Loans

Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, which is most commonly a house (in this case a mortgage is secured against the house.) The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset in order to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.

Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending. Certainly many, if not most, debt consolidation transactions do not involve predatory lending.

What is a Federal Student Consolidation Loan?

A Federal Consolidation Loan is a loan that you can use to pay off all or a portion of your original eligible federal student loans. You combine (consolidate) your existing federal student loan debt into one new loan.

What are the terms of a Federal Consolidation Loan?

o The interest rate on a Federal Consolidation Loan is fixed, meaning it will not change over the life of the loan, even if the interest rates on other federal loans go up (or down).

o The interest rate is calculated from the weighted average of the interest rates of your
existing loans, rounded up to the nearest 0.125%, with a cap of 8.25%.

o There are no fees to apply for or receive a Federal Consolidation Loan.

o The repayment term is up to 30 years, depending on the total amount of your student loan debt, and there is no pre-payment penalty.

Why should you consider consolidation?

With a Federal Consolidation Loan, you can benefit from:

o Lower monthly payments

o Fixed interest rates

o Only one payment for your federal loans each month

o New or renewed deferments

Because you are allowed up to 30 years to repay your loan, your monthly payment can be significantly lower with a consolidation loan, although you may pay more in total interest over the life of your loan.

When should you consolidate?

Only loans that are in grace, deferment, forbearance, or repayment can be consolidated into a Federal Consolidation Loan. Loans that have an in-school status cannot be consolidated.

There are no deadlines. However, Federal Stafford Loans that are in the grace period (or in deferment) have the lower rate compared to loans in repayment (or forbearance). Because the current interest rate is used in the calculation to determine the weighted, fixed interest rate of your consolidation loan, you will save money over the long run if you consolidate while in your grace period or while in deferment. (If you choose to consolidate while in your grace period, keep in mind that your grace period will be cancelled when the consolidation loan is issued and you will begin repayment.)

Student loan consolidation

In the United States, federal student loans are consolidated somewhat differently, as federal student loans are guaranteed by the U.S. government. In a federal student loan consolidation, existing loans are purchased and closed by a loan consolidation company or by the Department of Education (depending on what type of federal student loan the borrower holds). Interest rates for the consolidation are based on that year’s student loan rate, which is in turn based on the 91-day Treasury bill rate at the last auction in May of each calendar year.

Student loan rates can fluctuate from the current low of 4.70% to a maximum of 8.25% for federal Stafford loans, 9% for PLUS loans. The current consolidation program allows students to consolidate once with a private lender, and reconsolidate again only with the Department of Education. Once the student has consolidated their loans, the loans are set to a fixed rate based on the year they consolidated; reconsolidating does not change that rate.

Federal student loan consolidation is often referred to as refinancing, which is incorrect because the loan rates are not changed, merely locked in. Unlike private secton debt consolidation, student loan consolidation does not incur any fees for the borrower; private companies make money on student loan consolidation by reaping subsidies from the federal government.

Student loan consolidation can be beneficial to students’ credit rating, but it’s important to note that not all federal student loan consolidation companies report their loans to all credit bureaus; SLM Corporation (formerly Sallie Mae) does not report to Experian or Transunion, which means that students will have differing credit scores at Equifax, Transunion, and Experian.

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Life insurance settlement or Federal Student Loan Consolidation

Author: Masha Cutikk
Article Source: EzineArticles.com
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Private Student Loan

Private student loans have several advantages. Private student loans are not complicated, it dosent take long to finalize the process, and because of the extreme flexibility its pretty straightforward. Most lenders will qualify loans to students with no credit history. There are two main types of student loans for you to pick from those are federal student loans and private student loans. A good credit history is an important prerequisite for applying for a student loan. Private student loans are commonly given to those who are credit worthy, and typically you’ll need a co-sign.

If you are a student with a good credit history you should have no problem qualifying for a student loan. Whatever you do bear in mind that your credit is very important, and if you think you may ever want to apply for a private student loan, know that your good credit will insure that you qualify. Private student loans are not complex to obtain for students with a good credit report, or for those who are regular employees or if he is a permanent resident of United States. With private student loans there is no need to be concerned about application filling deadlines or the typical closing dates that you would otherwise need to worry about.

The amount of funds available to you through private student loans is much higher than the federal loans and scholarship funds. Private student loans are approved after checking the credit history of a student or his parents. Usually, a student loan with no credit history does not necessitate any income or a co-signer. But this is sanctioned only for a small credit limit. To get larger credit limit, the help of a co-signer is essential. Before taking student loans with no credit history, compare the interest rates and the fees from different lenders. You can get student loans applying online also. The lender will insist on records such as proof of your identity, and your place of employment.

The approval process for your private student loan doesn’t take much time at all, as a matter of fact that the funds can be credited to your account within five business working days.

Private student loans are often times used in combination with Federal student loans, particularly when the student doesn’t have the resources needed with their federal student loans to cover the full educational expenses. You can refinance your federal student loans at much lower interest rates than you can your private loans. Also, the private student loans carry a hefty interest rate when compared with government student loans.

Many private student loans can be consolidated. The best feature to me about private student loans is that with a private student loan you are likely to get offered and receive a higher loan amount. With a private student loans you can pay for the things you need too, like a laptop, supplies and other educational expenses at your own discretion. It is advisable to have a thorough check on the terms and conditions of a student loan before signing the deal

By: Vernosha Anderson

Consolidating Student Loans
Some consolidators can attempt to make you consolidate all your debt – comprising credit card debt, student loans, and private loans that you may have.
You should know that consolidation the loans including ones not federal student loans are the”private” loans that typically do not provide the same advantages as Federal Consolidation loans. Thus, you must be aware that in case you consolidate some other types of debts or loans with the student loans into one private consolidation loan, you may risk to raise the whole interest on your loan as well as may lose some of your deferment eligibility and loan forgiveness opportunites federal education loans have.
A great number of companies provide loan consolidation and most provide great service, though some cannot offer the service you want or need. It is a necessary practice to know the lender and the reputation. You should check with the present lender(s) concerning whether they provide loan consolidation and check with your college’s financial aid office in terms of the experience of the other borrowers with certain loan consolidators. Your college provides a list of the best lenders – reputable servicers and banks that have reliable experience working with student loans. The list can assist you to do the homework and locate the lender best for you.
It is not a sound idea to consolidate in case you are close to repaying your student loans. In fact, consolidation can affect the eligibility for particular loan forgiveness programs as well as interest subsidies.

Qualifying for certain student loans is not an easy task. There are requirements that are not easily met by applicants not only for private student loans but also for federal student loans. However, once you understand the differences between these loans and the requirements to get approved for them, you can work to solve the obstacles and apply successfully for a student loan that suits your needs and situation.

You won’t be able to get approved for any loan type as some loan requirements are either met or not. But other requirements can be overcome like credit requirements and income requirements. So, knowing exactly what you need will aid you in the process of finding the right student loan for you.

Federal Loans And Subsidized Private Loans

Though these loans have little to no credit requirements, they have additional requirements for approval that cannot be easily bypassed. In order to get approved for these loans you need to meet exceptional non credit qualifications. Federal Student loans are awarded according to the needs of the applicant. Thus, only those going through underprivileged situations can qualify for these loans. If you have a good repayment capacity, chances are that you won’t be able to qualify for these loans.

Subsidized private loans are awarded by private non profit organizations and work with the same system. There are however, some loans provided to those who can show certain merit. These loans based on merit, are awarded to those that have shown an outstanding performance on their previous studying courses and thus deserve to be financially supported on their careers’ next steps.

Regular Student Loans

As opposed to the previous loan types that have requirements that you either meet or not, private student loans have regular credit and income requirements that can be overcome with certain means. In order to do so, you first need to know what these requirements are and whether you qualify for the loans or not and why.

Private student loans have credit requirements just like any other kind of loan. A good credit score is preferred in order to get approved for an unsecured private student loan. For secured private student loans, there are bad credit options but the interest rate charged is significantly higher. Though there are some unsecured private student loans for people with bad credit, the interest rate charged is too high. In these cases you should try to analyze, whether you can get approved for a subsidized loan.

There are also income requirements that need to be met and usually have to do with the repayment capacity of the loan’s installments. The lender needs to know for sure that your income will let you afford the monthly payments of your loan even if unexpected expenses modify your budget.

Both these requirements can be lowered and lessen by offering collateral. But if that’s not possible, you can always apply for a student loan with the aid of a co-signer. A co-signer with a better credit score and a good income can be a good enough guarantee for the lender. Thus, a co-signer can aid you overcome the obstacles on your student loan approval.

This article discusses everything you should know before applying for student loans. If you do not plan on employing a student loan counselor, then you must read this article!

Student Loans Types

Private loans & Federal loans.

Federal loans can be deferred. Private loans have different repayment terms.

A federal perkins loan is a long term student loan with low interest. The college or university collects the payments.

A Federal Family education loan or a stafford loan consist of subsidized or unsubsidized terms. With a Subsidized Stafford Loan the government covers the interest on your loan as long as you are enrolled in school and taking 6 or more credits. You can qualify by meeting the criteria for financial need. On the contrary with an Unsubsidized Stafford Loan the student must pay the interest on the loan while they are enrolled in school.

Another type of loan is parent loans for undergraduates. No credit check is made for federal student loans. But a credit check is required for parent loans.

College Loan Repayment Options

You can increase the college loan repayment time on your college loans to lower your monthly payments. You can default your student loan payments. To default your loan it means: You can deffer your college loans which means:

Student Loan Grace Periods

There are different options during the student loan grace period. The student loan grace period lasts for the first 3 months after you graduate college. This is the time to take advantage of your student loan repayment options. Find more information about student loan grace periods by referring to the resource box.

Student Loan Consolidation

Well the truth is consolidation is not the answer for everyone who has a student loan. Federal loans should consolidated separately from private loans. It may be more beneficial in some cases not to consolidate your loan. Student loan counselors get paid the big bucks to help you figure out this information. However this article is designed to help you develop a better understanding of everything about getting a student loan. Find more information at: How to Get a Student Loan

If you’re a graduate or college parent with any outstanding federal student loans, you may be able to lower your monthly student loan payments by up to 42% just by consolidating your parent or student loans. When you consolidate your college loans, you may be able to extend the repayment term on your parent or student loans by up to 20 years. With that longer repayment term, since you have more time to repay, the amount you have to pay each month will typically go down.

NextStudent, a leading Phoenix-based education funding company, offers a student loan consolidation program with no application fees, no processing fees, and no credit checks. By consolidating your parent or student loans, your monthly payments could go down by up to 42%.

Here’s an example: Estimated monthly payments on a $75,000 NextStudent Federal Consolidation Loan fixed at 7.25% and repaid over an extended term of 30 years are $512, versus estimated monthly payments of $879 on a $75,000 Federal Stafford Loan issued at 7.22% and repaid over 10 years — a 41.8% reduction in monthly payment amount. (Your actual payment reduction may vary and will depend on the terms of the student loans you’re consolidating.)

Replace Your Variable-Rate Student Loans With One Fixed-Rate Student Loan Consolidation

If you took out your Federal PLUS Loans or Stafford Loans prior to July 1, 2006, those student loans are subject to variable interest rates that will adjust every year. So when interest rates rise, your monthly student loan payments may also go up. Student loan consolidation puts an end to rate increases and rising payments.

NextStudent’s student loan consolidation program gives you the security of a fixed interest rate. By consolidating your federal college loans with NextStudent, you’ll replace your variable-rate college loans with a fixed-rate student loan consolidation loan and lock in your new monthly payments, so you’ll never have to worry about interest rates rising and leaving you guessing about your monthly payment amount.

Make Repaying Your Student Loans Convenient and Hassle-Free with Student Loan Consolidation

If you have multiple college loans in repayment and you’re dealing with the hassle of multiple bills, multiple due dates, and multiple monthly payments to multiple lenders, a student loan consolidation could help make your repayment easier to manage.

With a student loan consolidation program, you can bundle all your eligible federal parent or student loans into one single consolidation loan with just one monthly bill, one lender, and one monthly payment that’s fixed for the life of your student loan consolidation.

Apply in Minutes to Consolidate Your Student Loans

Typically, you can apply for a student loan consolidation in minutes. Just visit an online student loan consolidation lender or make a quick phone call to the lender of your choice. It’s fast, easy, and free to apply, and there are NO fees, NO credit checks, and NO co-signers required.

There are also no prepayment penalties. When you consolidate your federal parent or student loans with NextStudent, you’ll never be charged extra for paying more than the minimum each month or for paying off your student loan consolidation early.

Student Loan Consolidation for Private Student Loans

If you have private student loans in addition to (or instead of) your federal student loans, you won’t be able to consolidate your private student loans under the federal student loan consolidation program. But you may be eligible to consolidate your private loans separately with a Private Consolidation Loan, which offers the same convenience of a single consolidated loan for your private student loans.

NextStudent believes that getting an education is the best investment you can make, and we’re dedicated to helping you pursue your education dreams by making college funding simple. Learn more about Student Loans, Private Student Loans and Student Loan Consolidation at NextStudent.com.

Many inquiries made to financial advisors on our team have a common issue: bad credit and student loan approval: People who want to pursue a career to improve their life and financial situation but fear that they cannot get approved for financing due to their bad credit score and history. The availability of bad credit student loans is not widespread and thus people often wonder if they exist and if approval is feasible or there are extremely onerous requirements for approval.

Federal or Private Financing

There are federal student loans that are not based on the applicant’s credit score and history but on the merits or the needs. Therefore, those with bad credit can obtain federal funds if they meet the requirements for these loans. But the average applicant will not be able to get approved for federal funding and for federal subsidized private loans because these loans are based on credit assessment.

Private funding has similar issues: all private student loans are based on credit verifications and thus, there are limitations for those with bad credit. And even though there are private student loans provided to those going through underprivileged situations and for those that show special merits on certain fields of interest (loans provided by non profit institutions), the average applicant cannot access these loans.

But private funding always finds a way to provide a product when there is a need and thus, there are bad credit student loans available for those with bad credit, no credit and past bankruptcies. The drawback is obviously the interest rate charged for these loans and the lack of deferment that most of these loans have. There are very few private student loans for bad credit applicants with deferment till after graduation.

Bad Credit Private Student Loans

These loans are provided for those with bad credit who need to finance college studies. The amounts offered are not that high and can help you finance only a couple of years of college studies but unlike federal funding you can use the funds for any college costs including tuition, accommodation, transportation, studying material, laptop, etc. There are no limitations when it comes to the use of the funds as long as they are college related.

Another issue with bad credit private student loans is that only a few of them provide funds with deferment of the loan repayment till after graduation. Thus, the applicant needs to have a source of funds in order to afford the monthly installments. If the applicant has a limited income it is possible to apply with the aid of a co-signer in order to obtain approval and also to boost the chances of getting better terms on your student loans.

Where to Get Them?

Private student funding can be obtained through the student affairs departments of each institution and you can also obtain them by applying online. There are many online student loan lenders offering bad credit loans for financing college studies and there are also sites offering comparatives so you can choose the best option for you.

Private student loans are credit-based and have more attractive repayment terms as well as interest rates. It can really help in saving money every month unlike the Federal student loans. Private student loan consolidation is simply the process of refinancing and combining private student loans into a single debt only. It may result to a lower monthly loan payments thus will also lessen your worries about your multiple loans.

The very main essence of a private student loan consolidation is to lessen the monthly payment of students who have multiple loans. By getting quotes from various lenders, a student can have knowledge about how to get the best deal with all the prevailing market rates present nowadays. Furthermore, private student loan consolidation can result to an extended loan payment. This gives the student borrowers enough time to pay their loans with fewer burdens. These beneficial advantages offered by the private student loan consolidation are not possible if students have several loans to handle.

There are various private student loan consolidation companies which offer more benefits. One of these is the interest rate reduction which can result to lower loan monthly payments to think of. The options for the loan repayment procedures depend upon the qualifications being required by a particular lending company. Thus, it is also the work of the lending company to choose the best private student loan consolidation program suitable for a particular student loaner.

Indeed, private student loan consolidation brings various benefits. However, one should still be aware of some situations like the drawbacks of having a private student loan consolidated.

Student loans are indeed a very big help for students who are deeply in need of some financial aids. However, all students who have decided to avail of a particular student loan should bear in mind the responsibility in repaying the borrowed amount of money. In fact, there are so many ways on how to pay off student loans.

The very first thing to do is to develop a plan on how to pay off student loans. Second is to look for a summer jobs or internships to be able to save a lot of money and not waste your valuable time. Part-time jobs will also do to help pay a loan.

Also, take into consideration to consolidate current student loans to have lower interest rates. Furthermore, one should perform volunteer works like teaching, medical works or even military works to reduce at least somehow a debt. It would also be good to apply for some grants and scholarships while in school to lessen the burden.

And lastly, take good care of the credits. Late payments should be avoided to have a good credit score.

It is important to pay off private student loans as quickly as possible. Sometimes, early paying off of the loan will lessen the burden along with a particular student loan. To make paying off easy, one can start paying off first the non-subsidized loans for it has an obligatory interest. Also, if one has several loans already, paying off first the smallest loan would be much better.

Just always remember to always do the best in paying off student loans. Be a responsible student loaner!

Failing to pay off student loans can stick with you for decades. You can’t go bankrupt on student loans so don’t count on that as saving you down the road!

College Student Loans : Federal and Private Loans

When a student or parent sets out to obtain a loan and/or financing a college education there are a many different sources they can go to in order to acquire the funding necessary. However, there are two different categories of loans which are either federal loans or private loans.

As for federal funding for college, in many cases it is much easier to get the financing if you fit the criteria set in place. By far, one of the most popular federal student loans is the Stafford loan. There are two types of Stafford loans which are the federal family educational loan and the William D. Ford federal direct loan. The process of obtaining a Stafford loan is through the student filling out a federal student aid application, then once approved they will sign a promissory note on the loan.

The only real difference between the two types of Stafford loans is where the actual funding is coming from. For a direct loan, the funds are coming directly from the federal government as for a FFEL loan, the funding comes from either a bank, credit union or another participating lender in the program.

There are also a couple more that should be mentioned in this article and those are the Parent PLUS and Perkins loans. First, the Parent PLUS loan is designed for parents in need of assistance for paying their child’s college fees. This loan basically will fill in any gaps that the parent needs in order to cover all the college expenses fully.

The Perkins loan is basically a student loan which can be applied for at the college or university financial aid office which usually has a very low interest rat, but has a maximum loan amount of around $4,000 each year for students. They are federal fund and can be added to other types of funding. There are late fees and fees for skipping payments on the Perkins loan as well.

These loans and more can all be inquired upon at your selected college or university.

Credit history may not be as necessary if it is necessary at all in obtaining these types of funding options. As opposed to federal student loan funding, there are many private lenders willing to provide assistance for college funding as well. However, if you so decide to take the private lender route for financing a student loan, it is important to remember that most will need a bit of a credit history from the potential debtor and will most likely require a co-signer on the loan if the student with not much credit history at all is attempting to obtain the financing.

Federal funding for college students who need the financing, as well as parents is very available for anyone who has a need for such funding and it would be a good idea to look at all the options available in order to compare interest rates, fees, and more as these student loans will be around for a while after college as some loans will begin the payment schedule immediately during college like the Parent PLUS. Other repayment schedules will begin after 6 months for Stafford loans and 9 months for Perkins. So it would be a good idea to get all this information first hand before making any quick decisions about your college student loans.

If you are a follower of the financial aid and student loan industry, you have seen that there has been a recent upheaval in regards to how federal student loans are distributed and increased downward pressure on interest rates. In addition, a planned interest rate reduction for federal subsidized Stafford loans goes into effect in July 2010, from 5.6% to 4.5%. In July 2011, there will be another planned rate cut to 3.4%.

Thanks to the Student Aid and Fiscal Responsibility Act (SAFRA) passed into law in March, private banks will no longer be allowed to originate federal student loans for students attending schools that are affiliated with the Federal Family Education Loan (FFEL) Program. The effect of this new bill is that as of July, the banks participating in FFEL will be losing a substantial revenue stream and will start to look elsewhere to recoup the lost income. Due in part to these changes, banks are lowering their interest rates and fees to attract borrowers that ordinarily may not be as keen to apply for a credit-based loan.

You may be wondering, “What does that mean for me?” Two main things:

1) Lower interest rates = less money paid over the life of the loan

2) Historically low index rate = potential to pay more over the life of the loan

Sounds counter-intuitive, right? Let’s break down the terms and uncover the hidden meanings.

Interest Rate: the percentage of a sum of money charged for its use; this number is usually derived from a variable index rate plus a “margin”

e.g. If you lent me $100 for a year at 5% interest, when I pay you back… the total will be $105. That $5 is what you charge me to borrow the money.

Index: A statistical indicator that measures changes in the economy in general or in particular areas. In the case of student loans, the federal funds rate and London Interbank Offered Rate (LIBOR*) are typically the most commonly used indices (The Free Financial Online Dictionary).

*If you want to learn more about LIBOR and the federal funds rate, they are published daily in the Wall Street Journal and are available online from a wide variety of financial websites.

These indices change over time depending on how the economy is performing. If the economy is great, they tend to be higher; if it is doing badly — or in our case, recovering from an intense global recession — they tend to be lower. These changes are all methods of financial controls to help expand or slow down the economy. If you do not have a background in economics, the important thing to remember is that the Fed does not want our economy to grow or shrink too fast; stable, gradual growth is always preferred over rapid growth because it constitutes lower financial risk and is easier to forecast.

Now that you know what these terms mean, I invite you to think about how a historically low index rate might affect your student loan. To get a firm grasp, there are a few key points you need to keep in mind:

1) All private student loans have variable interest rates (meaning they change); generally the rates are re-adjusted every 3-6 months

2) Low index rates = recession economy or an economy that is set for high growth

3) Interest rates are at least partially based on index rates

When you connect the dots, you see that there is a distinct possibility that as the economy improves, so will the indices. The result? Your variable interest rate will rise along with the index and cost more money in the long run.

Sounds kind of negative, right? Not necessarily. Due to these historically low index rates, you can actually get a private student loan (assuming you have a good or excellent credit score, or creditworthy co-signer) at interest rates lower than a federal Parent PLUS loan. The game here is really finding a loan that has the best of all worlds. In this case, you want to find one that has a low “margin” number. You know when you see a loan offer and it says something like LIBOR + 3% or Prime + 2.5%? That “+X%” is a margin.

Thus your objective, daring loan seeker, is to find a private loan that has both a low margin and low to medium index rate. The more stable the index is, the more stable your interest rate will be. Keep in mind that you are under no obligation to accept the first loan offer you receive and have a 30-day window to apply for loans without taking a credit penalty. As a responsible borrower, you are encouraged to shop around for loans and find a product that matches both your needs and financial capability. PrivateStudentLoans.com has an excellent loan comparison tool for this purpose. Explore all your options before making a choice and best of luck in your academic pursuits!