Benefits of Consolidating Your Student Loans?
Dealing with finances is enough to give some people real fits. Even adults occasionally have a difficult time meeting financial obligations, and sometimes, paying back loans can be frustrating and scary. Can you imagine what it feels like for an eighteen year old to be looking at student loans as the only means to completing a college education?
Not only must a student deal with the stress and frustration of a full course load for several years, he or she must also figure out how they’re going to pay for all of it. Without making a blanket statement, most kids that age only think in the here and now, and don’t really find the concept of having to come up with money later as an issue to get all worked up about. However, more often than not, and after procuring two, sometimes three or even more student loans to pay those college costs, a graduating student is suddenly faced with debt that literally causes palms to sweat and the heart to pound.
Sure, you have the education you always dreamed of, but now you can be thousands, if not tens of thousands, of dollars in debt from those college student loans. If you’ve gone to medical school, your debt may reach one hundred thousand dollars before it’s all said and done. How in the world do you pay that kind of money back? Read more
Understanding Chapter 12 Bankruptcy
Chapter 12 bankruptcy covers anglers and farmers. If your income comes from family fishing or farming and you have a steady flow of income in prior years you can qualify for chapter 12 bankruptcy. The chapter 12 covers family businesses in these areas of business. The debt ratio of anglers and farmer is usually too high for chapter 11 and 13, which corporations usually use when filing bankruptcy.
More than fifty percent of your income has to come from the business in order to file under chapter 12 bankruptcies. You must have had this income for more than three years. The loss or debt must not exceed a certain amount if you are a farmer and another amount for an angler. The percentage of the debt must come from the operations of the business as well. Both businesses have different amounts for total debt. Read more
Credit Card Basics-What You Need To Know
Unfortunately, part of the reason that consumer debt is at an all-time high is because of credit cards. It’s due to a combination of misunderstanding credit cards and abusing them. While credit card abuse is a more personal matter, credit card education is something people should undertake when acquiring a card.
The most important aspect to understand about credit cards is that it’s a “revolving†account. Unlike most mortgages and car loans, which have set terms such as 5, 10, 20, and 30 years, revolving accounts stay open and require payment for as long as a balance exists. This applies not only to credit cards, but to other lines of credit such as personal loans and home equity loans.
Being a revolving account, credit cards have minimum payments that must be paid in order to keep your account current. Minimum payments are usually a percentage of your outstanding balance. The percentage can range from 10% to 30%. If you only pay the minimum payment, interest continues to accrue at a torrid pace. If you continue to pay the minimum, it can take a very long time to pay off a credit card balance. A $4,000 balance, for example, can take up to 40 years to pay off if only the minimum payment is made, depending on the interest rate.
Obviously, the key to shortening credit card debt is to pay more than the minimum amount due. When you pay more than the minimum amount, you pay down your principal, which is the actual amount that you borrowed. The lower your principal, the less interest accrues on your account. Read more
Comparing Consumer Credit vs. Mortgage Credit
Different companies have different criteria for evaluating good credit. An employer, for example, might consider having zero credit cards as good credit. A credit card company might consider having credit cards that are spent to the limit as good credit, as long as the payment history is perfect. A mortgage company, on the other hand, does not consider maxed credit cards as favorable.
How does mortgage credit differ from other types of credit?
You might hear about the conventional wisdom of good credit. For example, it’s good credit when you have paid off your credit cards in full. Don’t carry a balance on your credit cards. Close credit card accounts when you don’t need them anymore.
While this is good, solid advice for debt management and control, if you’re trying to get a mortgage, it can work against you.
When mortgage companies evaluate applications, they like to see consistency. If you have a credit card, mortgage lenders want to see at least 24-36 months of perfect payment history on it; that is, 24-36 months with no breaks in between. If you’re fortunate enough to be able to pay your credit card off every month, you might want to rethink this strategy if a mortgage is in your future.
If you allow a paid-off credit card to remain that way for at least 2 straight months, your credit report will show a break in your payment history. Over the past 12 months, it might look something like this on your credit report:
CCCC CC CCCC
Mortgage lenders want to see this on your report:
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If you already have perfect credit with high scores, this isn’t much of an issue. However, if your scores are lower, or if you’re trying to rebuild credit, it is very highly recommended that you maintain a consistent payment history with no breaks. How can you do this without getting yourself into a mess of debt? You can put an inexpensive magazine subscription on your credit card, for example. That way, you never need to carry the card around, and it’s automatically charged for your subscription amount. Just make sure that you pay it off every month on time.
Conventional wisdom tells you to keep a zero, or almost zero, balance on your card. When it comes to mortgage lending, however, it is a dangerous trap. If you have a very low balance on a card, mortgage lenders will look at the “potential†of you maxing out that card. If you were to do that, your debt ratio will increase, and you could default on your loan. The higher your credit limit, the more this becomes an issue. A $300 credit card with a $20 balance won’t matter as much as a $3000 credit card with a $200 balance. In the latter scenario, you have the potential to add $2800 to your current debt load.
Generally, lenders like to see around 25% to 50% of your credit line used up. That way, it lessens the hit on your debt ratio if you were to max the card out. While this criterion by itself might not be enough to approve or deny you, it is definitely a factor worth considering.
If you have no balances on your cards, why not close the account? Then the low balance issue is moot, right? Unfortunately, closing accounts will lower your credit score. As well, lenders like to see at least 3-6 revolving accounts on your credit, and at least 1-2 installment loans. If you have too many revolving accounts with no balances, then you might want to close some. But if you’re in that 3-6 range, keep them open.
Obtain a copy of your credit report and see how your credit history reads. Make sure there aren’t any breaks in your history, especially if you’re a borderline applicant. Even if you do have a break, a high credit score will offset any penalties your potential lender might invoke. Keep the score as high as you can, and keep your credit history consistent.
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Bad Credit And The Term Issue
When we talk about the term issue we refer to the fact that the repayment programs or schedules of most financial products available for those with a bad credit score or history are usually not as long as they would desire. The consequence of this fact on the other variables of the loan such as interest rate, amount of the monthly payments and loan amount are usually also disadvantageous for bad credit applicants.
Personal Loans Available for Bad Credit Applicants
For those with bad credit, the only personal loans available are usually short term loans. These loans only offer small amounts for a reduced period of time. The length of the loan repayment programs can be extended up to a year at most. And even these personal loans are difficult to qualify for when the applicant has a bad credit score or history. The requirements for approval will be significantly harsher for them. Read more