Be an Informed Consumer – Understand Those Student Loan Terms Before You Sign
Sep 25, 2011 Student Loans
The smart thing to do before you actually accept a student loan would be to read the fine print – the student loan terms and conditions. You do have a choice to shop somewhere else if the terms of your loan seem unfair.
The thing is, people spend the best years of their life paying off their student loans. These aren’t years that you want to waste on an unfair contract. The more careful you are signing the contract, the better it’ll be over the long term.
Let’s take a quick look at some of the student loan terms that you’re likely to come across on any kind of student loan, and see how you should assess them. This isn’t really a very complete list though. It just touches on the most important points. Before you actually sign a contract, you should probably talk to your school’s financial aid administrator to really understand your contract.
Let’s start with the interest rate – something that most people agree is the most important part of your loan. This is the percentage of your actual loan amount that you will pay them every month for the privilege of using their money. Now the rate may either be a fixed percentage or it may be a variable sum – where they reserve the right to change the interest rate from time to time. And they may charge interest on the main loan alone or the loan plus other fees added.
Should you be alarmed if it’s a variable term interest rate? Federal Stafford loans usually use variable rates. But just because it’s variable, doesn’t mean they can put in any number. They usually specify how high it can go. When the interest rate kicks in, some loans will charge you interest only once you graduate. Others will charge you interest from day one. Make sure you understand all the student loan terms to do with this.
Every loan on earth comes attached with a few charges and fees. And student loans are no different. You’ll find that the point at which you actually receive your loan, they charge you something called origination fees. Sometimes they charge you this when you actually begin to repay the loan. And there will be penalties for when you miss a payment come the day that you begin repaying your loan.
You need to take a look at your student loan terms to find out if they take these fees out of the loan that they’re giving you and only give you the remainder. Other lenders will just add the amount of the fees to the loan. And you have to pay interest on that too. That isn’t a very pleasant prospect, needless it is to say.
Tags: Student Loans
How to Use Cosigners With Student Loans
Sep 10, 2011 Student Loans
When a student is preparing to go to college, one of the biggest questions often becomes, with what money. Some parents scrimp and save for years for their children’s college fund; others address more immediate concerns as their children grow up and fall short when the time comes. Some students may have some of the money to pay for college, while other have little to nothing. The most popular ways to cover the costs are through scholarships and grants, because the money does not have to be repaid. When this is not an option or it is not enough, a student loan may be an alternative. Sometimes the student can accept the responsibility of borrowing and paying back a college loan; sometimes, however, they can’t. Either way, the student’s parents, grandparents or legal guardian may consider cosigning on the loan.
Terms
When someone cosigns with someone else, they agree to take responsibility for the loan if the primary borrower fails to make payments on time and in full. Depending on the financial stability of the potential cosigner and the trustworthiness of the student, there may or may not be anyone willing to cosign the loan. In some cases, the person does not have stellar credit and does not want to put it at further risk. In other cases, they may not have the financial abilities to agree to another payment should it be necessary. When they do agree to cosign, the complexion of the loan changes; sometimes dramatically.
Approval
When a student has an established adult cosign on the private loan, it often improves the chances of the application being approved. With two individuals instead of one to look to for payments, the applicant is a better risk for the lender.
Interest
Some lenders will lower the interest rate for parent-student loans. This not only encourages the parent to cosign, it places a lower risk on the account. Lowering the interest rate further improves the chances of prompt repayment.
Release
In some cases, the student is able to get a cosigner on the account. If circumstances change and the borrower feels that they can handle the principal and interest monthly payments, it is possible to apply for a release for the cosigner. For example, the borrower may be required to make 24 consecutive payments on time and in full before the cosigning responsibilities are lifted.
Regardless of the final outcome, having someone cosign a loan sometimes makes the difference between someone going to college and staying home or working at a lower paying job.
Tags: Student Loans
Understanding Government Student Loan Consolidation
Dec 20, 2009 Student Loans
While you were a student you probably took out more than one loan in order to cover the costs of your education. Did you know that you can actually combine all loans together and make them into one loan? This can be done through student loan consolidation. You do not even have to worry whether a loan was a government loan or a private loan as both can be combined.
A student loan consolidation is a great tool that is used by both the government and local financers who are willing to help you reduce your student loan debts. When you consolidate your loans you will be able to lower your overall monthly payments and have a lower interest rate. Plus it is not uncommon to graduate with a significant amount of money in student loans. Before you choose you will want to know about some of the benefits of government consolidation programs.
Government Student Loan Consolidation
A federal student loan consolidation is financed by the Federal Student Aid. Since you probably took out more than one loan when you were a student, you are probably overwhelmed looking at the amount of bills that you have. This is a great way to be able to reduce the number of payments that you are making. It is really pretty simple to combine these loans but you will want to be aware that you could be losing some useful benefits that were first given to you with the federal loans.
There are so many advantages to consider that it is hard to choose where to start. One of the biggest advantages is that you are able to get a longer repayment term. You will be able to get lower interest rates as well so you will not be paying more money when paying over a longer period of time. Depending on the total amount of your loans, you will actually be able to have a repayment term of between ten and thirty years.
Another thing to consider is that if you have bad credit, you will not need any credit checks. There are no additional fees either with this form of student loan consolidation. You will also get the advantage of not having to make more than one monthly payment.
There are some reasons why you might want to combine your subsidized and unsubsidized loans. You can actually take advantage of this and not lose any of the other benefits that you had when you had both types of loans. This just means that you will only have one payment each month. The two loan types will be separated for you to check and look at on a regular basis either online or in your statements.
This process only takes between sixty and ninety days and is quite simple. The steps that you have to take for government student loan consolidation include filling out an online application and submitting a promissory note and introduction letter.
By choosing a government student loan consolidation, you are choosing a fixed interest rate, lower payments, and better repayment terms.
Tags: Student Loans
