Private student loans - Questions and Answers on student loans

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There are plenty of myths surrounding private student loans. The below information will help answer and dispel some of the myths on private student loans. There are certain conditions which when working in your favor will substancially reduce interest rates on private student loans. It is important to get a low interest student loan so you can pay off within a few years once you start working. In many cases private student loans are tax deductable. Please consult with your tax attorney or accountant to discuss tax considerations relating to private student loans. Pay off private student loans and start saving for a downpayment of your home or invest for your goldent years.



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Private student loans - Questions and Answers on student loans
Private Student Loans - dispelling the myths

If savings, grants, scholarships, and federal loans don't cover the cost of your education, it's time to turn to private loans. But young college students can't qualify for a private loan, can they? Wrong! This article addresses this and other myths about student loans that you may run into.

I don't have any collateral, so I can't get a private loan.

Private loans are usually unsecured, which means no collateral is required. On the downside, this may also mean a higher interest rate.

I don't have a good credit history (or no credit history at all)

Since the government doesn't back private loans, your credit history is a consideration in being approved for a loan. If your credit history is bad or non-existent, you may be subject to a higher interest rate. And remember, you can always get a co-signer. Pay your loan off on time, and soon you will have a good credit history!

I have enough funds for tuition and fees, so I can't get a private loan

In addition to paying tuition and fees, funds from private loans can be used to cover living expenses, supplies, computers, and other everyday living needs.

I can't afford to make payments on a loan while I am still in school

For most loans, your principal and interest payments can be deferred while you are enrolled in school. Another option is to make interest payments while you are in school but defer paying off the principal. Your interest payments might even be tax-deductible!

I missed the deadline for applying for financial aid this year

You can apply for private student loans any time - there is no deadline. Depending on the financial institution you choose, you can be pre-approved in minutes and have the money (which will be sent directly to you) within a matter of days.

I don't have a bank to apply through

Private loans are offered by thousands of banks, credit unions, and other financial institutions. Just search the internet for "private student loans" and you will find many places to apply to.

If you need the additional funds provided by private loans, don't let myths and misconceptions keep you from applying!

This article is distributed by NextStudent. At NextStudent, we believe 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 as easy as possible. We invite you to learn more about Private Student Loans at http://www.NextStudent.com .

My goal is to help every student succeed - education is one of hte most important things a person can have, so I have made it my personal mission to help every student pay for their education. Aside from that, I am just a pretty average girl from SD.

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How to reduce debt with low interest loans

It happens to the majority of us, credit card debt accumulates and before we quite realize it, we are carrying a debt load that is far beyond our means. When this happens, we need to take immediate positive steps to knock down the debt as quickly as possible. One of the most efficient ways to do this is to reduce the amount of interest we pay by shopping around for a better rate and having our balances transferred over. By doing this, we pay more towards the principal, thereby reducing the duration of the loan and saving ourselves potentially thousands of dollars over the lifetime of the loan.

Typically, a credit card carrying a balance of $5000 dollars, with an interest rate of 17.5 % and a minimum monthly payment of $150 would take you 3 years and 10 months to pay off. The total interest accrued would amount to $1, 846. However, if you were to transfer your credit card debt to a lower interest rate loan of 7 %, that same $5000 paid in increments of $150 a month, would be paid off in 3 years, 2 months, substantially reducing the amount of interest to just $564. That's a savings of $1,282.

There are several options available for lowering your interest rates. Each one has its benefits and drawbacks. By educating yourself, you can choose the one that is best for you.

Consumer Credit Counseling Service

Consumer credit counseling services offers to consolidate your debts into one payment, negotiating with creditors on your behalf to have late fees waived, interest rates lowered and loans extended. Counseling Services will require a 'donation' or payment to cover costs and handling fees. You need to weigh these costs to determine if you would still come out ahead by paying a company to negotiate a better interest rate for you; a service that you may be able to do yourself.

Choose a reputable firm that will handle the consolidation in a way that preserves your credit scores. Prior to the consolidation, due dates should be changed to correspond with the counseling service's payment schedule, since many counseling services only send out checks twice a month, on the 1st and the 15th. If these dates do not harmonize with the due dates on the cards, they will show up as late payments on your report. In addition, it's important to realize that you need to proceed with caution with these companies because not all are reputable and many remain unregulated. Watch for the following signs that may mislead you into trusting a company you shouldn't:

understand the term "non-profit." It does not necessarily mean the company is legitimate or that you will get a better rate. The laws governing a 'non profit' organization are vague. Many companies qualify for this title by arranging finances to indicate that the company has not profited, while paying their employees large salaries.

To find out if a CCCS is legitimate, check with the National Foundation for Consumer Credit (NFCC) and the Better Business Bureau in your area. Be wary of companies claiming you can lower your monthly payments-this is a fallacy. As of March 25th 2004 the last two banks to accept lower payments discontinued this practice. Question companies that offer lower interest rates than their competitors. All creditors work off the same interest rate reductions and minimum percentage payments on balances so therefore it is highly unlikely to have this lowered.

Be familiar with the current interest rates on the cards you carry and ask that you choose which cards to consolidate. You already may carry balances with interest rates that are lower than the one they are offering you. If so, request that you be able to exclude those balances from consolidation.

You have to decide if there is a benefit to going to a Consumer Credit Counseling Service or if you can do their job just as effectively yourself. A consumer can often negotiate with creditors themselves for a better interest rate. One option is to shop around for a better interest on credit cards and to transfer the balances from the high cards over to the lower card. Contact your credit card company and tell them you have been offered a better rate at another company and if they plan on matching or beating that rate. If they do not rise to the challenge then transfer your balances to the new card. One option for transferring your balances is to take out a home equity line of credit.

Home Equity Line of Credit

A home equity line of credit is a loan taken out against the equity in your home, in other words your home is offered as collateral. These loans are usually offered at low interest rates. As with any credit, you should weigh the benefits and costs before deciding. Bare in mind that failure to repay the loan, with interest could result in the loss of your home.

The credit limit on the line is derived at by taking a percentage of the home's appraised value and subtracting the balance owing on the mortgage. The line of credit amount is also based on your income, credit history and additional debt load.

The home equity line of credit works on a variable interest rate, based on the prime rate. Lenders usually charge prime rate plus a 2 percent margin. By law, equity lines of credit must have a cap on how much the interest rate may increase over the life of the plan. Some also limit how low your interest rate may fall if there is a drop in rates.

Home equity plans may set a fixed period during which you can borrow money. At the end of this draw period you may have the option of renewal, or if no renewal option exists, then the plan may call for full payment at the end of the term.

As with any contract, you must read the terms and conditions carefully, as many plans have fees, charges and hidden costs. Some of the costs involved in establishing a home equity line of credit include property appraisal fees, application fees, closing costs and attorney fees. In addition to these costs, you may expect to pay transaction fees every time you draw on the line.

The benefit of opening a Home equity line of credit is that the minimum payments are low, often set at just the interest or interest plus a few percentage points. Be aware that with a variable interest rate, monthly payments may fluctuate. If you sell your home you will probably be required to pay off your loan immediately.

No matter which option you choose, the main goal should be to reduce those high interest rates while paying the lowest penalty for doing so. Weigh the pro's and con's of all options carefully and choose a road that best suites your financial situation.

Stay Informed

It is important to stay informed about your credit before you apply for any loan. An excellent way to begin taking control of your financial future is to obtaining a copy of your credit reports before you see a lender. Today you can get your free instant credit reports from the major 3 credit report agencies online. This way you can see exactly what the lender will see. When obtaining your credit reports, you will want to make sure you get your credit report scores as this is what lenders base most of their decision on. The higher your credit score the lower your interest rate will be and vice versa. So be a wise consumer, get you're a copy of your credit report and reduce your debt through lower interest loans.

About The Author

Melanie Cossey is a successful home based freelance writer. Meanie writes many informative articles on the topic of credit, such as What is a FICO score and why is it important? and Comprehending a Credit Report.


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Private student loans - Questions and Answers on student loans
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