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Tailor home loan rates

FALLING interest rates are causing a surge of activity as Mount Isa area residents are looking for ways to save more money on their home loan, says Yellow Brick Road Mount Isa branch principal Steve Williams.

The Reserve Bank kept the cash rate on hold in March following a significant rate cut in February, dropping the rate to a historic low of 2.25 per cent.

Mr Williams said his branch was urging Mount Isa residents to look beyond the cuts and pay attention to where their rate fitted in comparison to the rest of the market. ‘‘Getting an interest rate that’s among the most competitive on the market is one of the best ways to make your financial goals and dreams a reality.”

Steve Williams’ top 10 tips to spend less on your loan and more on your dreams

1. Have a plan: You should plan to own your home as fast as possible, and therefore pay as little interest as possible.

2. Pay attention to the rate: Stay up to date with what the market value is on rates. Consider a $450,000 loan over 25 years. If you had a 4.95 per cent mortgage and refinanced at 4.39 per cent – your repayments would decrease by $147 a month, saving you over $55,000 in interest over the life of your loan.

3. Be prepared to refinance: To save on a mortgage, you must be prepared to go to a lender with a lower interest rate than your current one.

4. Understand the loan term: Shorter loan terms usually mean you pay less interest and pay the debt faster. Let’s say you have a $450,000 mortgage at 4.39 per cent, and you opt for a 25-year loan rather than a 30-year: you’d save $68,100 in interest alone.

5. Repayment frequency is key: The higher the frequency of payment, the slower the interest accrues and the faster you pay off the mortgage. If you pay half the monthly repayment amount fortnightly, rather than monthly, or a quarter of the monthly payment weekly, you end up saving the equivalent of an extra month’s payment each year. Consider an average mortgage of around $450,000 and a 30-year term at 4.39 per cent. You’d save around four years and four months off your loan term and more than $60,000 in interest.

6. Put windfalls into your home loan: Tax refunds, Medicare rebates and work bonuses should go into the home loan, cutting interest and speeding repayment.

7.Have the right loan: Ensure your mortgage allows you to put in lump sum amounts. Many fixed rate loans don’t allow this. If you’re offered an offset mortgage that lets you put your income directly into the loan, make sure this suits you.

8.Do it early: Increasing your repayments and putting in lump sums is most effective when you do it early in the term of the loan.

9. Know your fees: The headline repayment figure in your mortgage agreement is not the only number you should look at. Lenders charge different fees, so be cognisant of any incidentals that may not be captured in the comparison rate.

10. Beware of interest only: Don’t select an interest-only loan if you want to repay it quickly. Always opt for principal plus interest. When borrowers ‘‘set and forget’’ their mortgage, they usually pay too much interest and have the debt longer than they should.


Applying for a Short Term Business Loan Online? These 4 Steps Can Protect Your Startup.


I recently met an entrepreneur who started a franchise in his mid-50s with funds from his 401k but was now in a tough spot. His first payroll check had just bounced and he was shaken up about it, as his franchise employed 30 people and he dreaded the thought of having to shutdown.

Like many others, this entrepreneur experienced sporadic cash-flow droughts in his first years of business. To rebound quickly, he took out cash advances that quickly led him into a cycle of renewals. Now, cash advance merchants claimed 30 percent of his monthly revenue.

Visit: Entrepreneur Bank Search — A search tool to help you discover local banks.

As the founder of a small-business loan advisory, my firm often receives calls from entrepreneurs who are stuck in a debt cycle. I see many cases where the entrepreneur realizes the risks of cash advances or short term business loans too late and they’re left repaying with huge percentages of their revenue, plus the expensive fees and interest rates.

Better standards for this self-regulated industry would help, but until those standards are in place, entrepreneurs need to educate themselves about this industry and the impact merchant cash advances might have on their business. Here are steps entrepreneurs should consider taking before signing the dotted line.

Related: How to Cure Entrepreneurial Brain Freeze

  1. Applying for a short term loan online or cash advance should always be your last resort because these forms of capital are often the priciest option. If you’re considering one of these loans take a step back and look at investment lenders or SBA lenders who will offer you much longer amortizations and reasonable interest rates.
  2. Before you take on one of these loans or advances, ask your vendors if they can be flexible with your payments. Even if the vendor charges you a fee, it will likely be cheaper than the short term online lender.
  3. If you do choose to pursue one of these loans or advances, the most important step is to calculate your daily payment to the lender. These payments will come out of your checking account daily for the life of the loan. Think long and hard if you will be able to handle these cash withdrawals.
  4. Also, the lenders or advance companies will often encourage you to take the shortest possible loan. In the cases where these loans are the only choice for your business, I encourage a borrower to take the longest possible loan, and get the smallest possible daily payment. While the longer loan will cost the borrower more dollars in the long run, you have to think about your cash flow. If you take the shorter term, you might be forced into a renewal half way through your loan or advance in order to keep up with the cash flow.

With the right education, entrepreneurs can keep running their businesses instead of getting trapped in a debt cycle until better standards for unregulated lenders are in place.

Visit: Entrepreneur Bank Search


Are Your Student Loan Payments Higher Than Necessary?


Source: Tulane Public Relations via Flickr.

If you’re among the millions of Americans who make student loan payments each month, it’s important to know all of the repayment options available to you. Certain plans could lower your monthly payments, freeing up more of your cash.

Here’s an overview of the most advantageous repayment plans, along with the pros and cons of reducing your payment.

The Pay As You Earn plan
The Pay As You Earn is designed to keep your payments low when you’re fresh out of school and not earning much money. Then, as your income grows, so do your repayments.

The required payment amount is actually quite low: It’s capped at either 10% of your discretionary income or what your payment would be under a standard 10-year repayment plan. For the purposes of this calculation, your discretionary income is the difference between your income and 150% of the poverty guidelines for your family size and state of residence.

As an example, let’s say you earn $60,000 per year, live in any of the 48 contiguous states or Washington, D.C. (the poverty guidelines are only different for Alaska and Hawaii), and are married with one child (family size of three). The poverty guideline for 2015 is $20,090, and 150% of that amount is $30,135. Therefore your discretionary income is $60,000 minus $30,135, which comes to $29,865. Divide this over 12 months and apply the 10% rule, and you can see that your monthly payment would be capped at about $250, no matter how high your student loan balance is.

Now, the most common concern I hear is that such a low payment may not even cover the interest on the loans, and therefore it could take decades to pay off the balance. However, under the Pay As You Earn plan, any remaining loan balance will be forgiven after 20 years of on-time payments, regardless of how much is left.

It’s also worth noting that Pay As You Earn isn’t available to all borrowers yet. It was announced last year that the program will be available to all borrowers by the end of 2015, but for now it’s only open to borrowers who took out their first loan after October 2007. For those who are currently ineligible, the Income-Based Repayment, or IBR, plan, offers similar benefits: The payment cap is slightly higher at 15% of discretionary income, and any remaining balance is forgiven after 25 years.

Extended repayment
If you’d prefer payments that stay the same over the years but find the 10-year repayment plan a little too expensive, there’s also the option of an extended repayment plan, which spreads your payments over a longer time frame (up to 25 years). This tends to be an appealing option for people who earn too much to take full advantage of the Pay As You Earn plan but find the 10-year payment amount to be too high to manage along with their other expenses.

Another advantage of the extended option is that your loan balance will go down over time, which can provide a nice boost to your credit score. According to the FICO scoring formula, 30% of your score comes from “amounts owed,” which takes into account, ;among other things, the remaining balances on your loan relative to the original loan amount.

The downsides of choosing the extended repayment plan are that you’ll never be eligible for loan forgiveness as you would with the Pay As You Earn plan, and you’ll end up paying a lot more interest over the life of the loan than you would under a standard 10-year repayment plan.

For example, if you owe $35,000 in student loans at 6% interest, your monthly payment under the standard 10-year plan would be $389 per month. So, over the life of the loan, you’ll pay $11,680 in interest. However, if you choose to pay it back over 25 years, your monthly payment falls to about $225, but you’ll end up paying $32,650 in interest.

The downside to lower payments
As with anything else in life, there are pros and cons to all repayment options, including Pay as You Earn and extended repayment. As I mentioned before, you’ll end up paying more interest with an extended repayment plan than with a standard repayment plan, and if your income increases over the years, this could be the case with Pay As You Earn as well.

And with Pay As You Earn, remember that your payments will rise in proportion to your income, and this could cause a rather sharp increase if you get a raise or a higher-paying job. In the earlier example of a borrower who earns $60,000 per year, a promotion to a job paying $80,000 per year (33% raise) would increase the allowable loan payment from $250 to $415 (67% increase). With a raise that size, a higher loan payment isn’t the end of the world, but it’s definitely something to keep in mind.

Aside from these drawbacks, the Pay as You Earn plan and the extended repayment plan can be excellent ways to manage your student loan expenses while still building up a solid payment history.

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Fundation Advances Small Business Education Agenda With Release of “Simple Interest Loan Calculator”


Fundation Advances Small Business Education Agenda With Release of “Simple Interest Loan Calculator”

Fundation Group LLC, a leader in online small business loans, recently launched a simple interest loan calculator, a comparison tool on its website that educates small business borrowers on the critical differences between simple interest business loans and fixed payment contracts, such as merchant cash advances and other daily payment financing arrangements.

Fundation is often mistakenly compared to credit providers that offer ‘cents on the dollar’ payment contracts that are marketed as loans.

(PRWEB) December 29, 2014

Fundation Group LLC, a leader in online small business loans, recently launched a simple interest loan calculator, a comparison tool on its website that educates small business borrowers on the critical differences between simple interest business loans and fixed payment contracts, such as merchant cash advances and other daily payment financing arrangements.

“In addition to offering technology-based business loan solutions, we strive to educate small business borrowers on the fundamentals of business finance and financial management,” said Fundation CEO Sam Graziano. “Alternative lending is a broad catch phrase for a wide and varied set of credit providers to small businesses, however, the differences amongst them are incredibly important to understand.” Graziano added, “Fundation is often mistakenly compared to credit providers that offer ‘cents on the dollar’ payment contracts that are marketed as loans. While these products serve a limited purpose as a liquidity tool for short-term cash flow needs, business owners are unaware of the actual economic implications of these products which carry materially higher effective financing rates than are advertised. Our new interactive tool allows business owners to easily compare how a true simple interest business loan works versus these fixed payment contracts.”

This simple interest loan calculator allows business owners to enter the terms of their “cents-on-the-dollar” offer and see how much more they will be paying than if they utilized a simple interest loan. In addition, this tool illustrates the effective Annual Percentage Rates (APRs) of a simple interest loan and a “cents-on-the-dollar” contract over the life of the contract and if the loan is repaid after one month.

“Moreover,” Graziano said, “at Fundation, we often find ourselves having to explain how much more attractive our products are than offers received from a ‘cents-on-the-dollar’ credit provider. Interest on our products are just like fixed rate mortgages, they are calculated based on the outstanding balance of the loan. These other payment contracts calculate interest on the original principal balance, then lock the borrower into the full contractual payments, even if the funds are paid back in their entirety the very next day. We hope that this simple tool can help business owners make better decisions going forward.”

Fundation’s simple interest loan calculator can be found on Fundation’s website in its “Become and Expert” section at

Fundation Group LLC is a technology-empowered direct lender that delivers small balance online commercial loans. The firm provides fixed rate loans up to $500,000 using its own capital. Fundation fills a void in the small balance commercial loan market by offering loans to businesses that banks are unwilling or unable to lend to, and those that desire a simplified process, with capital on terms that will enable them to grow. Fundation’s technology streamlines the loan application process by collecting third party data and automating the majority of the credit review process.


Should You Borrow From Your Life Insurance?

If you need money in an emergency, one place to look is your insurance policy. That is, if what you have is permanent life insurance – available as either “whole life” and “universal life ” (see Permanent Life Policies: Whole Vs. Universal).

Unlike term life insurance, which has a set time limit on its coverage period and does not accumulate cash value, universal life does have a cash component, especially later on. “In the early years of the policy, most of the premium goes to funding the indemnity benefit. As the policy matures, cash value increases,” says Luke Brown, a retired insurance lawyer in Tallahassee, Fla., who operates YourProblemSolvers to help consumers with insurance, healthcare and consumer issues. (For details, read How Cash Value Builds In A Life Insurance Policy.)

How Much, How Soon

As cash value builds in a whole or universal life insurance policy, policy holders can borrow against the accumulated funds. Life insurance policy loans have one distinct advantage: The money goes to your bank account tax-free.

Insurers generally make no promises as to how fast or to what extent the cash value will increase. So it’s hard to know exactly when your policy will be eligible for a loan. What’s more, insurers have varying guidelines outlining how much cash value a policy must have before you can borrow against it – and what percentage of cash value you can borrow.

Your policy is likely to have sufficient cash value to borrow against “typically after the 10th year the policy is in force,” says Richard Reich, president, Intramark Insurance Services, Inc. a life insurance agency in Glendale, Calif.

Something else to know: This loan isn’t taking money from your own cash value. “You are actually borrowing from the insurance company and using your policy’s cash value as collateral,” says Reich.

No Need to Repay

One attractive aspect of loans against cash value is that you don’t have to repay them – a huge benefit in an emergency.

If you do pay back all or a portion of the loan, options include periodic payments of principal with annual payments of interest, paying annual interest only or deducting interest from the cash value. “Loans have an interest rate like any other type of loan. It tends to be in the 7% to 8% range, which is high in our current environment,” says Reich. Interest will be fixed or variable, depending on your policy.

There is a good reason to repay the loan if you can. “If the loan is not paid back before death, the insurance company will reduce the face amount of the insurance policy when the claim is paid,” says Ted Bernstein, CEO, Life Insurance Concepts, Inc., a life insurance consulting and auditing firm in Boca Raton, Fla.

The accumulated interest can cut deeply into the benefit: “If the policy loan remains outstanding for many years, the amount of the loan grows and grows due to the added interest,” Brown cautions. “That puts the policy at risk of not providing beneficiaries any money upon the death of the insured.

“At the very least, interest payments should be made so that the policy loan does not effectively grow,” Brown adds. That gives you a better shot of having money left to pay out after your death.

When Life Insurance Loans Make Sense

Here are some financial situations when a life insurance loan might be a sensible choice:

You can’t qualify for a standard loan or need cash really, really fast. Because the money is already within the policy and immediately available, it’s a quick source of immediate funds for a new furnace, medical bills or another emergency, with no credit check required. Even if you qualify for a traditional loan from a bank or credit union, a life insurance loan could be a valuable stopgap if you t don’t have time to wait for your application to be processed. When the traditional loan comes through, immediately use it to repay the life insurance loan. You can’t afford your policy’s annual premium. Don’t let a life insurance policy lapse because you can’t afford the payment. A loan can keep the policy in effect as long as the death benefit is greater than the amount of the loan. Your only other loan options have much high interest rates. Before paying a higher interest rate for a loan or pledging additional collateral for a traditional loan, consider taking out a life insurance policy loan, says Bernstein. “Since there are no loan terms such as repayment dates, renewal dates or other fees, compared to traditional loans, life insurance policy loans can be very competitive,” he says.

The Bottom Line

Choosing if and when a life insurance loan is right for you is subjective, Reich says. “You have to look at which is more important; the immediate need for the cash or your family’s need for the death benefit. Understand that any outstanding policy loans will be deducted from the death benefit, resulting in a smaller benefit for your family.”

Before borrowing against your life insurance, it may be helpful to consult a financial advisor to weigh all possible options and outcomes based on your financial portfolio. For more, see What are the pros and cons of life insurance policy loans? and 6 Ways To Capture The Cash Value In Life Insurance.


Want a mortgage? Ditch cash-only, build a credit history

Dear To Her Credit,
My good friend is looking to buy a $69,900 house, but he doesn’t have any credit. He pays all his bills and things with cash.

He’s been working on a farm milking cows for about a year and has a steady check every month. But since he’s just getting his life going, all of his phone bills, car bills and so on are still combined with his mother’s bills. He does pay his half.

He’s trying to get a mortgage plan, possibly with the help of FHA or Fannie Mae’s program. He just needs some good tips or ideas on how to get everything approved. Any advice? — Alexys

Dear Alexys,
He’s been working a steady job, he’s not in debt and wants to buy a house. Sounds like he’s doing pretty well!

Before he can get a home loan, however, he needs to ditch the cash-only lifestyle and build a credit history. Even government homebuyer programs, such as FHA loans, require homebuyers to demonstrate financial responsibility before they qualify for a mortgage. Here’s how he can start building a good credit history:

He needs some kind of credit. He doesn’t need to go into debt; in fact, I hope he doesn’t. He can open a couple of low-limit credit cards, make a few purchases of gas and groceries on them every month and pay them off before the due date. If he has trouble opening a regular credit card with no credit history, he may need to start with a secured card. This is a card that is secured by an account in which he would keep cash equal to the limit on the card. The bank’s interest is secured by the cash account balance. Have him consider being added as an authorized user. By having his mother add him to one of her credit card accounts, his credit history gets the benefit of her account’s good payment history. A couple of caveats: He shouldn’t try this if there’s any chance he could spend more than he can easily pay off every month. And make sure his mother’s account has an excellent payment history or adding his name to it will do more harm than good. He needs to keep an eye on his credit report from now on. He can check his report once a year for free from If he sees any items that are incorrect, he should dispute them immediately. Note: If your friend has truly never had any kind of loan or credit, he may not have a credit report until he opens his own card account or has a loan. He can try to get a small loan from a local bank or credit union. Before getting a mortgage, he should start with a smaller loan to build a pattern of on-time payments that will reassure bigger lenders. Sometimes a local bank or credit union can help out by extending a small personal loan to your friend. By paying back the loan with regular, on-time payments, and with bank reporting those payments to the credit bureaus, a credit history is started.

You say he pays his bills with cash, but I hope he also has a bank or credit union account. Banks don’t report normal checking account activity to the credit bureaus, so having a checking account doesn’t directly affect a person’s credit score. However, as he starts paying credit card bills and applying for a loan, he needs to be part of the banking system. He’ll need other banking services as he gets ready to buy a house, such as getting a cashier’s check for closing.

Building a new credit history is not complicated. After your friend takes a few steps to establish a good credit history, he can start packing. He’s well on his way to buying a house he can call his very own.

See related: 4 ways to build credit without a credit card, Steps to build good credit your first credit card

Want a mortgage? Ditch cash-only, build a credit historyAvoid late payments by setting up auto bill payInheritance spent, bankruptcy loomingFinanceCreditcredit cardscredit historycredit bureauscredit union […]

There Are More Payday Lenders in US Than McDonald's – NBC News

There are more payday lenders in the U.S. than McDonald’s or Starbucks, reflecting economic conditions in which fast money is even more important than fast food.

Payday lending, in which users pay a fee for what amounts to an advance on their paychecks, has blossomed over the past 20 years. There are now more than 20,000 across the country, according to the St. Louis Federal Reserve, while McDonald’s boasts 14,267 locations.

They’re used most often by people who lack access to ordinary credit—often those at or near the bottom of the economic spectrum, with nearly a quarter living on public assistance or retirement income.

While the loans can fill a need for fast cash, they also can become a way of life for users who end up paying effective annual percentage rates, or APRs, well in excess of 300 percent.

Consequently, they’ve attracted the attention of regulators, politicians and economists why worry about those left behind in a decidedly uneven economic recovery.

“A large number of Americans are literally living paycheck to paycheck. They’re one unplanned expense away from being in financial distress.”

“A large number of Americans are literally living paycheck to paycheck,” said Greg McBride, chief financial analyst at “They’re one unplanned expense away from being in financial distress.”

McBride cited some sobering statistics: Twenty-six percent of Americans have no emergency savings and 41 percent say their “top financial priority” is simply staying current with their expenses or getting caught up on their bills. This is occurring even as the financial headlines trump new stock market highs by the day and President Barack Obama’s administration touts the U.S. economic recovery.

“Americans that have assets have seen the value of those assets appreciate, but Americans who don’t have those assets, they’re not feeling the recovery in their pocketbooks, particularly at a time of stagnant income,” McBride said. “If you don’t have those things, and you haven’t seen a pay increase, then you’re no better off, you’re no wealthier.”

Finding Themselves Poorer

Those using payday loans, in fact, may find themselves poorer.

The mean, or typical, payday borrower makes $22,476 a year and paid $458 in fees. However, a quarter of those borrowers paid $781 or more in fees due to repeat usage, according to the Consumer Finance Protection Bureau, which is closely monitoring the approximately $50 billion industry and will likely put forward more regulation.

About 48 percent of borrowers had done 10 transactions in the CFPB’s time sample, and 14 percent had more than 20 transactions. The median borrowing amount was $350, for a 14-day term. Median fees for $15 per $100, which computes to an APR of 322 percent.

In all, consumers using payday loans were on the hook to their lenders for 199 days, or about 55 percent of the year.

“It appears these products may work for some consumers for whom an expense needs to be deferred for a short period of time. The key for the product to work as structured, however, is a sufficient cash flow which can be used to retire the debt within a short period of time,” the CFPB wrote in a 2013 report studying the payday proliferation.

“However, these products may become harmful for consumers when they are used to make up for chronic cash flow shortages,” the report continued. “We find that a sizable share of payday loan and deposit advance users conduct transactions on a long-term basis, suggesting that they are unable to fully repay the loan and pay other expenses without taking out a new loan shortly thereafter.”

A year ago this month the bureau began accepting consumer complaints and received thousands soon after, according to the St. Louis Fed, which in its own recent report cited the potential for payday loans to “become a financial burden for many consumers.”

Payday lending is allowed in 36 states, and fees are lowest in the states that regulate them.

Bankrate’s McBride cautioned, however, that excessive regulation could be problematic if it ends up denying cash-strapped consumers who can’t get conventional loans or credit cards access to emergency funds.

“That’s a double-edged sword,” he said. “In some ways it can benefit consumers but in some ways it can hurt consumers. Limitations on how often that borrowed amount can be rolled over could keep consumers from falling into a bottomless pit of debt. But there’s certainly a fine line. These services exist because the demand is so high. The reality is a lot of Americans need short-term credit.”

First published November 24 2014, 12:16 PM


How can I borrow money from my life insurance policy?


While borrowing from your life insurance policy can be a quick and easy way to get cash in hand when you need it, there are a few specifics to know before borrowing. Most importantly, you can only borrow against permanent or whole life insurance. Term life insurance, a cheaper and suitable option for many people, does not have a cash value and expires at the end of the term, generally anywhere from one to 10 years.

A whole life policy is more expensive but has no expiration date. The term lasts the lifetime of the insured. While the monthly premiums may be higher, the money paid in to the policy exceeding what is needed for the death benefit is invested by the life insurance company, creating a cash value after a few years. The whole life policy essentially has two values: the face value, or death benefit, and the cash value that acts as a savings account. Once the money invested increases the amount of the death benefit, the tax-free cash value can then be borrowed against. It is also important to understand that the policy loan is not taken out of your death benefit, but borrowed against it, and the insurance company is using your policy as collateral for the loan.

Unlike a bank loan or credit card, policy loans do not affect your credit and there is no approval process or credit check since you are essentially borrowing from yourself. When borrowing on your policy, no explanation is required about how you plan to use the money, so it can be used for anything from bills to vacation expenses. The loan is also not recognized by the IRS as income, therefore it remains free from tax. However, the policy loan is still expected to be paid back with interest, though the interest rates are typically much lower than on a bank loan or credit card, and there is no mandatory monthly payment.

Even with low interest rates and a flexible payback schedule, it is still important for the loan to be paid back in a timely manner. Unless it is paid out of pocket, interest is added to the balance and accrues whether the bill is being paid monthly or not, putting your loan at risk of exceeding the policy’s cash value and causing your policy to lapse. Insurance companies generally give many opportunities to keep the loan current and prevent lapsing. However, in the event of a policy lapse, taxes must be paid on the cash value. If the loan is not paid back before the insured person’s death, the loan amount plus any interest owed is subtracted from the amount the beneficiaries are set to receive from the death benefit.


How To Score A Private Student Loan

It’s no secret that college is phenomenally expensive, and the sticker price rises every year. In fact, college tuition has increased by nearly 1,200% over the past 35 years. For the 2013-2014 academic year, the College Board reports a “moderate” college budget averaged $22,826 for an in-state public college and $44,750 for a private college. The most expensive colleges cost more than $60,000 a year. Cha-ching!

Obviously, most families don’t have that kind of cash lying around, which is why the vast majority of students borrow money to help pay for college. For the most part, there are two types of student loans:

  1. Federal student loans funded by the U.S. government
  2. Private student loans from a non-federal lender, such as a bank, credit union or private lender

Federal student loans offer significant advantages, including fixed interest rates and income-based repayment plans – which means they are generally less expensive than private student loans. However, when it comes time to pay for college, many students who obtain federal student loans come up short.

When a federal student loan doesn’t cover the full cost of college and the student didn’t land a substantial scholarship, it’s time to search for a private loan.

Offered by banks and private lenders, private student loans generally come with variable interest rates between 3% and 12%, origination fees and other charges. These days, most private student loans mandate a cosigner, especially for younger students who haven’t established a credit history.

For these reasons, private student loans are often considered a last resort for families. Even so, with proper research, it is possible to find a competitive loan that meets the student’s needs.

Not sure where to begin with your private loan hunt? Here are a few tips:

A Lot Depends on Credit Scores

As you research student loans, pay close attention to interest rates. Unlike federal student-loan interest rates, which are the same for every borrower, the interest rates for private student loans vary. That’s because private loans are credit-based; students with better credit scores may receive a more favorable interest rate.

Students with a low credit score or no established credit history should apply with a credit-worthy co-signer, like Mom or Dad. Not only will this increase the chances of getting approved, but it could also significantly reduce the interest rate. Co-signers should be aware of the risk they are taking on, however. See Seniors: Before You Co-sign That Student Loan.

Check Out the APR

As you’re shopping around for the best deal, you may be tempted to choose the loan with the lowest interest rate. Don’t make this mistake. When it comes to private loans, it’s more effective to compare the Annual Percentage Rate (APR). Why? Because basic interest rates may not represent the true cost of the entire life of the loan. The APR factors in account deferment periods and repayment terms, which can have a huge impact on the overall cost of the loan.

To top it off, most lenders won’t give you an actual interest rate until after they have a chance to review your application. However, lenders typically provide APR examples up front, which can help you compare loans apples-to-apples. These APR examples also illustrate the lowest and highest interest rates available, which will give you an idea of what you can expect to pay. You’re likely to receive an interest rate that lands somewhere between those numbers.

Compare Payment Plans

It’s extremely important to find a lender that offers some flexibility when it comes to repaying your private loan. While some lenders require that you start making monthly payments while the student is still in school, others allow you to wait until after graduation. Pay close attention to these details and choose a lender that offers the ideal payment plan for you. For additional information on loan repayment, see Time To Consolidate Your Student Loans?

Study Up on Borrower Benefits

For bonus points, some student-loan lenders offer additional borrower benefits. These might include an automatic-payment interest-rate reduction (the interest rate drops for borrowers who sign up to have loan payments deducted automatically from their bank account), principal reduction or even cash rewards. For example, when you enroll in an automatic payment plan, most lenders will offer anywhere from a 0.25% to 0.50% interest rate reduction. This can translate into hundreds of dollars of savings over the life of the loan.

Be sure to read the fine print about these benefits. If borrowers can’t meet their end of the bargain (one month, they miss an auto-payment because their account balance is too low), they could lose the benefit permanently. Read more about the risks and rewards of these benefits here.

Reputation Rules

It’s important to choose a student loan lender that has a stellar reputation and offers first-class customer service. Professional and friendly customer service reps will be able to answer all of your complex questions and act as an ally when a borrower needs support and guidance in tough financial times. Not only can they walk students through their repayment options, but they can also help them avoid late payments.

To evaluate the customer service for each lender, ask the following questions:

Does it offer an online loan application?Does it provide toll-free 24/7 customer service with reasonable wait times?Does it have a website where borrowers can securely access loan information?Does it generate a lot of complaints from their borrowers?Is the lender recommended by schools and borrowers?Most colleges provide a preferred lender list, including contact information for reputable lenders with whom they’ve worked in the past. These recommended lenders usually offer the most competitive rates and superior customer service. Check out the school’s website or ask the college student aid office for a list. For more information, see Top Student Loan Providers and our tutorial on student loans. The website Simple Tuition will also enable you to compare loan options.

The Bottom Line

Families should try for federal student loans first. Private student loans are a last resort when federal loans and other funding (help from grandparents, perhaps) fall short. Research will allow you to compare private loan options and identify the best available deals.


Some New Insights Into Logical Payday Loans Online Uk Methods …

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