Purchasing a home is a huge investment, and one that takes a lot of funds, patience and responsibility. While it can be tempting to move out of your parent’s home to fend for yourself, owning a house has its own list of unique duties that require a certain level of property management skills. The question lies in whether or not a college student or recent graduate should attempt to buy their own house. After all, many might ask themselves; if not now, when? You might be studying to enter a solid, high-paying career or you might have recently graduated and are sure that you’ll find a job that pays well, guaranteeing you that owning a home will be a cake walk.
Here are some of the facts you’ll want to consider before buying your first home:
Do You Have a Stable Career Ahead of You?
Just because you graduated college or are studying a major that could potentially bring in a six-figure salary does not mean that you’ll get what you want. It’s not uncommon for college students to graduate and work minimum wage jobs for years before something comes through. You cannot rely on a college degree alone to pay for your home, that’s the simple truth. Your college degree means nothing when buying a home if you don’t have the job to back it up.
Do You Have Enough Saved Up for a Down Payment?
Home experts agree that a good down payment is 20 percent of the cost of the home. Your $200,000 home will require a down payment of about $40,000 if you want to reduce mortgage costs and eliminate future debt problems. Without a down payment, that 20 percent gets included into your mortgage and can raise the monthly payments substantially. If you haven’t already started saving up for a down payment on a home, now is the perfect time to do so. Instead of buying a home straight out of college, spend some years saving money and you’ll eventually be glad you did.
Do You Know How to Care for a Home?
Caring for a home is a skill in and of itself. Yes, you can call plumbers, electricians and painters to do all of the work in your new house, but this can become extremely expensive relatively quickly. While you don’t have to be a full-on construction worker to successfully own a home, a small amount of foreknowledge on home repair and maintenance is necessary to avoid hefty contractor fees.
Can You Afford Monthly Mortgage Payments?
It’s upsetting to realize that an estimated one million people lose their homes to foreclosure every single year. Foreclosure is the leading cause of home loss in America, forcing people to leave their houses and essentially fend for themselves. Foreclosure occurs when you don’t make your monthly mortgage payments and the bank takes possession of your home. For college students and recent grads, you need to know that you have it within your budget to pay for a mortgage so that foreclosure doesn’t happen to you.
Will You or Do You Have Student Loans?
It’s all too easy to get caught up in the excitement that comes with buying a new house. You might have friends or coworkers who are homeowners and it’s thrilling to know that could be you, too. However, being a college student nowadays and having insurmountable student loan debt almost go hand-in-hand. If you’re drowning in a sea of student loan debt, there is no possible way for you to afford a mortgage on top of your already-impossible financial burden.
So, Should a Student or Grad Buy a Home?
Unfortunately, it is often financially unsafe and irresponsible for students and recent graduates to buy a home. Student loans, an inadequate down payment or an irresponsible attitude towards bills could leave the cheery-eyed youth racing to the bank to beg that their home not go into foreclosure. Home buying works for some young people, but it is often recommended that you stick to a rental or continue living at your parent’s until you are absolutely certain that purchasing a home can be done safely and securely.
Court cases or death benefits that involve young people are often ordered by the judge to be accessible only through annuity payments. This method prevents the young person or their parent from spending the money too quickly, further improving the future financial stability of that person. Structured settlement payments are given over the course of time in the form of a monthly check. The young adult, teenager or child will receive these payments for their everyday living costs and expenditures. Experts recommend that the money given by these settlements be put into a fund to grow as opposed to given directly to the, often irresponsible, individual. There are a number of structured settlement annuity and loan companies out there that will be of much help in making this decision.
What Young Adults Can Do with Their Structured Settlements
Unlike an adult coming into a windfall of money from a settlement or death benefit, people under the age of 18 are unable to control any of this money. A judge will court order how the money is dispersed, which is often done advantageously to the child or teenager. Once the young person reaches the age of 18, they can control the payments being received and change how often and how much they get.
Structured settlements go a long way when invested or saved. As long as the minor does not need that money upfront, the cash flow should go into a savings account or investment plan that grows the money over time. Saving and investing should always be done with a knowledgeable adult’s guidance. It can be all too easy to lose all of your monetary gain just by making a bad investment decision.
What are the Benefits of Structured Settlements?
Court settlements and death benefits come in two different forms: a lump sum and a structured annuity. The lump sum of money is ideal for those who need to pay off large bills right off the bat, but the amount you pay in tax can be shocking. Federal guidelines will withhold 20 percent of your lump sum, reducing the amount you receive. State tax is also taken out and, while less than federal, can also be substantial. Structured settlements are ideal because they are essentially tax-free. The only time when tax is an issue is if you turn your annuity into a lump sum payment at any point in time.
For young people, the annuity is vested and protected so that the child or his parents do not have access to change it. This prevents anyone from spending the money prematurely and is fully safeguarded until the child turns 18. The payments received as part of the annuity never falter due to variable stock market dips. No bank maintenance fees are required to continue to obtain your monthly payments.
A major downfall to structured settlement agreements is the inability to change anything once it has been locked in. Your child or teen will only be able to do this once they reach adulthood. This could potentially be a problem if large lump sums of money are needed for medical bills or other emergencies. Even when the child turns 18, they can only change the agreement once before getting locked into it again.
How Are They Governed?
Almost all structured settlements are governed by insurance providers and the Federal Treasury. This prevents the annuity from being tampered with by creditors and other judgement. For example, if a young adult experiences a debt collection problem due to unpaid bills, their annuity cannot be touched. This can save lots of headache, heartache and time because you can still receive your much-needed monthly payments without giving it up because you are in collections.
The structured settlement option is ideal for most adults, but it is especially beneficial to younger people who would otherwise be irresponsible with a windfall of cash. Annuities are decided on the specific amount that is due and the term length. Tax is never deducted from this amount, so what you get from a settlement or death benefit is what you’re going to receive. Only a judge can initially govern the specific amount that you’ll get as form of payment. Once you or your child reaches adulthood, they have all the say in how that money is vested and spent.
Just because you’re in college doesn’t mean it’s too soon to start thinking about your credit score. In fact, the sooner you start building your credit score, the better. A bad credit score or even just a lack of credit history can hurt you in several ways in the future. You may not get that apartment you like if your credit score isn’t high enough. Need a new car? Expect to pay considerably more in interest on an auto loan with no credit history to your name.
Building credit as a student isn’t difficult. If you approach it the right way, you’ll have a dramatically higher credit score by the time you graduate.
1. Pay Bills on Time
If a bill is in your name, then paying it on time is important for your credit history. Set up automatic bill payments if necessary, just make sure that you keep enough money in the account that you use to pay the bill.
2. Apply for the Right Credit Card
Using a credit card is one of the best ways to build your credit score. Look for a card with no annual fee so it doesn’t cost you any money. It may be difficult to get a credit card as a college student, so consider asking your parents to co-sign if credit card companies deny your application.
You won’t build your credit if you never use your credit card. The important thing is that you don’t overspend. Keep your financial habits the same, and only buy what you can afford at that time. Treat your credit card exactly like you would your debit card.
4. Pay Your Balance in Full Every Month
Don’t carry around a balance on your credit card. Every month you don’t pay it off, the credit card company will add more interest charges onto that balance. Get into the habit of paying that bill down to zero every time so you never pay a cent in interest.
5. Obtain Your Credit Reports
Everyone has three credit reports, one each from Experian, Equifax, and TransUnion. You’re able to request one free credit report from each of those credit reporting agencies per year. Do this every year to ensure that the information is accurate and that you haven’t been the victim of identity theft.
6. Dispute Errors on Your Credit Report
Errors on your credit report can lower your score. If you spot any, contact both the credit reporting agency and the creditor to dispute the error. Alternatively, you can hire a credit repair company to do this for you.
7. Don’t Co-Sign for Anyone
When you co-sign for someone, you’re putting your own credit on the line. Don’t risk your credit by co-signing a loan or any sort of application, no matter how much you trust the applicant, as it’s not worth jeopardizing your financial future.
8. Avoid Closing Credit Card Accounts
When you close a credit card account, this reduces your available credit, which can lower your credit score. It’s smarter to only open credit cards that you plan to use. As a student, start with one credit card to avoid running up balances on multiple cards.
A hard inquiry occurs when an individual or business runs a credit check on you. You may have to provide authorization for these if you’re applying for a loan (such as a student loan or an auto loan) or a new credit card. Too many hard inquiries can lower your credit score. One way to reduce their impact is to do anything that requires these hard inquiries within a 14-day time period, as all the inquiries within this period of time will only count as one inquiry.
10. Keep Your Credit Utilization Under 30 Percent
If you do end up with a balance on your credit card, don’t let it exceed 30 percent of your available credit. Once it does, it will lower your credit score. As long as you maintain a 30 percent or lower credit utilization, your credit score won’t be negatively affected.
Which bank you choose to refinance or consolidate your student loan makes a difference. To get the best deal possible, you must consider your options. Don’t just go to the bank you have a checking account with or accept the first offer you find. Shopping around for the best bank to refinance and consolidate student loans will allow you to receive the lowest monthly payment and/or the lowest interest rate. Here is a list of the top six banks for student loan refinancing and consolidation:
1. Darien Rowayton Bank
On average, students save $20,200 by refinancing their loans with Darien Rowayton Bank. You can refinance up to 100% of private and federal loans. The interest rates on Darien Rowayton Bank’s refinanced and consolidated loans are low, ranging from 4.25%-7.20% for fixed rates and 3.64%-6.29% for variable rates. DRB doesn’t charge origination fees or prepayment penalties. Parents who took out student loans on behalf of their children are allowed to refinance and consolidate them at this bank as well. If you set up automatic payments on your loan, the bank will decrease the interest rate by 0.25%.
2. Citizens Bank
Citizens Bank offers an Education Refinance Loan for refinancing and consolidation on private and federal student loans. They provide loans with interest rates as low as 2.37% APR for variable rates and as low as 4.74% on fixed rates. Customers who take out an Education Refinance Loan at Citizens Bank save $1,644 per year on average. The bank offers two possible interest rate discounts: loyalty and automatic payment. You’ll receive a loyalty discount of 0.25% off of your interest rate if you have a qualifying account with Citizens Bank at the time of applying for the loan. An automatic payment discount subtracts 0.25% off of your interest rate if you set up automatic monthly payments on your loan. Citizens Bank doesn’t charge origination, disbursement, or application fees.
3. Wells Fargo
Student loan refinancing and consolidation at Wells Fargo has a 3.99%-8.99% variable interest rate and 6.24%-10.99% fixed interest rate. Wells Fargo doesn’t charge origination or application fees. The bank also doesn’t give out prepayment penalties. Similar to Citizens Bank, they will reduce your new loan’s interest rate by 0.25% if you enroll in automatic payments or if you have a qualifying Wells Fargo account. Students who have borrowed money for education from Wells Fargo in the past also qualify for a 0.25% interest rate discount.
4. Alliant Credit Union
Another great bank for student loan refinancing and consolidation is Alliant Credit Union. You can consolidate up to $100,000 in student loans at this bank. Variable interest rates run as low as 3.75% and repayment terms are as long as 25 years. Alliant Credit Union doesn’t deal out prepayment penalties, allowing you to make early payments when you can. This bank provides consolidation for both private and government loans.
5. First Republic
First Republic Bank offers student loan refinancing with interest rates as low as 2.25% APR. They don’t charge annual, origination, or prepayment fees. First Republic Bank actually offers an incentive for prepayment. If you pay off the original loan balance within 48 months, you’ll receive up to 2% of the interest back. The bank offers both variable and fixed interest rates on refinanced student loans. Customers who open a First Republic ATM Rebate Checking account with automatic loan payments will qualify for lower interest rates.
At iHelp, you can find student loans from community banks. IHelp’s student loan consolidation program allows clients who obtained a loan with a cosigner to release their cosigner after 24 months of on-time payments. They also have both variable and fixed interest rates. Student loan consolidation from iHelp ranges from $10,000-$250,000. A fixed 10 year interest rate on an iHelp consolidation loan for student debt is 2.5%-9%.
If you want to receive a student loan refinancing or consolidation from a bank that has fair terms, then the six companies listed above are your best options. As always, take your unique situation into consideration as you choose a bank to obtain a refinancing or consolidation from. One loan may be ideal for another student but not you and vice versa. In general, the six companies listed above are excellent choices in student loan refinancing and consolidation.
Find a mentor – Entering into the real world can be both exciting and intimidating. Finding a good mentor can help mitigate this anxiety. Whether it is shadowing someone in their field or visiting an office to get career advice, having the guidance from a professional can benefit you greatly.
Use the career center – At the beginning of your senior year, it is a great idea to get accostomed to the career center to see all that it has to offer. They can halp you find a mentor, plan to get a job after graduation and assist you with resume preparation.
Plan mock interviews – Some schools have career classes as an elective that can teach you how to effectively enter the professional world. They can teach you how to dress, use appropriate language, perform mock interviews and many other things to help you in your professional life.
Prepare for your finals – Make sure that your last year of school is one without distractions. You are finally at the finish line and all you have to do is cross it. Make a schedule that will deter disruptions from roommates, work and family. This is the time to really buckle down.
Figure out what to do next – Decide whether you are going to go to graduate school or if you will get a job. Most graduate programs require a test such as the GMAT or the GRE. Decide how you are going to prepare for these exams, and get to it.
Try to get references – Inform your favorite professors and administrators that you would like to use them for a reference. You can also use managers from a current job or internship. Some programs require a letter of reference. Let your reference know early that you would like their assistance. They will be obliged to help you.
Decide where you will live after graduation – Find out If you are going to continue living with your friends, move back home with your parents or venture out on your own. Letting your landlords and roommates know your plans can save you a lot of money and stress in the long run. Putting down a deposit on a new place prior to graduation will make your move easier. Then you can focus on getting your diploma and making the necessary plans for the next stage in your life.
Pay off any school fees – Before you graduate, it is important to pay off any fees that you might owe the school. The bursar’s and administration offices are great places to check to see if you have any outstanding debts that need to be paid. If they are not paid, the school will not release your diploma or your transcripts.
Attend Job Fairs – Recruiters from major companies attend job fairs to get the best and brightest graduates from each school. After visiting the career center, check their listings for local career fairs. Equipped with your new resume, you can land a good job.
Buy a good suit – Presentation is key when it comes to getting a job. Investing in a good suit will help you look and feel your best while talking to companies. The investment will pay you back many times over.
Review your online presence – There is nothing worse than landing the job that you want and having the risk of losing it because of pictures from your spring break vacation. Scour the web to make sure that your best and brightest accomplishments are highlighted. It might be a good idea to make your accounts private or even delete them.
Find companies in your major – Some majors are simple to accommodate in the professional world. Others may be a little more liberal and require some searching and advice. Getting a career counselor can help with this. They have tools to help you find your strengths, and may even know insiders at certain companies.
Enjoy yourself – In your last semester, it is good to just take it all in. Visit your favorite hang outs, spend time in the neighborhood, buy a cup of coffee for your favorite professor. Enjoy your last days on campus.
When you’re drowning in a sea of insuperable debt and don’t know how to shake loose, it can be tempting to seek out a professional consolidator or financial expert who can take all of your debt woes away. Unfortunately, hiring such a professional costs money and you may not even get the end result that you are looking to achieve by using their services. Believe it or not, debt consolidation can be done on your own, saving you money, time and hassle. No matter how much debt you have, one or more of these methods are sure to work for you and can be advantageous to saving money you can put into long-term funds or savings accounts.
1. Take Out a Debt Consolidation Loan
A debt consolidation loan is specifically used to roll all of your debts into one, making payment more manageable. The loans are offered by major banks or debt consolidation firms. You should be cautious when using debt consolidation companies to take out one of these loans. The loans often include additional fees and higher interest rates, making the loan costly and nearly impossible to pay off in full. It is best to get your loan from a reputable bank as opposed to going straight to a debt consolidation company. With a bank, you can compare rates and choose the option that fits your budget with the security of knowing you’re going through a trusted financial institution.
2. Credit Card Balance Transfer
If most of your debt has accumulated on multiple credit cards, you should consider transferring this amount to a card that has a low interest rate. Credit cards are notorious for having high interest rates, sometimes totaling 20 percent or more. If you are able to roll your debts from a high interest card onto a low interest one, you’ll be lowering your monthly payments drastically and saving on annoying interest fees.
3. Taking Out a Home Equity Line of Credit or Loan
It is possible to borrow against your home’s equity by either taking out a loan or utilizing a home equity line of credit. You can then use this loan to pay off any of your debts, enabling yourself to catch-up financially. The home equity loan is a close-ended fund that you repay over the course of time. The line of credit is more open-ended and similar to taking out a credit card, but the money is being borrowed against your property. The benefit to these credit lines and loans is that they have more affordable interest rates and higher borrowing limits than other loans. The drawback to using this method is that you’re securing your debts into the equity of your house.
4. Borrow on Your Life Insurance
Unfortunately, there comes a time in some people’s lives when it comes down to filing for bankruptcy or borrowing on important plans they’ve put money into for years. You can borrow your life insurance in the form of a cash value loan. You will not be required to make monthly payments when borrowing life insurance unless the amount you take out is more than what was originally in the policy. If you have a loan that goes unpaid, the amount will be deducted from your death benefit.
5. Borrow from Your Retirement
The golden years may be decades away and even though it’s nice to have a retirement fund to fall back on when you get older, entering into retirement with insurmountable debt can be an enormous burden. Retirement savings accounts and 401K plans can all be borrowed from to pay off credit cards and other debt problems. When taking money out of your 401K, keep in mind that both a federal and state tax are deducted from the amount. This only happens when you pull money out of the plan before you hit retirement age.
Debt affects more than 45 percent of Americans and it’s staggering to find out that the average American in debt owes a little over $15,000 in credit cards, student loans or personal loans. While borrowing money and taking out loans isn’t always desirable, it is often necessary to dig yourself out of the hole that has been created and start having money to save up for more important things.
Millions of people in the nation are in debt, and the numbers are growing rapidly. The most common causes of overwhelming debt are job loss, disability, divorce, gambling, underemployment and poor money management. Many debtors cling to bankruptcy when they find that they are having debt issues. Bankruptcy should be a last resort, however. Debt consolidation is an option that many consumers overlook. It can provide just the right financial balance for some consumers to get right back on track. The following is some information about debt consolidation.
What Is Debt Consolidation?
The term “debt consolidation refers to a process during which a consumer merges all of his or her existing debt into one account. The person can perform that task using a number of strategies.
Benefits of a Debt Consolidation
A debt consolidation has many benefits to it. One of the main benefits is that it organizes debt so that the debtor does not forget to pay what he or she owes. The debtor also can save money if the interest rate on the consolidation is lower than the scattered interest rates on the existing debt.
Who Qualifies for Debt Consolidation?
Anyone can qualify for a debt consolidation. The type of consolidation may vary from person to person. There are generally three ways that one can complete the process of merging debt. Those processes do have requirements. Fortunately, debt consolidation is available in some form to every consumer whether that person has glowing and excellent credit or very bad credit. A financial advisor can help a consumer to decide which process will work best for him or her. Alternatively, the consumer can review the options in this text and then choose the route that seems best in his or her world.
Types of Debt Consolidation
A consumer can try three types of debt consolidation to resolve any issues that may be apparent. The first type of consolidation that the person can try is a consolidation loan. A consolidation loan covers all existing debt, has a low APR and is available to consumers who still have salvageable credit. This type of loan is definitely available to those who have good or excellent credit. Some consumers with fair credit may be eligible to receive assistance, as well. A curious consumer can complete an application and receive an answer.
The second type of consolidation that one can conduct is a high-limit credit card consolidation. The consumer takes all of his existing debt and transfers it to a high-limit credit card using a balance transfer. The person who applies for the high-limit credit card must have good credit. This type of consolidation is the most difficult type to get, but it is also the most beneficial because of the revolving credit. Consumers can transfer their debt during the application process for a high-limit balance transfer card. One amazing benefit that consumers get from using this process is the big savings on the interest rates. A high-limit credit card may have a promotional term where the consumer does not have to pay an APR.
A third way that a consumer can conduct a consolidation is by signing up for a debt management program. A DPM is like a third party arrangement where the counselor negotiates with the creditor to get all his or her debt down and then collects a lump sum from the consumer each month. The counselor then makes sure that all the consumer’s debts get paid on a monthly basis. Anyone can sign up for a debt management program because no lending is involved in its processes.
Which Consolidation Do You Need?
Each consumer must decide which option is best in his or her world. People who are in the worst condition would probably be best with a DMP. Consumers who are in good standing should perhaps try the credit card consolidation for all of the benefits it has to offer.
How to Start a Debt Consolidation
Interested persons can start the process of consolidating debt by contacting the organization that is in charge. The person should have a list of debtors on hand as well as some pay stubs or tax returns to show income.
Student loan scams are rampant. As a result, many students fall for the scams. They are so desperate to get rid of the debt; they fall prey to unscrupulous companies. Words like loan forgiveness and debt consolidation make the offers sound too good to be true. The following list will guide and help you avoid the traps.
1. Loan Forgiveness Programs
Student loan scams are huge money makers. Crooked companies lure unsuspecting students into more debts. They promise students to pardon their loans if they pay an upfront fee. The Federal Trade Commission (FTC) states no one can guarantee full loan forgiveness. These scammers tell students they will wipe out the student’s debts via disputes.
People running student loan scams will encourage students to stop paying their debt. The scammers will even tell students to not speak to their loan officers. They will convince you they will work out a better deal with your lender. If you fall for the lies, you can harm your credit standing. Be careful when searching for loan programs.
Scammers parade Department of Education seals to fool borrowers. Part of the student loan scams is to convince students they will get government aid. The aid is a loan forgiveness program, helping them to wipe out their debt. They will offer you a federal loan consolidation to ease your burden. If the government is not offering the program, the deal is a scam.
2. Loan consolidation instead of loan forgiveness
Scammers will convince students they are getting a Federal Loan Forgiveness. But, you are getting a loan consolidation. You will pay a high upfront fee and a month-to-month charge. It is better to sign up for a loan consolidation with your lender for free. There is no need for a middleman.
The scammers misrepresent themselves. They make you think they are a part of the federal program. Most of these people are running student loan scams. These companies advertise on social media and send letters to students in the mail. Think Progress states scammers take advantage of the student’s lack of knowledge.
3. Paying to get help
When you have federal student loans, you do not have to pay for help. The Dept. of Education will offer aid for free. Paying an upfront fee for loan support means the company is running student loan scams. A 2010 law per the FTC says companies should not charge upfront fees to settle debts. Always speak with your lender to find out the next course of action.
4. Government-Affiliation student loan scams
Several companies running student loan scams have “.gov” or “.edu” in their web URLs. The web addresses fool innocent students. These scammers charge you a fee for services you can get from the government for free. Only the government can offer many of the services these companies provide. For example, only the federal government offers loan forgiveness. Private organizations cannot give you such a deal.
The companies misrepresent themselves, making students think they have government affiliations. Always be on the alert when these companies ask for your social security number. Guard the number as much as possible. Scammers prey on students who do not know the facts.
5. Loan debt solved right away
Take heed if a lender tells you she can get you out of default and offer you a small monthly payment. Better yet, the loan officer will settle your debt. It is a trick to lure unsuspecting students desperate to get help. She will tell you the government will pay off your loan and issue a new one.
The new credit will combine all your outstanding balances. Instead, the loan officer will offer you a consolidation loan. That is how most of the student loan scams work. The seller convinces students the government is helping them when that is not the truth. When in doubt, check with your educational institution. They will give you better answers.
If you suspect someone of scamming, you can file a complaint with the FTC. Settle disputes with your loan officer. People will promise to handle disputes on your behalf if you pay them a fee. Stay clear of those people. Scammers are waiting in the wings to prey on innocent students. Refrain from giving out your personal information to unscrupulous organizations.
A car is a necessity for many college students. It’s not always possible for students to survive in a college town without a car, even if they live on or very close to campus. Public transportation is usually abundant in college towns, but it’s not always an option for those who still live at home with their parents or who live and/or work off-campus. It’s also questionable for those who already have student loan debt. It’s easier to have a car of your own so you can get where you need to go when you need to go, but it’s also ideal to have a car without a payment. Making payments on a car while in college only increases your need to work hard and spend less time studying. However, sometimes it’s not an option. When you must have a car with a payment, you might find yourself wondering if a leased car is right or if you should finance your car. Here are a few considerations to make.
Create A Budget
Don’t make any financial decisions without first establishing your budget. What can you afford? This might be the catalyst that helps you find the right solution. Most lease deals require you put down a significant down payment to keep your payment low. Can you afford to make that down payment? While it’s advisable you do make a down payment when you buy a car, it’s not a requirement. If you don’t have that kind of money just lying around, it’s probably the best option to just buy.
Consider Your Driving Habits
Do you drive a lot? Do you live 45 miles from campus with your parents and commute? If you put serious miles on your car, leasing is not a great option. There are mileage limits for all leased vehicles. While it’s possible to purchase more miles upfront, it’s expensive. This makes the car less affordable before you even drive it off the lot, and it’s going to mean you pay more at the end of your lease if you go over your mileage. On the flip side, if you live 2 miles from campus, from work, and from everything else you do regularly, you might be able to get away with a car that requires keeping the mileage low.
What Payment Can You Afford?
When creating your budget, this is required. This helps you determine your best options. Lease payments can be very low for specific cars if you’re a well-qualified buyer with excellent credit. If you don’t have great credit, your payment isn’t going to be as low. If you don’t have great credit, you might be limited to what you can afford to buy, too. This could mean buying an older car with more miles, and one that’s less reliable.
When this is the case, you should do your homework to find out what you qualify for, how much you’ll be making in monthly payments, and what type of car you might be able to drive if you lease versus buy. This can help you make a decision regarding the road you take when shopping for a new car.
Learn the Pros and Cons
Leasing means getting a new car. It also means most of your maintenance is taken care of for the life of your lease. Buying means you might need a used car. You’re also responsible for most of the repairs and issues you have if the warranties are up. Can you afford this? Sometimes you might take a slightly higher payment to drive a newer car with warranties on things that might go wrong. Know the pros and cons of each, and make your decision based on that information.
The best solution for college students is to do what’s right for their own financial situation. There is no right or wrong answer regarding leasing or buying a car. You must keep your own personal finances in mind, but you can make a decision on your own. Leasing is usually considered a less desirable way to buy a car, but it works well for many people across the country. Take into consideration your finances and go from there.
Refinancing or consolidating student loans refers to the process in which old loans are paid off and replaced entirely with a new one. Depending on what you owe and the payment plan you’ve chosen, the repayment agreement can be extended to lower your monthly payments. Generally speaking, when you have a longer term on your student loans, the interest rate will automatically be higher to supplement the lengthy payment contract. Keep in mind that there is no penalty for paying off the loan earlier than specified or making extra payments along the way.
Reasons You Should Refinance Student Loans
Save Yourself Money –
Refinancing allows you to either lengthen your loan term or lower your interest rate, allowing you to save money over the course of your new agreement.
Organize Your Bills –
If you have multiple student loans, refinancing bundles all of them into one convenient and easy-to-manage loan payment. This can simplify your bills to help control debt.
Get a Handle on Debt –
Refinancing student loans lowers those monthly payments, giving you the chance to spend the saved money on other debts like credit cards or delinquent car payments.
Get Rid of a Cosigner –
If someone co-signed the student loan with you, you may want to refinance to remove them from the contract. Cosigner release is a specific term that often pertains to parents who want to be exempt from past loan agreements with their children.
Change Lenders –
Student loan lenders vary from one company to another, and if you’re not happy with the lender you’re currently using, you can refinance to change companies. If you’ve ever had poor customer service from your lender, this is a sure sign that you need a different company.
Reasons Refinance Might Not Be the Best Option
You Could Lose Loan Benefits –
Refinancing your federal student loans to a private lender could cause you to see the loss of federally-granted benefits like deferment, loan forgiveness, forbearance and government-paid interest.
You Would Wind Up Spending More Money –
Refinancing could potentially cause payments or interest rates to be higher, costing you more money long-term than you would have paid with previous lending.
You Would Lose Your Grace Period –
You could lose your grace period if you refinance before this term has ended, causing you to have to make loan payments right away with the new company.
Military Servicemen and Women Could Lose Benefits –
If you are active duty and consolidate or refinance student loans, you will not qualify for the reduction in interest rates found under the Service Member Civil Relief Act (SCRA) for any loan you took out during your service.
Types of Refinancing Options
Direct Consolidation –
This type of agreement only includes student loans that were received with federal aid. These specific loans include ones obtained through Direct Unsubsidized, PLUS, Perkins and Direct Subsidized. Direct consolidation is provided to you by the federal government and eligibility is solely based on your credit score. With this refinance option, you can be sure that your interest rate will remain the same for the entire length of term.
Private Loan –
Private lenders offer loans for both private and federal contracts. Instead of the government being your lender, you will be working directly with the bank or loan company that provides the arrangement. Again, your credit score comes into play when applying for a loan through a private lender and interest rates can go up or down depending on a variety of factors.
Refinancing your student loans can lower payments, provide you with a better rate and offer you a solution for accumulating debt. Over 40 million Americans hold some degree of student loan debt, with many of these individuals graduating already owing a large sum in loan repayment. Many graduates find it difficult to put their degrees to use, making it especially strenuous to pay off those loans. If it’s been years since you graduated and you’re still dealing with high interest student loan payments, it’s time to consider refinancing to lower costs and make life easier on yourself.
Student loan debt is a harsh reality for millions of graduates. The amount of student loan debt graduates leave school with surpasses $30,000 on average, and it’s leaving grads in a tough situation. Many post-graduate jobs require students start at the bottom with a modest salary. While this might not sound like a problem for some, the idea of starting life with a modest salary and ample debt is intimidating. College grads are ready to begin their adult life, which often means purchasing a house. Should you buy a home with student loan debt to consider? There is no right or wrong answer, only answers that apply specifically to each graduate.
Federal or private, student loans will bury you in debt if you’re not careful with them. There are positives and negatives to both. In general, it’s federal loans you should take out if you can. These loans are regulated by the federal government. There are programs available to recent graduates on a tight budget. These repayment plans are available to anyone, and they’re income-based in many situations. Some even cap out at a certain point and so many years while you repay as much as you can, which is sometimes listed as $0 for many income-based plans.
Private loans are stricter. Banks want their money repaid, and many don’t consider alternatives to student loan repayment. This leaves many borrowers in default, which can end in wage garnishment, lawsuits, and more. In some cases, private student loan lenders write off your debts after so many years, and you’ll receive a 1099 in the mail and pay taxes on that as if it was your income. It greatly affects your credit.
If you can apply for grants and/or scholarships when you go to school, it’s a far better situation. There is very little you must do but apply for these, and it’s a simple task. Once you have this money, you can use it to pay for your tuition, and you never pay it back. You can graduate without going into debt, and you can buy a house with the income you’re earning once you get into the workforce with that new diploma.
Grants are available everywhere, and almost anyone can apply for them. Federal, state, and local grants and scholarships are always available to those who want to see their future look brighter. A good rule of thumb is to spend time applying for all grants and scholarships so you can get as much free money as you can for school. The worst you can do is be denied a grant, but it’s better than taking out another loan.
Buying a Home
Now that it’s time to buy a home, you simply consider the factors at hand. You need excellent credit to get the lowest rates, which is what allows to afford more home. You need a low debt-to-income ratio to qualify for a larger mortgage with a lower payment. What you can afford depends on what you can pay for, and your debt is what tells lenders how much you can afford.
If you have significant debt and a lower income, buying a home isn’t a wise decision. If you want to make affording a home more affordable, your best option is to pay off as much debt as possible before applying for a mortgage.
Paying Off Debt
Significant debt doesn’t allow for a great credit profile, which doesn’t allow for low interest rate approval. To ensure you’re getting the most for your money, see if you can pay off as much debt as possible if you’ve already accumulated it. Many consumers spend a year or two living with their parents while they work after graduation so they can use their income to pay down their student loan debts. Once these debts are paid, it’s easier to apply for a mortgage with better terms.
Staying out of debt throughout college is better than applying for loans and graduating in debt and unable to care for your future. Don’t take out more loans than you need to afford tuition, work for your money, and see about scholarships and grants. Student loans should always be a last resort rather than the first option when it comes to paying for school.