September 23rd, 2013
**Today’s guest post is contributed by Dana Fulton.**
For most people, student loans represent their first encounter with the world of credit and finance. They can open a world of opportunity to young people who might otherwise not be able to pay to continue their education. More than 60% of American students (that’s almost 12 million in total) will borrow money annually to help pay for college. It’s likely that this is where you’ll begin to build your credit score: a little number with huge consequences. It can be intimidating, but there’s really no reason to stress out. Staying in control of your student debt is easier than it sounds. When dealing with loans, you should:
Know the nitty-gritty details of your loans and your lenders
Ignorance is not bliss when it comes to dealing with educational loans. The first and most important step to staying on top of your loans is getting up close and personal with all the details. Not all student loans are created equal, and students may use a combination of different types of federal and private loans to make up their financial package. Each type of loan carries its own terms, and you should be familiar with the specifics of every loan you take out. Make sure that you know exactly how much you owe, what your interest rates are, and what minimum monthly payment you’ll be expected to make. Many loans come with grace periods, which are amounts of time after graduation you can wait before beginning repayment. Grace periods can vary greatly between loans, so it’s vital that you keep an eye on what will need to be paid when. Keep careful record of the contact information for all of your lenders (loans are often sold between institutions, so they are subject to change), and keep in touch with them. If you find yourself unable to make the monthly payments, they should be your first call. There are many options out there to deal with repayment issues, but if you don’t let them know what’s happening, they can’t help. It’s common to move around a lot during and after college, so be sure to update your lenders on any changes in address to avoid missing statements.
Be strategic about your repayment plan
Deciding when and what to pay can make a real difference when figuring out your student loan repayment plan. If you can manage it, pay off the highest-interest loans first, regardless of their grace periods. This is actually a great financial tip for all kinds of debt. Subsidized federal loans don’t accrue interest while you’re in school, but most other loans will. If you can budget to pay even just the accruing interest while you’re in school and through your grace period, you’ll make a real dent in the final figures. If you can make payments on the principal, this is even better. Many lenders will allow you to pay early without penalty, and chipping away at the main loan is the most effective way to get out of debt early. After school, if you’re struggling to make payments, deferment or forbearance are options, and certainly better than just missing payments or defaulting. But remember that both of these options may increase what you pay over the term of the loan, because interest continues to accrue each day. They should be considered a last resort, and you should fight hard to resume payments as quickly as you can.
Sign up for automatic debit
If you miss a payment on your student loan, you’re looking at late fees and adding to the amount of interest that accrues. You don’t want to add to the amount you have to pay, so you should do everything in your power to minimize the chances of paying late or skipping a payment altogether. Setting up an automatic payment may be a great first step. This may simplify things for you, and you might even be able to take advantage of other benefits. Some lenders offer special deals to borrowers who can consistently make their payments on time. By signing up for automatic payments, you may be able to qualify for reductions in your interest rate or principal, which can save you a lot of money in the long run.
The truth is, borrowing money for college is a fact of life for many people, and with a bit of education (see what we did there?) it’s totally possible to take the fear out of the equation and use your student loans to build a solid financial future for yourself.
Dana Fulton is a marketing consultant for Wells Fargo Education Financial Services, and received her Bachelor of Science from the Massachusetts Institute of Technology. Today she spends her spare time in the house she rebuilt with her husband, raising two small daughters that inspire her to do meaningful work and save as much as she can for their upcoming college years.
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July 3rd, 2013
Students heading back to school this fall with new student loans could be shelling out more money. The deadline to raise the federal student loan rate passed without a vote on July 1st. Congress left for the their July 4th recess with no resolution, allowing interest rates on new subsidized Stafford loans to increase to 6.8 percent from 3.4 percent.
May 30th, 2013
Welcome a new member to the online-only personal loan space! Chicago-based AvantCredit aims its unsecured loans at consumers with credit scores between 620 and 720—a nearly-prime community rarely served by other lenders. Like NetCredit, AvantCredit hopes to bridge the gap between payday loans and traditional personal loans. Its loans range from $1,000 and $10,000 and are payable over one to three years, depending on the terms you receive.
November 13th, 2012
Picture this: You’re starting a new business, say a hat shop. You need a small business loan to get the Hat Shack up and running, but each bank you visit has tightened its purse strings. Loans are difficult to come by, and they have high credit score requirements. Where do you go so you can get your shop ready to go before hat season? Enter Borro, an online pawnbroker that extends secured personal loans backed by valuable assets.
September 21st, 2012
I got my first full time job in April 2010 as a Social Media Coordinator. Before that, I had been a broke college student surviving off credit cards, especially after I quit my part-time receptionist job to take care of my mom when she got sick.When I moved into my own place with my boyfriend (now husband), we were both making good money, but I was just paying the minimums on my cards month to month. It’s not that it wasn’t manageable, but I would’ve preferred to get out of debt sooner than later, and see some sort of light at the end of the tunnel.
June 8th, 2012
NetCredit, a new online personal loan lender, is providing loans to consumers with poor credit in hopes of filling the gap between payday loan users and consumers who qualify for traditional loans. The company, located in Chicago, isn’t new to lending. It’s an extension of Enova Financial, which has been involved in the industry since 2004.
December 8th, 2011
When it comes to finding money to take care of financial obligations these days, your options are even more limited than ever before. Thanks to the credit crunch, banks and other financial institutions have made it more difficult than ever to borrow money. Those that will lend will only do so to individuals with an excellent credit score and charge a premium for the privilege. Many people are caught in the crosshairs and simply don’t qualify for a loan.
October 31st, 2011
The American Bankers Association (ABA) recently released a worrisome report. According to a second quarter review, delinquencies amongst American consumers are on the rise. At the heart of these delinquencies are bank card debts and defaults. A close second to bank cards is home equity lines and loans—specifically auto loans.
September 21st, 2011
If life were like a car commercial, you’d walk into a dealership, point to the shiny new red sports car, and drive away. Sadly, life is not a car commercial. Buying a car includes deciding whether to take out a loan, sign up for a lease, or pay for your new vehicle with cash. All three options include details that you’ll want to carefully weigh and consider.
August 31st, 2011
It happens to the best of us.
We find ourselves strapped for cash with nowhere to turn and payday is still two weeks away. When you need cash fast, some loans might seem appealing, but even in times of extreme financial desperation, there are three types of loans you should always steer clear of.
Here we’ll show you why they’re risky and how you can avoid them.