The financial camps are divided between paying off your smallest first vs. your highest interest student loan. So whoâs right? Finance people can agree on a few things. Some debts like payday loans and IRS back taxes are worse than…
The post Which Student Loan Should You Pay First? appeared first on Modern Frugality.
Due to financial consequences of COVID-19 â and the broader impact on our economy â now is an excellent time to consider refinancing most loans you have. This can include mortgage debt you have that may be converted to a new loan with a lower interest rate, as well as auto loans, personal loans, and more.
Refinancing student loans can also make sense if youâre willing to transition student loans you currently have into a new loan with a private lender. Make sure to take time to compare rates toÂ see how you could save money on interest, potentially pay down student loans faster, or even both if you took the steps to refinance.
Get Started and Compare Rates Now
Still, itâs important to keep a close eye on policies and changes from the federal government that have already taken place, as well as changes that might come to fruition in the next weeks or months. Currently, all federal student loans are locked in at a 0% APR and payments are suspended during that time. This change started on March 13, 2020 and lasts for 60 days, so borrowers with federal loans can skip payments and avoid interest charges until the middle of May 2020.
Itâs hard to say what will happen after that, but itâs smart to start figuring out your next steps and determining if student loan refinancing makes sense for your situation. Note that, in addition to lower interest rates than you can get with federal student loans, many private student lenders offer signup bonuses as well. With the help of a lower rate and an initial bonus, you could end up far âaheadâ by refinancing in a financial sense.
Still, there are definitely some negatives to consider when it comes to refinancing your student loans, and weâll go over those disadvantages below.
Should You Refinance Now?
Do you have student loan debt at a higher APR than you want to pay?
If no: You shouldnât refinance.
If yes: Go to next question.
Do you have good credit or a cosigner?Â
If no: You shouldnât refinance.
If yes:Â Go to next question.
Do you have federal student loans?
If no: You can consider refinancing
If yes: Go to next question
Are you willing to give up federal protections like deferment, forbearance, and income-driven repayment plans?
If no: You shouldnât refinance
If yes: Consider refinancing your loans.
Reasons to Refinance
There are many reasons student borrowers ultimately refinance their student loans, although they can vary from person to person. Here are the main situations where it can make sense to refinance along with the benefits you can expect to receive:
Secure a lower monthly payment on your student loans. You may want to consider refinancing your student loans if your ultimate goal is reducing your monthly payment so it fits in better with your budget and your goals. A lower interest rate could help you lower your payment each month, but so could extending your repayment timeline.
Save money on interest over the long haul. If you plan to refinance your loans into a similar repayment timeline with a lower APR, you will definitely save money on interest over the life of your loan.
Change up your repayment timeline. Most private lenders let you refinance your student loans into a new loan product that lasts 5 to 20 years. If you want to expedite your loan repayment or extend your repayment timeline, private lenders offer that option.
Pay down debt faster. Also, keep in mind that reducing your interest rate or repayment timeline can help you get out of student loan debt considerably faster. If youâre someone who wants to get out of debt as soon as you can, this is one of the best reasons to refinance with a private lender.
Why You Might Not Want to Refinance Right Now
While the reasons to refinance above are good ones, there are plenty of reasons you may want to pause on your refinancing plans. Here are the most common:
You want to wait and see if the federal government will offer 0% APR or forbearance beyond May 2020 due to COVID-19. The federal government has only extended forbearance through the middle of May right now, but they might lengthen the timeline of this benefit if you wait it out. Since this perk only applies to federal student loans, you would likely want to keep those loans at 0% APR for as long as the federal government allows.
You may want to take advantage of income-driven repayment plans. Income-driven repayment plans like Pay As You Earn (PAYE) and Income-Based Repayment let you pay a percentage of your discretionary income each month then have your loans forgiven after 20 to 25 years. These plans only apply to federal student loans, so you shouldnât refinance with a private lender if you are hoping to sign up.
Youâre worried you wonât be able to keep up with your student loan payments due to your job or economic conditions. Federal student loans come with deferment and forbearance that can buy you time if youâre struggling to make the payments on your student loans. With that in mind, you may not want to give up these protections if youâre unsure about your future and how your finances might be.
Your credit score is low and you donât have a cosigner. Finally, you should probably stick with federal student loans if your credit score is poor and you donât have a cosigner. Federal student loans come with fairly low rates and most donât require a credit check, so theyâre a great deal if your credit is imperfect.
Important Things to Note
Before you move forward with student loan refinancing, there are some details you should know and understand. Here are our top tips and some important factors to keep in mind.
Compare Rates and Loan Terms
Because student loan refinancing is such a competitive industry, shopping around for loans based on their rates and terms can help you find out which lenders are offering the most lucrative refinancing options for someone with your credit profile and income.
We suggest using Credible to shop for student loan refinancing since this loan platform lets you compare offers from multiple lenders in one place. You can even get prequalified for student loan refinancing and âcheck your rateâ without a hard inquiry on your credit score.
Check for Signup Bonuses
Some student loan refinancing companies let you score a bonus of $100 to $750 just for clicking through a specific link to start the process. This money is free money if youâre able to take advantage, and you can still qualify for low rates and fair loan terms that can help you get ahead.
We definitely suggest checking with lenders that offer bonuses provided you can also score the most competitive rates and terms.
Consider Your Personal Eligibility
Also keep your personal eligibility in mind, including factors beyond your credit score. Most applicants who are turned down for student loan refinancing are turned away based on their debt-to-income ratio and not their credit score. Generally speaking, this means they owe too much money on all their debts when you compare their liabilities to their income.
Credible also notes that adding a creditworthy cosigner can improve your chances of prequalifying for a loan. They also state that âmany lenders offer cosigner release once borrowers have made a minimum number of on-time payments and can demonstrate they are ready to assume full responsibility for repayment of the loan on their own.â
Itâs Not âAll or Nothingâ
Also, remember that you donât have to refinance all of your student loans. You can just refinance the loans at the highest interest rates, or any particular loans you believe could benefit from a different repayment term.
4 Steps to Refinance Your Student Loans
Once youâre ready to pull the trigger, there are four simple steps involved in refinancing your student loans.
Step 1: Gather all your loan information.
Before you start the refinancing process, it helps to have all your loan information, including your student loan pay stubs, in one place. This can help you determine the total amount you want to refinance as well as the interest rates and payments you currently have on your loans.
Step 2: Compare lenders and the rates they offer.
From there, take the time to compare lenders in terms of the rates they can offer. You can use this tool to get the process started.
Step 3: Choose the best loan offer you can qualify for.
Once youâve filled out basic information, you can choose among multiple loan offers. Make sure to check for signup bonus offers as well as interest rates, loan repayment terms, and interest rates you can qualify for.
Step 4: Complete your loan application.
Once you decide on a lender that offers the best rates and terms, you can move forward with your full student loan refinancing application. Your student loan company will ask for more personal information and details on your existing student loans, which they will combine into your new loan with a new repayment term and monthly payment.
The Bottom Line
Whether it makes sense to refinance your student loans is a huge question that only you can answer after careful thought and consideration. Make sure you weigh all the pros and cons, including what you may be giving up if youâre refinancing federal loans with a private lender.
Refinancing your student loans can make sense if you have a plan to pay them off, but this strategy works best if you create a debt repayment plan you can stick with for the long-term.
The post Should You Refinance Your Student Loans? appeared first on Good Financial CentsÂ®.
The new year is right around the corner and if youâre like most people, youâve probably got a running list of resolutions to achieve and milestones to reach. If getting out of debt ranks near the top, nowâs the time to starting thinking about how youâre going to hit your goal. Developing a clear-cut action plan can get you that much closer to debt-free status in 2016.
1. Add up Your Debt
You canât start attacking your debt until you know exactly how much you owe. The first step to paying down your debt is sitting down with all of your statements and adding up every penny thatâs still outstanding. Once you know how deep in debt you are, you can move on to the next step.
2. Review Your Budget
A budget is a plan that sets limits on how you spend your money. If you donât have one, itâs a good idea to put a budget together as soon as possible. If you do have a budget, you can go over it line by line to find costs you can cut out. By eliminating fees and unnecessary expenses like cable subscriptions, youâll be able to use the money you save to pay off your debt.
3. Set Your Goals
At this point in the process, you should have two numbers: the total amount of money you owe and the amount you can put toward your debt payments each month. Using those two figures, you should be able determine how long itâs going to take you to pay off your mortgage, student loans, personal loans and credit card debt.
Letâs say you owe your credit card issuer $25,000. If you have $500 in your budget that you can use to pay off that debt each month, youâll be able to knock $6,000 off your card balance in a year. Keep in mind, however, that youâll still need to factor in interest to get an accurate idea of how the balance will shrink from one year to the next.
4. Lower Your Interest Rates
Interest is a major obstacle when youâre trying to get out of debt. If you want to speed up the payment process, you can look for ways to shave down your rates. If you have high-interest credit card debt, for instance, transferring the balances to a card with a 0% promotional period can save you some money and reduce the amount of time itâll take to get rid of your debt.
Refinancing might be worth considering if you have student loans, car loans or a mortgage. Just remember that completing a balance transfer or refinancing your debt isnât necessarily free. Credit card companies typically charge a 3% fee for balance transfers and if youâre taking out a refinance loan, you might be on the hook for origination fees and other closing costs.
5. Increase Your Income
Keeping a tight rein on your budget can go a long way. But thatâs not the only way to escape debt. Pumping up your paycheck in the new year can also help you pay off your loans and increase your disposable income.
Asking your boss for a raise will directly increase your earnings, but thereâs no guarantee that your supervisor will agree to your request. If youâre paid by the hour, you can always take on more hours at your current job. And if all else fails, you can start a side gig to bring in more money.
Hold Yourself Accountable
Having a plan to get out of debt in the new year wonât get you very far if youâre not 100% committed. Checking your progress regularly is a must, as is reviewing your budget and goals to make sure youâre staying on track.
How much does college cost? This is a question many wonder. There’s rarely a week that goes by where I don’t receive an email from a student or parents of a student who are looking for ways to cut college costs. That’s why today I want to talk about college costs and how you can create a college budget that works so that you can save money in college.
College is very expensive – there is no doubt about that.
However, I want you to know that it IS possible to get a valuable college degree on a budget!
The average public university is over $20,000 per year and the average private university totals over $45,000 once you account for tuition, room and board, fees, textbooks, living expenses and more.
Even with how expensive college can possibly be, there are many ways to cut college expenses and create a college budget so that you can control rising college costs.
Continue reading below to read about the many different ways I cut college costs. While I was not perfect and still racked up student loan debt, I did earn three college degrees on a reasonable budget.
How I Graduated From College In 2.5 Years With 2 Degrees AND Saved $37,500
How I Paid Off $38,000 In Student Loan Debt In 7 Months
The Benefits of Paying Off Student Loan Debt Early
Should I Ruin My Retirement By Helping My Child Through College?
How To Save Money – My Best Money Saving Tips
1. Take classes at a community college to cut college costs.
Whether you are in college already or you haven’t started yet, taking classes at a community college can be a great way to save money.
Earning credits at a community college usually costs just a small fraction of what it would cost at a 4-year college, so you may find yourself being able to save thousands of dollars each semester.
There is a myth out there that your degree is worth less if you go to a community college. That is NOT TRUE at all. When you finally earn your 4-year degree, your degree will only say where you graduated from and it won’t even mention the community college credits at all. So this myth makes no sense because your degree looks the exact same as everyone else’s’ who you went to college with. You might as well save money because it won’t make much of a difference.
I only took classes at a community college during one summer semester where I earned 12 credits, and I still regret not taking more. I probably could have saved around $20,000 by taking more classes at my local community college.
Also, you are most likely just taking general credits at the community college, so it’s not like you would be missing much by taking classes there instead of a college that has a better reputation for the major you are seeking.
If you do decide to go to a community college, always make sure that the 4-year college you plan on attending afterwards will transfer all of the credits. It’s an easy step to take so do not forget! You should do this before you sign up and pay for any classes as well as to make sure that ALL of the classes will transfer succesfully.
2. Take advantage of high school classes to lower your college budget.
Many high schools allow you to take college classes to earn both college and high school credits at the same time.
This is something I highly recommend you look into if you are still in high school, as it saves time and is one of the best ways to save money on college costs.
When I was in my senior year in high school, nearly all of my classes were dual enrollment courses where I was earning college and high school credit at the same time. I took AP classes and classes that earned me direct college credit from nearby private universities. I left high school with around 14-18 credit hours (I can’t remember the exact amount). This way I knocked out a whole semester of college. I could’ve taken more, but I decided to take early release from high school and worked 30-40 hours a week as well.
3. Take all the credits you can to stay within your college budget.
At many universities, you pay a flat fee. So whether you take 12 credit hours or 18 credit hours, you are paying nearly the exact same price.
For this reason, I always recommend that a student take as many classes as they can if they are going to a college that charges a flat fee tuition.
If you think you can still earn good grades and do whatever else you do on the side, definitely get full use of the college tuition you are paying for!
4. Apply for scholarships to lower your college costs.
Before you start your semester, you should always look into scholarships, grants, FAFSA, and more. You usually have to turn in any paperwork around spring time for the following semester, so I highly recommend doing this right now if you are going to college in the fall.
Another myth will be busted right now. Many believe that all scholarships are impossible to have or it means you have to win a contest. That is just a myth.
I received around $16,000 a year in scholarships to the private university I attended. That helped pay for a majority of my college tuition. The scholarships were easy for me to get as they were all just because I earned good grades in high school and scored well on tests. I received scholarships to all of the other colleges I applied for as well just for good grades, so I know they can be found as long as you do well in high school!
There are other ways to find scholarships as well. You can receive scholarships from private organizations, companies in your town, and more. Do a simple Google search and I am sure you will find many free websites that list out possible scholarships for you to apply to.
Tip: Many forget that you usually have to turn in a separate financial aid form directly to your college. Don’t forget to do this by the deadline each year!
5. Search for cheaper textbooks to lower your college budget.
Students usually spend anywhere from around $300 to $1,000 on textbooks each semester, depending on the amount of classes they are taking and their major.
For me, many of my classes required more than one book and each book was usually around $200 brand new. This means if I were to buy all of my college textbooks brand new, I probably would have had to spend over $1,000 each semester.
I saved a decent amount of money on college textbooks by renting them and finding them used. Renting them was nice because I just had to pay one fee and didn’t ever have to worry about what to do with the textbook after the class was done, as I only had to return them. There was no worrying about the book being worthless if a new edition came out, which was nice! Buying books used was nice occasionally as well just because sometimes I could make my money back.
I recommend Campus Book Rentals if you are looking for textbook rentals. Their rentals are affordable and they make getting the textbooks you need easy.
Read: How To Save Money On Textbooks + Campus Book Rentals Review
6. Skip the high price of living on campus to cut your college budget.
To save more money, I decided to live on my own. I didn’t have the option of living at home after high school and living on campus would have cost me a ton of money.
Instead, I found a very cheap rental house (the house was VERY small and probably could have been considered a tiny home) and was able to somewhat easily commute to work and college from it. I probably saved around $500 a month by living on my own instead of on campus, and I learned a lot by living on my own at a young age as well.
If you can live at home though and want to save money, I highly recommend it if it’s an option for you. You can save thousands of dollars a semester by doing this!
I understand that some are against this because it may impact your “college experience,” but I think most people would be fine not living on campus, especially if it’s not in the budget. You could probably save around $40,000 over the years on your degree by living at home.
How did you cut college costs and control your college budget? How much student loan debt did you have when you graduated?
The post 6 Ways I Saved Money On College Costs appeared first on Making Sense Of Cents.
A consumer loan is a loan or line of credit that you receive from a lender.
Consumer loans can be auto loans, home mortgages, student loans, credit cards, equity loans, refinance loans, and personal loans.
This article will address each type of consumer loans.
Get Approved for personal loan today.
Types of consumer loans:
Consumer loans are divided into several kinds of categories. They include auto loans, student loans, home loans, personal loans and credit cards. Regardless of type, consumer loans have one thing in common: you have to repay the loan at some period of time.
Most people who are thinking of buying a car will apply for an auto loan. That is because buying a car is expensive.
In fact, it is the second largest expense you will ever make besides buying a house. And unless you intend to buy it with all cash, you will need a car loan.
So, car loans allow consumers to purchase a vehicle where they may not have the money upfront. With an auto loan, your payment is broken into smaller repayments that you will make over time every month.
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You can choose between a fixed or variable interest rate loan. But the most important thing is, whether you’re buying a new or used car, it’s important to compare loans to help you find the right auto loan for your needs.
Start comparing auto loans now!
Another, and most common, type of consumer loans are home loans. A home loan or mortgage is a loan a consumer receives for the purpose of buying a house.
Buying a house is, undoubtedly, the biggest expense you’ll ever make in your life. So, for the majority of consumers who want to purchase a house, they will need to borrow the money from a lender.
Home loans are paid back over a period of time. Those mortgages term are typically 15 to 30 years. They can be variable rate or fixed rate. A fixed rate means that your repayments are locked in for a fixed term.
Whereas a variable rate means that your repayments depend on the interest rate going up or down when the Federal Reserve changes the rate.
Over the loan’s term, you will pay back the principle amount of the loan plus interest. This makes it very important to compare home loans. Doing so allows you to save thousands of dollars on interest and fees.
The most common types of consumer loans are personal loans. That is because a personal loan can be used for a lot of things.
A personal loan allows a consumer to borrow a sum of money. The borrower agrees to repay the loan (plus interest) in installments over a period of time.
A personal loan is usually for a lower amount than a home loan or even an auto loan. People usually ask for $500 to $20,000 or more.
A personal loan can be secured (the consumer backs it with his or her personal assets) or unsecured (the consumer does not have to use his or her personal asset).
But most of them are unsecured, so getting approved for one will depend on your credit score, income and other factors.
But consumers use personal loans for different purposes. People take out personal loans to consolidate debts, such as credit card debts. You can use personal loans for a wedding, a holiday, to renovate your home, to buy a flt screen TV, etc…
Consumers use these types of loans to finance their education. There are two types of student loans: federal and private. The federal government funds a federal student loan.
Whereas, a private entity funds a private student loan. Generally, federal student loans are better because they come at a lower interest rate.
Believe it or not credit cards is a type of consumer loans and they are very common. Consumers use this type of loan to finance every day expenses with the promise of paying back the money with interest.
Unlike other loans, however, every time your pay with your credit card, you take a personal loan.
Credit cards usually carry a higher interest rate than the other loans. But you can avoid these interests if you pay your balance in full immediately.
Small Business Loans
Another type of consumer loans are small business loans. These loans are used specifically to create a business or to expand an already established business.
Banks and the Small Business Administration (SBA) usually provide these loans. Small Business Loans are different than personal loans, because you usually have to provide a collateral to get the loan.
The collateral serves as a way to protect the lender in case you default on the loan. In addition, you will also need to provide a business plan for the lenders to review.
Home Equity Loans
If you have your own home, you can borrow money against it. These types of consumer loans are called home equity loans. If you’ve paid off the mortgage on the home, you can borrow up to the full value of the home.
Vice versa, if you’ve paid half of the mortgage on the home, you can borrow half of the value of the house. You can use a home equity loan for several purposes like you would with a personal loan.
But most consumers use this type of loan to renovate their house. One disadvantage of this type of loan, however, is that you can lose your house in case of a default, because your house is used as a collateral for the loan.
Loan refinancing is a basically taking a new loan to replace an existing one. But you get this loan specifically either to refinance your existing mortgage or to refinance your student loans or a personal loan.
Consumers usually refinance in order to receive a lower interest rate or to reduce the amount of monthly payments they are making on their existing loans.
However, reducing to a lower payment will lengthen the time to pay off the loan and you will accrue interest as a result.
Consumers also use this type of loan to pay their existing loans off faster. However, some mortgage refinancing loans come with prepayment penalties. So do you research in order to avoid that extra charge.
The bottom line is consumer loans can help you with your goals. However, understanding different loan types is important so that you can choose the best one that fits your particular situation.
So do you need a consumer loan?
Get Approved for personal loan today.
Speak with the Right Financial Advisor
If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post What Is A Consumer Loan? appeared first on GrowthRapidly.