the back of a tough 2024 when 13,000 shops closed their doors for good, already a 28% increase on the previous year. Professor Joshua Bamfield, director of the CRR said: "The results for 2024 show that although the outcomes for store closures overall were not as poor as in either 2020 or 2022, they are still disconcerting, with worse set to come in 2025." Professor Bamfield has also warned of a bleak outlook for 2025, predicting that as many as 202,000 jobs could be lost in the sector. "By increasing both the costs of running stores and the costs on each consumer's household it is highly likely that we will see retail job losses eclipse the height of the pandemic in 2020."
