Have you been kept from applying for loans because of bad credit history? Do you see your dreams of college being taken from you because of this? Admittedly, it can be a great deal easier for you if you have a good credit rating to get the approval you need- BUT it is not as hard as some might think to get a loan, even with a credit history that is less than ideal.An example? Some don’t consider credit rating as essential a factor as others when approving student loans, such as The Stafford loan. This is a popular US Department of Education loan, and they assume that applicants are leaving high school to go to college, and are young people with no credit history at all. Another example is Perkins loan, who also practices the same method, and they are a federal student loan for the most destitute families.Unless you’ve previously defaulted on a federal student loan, bad credit history doesn’t need to be nearly as helpless as you may have been led to believe! If you have bad credit student loans, but your parents are fine, you might want to consider A PLUS loan, since it is arranged with your parents instead of you. It is put in place for parents who are financially supporting their children through college, and is a viable option for many young adults.Federal funding is also available, tailored to students who have struggled with their credit history in the past. This is definitely worth at least looking into, since the requirements are less rigorous than other lending companies and banks. One more word of advice: if you applied for a federal student loan and were rejected, it’s not the end of the world.Try a private loan. Especially if you are going into a field with high earning potential, like a legal or medical profession, this can be your best choice.
Refinancing your home – everyone’s doing it! Everywhere you turn, there’s someone talking about refinancing; when they refinanced their home, how their parents refinanced their home, when are you going to refinance your home… and so on.If everyone’s doing it, it must be the right thing to do… right?Refinancing your home does have some benefits, there’s no doubt about that. After all, if it didn’t, it wouldn’t be such hot news.But does that mean that there’s nothing for you to think about or consider, that you should just run right out and sign up for the fastest and easiest refinancing deal you can get? Refinancing is like a windfall of cash from your home, right?Absolutely not. Refinancing your home is a legal contract and a debt that you’re entering into, and one that should be done only after you’ve given it some thought, time, and attention. There have been many homeowners who have made that mistake, of rushing out to sign the first refinancing deal they can, only to regret it later when they realized just what they had done.Why is that? What information did they miss or refuse to consider?If you don’t want to make the same mistake they did, if you want to be sure that refinancing really is the best deal for you and your family and your unique financial situation, here are seven critical factors about refinancing that you must consider first:1. What it means to refinance.Refinancing your home means setting aside your original mortgage in order to sign a new one; this new mortgage amount would include the balance on your current mortgage plus its own interest amount.When refinancing, you are basically asking the bank to set aside your current mortgage and then loan you the money you currently owe on your home all over again. So, if you originally borrowed $150,000 for your home purchase and since then have paid enough so that you currently only owe $100,000 on your mortgage, to refinance means to set aside that original loan and ask the bank to lend you that $100,000 as a fresh loan.This is important because many people think that refinancing is like a home equity windfall, where you adjust your current mortgage to get cash in your pocket from your home’s equity.This just isn’t correct. Refinancing is a completely new mortgage that replaces your old one.2. Not everyone is eligible to refinance.Your original mortgage that you currently have on your home is a legal contract that you’ve entered into, obligating you for the life of that loan. Not every bank or lending institution even allows for you to set that loan aside and find a new mortgage.Additionally, refinancing into a new mortgage also has qualifications that come with it, including credit history, the home’s value, and so on. Some people have found that their poor credit history has made them ineligible for refinancing, or for refinancing at a lower interest rate than what you have currently. As with other loans and even your original mortgage, the better your credit history, the lower the interest rate you are offered. If you still have poor credit, you might not be eligible for an interest rate that’s any better than what you currently have.To think that you’re automatically eligible for refinancing without first checking with your current mortgage holder to see if you can even set aside this original mortgage, or if your credit history is adequate, would be a mistake. It will save you a lot of time and effort if you first check with your current mortgage holder regarding their policy on refinancing, and do some checking on your own credit score as well.3. There is often a penalty involved.When you realize that refinancing means setting aside your original mortgage, you may naturally ask why your bank would allow you to do that. Won’t they lose money in the interest that you would continue to pay for the life of that mortgage?The answer is yes, they would lose money. Which is why most banks have a stiff penalty for anyone that wants to pay off their mortgage early or refinance with another lending institution.And sometimes this penalty can be steep. It’s usually figured as a percentage of your current mortgage, so if the principal amount that you still owe is quite high, this penalty will be rather high as well. If you’re not sure if your current lender includes a penalty for early payment, don’t hesitate to ask them directly.4. There are fees and closing costs that come with refinancing.Remember when you signed your original mortgage, and you had to pay a number of fees – credit check, appraisal fee, home inspector’s fee, processing fee, title search, title insurance, and so on?All of these fees and costs are also tacked on when you refinance. And as with the penalty for early payment, sometimes these fees can be very high as well, even into the thousands of dollars.5. It doesn’t always save money.Consider the information we’ve given you already, about penalties and fees associate with refinancing.Many people have found that when they add up all these costs, they really are not saving any money with refinancing, at least not right away.Most lending institutions refer to a “break-even point.” This means how many months it takes of paying a smaller mortgage payment before you’ve saved enough to cover, or break even, from these penalties and fees.To figure if you would really save money on a new mortgage, you would need to add up all the potential fees, penalties, and costs with refinancing. Then, you can take the amount of money you would save every month with your new mortgage, and divided those costs by this number, and that will tell you how many months it will take before you break even.Let’s give you a quick example. Suppose your penalties, closing costs, and other fees add up to $3,000.Suppose your current mortgage payment is $1,000. With refinancing, your new mortgage payment will be $850. This means you would be saving $150 per month.$3,000 divided by $150 is 20; it would take you 20 months (almost two years) to just break even from your penalties and fees.Obviously your own numbers would be different, but it does give you some information to think about. If your savings per month will be even less and your costs even more, and it takes you years to just break even, is it worth the time and hassle to go through refinancing in the first place?6. It can actually save you thousands of dollars in the long run.If we just said that the penalties and costs can make refinancing not worth the time and hassle, how can we say now that it might actually save you thousands of dollars?Simply put, many people signed up for an adjustable rate mortgage (ARM) years ago when interest rates were low. They did this because they were able to use a smaller down-payment and had lower mortgage payments at the time, so they were able to afford a home.However, interest rates have a tendency to do nothing but rise, and many people are finding that their mortgage payments are also creeping up. However, their higher payments are doing nothing to pay down the principal of their mortgage but are simply paying more and more toward the interest.If this is true in your case, you may want to consider refinancing in order to lock in a lower interest rate now, before rates get even higher. While an 8% interest rate may seem high if you signed your mortgage at 6%, it will seem very reasonable a few years from now if your ARM reaches 10% or even more.7. It can be wise if you’re using the home equity in other ways.Let’s suppose you are hesitant about refinancing because that 8% interest may seem high compared to the original interest rate you once had.However, there may be other things that you can do with the equity cash back you receive from refinancing, other than put it toward your mortgage payment. For example, are you swimming in credit card debt? What is the interest rate on your credit cards? If it’s higher than the rate on your mortgage (which it usually is), then it might be wise to use that money you get back or save from refinancing to pay down that debt.No, you don’t build equity by paying credit card debt the way you would by paying your mortgage, but many people simply don’t realize how much money they waste on credit card interest payments, especially when they’re paying only the minimum balance month after month, year after year. Assuming that you don’t even use the credit card to increase its balance, you can actually wind up paying half over again (or even more) in interest charges by the time you pay off your credit card.Additionally, you may be thinking of refinancing so that you can use some cash back to invest in your home for repairs or upgrades. These types of things can only increase the value of your home, making it a worthy investment.So depending on how it is that you expect to use the money you would save from refinancing, it might actually be a wise financial decision.These few tips that we’ve outlined here are in no way meant to be an exhaustive education on refinancing. And of course, as we’ve said, your exact numbers and financial situation will be different.However, the point is that for you to make the best decision for yourself and your family, you do need to do some homework. If you’re considering refinancing, set up an appointment with your lending institution or financial counselor. Don’t hesitate to ask questions and make sure you really understand every detail before you sign papers.And in the end, you’ll be able to make the best financial decision for yourself and your family.
As a student approaches graduation they begin to search in earnest for the perfect job. This is also the time to find good student loan consolidation advice. Finding a quality job during this time of economic stress can be a real challenge. A college or university degree will help a great deal. However many recent graduates find that companies are looking at more than just a good education when comes to hiring.In fact many new graduates are surprised to find that they must submit their credit history as part of the job application process. Many employers equate a poor credit history with a poor potential employee. In fact many recruiting services have found that people with good credit histories make better employees.People who are able to manage their personal finances generally are able to manage their job better. Research has shown these individuals are more productive, miss less work and are much less likely to leave a company. Hiring a new employee is very expensive in terms of both time and money. Obviously a company is going to look for the best investment and many times it is the applicant with a good credit history.If you are a typical student then you are carrying both consumer and student loan debt. Education is expensive and that is why few people are able to pay cash for their education. It is not uncommon for a recent graduate to acquire $30,000.00 in student loan debt by the time they receive their diploma. In addition many also have credit card debt exceeding $10,000.00. All of which impacts your credit score and history. Frequently the more loans you have outstanding the lower your credit score will be. Despite the heavy debt load you can do things that will improve your credit history. Probably the most important is to stop using credit cards and start using cash to make daily purchases. Yes this is going to be tough but if you are a good manager you can do it. Make sure you pay all your payments on time and always pay more than the minimum payment. Even paying a few dollars more each month will have an impact on your credit score and history.Your student loan payments will in most cases be deferred until you graduate. However shortly after graduation you will be required to make a payment on each of these loans each and every month. This can mean that you may be making several payments each month. A smarter alternative is to seek good student loan consolidation advice. Consolidating all you loans into one convenient loan makes sense in terms of loan management and reduced cost.Frequently a loan consolidation can save you several hundred dollars a month in payments at a time when your income is low. In some cases you can even combine all your consumer debt including credit card debt and student loans into one loan package. Consolidation will not only lower your payments but increase your credit score. Each student loan program is unique and so it is important to talk to your student loan lender well before graduation.Again seek student loan consolidation advice from your college student financial services office and your student loan provider. Stop using credit cards and pay your month payments on time with more than the minimum payments and you will improve your credit score and history. Proper management of your credit history can yield benefits when it comes to finding the best job after graduation.
There are a number of ways for you to get a debt consolidation loan without owning a home. There are two main paths for you to go down when looking at how to do this–you can look into other secured loan options, or look into unsecured financing. Both of these paths will have their own advantages and disadvantages, and frame most of your borrowing experience, so they should be considered carefully.As far as looking into other secured options go, you can always offer some other form of collateral. Having collateral gives you a number of benefits. Lenders decide whether to lend to you at all, and how much of an interest rate to offer you, based on how likely it is that they will get the money they lend back. When you have collateral they have some way to recuperate their funds if you fail to repay them, so they’re more willing to lend to you, and at a more reasonable interest rate. While most banks will only accept real estate as collateral, it’s fairly common for other lenders to accept a vehicle, and you can often find those who will accept high priced collectibles or jewelry.Unsecured options have the downside of being based largely on your credit history. If your rating isn’t in great shape you’ll have a harder time finding lenders who will work with you, and your interest rate will be higher. But, if you know that going in and this is what’s available for you, you can still try and make the best of it. If there is anything you can do to improve your credit score, you should take care of that first, as any improvement will help. If you have a well paying job that you’ve had for a while this will also greatly help your situation, as it shows stability and a way to repay the loan.No matter which of these paths you decide to go down, the important thing is that you are taking control of your financial problems.
The responsibilities of a cosigner don’t end when the bank approves the student loan application and doles out the money. In truth, the responsiblity has only just gotten started.As a cosigner, your first responsibility will be to counsel the person asking you cosign on their loan and advising them as to the best course of action. Make a gut decision if this amount is the right amount. Too much borrowed could allow for excess spending, and a tough financial burden if the student drops out of school. Too little borrowed, and the student may not be able to complete studies due to a lack of funding. Either way, the student loses. And the cosigner could get stuck with the bill.Moreover, ask all the “what if” questions: What if you quit school? How will you pay off this loan? What if you move out of state? How will I reach you? What if you worked part-time and only took out a smaller, more affordable student loan to get your through school? What if you sought out loan forgiveness programs available in certain professions like nursing, teaching, and the military?”In non-legal terms, a cosigner agrees, with the simple stroke of pen adding their name to the college student loan contract, to assume equal responsibility for loan repayment. The cosigner then has assumed a loan obligation which could negatively impact their credit history and lower their credit score.As a student loan cosigner, you must be responsible to retain copies of all important papers related to the loan, and develop leverage of the borrower to ensure that this loan gets repaid on time.Entering into a loan agreement means that the cosigner is pledging to pay off the loan if the student
borrower fails to live up to the terms of the loan. If the loan goes into default, the cosigner will be equally liable. And, since a cosigner will probably have more tangible assets, a lender will be able to file a lien on the cosigner’s property to recover on the loan.So, say if the borrower stops making payments, the cosigner will have to take over the payments. You may even be responsible for the full payment of the loan in the event that the borrower dies or is disabled, though oftentimes a student loan can be forgiven if the right type of loan has been taken out.Some banks will relieve the cosigner of his or her obligation after the first two years of loan repayments. After the student has made his or her first 24 consecutive monthly payments on time and meets certain credit requirements, he or she often has the opportunity to request to remove the cosigner from the loan.A cosigner should have a good credit history and steady income, plus full trust in the person he is helping get a loan that he or she will honestly do eveything they can do to repay the loan when the note comes due.What does a cosigner need to sign on the dotted line and make the loan go through? All lenders require different documentation to approve a student loan. During the application process, cosigners will generally be asked to supply some or all of the following information:Current address, phone numbers, and alternate contact information
Personal reference information, including full names and phone numbers
Employment information: employers, address, phone numbers, supervisors, time worked at each job, and gross income
Your monthly rent or mortgage payment
Social Security number (some will require you produce the actual Social Security card so they can photocopy it and keep it with the loan application).When you cosign, your credit history will be examined by the lender. A higher credit score, stable work history and a long-term successful use and repayment of previous credit should help you and the borrower get approved for the loan.There are two rights that most co-signers should request from the lender. One, demand that the lender give them proper notification of any and all late payments. And, two, writing into the loan agreement a clause limiting the cosigner’s financial responsibility only to the loan’s principle, and excluding late fees and attorney costs. Such rights, properly exercised, could limit the financial liability to the cosigner in the end, should the student loan go into default.If you are a Sallie Mae cosigner, then there are new protections available. Under the Sallie Mae’s ‘Smart Option Student Loan’, if the primary borrower dies, becomes permanently and totally disabled, whatever balance remains of the loan is forgiven. Thus, the cosigner is not expected to continue making those monthly loan payments. (or permanent and total disability), the remaining balance would be forgiven. However, for other loans such as a Perkins student loan or a Stafford student loan you need to read over the promissory note carefully to see if similar protections apply.As was stated earlier, the responsibilities of a cosigner don’t end when the application is approved and the loan is funded. The responsibility bestowed on a cosigner after all the money has been spent, the classes taken, and the loan payments begin could last for many years. Thoughtful analysis of all the factors surrounding such a loan request should be carefully considered before one agrees to cosign a college loan.
Credit scores are a critical component for lenders trying to approve home loan borrowers. Multiple studies by the Federal Home Loan Mortgage Corporation (usually called Freddie Mac) have shown that credit scores are some of the best indicators for a borrower’s long term performance. So, what exactly does your credit report show?The basic information in your report identifies you and is updated as you apply to various lenders. This information includes your name, date of birth, social security number, address, and job history.Your credit report also shows the lines of credit that you’ve previously established, such as car loans, home mortgages, and credit cards. Each line of credit shows the date that it was opened, what you currently owe, a history of payment, and how much you’re allowed to borrow. These credit accounts basically show a likelihood of spreading yourself too thin financially. Although it’s good to have some of these items in your report (otherwise, you wouldn’t have a credit history), it can actually hurt you to have too many accounts currently opened. So, if you have more than, say, three or four credit cards, it would be beneficial for you to close some of the accounts that you don’t use. Credit counselors can help you determine ways to improve your credit and can give you advice about such strategies.A report also gives a history of everyone who has accessed it, including you. When you access your own credit report (which you should do periodically in order to check for errors), that’s considered a voluntary inquiry. The report also shows involuntary inquiries, which is when lenders request your report for getting you approved. Lenders only order a copy of your credit report if you apply to them for a loan, and you have to give them authorization to do this. When you have five or more lender inquiries in a year or so, this can raise red flags for lenders. Having too many inquiries suggests that you may be requesting a lot of money that you don’t have – maybe you’ve maxed out credit cards, or you’ve recently bought a lot of items that you can’t really afford. So, keep this history in mind when you apply for loans.The last information on credit reports shows whether you have overdue items such as foreclosures, bankruptcies, property liens, or legal suits. This kind of kind of information goes on public records due to collection agencies, and it can major damage to a borrower’s ability to get approved for future loans. In fact, this fourth section can cause the most harm on the entire credit report for borrowers.If you have questions about your credit report – or questions about how to improve your credit report – be sure to talk with a credit counselor. If you’re considering buying a home, the earlier you start on building your credit report, the better your chances will be of getting the home loan you need.