Introduction to Student Loans: Whare are Pros and Cons?

student-loans-pros-cons

Being a US student will require you a lot of investment and many times you won’t be able to afford to study without getting a loan. That’s why you should always consider getting a student loan as it can indeed help you relieve the financial pressure.

But what are the pros and cons of student loans?

Let’s find that out!

Student loan pros

Student loans are very helpful for most students mainly because they offer immediate financial aid and they can help you get past any financial trouble. There are many reasons why student loans are a great option, as you can see below:

  • With a student loan, you will be able to afford any type of college, even if your parents might not have the money to pay for it.
  • You can eliminate other financial obligations a lot faster. With their help, you can focus on repaying your college debt without having to worry about any other debts.
  • If you do have a poor credit score, the student loans will allow you to improve it. Most of these loans are handed even to the students with a poor credit and if you use them properly you can indeed get away from poor credit situations.
  • A student loan will help you get the education you want even if you have no income of your own. They can be repaid by your parents or tutor and you can still get the education you want without any restrictions.
  • You can repay the loan on a monthly basis. You don’t have to worry about giving all that money back at once, basically, you have less pressure to deal with so you can focus on your studies.

Student loan cons

Obviously, acquiring a student loan does come with its own set of downsides. While you can get them fast, you do need to be very consistent with your payments otherwise you can easily get into financial trouble. Here are some of the student loan downsides:

  • These loans will never go away even if you file for bankruptcy. Not only that but while you can defer loan you can’t just ignore them as you will end up reaching court and repay a much larger amount.
  • The student loans come with a high-interest rate that only gets higher if you have a low credit score. Sure, they seem appealing at first but these high-interest rates can be a huge downside for many students.
  • Once you get a student loan, you will have to repay it in the designated amount of time. If you don’t do that, this loan will keep you away from accomplishing financial milestones and goals. it can increase your mortgage rate; it will haunt even your retirement if you don’t get rid of it properly.
  • While there is a student loan forgiveness program, not everyone qualifies. In fact, it can be really hard to qualify for that type of program which only manages to make everything a lot more difficult.
  • These loans come with a high risk because even if you contract such a loan you can’t be certain that the education you get can be a very good one. That’s because some of the private educational institutions won’t offer you the ultimate value for your money.

If you do want to get a student loan, it’s a very good idea to put both the pros and cons in the balance. This is a major financial commitment so you have to think about it as much as you can. Take your time, study all opportunities and the results can be very well worth it!

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8 Tips To Help You Avoid Foreclosure

foreclosure-for-sale

If you can’t keep up with your mortgage payments, then you’re at risk for foreclosure and a lender may send you paperwork to contact them. Here’s how you can avoid foreclosure.

You Can’t Ignore the Problem

You have to address this issue as you can’t get further behind in your payments. It will be harder to reinstate your loan and more than likely, you’ll lose your home. If you have a problem, contact your lender right away to work through your issues with them. The lender wants you to keep your home and have option to help you with difficult financial matters, but you have to contact them to discuss your individual issues.

Respond to Lender Mail

The first letters you get will provide options about foreclosure prevention. You need to heed these options as they can help you get out of a hard financial situation. Later letters may point to pending legal action, so you have to address the issues right away. If you fail to open the mail, this is not going to be an excuse you can use in foreclosure court.

Understand Your Mortgage Rights

Have a look at your loan documents. Tis will tell you what the lender may do if payments aren’t made. You need to understand foreclosure laws and the timeframe in your individual state as each one of the states is different. You can do this by contacting the State Government Housing Office. There’s foreclosure prevention which is also called loss mitigation that you can read about online as this will show you valuable options.

Contact a Housing Counsellor That’s HUD-Approved

HUD or the U.S. Department of Housing and Urban Development funds low cost or free housing counselling across the nation. These counsellors can help you understand the options you have and how the law works. They can organize your finances and will represent you in negotiations you have with your lender. To get assistance call (800) 569-4287 or TTY (800) 877-8339 to speak with one of these counsellors.

Get Your Spending Prioritized

You want to keep your home as this is a top priority. Make sure you review your finances and see where cuts to your spending can be made. You want to make your mortgage payments. You should cut down on optional expanses like television, entertainment, memberships and so on. Delay other payments until you’re able to make your mortgage payment and then work on the other bills.

Use Assets

If you have assets like a car, while life insurance policy, or jewelry that you may be able to sell for cash. This can help you reinstate your loan. You might be able to get a second job so you have more income to put towards the payments. If you can demonstrate to the lender that you’re making sacrifices, you may still be able to keep your home.

Don’t Work with Foreclosure Companies

Foreclosure companies charge you fees and you don’t need to do this. You will get companies looking to work with you, but this all costs money that you can’t afford. Put this cash down on your payment instead as these companies will charge you high fees, even as high as several months of your mortgage. Talk with a HUD counsellor as this is free.

Avoid Scams

There are companies which claim they can stop the foreclosure right away. If you sign paperwork that appoints them to act for you, then you just might be signing away the title to your property and become a renter in your own residence. Make sure you never sign documents until an attorney or a real estate professional has looked it over and that all the terms are understood. You should also discuss this with a HUD counsellor.

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Peer-to-Peer Lending: Ideal Solution For Those With Bad Credit?

p2p-lending

In the personal loan industry, new start-up companies have disrupted lending practices. There’s now more option for peer-to-peer lending.

To get one of these loans, you don’t actually have to meet or even know those you’re getting the loan from.

These lenders will connect individuals that need a loan with others that are looking for investments.

Here’s how all of this works.

Brief History

In the past, if you needed a loan, you simply went to the bank and asked for one. You filled out the paperwork and waited for the underwriting to go through the process. It could sometimes take a lot of time and you were never guaranteed anything. With peer to peer lending you can be approved for a loan within a few hours or a few days.

How Peer-to-Peer Loans Work

All you need to do to get a peer-to-peer loan is to find a site that does this sort of lending. You’ll enter some personal details which will include your name and the amount of loan that you’re looking for.

You will have to share your savings levels and the amount of income that you make. In some cases, you’ll need to go through a credit check and share your Social Security number, but this will vary depending upon the lender you’re working with. The lending company won’t share your personal information with the “peer” who will take on your loan.

On some sites you’ll need to explain the nature of the loan that you’re looking for. The sites are looking for personal stories and what the individual will do with the money given to them. If you need a loan for a new course you want to take or for a small business, you should mention this as it may help you.

If you’re looking to pay off some credit card debt, you should try a peer-to-peer site that’s not looking for you to pitch why you need the loan to them.

Advantages of Peer-to-Peer Loans

There are a couple of advantages with this type of loan. The most obvious advantage is that a peer-to-peer loan is much easier to get than a regular bank loan is. T

he second advantage is that there are low interest rates for customer that have credit risk which is comparable.

If you’re a college grad for example, a peer-to-peer site is going to make it easier to get a loan than a bank would make it for you even though you probably have a thin credit history.

The interest rate will still be lower than what the bank would offer. If you have good credit history, you’ll end up with low interest rates which will be better than the rates you can get with your regular bank.

These peer-to-peer lenders also have a lot less overhead to deal with. They can take risks on applicants with poor or lower than normal credit. These sites can serve customers that find it impossible to get a loan at a bank

Your Credit and Peer-to Peer Loans

Some of the peer-to-peer sites specialize in loans for those that have average or above average credit. Some of them provide loans for those will poor or nonexistent credit, but the interest rate in higher to work with them.

For those will poor credit or credit problems, these peer-to-peer sites may be the only way that you can get the loan.

These loans are still better than a very expensive payday loan or installment loan. You’ll be able to rebuild your credit this way; just don’t apply for a loan you can’t afford to pay back or you’re going to be back at square one.

Some of the peer-to-peer sites don’t report your loan payments to the credit agencies so you need to shop around to find a site that will do this if you need to rebuild credit.

This will help rebuild your credit rating so you can actually work with banks if you need to in the future. The peer-to-peer sites may do a credit check, but it won’t be one that will harm your credit rating.

Fees and What to Keep in Mind

There can be fees with these loans so you have to compare. It more than just the interest rate you have to be aware of.

There may be flat percentage fees that come with your loan. These may be called closing fees or origination fees. They can range about 1-5% of the amount of your loan.

Other Things to Keep in Mind

Peer-to peer lending sites are still quite new, but they have a lot of options. Some of the well-known ones are Upstart, Prosper,and Lending Club.

lending-club

Some of them work like a charity does. They will form lending circles and help people out that need a personal loans so you don’t have to resort to payday loans or expensive installment loans.

The groups don’t charge much or even anything for the loans that they offer you. Some sites may charge more than the non-profit lenders, but it’s still less than the rates you get with your bank.

Some of the sites may ask you more questions such as where you went to school or what your high school GPA was. You need to answer all the questions honestly in your application

Peer-to-Peer is Big Business

It has become big business in the peer-to-peer work of lending so this can work in your favor. Investors such as big hedge fund companies will build up a portfolio of loans and they offer loans with lower rates and risk for you. Those that have bad credit can work with these lenders to get the money that they seek.

Conclusion

If you’re in the market for a loan and don’t want to work with the bank or have a poor credit rating which prevents you from getting a loan, then peer-to-peer lending can work for you.

One thing you must do is to shop around to get a good rate and know exactly what you’re getting with the loan. Watch for hidden fees or prepayment penalties.

Make sure you have a budget and can actually pay back the loan that you get. The loan should help you and not hinder you so don’t put it before expenses that are more important than the loan like rent, food, or other necessities.

Once you get the loan, spend it in wise manner and make your payments on time which is just smart financial advice to keep in mind.

Sources and citations

https://www.cafecredit.com/free-credit-score/
http://www.theatlantic.com/magazine/archive/2014/09/bypassing-the-bankers/375068/

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