Are you in need of some extra money? Sometimes you just have to spend the money that you don’t have. There are many people that are turning down the credit cards and turning to small, closed-end, unsecured loans instead.
Approximately 1/5 of all non-mortgage installment loans are personal loans, says Jane C. Yoa, managing director for surveys and statistics for the American Bankers Association. “It’s a product that banks are finding a demand for in the market,” she says.
Many banks don’t advertise that they offer unsecured loans because they are not as profitable as other loans. They bank would rather offer a credit card because it is a long term commitment, ongoing in many cases.
Using a credit card for short-term loans isn’t the best option for the typical borrower. The high interest rate can accumulate more in interest payments. Plus, you must be very disciplined to only use the card for that loan. You have to pay it off like a loan; minimum payments could take you decades.
First, you need to decide how much money you really need. Look for the least amount of money that will make everything work out. Look at your credit situation and decide if you truly can afford one more loan. If you don’t have an emergency fund, you may find that you have few other options.
Once you know that you will need to take out a loan, start shopping around. Terms can vary and you want to find the best rate possible. Call around and talk to all the banks in your area, plus some national lenders. Don’t just go to a payday lender, talk with your bank or credit union first.
What kind of rates should you look for? Two year personal bank loans are averaging above 11.8% for interest rates. Credit unions may offer better rates and terms than banks, because they often are non-profit institutions.
Short-term unsecured loans can be found at 96% of all credit unions, and many make loans in amounts less than $500. Most people borrow an average of $2,300. Many loans under $500 can be made with a quick limited credit check.
When it comes to your terms, look at the total cost of the credit, not just the monthly payments. While you may want to pay the least amount possible per month, a longer payback period means you pay much more in interest.
Look for any hidden fees and charges. You don’t want to pay for credit insurance, buying clubs or other extra fees. If you don’t understand what a fee is going towards, make the loan officer explain it. Ask about each charge and fee.
Read everything carefully before you sign it. If you are told something different than what is in writing, only trust the writing. Once you have signed something, any verbal conversations mean nothing. You have no agreements unless they are in writing.
Don’t let the officer talk you into borrowing more money than you need. Recently a loan officer offered me $5,000 more than I was asking to borrow. I didn’t need the temptation, the added interest costs or the extra debt, so I politely refused. Many officers receive a commission based on the loans they approve. Know what you need to borrow and stick with that amount.
Often, the bank will offer you a credit card instead of an unsecured loan. This isn’t a great idea. The rates aren’t fixed and can change during the course of the loan. Credit cards are considered revolving credit, which means you have no set repayment date. It might sound attractive, but in two years you could be paying 23% interest. Can you afford the risk? Instead, ask for a specific loan amount with a fixed interest rate and a repayment schedule.
And finally, start saving! Next time you won’t need to take out a loan if you already have the money in a savings account. While you are at the bank, go ahead and set it up.
By: Martin Lukac
Many college students today hit a hurdle before they even start when it comes to finding the funds necessary for college because they have already managed to run up a poor credit history. Fortunately however there are aid and loan packages available today which look principally at need and ignore your credit history and so this is where you will need to start your search for funding.
One of the oldest sources of funding and one which is chiefly available on the basis of economic need is the Pell grant. As long as the student and his family are considered to be a low-income family a Pell grant is more or less automatic and is made on the basis of the submission of supporting documentation.
The student will be required to provide proof of the cost of his intended course (including tuition fees and other qualifying costs) and will also need to provide details of the family’s income from which an EFC (Expected Family Contribution) number will be calculated. On this basis a decision will be made and the grant made or refused.
As the name suggests, a Pell grant is a ‘gift’ and not a loan and it does not have to be repaid. Pell grants are currently for a maximum of $4,731 a year (depending on your assessed financial need) and, while this will not normally cover the full cost of attending college, it can go a long way towards helping. However, most students will need to seek loan funding in addition to a Pell grant and the best form of loan funding initially are Stafford loans.
There are two different types of Stafford loan and the first is a subsidized Stafford loan on which the government pays any interest charges while you are studying full-time and for up to six months after graduation. The second type of Stafford loan is an unsubsidized Stafford loan on which you will be responsible for making all interest payments.
Unsubsidized Stafford loans need to be considered very carefully because, although you will be responsible for making interest payments, you will not be required to do so while you are in full-time education and for up to six months after graduation. However, during this period interest will still be applied to any loan and will simply be added to the outstanding amount of the loan. This means that during a three or four year college course your loan debt can grow substantially and reach a very significant sum by the time you do start paying it off.
Naturally, most students would prefer to have an unsubsidized Stafford loan but loans are disbursed according to the funds available and on the basis of need so that only a minority of students will qualify for a subsidized loan. The good news however is that most students will qualify for an unsubsidized loan and, despite their drawbacks, these still represent one of the best forms of college loan funding available today.
There are of course other forms of grant and loan funding available (and scholarships) and you need to shop around to see just what is available and best suits your circumstances. However for students from low-income families Pell grants and Stafford loans are invariably the best routes to follow.
By: Donald Saunders
If you are a student and don’t have any sufficient financial support, to achieve higher education can be intricate for you. In the modern age, pursuing higher education in capable college is extremely difficult. Hence, the student who feels like to study further and don’t have hard cash, the student needs to take financial aid. In this requirement, lots of student loans are available to serve you in your education issues. But the alternatives of Direct Student Government Loans are the most popular of its transaction. Such kinds of loans are provided to the students directly by the Federal Government. And after having the cash in the hand of student, he can keep himself in strong position to correspond incidentally education needs.
Direct Student Government Loans are bestowed directly to the students by the Federal Government or UK Department of Education. The most important thing of such loans is that the private lenders, traditional banks are not involved for these loans to provide cash. The rate of interest is very low. Direct Student Government Loans can be obtained in both categories subsidized Stafford loans and unsubsidized Stafford loans. The subsidized loan has an interest subsidy. Every student granted those direct loans are dependent on the government to cover their interest payments while the students are still in college. Unsubsidized loan has not interest subsidy. The interest payments are reliant on students. Such kinds of loans can be reimbursement either six months or after leaving the college or your salary will be $1000 per month.
The students who are dependent on their parents to follow study but their parents don’t have ready currency to fulfill education requirements. Then they don’t need to concern for the amount since PLUS loans (Parents Loans for Undergraduate Students are utterly made-up for parents who needs extra funds to utilize the financial requirements of their students for college. The students’ parents can simply derive this loan if the students are a dependent undergraduate and enrolled as a minimum half time. PLUS loans lenders as banks and credit agencies provide loans. PLUS loans are different than other federal government loans because PLUS loans are reimbursement by the parents and not the students but once in a while few lenders of these loans can ask the borrowers to fulfill a Master Promissory Note (MPN) that is an important document that makes clear the deal between the students and the Department of education.
By: Andrew Peterson