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Avoiding Payment Shock



When you are about to go from a lower payment or no payment on your housing to a higher payment, I recommend taking some steps to avoid running into problems with payment shock.


These steps can have 3 primary benefits:

Easing Your Transition

These steps can make the transition of lower/no payments to higher payments much easier, having a positive impact on your ability to not experience late payments/missed payments when you have a higher payment required.

Expediting Debt Pay Down & Savings Boost

Boosting Your Lender's Perception

Here are the steps that I recommend:

Establish At Least 1 Free Savings Account At a Separate Institution

Ideally the new savings account would include the following elements:

  1. Free to keep open with no minimum balance or a low minimum balance.

  2. Free ACH transfers to your other accounts or another means of free transfers to other accounts.

  3. High interest rates (i.e. >5%)


If you plan on funding an account with at least $1k and never going below $1k in the account, you might like https://www.cfg.bank/personal-banking/personal-deposit-rates/ with current APY on their money market account of 5.02%.


If you won't be funding the account with at least $1k, Synchrony Bank's 4% APY isn't bad:

https://www.synchronybank.com/banking/high-yield-savings/?UISCode=0000000

How Much to Fund Savings Account

How to Get Funds to Disburse Automatically to Your New Account with Your Paycheck

Separate Accounts for Other Recurring Expenses


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