Does Comparing Loans Affect My Credit Score?

loans and credit score

When it comes to shopping for the right loan, it makes sense that you’d want to do your research in order to score the best rate possible. And the Internet has made it easier than ever to do so. But before you start comparing loans, it’s important to understand the effect this could have on your credit.

And the answer isn’t as clear-cut as you might think.

Credit inquiries

Whether or not comparing loans will affect your credit score depends on whether a hard or soft inquiry is required.

Soft inquiries happen when a business pulls your basic credit information without your directly applying for anything — for instance, when credit card companies check to see if you prequalify for a card. Soft credit checks have no impact on your credit report.

Hard credit inquiries come whenever you directly apply for a loan or new line of credit, such as a mortgage, car loan, or new credit card. The lender pulls your complete credit report to determine whether you’re a safe borrowing candidate.

Since you took the steps to apply, hard inquiries are considered “authorized,” and they do end up on your credit report and affect your credit score. Luckily, if your credit is otherwise in good standing, the effect is fairly minimal; your credit score will only drop by a few points, and it usually bounces back from the hit within six months. (However, the effect may be more impactful if your credit isn’t as strong.)

When credit checks are required

Hard inquiries may not be required until you’re further into the loan process. Lenders can get an idea of what interest rate you’d qualify for by performing soft inquiries using basic information including your name and annual income. So if you’re shopping around, this is the best way to look at all of your options.

However, to get an official rate quote, you will have to directly apply for the loan, which will result in a hard inquiry.

But here’s the good news: if you submit multiple applications for the same type of loan (say, a car loan) over a short period of time (usually between 14 and 45 days), it’s not considered risky behavior because it’s evident to the credit bureaus that you’re simply looking for the best deal. As such, credit bureaus will often count these multiple applications as a single hard inquiry.

(Note: This isn’t the case for credit cards. Submitting multiple credit card applications over a short period could not only bring down your credit score, it could also make you look like a risky borrowing candidate to lenders.)

How to shop for loans

In order to avoid damaging your credit as you shop for loans, make sure you’re aware whether your credit is being submitted for a hard or soft inquiry. Many websites will let you know, but if you’re not sure, call the company’s customer service to ask.

Also, make sure you’re protecting your privacy. A secure Web page will begin with “https,” so if you’re entering your social security number or any other sensitive personal information, make sure to double-check for that protocol.

If you’re having trouble getting approved for a loan, it could be that you need to fix your credit. For credit help, consider speaking with a credit repair expert. Lexington Law offers the legal expertise to help you repair your credit and ensure that your credit report remains fair and accurate.

Carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Source: lexingtonlaw.com

You Don’t Have to be a Farmer to get a Home Loan from the USDA

If you’re searching for a good deal on a mortgage, you might want to look into little-known home loan programs run by the US Department of Agriculture. A USDA loan can be just as good, or even better than an FHA or VA loan. However, you must live in an area considered “rural” by the Department of Agriculture and meet income limits that vary by county and size of your family. The mortgage insurance that USDA requires is similar to fees charged by VA but significantly less than you would pay for FHA mortgage insurance or private mortgage insurance required for conventional loans with a down payment lower than 20%.

USDA loans also have a number of great features. They are zero down payment loans, the same as VA and less than FHA’s 3.5%. You can use USDA loans for repairs, rehabilitation, refinancing and even a pro-rated share of real estate taxes. They can be used to buy vacant lots, condominiums, and even manufactured (mobile) homes.

rural town perfect for usda home loansrural town perfect for usda home loans

USDA Single-Family Home Loans

The USDA offers three programs designed to provide rural residents decent, safe, and sanitary housing in eligible areas.

Single-Family Housing Guaranteed Loan Program.  This is USDA’s most popular program. It features zero down payments and enables banks, mortgage companies, credit unions, and other qualified lenders to provide zero down payment financing by guaranteeing 90% of the loan, which greatly reduces lenders’ risk. Here is a national list of approved lenders.

The annual USDA mortgage insurance premium covers just 0.35% of the loan amount—and is 40% lower than the mortgage insurance premium charged for a comparable FHA-backed loan. It requires a 1% up-front fee and a 0.35% annual fee based on the remaining balance of the principal.

These loans can be used for:

  • Purchasing a new or existing home to be used as a permanent residence;
  • Pay costs associated with buying a home, such as closing costs, home inspection and other customary expenses associated with a home purchase;
  • Repairs and rehabilitation associated with the purchase of an existing home, such as mold remediation or termite damage;
  • Refinancing an existing mortgage or eligible loans;
  • Special design features or equipment to accommodate a household member who has a physical disability;
  • Connection fees and installment costs for utilities such as water, sewer, electricity, and gas;
  • A pro-rated share of real estate taxes due on closing;
  • Purchasing and installing features to improve energy efficiency such as insulation, double-paned glass, and solar panels;
  • Fixed broadband service, as long as the equipment is conveyed with the sale;
  • Purchase of a lot and site preparation costs, including grading, foundation plantings, seeding or sod installation, trees, sidewalks, fences and driveways; and
  • Site preparation costs, including grading, foundation plantings, seeding or sod installation, trees, sidewalks, fences, and drives.

Single Family Direct Loan Program. This is a “payment assistance” program that helps low-income applicants get decent, safe and sanitary housing to increase their ability to repay. It is a type of subsidy that reduces mortgage payments for a short period determined by a family’s adjusted income and is available only to families that cannot obtain a mortgage from other sources. It’s a “direct” program, which means USDA makes loans directly to buyers rather than through an approved lender. Borrowers must repay all or a portion of the loan before selling the home.

Requirements:

  • Properties must be 2,000 square feet or less and be worth less than the applicable local loan limit as set by USDA.
  • Borrowers must be unable to obtain a loan from other resources on terms and conditions that they can reasonably be expected to meet.
  • Borrowers must demonstrate a willingness and ability to repay debt.

Single-Family Housing Repair Loans & Grants. These help very-low-income homeowners to repair, improve or modernize their homes. Loans may be used to repair, improve or modernize homes or remove health and safety hazards and grants must be used to remove health and safety hazards.

Requirements:

  • Borrowers must be unable to obtain affordable credit elsewhere and have a family income below 50 percent of the area median income.
  • The maximum loan under this program is $20,000; the maximum grant is $7,500.

Eligibility: Location and Income

Generally, USDA Home Loans are available only to citizens or permanent residents who live in counties or portions of counties where the total population is 35,000 or less. In 2013, the average household income for direct borrowers was $28,600 while guaranteed loan recipients earned an average of $54,200.

Rural areas are adjusted to reflect the latest data from the Census Bureau. Income limits are based on a national target of $75,650 for households with 1-4 family members and up to $153,400 in certain high-cost areas.

To find out if you are eligible for either the direct or guaranteed loan program, go here and enter your address. Click on “property eligibility,” “income eligibility,” or “income limits” in the menu across the top of the screen. Go here to find out if you qualify based on family size, income, and location.

For current information on programs in your state, go here.


Steve Cook is the editor of the Down Payment Report and provides public relations consulting services to leading companies and non-profits in residential real estate and housing finance. He has been vice president of public affairs for the National Association of Realtors, senior vice president of Edelman Worldwide and press secretary to two members of Congress.

Source: homes.com

Subsidized vs. Unsubsidized Loans

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

The federal direct loan program offers subsidized and unsubsidized loans to college students. A federal direct subsidized loan is a loan where the government pays the interest while the student is in school. A federal direct unsubsidized loan is one in which the student is responsible for paying all interest, receiving no additional federal aid.

What Is the Difference Between Subsidized and Unsubsidized Student Loans?

The main differences between federal direct subsidized and unsubsidized loans are the qualification criteria, the maximum limits and how the loan interest works.

A chart displaying the differences between subsidized and unsubsidized student loans.

Loan Qualifications

Subsidized: To qualify for a subsidized loan, you must be an undergraduate student who can demonstrate financial need based on the information you submit through the Free Application for Federal Student Aid (“FAFSA”).

Unsubsidized: Unsubsidized loans are available to both undergraduate and graduate students, and there is no requirement to demonstrate financial need.

Maximum Loan Limits

Subsidized: Your school will determine exactly how much you can borrow each year, but there are federal limits. These limits are based on what year of school you are in and whether you file as a dependent or an independent. Subsidized loan limits tend to be lower than unsubsidized limits. The aggregate limit for an independent student with subsidized loans is $23,000.

Unsubsidized: Unsubsidized loan limits tend to be higher than subsidized loan limits. The aggregate limit for an independent student with unsubsidized loans is $34,500.

How Interest Accrues

Subsidized: The U.S. Department of Education pays the interest for subsidized loans as long as the student is enrolled in school at least half-time. They will also pay the interest during your grace period—defined as the first six months after leaving school—and any period of deferment. This means that the amount of the loan will not grow once the student graduates, since the government has been paying the interest.

Unsubsidized: Whether you’re an undergraduate or a graduate student, you’re responsible for paying all of the interest during the entire life of your unsubsidized loan.

What Are the Similarities Between Subsidized and Unsubsidized Student Loans?

When it comes to interest rates, fees and the “maximum eligibility period”—the amount of time you’re able to take out loans—subsidized and unsubsidized loans are virtually the same.

Fees

On top of interest, you can expect to pay a small fee for both types of loans. This is approximately 1.06 percent of your total loan amount, and it is deducted from each loan disbursement. 

Both subsidized and unsubsidized student loans have a fee of 1.06% of the total loan amount.

Undergraduate Interest Rates

The interest rates for both subsidized and unsubsidized loans for undergraduate students are the same. Currently, the rate is at 2.75 percent for loans first disbursed from July 1st, 2020, to June 31st, 2021. The one exception is for direct unsubsidized loans for graduate students, which have an interest rate of 4.30 percent. 

Maximum Eligibility Period

For both loan types, the time in which you’re eligible for your loans is equal to 150 percent of the time of your program. For undergraduates pursuing a four-year bachelor’s degree, this means they will be eligible for their loans for six years. Those pursuing a two-year associate’s degree will be eligible for three years. This ensures that students can still receive loans even if they’re unable or choose not to graduate within the program’s time frame. 

How to Apply for Subsidized and Unsubsidized Loans

Once you’re ready to apply for a federal direct loan, fill out the FAFSA. Your school will send you a detailed report of what student aid you’re eligible for. Any grants or scholarships are free money, so make sure to accept them. They’ll also decide which loans you’re eligible for, the amount you can borrow each year and what loan type you can get—subsidized or unsubsidized. 

No matter what type of student loan you go for, it’s important to understand how they affect your credit so that you can set yourself up for financial success after graduation. With responsible, on-time payments, you’ll be well on your way to healthy credit for life.


Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

Attending College as a Non-Traditional Student

home-office-599475_640

home-office-599475_640Femme Frugality writes about money as it pertains to young adults, brides, parents, Pittsburghers, and, of course, college students. You can read her blog here.

Recently Michelle shared that W was returning to school, and asked for some tips for non-traditional students. I recently graduated, and now my fiance is going to college for the first time.

We’re about as non-traditional as it gets, both being far beyond “traditional” college age, and having children. So I’ve got a plethora of tips that have been helping us get through this stage in our lives. And Michelle was kind enough to let me share them in a post.

Work as Little As Possible

I know that sounds crazy. As a non-traditional student, you’ve got very grown-up bills to pay. But trust me. If you’re serious about your degree, trimming down your work schedule will help not just your grades, but your overall mental health. I am not suggesting you go into debt in order to go back to school. (Both my fiance and I are doing this without any loans.)

What I am suggesting is that you sit down and look at your monthly budget. Look at your bills, how much you’ll need to be contributing to your emergency fund, how much you’ll need for other essentials such as gas and groceries, and a realistic entertainment category (though it might not be a bad idea to trim it down a little bit if you can).

Figure out the lowest number you’re willing to commit to (be realistic about this) for your overall monthly budget.

Now, figure out the minimum number of hours you’d have to work in order to meet that number. The next step is having a conversation with your boss about lowering the amount of hours you are working every week as you return back to school.

I was really lucky when I decided to go back to school. I was able to not work at all. Granted, part of that was because I was having a child at the beginning of my return to my education, and daycare costs would have been more than my working salary at the time.

My fiance supported me through the completion of my degree, and for that I am so thankful. But I did things to contribute to our combined coffers, too. And it’s something you can do if you don’t have someone there to help you out with the bills:

Apply for Scholarships

I know this sounds obvious. But so many people don’t apply because they think they won’t qualify. Or they won’t be able to write a perfect essay. Or a million other reasons. Just do it.

Start with the scholarships at your school and branch out from there. (I wouldn’t necessarily apply at sites such as FastWeb….your odds are so low when there’s so many people competing.)

When you’re applying, first look for any scholarships you can get your hands on; they all cover tuition. But once you have your tuition fully-funded, look for scholarships that cover tuition and other educational costs. With these, your school with cut you a check for every penny that’s paid above and beyond your tuition.

For example, if your tuition is $5,000/semester and you get $6,000 funded via scholarships, the school would cut you a check for $1,000 that semester. That $1,000 (or however much over you earn in scholarships) can then be used for things like books, rent, groceries, etc. Depending on how much you earn you may find that you’re able to stop working and focus completely on school, too.

Get Involved Without Over-Committing

A great way to kick-start your career is to be involved in a fraternity, national club, or some other scholarly organization pertaining to your field. Doing so can also increase your networking power when you’re looking for a job after graduation. So join. Something. Get involved. But be incredibly aware of your constraints.

Are you working? Then don’t promise to volunteer as a full-time “job.” Do you have kids? Then don’t say you can serve as club president when the weekly meetings are held when you need to be getting the kids off the bus.

Make a Schedule

Scheduling is so incredibly important. Make sure you schedule for things like

  • class
  • work
  • study hours
  • socializing/relaxation
  • school organizations

If you’re in a relationship, have kids, or other people that depend on you, there’s even more you have to schedule for, and it’s incredibly important:

  • date nights
  • time to talk and catch up with each other
  • time to spend with your kids/whoever else may depend on you

The task can seem daunting. It can even be tempting to eliminate things on that list. But remember, you’re in this for about four years. Can you really go four years without socializing? Maybe. But you’d probably be hating life. Can you skip the talks with the girlfriend? Probably. But only if you’re trying to kill your relationship. And the studying? It’s necessary if you want to be any kind of good in the the field you’re entering. Schedule purposefully, and live life accordingly.

Spread It Out

If you’ve done the fall semester full-time and it’s just way too stressful or your grades are suffering, instead of giving up try going half-time in spring. Then you can go half-time in summer, too, and not be behind on your classes.

Most of the classes offered in summer are general electives that a lot of people need to take, so keep that in mind. If you’re receiving financial aid such as a Pell Grant or state aid, if you go half-time you’re only awarded half of your grant.

The other half that you qualify for can be applied to the summer semester and completely cover it the same as if you had gone full-time in the spring. So you’re not losing any money. At least that’s how it worked at my school.

Double-check with your financial aid office. And if you’re concerned about not having a summer break, don’t worry. Most schools have a 3-4 week break between Spring and Summer semesters, and then another 2-4 week break between Summer and Fall.

Think Ahead

If you’re going to do something like an internship at the end of your course of study, think about that now. How will that work out with work? If you have kids, how will childcare work?

Talk with your boss about it early so that they know to expect it and you all have time to work out a viable solution to give you the time you need to complete that internship (without bidding your current employer a premature adieu.) Give yourself years to figure out the whole childcare debacle instead of just weeks or months.

You Will Be Stressed.

And that’s okay. That’s normal.

That’s why scheduling things such as socialization, relaxation, and date nights are important. If you’re in a relationship with someone who is going back to school, it’s going to change your status quo. There will be stress, and stress usually leads to fights.

You will most likely fight. But that doesn’t mean that your relationship is crap. It means you’re stressed out, and you both need to find ways to cope better. Which is why scheduling time to talk and connect is so important.

Going back to school as an adult who isn’t fresh out of high school comes with a complex set of challenges.

Family responsibilities, work responsibilities, and just general grown-up bills and concerns can weigh you down. But don’t let them hold you back. Those few stressful years are so worth it. And you can hold your head a little higher than those younger kids when you walk at commencement, because you know that you had to work a little harder to hold that degree in your hand. But you didit.

What tips do you have for someone going back to college as an adult? How was your experience?

Related Posts

<!–
–>

Source: makingsenseofcents.com

Documents You Need to Apply for a Mortgage

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Any application for credit should be taken as a serious matter. Simply applying and allowing the lender to pull your credit report has an impact on your credit score, so it’s not a good idea to apply for things on a whim. But mortgage applications tend to be more serious than most other apps because they’re for such large amounts of money and longer terms.

When you’re borrowing hundreds of thousands of dollars for 15 to 30 years, the lender wants to ensure you’re a sound investment. They actually have an obligation to their shareholders, employees and other customers to try to take on mortgage accounts that are likely to result in a return instead of a loss.

For these reasons, you usually have to show up to the mortgage application process with a lot of documentation. Here’s a rundown of the documents needed for a mortgage application.

Mortgage Application

The first document is the mortgage application itself. Whether you complete it online or as a physical piece of paper at a broker’s office or bank, this is the document that launches the process.

Typically, mortgage applications require the same type of information. That includes:

  • What type of loan you want. You may need to check or click boxes to indicate whether you want a conventional loan, VA loan, FHA loan or other type of loan.
  • Why you need the loan. Is it a refinance or new purchase, and are you purchasing a single-unit home you plan to live in, a rental property or a business property?
  • The property itself. You must fill in the address and some other basic information about the property you want to buy.
  • Demographic information about the person or people borrowing the money, including name, address, phone number and Social Security number.
  • Employment history for all borrowers.
  • Income and assets for all borrowers.
  • Debts and other liabilities for all borrowers.

You’ll also need to sign various agreements and disclosures. That includes whether you have a bankruptcy or other issue in your financial history and an agreement that the creditor can pull your reports.

Assets

You can’t just list items like assets on your mortgage application, though. You also have to prove your statements with documents. Documents that prove your assets can include bank statements showing current cash balances, investment statements showing current values and life insurance policies. If you’re including gift funds in your assets, you’ll need letters or other documents demonstrating where the money came from.

Debts and Expenses

Most of the time, the mortgage company can see evidence of your debts and expenses on your credit report. If the underwriter has any questions or concerns during the approval process, they may reach out for additional information such as copies of credit card statements. This is especially true if you’ve recently paid down debt and that isn’t yet reflected on your credit report.

When it comes to debts, one of the major concerns is your debt-to-income ratio. If it’s too high, the lender is less likely to approve you. Calculate this ratio by adding up all your monthly debt payments along with the estimated mortgage payment and dividing it by your total monthly income.

For example, if you have a car payment of $400, credit card bills with monthly minimums of $200 and student loans of $500 a month, that’s $1,100 in debt. Add a $1,500 mortgage and you would have $2,600 in debt. If you make $7,000 a month, your debt-to-income ratio is 37 percent.

The Consumer Financial Protection Bureau notes that the preferred debt-to-income ratio for mortgage approval is 43 percent or less. This is because you can’t use all your income up on debt—you still need money for utilities, food, fuel, savings and other critical expenditures.

Income and Employment Verification

You do have to prove the income amounts you put on a mortgage application. Common ways of doing so are summarized below.

Tax Returns

Tax returns from the past few years can demonstrate that you make a certain amount per year and have done so consistently. If you’re planning to apply for a mortgage soon and don’t have copies of your tax returns, consider proactively ordering a free transcript from the IRS.

W-2s and Pay Stubs

Copies of W-2 forms or a handful of pay stubs from your employer are also good ways to demonstrate your income. Start saving your paycheck stubs if you think you’ll apply for a mortgage soon.

Additional Information (Self-Employed)

If you’re self-employed or have forms of income that aren’t from an employer, you’ll need documentation. Some options can include statements from checking accounts or payment systems that show money you received. You could also provide a profit and loss statement if you’re self-employed.

Credit History

While the lender can get most of what they need from your credit report, you may need to be available to answer questions. Specifically, be ready to explain any negative items on the report. It’s a good idea to get a copy of your credit report for yourself before you apply for a mortgage so you know what might come up.

Other Documents

  • Photo IDs, such as a driver’s license or passport
  • Your rental history if you don’t already own a home, especially if you want to use it as demonstration of your payment history
  • Divorce records to prove that certain debts are no longer yours or that you don’t have access to funds from a previous spouse
  • Foreclosure or bankruptcy records, if applicable
  • Documentation of residency status if you’re applying as a noncitizen

Who Do You Give These Documents to?

You give the documents as requested to a mortgage broker you’re working with or to an underwriter with the mortgage company. You might be asked more than once for some documents, especially if you go through a preapproval process.

During preapproval, the mortgage company evaluates you as a borrower in general and lets you know what amount, terms and interest you can qualify for. Once you move to buy a home, the mortgage must go through a final approval process, and someone may need to look at your documents again or request additional documents.

Start Preparing for a Mortgage Early

A lender might ask for documents and require that you respond in a certain amount of time or it will deny the application automatically. So, you don’t want to get caught searching for documents during the process. Prepare for a mortgage app early by gathering everything that you anticipate that you might need. Another way to boost your chances for mortgage approval is to check your credit and resolve any negative items you can.

You might also be able to take actions to positively impact your credit before you apply for a mortgage—especially if your report has mistakes on it. If you want to repair your credit before making a big financial move, contact Lexington Law to find out how we can help.


Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

Should I Ruin My Retirement By Helping My Child Through College?

Should I Ruin My Retirement By Helping My Child Through College?

Should I Ruin My Retirement By Helping My Child Through College?Today’s topic will probably be a touchy one and it’s all about whether or not parents should start (or end) saving for children’s college expenses. Ever since I paid off my $38,000 worth of student loans last year, I have received many e-mails from parents who are interested in seeking help for their children.

These e-mails are all related to whether or not parents should risk or sometimes even ruin their retirement by helping their child pay for college.

There is usually one common theme in these e-mails – the parents are usually not on track for retirement, they have debt, or they cannot afford to help their child in college.

Here are some of the stories I have heard in these emails:

  • The parents have over $100,000 in student loans that they took out in THEIR name so their child could go to school. These parents are not on track for retirement and they have a lot of other debt besides student loans.
  • Their child is in medical school and the parents are paying for all of their college expenses plus food, car, rent, etc. These parents are not on track for retirement and they have debt.
  • Their child is in law school and the child said that if his/her parents don’t continue paying for their expenses, that they would hate their parents. This child was even more mad when the parents printed out every single blog post of mine and gave it to them (I did not tell their parents to do that, it was entirely their idea). The child said I was ruining his/her life (yup, that actually happened). These parents are not on track for retirement and they are afraid of losing their child now as well.

I know I’m not a parent.

I’m not a parenting or child expert either.

I know I don’t know what it is like to have a child and the feelings that go along with that. However, I do know that I raised my younger sister after my father passed away and her attending college did make me want to help her so that she wouldn’t have to worry about money as much.

The other day I was talking to my sister and she was bringing up different ways she could possibly side hustle so that she could make extra money. It sort of made me feel bad, and for a moment I thought about helping her financially. Luckily, she snapped me out of it and told “You’ve helped me enough already. Do not worry.”

Her saying that really made me happy. I actually had tears in my eyes!

Instead of just giving her money, I helped her with her budget, I have supported her, I helped her find side hustles so that she could make extra money, I helped her make a plan, and more.

I know all of these other things I am doing have shaped her into an awesome young lady. Yes, she has to learn things the hard way but in the end she will be just fine.

Quick note: If you are looking for information on college funding, I recommend attending the webinar 6 Steps To Quickly Secure Scholarships For College. Jocelyn Paonita Pearson, Founder of The Scholarship System, secured over $125,000 in scholarships and funding by following this system!

Alarming information about student loans.

According to the Federal Education Budget Project, around $100 billion was borrowed by students in fiscal 2014 alone. Also, the default rate on student loan debt averages around 13% to 14%. 90% of student loans in recent years are co-signed by others (mostly parents), and that is a big burden falling on parents.

That’s a lot of debt, and that’s a lot of debt that isn’t being paid for. If you are a parent cosigning on student loan debt, I hope you understand the consequences that can come from it.

Should parents help their children go to college?

Okay, before anyone thinks this is a post bashing all parents who help their children, I should say that I have no problem with parents helping their children pay to go to college. However, that’s AS LONG AS THE PARENTS CAN AFFORD IT.

I have plenty of friends who went to college where a lot of it was paid for by their parents. These parents could afford it, and that is key. If you are on track for retirement, you are not struggling, and so on, and you want to help your children attend college, then by all means go for it.

I also have plenty of friends who went to college where everything was paid for yet their parents clearly could not afford it. Some of these parents took on a second or even a third job so that their child could go to school. They racked up credit card debt and student loan debt as well. Some of these students never paid a cent towards their student loans and their parents were forced to in the end. They risked their retirements, their happiness and more. While I understand that these parents care for their children, they need to realize they are putting their retirements at risk.

Like Shannah said above in the tweet, you can take out loans for student loans, but you can’t for retirement.

When we have children, as long as we are on track for retirement then we will most likely help our children attend and afford college.

I know that my story is not the average story, but I went to college with no help at all. I paid for all three of my degrees on my own, lived on my own, worked full-time, paid for all of my food, and more, all starting just days after I turned 18 and graduated from high school.

It was tough, but I do think it is possible.

For other students, it may take longer to graduate, or it may take less, they may take on more debt, or they may take on less. Everyone’s story is different, but it does not mean it is not possible.

One great story I recently read was How I Graduated College With $100k… in Savings on Budgets Are Sexy. Many say my story is impossible, but just wait until you read this great story. You will be amazed at how awesome Will is! I’m jealous but I know he worked hard for his accomplishments.

How can parents help but not risk their retirement?

Instead of risking your retirement, you can do other things to help your child go to college. Below are some of my tips if you have children who are about to attend college:

You don’t need to help in every way possible. For some reason, there is this myth out there that helping your child go to college means you need to pay for everything for them. Instead of paying for their tuition, textbooks, food, dorm, car, and everything else, set limits. You might help by giving them emotional support, letting them stay in your home while they are in college, helping them find ways to save money for college, helping them cut their college expenses, and more.

Help them get a job. If you don’t have the money to help your child, you may want to help them find a job. This way they can pay for their own expenses. Just a little bit can go a long way.

Help them create a budget. If your child doesn’t have a budget, help them create one now. Read Does your budget suck? – Budget Categories. A budget can go a long way and help someone overcome many financial difficulties.

Related articles:

There are quite a few questions for you today, because I think this topic is an interesting one. I know that not everyone will have the same opinion so I want everyone to chime in! 🙂

Do you think parents should risk their retirement and pay for college? What if the parents are on track for retirement? How much should they help, if anything at all? Will you help your children go to college?

Related Posts

<!–
–>

Source: makingsenseofcents.com

My $38,000 Student Loan Payoff Plan


My $38,000 Student Loan Payoff Plan$40,000.

That’s the total amount of student loans that I accumulated while I was getting my undergraduate and graduate degrees. The amount that is left is still at $38,000 now, mainly because I haven’t really bothered with student loan repayment (even though I should have!) and interest has stupidly been building up. I would have taken out more in student loans but the last couple of semesters I wised up and paid for in cash instead.

It is a lot of student loan debt, but I don’t feel completely horrible about it, I did earn 2 undergraduate degrees and a Finance MBA all for that amount. If I wouldn’t have earned scholarships or paid some of it, it would have easily been 3 or 4 times that amount.

I’ve been talking a lot about my plan to payoff my student loans as fast as possible. Back in February of 2012, I started my action plan for them to be gone. For me, it’s almost to the point where I am obsessing a little too much about my student loan repayment plan. I am constantly trying to figure out my cash flow and budget to see if I can get there any more quickly. I’m really focused on my extra income efforts and it’s an obsession now.

Luckily, I was able to graduate and find a great job back in 2010 and it helped me pay back student loans a little bit and start my student loan repayment plan. So many people told me that I wouldn’t find a job though. They were probably just trying to help me out by telling me what most kids my age didn’t know back then, but I wasn’t listening.

Now that I am done with graduate school (which I am extremely happy about being done with), I really need to start focusing and finally starting to aggressively pay back my student loans and start my student loan repayment. I’ve been paying down my student loans a little bit here and there but not enough where you can actually notice it.

My goal with my student loan repayment plan.

My goal is to have my student loans completely gone by April of 2013, or even possibly March of 2013. I know any sooner is most likely not possible since my plan is already pretty strict. Learning how to pay student loans faster is not easy though. Yes, you can read about how to pay student loans faster, but you really need to sit down and make an action plan.

In order to complete my goal, I need to pay around $7,000 per month on my student loans for around 6 months (which would make the payoff date April of 2013). This most likely sounds insane, but I know it’s possible. No, I will not be living off of Ramen noodles. I will still have the same quality of life and be doing nearly everything the same.

My main thing is that we have really ramped up our income in the past couple of months. W is currently making more than three times what he used to make at his old job, and I’m making more as well. This extra money definitely helps make this goal more attainable.

So, as long as our income continues to remain the same, then my plan should work perfectly. And if we start to make anymore money, then hopefully I will be able to fully pay off my student loans in March, however, a one month difference will not kill me.

Here’s what I have done so far and what you should start with when learning how to pay student loans faster. Also, the below can also help you if you are wanting to learn how to pay for college without going into debt.

Related content: How Do Student Loans Work?

1. Add up your total student loan debt for your student loan repayment plan.

Your very first step with your student loan repayment is to add up your total student loan debt. Use a student loan calculator if you need to.

This may sound stupid, but have you ever truly added up your total student loan debt, down to the exact cent? Enter reality and figure out how much you actually owe. I have a couple of friends who still can’t really say how much they owe, because they aren’t sure. I can understand this because some of the loans that you’ve taken out might have been from 4 or more years ago.

When I added up my total student loan debt, I wasn’t completely sure of the exact dollar amount. YES I REALLY JUST SAID THAT, I’m a bad personal finance blogger. I did know of the general area, but I was off by around $2,000. When I finally sat down and realized the exact dollar amount that I owed, reality really set in.

Once you know that exact number, it’ll help you realize that you need an student loan repayment action plan to pay it off.

Also, using a student loan calculator can help if you want to figure out your monthly student loan payment. You can find several student loan calculators online with just a simple Google search.

Related tip: I highly recommend Credible for student loan refinancing. You can lower the interest rate on your student loans significantly by using Credible which may help you shave thousands off your student loan bill over time.

2. Decide which student loans you’ll pay off first.

It’s really up to you personally. Different people prefer to attack their debt in different ways. With me, I’m trying to get rid of my student loans which have the highest interest rates. A large amount of my loans are at 6.8%.

I prefer to pay the highest so that I am gaining the LEAST amount of interest on my loans that I possibly can. If I stared by knocking out a loan than gets 0% (which none of mine do, just hypothetically), then I would still be gaining interest on my other loans and that, in the end, would not be worth it to me at all.

However, some choose to pay off the loans that have the highest or lowest amounts. This way you can really feel like you are accomplishing something when you knock out loans one by one. If you knocked out the student loans with the lowest amounts first, then you will probably feel like you’re accomplishing more and be more motivated with each student loan that you eliminate.

3. Find extra money to apply towards your student loans.

I’ve really been working hard on finding ways to earn extra income for help paying student loans. I’ve been doing great with this, but it hasn’t always been this easy. In September I made $3,275 and in October I made $3,700 (both after fees but before taxes) in extra income. Before September, I wasn’t making nearly these amounts, and I am still very surprised.

EDIT (February 8, 2013): In the month of January, I made over $6,000 in extra income. I do many things in order to reach this level, read further on my extra income page. I’m a freelance writer, a virtual assistant (read further on how to become a virtual assistant and what exactly a virtual assistant does), and blog owner in my spare time.

For me, the main thing I do to make extra money is blogging and freelancing. If you are interested in starting a blog of your own, I have a tutorial that will show you how to easily make a blog of your own in just minutes. You can find the tutorial here.

My goal right now is to throw nearly all of my extra income towards my student loans so that I can pay off my student loans fast. Now, why am I not saying “ALL” instead of “nearly?” It’s because I am being realistic. I know for a fact that I will not put all of it towards student loans, in fact, I’ve already spent some of it (not a lot though).

Related articles:

4. If you can or want to, then ELIMINATE expenses!

There are probably a couple of things out there that you do not absolutely need. Or maybe there are things in your life that you can get for cheaper. Try calling any of the companies that you do business with and see if they can lower their prices at all. This can be your gym, cell phone, internet and so on. Getting a cheaper price can make student loan repayment attainable.

There are also many other things that you can do. Lowering your auto expenses, lowering your utility bills, eating at home more often, cooking from scratch and so on are all great things you can do to lower your expenses.

We are really working on eating at home as much as we can. We used to go out to eat way too much. What’s the point of eating out at a restaurant every single day? We were being stupid, it’s that plain and simple.

Cutting your expenses can help you pay off your student loans fast and reach your student loan repayment plan with a little less stress.

If you are still in college, I recommend you read my post How To Save Money On Textbooks + Campus Book Rentals Review. I have a coupon code in there as well, so if you are interested in saving money on your textbooks, it can be a great post to read.

What are you doing to pay off your student loans quicker?

 Answer these questions:

1. How much do you owe?

2. How much have you paid off?

3. How long do you think it will take you to pay your student loans off completely?

4. What are you doing to pay them off more quickly?

UPDATE: My student loans are gone (click here to read all about it)! 🙂

Related Posts

<!–
–>

Source: makingsenseofcents.com

Can I Consolidate Student Loans While Still in School?

Consolidation involves combining all of your loans into one single loan through the U.S. Department of Education. It’s a strategic move that will make payments simpler, but you won’t get a lower interest rate. However, it could lower your monthly payment by extending the repayment term.

The earliest point that you can consolidate your federal student loans is when you enter into your grace period, the six-month interval prior to repayment that’s triggered when you graduate, leave school for any other reason or drop below half-time enrollment.

You can also consolidate at any point during your repayment.

Parents, however, can consolidate parent PLUS loans at any time, including while their student is still in school.

Consider making interest payments in school

What you can do while in school is make interest payments on your debt.

While you’re in school, interest grows daily on the amount you borrowed. When you start repaying the debt, the accrued interest amount capitalizes, which means it’s added to the total amount you owe.

By making interest payments while you’re in school, you can lower the total balance you’ll need to pay off when you leave.

When can I refinance my student loans?

Refinancing, unlike consolidation, is done through private lenders, combining existing student loans into one new one at a lower rate.

Most lenders require a bachelor’s degree to qualify, as well as credit scores at least in the high 600s and stable finances that allow you to pay all of your debts. Some approve borrowers approaching graduation or those who have left school without earning a degree.

You can refinance both federal and private loans, but consider holding off on refinancing federal student loans since you’ll lose out on opportunities for forgiveness and income-driven repayment.

Source: nerdwallet.com

Who Has the Lowest Student Loan Refinance Rates?

Key takeaways

  • Compare rate offers from several lenders to determine which will give you the lowest rate.

  • Borrowers with high credit scores and low debt-to-income ratios are more likely to get approved at lower rates.

  • Don’t refinance right now if you have federal student loans; you’ll lose the interest-free forbearance benefit.

The lender that has the lowest advertised student loan refinance rates may not be the one that gives you the best deal.

You’ll need to compare student loan refinance offers from several lenders to determine which has the lowest rate for you. Rate offers can vary greatly from lender to lender and will largely depend on your credit score and debt-to-income ratio, or DTI.

Here’s what you need to know to increase your odds of getting the lowest rate.

Who gets the lowest student loan refinance rate?

Many lenders require a credit score in the high 600s and a DTI of less than 50% to refinance a student loan. And the better those numbers are, the lower the interest rate you’ll qualify for.

For context, Earnest’s minimum FICO is 650, but the average score of approved applicants is 760. And while Lendkey allows up to 50% DTI, the average for approved borrowers is 27%.

Still, it doesn’t hurt to see if you can get a lower rate than you have now. Pre-qualifying won’t affect your credit, and there are no fees to refinance a student loan. If you don’t get the lowest rate on your first student loan refinance, you can refinance again when you have a higher salary and longer credit history.

How to get the lowest student loan refinance rate

Pay down other debt

Paying down your debt serves two purposes to help you get a better student loan refinance rate: It can help your credit score and lower your DTI.

Tackle your credit score with extra payments or on time payments above the required minimum. Extra payments decrease your credit utilization ratio, which is your balance divided by your credit limit. Credit utilization is a big part of your credit score, so aim to keep it below 30% for the most improvement.

The extra payments will also help you pay down your debts fast, which will increase your cash flow. Cash flow is the money you have left over after you pay your bills. Lenders look closely at cash flow to gauge how likely you’ll be able to repay a refinanced student loan. The more cash flow you have, the lower interest rate you’ll likely get.

If you can’t pay extra on your debts, you can improve your cash flow by earning extra money through a part-time job or side hustle.

Get a co-signer

Adding a qualified co-signer to your student loan refinance application could lead to a lower rate than you would get on your own.

A co-signer is responsible for your loan if you miss payments and gives the lender another person to hold accountable for the debt. The refinanced student loan will also show up on your co-signer’s credit report, and could impact their DTI.

A co-signer who exceeds the lender’s minimum requirements will give you the best shot at a lower rate. But look for student loan refinance lenders that offer a co-signer release after a set amount of successful payments. That way, you can still have the benefit of a lower interest rate and let your co-signer off the hook for your debt.

Shop around

Once you’re ready, check with several lenders to see which will give you the lowest rate. Make sure the lenders will show your interest rate offer without a hard credit check, which could hurt your score.

Use this calculator to see the rates you qualify for and how much money you could save.

Source: nerdwallet.com