To a college graduate, the call to "consolidate" is almost as familiar as her school fighting song. But consolidating student loans might not be as warranted as it was in years past-especially in light of recent rate changes.
Most college students spend a great deal of time with advisors. They receive guidance on class work and their various areas of study. The smart student should also seek out guidance on financial matters- especially if she has student loans.
For the last several years, students have been told to consolidate their loans before a July 2007 rate hike took place. Now that the deadline has passed, many factors need to be considered before initiating a loan consolidation.
Rate matters
The first thing that you want to do is compare the rates of your current loan with today's market. When you consolidate your student loans, a weighted average of all the interest rates of the loans is taken and rounded up to the nearest 0.125 percent.
To find out what your new monthly payment would look like after consolidation, meet with a lending official and/or do it yourself with an online loan calculator. You may discover that the new rates don't justify a refinance. You'll also want to see if the rates on your current loans are fixed. If they are, it may not make sense to refinance everything just so that you have the convenience of one loan payment. If you're uncertain about the terms on your loan, review your portfolio with a lender. Many will be happy to help you, free of charge.
Act quickly for student debt consolidation
Consolidation works most effectively if the transaction occurs within six months of graduation. That stretch of time is considered a grace period for students-they receive a price break if they start repaying their loans during that time. When the grace period ends, the interest rate on the loan increases by nearly 1 percent.
Unfortunately, if you choose the rate discount, you'll have to start repaying the student loans almost immediately after graduation. However, there are lenders willing to hold the package until the end of the grace period. Check with your bank to see if they have the same policy.
Long-term costs vs. consolidation
Ultimately, you'll need to determine your top priority. If you need low monthly payments on your loans, you may want to consider refinancing and stretching out your loan terms. However, if you'd like to be rid of a monumental debt as quickly as possible, you can opt to keep your loans at their current rate and pay down your principal.
As any academic advisor will tell a student, there are many variables to consider when making a decision. When it comes to student loans, take a good look at your current financial situation and consider your short-term job prospects. Don't jump at the easy money that a consolidation can bring. The best advice dictates that you understand all the factors at play before you make your consolidation decision.
Saturday, May 10, 2008
When Not to Consolidate Student Loan Debt
Four Ideas for Student Loan Consolidation
To consolidate or not to consolidate? Hamlet might have asked this question if he had graduated from college with student loans. If you're considering a loan consolidation, you'd be wise to follow a few simple tips.
The great thing about graduating from college is that you don't have to worry about homework hanging over your head. On the flip side of the coin, you may have something far worse to be concerned about-a student loan payment.
Many graduates consolidate their loans to lessen the pain of repayment. But no financial transaction should be taken lightly. Not only must you carefully analyze your current situation and goals, you need to consider what types of student loans are on the market. Here are some student loan consolidation tips to keep in mind.
1. Shop until your payment drops
You don't have to stick with the same lender if you're going to consolidate your loans. Shop around and look at different opportunities. Rates may not vary, but you could find that different lenders offer different discounts (see next tip). You may also find that the lender that you're currently with has included extra charges that you don't need to pay. It's always wise to comparison shop, no matter what your purchase.
2. Go discount shopping
As you're shopping for the best consolidation package, ask about discounts. Lenders today offer them for a variety of items, including everything from making a payment on time, to using automatic withdrawals from your checking account. Lenders highly value graduates who can make their student loan payments on time, primarily because so few of them do. Discounts for on-time bill paying might include reducing your payment by one full percentage point if you can rack up a 36-month consecutive payment streak.
3. Tame the terms
By extending the repayment term of your loan, you can lower your monthly payment. For most graduates struggling in an entry-level job, that's a very enticing prospect. But don't judge a payment book by its cover-an extended loan term can be as frightening as term papers. Those lower payments don't come cheap-you're going to get whacked long-term by higher interest costs. Ask your lender to tell you the difference in long-term interest costs for loans with different repayment terms. The results will startle you.
4. Do a reality check
Most importantly, don't choose a lower loan payment just so that you can buy a really cool car. Unless you've landed an exceptionally high-paying job out of college, you'll probably have to choose more of a utilitarian vehicle until you can afford a nicer ride.
As a graduate, it's great to be free from the constraints of endless exams and required reading. Unfortunately, the financial equivalent to academic pain is waiting in the wings. Repaying a student loan will be a concern of yours for a long time to come. Make sure that the debt isn't with you one day longer than necessary by carefully shopping for the right consolidation loan.
Colleges recommending lenders to students must adhere to stricter guidelines
By Jodi S. Cohen , Chicago Tribune
CHICAGO - Beginning next school year, colleges that recommend specific lenders to their students must list at least three unaffiliated companies and disclose how they were chosen - reforms prompted by a wide-ranging investigation of student loans that has tripped up universities in Illinois and across the nation.
A final version of the new U.S. Department of Education regulations, which will be published in early November and go into effect in July, also will make it clear that college administrators cannot accept gifts, payments or other perks from lenders eager to get business at the campuses, Education Secretary Margaret Spellings and other officials told reporters during a conference call Wednesday.
"We encourage participants to start adopting these practices sooner rather than later," said Sara Martinez Tucker, Education Dept. undersecretary.
The new rules, similar to those pending in Congress, come toward the end of a year marked by scandals in the student loan industry. The Education Department has come under pressure to beef up its oversight, after numerous revelations of cozy relationships between colleges and lenders.
State and federal investigations found instances where financial aid officials held stock in companies on their universities' preferred-lender lists. In other cases, colleges and universities were receiving fees from lenders based on the number of students' loans.
The new rules for the first time mandate that colleges with preferred lender lists include a minimum number of companies. Critics have said that colleges used the lists to steer students to specific lenders, while supporters of such lists said they protected students by pointing them to reputable companies.
Campuses could be fined or barred from participating in the federal lending program, known as FFEL, if they violate the department's student loan policies.
Earlier this year, the Education Department sent warning letters to 921 colleges and universities where 80 percent of the federal student loan volume in 2006-2007 was handled by one lender. The letters reminded officials not to limit student choice in picking a lender.
Education Department officials said Wednesday that they sent 55 of those schools another letter on Oct. 24 requesting more information about their arrangements with lenders. At 48 of those schools, where federal loan volume exceeded $10 million a year, 95 percent of the loans went to one lender.
The letters went to schools where students had more than $10 million in federal loans last year. The Education Department did not provide a list of the schools.
The letters, also sent to 23 lenders, request copies of any agreements between colleges and lenders; information about cash, stock or other perks provided to college officials or the institutions; and the names of any college employees who served on lender advisory boards.
"We are not accusing them of anything illegal at this point in time," Tucker said.
(c) 2007, Chicago Tribune.
Visit the Chicago Tribune on the Internet at http://www.chicagotribune.com/
Distributed by McClatchy-Tribune Information Services.
Friday, May 9, 2008
How a Debt Consolidation Loan Works .
A debt consolidation loan is essentially a home equity loan or refinance mortgage, which is used specifically for consolidating high interest debt into a lower fixed rate monthly payment. Fixed rate debt consolidation loans are amortized to be paid off at the end of the term, eliminating the debts.
It's possible to save more money by converting high interest rates, and daily compounded interest on credit cards, and other debt, into a lower rate loan with simple annual interest. More savings may come from tax deductible interest when a loan is placed on an owner occupied residence.
$40,000 of debt at an average credit card interest rate of 15%, might have a payment of about $560 per month, when amortized over a 15 year term. A debt consolidation loan term at 8% would have a payment of about $382 over the same time period, which could save $178 per month. If your goal is pay off your debt as soon as possible, the loan term could be reduced to about 8 years by applying the monthly savings to the debt consolidation loan payments.
In addition to reducing your rates, eliminating compound interest can add to your total monthly savings. In this example, you may save another $50 per month by converting to a simple interest debt consolidation loan, instead of making minimum payments on credit cards. It's possible that daily compounded interest on credit cards can accumulate to more than the minimum monthly payments, which can result in paying interest on the interest accumulating on the account. Consolidating debt into a fixed payment schedule can help eliminate the never-ending minimum payment cycle.
Financing Your Home Improvements.
A home improvement loan can provide tax deductible money for either a complete remodel of your home, or just for specific improvements, which can increase the value of your property based on the projects, as well as functionality.
The way it usually works is essentially a home equity loan, or second mortgage is placed on an owner-occupied home, and the lender pays the entire amount of the loan at closing, which can then be used to pay for projects as needed. Home improvement loans are used for improving existing residential homes, which is different than construction loans for building new structures.
Lenders normally do not place any restrictions on your home improvement projects, as long as they conform to your local building requirements. You have the choice of completing the work yourself, or using a home contractor.
If you are remodeling or doing major home improvements that require a larger loan amount, long term fixed rate payments can make your loan easier to pay off over an extended period of time.
If you only want to borrow relatively small amounts, and pay off the loan quickly, a line of credit can provide more flexibility with the convenience of withdrawing money in variable amounts as needed. However, a home improvement loan with a variable rate has the potential of increasing.
Terms for home improvement loans can range from 5 to 30 years. There is usually no equity required in order to qualify for new financing, with some lenders offering loans as high as 100% loan to value.
When a loan for home improvement is secured by a primary residence, the interest portion of the payments may be deductible for $100,000 or up to 100% of the value. Check with an advisor.
Credit Unions Offer Themselves as Partial Solution to Looming Student Loan Crisis
In the last six months alone, since legislators eliminated over $21 billion in subsidies to student loan lenders in the Federal Family Education Loan Program, at least 44 FFELP lenders have stopped originating federal student loans.
This exodus of lenders from the federal student loan program, combined with the current credit and liquidity crunch resulting from an epidemic of defaulted mortgages, may leave many college students scrambling for money for school this fall.
In an effort to help avoid a student loan crisis before it starts, a group of credit unions serving students in California, Texas, and Wisconsin is lobbying for federal subsidies that would allow credit unions to provide significantly more loan capital for students.
Last September, federal legislation set two lender subsidy rates on federally guaranteed student loans, one rate that applies to for-profit lenders and a second for state-chartered nonprofit agencies, explains Paul Basken of The Chronicle of Higher Education.
When those rates were set, credit unions, which are essentially nonprofit banks, were left out of the picture, neither subject to the for-profit lender rate nor eligible for the nonprofit rate which is guaranteed only to state-chartered lenders.
Now, writes Basken, as more for-profit bank and nonbank lenders abandon the FFEL program each week, the credit unions seek legislation that would make them eligible for the nonprofit subsidy rate (“Credit Unions Will Lobby Congress for Loan-Subsidy Benefits Accorded to Nonprofit Lenders,” April 4, 2008).
A Viable Source for More Student Loans?
Credit unions currently provide less than 1 percent of all FFELP loans, according to Mark Kantrowitz, publisher of FinAid.org, a financial aid website.
However, credit unions could offer significantly more volume at some institutions, Michael K. Kim, vice president for student services at the USC Credit Union, told The Chronicle.
The USC Credit Union provided 30 percent of all federal student loans at the University of Southern California last year, and Kim believes the USC Credit Union could double its student loan lending to $200 million to provide financing for any students unable to find another lender.
Although Kim thinks the credit union might find a way to double its student loans even without the nonprofit subsidy, the nonprofit rate would help.
One of the key selling points in the credit unions’ lobbying efforts, Basken writes, may be the fact that credit unions have a ready pool of capital — their customer deposits — from which to lend. In contrast, nonbank lenders, who don’t hold funding capital, must find external funding sources for their student loans and thus have been more vulnerable to the liquidity crisis that’s followed the fallout in mortgage lending.
Joining Kim’s Southern California credit-union group in lobbying Congress next week for the nonprofit subsidy rate are the UW Credit Union, serving universities in Wisconsin, and the University Federal Credit Union, which serves more than 100 colleges and employers in central Texas.
More, but Still Not Enough
An advisor from Senator Edward Kennedy’s office recently expressed support for the credit unions’ request that their proposal for inclusion in the nonprofit subsidy rate be added to the legislation for reauthorization of the Higher Education Act currently before Congress.
Kantrowitz believes that the credit unions’ subsidy proposal is reasonable since they’re nonprofit entities whose earnings don’t benefit outside investors.
On the other hand, he says, the additional loan volume credit unions could provide for the federally backed student loan program will likely not be enough to staunch the tide of students that may potentially be unable to find lenders this fall.
Kantrowitz further points out that among the 100 largest lenders in the federal student loan program, only three are credit unions.
“If credit unions can double their volume, that’s a 5-percent solution,” Kantrowitz says. “It could be part of the solution, but not even close to the entire solution.”
Availability of Federal Perkins Student Loans Is Dwindling
A growing shortage of funds in the federal Perkins student loan program could affect as many as 50,000 students in the upcoming academic year, according to a recent article in U.S. News & World Report.
Students who would have been eligible to receive a low-cost Perkins loan last year may not be offered one this year due to the limited availability of funds.
And the students who do manage to get a Perkins loan will likely see the size of their award shrink, writes U.S. News reporter Kim Clark (“Why Perkins Loans Are Harder to Get This Year,” March 25, 2008).
Schools Struggle to Replenish Limited Perkins Funding
Federal Perkins loans, which carry a fixed interest rate of 5 percent and are subsidized by the federal government, are reserved for undergraduate and graduate students who are considered to be “exceptionally needy.”
Financial aid officials at the nation’s colleges and universities are attributing the scarcity of Perkins loans to a combination of factors: the failure of federal funding for the Perkins program to keep pace with what has been a steady increase in college enrollment, and Perkins borrowers who are taking longer to repay their loans.
Schools are each assigned a fixed pool of Perkins funds from which to lend. Unlike other federal college loans, which are paid back directly to the government or to lenders in the federal education loan program, Perkins funds are payable to the school, with schools dependent on that repayment money to generate new Perkins loans for incoming and returning students.
The longer alumni take to repay their Perkins loans, the less money is immediately available to current students eligible for these loans.
Many Perkins borrowers, faced with rising interest rates over the last few years on everything from private student loans and federal consolidation loans to credit cards and home loans, have focused on repaying their higher-interest student loans and other debt, steering away from paying off their Perkins loan early and opting instead to take the full 10-year Perkins repayment term.
Adding to the problem, says Rick Shipman, director of Michigan State University’s financial aid office, is the fact that some students are able to discharge their Perkins loan if they go into the military or teaching.
“Their debts are forgiven by the federal government but the federal government doesn’t necessarily reimburse the school,” explains Shipman (“Credit Crunch Alarms Student Loan Lenders,” MSU State News, March 26, 2008).
Colleges and Universities Scaling Back on Perkins Awards
With less Perkins repayment money coming in and no government funds being added to expand the federal Perkins pool, schools are being forced to scale back their Perkins awards.
At Ohio University, Perkins funding is so limited, Clark writes, that officials anticipate a 12 percent decline in the number of Perkins student loans the school will be able to issue this fall.
Also expecting to make cuts to its Perkins student loans is the University of Maryland at College Park, which has seen its Perkins funding shrink this year to just half of the $2.3 million it had available last year.
At Michigan State University, where the Perkins pool has dropped from $7 million to $5 million in the last year alone, financial aid officials plan to eliminate over 2,000 Perkins awards in the fall and cut the average award from $1,200 to $1,000.
MSU expects to award about 4,400 Perkins loans to undergraduates in the upcoming academic year, down from the 6,600 it issued in 2007–08. The school already eliminated Perkins loans for its graduate students last year.
Bad Credit Mortgage Loans: Finding a Second Chance.
Depending on the severity of your bad credit, and how long since you've had bad credit, you may still qualify for a mortgage loan. Before shopping for a bad credit loan, and certainly before shopping for a home, it's a good idea to understand how mortgage lenders approve home loans.
You're Done with Bad Credit: Second Chances are Available!
Don't despair just because you have made some late payments, or even missed a payment on a bill here and there. Mortgage lenders do make bad credit mortgage loans, but knowing in advance what they look for can help you decide when and how to shop for a bad credit mortgage.
Getting a Bad Credit Mortgage: What Happened Then Impacts What Happens Now
Reviewing your credit report can help track your credit history. Typically, a credit report shows how much you owe now, how much you've owed in the past, and how you pay each debt. The information compiled on your credit report is used in calculating your credit score. Consumers can order credit reports once a year at no cost. Credit scores are also available for fee. It's important to check your credit report and ensure that there are no errors. You can also address any negative information contained in your report. If you have filed bankruptcy, had a car repossessed, or have had a mortgage foreclosure, these items can stay on your credit report for seven to ten years. Typically, mortgage lenders can work with you if a couple of years have passed since the event, but you may have to come up with a larger down payment or pay higher interest rates. Mortgage lenders can help you find a bad credit mortgage appropriate to your needs.
Bad Credit Mortgage Loans: Finding a Second Chance
By Karen Lawson Mortgage Credit Problems Columnist
About the AuthorKaren Lawson is a freelance writer with more than 15 years of experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.
For Learn About Mortgage Loans: Information You Need Before Signing
It's important to ask certain questions of mortgage lenders before accepting a home loan. If you were shopping for a car and the dealer offered you a car that was concealed from view, would you buy it? "Kicking the tires" of prospective mortgage loans is even more important and can help avoid unwelcome surprises.
Mortgage Loans 101: Considering More than Payment Amounts
People often focus on getting mortgage approval, especially if they've made an offer on a home and have limited time to shop. Under these circumstances, it's tempting to say "yes" to the first mortgage option offered. This can be disastrous if "yes" is solely based on the initial payment amount.แสดง
ส่วนIdeally, it's best to shop for a mortgage before looking at homes, especially for a bad credit loan. This allows time for considering several mortgage options without pressure. Here's what you'll need to know before accepting a mortgage loan offer.
How long will the initial payment amount last?
If payments will change, how much can they increase, and how often?
What is the APR for this loan? (APR stands for annual percentage rate, and it refers to the cost of financing including interest and lender charges expressed as an annual percentage of the original mortgage amount.)
How much will I have to pay for taxes and insurance?
How much is my mortgage amount, and can it increase? Borrowers may focus on low initial payments without realizing that unpaid amounts can be added to the original mortgage amount.
It's also a good idea to know your credit scores and do some research on interest rates available to those with bad credit. Knowing what to expect when you contact mortgage lenders can help you get a better deal.
Learn About Mortgage Loans: Information You Need Before
Signing
By Karen LawsonMortgage Credit Problems Columnist
About the AuthorKaren Lawson is a freelance writer with extensive experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.
The Bad Credit Mortgage Loans: Learning from Past Mistakes
Having bad credit can be embarrassing and costly, but it doesn't mean that owning a home is out of reach. Creditors, including mortgage lenders, may assess additional financing costs due to their perception of higher risk associated with bad credit loans. Prospective home buyers and homeowners looking to refinance existing mortgage loans should understand some basics about mortgage loans and financing charges. This can help save money, or avoid unanticipated mortgage terms such as increasing interest rates and rising payments.
Bad Credit: Misunderstandings Can Damage Credit
Credit can be damaged for a variety of reasons, but not understanding the terms of a credit contract can often lead to disaster. For example, signing for an adjustable rate mortgage (ARM) that has no limits on how payments can adjust can lead to trouble if borrowers don't understand that their payments can increase. When considering bad credit mortgage loans, potential borrowers need to know:แสดง
ส่วน
The interest rate
If the rate is fixed for the life of the loan or if it changes
When the rate can change (when the initial low-rate "teaser" period expires)
What the maximum rate can be at the first adjustment and each subsequent adjustment (rate cap)
What the maximum payment can be at the first adjustment and each subsequent adjustment (payment cap)
What the maximum rate and payment can be over the life of the loan (lifetime cap)
If there is a prepayment penalty and how it is applied
If the answers to these questions are not apparent, don't be afraid to ask! Mortgage documents represent a binding contract to repay the mortgage according to its terms. Making payments on a bad credit mortgage can help rebuild credit, but be sure that you don't commit to a mortgage loan and payment that you may be unable to honor. It's important to plan carefully to ensure that any mortgage chosen is affordable and appropriate to individual financial situations.
Your mortgage lender should work with you to find a loan that is most appropriate -- don't be afraid to speak to several until you find one you are comfortable dealing with.
The Bad Credit Mortgage Loans: Learning from Past Mistakes
By Karen LawsonMortgage Credit Problems Columnist
About the AuthorKaren Lawson is a freelance writer with extensive experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.
How to Refinance: What Loan is Best When You Have Bad Credit?
You've found that refinancing might be a good option for you, and you've started shopping for lenders. But what kind of loan should you look for? If you have bad credit, your needs are different from other people and you will be choosing different loans.Borrowers with poor credit have different objectives than borrowers with good credit. A borrower with good credit and a stable situation usually wants to lock in a low rate and keep the loan for some time. But a bad credit mortgage doesn't have the best rate, so you're not going to want to be stuck with it forever. แสดง
Repair Bad Credit with a Good MortgageSome mortgages, like the Fannie Mae and Freddie Mac alternative lending programs, work for borrowers with bad but not terrible credit. Your rate actually improves as you develop a good payment history, and your good behavior is reported to credit bureaus. Whatever program you choose, ask if they report your payment history to credit bureaus. You don't want to carefully rebuild your credit only to have no one see it!
Treat Your Bad Credit Problem with a Band-Aid MortgageIf you refinance into better terms and perhaps consolidate debt, you need to concentrate on improving your credit and finances over the next two years. A bad credit mortgage is not a good long term solution. Avoid really long term fixed rates and prepayment penalties longer than two or three years. An ARM fixed for two or three years should get you on your feet. Improve your credit and move to a good credit mortgage in two or three years. Treat your bad credit mortgage loan as a temporary solution to a problem, repair your credit, and move on. Don't let bad credit and bad credit mortgages become a way of life for you.
How to Refinance: What Loan is Best When You Have Bad Credit?
By Gina PogolMortgage Credit Problems Columnist
About the AuthorGina Pogol works as a writer and editor for an online media company. She has a BS in financial management, and was formerly a business credit systems consultant with Experien and a mortgage loan consultant.
Bad Credit Mortgages: Make Teaser Rates Work for You.
When you have bad credit, expect to pay higher mortgage interest rates when buying or refinancing your home. The introductory or "teaser" rates offered by many subprime lenders can help you afford your home and restore your credit rating.
Teaser Rates Can Hurt Borrowers with Bad Credit
Many mortgage loans for borrowers with bad credit have 2 stages. The first phase is an introductory period of 2 or 3 years. During this time the rate is fixed and is significantly lower than 30 year fixed rates. This rate has been nicknamed a "teaser" because lenders use it to make the loan more attractive to prospective borrowers. In the second phase, the loan converts to an adjustable rate mortgage (ARM) and the rates and payments can skyrocket. Unprepared or poorly counseled borrowers could be in danger of losing their homes when this happens.
Teasers Can Make Homes Affordable
Loans with teaser rates can help you improve your bad credit. In fact they are sometimes called "band-aid loans" because they are supposed to be temporary. The lower rate gives you a chance to buy a home that would otherwise be unaffordable. The mortgage also allows you to build a positive credit history by paying it on time. And finally, it provides a two-or-three year window to clean up your credit. You should be able to refinance to a lower rate before the introductory period ends and the rate goes up.
How to Shop for a Bad Credit Mortgage
Check with several lenders for rates and fees because bad credit mortgages are often underwritten and priced on a case-by-case basis. Make sure that you will be able to refinance without a prepayment penalty before the loan converts to an ARM. By using the first 2 or 3 years to change your behavior and fix your credit, you can have a happy ending. Your reward will come when you refinance to a better loan.
Bad Credit Mortgages: Make Teaser Rates Work for You.
By Gina PogolMortgage Credit Problems Columnist
About the AuthorGina Pogol writes for an online media company and specializes in finance and mortgage issues. She formerly worked as a systems consultant with Experian and a mortgage consultant with Centex. She has a BS in financial management from the University of Nevada. About the AuthorGina Pogol works as a writer and editor for an online media company. She has a BS in financial management, was formerly a business credit systems consultant with Experian and a mortgage loan consultant.
Student loans and student loan consolidation for law school and legal students and graduates .
The verdict is in…
... and whether you are a law or legal professional student or graduate, the time is now to get the money you need to pay for school or take control of the student loans you already have.
Fundamental can help you with both. If you are a student, we can help you find a low cost and reflexible loan to pay for tuition and other school related expenses. And if you are a graduate, we can help you consolidate your student loans and reduce your monthly payments up to 50%.
See for yourself how much money you can save on your student loans. Call and find out how much in just a few minutes. Then apply in as little as 15 minutes and you are on your way.
Graduates can lower monthly payments on their student loans up to 50% each month.
Consolidating your student loans can often lower you monthly payments by extending your repayment period up to 30 years, depending on the outstanding balance of your student debt. That means you will have more money each month to properly launch your law career and meet other important household expenses.
Our friendly and knowledgeable Loan Consultants will guide you to an understanding of the available loan, repayment and benefit options. Best of all, our fast and secure online application process makes getting the process started as easy as can be. You will be done in as little as 15 minutes.
Yes – the verdict is in! Fundamental can save you money on your Student Loans!
Source :fundamental.com
Thursday, May 8, 2008
Refinance Home Loan Offers
When refinancing, first consider how long you might be keeping your home, because the overall amount of savings from your mortgage can vary depending on the specific refinance home loan program, and the associated rates and costs.
For example, a good way to save money if you plan to stay in your home for a short time, is to use a zero point, or a zero cost refinance loan, because if you move or refinance your home again later, you're not wasting any money. Another option is a 3 year, or 5 year mortgage refinance with a lower initial rate that is fixed. Also, see FHA loans if you have a high loan to value, or low credit scores.
Other short term refinancing includes the 6 month, or 1 year ARM. To attract borrowers, lenders often provide adjustable refinance rates that start lower than a fixed rate mortgage. Every 6 months or 1 year, the rate is adjusted based on the index plus the margin, and is subject to periodic and lifetime rate caps. The index is usually based on the 1 year T-Bill, Cost of Funds, Treasury Average, or LIBOR. The margin is a fixed number set by the lender, which can range from 2.25 to 3.00.
Refinancing to a 30 year fixed rate home loan can be a safe bet, however, if your goal is to keep your house until it is free and clear, you may want to consider a 15 year fixed refinance loan. The interest rate is a little lower, and the payments are higher, but the principal reduction is accelerated, so you can drastically reduce the total amount of interest paid over the life of the mortgage.
For example, the monthly payment for a $200,000 refinance home loan, for a 15 year term would be almost $500 per month more than a 30 year term, but it would also save about $128,000 in interest payments. Technically, you could achieve similar results on a 30 year mortgage by sending an additional amount each month to be applied to the principal balance, if you have the discipline.
Bank of America Backs Out of Private Student Loan Business
On April 17, Bank of America Corp. notified student-loan packager First Marblehead Corp. that it would no longer offer private student loans, focusing instead on providing federal student loans. Bank of America’s announcement comes amid increasing unsteadiness in the federal student loan market, where nearly 50 non-government lenders in the last six months have suspended their federal student loan programs.
Bank of America exercised its right to terminate its agreement with First Marblehead after The Education Resources Institute, the Boston-based nonprofit that guaranteed the loans packaged by First Marblehead, voluntarily filed for Chapter 11 bankruptcy protection on April 7, 2008.
Bank of America’s decision delivered yet another financial blow to First Marblehead, whose shares have already been on a downward spiral over the past few weeks, tumbling 37 percent on April 8 alone, the day after TERI filed its bankruptcy petition.
Shares in First Marblehead fell another 17 percent to $3.37 on the heels of Bank of America’s announcement, with the stock down nearly 91 percent over the past year. The loans originated by Bank of America accounted for about 15 percent of First Marblehead’s total revenue for the 2007 fiscal year, according to a Boston Business Journal article (“First Marblehead Loses Major Customer, Revenue Source,” April 18, 2008).
Kentucky Lender Puts Brakes on Student Loans to New Borrowers
Citing ongoing fallout from the national capital market crisis, Kentucky officials announced the state’s student loan agency will stop making student loans to first-time borrowers beginning May 1 until it can secure additional financing, according to an article by Nancy C. Rodriguez in the The Courier-Journal (“State to Suspend Student Loans to First-Time Borrowers,” April 18, 2008).
The Kentucky Higher Education Student Loan Corp., also known as The Student Loan People, will continue to make student loans for its returning borrowers based on the availability of funds.
In the meantime, the student loan company has asked the U.S. Treasury to allow the Federal Financing Bank to temporarily help the state fund new student loans until confidence in the market is restored.
A few months ago, the state also announced it would be phasing out three loan-forgiveness programs for health care, education, and public prosecutors due to federal cutbacks and overall market instability.
Kennedy to Colleges: Have Back-Up Plan for Students
In a letter sent to the American Council on Education on April 15, Sen. Edward Kennedy, D-Mass., the chairman of the Senate Education Committee, urged colleges to sign up for the Department of Education’s Federal Direct Loan Program as a preventive measure against the potential funding inadequacies within the Federal Family Education Loan Program.
His recommendation to colleges and universities to enroll in the direct-lending program as a backup option for student loan funding is yet another one of Kennedy’s attempts to help protect students against a federal funding nightmare this fall.
Kennedy has also introduced the Strengthening Student Aid Act of 2008 into the Senate that would, in part, allow the federal government to inject liquidity into the student loan market and enable the Department of Education to purchase FFELP loans from failing lenders.
Kennedy’s efforts to help secure the federal student loan sector come at a time when almost 50 FFELP lenders have suspended their federal student loan programs in recent months, including 21 of the top originators of federal student loans and five of the largest holders of student loan portfolios, according to FinAid.org.
Several schools had already made the move to the Direct Loan Program before Kennedy sent his letter to the ACE, including Pennsylvania State University, which, at $276 million, has a substantial federal student loan volume. Secretary of Education Margaret Spellings has assured schools that the Education Department is equipped to handle double the volume within the Direct Loan Program, if necessary.
Consolidate Student Loan
Student Loan Consolidation, also called a Student Consolidation Loan, combines several student or parent loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. Consolidation loans are available for most federal loans, including FFELP (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. Some lenders offer consolidation loans for private loans as well.
How It Works
Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. (10 years for less than $7,500; 12 years for $7,500 to $10,000; 15 years for $10,000 to $20,000; 20 years for $20,000 to $40,000; 25 years for $40,000 to $60,000; and 30 years for $60,000 and above.) The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid is increased.
In certain circumstances (for example, when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements), a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years. In effect, the shorter-term loan is being extended to 10 years. The total amount of interest paid will increase unless you continue to make the same monthly payment as before, in which case the total amount of interest paid will decrease.
The interest rate on consolidation loans is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.
If a student consolidates their loans before they enter repayment, the interest rate used is the lower in-school interest rate. Thus, although the rounding up of the weighted average can potentially cost the student as much as 0.12%, a student who consolidates before entering repayment can save as much as 0.6%, a substantial net savings. (The in-school interest rate is 1.7% plus the 91-day treasury bill rate from the last auction in May. During repayment, the interest rate is the 91-day T-bill rate plus 2.3%.) This loophole has been confirmed by an excerpt from the Federal Register and direct correspondence with the US Department of Education. Additional details can be found in the interest rate loophole section.
Some graduate students have found it necessary to consolidate their educational loans when applying for a mortgage on a house.
To find out more about Student Loan Consolidation, check with your lender.
Alternatives
Consolidation simplifies the repayment process but does involve a slight increase in the interest rate. Students who are having trouble making their payments should consider some of the alternate repayment terms provided for federal loans. Income contingent payments, for example, are adjusted to compensate for a lower monthly income. Graduated repayment provides lower payments during the first two years after graduation. Extended repayment allows you to extend the term of the loan without consolidation. Although each of these options increases the total amount of interest paid, the increase is less than that caused by consolidation.
Bad Credit Loans .Get Money And Solve Your Cash Issues
When the problems are numerous, friends are few. These words are very apt when it comes to the situation of bad credit. Fulfilling your cash needs when having a bad credit history, it may be difficult to get the support you want. Getting external help will still suit you as the money is available without any hassle through bad credit loans
The borrowers who have a credit score which is lower than 580 in the FICO report may be suffering from this problem due to various factors. It can be arrears, defaults, missed repayments or CCJs that have caused this problem. But the borrowers still deserve a chance to avail these loans for their needs.Through these loans, the borrowers can choose whichever option that they like out of the secured and the unsecured form, according to suitability. The loan form also depends upon the ability of the borrower to pledge collateral with the lender for the money. If a bigger amount is required by the borrowers, they can take up the secured form by pledging an asset with the lenders. Amounts can be borrowed within the range of £5000-£75000 for a term of 5-25 years. The home, car or any asset of the borrower can be pledged as collateral.Borrowers who need smaller amount can also take up money and that too without pledging any assets. This is possible through unsecured form of these loans. Money that is obtainable by the borrowers lies in the range of £1000-£25000 and has to be repaid in a term of 6 months to 10 years. Tenants and non-homeowners can also take up these loans for their needs easily.Adverse credit history of borrowers may entail a higher rate of interest. But with the help of online research and comparison, the borrowers can take up low rate deals with the help of comparison of the loan quotes easily.Bad credit loans are a great opportunity for the borrowers to avail money at the most needful times. It is a great respite for borrowers stuck in bad credit.About The AuthorSimon Tauffel has been associated with Bad Credit Unsecured Personal Loans. To find more about Bad Credit Loans, Unsecured Loans, Personal Loans, Unsecured Personal Loans, Bad credit unsecured loans
Wednesday, May 7, 2008
How Does a Home Equity Loan Work?
Fixed rate, simple interest home equity loans, can be secured by a first or second lien on the title deed of a residential home. The amount of home equity that is available for a loan is determined by the difference between the appraised value of the property, and the balance on the first mortgage.
With a fixed rate home equity loan, the lender makes a one-time payment of the full amount that is borrowed, which is paid to you at the closing of the loan process. If you have an existing second mortgage, line of credit, or equity loan on your home, it will need to be paid off with the proceeds of your new loan, so be sure to request a sufficient amount of money to include the existing loan.
The available loan programs can vary, and the maximum loan to value, depending on the specific lender. Other options can include a zero cost loan, or loans for borrowers with bad credit, which usually require more equity. Home equity rates can vary depending on risk factors such as, credit scores, the amount of the loan, and the loan to value.
Tax deductible home equity loan interest provides an additional incentive to pay off high interest debts, make home improvements, or take cash out. When a loan is secured by a lien on your primary home, the interest payments may be tax deductible within allowed limitations, which can be the lesser of $100,000 or a maximum 100% of the home value.
Loan terms can range from 10, 15, 20, or 30 years. A longer term provides a lower monthly payment, but also means you will pay more interest over the life of the loan. For example, the payment on $100,000 for 30 years may be about $200 less per month than a 15 year term, however, the interest charges could be more than double, if paid over the full 30 year term.
Tufts University to Help Graduates in Public-Service Repay Student Loans
Under a new student loan repayment program offered by Tufts University, graduates and undergraduates from the school who pursue jobs in public service could have a portion of their student loans forgiven.
Tufts alumni from any graduating class who choose or have chosen to work for a nonprofit or public-sector employer following graduation may be eligible for the program, according to an article by The Chronicle of Higher Education writer Elizabeth Farrell (“Tufts Offers Loan Relief to Public-Service-Minded Students and Alumni,” April 23, 2008).
Tufts officials tout the university-wide program as the nation’s first debt relief plan to include all students who graduate from a particular school, Farrell wrote.
The total loan-repayment-assistance award a Tufts graduate could receive through the program is dependent on the graduate’s income level and the remaining balance of his or her student loan debt.
University officials expect to grant the school’s first loan-forgiveness awards in December. Initial funding for the program includes a $100 million gift from Tufts graduate, and eBay founder, Pierre Omidyar and $500,000 from the Omidyar-Tufts Microfinance Fund.
Arkansas Offers State Student Loan Agency $80M Line of Credit
The Arkansas state student loan authority has been tentatively approved for an $80 million loan after an announcement that it may not be able to continue issuing student loans without financial assistance.
The state board of finance, the investment arm of the state treasurer’s office, unanimously approved the line of credit to the Arkansas Student Loan Authority, whose ability to offer student loans has been severely compromised by the nation’s ailing economy, according to an Associated Press article (“Arkansas Offers $80M to Help Student Loan Agency,” April 24, 2008).
At a meeting next month, the five-member board will vote on the final terms and conditions of the loan, which will be issued from state treasury funds that would normally be invested in banks.
Mark Conine, the authority's chief financial officer, told the Associated Press the money would solely be used to issue student loans. The authority issued $70 million in new loans last year.
Tuesday, May 6, 2008
Bank of America Pledges Help to Troubled Owners.
With the takeover of home-loan giant Countrywide Financial Corp imminent, the Bank of America took time off its round table negotiations to promise help to the troubled 265,000 borrowers struggling to keep their homes over the next two years by refinancing or modifying at least $40 billion in mortgages.
Bank of America also plans to double its community development lending, which focuses on affordable housing, small businesses and people in low-income and minority neighborhoods, to $1.5 trillion during 10 years, said Liam E. McGee. "It's very much our intent to make mortgages available to the undeserved. But we're going to make sure that people who get loans from us repay them and stay in their homes."
According to reports from The Times, the nation's largest retail bank also plans to donate $2 billion to charity over the coming decade, a 33 percent increase from its current level.
McGee is expected to unveil the commitments Monday while testifying at a Federal Reserve hearing on the bank's plan to buy Countrywide, the nation's largest mortgage lender, for $4 billion in stock.
Bank of America Pledges Help to Troubled Owners
By: MortgageLoan.com
Student Loan Consolidation Can Help.
Today's career minded students can get help with the burden of having several student loans. One can focus on their chosen career, instead of losing sleep over paying several monthly student loan payments. Student loan consolidation can be the solution with several advantages.
How Student Loan Consolidation Works
Here is typically how a student consolidation loan works. When a student first applied for several loans from several different agencies and student loan providers, they each gave a different interest rate and term for paying back the loans. The idea of student loan consolidation, is to take all the different student loans and put them into one easy convenient loan. You them only have to make one monthly loan payment every month, instead of several loan payments every month over time. This saves the student both time and money. Having a lower interest rate and less checks to write every month are a couple of advantages of doing a student loan consolidation.
5 Helpful Benefits of Student Loan Consolidation
1. Lower Monthly Payments.
Depending on your student loan situation and the type of lender you choose, you may be able to lower your monthly payments by up to 50%
2. Having Simple Loan Payments.
By consolidating your student loans, you only have one loan payment per month and one check to write. This is very beneficial if you are writing several checks every month to multiple lenders.
3. Having Fixed Interest Rates.
With some federal consolidation loans you can have a fixed rate for the life of your student loan. It's best to do research to see what the best interest rates and term you are eligible for. You can check online to calculate the interest rate on a new student consolidation loan based on the rates of your current student loans. You can then round up to the nearest 1/8th of a percent of the we ighted average of the interest rates on your eligible student loans.
4. Extending Your Payment Period.
You may have a lot of student loan debt. With federal consolidation loans you may be able to extend the payment term up to 30 years. It's a good idea to realize you will end up paying more interest over the life of your student loan consolidation. The idea is to get some leverage until your career takes off. You can focus on making money instead of several monthly loan payments.
5. In School Consolidation Programs.
While still in school, eligible students can lock in a low rate. This would put you into repayment status, but since you are still in school, you are automatically put into deferment. The drawback of consolidating your loans while in school, is that you lose your 6 month grace period. The solution to this would be to request forbearance for up to 1 year on your student loan consolidation. Here again you can do some research and get more information online.
Student Loan Consolidation Help Online
With today's Internet technology, you can get a student loan consolidation quickly and easily. The Internet makes research and finding great programs, easy as a few clicks of the mouse. You can learn everything you need to know from information sites that provide the latest news and data in regards to student loan consolidation. With just a few clicks of the mouse, you now can get loan quotes and compare loan companies without having to run all over town.
Student Loan Consolidation Helps Relieve Stress
Student loan consolidation can help student loan borrowers focus on their education, instead of debt. With a single new loan and lower monthly payments, you can focus on what's most important, education and your new career. There is no need to lose sleep stressing out about how you're going to pay back all those student loans. There are several agencies and companies online that can help with many resources and information to get the help you need.
Pennsylvania’s student-loan agency will cut college grant amounts for the 2008–09 academic year by up to $750 and will offer voluntary buyouts to some
Pennsylvania’s student-loan agency will cut college grant amounts for the 2008–09 academic year by up to $750 and will offer voluntary buyouts to some of its nonunion employees in an effort to keep the company afloat.
The Pennsylvania Higher Education Assistance Agency will determine the adjusted grant amounts based on a recipient’s college costs, family size, and the number of children from the family enrolled in college. Next year’s awards will range from $2,100 to $3,948, compared to this year’s awards which ranged from $2,500 to $4,700.
The agency expects to save $12.5 million annually with the nonunion buyout agreements, after losing more than $37 million in the nine months leading up to March 31, agency spokesman Keith New said in an Associated Press article, (“Pa. Student-Loan Agency to Cut Aid, Offer Employee Buyouts,” April 24, 2008).
During the same period last year, the agency earned nearly $113 million in operating income.
Employees eligible for buyouts will receive two weeks’ pay for each year of service at the agency for up to 16 weeks. The number of buyouts needed to steady the company has yet to be determined and is dependent on the salaries of departing employees.
The agency, which New said has “never before experienced more difficult or severe economic conditions,” will only impose layoffs as a last resort.
Monday, May 5, 2008
125% home equity loan
What is a 125% home equity loan?
The is a second mortgage that allows you to borrow more than what your home is worth. You can borrow up to 125% of your home's value. This is an ideal loan for you if you have no equity in your home. If you have a VA or a FHA loan or want to payoff a second mortgage to get some extra cash this one is for you. Its generally tax deductible up to 100% of the value available of the house.
How does it works ?
This is a FICO based program with a minimum of 640 middle fico score required. Presently there are no exceptions. For example, if your house is worth $100,000 then you would be allowed to borrow a combined total of $125,000 between your first and second mortgage.You have to be in the property for at least 6 months or to be a previous owner.
Why should I apply ?
Pay off credit cards,and other debt.
Lower your payments by hundreds of dollars each and every month, and make only one easy monthly payment.
Make home improvements, pay college tuition, or just take a vacation.
Tax deductions ( please consult your CPA)
What is the criteria for this loan ?
FICO Scores 640 and above.
Some Cash Out restrictions
Loan amounts $30,000 and above
For A Credit borrowers
Bankruptcy 5 years discharged.
Appraisal required for amounts above $35,000
Six months in the property or a previous home owner.
100 % Home Equity Loans
What is a 100% home equity loan?
Its a second mortgage that allows you to borrow up to 100% value of your home. It's generally tax deductible up to 100% of the value of your home. Loan terms can be as long as 30 years due in 15 or simply 15 years amortized.
Qualifications for 100 % home equity loans
FICO based program with minimum of 640 middle score required.
Ownership in the property 6 months to get a new appraised value.
No Bankruptcies and foreclosures in the last 2 years.
Documented income.
Why should I apply for a 100 % Second Loan?
Pay off credit cards,second loans,and other debt.
Lower your payments by hundreds of dollars each month, and make only one easy monthly payment.
Make home improvements, pay college tuition, or just take a vacation.
Tax deductions ( please consult your CPA)
What is the criteria for 100 % LTV Second Mortgage ?
FICO based program with 640 middle fico.
Stated income 680 middle fico score required
Some Cash Out restrictions
Loan amounts up to $200,000.
For A- Credit borrowers
Bankruptcy 2 years discharged.
Appraisal required for amounts above $35,000
Six months seasoning to get new appraised value.
What are Home Equity Loans and Lines of Credit?
If you've never had a home equity loan or a home equity line of credit, it can be confusing. Here are a few home equity basics to help you. Premier Equity home equity loans and lines of credit can only be offered as an additional financing option when you refinance your first mortgage with us — otherwise known as a combination mortgage. If you would like further explanation on any aspect of home equity loans, talk to one of our friendly and knowledgeable Account Executives. They're here to answer your questions.
Home equity loans or lines of credit are also referred to as second mortgages. These second mortgage loans work like traditional home loans and are secured by your home. Home equity loans and lines of credit generally have interest rates lower than most credit cards.
The difference between a home equity loan and a home equity line of credit is that with a home equity loan you get all of the money at once and the loan usually has a fixed interest rate. A line of credit has an initial time frame where you can reuse the money as often as you like, up to your approved credit line amount (the draw period) followed by a period where you pay off the entire balance without the ability to withdraw any additional funds (the repayment period).
Equity refers to the portion of a home's value that the homeowner owns outright. If your home is worth $150,000, and the amount due on your current mortgage is only $50,000, the equity that you have in your home is $100,000. There are low equity loan options available.
Tax benefits - In many instances, the interest on a home equity loan of up to $100,000 can be fully tax-deductible up to 100% of your home's value. Consult your tax advisor.
People frequently choose a home equity loan to consolidate high-rate debt, such as credit cards, or to finance large expenses, like college, remodeling or home repair. The loan provides a lump sum of money at a fixed interest rate with a fixed repayment period and the same monthly payments for the life of the loan.
A home equity line of credit sets a credit limit and allows the homeowner to withdraw and reuse money as needed. This is most often done with a check book. There is often a minimum initial withdrawal requirement. You only pay interest on the amount that you have withdrawn and not yet repaid. A home equity line of credit usually has a variable interest rate, and a fixed period of time where you can borrow and repay as often as you like followed by a specific time period during which you pay off the loan.
As another alternative to a combination mortgage, you can refinance your current first mortgage with a cash-out first mortgage. This is a loan where you can take out cash that is in excess of the amount that you owe on your current first mortgage up to 90% of the home value. The new loan is used to pay off your old mortgage plus you can take out additional cash. This mortgage usually has a lower interest rate than a typical home equity loan.
You may have the option to obtain a lower interest rate by paying discount points. One point represents one percent of the loan amount.
To see if a Premier Equity first mortgage or combination mortgage is right for you, and which products and options are available in your state, complete our short online form. A Premier Equity Account Executive will contact you within one business day to discuss how much you could save in the coming months. There's no obligation.
Rockefeller Gives $100 Million to Harvard
Recently, Harvard University alumnus David Rockefeller, announced that he will be giving his alma mater the single largest gift from a former student ever, writes Stephanie Strom of The New York Times, (“Rockefeller Gives Harvard $100 Million,” April 25, 2008).
The $100 million gift will be added to the school’s $35 million endowment, the largest among all universities.
Roughly $70 million of the award will help fund the school’s undergraduate international study programs, which have more than doubled in participants over the last four years, and, according to a university survey, have been financially inaccessible for many more Harvard students.
The remainder of the gift will be earmarked for the expansion of the school’s arts education programs.
In a telephone interview with The Times, Rockefeller commented that Harvard played an important role in his life and that the school’s study abroad program helped inspire his passion for studying art. In the summer of 1936, Rockefeller took his first art courses in Germany, where he chose to study to fulfill his foreign language requirement, Strom writes.
Although Harvard will not receive Rockefeller’s $100 million gift until after his death, he has agreed to give the school $2.5 million annually, resulting in the school receiving more than the promised $100 million.
by Student Loan
Sunday, May 4, 2008
House Panel Approves Bill to Assist Borrowers
The House of Representatives Financial Services Committee on Thursday approved a sweeping bill led by the Democrats to finance $300 billion in distressed mortgages with the aim of helping homeowners facing the threat of foreclosure.
The Financial Services Committee approved the bill 46 to 21, with 10 Republicans joining the Democrats in favor of it. The committee chaired by Rep. Barney Frank, the main author of the bill stressed the need for urgency.
"There are people who made loans that should not have been made; there are some people that were wrong to take loans out, some wrong to make the loans. If nothing happens all those loans go under foreclosure, the economy suffers," he highlighted.
The Massachusetts Democrat also said he hoped President Bush would sign the bill if it reached the White House as part of a wider package and it contained the legislation that Mr. Bush had demanded.
The new loans would be limited to no more than 90 percent of a property's value based on an updated appraisal. The government would retain a stake in any future sale of the property, worth 3 percent of the initial loan balance or 50 percent of net profit from a sale, whichever is greater.
Borrowers would have to demonstrate the ability to repay the new loan and if they default, they will forfeit the property. Democrats say the plan could help as many as 2 million homeowners.
House Panel Approves Bill to Assist Borrowers
By: MortgageLoan.com
Paying Student Loans With Home Equity
When students graduate from college, they begin to enjoy the fruits of their labors. Many land good jobs, and some buy new homes. After a few years of home ownership, if the market is rising, they may also eyeball their student loans, and consider the pros and cons of using a home equity loan to pay off their debts.
If you're a college graduate with student loans, you probably envision having to pay your debts for years to come. While the prospect of becoming debt-free seems like a pipe dream, it can happen much sooner if you manage your debt intelligently. But does smart debt management include using a home equity loan to pay off your student loans? Like anything in the financial world, this option has a variety of pros and cons.
Lower rate, tax deductible interest
At first glance, consolidating your student loans into a home equity loan seems like a no-brainer. Because a home equity loan uses your property as collateral, banks can offer it at a lower rate than most private student loans. The lower rate alone can save you thousands of dollars in long-term interest payments, and you also get added tax benefits. Interest paid on a home equity loan is tax-deductible, which will lower your overall costs.
A home equity loan is a fixed-rate, fixed-term loan. The fixed rate can be extremely appealing, as private student loans often include variable rates. If you're conservative with your money, eliminating uncertainty may help you sleep better at night.
A home equity line of credit (HELOC), which is a line of credit based on the equity in your house, will also help you pay off your student loans. As an added bonus, you can use the HELOC as an emergency source of funds if you get into a crunch. The interest is still tax-deductible, but be forewarned: the rate on a HELOC is variable, and can spike upwards.
Notice the rewards; consider the risks
Choosing a home equity loan to repay your student indebtedness has plenty of rewards, but you do need to be aware of the risks. First and foremost, a home equity loan uses your house as collateral. If you run into tough times, and have to default on your mortgage, you could lose your home.
While you'll gain a tax deduction for interest paid on your home equity loan, you'll lose the deduction that comes with student loan interest. You'll need to run the numbers to see which loan benefits you the most.
The future for most college graduates will include years of debt payments. Between mortgages and student loans, it may seem like you'll be mired in debt until the end of time. However, smart management of these debts-such as paying off your student loan with a home equity loan-can save you thousands of dollars. Understand your options, and you'll be on your way to a debt-free life.
Paying Student Loans With Home Equity
By: Greg Mischio
Should we use home equity to pay off student loans?
Should we use home equity to pay off student loans?
by Liz Pulliam Weston
Dear Liz: Our question is about student loans.
We have a total of $69,000 in education debt. We also have a home worth $400,000 and our mortgage balance is $266,000, plus a home equity loan with a balance of $14,500.
We make a good salary, have excellent credit, pay all our bills on time, and, if gas weren't so darn high, we would have a decent amount of discretionary income.
We make extra principal payments when we can. The problem is that interest rates on our school loans are climbing, and payments are getting higher and higher.
We're wondering whether we should take out another home equity loan to pay off the student loans.
That would obviously leave us with less equity, which could limit the price we could pay on the house we plan to buy in three to five years.
But it would also decrease our monthly loan payment significantly and we would be able to deduct the interest on the home equity loan. (We can't deduct student loan interest because we make too much money.)
Does a home equity loan make sense in this case?
Answer: Generally speaking, trading student loan debt for home debt isn't a great idea.
Student lenders typically are much more flexible than mortgage lenders, with a wider variety of repayment options. You also can get a deferment or forbearance if you lose your job or otherwise encounter a financial hardship. This respite from payments can last as long as three years on many student loans.
Compare that with what would happen if you couldn't make your mortgage payments. Within a year, and usually much less, your home lender would start foreclosure proceedings.
In addition, most student loan debt can be consolidated. This would allow you to lock in your current interest rate and perhaps lengthen the repayment term to lower your monthly payments.
A longer loan means you would pay more interest over time, but it could help ease the monthly crunch you're feeling.
All that said, not being able to deduct the interest on your student loans is a significant disadvantage.
If you're confident you'll be able to make the payments, then you might consider paying off at least some of your student loan debt with home equity borrowing.
You should, however, limit your total borrowing — all your home equity loans plus your primary mortgage — to no more than 80% of the value of your house.
You want to keep at least a 20% equity cushion in your home whenever possible, as a last-resort emergency fund and also to protect yourself in case of declining home values. (You don't want to be faced with having to sell your home and owing more than it's worth.)
Given the loans you already have, you should be able to pay off $39,500 of your student loans with home equity debt. Then you could consolidate the remaining $29,500.
--
Liz Pulliam Weston is the author of "Deal with Your Debt: How to Manage Your Bills and Pay Off What You Owe" and "Your Credit Score: How to Fix, Improve and Protect the 3-Digit Number that Shapes Your Financial Future." This column may not be resold, reprinted, resyndicated or redistributed without written permission from its distributor, No More Red Inc.
Student loan or home equity financing?
That is the question. And a lot of parents are asking it. In fact,
"So could you maybe tell me which way is the better way to go to finance my daughter's college. She is a freshman and I'm not sure if I should do a Home Equity loan or try to get her a loan through her school's student loan program. She's going to Ol' Miss!"
The short answer is: It depends. There are several key differences to consider between these types of financing.
Generally, before considering any other type of financing, students should fill out the Free Application for Federal Student Aid (FAFSA) first, to see what they qualify for in financial aid. With the information from the FAFSA, the school can put together a financial aid package that may include grants and scholarships that your student doesn’t want to pass up.
Your student’s financial aid package will also show what he or she qualifies for in Federal Stafford Loans. The Federal Stafford Loan is one of the most affordable options for financing college today, with a fixed interest rate of 6.80%, so if you’re planning to borrow money for college, students should look to that loan first.
Assuming the Federal Stafford Loan does not cover all college expenses, there are three common choices to consider for financing to bridge the gap: the Federal PLUS Loan for parents, home equity financing, and private student loans.
Take a closer look at these options by reading this comparison chart.
Ultimately, you’ll want to choose the option that makes the most sense for your individual financial situation. It’s not a "one size fits all" approach. The financing that works for Nate and his daughter at the University of Mississippi may not work for you at all schools.
For example, maybe you don’t want to mess with the FAFSA and would like to bypass federal loans altogether, so you choose a home equity line of credit. Or maybe you don’t want to use the equity in your home for education because you know you’ll need a new roof soon, so you apply for a Federal PLUS Loan or cosign a private loan for your student.
Parents, tell us: When it comes to borrowing for education, what has worked best for you?
Student loan or home equity financing?
by Caroline,
Home Equity Loan Facts
A home equity loan is a special type of loan 5ACthat is used by homeowners who wish to use their equity as collateral. It may be necessary for a family to obtain a home equity loan for things such as medical bills, college costs, or house repairs. In a nutshell, a home equity loan is basically a lien that is placed on the property. Obtaining a home equity loan requires the customer to have good credit, and they should be a low risk borrower. Home equity loans are divided into two types, and these are open end and close end. A home equity loan may also be referred to as being a second mortgage.
When compared to traditional mortgages, home equity loans tend to be shorter in length. In places like the US, homeowners may be able to deduct the interest the earn on their income taxes. With the closed end home equity loan, the homeowner will be given a set amount of money at the closing, and they will not be able to borrow any more money. The amount of money that they are given will be determined by their credit score, salary, and the value of the home. It is not uncommon for a homeowner to borrow 100 percent of the value of the house, and some lenders will go beyond 100 percent in a process that is called over equity.
Closed end home equity loans will often have rates that are fixed. In addition to this, the loan may be amortized for as long as 15 years. Once the term of the loan ends, the homeowner may need to pay what is called a balloon payment. To avoid the balloon 5ACpayment, the homeowner will need to either pay more than the minimum payment each month or refinance the home equity loan. The open end home equity loan may also be called a home equity line of credit. With this loan, the homeowner can decide when they want to borrow money against the equity of the home.
At first, the lender will set a limit on the credit line, and this limit will be dependent on many of the things that are used with closed end home equity loans. As with the closed end loan, it is possible for the homeowner to borrow 100% of the value of their home with open ended home equity loan. The length of these loans may be as long as 30 years. The interest rate for the home equity line of credit will be variable. The minimum payment that is made each month will be directly connected to the interest. The interest rate of both of these loans will typically be dependent on the prime rate.
Home equity loans have a number of powerful advantages, and they are utilized by millions of consumers. Many people encounter situations where they need large sums of money, and they money that they have may be tied up in investments. Home equity loans are a great way for them to pay for these large expenses.
Michael Colucci is a writer on Home2CB Equity Loan which is part of the Knowledge Search network.
Home Equity Loan Facts
by creditmanagementbpwve
Impossible - Loans Even With Bad Credit?
Impossible - Loans Even With Bad Credit?
by Landon McGehee
There are ways to consolidate your debt, even if your credit is bad. You may not even know you have bad credit until you check it, right before you really need good credit. Most of the time, bad credit accumulates when you fail to pay credit card bills and the interest that goes with it. When you accumulate too much credit card debt without being able to repay it, you will no longer be able to use the credit cards, and your credit score will drastically drop. You can fix your credit by getting help from a debt consolidation company.
The debt consolidation company will look at your finances, then talk to your creditors to work out the best way to help. They will consolidate all your bills into one, while at the same time, reducing the interest rate.
Consolidation will relieve a lot of stress, and it will also show that you are paying off your credit, which will take away your negative credit. Next time you want to get a loan, it will be much easier.
You can also repair your credit by taking out a debt consolidation loan to immediately pay off all of your debts to credit card companies. You will then owe just the consolidation company, but it will show that all of your credit cards are paid off. You have to qualify to take out this type of loan, though, just like any other loan.
Be very careful that you negotiate all of the details of the loan. You have to make sure it will really help you.
If you have bad credit, need a loan, and don’t have time to consolidate before getting the loan, it is possible to get a private loan from a bad credit loan lender. You can use this loan to consolidate your debt, or for anything else that you really need. Beware, though, the bad credit loans have quite a high interest rate, and a high down payment requirement.
You can even get some loans, such as payday loans or cash advance loans, without a credit check. You can only borrow a small amount though, and it has to be paid back quickly.
You should only get a bad credit loan if multiple financial institutions have turned you down. If you need to get a bad credit loan, you should not have the payment period exceed 12 - 18 months, because of the high interest rate.
If you have bad credit, you should try to fix it any way you can so you can acquire lower interest loans. The high interest loans are more difficult to pay back, and if your credit isn’t great in the first place, this can be even more difficult. You’ll be amazed how much lower interest rates will reduce your payments. Contact a debt consolidation company to see how they can help you.
About the Author
Landon McGehee continues to learn more and enjoys shares that knowledge providing resources, advice and tips on topics like bad credit secured consolidation loans.
Student Loan Consolidation
Student Loan Consolidation by Student Loan Center
After graduation, many students do not realize the total amount of student loan payments they will be responsible for every month. Several smaller loan payments can add up to a substantial amount of money each month. While the interest rates for student loans are great, and the education received as a result of the loans is worth the inconvenience of loan payments, many students will still need to research ways to make their student loan payments more manageable. Fortunately, there are several worthwhile options for borrowers who find that they need some help in adjusting their student loan payments to fit their income. One such option is student loan consolidation, which is simply combining all of your student loans into one lender, and therefore making one monthly payment.
Should You Consolidate?
If you find that you are having trouble meeting all of your payment obligations every month, you may want to consider consolidating all of your student loans into one monthly payment. The payment is usually smaller under consolidation, which is beneficial if you want to reduce the percentage of your income that is used to pay your student loans. Another reason to consolidate, especially if you have an adjustable interest rate loan, is that you can often lock in an interest rate under consolidation. You will want to be very careful, however, not to mix private and federal student loans together when you decide to consolidate; because when you do so, you will lose all of the tax benefits available to you with your federal loans (such as the tax deduction for interest paid). Another factor to consider with student loan consolidation is that by reducing your payments and lengthening the term of your loan repayment, you will be adding to the total amount of money you will be repaying; so be sure to pay any extra amount on your payment that you can, if possible.
Beginning the Consolidation Process
Once you have decided to begin the consolidation process, the most logical option is to contact one of your current lenders. Most of the lenders for federal student loans will be happy to buy out the loans from your other lenders and consolidate them for you. Be sure that you ask about the difference between private and federal student loans; because many lenders treat them very differently during consolidation. You may also need to specify that you are interested in locking in the lowest interest rate possible for the life of the loan. If you are a married borrower and your spouse also has student loans, the lender may suggest that the two of you consolidate all of your loans together, for one lower monthly payment. Be extremely wary of this option: by combining all of your loans into one, you are taking joint responsibility for the debt. This means if one of you dies, the other spouse continues to be responsible for the loan; it also means that, in cases of divorce, you must go through the process of attempting to divide the debt.
There are many companies that will help walk you through the process of student loan consolidation; however, make sure that you are well-informed of the actual process before you sign on with any one lender. Student loan debt does not have to severely affect your finances, and consolidation is a great method of managing this type of debt. As long as you have researched all of the options of consolidation, and you have also well-researched your lender options, you can go through the process of student loan consolidation assured that you are making a very wise financial decision.
About the Author
For more information like this please visit the Student Loan Center
Also check out our sister site for Single Mom Financial Help
Federal Pell Grant
A Federal Pell Grant, unlike a loan, does not have to be repaid. Pell Grants are awarded usually only to undergraduate students who have not earned a bachelor's or a professional degree. Pell Grants are considered a foundation of federal financial aid, to which aid from other federal and nonfederal sources might be added.
How much can I get?
The maximum Pell Grant award for the 2007-08 award year (July 1, 2007 to June 30, 2008) is $4,310. The maximum award for the 2008-09 award year (July 1, 2008 to June 30, 2009) is $4,731. The maximum can change each award year and depends on program funding. The amount you get, though, will depend not only on your financial need, but also on your costs to attend school, your status as a full-time or part-time student, and your plans to attend school for a full academic year or less.
If I am eligible, how will I get the Pell Grant money?
Your school can apply Pell Grant funds to your school costs, pay you directly (usually by check), or combine these methods. The school must tell you in writing how much your award will be and how and when you'll be paid. Schools must disburse funds at least once per term (semester, trimester, or quarter). Schools that do not use semesters, trimesters, or quarters must disburse funds at least twice per academic year.
Source: studentaid.ed.gov
Publishing Company to Offer Free Online Textbooks
To help reduce the rising cost of textbooks, which are approaching $1,000 a year for the average college student, digital-textbook publisher Flat World Knowledge will begin offering free online textbooks starting next year.
The publishing company is signing authors it believes are the best in their fields, Flat World Knowledge co-founder Eric Frank told The Chronicle of Higher Education, (“An Online Company Tries an Unexpected Publishing Model: Free Textbooks,” April 24, 2008).
“We want to show professors that they’re not deciding between price and quality,” Frank said.
The online textbooks will include images, audio, and video features, and will be structured as “social learning” sites, meaning students can chat and share notes online while reading and instructors will be allowed to edit the author’s words without permission.
While its electronic textbooks will be free, Flat World Knowledge hopes to make money from the sales of supplemental materials like study guides or print-on-demand hard copies. The company also plans to take a cut of the sales of user-created study materials sold through its website.
But the company will have to find a market. Digital textbook sales currently represent only a small fraction of traditional publishers’ revenue.
Student College Loans Interesting Info
by Deepak Kulkarni
Are you searching for information related to Best Student Loans or other information somehow related to Direct Service Student Loans, Www FASFA Ed GOV, Federal Consolidated Student Loan, GOVT Student Loans, Student Loans For College Expenses or Private Student Loans Without Credit? If yes, this article will give you helpful insights related to Best Student Loans and even somehow related to Refinance Federal Student Loans, Consolidate Private Student Loans Fixed, FAFSA Calculator, Consolidate Private Student Loans Fixed Rate, Student Loan Direct Debit and Should I Consolidate My Student Loan? That you might not have been aware of.
After you graduate from college, you are beginning on your brand new life and career. However, six months later, you are hit with the reality of just how much debt you steadily gained while going to college. As you go through each paper of all the student loans you have received throughout the years, you become overwhelmed. You are possibly thinking how could I ever afford these with what I make? If you find troubles, it might be the perfect moment to consider calling student loan consolidation experts.
Sometimes the school you attend may recommend the right debt consolidation companies for you to approach for your student debt consolidation loan. However, you can have your federal school loan consolidated only if you have stopped attending school, have not missed any payments and your loan is of a sum of at least $10,000. If your federal school loan does not meet one of these requirements, then you can’t opt for student loan debt consolidation.
Soon after you send your application, the Department of Education will send out your student aid report (SAR) with all the information you provided as well as the information the school takes into consideration. If they ask for additional information, don’t wait to send it to them. Doing so could prevent you from getting aid of any type. How much you’ll be able to take out will depend on your information, the school and the budget they assume for the academic year.
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Unlike filling out applications by hand, you simply cannot go wrong with an online form, or miss providing some information. Why? Because these websites typically will not let you proceed until everything has been provided to them.
With an unsubsidized loan, the loan will be charged interest during the entire course of your school career. If the interest is left unpaid, it is then added to the principle amount of the loan. This tends to increase the amount you need to pay, as well as the time it will take you to pay off the loan.
If this article still doesn’t answer your specific Student College Loans quest, then don’t forget that you can conduct more search on any of the major search engines like Search.Yahoo.com to get specific Student College Loans information.
In order to make it easier for to help repaying student loans after graduating from college, the first step you seriously consider refinancing student loans and to consolidate your student loans into a single loan account. Through this, you will be able to avoid paying a lot of excessive money from all your various loans different interest rates. Having one single loan to deal with will also allow you to better manage your money and your loans.
Many folks seeking online for articles related to Wachovia Student Loans also sought for articles about Federal Direct Plus Loans, Student Loan Repayment Grant, and even GOVT Student Loan.
