Student Loan Consolidation – How does it Work?

Student Loan Consolidation – How does it Work? Student loans are a great source of financial aid for students who need help paying for their education. Unfortunately, students often leave college with burdensome debt. In addition, they often have multiple loans from different lenders, meaning they are writing more than one loan repayment check each month. The solution to this problem is loan consolidation.

What is loan consolidation? Loan consolidation means bundling all your student loans into a single loan with one lender and one repayment plan. You can think of loan consolidation as akin to refinancing a home mortgage. When you consolidate your student loans, the balances of your existing student loans are paid off, with the total balance rolling over into one consolidated loan. The end result is that you have only one student loan to pay on.

Both students and their parents can consolidate loans.

Should I consolidate my loans? Loan consolidation offers many benefits:

-Locks in a fixed, usually lower, interest rate for the term of your loan, potentially saving you thousands of dollars (depending on the interest rates of your original loans) -Lowers your monthly payment -Combines your student loan payments into one monthly bill

In addition, consolidated loans have flexible repayment options and no fees, charges, or prepayment penalties. There are also no credit checks or co-signers required.

You should consider consolidating your loans if the consolidation loan would have a lower interest rate than your current loans, particularly if you are having trouble making you monthly payments. However, if you are close to paying off your existing loans, consolidation may not be worth it.

How will the interest rate for the consolidated loan be? The interest rate for your consolidated loan is calculated by averaging the interest rate of all the loans being consolidated and then rounding up to the next one-eighth of one percent. The maximum interest rate is 8.25 percent.

To figure your interest rate, visit loanconsolidation.ed.gov for an online calculator that will do the math for you.

How much can I save? How much you save by consolidating loans depends on what interest rate you get and whether you choose to extend your repayment plan. According to Sallie Mae, the leading provider of student loans in the United States, consolidating student loans can reduce monthly payments by up to 54 percent. However, the only way to reduce your payment this much is to extend your repayment plan. You typically have 10 years to repay student loans, but, depending on the amount you're consolidating, you can extend your repayment plan all the way up to 30 years. Remember that if you choose to extend your repayment term, it will take longer to pay off your overall debt and you'll pay more in interest. There are no preypayment penalties, so you can always choose to pay off the loan early.

Am I eligible to consolidate my loans? In order to consolidate your loans, you must meet the following criteria:

- You are in your six-month grace period following graduation or you have started repaying your loans -You have eligible loans totaling over $7,500 -You have more than one lender -You have not already consolidated your student loans, or since consolidation you have gone back to school and acquired new student loans

The following types of loans can be consolidated:

-Direct Subsidized and Unsubsidized Loans -Federal Subsidized and Unsubsidized Federal Stafford Loans -Direct PLUS Loans and Federal PLUS Loans -Direct Consolidation Loans and Federal Consolidation Loans -Guaranteed Student Loans -Federal Insured Student Loans -Federal Supplemental Loans for Students -Auxiliary Loans to Assist Students -Federal Perkins Loans -National Direct Student Loans -National Defense Student Loans -Health Education Assistance Loans -Health Professions Student Loans -Loans for Disadvantaged Students -Nursing Student Loans

Where can I get a consolidation loan? You can consolidate your loans through any bank or credit union that participates in the Federal Family Education Loan Program, or directly from the U.S. Department of Education. The loan terms and conditions are generally the same, regardless of where you consolidate. You may want to check first with the lenders that hold your current loans.

If all your loans are with one lender, you must consolidate with that lender.

If you decide to consolidate your student loans, remember that you can only do so once unless you go back to school and take out more loans. Therefore, you will want to make sure you get the best deal the first time. The interest rate will be the same from all lenders, but some lenders may offer future rate discounts for prompt payment and a discount for having monthly payments directly debited from your account.

Can my spouse and I consolidate our loans together? You can consolidate your loans together, but it is not a good idea for a couple reasons:

-Both of you will always be responsible to repay the loan, even if you later separate or divorce -If you need to defer payment on the loan, both of you will have to meet the deferment criteria

When should I consolidate my loans? You can consolidate your loans any time during your six-month grace period or after you have started repaying your loans. If you consolidate during your grace period, you may be able to get a lower interest rate. However, since you will lose the rest of the grace period, it is a good idea to wait until the fifth month of the grace period before consolidating. The consolidation process usually takes 30-45 days.

Home Equity Loan Improvements

It's time for home equity loan improvements There's more Regulation Z compliance on the way, courtesy of the Home Equity Loan Consumer Protection Act. This fall banks will have to implement the new home equity loan disclosure rules the Federal Reserve Board was required to issue under the act. The Federal Reserve released the final version of the home equity regulation on June 5. The rules were made effective June 7.

However, compliance is optional until Nov. 7 because Congress gave institutions five months after finalization to start. However, there's no time like the present. This column is devoted to bankers' most common questions about the demands of this complicated rule. You should, of course, check the regulation and consult legal counsel before acting on these suggestions.

Product Design
Q. This is a disclosure regulation. Does that mean that, while we must provide customers lots of information about home equity products, we are free to design them as we see fit?
A. No. The regulation leaves many design matters to lenders and provides options in a number of other areas.

At the same time, however, it creates three absolute restrictions on design:
(1) If you offer a variable-rate program, you must use a base rate beyond your control. Information on that rate must be generally available to the public. Examples include the prime rate as published in The Wall Street Journal or rates on U.S. government securities.
(2) Lenders generally may not terminate the plan and accelerate the balance before the loan's scheduled expiration. There are three exceptions: customer fraud or misrepresentation; failure to meet repayment terms; or action or inaction adversely affecting collateral.
(3) Lenders may not unilaterally change any but insignificant terms of a home equity plan, with the following exceptions:
* You may make changes provided for in the contract, as long as both the triggering event and the resulting changes are stated specifically in the contract.
* You may substitute a new index if the original index becomes unavailable. This is subject to two conditions: the new one's historical fluctuations must be substantially similar to the old one and it must produce a rate similar to that in effect when the old index became unavailable.
* You may prohibit further advances or reduce the credit limit in four circumstances:
if the value of the dwelling falls significantly below original appraised value;
if you have a reasonable belief, based on evidence, that there has been a material adverse change in the customer's ability to repay;
if the customer defaults on any material obligation he's agreed to under the plan; or
if government action--such as a reduced usury ceiling--either precludes imposition of the agreed upon annual percentage rate (APR) or adversely affects the priority of your bank's security interest.
If you impose restrictions based on these four situations, you must reverse your action if and when the problem is eliminated. Preparing Early Disclosures

Q. What are the basic early disclosure requirements?
A. The heart of this regulation is a new requirement that customers be given detailed disclosures and a general brochure about home equity plans when provided with an application form. The only exceptions are for applications contained in magazines or taken by telephone or through third parties. In these cases, the lender can mail or deliver the disclosures and brochure to the customer within three businness days after receiving the application.

Q. Do these disclosures have to be in a form the customer can keep?
A. Not when they are provided with the application. This means that you have the option to simply print the disclosures on the application form. If you do so, however, you must include a statement suggesting that the customer make a copy.

Q. Must early disclosures be presented in any particular format?
A. Yes. You must be sure that certain required terms are grouped together and are segregated from other information.
These terms include the following (assuming they are applicable);
the first four must precede all others:
* The customer should keep a copy of the disclosure.
* Any time limit within which the customer must apply to receive the terms described. Alternatively, include a statement that terms may change. In addition, the lender must state that the customer has the right to a refund of any fees if any terms change and if, as a result, the customer decides not to enter into the plan.
* A warning that the lender is acquiring a security interest in the customer's dwelling and that the customer could lose his home if he defaults.
* An advisory that, under certain circumstances, the lender may terminate the plan and accelerate any outstanding balance; prohibit further advances; reduce the credit limit; or otherwise change the plan, as provided in the loan agreement.
* A discussion of the plan's payment terms. This should include: the length of the draw period and any repayment period; an explanation of how the minimum payment is determined, the timing of payments, and whether making only minimum payments would not repay any or all of the principal balance; and the fact that the plan permits conversion of the balance to a fixed-term loan. You must also include an example, based on a $10,000 outstanding balance and a recent APR, showing the minimum periodic payment, balloon payment, and the time needed to repay the $10,000 loan making only the minimum and balloon payments, with no additional advances. * For fixed-rate loans, the APR must be one that was in effect within the previous 12 months. For variable-rate plans, the historical table satisfies this requirement.
* A description and itemization of loan fees that the lender charges to open, use, or maintain the account. These can be stated as dollar amounts or percentages. You must also give a total dollar estimate of fees imposed by third parties and invite the customer to request more specific information.
* The fact that negative amortization may occur and that it increases the principal balance and reduces the customer's equity.
* Any limits on the number and size of credit extensions within any time period and any minimum balance or draw rules, stated as a dollar amount.
* A statement that the customer should consult a tax advisor regarding the deductibility of interest and charges.

Q. If we offer a variety of home equity plans, are we required to have a separate disclosure notice for each one?
A. No. The bank can choose to devise a separate plan disclosure for each home equity product or to use a more generic disclosure to cover all of them. If you use individual disclosures, you must inform customers that they should inquire about other options. If you use a single generic disclosure, you are required to spell out any linkages or relationships affecting the availability of certain terms.

For instance, if you tell the customer that your home equity loans are available with certain payment plans, and if the customer's opportunity to select these payment plans varies based on other loan terms, these restrictions would have to be explained. An example of such linkages: Say a bank offers two plans, one with a five-year term and the other with a ten-year term. The bank permits interest-only payments under the five-year plan, but requires payments of interest and principal under the ten-year plan. A generic disclosure would have to point out such a difference.

Q. Where do we get the brochure that must be given out?
A. You can either use the model brochure provided by the Federal Reserve Board or develop your own that is "substantially similar." If you want to use the Fed's version, you can obtain a limited number of original copies from your Federal Reserve Bank and reprint them verbatim. You could also reprint the Fed brochure with the bank's name and logo.

Q. The disclosures that go onto application forms seem fairly straightforward. But I foresee difficulties sending the required notices out within three days for telephone, third-party, and magazine insert applications. Is this going to be a management problem area?
A. Undoubtedly. You need to have a system and training for handling these applications. Staff should be directed to note them on a special log identifying the applicant, the time of receipt, and the source of the application. You then need to generate the required disclosures and record the date they were sent.

Q. We must disclose the circumstances under which we can change the terms of the plan and what the changes may be. These could grow quite lengthy. Must they all be included in the early disclosures?
A. No. You can include them all if you want to; if you do, you need not group them with the other early disclosures. However, if you prefer, you can simply disclose that the borrower may obtain a list of the conditions under which the lender could take these actions. In either case, the segregated disclosures must state that the lender has the right to terminate, accelerate, prohibit new advances, reduce the credit line, or make other changes. You must also state the fees for termination. Management tip: Designate which employees have the authority to terminate or change the plan terms. Then make sure these employees understand the rules. Permitting decentralized decision-making could lead to legal and customer relations problems.

Q. Our bank's home equity lines can be accessed with a credit card. Do we have to incorporate the new credit card early disclosures (ABA BJ, June, p. 14) into those for our home equity plan? A. No. The Federal Reserve's new credit card rules specifically excluded such plans. Initial Disclosures

Q. What is the difference between "early" disclosures and "initial" disclosures?
A. The early disclosures are the ones added by this regulation--those that must be provided with the application. The initial disclosures are the main Truth-in-Lending disclosures that have always been required at or before loan consummation.

Q. Does the new rule affect the initial disclosures we must make?
A. Yes. You must include in the initial disclosures the early disclosure terms that do not duplicate already-required initial terms. In addition, the initial disclosures must include the full list of the conditions under which the bank can terminate or modify the plan, incorporating, of course, the restrictions described earlier. It is not sufficient here to simply tell the customer that he may obtain such a list, in contrast to the early disclosure requirements. Loan Agreement

Q. Does the regulation require changing our standard loan agreements?
A. Very likely. As explained earlier, you must assure that the agreement uses a publicly available index beyond your control; that it only permits early termination within the circumstances permitted by the regulation; and that any provision for changing terms spells out specifically both the triggering event and the resulting change. An example of the latter: For an employee preferred-rate plan, the contract must provide that a specified higher rate will apply if the borrower's employment by the lender ends.

Steps For Finding A Thin Or No Credit Motorcycle Loan

It is no secret that thin or no credit can hurt just like bad credit when shopping for motorcycle loans. The main reason for this is that lenders all have a variety of strategies on how to approach motorcycle loans in their loan portfolios. Some lenders see motorcycles loans as a risky but feasible businness investment, while other lenders label motorcycles loans as a high risk money losing investment. Overall, the general perception of most lenders is that a motorcycle is a “toy” and therefore motorcycle loans are much more risky than other types of loans. This “toy” labeled perception from lenders is a critical component which makes shopping for a motorcycle loan much more difficult for motorcycle buyers with thin or no credit.

If you would like to get approved for limited or no credit motorcycle loans, the first step is to look online. Many online lenders are very competitive with offering motorcycle loans and some of them specialize in limited or no credit motorcycle loans.

If you have searched online and are still having trouble getting approved due to thin or no credit, it is critical that you begin to understand the impact of your FICO credit score. Essentially, a FICO credit score is the number one variable most lenders use in approving you for a motorcycle loan. The FICO credit score is a computer generated score which is comprised of your credit payment history, amount owed, length of credit, amount of new credit and types of credit.

Since many people with thin or no credit do not even have a FICO credit score associated with their credit file their motorcycle loan applications are sometimes automatically declined by lenders. Therefore, the first step to getting approved for a limited or no credit motorcycle loan is to start building credit history. In order to get a computer generated FICO credit score with your credit file you must have at least one credit account that has been open for at least 6 months and has been updated at least once in the previous 6 months.

This requirement can make it tough for young motorcycle buyers or immigrants who wish to establish a credit score since some lenders will not extend credit to people with a thin file. However in today’s age, there are credit card companies willing to give newcomers a credit card with a small $500 limit to get started.

As a result, if all else has failed and you have limited or no credit a great way for you to begin building your FICO credit score is to get a low credit limit credit card and begin using it regularly for small everyday purchases. The key to this strategy is keeping your purchases small and frequent and paying off the balance every month on time. Always try to avoid maxing out the credit cards or even using more than 30% of the available credit limit. To make this easy some small purchases can even become automatic by putting things like monthly cable or telephone bills on automatic credit card payment.

The bottom-line is that finding a limited or no credit motorcycle loan can be challenging, but working smarter by shopping for a motorcycle loan online and also beginning to build a credit history can take a lot of pain out of the process.

A Guide to Finding the Right Loan

Almost every day, you are involved in some type of financial transaction requiring an educated decision. And we all need extra cash from time to time. Maybe you need extra funds to purchase your "dream" home, or a more reliable vehicle. Perhaps you want to provide that "fairy book" wedding for your only daughter, or take that once-in-a lifetime paradise vacation.

Sometimes it is simply not practical to make a purchase by saving up the cash, and that's where a loan can help. Nearly everyone needs to borrow at some time in their life--to finance a house, buy a new automobile or send the kids to college. But with so many different types of loans from so many different financial institutions, how do you decide which is best for you?

When you set out to borrow money you are barraged with the jargon of the banking industry. Revolving loans, points, adjustable rates, bridge loans, beacon scores, amortization and on and on and on. It is important to understand these terms in order to get your best possible deal at the lowest interest rates that are currently available. Take some time, research the terminology and become a smart money shopper.

Not many years ago, banks were the only "boys on the block" when it came time to obtain a loan. You got dressed in your finest outfit, got a haircut, and shined your shoes in advance of your meeting with the bank manager. Today, loan providers are everywhere. Supermarkets, credit unions, television ads, daily credit card offers in the mail, finance companies, and the payday loan building on the corner. Where do you start? Obviously the first question--how much money do I need?--must be answered. If you are shopping for a home, for example, you will not be using a credit card. Here is where your neighborhood bank can help. And even Uncle Sam--if you get a Veteran's Administration (VA) or a Federal Housing Administration (FHA) loan.

Other types of loans available include: car loans, businness loans, debts consolidation loans, home improvement loans, home equity loans, refinance loans, personal loans, payday loans, and bridging loans (used to "bridge" a short-term financial gap when cash is needed for a special project). There are nearly as many loan types available as there are reasons to borrow money. Approval for loans is based upon a number of factors, such as age, employment, income, and credit rating.

Even if you have a poor credit rating or bad credit history, you can still find a range of "bad credit" personal loans, although the interest rates are generally higher than on standard loans. Beware, however, of the "payday" loans. Sometimes called cash advance loans, check advance loans, deferred deposit check loans or post-dated check loans, however check cashers or finance companies refer to them--they are EXPENSIVE.

Usually, a borrower writes a personal check payable to the lender for the amount needed plus a fee. Let's say you need a quick $100 and write a check to the lender for $115. You receive $100 and the lender agrees not to deposit your check until your pay day arrives three days in the future. It cost you $15 to borrow $100 for three days! You don't even want to know the Annual Percentage Rate (APR)on that loan.

When you need credit, shop carefully. Compare offers and institutions. Look for loans with the lowest APR. Compare the total finance charges, which include fees, interest and of types of credit costs. By going online you can obtain a multitude of loan options including: interest rates, length of the loan and the actual total monthly payment cost.

Learn the lending terminology, understand the different types of loans that are readily available and then make a choice that is best for your unique situation. In the borrowing world, there is no "one-size-fits all" solution. Your credit history, ability to repay the loan in a timely fashion, and the purpose of the loan should all be thoroughly considered.

Obtaining a Home Equity Loan Online

Private lenders, banks, and mortgage companies are all setting up shop on the internet, and all make it possible to obtain a home equity loan online. Competition between lenders is stiff, so be sure to check a few companies that offer applications about their rates, products, and customer service.

A mortgage site that provides a home equity loans will also give more detailed information for the typical uses of a home equity loan. Many people choose to get a home equity loan in order to consolidate existing debts- such as credit cards, loans, educational expenses, and car payments. Home equity loans are also used in order to finance home improvements that you'd like to make but don't have the cash on hand to pay for them, since the loans tend to be more economical than some of the other options for obtaining financing.

There are a few different versions of home equity loans that you can apply for and receive, and when you apply for a home equity loan online you'll make a decision as to whether or not you need a line of credit, a fixed loan, or what is called a 125% loan. The line of credit is a good choice if you want to have money available to borrow at any time, such as for home improvements or sending children to college. A fixed loan option is perfect for individuals who know exactly how much money is needed and only want to borrow once, while a 125% loan is useful for people who want to consolidate debts but do not have much equity in their home yet. The 125% loan allows the borrowers to borrow up to 125% of the property value and usually offers a fixed interest rate.

Benefits Of A Personal Loans

A personal loan can offer many benefits. The benefits will vary depending on the type of personal loan selected.

If you selected a secured personal loan it can offer the following benefits:

- A secured personal loan is far easier to obtain than unsecured personal loans. The added security that this type of loan gives the lender means that even those with a less than perfect credit history can get hold of a secured personal loan with relative ease.

- A secured personal loan is often offered with more favourable terms than other types of loans. With secured personal loans it is also far more likely that You can borrow a larger amount of money and pay it back over a longer period of time.

- A secured personal loan can help you to free up equity that would otherwise remain dormant in your property, letting you make use of capital that would otherwise remain unobtainable.

- The interest rates on secured personal loans are often considerably lower than those offered on unsecured personal loans.

- A secured personal loan will enable you to get your hands on money that would otherwise take a long time to save up, allowing you the freedom to spend it on whatever you want.

- A secured personal loan can be used for any purpose such as; paying off debts, making home improvements, buying a new car, luxury holiday or anything you choose!

If you selected an unsecured personal loan it can offer the following benefits:

If you want to raise money for most purposes but do not want to offer your home as security then an unsecured personal loan could be the solution.

An unsecured personal loan is a personal loan where the lender has no claim on a homeowner's property should they fail to repay. Instead, the lender is relying solely on the ability of a borrower to meet their loan borrowing repayments.

The amount you are able to borrow can start from as little as Ј500 and go up to Ј25,000. Because you not securing the money you are borrowing, lenders tend to limit the value of unsecured personal loans to Ј25,000.

The repayment period will range from anywhere between six months and ten years. Unsecured personal loans are offered by traditional financial institutions like building societies and banks but also recently by the larger supermarkets chains.

An unsecured personal loan can be used for almost anything - a luxury holiday, a new car, a wedding, or home improvements.

An unsecured personal loan is good for people who are not homeowners and cannot obtain a secured loan for example; a tenant living in rented accommodation.

There are a few things to consider before applying for an unsecured personal loan: Unsecured personal loans are invariably more expensive than secured loans, and the repayment periods demanded by lenders are shorter too. This is because they have no guarantee that you can repay the loan, and therefore charge you more in interest to cover the cost of insurance policies that they need to take out to protect them should you default on repayments. In the event that a borrower does not pay up, the lender will invoke the terms of the legally-binding credit agreement and pursue the borrower through the legal system.

Lenders are obliged by law to tell you how much they charge for this type of finance and this is worked out as an annual percentage rate (APR). Ask whether the APR figure quoted is ‘typical' or is what every applicant is charged. You should also investigate whether the interest rate charged is fixed for the lifetime of the loan repayment period, or whether it varies with the base rate. Check too on whether there are early repayment penalties.

Unsecured personal loans vary from lender to lender, so it pays to shop around before making a final decision.

Home Equity Loan Information - How to use One Wisely

Using a home equity loan to get out of debt or make improvements to your home is usually a smart move. You have earned the equity, so it only makes sense that you put it to good use. Usually this type of loan offers a lower interest rate than credit cards or traditional loans, so it is a wise move for many circumstances. Perhaps one of the smartest uses of a home equity loan is for home improvements. You can take a $10,000 dollar loan, put it towards a new kitchen, and then turn around and sell your home for a profit. There are a few tips to getting the most out of your home equity loan. Use your head and ask questions, and you should have no trouble making the right decision.

First, you need to do your homework. We cannot stress this enough! The more you know about the process and your lender, the better prepared you will be come closing time. Get quotes from several lenders, which will give you a bargaining chip when it comes time to secure a loan. If you have found other lenders that can offer you a better deal, use that to your advantage. Always get it in writing.

Second, understand what the market is doing at the moment. Research the current interest rates available as well as the government prime rate. This will help give you a picture of where the economy is headed. Understanding the value of your neighborhood will also come into play during the process. For instance, if a golf course or park is in the process of being built, you may find that the value of your home will skyrocket once the feature is in place. Consider waiting until the construction is complete, to get top dollar for your home.

Lastly, know where you are going in the next 10 years. Sure, you may be able to swing the second mortgage now, but where will you be in 10 years. While nothing is ever certain, there are a few life altering events that could drastically change your finances. These include:

1.A spouse changing jobs or deciding to quit working to stay home with children

2.A spouse or child attending college

3.The birth or adoption of a child

4.Illness or death in the family

So make sure to discuss your current situation with your friends and loved ones. If you plan on having another child or moving to one income, you may be better off waiting for a while. On the same note, if you or your spouse will graduate college or receive a promotion, you can probably go ahead with the loan.

When the time comes to decide on a loan product, do not get pressured into signing something that you don't understand. Even if the lender says that the document is "standard" read through it cover to cover before signing. The final piece of advice for you would be to not take more than you need. Let's say that you have about $5,000 in home repairs that need to be done. Even if the lender says that you can borrow $30,000 dollars, you shouldn't do it. Borrow only what you need. That way, you can be sure to repay the loan in a timely fashion. Put any excess Money into a savings or money market, so that you have a cushion should another emergency arise.