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Personal Loan – Advantages & Disadvantages

Personal Loan – Advantages & Disadvantages

Personal Loan is a type of unsecured loan that is given to a consumer to cater to any of their personal needs like buying a vehicle, home appliances, marriage or for renovation etc. It is given after verifying your ability to pay, particularly the source of income and also as per your credit history.Personal loan as the name itself suggests are those loans which are given to individuals for personal use and they are given without any security, in case of home loans property is a security, in case of vehicle loan vehicle itself is security but in case of personal loan the individual himself or herself is security and the repayment of this type of loan is dependent only on the income of the individual. In short personal loan is an unsecured loan; let’s look at some of the advantages and disadvantages of personal loan.Some processing fee is charged and the amount according to your paying ability gets credited to your account. The payment of the loan is made through fixed installments including interest for a fixed period of time. Personal loans come handy these days. You do not have to go through tedious paper work and loads of formalities. Majority of banks and financial institutions provide personal loans. The interest rates are also quite reasonable and people often take a personal loan for purchasing purpose.
 
Advantages of Personal Loans:-The biggest advantage of personal loan is that it can be used for variety of purpose, unlike housing loans which can be used for only construction or purchase of house or vehicle loan which can be used only for purchasing of vehicle. For example, if an individual needs $5000 for marriage, $2000 for the renovation of a house and $1000 for other important expenditures then a personal loan of $8000 will solve all his or her problems.Another advantage of personal loan is that the whole process right from applying for loan to the documentation of loan and then disbursement of loan takes far less time then compared to other loans. Hence when one is in urgent need of funds then a personal loan is the best option.All type of loans requires collateral security but personal loans are exception and hence people who do not have any fixed assets with them and are unable to get any loan then personal loan comes to rescue for such people. In short lack of any requirement of collateral security gives personal loan another edge over other types of debts.

Easily Available:-Getting a personal loan is not a tough task. Personal loans are offered at reasonable interest rates by almost all banks and financial institutions. It is easy and convenient to get these loans in comparison to other types of loans.

No Agent or Middleman Involved:-In order to get a personal loan you do not have to approach a middle man or an agent. This avoids unnecessary delays and expenses. You can directly approach the bank or financial institution for the purpose.

Unsecured Loan:-As stated earlier, personal loan is an unsecured loan. There is no collateral security required in order to get this loan. All that is required is your ability to pay back the money. You are not required to mortgage any of your assets or provide for any kind of guarantee. One the lending institution become sure of your re-payment ability, they process the loan.

Less Processing Time:-As personal loans are available without any security or guarantee the processing time involved in getting it is also very less.  

All Purpose Loan:-Personal loan is such where it is not mandatory for you to specify the cause for which you are to use the money. You can use the amount credited in your name for any purpose. It is at your discretion to decide what you have to do with the money.

Minimum Paperwork:-Getting a personal loan does not require verification of any asset or any other kind of proofs and certificates that involve a lot of paperwork as none of your property is mortgaged.

Schemes and Offers:-Number of banks and financial institutions keep announcing special schemes and offers of personal loans for professionals like Chartered Accountants, Doctors and Architects etc.

Amount and Tenure:-Personal loans are offered ranging from Rs15K to Rs 20 lakhs varying from bank to bank. The repayment can be made through EMIs which is an option available. Loans tenure may depend upon the amount borrowed and may be from 12 months to 60 months. It is always advisable to opt for a personal loan instead of going in for borrowing cash from credit card as the interest rate is comparatively low for the first one.

Disadvantages of Personal Loans:-The biggest drawback of this type of loans is that they carry very high interest rate, since personal loan is unsecured in nature therefore lenders or banks charge higher rate of interest on these loans as compared to housing or vehicle loans.It is not easy to get this type of loan it is not like you will walk in the bank and bank will give you money, in order to get personal loan an individual needs to have good credit rating and good credit history hence this requirement regarding credit rating and history makes majority of individuals ineligible for personal loan.Another disadvantage of personal loan is that many banks and financial institutions do not allow part repayment of the loan which in turn results in debt getting bigger and bigger due to interest. So for example if you have taken $10000 personal loan and if you want to repay $1000 then bank will not allow such part repayment which is not the case with housing or other type of loans where the loan amount keeps getting reducing due to part repayment feature resulting in lower overall interest.

Qualification Criteria:-You need to qualify for a personal loan as per the guidelines of the bank and once you do that there is no delay. The guidelines vary from one bank to the other and the lenders do observe strict guidelines in this case as there is no collateral security.

Credit History:-It is mandatory for you to have a good credit history when you apply for a personal loan or else your application may get rejected. No lender would want a bad debt for the amount he lends. So prior to applying for your personal loan make sure you have a good credit history without any default in payments. It is advisable to apply for a personal loan with the bank in which you have an account or with which you share good rapport. Applying for a personal loan with a new bank or financial institution may result in more paperwork as they may call for detailed documentation and references for verification.

Bank Account:-It is mandatory for you to have a bank account if you wish to avail a personal loan. Not necessarily with the bank you are applying for.

Lender’s Risk:-As it is an unsecured loan, the risk is quite high for the lender because there is no collateral security or guarantee with them. If the borrower defaults payments then recovery of these loans prove to be very expensive and tedious.

If you are the one who owns a good credit history and have means to repay the amount borrowed with interest then you can easily get a personal loan for any purpose you require. If you do a bit of research you may be able to strike the best deal in terms of interest rates while you apply for your personal loan.

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Types Of Personal Loans

Types Of Personal Loans

You’re in way over your head financially. You’re considering asking for a loan to consolidate your debt. You want to buy a new home or car. Whatever your reason for wanting a personal loan and before you decide your best option, understand that a loan, regardless of the type, involves borrowing money and having to pay it back with interest.

Different Types of Personal Loans:-Personal loans are not one-size-fits-all. There are several options. Personal loans include:

    -Convertible loans
    -Fixed-rate loans
    -Installment loans
    -Payday Loans
    -Personal Loans
    -Online Loans
    -Secured loans
    -Single-payment loans
    -Unsecured loans
    Variable-rate loans

What Is A Personal Loan:-A personal loan can be a secured loan or an unsecured loan. This kind of loan is used for everything from funding an education or financing a new business venture to purchasing luxury items or taking a lavish vacation. A secured loan uses an asset — such as a house or car — as collateral (or support). If the borrower defaults on the loan, the creditor can take the asset. An unsecured loan does not require collateral, so it is considered high risk for the lender. As such, it has a higher interest rate.Personal loans have evolved over the years to meet the changing needs of the consumer. It used to be nearly impossible to get a personal loan with a limited or bad credit history, but today there are loan options for people with bad credit and nearly every other type of consumer.

Benefits Of Choosing a Personal Loan:-The major benefit of a personal loan is in the name: It’s personal. You can use it for any reason you like and you don’t need collateral to get one.The choices range from something practical like consolidating credit card debt or remodeling the bathroom to something whimsical like buying a boat or taking a European vacation. The choice is yours.Personal loans, especially unsecured ones, usually don’t require much more than filling out an application form and supplying documents that verify your financial standing. The money doesn’t have to come from a traditional source like banks or credit unions.Family and friends can be the source of money, though it is advisable to have a formal loan agreement with them to make sure the relationship doesn’t go sour. There also are a number of peer-to-peer online lending sources like Prosper and Lending Club, as well as sites like Kickstarter and IndieGoGo that cater to entrepreneurs. The online sites normally charge a fee, but if you need money and need it fast, this is one of the options available.

Some other benefits of personal loans include:

    -You get the money faster. In most cases approval is much quicker than with conventional loans.
    -Don’t need a bank. The money could come from an online lender, a family member or friend.
    -Fixed rate interest, fixed length of repayment and fixed monthly payments
    -Loan amounts available from $1,000 to $100,0000
    -Lower interest rates than credit cards.
    -If loan comes from bank, possible discounts on interest rates.

Each loan type serves a purpose, so it is important to understand how to obtain the best type of loan for your individual situation.

Convertible Loans:-Normally used for business, convertible loans allow lenders the option to convert the outstanding principal of the loan into an equity position in the borrower’s company, which over time, may be worth more.

Fixed-Rate Loans:-Most personal loans are fixed-rate loans. The interest rate remains constant, so you pay the same amount every month until paid in full. Most homebuyers look for fixed-rate loans when they purchase a home. Though the interest rate is higher than with an adjustable-rate home loan, this type of home mortgage offers more security.

Installment Loans:-These are what most people think of when they think of a loan. You borrow a set amount of money and then repay it along with interest at regular intervals over a set period. These loans typically finance homes, cars, and other expensive items.

Payday Loans:-In general, payday loans (sometimes called cash advances) are one of the most expensive borrowing options, charging extremely high interest rates and excessive fees. They are a small, short-term loan secured against your next paycheck and are typically used for emergencies only.However, there are several payday loan alternative lenders out there like LoanNow, which offer better rates and experience for borrowers.

Secured Loans:-A secured loan is such because you offer an asset, like a home or car, as collateral to guarantee repayment of the loan. If you fail to pay, the lender takes your asset. Home equity and standard car loans are examples of secured loans.

Single Payment/Bridge/Interim Loans:-The single payment loan has many names, including bridge loan and interim loan. Generally, a single payment loan is used for short term, temporary financing and is repaid with interest in one lump sum at the end of the term. Payday loans are examples of a single-payment loan.

Unsecured/Signature Loans:-Unsecured or signature loans do not require collateral. With the right kind of credit history, your mere signature guarantees this type of loan. Unfortunately, they have a high interest rate due to the high level of risk. Credit cards are the best example of an unsecured loan.

Variable-Rate/Adjustable Loans:-Variable-rate loans are riskier for consumers than fixed-rate loans because the interest rate adjusts at different intervals throughout the life of the loan based on the market. However, the maximum interest rate a lender can charge is limited (capped). It is generally easier to get an adjustable loan, and the initial interest rate is typically lower. The most common variable-rate loan is the ARM (adjustable-rate mortgage) for homebuyers.

Securing a Personal Loan:-If you’ve read this far and have decided that a personal loan is right for you, there are steps you need to take before you get cash in hand.

    -Make sure your credit is good by obtaining a copy of your credit history. Review it carefully and fix any problems (such as outstanding debt or errors in the report) immediately.
    -Check out your credit score (760 or higher gets you the best deal). You can get FICO scores and credit reports at  (consumer division of Fair Isaac Company). You can also ask a lender where you’ve recently submitted a loan application, though they might not provide it.
    -Shop around for a lender. Some suggest shopping local (like the corner credit union) before contacting the larger institutions.
    -Compare lenders’ annual percentage rates, called APR. This is the annual rate of interest you pay for a loan.

Applying for a personal loan is a big step. Before you take any action, make sure you fully understand your options as well as the advantages and disadvantages of borrowing.

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Things You Should Know About Joint Checking Accounts

Things You Should Know About Joint Checking Accounts

Joint checking accounts offer convenient money management for many different types of relationships, including married and cohabiting couples and adult children and their parents.But the convenience of joint checking accounts potentially comes with a cost that families need to consider before signing up. Here are six issues you need to think through before you open a joint checking account with a spouse, a significant other, an adult child, or a parent.

There is no accountability for withdrawals:-Generally, couples tend to open joint accounts because they are sharing a home and expenses. That means that it’s in their best interests to be responsible with the money, since it will affect them both if the rent money is spent on a weekend in Vegas. However, if one person is unreliable with money, or planning to leave the relationship suddenly, a joint account can be dangerous for the other account holder.This issue can be more difficult when the two account holders are parent and child. Often, an adult child will request that they be added to their elderly parents’ checking account to help protect dear old Mom or Dad. They can help pay bills, and make sure that there is no fraudulent activity on the account. The problem is that both account holders have every right to withdraw money from the account — which an unscrupulous adult child could take advantage of.

Joint accounts are vulnerable to the financial mistakes of both owners:-If either account owner has unpaid debts that go into collection, the creditor has every right to use the joint account to satisfy those debts. This means you might potentially find your joint checking account completely drained in order to pay off debts you are unaware that your co-owner has run up.In addition, if there is a legal judgment against either account owner, the money in the joint account could be considered part of the assets awarded in the judgment. For instance, if Jane is sued because she crashed into a bus, then the assets in the joint account she holds with her elderly father are considered part of Jane’s assets in terms of the lawsuit — even if the account was originally solely in Dad’s name.

A joint account could hurt your credit:-Although your spouse or child’s credit rating can’t ding your score, the way they handle their money can hurt your credit if you share a joint account with them. Since creditors are required to report joint account information, an account holder who struggles with debt and paying bills on time will negatively affect the co-owner’s credit rating — unless and until the money behavior improves.If either account owner needs to qualify for any kind of financial assistance, from financial aid for college to Medicaid, the money in a jointly held account is included in the eligibility calculations for the financial aid. That means you might end up forfeiting your ability to qualify for the financial assistance if your account co-owner holds more cash in the account than you would as a sole account owner.

Your co-owner can close the account without your permission:-Certain banks require consent from both parties to close a joint checking account, but most do not. Typically, state laws dictate that any person who can write checks on the account can close it, at any time, regardless if their co-owner is present or even aware. The benefit to this is if one party relocates, passes away, or otherwise becomes incapacitated, there are very few issues the remaining co-owner must go through to close the account. The danger, however, lies in the potential for one co-owner to simply deplete the funds, close the account, and disappear. Always make sure you’re sharing a checking account with someone you trust.

Parent/child joint accounts can have estate implications:-A joint account holder retains sole control of the money in the account in the event of the co-owner’s death. In the case of spouses or other cohabiting couples, this kind of financial transfer in case of death is not a problem. However, if the account owners are a parent and child, the issue is much more complicated.That’s because the money in the checking account stays with the surviving account holder, bypassing whatever the deceased account holder may have put in their will. For instance, Loretta has three children and has specified in her will that her assets will be distributed evenly among them. But Loretta has a sizable joint account with her son Jason, and upon her death the money in that account will be solely under his control. Unless Jason feels like splitting up the money in the account three ways, his siblings are not going to see that portion of their inheritance.

Merge with caution:-While joint checking accounts offer convenience to couples and parent/child relationships, they also come with a number of potential headaches. Make sure you know what you are signing up for before you and your potential co-account owner start picking out your personalized checks.

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The Different Types of Loans

The Different Types of Loans

The other day a friend of mine asked me about different loan types, as she was on her way to the bank to consolidate some high-interest credit card debt. I was surprised at the seemingly elementary questions she was asking — she is an intelligent well-established gal who is pretty good with numbers (the credit card debt is another story).It made me realize that maybe she is not alone. Although you may know what the various debt vehicles and loan types are, do you know all their inherent characteristics? If you’re not sure, here is a loan primer to refresh your knowledge.
Secured vs. Unsecured

All loans, no matter what they are, are either secured or unsecured.
Secured Loans:-These are secured (or borrowed) against an asset you own, such as your home, which is offered up as collateral. Ultimately if you default on the loan, the bank will get their money back by way of foreclosing your house (or otherwise seizing the collateral).The interest rate should be very low (and often negotiable), hovering close to prime rate. The better your credit rating is, the more bargaining power you have with the terms, including loan amount and repayment period.Payment terms are flexible, and can even be structured as “interest-only.”If the loan is secured against the equity in your home, the application process usually involves a “drive by appraisal” of your home and some legal fees, that together amount to a few hundred (up to a thousand) dollars. As such, it’s usually best to apply for a higher loan qualification amount than you think you need (as long as you know yourself well enough not to get into more debt unnecessarily). This way if you wish to borrow more money later on, new appraisals and legal fees can be avoided.

Examples of secured loans:-

   Car loans
    –Boat (and other recreational vehicle) loans
   Mortgages
   Home equity loans
    –Home equity lines of credit

Unsecured Loans:-These are (as they sound) not secured against any assets. The bank can only utilize collectors (and freeze your accounts) if you default.The loan amount granted is largely attributable to your credit history and income/assets/debts at the time of application. There is a considerably higher assumption of risk on the bank’s part with an unsecured loan. Thus, the interest rate is much higher.

Examples of Unsecured Loans:-

    Personal loans
   Personal lines of credit
   Student loans
   Credit cards/department store cards

Loan Types:-There are a few different ways the bank can lend you money.

Line of Credit:-Similar to a credit card,you are given a maximum allowable balance, and each month you can borrow as much as you wish from the line of credit up to the maximum.Monthly minimum payments vary from a percentage (e.g. 3%) of the outstanding balance (as for most unsecured lines of credit), to as little as interest only (as for some secured lines of credit).You can pay as much as you wish above the minimum payment amount, whenever you wish.Some lines of credit come with checks, or can be linked to your bank card for debit transactions.Can be secured or unsecured.

Conventional Loans:-Conventions loans include personal loans, home equity loans, car loans, etc.The repayment terms and amortization is pre-determined and consistent. For example, a $5,000 loan payable over 3 years in equal payments at 8% interest.You cannot add to this loan without applying for a new loan entirely.You can usually pay off the loan faster than schedule without penalty.Monthly minimum payments will often be higher than they would with a Line of Credit, due to the shorter amortization (period of time to pay it back).Can be secured or unsecured.

Mortgage:-Mortgages are always secured loans, with the collateral usually being real estate. They are for large amounts of money, and are payable over long periods of time.Maximum amortizations (repayment periods) for a mortgage range from 25 to 30 years, depending on where you live.You can borrow up to a certain percentage of the appraised value of the property, subject to some restrictions and insurance provisions.Interest terms can be either fixed or variable. Fixed interest locks your rate in for a fixed period, typically five years. Variable interest rates will fluctuate with the prime rate, and have little to no lock-in period.The penalty to break a fixed rate mortgage mid-term can be outrageous. So if the interest rates go down dramatically, you are stuck with the rate you have until the term (e.g. five years) is up. On the flip side, if the interest rates go up dramatically, your interest rate is protected for the duration of the term.

All the interest is paid up front. In the first few years of having a mortgage, almost all of your payments are comprised of interest, with only a few dollars reducing the principal. It is not until the later years of a mortgage that the reduction of your principal loan amount picks up momentum.Althoughp you can’t always repay as much as you wish, you can usually make additional payments which directly reduce your principal loan amount.

Credit Cards:-Known in some circles as the antithesis of all things good and pure, credit cards tend to get a bad rap. Depending on how they are used and abused, they can admittedly be bad news.You are allocated a maximum balance, with freedom to charge as much or little to it within the limit.Standard credit cards are always unsecured, so the interest rate is high: usually 9-19% (with the average being closer to 18%).The minimum payment is usually quite small — expressed sometimes as a percentage of the outstanding balance, but in some cases it is little more than just the interest.Ifyou pay off the balance in full before the due date, you are not usually charged any interest (this depends on the credit card).Each type of debt serves a specific purpose, although they can be interchanged depending on your situation. The most important thing in managing your debt is to be realistic about what you can handle. Underestimate the amount of money you have to pay towards your debt each month to be safe, in order to avoid getting in too deep.

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Direct PLUS Loans (Parent & Graduate)

Direct PLUS Loans (Parent & Graduate)

The Direct PLUS loan, provides parents (Direct PLUS) and students (Direct Graduate PLUS) with competitive rates and repayment terms.  The parents’ creditworthiness is considered in determining their eligibility.The Direct PLUS loan may be used by the parent of a dependent student or a graduate student who has borrowed the maximum amount of Direct Loan assistance. The loan is available to students regardless of the level of financial need. Direct Loans are funded by the U.S. Department of Education through Villanova University and are managed by federal loan servicers, under the supervision of the Department of Education.  If you are a dependent student, your parents can borrow up to your cost of education less all other financial aid received. Graduate students are also eligible to borrow up to their total cost of education less all other financial aid received. Direct PLUS Loans are not based on need but rather on the borrower’s creditworthiness.An endorser is someone who agrees to repay the Direct PLUS Loan if the borrower does not repay the loan. The endorser may not be the student on whose behalf a parent obtains a Direct PLUS Loan. In some cases, you may also be able to obtain a Direct PLUS Loan if you document to the Department of Education’s satisfaction that there are extenuating circumstances related to your adverse credit history.

Villanova parents who wish to apply only for a Direct PLUS Loan for the 2016-2017 academic year are required to complete the FAFSA.Direct PLUS Loans are part of the federal Direct Loan Program. Unlike most other federal student loans, PLUS Loans are not awarded when you apply for aid. Graduate/professional students (Grad PLUS loan) and parents of undergraduates (PLUS Loan) apply separately for the PLUS (in addition to completing a FAFSA) if they need additional funds to cover college costs.After applying and being approved for a Direct PLUS Loan, the award will appear on your financial aid Award Notice. Borrowers must complete the Direct Loan Program requirements listed on this page in order to receive loan funds.

About The Plus Loan:-The Direct PLUS Loan is unsubsidized, so interest accrues while the student is enrolled at least half-time and during deferment periods. Eligibility is not based on financial need, and graduate students and parents of undergraduates may borrow up to the amount of the student’s Cost of Attendance, minus any other financial assistance a student receives.

The Direct PLUS Loan may be of particular interest to students and parents who:-

    are not eligible for other types of financial aid
    have unusual costs above the standard student expense budgets
    –have remaining financial need after other forms of financial aid have been awarded, or
    –wish to borrow all or part of their Expected Family Contribution

PLUS Loans offer advantages compared to private education loans, including the stability of federal funding, a fixed interest rate, and repayment and deferment options.

Eligibility, Loan Terms, And Requirements:-Students (or their parents) must submit a Free Application for Federal Student Aid (FAFSA) when applying for a PLUS or Grad PLUS Loan. Borrowers must have an acceptable credit history or a loan endorser with an acceptable credit history. Families with adverse credit may sometimes borrow under PLUS if they can document extenuating circumstances.

Key information about PLUS:-Because credit reports are only valid for a limited time and we process PLUS Loan applications in July, we wait until early April to accept PLUS applications so that only one credit check is required.
   We will assume that your application is for the Fall/Winter terms. If you want the loan for one term only, advise us as soon as possible. We begin sending PLUS applications to the federal processor in early July. Eligibility is determined when your application is processed in July.
    Contact our office if you require a paper PLUS Loan application (this version is longer credit check results will be delayed until the application is processed).

Direct PLUS Loan (Parent):-
   Apply for a Federal Direct PLUS through the U.S. Department of Education.
    Interest rate is 6.31% fixed during repayment for loans disbursed on or after July 1, 2016.
   Interest starts accruing at the loan’s first disbursement.
   Rates are annually reset by the federal government on July 1.
   Origination fee will increase to 4.276% for loans disbursed on or after Oct. 1, 2016, and before Oct. 1, 2017.
   Eligibility is COA minus any aid received by the student
   The school will determine the amount you are eligible for upon certification of the loan.
    –A Free Application for Federal Student Aid (FAFSA) must be completed for the student before you apply for a Federal Direct PLUS loans.
    Parents must complete an MPN.
   The MPN is completed online using your FSA ID. As the parent of the student, you will need to sign with your own parent FSA ID and cannot use your son or daughter’s FSA ID.

Graduate Direct PLUS Loan:-
    –Apply for a Federal Direct PLUS through the U.S. Department of Education.
    –Interest rate is 6.31% fixed during repayment for loans disbursed on or after July 1, 2016.
    –Interest starts accruing at the loan’s first disbursement.
   Rates are annually reset by the federal government on July 1.
   Origination fee will increase to 4.276% for loans disbursed on or after Oct. 1, 2016, and before Oct. 1, 2017.
   Eligibility is COA (cost of attendance) minus any aid received by the student.
   The school will determine the amount you are eligible for upon certification of the loan.
    A Free Application for Federal Student Aid (FAFSA) must be completed for the student before you apply for a Federal Direct PLUS loans.

Completing Your Loan Requirements:-Master Promissory Notes Parents and students borrowing for the first time through the Direct Loan Program must complete a Direct Loan Master Promissory Note (or MPN) to receive their loan funds. The MPN authorizes U-M to credit the Direct Loan funds to the U-M student’s account. Once you complete the MPN, you will not have to complete another Direct Loan MPN for 10 years. If you have accepted other federal loans, you will need separate promissory notes for those loans. The Office of Financial Aid will notify you of how to complete them.

Entrance and Exit Counseling:-

Entrance Counseling:-If you are a graduate student PLUS borrower, you must complete Direct Loan Entrance Counseling on the U.S. Department of Education’s .This interactive counseling session and quiz helps students develop budgets for managing educational expenses and also understand their loan responsibilities. You must complete the counseling before your loan funds can be disbursed to you.Parent PLUS borrowers are not required to complete entrance counseling.

Exit Counseling:-This is required for Direct Loan student borrowers who are graduating or dropping below half-time enrollment. This counseling session helps borrowers understand their rights and responsibilities in repayment and helps them choose a repayment plan. You must use your Department of Education FSA ID to access this counseling session.

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Loan In America

Loan In America

In finance, a loan is the lending of money from one individual, organization or entity to another individual, organization or entity. A loan is a debt provided by an entity (organization or individual) to another entity at an interest rate, and evidenced by a promissory note which specifies, among other things, the principal amount of money borrowed, the interest rate the lender is charging, and date of repayment. A loan entails the reallocation of the subject asset for a period of time, between the lender and the borrower.In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time.The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to ngage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent.Acting as a provider of loans is one of the principal tasks for financial institutions such as banks and credit card companies. For other institutions, issuing of debt contracts such as bonds is a typical source of funding.

Secured:-A secured loan is a loan in which the borrower pledges some asset as collateral.A mortgage loan is a very common type of loan, used by many individuals to purchase things. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security – a lien on the title to the house – until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter – often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.

Unsecured:-Unsecured loans are monetary loans that are not secured against the borrower’s assets. These may be available from financial institutions under many different guises or marketing packages:

    –credit card debt
   personal loans
   bank overdrafts
   credit facilities or lines of credit
   corporate bonds (may be secured or unsecured)
    –peer-to-peer lending

The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.Interest rates on unsecured loans are nearly always higher than for secured loans, because an unsecured lender’s options for recourse against the borrower in the event of default are severely limited. An unsecured lender must sue the borrower, obtain a money judgment for breach of contract, and then pursue execution of the judgment against the borrower’s unencumbered assets. In insolvency proceedings, secured lenders traditionally have priority over unsecured lenders when a court divides up the borrower’s assets. Thus, a higher interest rate reflects the additional risk that in the event of insolvency, the debt may be uncollectible.

Demand:-Demand loans are short term loans that are typically in that they do not have fixed dates for repayment and carry a floating interest rate which varies according to the prime lending rate. They can be “called” for repayment by the lending institution at any time. Demand loans may be unsecured or secured.

Subsidized:-A subsidized loan is a loan on which the interest is reduced by an explicit or hidden subsidy. In the context of college loans in the United States, it refers to a loan on which no interest is accrued while a student remains enrolled in education.

Concessional:-A concessional loan, sometimes called a “soft loan”, is granted on terms substantially more generous than market loans either through below-market interest rates, by grace periods or a combination of both.Such loans may be made by foreign governments to developing countries or may be offered to employees of lending institutions as an employee benefit.

Target markets:-PersonalLoans can also be subcategorized according to whether the debtor is an individual person (consumer) or a business. Common personal loans include mortgage loans, car loans, home equity lines of credit, credit cards, installment loans and payday loans. The credit score of the borrower is a major component in and underwriting and interest rates (APR) of these loans. The monthly payments of personal loans can be decreased by selecting longer payment terms, but overall interest paid increases as well. For car loans in the U.S., the average term was about 60 months in 2009.

Commercial:-Loans to businesses are similar to the above, but also include commercial mortgages and corporate bonds. Underwriting is not based upon credit score but rather credit rating.

Loan payment:-The most typical loan payment type is the fully amortizing payment in which each monthly rate has the same value over time.

Abuses in lending:-Predatory lending is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the moneylender is not authorized, they could be considered a loan shark.Usury is a different form of abuse, where the lender charges excessive interest. In different time periods and cultures the acceptable interest rate has varied, from no interest at all to unlimited interest rates. Credit card companies in some countries have been accused by consumer organizations of lending at usurious interest rates and making money out of frivolous “extra charges”.Abuses can also take place in the form of the customer abusing the lender by not repaying the loan or with an intent to defraud the lender.

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Loans for Veterans

Loans for Veterans

Deciding to purchase your first home is one of the biggest and best decisions anyone ever makes. After all, a home is one of the largest and most emotional investments most people will ever make. Searching for your new home is always an exciting, but demanding experience. Having real estate professionals take a lot of time understanding your unique needs and lifestyle is important. Our experienced professionals work hard to find you the perfect home and ensure that each detail of the purchase process is handled with care. Security America Mortgage is dedicated to helping Veterans through the VA Loan process and finding the right home for you, this guide will explain how the VA Loans for veterans process works from start to finish.VA Home Loans are provided by private lenders, such as Security America Mortgage Inc.  VA guarantees parts of the loan against a loss, allowing the lender to provide you with better terms.The service of veterans has done a tremendous amount for the United States – on our own soil and around the world. Many continue their contributions to the country by channeling their skills and leadership into entrepreneurial endeavors that help strengthen our economy.And now through the rest of the fiscal year, SBA’s Express Loan Program will make it easier to get loans in the hands of veterans so they can succeed in their business ventures.

A VA loan is a mortgage loan in the United States guaranteed by the United States Department of Veterans Affairs (VA). The loan may be issued by qualified lenders.The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. Eligible areas are designated by the VA as housing credit shortage areas and are generally rural areas and small cities and towns not near metropolitan or commuting areas of large cities.The VA loan allows veterans 103.3 percent financing without private mortgage insurance or a 20 percent second mortgage and up to $6,000 for energy efficient improvements. A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA; this fee may also be financed. In a purchase, veterans may borrow up to 103.3% of the sales price or reasonable value of the home, whichever is less. Since there is no monthly PMI, more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment. In a refinance, where a new VA loan is created, veterans may borrow up to 100% of reasonable value, where allowed by state laws. In a refinance where the loan is a VA loan refinancing to VA loan (IRRRL Refinance), the veteran may borrow up to 100.5% of the total loan amount. The additional .5% is the funding fee for an VA Interest Rate Reduction Refinance.VA loans allow veterans to qualify for loan amounts larger than traditional Fannie Mae / conforming loans. VA will insure a mortgage where the monthly payment of the loan is up to 41% of the gross monthly income vs. 28% for a conforming loan assuming the veteran has no monthly bills.The maximum VA loan guarantee varies by county. As of 1 January 2017, the maximum VA loan amount with no down payment is usually $424,100, although this amount may rise to as much as $721,050 in certain specified “high-cost counties”.

The VA guarantee lets Security America Mortgage to provide you with better terms, including:-

    -No down payment for loans that are same to property value
    -Limited amount of charges for closing costs
    -No mortgage insurance
    -Possibility of closing costs being paid by the seller
    -Security America Mortgage won’t charge a penalty fee for paying the loan off early
    -The VA could possibly provide you assistance if you struggle making payments
    -It doesn’t have to be your first home
    -Your benefit can be reused
    -VA loans are assumable, as long as the person qualifies

Before buying a home it is important to educate yourself on the real costs of homeownership.  By planning ahead, you will know how much you can afford so as to not be set back with unwanted expenses.The Consumer Financial Protection Bureau can help by reviewing your spending and seeing future homeownership costs.You can use our VA Loan Calculator, which will help you calculate your affordable mortgage payment.This an excellent opportunity for your family to consider the important factors in purchasing a home.  These factors can include driving distance to work, expenses in things like shopping and entertainment, and desired quality of schools.  Considering all of these factors is an important step in the path to choosing the right home.When using the VA Home Loan for Veterans, a VA approved appraiser will complete the appraisal to complete the home’s value and ensure it is safe and sanitary for your family.Security America Mortgage Inc needs to review the appraisal when it is complete to make sure it meets our underwriting standards, as well as sufficient collateral to finish the home loan.  Security America Mortgage Inc will give you a copy of the appraisal.If the appraised value is not sufficient enough to complete the loan, you have several options to enable you to continue with the purchase:

    -Request a Reconsideration of Value (ROV).
    -Renegotiate the sale price.
    -Bring cash to the closing table.

An appraisal is different than a home inspection.  Buyers should sometimes consider hiring a qualified home inspector to fully inspect the home for problems and potential maintenance issues.

Closing and Move In To Your New Home:-Before the actual closing date, you should review the amount of fees and the terms and conditions of your contract. Additionally, you’ll need to know the amount you need to bring to the closing. But of course, our Loan Officers and Real Estate Agents will assist you with this entire process.The closing of the home is when the purchase is funded with your VA Benefit.  Thanks to its many benefits, the VA home loan has no down payment.  Because of this feature, a home buyer can use those savings to increase your emergency fund or use the money on personal expenses.Security America Mortgage is required by law to give you a “Closing Disclosure” at least three business days before closing. For more information on the closing disclosure .Depending on your area’s laws, closings may occur at the title company, escrow office, or attorney’s office.  At the time of closing, expect to sign many documents including the mortgage, the note, and the deed.  Your military-friendly Real Estate Agent will be present, as well as an escrow officer or closing agent to conduct the transaction. This may be a long process but always know to ask our friendly staff any questions you come across.

Loan fees:-Through the end of September, SBA has set the borrower upfront fee to zero for all veteran loans authorized under the SBA Express program, which supports loans of up to $350,000.Additionally through the end of the fiscal year, fees on all loans (and not just for veterans) $150,000 and under are set to zero.These initiatives make the loans cheaper for the borrower, which is just another way SBA is looking to serve small business owners – and those veterans who have served us – as they look for ways to access capital.

About the Express Loan Program:-One great feature of the Express Loan Program is that it has an accelerated turnaround time for SBA review. You’ll receive a response to your application within 36 hours.With a fast turnaround, streamlined process and easy-to-use line of credit, this program is SBA’s most popular loan delivery method – nearly 60 percent of all 7(a) loans over the past decade being authorized through the program. Since the program began, it has also been one of the most popular delivery methods for getting capital into the hands of veteran borrowers.

Getting started:-Interested in exploring loan options to get your business started? Check out these loans that fall under Express Program standards. Our business loan checklist can also help prepare you for the application process, in addition to taking a look at the credit factors lenders will consider when you apply for an SBA-backed loan.In the transition from military service to customer service, you’ll find great resources from SBA to help you find success. And if you’re looking for funding to get your business off the ground, these loan perks may make it possible to do just that.

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Borrowing from Friends and Family

Borrowing from Friends and Family

Your own resources may not be enough to give you the capital you need to start your own business. After self-financing, the second most popular source for startup money is composed of friends, relatives and business associates.In fact, “most businesses are started with money from four or five different sources,” says Mike McKeever, author of How to Write a Business Plan.”Family and friends are great sources of financing,” says Tonia Papke, president and founder of MDI Consulting. “These people know you have integrity and will grant you a loan based on the strength of your character.”

It makes sense. People with whom you have close relationships know you are reliable and competent, so there should be no problem in asking for a loan, right? Keep in mind, however, that asking for financial help isn’t the same as borrowing the car. While squeezing money out of family and friends may seem an easy alternative to dealing with bankers, it can actually be a much more delicate situation. Papke warns that your family members or friends may think lending you money gives them license to meddle. “And if the business fails,” she says, “the issue of paying the money back can be a problem, putting the whole relationship in jeopardy.”

The bottom line, says McKeever, is that “whenever you put money into a relationship that involves either friendship or love, it gets very complicated.” Fortunately, there are ways to work out the details and make the business relationship advantageous for all parties involved. If you handle the situation correctly and tactfully, you may gain more than finances for your business–you may end up strengthening the personal relationship as well.

The Right Source:-The first step in getting financing from friends or family is finding the right person to borrow money from. As you search for potential lenders or investors, don’t enlist people with ulterior motives. “It’s not a good idea to take money from a person if it’s given with emotional strings,” says McKeever. “For example, avoid borrowing from relatives or friends who have the attitude of ‘I’ll give you the money, but I want you to pay extra attention to me.’ “

Once you determine whom you’d like to borrow money from, approach the person initially in an informal situation. Simply let the person know a little about your business and gauge his or her interest. If the person seems interested and says he or she would like more information about the business, make an appointment to meet with them in a professional atmosphere. “This makes it clear that the subject of discussion will be your business and their interest in it,” says McKeever. “You may secure their initial interest in a casual setting, but to go beyond that, you have to make an extra effort. You should do a formal sales presentation, and make sure the person has all the facts.” A large part of informing this person is compiling a business plan, which you should bring to our meeting. Explain the plan in detail and do the presentation just as you would in front of a banker or other investor. Your goal is to get the other person on your side and make him or her as excited as you are about the possibilities of your business.

During your meeting-and, in fact, whenever you discuss a loan-try to separate the personal from the business as much as possible. Difficult as this may sound, it’s critical to the health of your relationship. “It’s important to treat the lender formally, explaining your business plan in detail rather than casually passing it off with an ‘if you love me, you’ll give me the money’ attitude,” says McKeever.Be prepared to accept rejection gracefully. “Don’t pile on the emotional pressure-emphasize that you’d like this to be strictly a business decision for them,” says McKeever. “If relatives or friends feel they can turn you down without offending you, they’re more likely to invest. Give them an out.”With bank loans so hard to come by, a growing number of businesses are borrowing from family and friends as a way of getting low cost funding without having to jump through too many hoops.But while borrowing from friends and family can be a great way of getting inexpensive funding for your business, it can also be a recipe for disaster, leading to family arguments, breakdowns in relationships and even legal action. Here’s how to do it right:

1. Take it seriously. Borrowing money from a family or friend is a big deal for both you and them, so treat it that way. Give them a formal presentation so they know exactly what they are getting themselves into. Explain what the money will be used for and provide regular updates on the progress of the business.

2. Make it clear whether it is a loan or equity. Are you borrowing money that you plan to pay back? Or are they investing in your business in return for an equity stake? Make sure both sides understand exactly what is taking place and the consequences. If it is an equity investment, for example, then if the business fails they will lose all their money – and even if it is a success they may not be able to realise their investment for many years.

3. Do not borrow more than your family or friends can afford to lose. This is really important, and requires considerable careful personal judgement, especially if the lender is an elderly parent who may well be quietly making financial sacrifices elsewhere in order to help the next generation get a venture off the ground. If your business fails you need for it to be a shame not a crisis; and not so awful that it compromises your parents’ retirement plans.

4. Be honest about the risks involved so that your family and friends go into the venture with their eyes open. If they think you are creating the next Facebook and you have done nothing to correct that impression, then both you and they could be in for a nasty shock.

5. Determine upfront the extent of their involvement in the day to day running of the business or in deciding the strategic direction of the business, if any. If you haven’t laid out clear ground rules in advance then a relative or friend who has lent money may believe he then has a right to get involved in decisions about the direction of the business. If they are popping into your office everyday with ‘helpful’ suggestions, then things could get awkward fast.

6. Put everything in writing so both sides know what is involved. It may sound overly formal but it is really important. If it is a loan, will you pay them interest, and over what time period you will be paying them back – in regular monthly sums, or in lump sums depending on how the business is doing? And what happens if the business fails? No matter how well you know someone, a casual conversation can easily be misinterpreted and mean different things to different people even at the time, never mind years later. If you write it down there is less likely to be room for any dispute.

Alan Pluck is the chief executive of Portobello Business Centre, an enterprise agency which helps start-ups and small businesses. He says: “Draw up a schedule of when the payments are going to be made, and how, and agree what happens if you can’t meet the payments, for example if there can be a break. Putting it all in writing will not necessarily stand up in a court of law, but the process of writing it down strengthens the chances of it going smoothly. If it is in writing then no-one can argue with it.”

7. Avoid talking about it at family occasions. Try to keep business talk separate from family life and social events with friends because otherwise everyone else will get really bored – and then they will get cross with you for spoiling the occasion.

8. Put family first. If a friend or family member has lent you money and your business shows signs of becoming really successful, then instead of paying back all the loan, consider offering them a slice of equity in return for the amount outstanding. It may cost you more, but if it keeps the peace, it’s a small price to pay. And if you are not prepared to put your friends and family first, think carefully about whether this really is the best financing route for you.Budding entrepreneurs often turn to a lender that overlooks weak points, provides flexible terms, and offers a dream-come-true interest rate: the Bank of Mom or Dad. Without an established track record, start-ups often have trouble getting a traditional bank loan or funding from venture or angel investors. So after tapping their savings, founders often turn to informal investors, which usually means family members and friends.Such arrangements combine best wishes, a pay-me-when-you-can attitude, and few expectations of a meaningful return. That might be the most realistic view of family and friends financing. So in many cases, it might be wise to not formalize the loan since doing so can raise expectations that it will be repaid in full.

Many people will opt for a loosely structured deal in which, for example, repayment may start only when a company has reasonable cash flow and can afford to make payments — a position many businesses don’t reach until three to five years down the road, if at all. Such an arrangement doesn’t raise expectations of prompt repayment. But such vagueness can lead to problems and confusion later on, prompting some experts to urge putting into writing whether funds are a loan, a gift or an investment. Still, terms of the agreement need close attention. Failure to collect interest or a repayment might prompt the Internal Revenue Service to decide the “loan” was actually a gift and impose gift tax and other penalties.
Online services, such as Prosper Inc. and Virgin Money, a unit of Virgin Group PLC, offer to structure arrangements between borrowers and individual lenders, who are often relatives or friends. For smaller loans, Virgin Money, for example, provides documentation and a payment schedule. For larger business loans, it will service the loans, send payment reminders and provide year-end reports. A more formal plan for larger loans services the loan — including setting up electronic fund transfers, sending email reminders and providing online account access. It also sends out year-end reports to the borrower and lender. The loans are flexible, usually offering lengthy grace periods and interest rates and payment schedules favorable to the business owner.

Some planners note that family members can provide money as an annual gift, helping reduce the size of an estate subject to taxes. Gifts also ease worries of conventional lenders who might be concerned that family loans could impair their ability to collect. One other thought: Some family members who provide loans or gifts think the funds come attached with the right to have a say or participate in the business. Documentation can spell out such issues.

Content Credit :- Caroline Layzell Yoga Teacher Bali

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Federal Perkins Loan In USA

Federal Perkins Loan In USA

Federal Perkins Loan is a low-interest loan for both undergraduate and graduate students. The interest rate for a Perkins loan is 5%. Your school is the lender. The loan is made with government funds, and your school contributes a share. Repay Perkins loans to your school.A Federal Perkins Loan, or Perkins Loan, is a need-based student loan offered by the U.S. Department of Education to assist American college students in funding their post-secondary education. The program is named after Carl D. Perkins, a former member of the U.S. House of Representatives from Kentucky.

Perkins Loans carry a fixed interest rate of 5% for the duration of the ten-year repayment period. The Perkins Loan Program has a nine-month grace period, so that borrowers begin repayment in the tenth month upon graduating, falling below half-time status, or withdrawing from their college or university. Because the Perkins Loan is subsidized by the government, interest does not begin to accrue until the borrower begins to repay the loan. As of the 2009-2010 academic year, the loan limits for undergraduates are $5,500 per year with a lifetime maximum loan of $27,500. For graduate students, the limit is $8,000 per year with a lifetime limit of $60,000 (including undergraduate loans).

Perkins Loans are eligible for Federal Loan Cancellation for individuals choosing to work in a number of different public service occupations including early childhood education, elementary and secondary school teaching, speech therapy, nursing, law enforcement, librarian, public defense attorney, fire fighting and certain active duty military postings.Depending on the field of employment, further restrictions on the setting of employment may apply. For example, forgiveness for teachers may be restricted to designated low-income schools or specific teacher shortage areas such as math, science, and bilingual education and forgiveness for nurses requires employment at a non-profit medical facility. A percentage of the loan is cancelled for each year spent teaching full-time(as long as the loan remains in good standing). This cancellation also applies to Peace Corps Volunteers. Cancellation typically occurs on a graduating scale: 15% for year 1, 15% for year 2, 20% for year 3, 20% for year 4, 30% for year 5. These percentages are based on the original debt amount. Thus after 3 years of service, one would have 50% of their original debt cancelled.
The Federal Perkins Loan program is set to expire on September 30, 2017, this is an extension to an earlier program expiration of September 30, 2015. The extension was made possible by the General Education Provisions Act (GEPA), however this act also prohibits any further extensions of the Perkins Loan Program.
The Student Loan Ranger writes a lot about federal student loan programs, but tends to focus on the big ones, such as Stafford and PLUS loans. This week, we will shine the spotlight on a lesser known, but no less important, federal program – the Perkins loan.
Depending on what Congress does in the next few weeks, one might consider this our eulogy to a program that’s helped around 30 million needy students in its 57-year history.

Perkins Loan Basics:-About 1,700 higher education institutions participate in the federal Perkins Loan program. Only students with exceptional need may receive a Perkins loan. As every school has a different amount of revolving Perkins loan funds available, the income threshold defining eligibility will vary.Funding for new loans comes in part from federal budgetary appropriations, collection of existing loans and funds from the participating schools. For the last few years, the program has made loans to about 500,000 undergraduate and graduate students per year, with an average amount of about $2,000.Undergraduate students may receive up to $5,500 in Perkins funds per year with an aggregate maximum of $27,500, while graduate students are potentially eligible for up to $8,000 per year with a maximum, including undergraduate amounts, of $60,000. To be eligible for a Perkins loan, a student must be attending a graduate or undergraduate program on at least a half-time basis as defined by the school. Some less-than-half-time students are eligible for Perkins loans, but they are not eligible for an in-school deferment.

These loans have a low fixed rate of 5 percent with no interest accruing while the student borrower is at least half time in school, in deferment or in their grace period. In most cases, the grace period is nine months from the time the student becomes less than half time in school, and the repayment term is ten years.Perkins loans are eligible for various deferments for things such as unemployment or illness – but these policies vary by school. Repayment schedules are set up to ensure the loan is paid off within 10 years, and payments can be required monthly, bi-monthly or quarterly depending on the school. One of the reasons these loans are so important to needy students is the generous and varied forgiveness programs that are unique to the Perkins program.

Winding Down:-So now that we’ve explained all the benefits of the Perkins program, let’s talk about why it’s – maybe – going away. In short, it’s a budget issue.For a few years now, there’s been a lot of talk about how complicated the federal aid programs are, both to families and to college aid administrators. Many feel that the Perkins program serves roughly the same student populations as other programs, such as the subsidized Stafford loan or Pell Grants.

Ceasing new funding for Perkins would free up federal ppropriations and overall operational costs that could be funneled to other programs. Those against the termination of the program argue that Perkins provides the extra funds needed for these exceptionally needy students to pay for college, and that to date there is no legislation that would repurpose those funds to fill the gap.

The statutory authority to use appropriated funds for the Perkins loan program expires on September 30, 2015. This means that unless Congress does something between now and then, which is close to impossible as of the writing of this blog, schools will be prohibited from making new Perkins loans to students who have not received them prior to Oct. 1, 2014.This means that if you’ve never received a Perkins loan in the past, and don’t receive at least a disbursement before the deadline, you won’t be able to receive them at all. If you have received them in the past, you’ll be allowed to continue to do so until you complete your program at your existing school.Those with existing Perkins loans, however, can rest assured that existing repayment, deferment and forgiveness options will not change, although the loan holder may change to a Department of Education servicer at some point in the future.

It’s Not Over Until It’s Over:-Thanks to significant activity from school and student groups, it’s still possible the program could be saved or at least extended. Last week, House Rep. Mike Bishop, R-MI, and Rep. Mark Pocan, D-WI, introduced the Higher Education Extension Act of 2015, which passed the House on Monday and extends the program for another year. A bipartisan group of senators from the Senate Health, Education, Labor and Pensions Committee quickly followed the introduction with a resolution showing support for the program’s extension.We’re guessing that the late Rep. Carl Perkins, the program’s namesake, who before his sudden death had a significant impact on both education and the needy, is watching and hoping his legacy will continue.Betsy Mayotte, director of consumer outreach and compliance for American Student Assistance, regularly advises consumers on planning and paying for college. Mayotte, who received a B.S. in business communications from Bentley College, responds to public inquiries via the advice resource “Just Ask” and is frequently quoted in traditional and social media on the topics of student loans and financial aid.

Applying for a Federal Perkins Loan:-A Federal Perkins Loan is a 5% fixed interest rate loan for undergraduate and graduate students with exceptional financial need. Because of its low interest rate, need-based award, and generous cancellation policies, it is one of the most affordable options for students in postsecondary education.Unlike for other types of federal loans, such as the Federal Stafford Loan and Parent PLUS Loan, the school is your lender for Federal Perkins Loans. Approximately 1,800 participating postsecondary institutions offer the Perkins Loan.

Eligibility:-The following conditions are required to be eligible for Federal Perkins Loans:

    Enrollment in an eligible school at least half-time for a degree program
   US citizenship, permanent resident, or eligible non-citizen status
   Satisfactory academic progress
    –No unresolved defaults or overpayments owed on Title IV education loans and grants
   Satisfaction of all Selective Service requirements

If you meet all of the above criteria, financial need is determined by the US Department of Education, using the information you provide on the FAFSA. Factors that can influence your eligibility are:

   Student’s income & assets
   Parent’s income & assets
    Household size
    Number of family members (excluding parents) attending postsecondary institutions

The maximum amount that you can receive based on this formula is capped to:

   Undergraduates: up to $5,500 a year (up to $27,500 for entire undergraduate schooling)
   Graduates/professional students: up to $8,000 a year (up to $60,000 for entire graduate schooling)
   Non-undergraduate or non-graduate/professional student: up to $11,000 for entire schooling

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Student loans In The United States

Student loans In The United States

Student loans in the United States are a form of financial aid used to help more students access higher education. Student loan debt has been growing rapidly since 2006, rising to nearly $1.4 trillion by late 2016, roughly 7.5% GDP. Approximately 43 million have student loans, with an average balance of $30,000. Loans usually must be repaid, in contrast to other forms of financial aid such as scholarships, which never have to be repaid, and grants, which only rarely have to be repaid. Research indicates the increased usage of student loans has been a significant factor in college cost increases.

Student loans play a very large role in U.S. higher education.Nearly 20 million Americans attend college each year. Of that 20 million, close to 12 million – or 60% – borrow annually to help cover costs. In Europe, higher education receives much more government funding, so student loans are much less common.In parts of Asia and Latin America government funding for post-secondary education is lower – usually limited to a few flagship universities, like the Mexican UNAM – and there are no special programs under which students can easily and inexpensively borrow money.However, in the United States, much of college is funded by students and their families through loans, although public institutions are funded in part through state and local taxes, and both private and public institutions through Pell grants and, especially with older schools, gifts from donors and alumni.Some believe this substantially increases intergenerational correlations in income (having two generations of a family have similar earning ability), although other factors, including genetics, have been estimated to play a larger combined role.Nonetheless, higher education in the United States has been shown to be an excellent investment both for individuals and for the public, even though differences in the returns to educational investment across schools has been overstated in many cases.

Student loans come in several varieties in the United States, but are basically split into federal loans and private student loans. The federal loans, for which the FAFSA is the application, are subdivided into subsidized (the government pays the interest while the student is studying at least half-time) and unsubsidized. Federal student loans are subsidized at the undergraduate level only. A subsidized loan is by far the best kind of loan, but an unsubsidized federal student loan is far better than a private student loan. Some states have their own loan programs, as do some colleges.In almost all cases, these student loans have better conditions – sometimes much better – than the heavily advertised and expensive private student loans.Student loans may be used for any college-related expenses, including tuition, room and board, books, computers, and transportation expenses.An unusual provision in the law prohibits student loans from being discharged through bankruptcy.

The main types of student loans in the United States are the following:-Federal student loans made to students directly:-These loans are made regardless of credit history approval is automatic if the student meets program requirements. The student makes no payments while enrolled in at least half-time studies. If a student drops below half time or graduates, there is a six-month grace period. If the student re-enrolls in at least half-time status, the loans are deferred, but when they drop below half time again they no longer have access to a grace period and repayment must begin. All Perkins loans and some undergraduate Stafford loans receive subsidies from the federal government. Amounts of both subsidized and unsubsidized loans are limited. There are many deferments and a number of forbearances one can get in the Direct Loan program.For those who are disabled, there is also the possibility of 100% loan discharge if you meet the requirements.Due to changes by the Higher Education Opportunity Act of 2008, it became easier to get one of these discharges after July 1, 2010.There are loan forgiveness provisions for teachers in specific critical subjects or in a school with more than 30% of its students on reduced-price lunch , and qualify for loan forgiveness of all their Stafford, Perkins, and Federal Family Education Loan Program loans totalling up to $77,500.In addition, any person employed full-time by a public service organization, or serving in a full-time AmeriCorps or Peace Corps position qualifies for loan forgiveness after 10 years of 120 consecutive payments without being late.
    
Federal student loans made to parents:- Much higher limit, but payments start immediately. Credit history is considered; approval is not automatic.
    
Private student loans, made to students or parents:-Higher limits and no payments until after graduation, although interest starts to accrue immediately and the deferred interest is added to the principal, so there is interest on the interest. Interest rates are higher than those of federal loans, which are set by the United States Congress. Private loans are, or should be, a last resort, when federal and other loan programs are exhausted. Any college financial aid officer will recommend you borrow the maximum under federal programs before turning to private loans.

Federal loans to students:-United States Government-backed student loans were first offered in 1958 under the National Defense Education Act (NDEA), and were only available to select categories of students, such as those studying toward engineering, science, or education degrees. The student loan program, along with other parts of the Act, which subsidized college professor training, was established in response to the Soviet Union’s launch of the Sputnik satellite, and a widespread perception that the United States was falling behind in science and technology, in the middle of the Cold War. Student loans were extended more broadly in the 1960s under the Higher Education Act of 1965, with the goal of encouraging greater social mobility and equality of opportunity.Prior to 2010, Federal loans included both direct loans—originated and funded directly by the United States Department of Education—and guaranteed loans—originated and funded by private investors, but guaranteed by the federal government. Guaranteed loans were eliminated in 2010 through the Student Aid and Fiscal Responsibility Act and replaced with direct loans because of a belief that guaranteed loans benefited private student loan companies at taxpayers expense, but did not reduce costs for students.Both subsidized and unsubsidized loans are guaranteed by the U.S. Department of Education either directly or through guaranty agencies. Nearly all students are eligible to receive federal loans (regardless of credit score or other financial issues). Federal student loans are not priced according to any individualized measure of risk, nor are loan limits determined based on risk. Rather, pricing and loan limits are politically determined by Congress. Undergraduates typically receive lower interest rates, but graduate students typically can borrow more. This lack of risk-based pricing has been criticized by scholars as contributing to inefficiency in higher education.Both types offer a grace period of six months, which means that no payments are due until six months after graduation or after the borrower becomes a less-than-half-time student without graduating. Both types have a fairly modest annual limit. The dependent undergraduate limit effective for loans disbursed on or after July 1, 2008 is as follows (combined subsidized and unsubsidized limits): $5,500 per year for freshman undergraduate students, $6,500 for sophomore undergraduates, and $7,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. For independent undergraduates, the limits (combined subsidized and unsubsidized) effective for loans disbursed on or after July 1, 2008 are higher: $9,500 per year for freshman undergraduate students, $10,500 for sophomore undergraduates, and $12,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. Subsidized federal student loans are only offered to students with a demonstrated financial need. Financial need may vary from school to school. For these loans, the federal government makes interest payments while the student is in college. For example, those who borrow $10,000 during college owe $10,000 upon graduation.

Stafford loan aggregate limits:-Students who borrow money for education through Stafford loans cannot exceed certain aggregate limits for subsidized and unsubsidized loans. For undergraduate dependent students, the maximum aggregate limit of subsidized and unsubsidized loans combined is $57,500, with subsidized loans limited to a maximum of $23,000 of the total loans.[19] Students who have borrowed the maximum amount in subsidized loans may (based on grade level—undergraduate, graduate/professional, etc.) take out a loan of less than or equal to the amount they would have been eligible for in subsidized loans. Once both the subsidized and unsubsidized aggregate limits have been met for both subsidized and unsubsidized loans, the student is unable to borrow additional Stafford loans until they pay back a portion of the borrowed funds. A student who has paid back some of these amounts regains eligibility up to the aggregate limits as before.

Content Credit :- tubidy

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